Generally, many of the estate litigation cases we see settle before the hearing of the application or before the matter proceeds to trial. However, quite often, minutes of settlement are not executed at the time an agreement is reached. Indeed, cases are sometimes resolved late in the evening or there is an agreement in principle or signed settlement terms, with a formal agreement to follow. While parties may be able to ultimately finalize their agreement in minutes of settlement, a motion to enforce a settlement may become necessary if that cannot be achieved.

As set out in Donaghy v. Scotia Capital Inc./Scotia Capitaux Inc., the Court’s jurisdiction to enforce a settlement agreement derives from the common law. The test on a motion to enforce a settlement agreement is two-pronged: (a) is there a genuine issue about the existence of an agreement to settle? and (b) if a settlement agreement is found to exist, should the Court nevertheless exercise its discretion not to enforce the agreement? The Court in Dodla v. Dodla stated that an enforceable settlement agreement exists if the parties had a mutual intention to create a legally binding contract and reached agreement on all essential terms of the settlement. Notably, it is of no consequence that the parties intended to formalize their agreement afterwards in writing and with signatures.

The test for whether the parties reached an agreement on all essential terms is an objective one. An agreement is established if the words or acts of the parties manifested an intention to agree to the matters in question. This is to be judged according to a reasonable standard after looking at the language used by the parties in the formation of the contract, the parties’ outward expressions, and the parties’ inferred intentions. No consideration should be given to the subjective or unexpressed intentions of the parties (North York Excavating & Contracting Limited v. D’Urzo). Moreover, it was held in Idea Notion Development v. CTO Boost Inc. that the general policy of the Court is to encourage the settlement of litigation, and as such, the Courts should refrain from an overly restrictive consideration of the essential terms of the agreement.

Once a settlement agreement is found to exist, the Court must move to the second stage of the test and consider whether, on all of the evidence, it would be fair for the Court to exercise its discretion to enforce the settlement (Capital Gains Income Streams Corporation v. Merrill Lynch Canada Inc.). As referred to above and for the most part, there is a strong presumption in favour of enforcement. The Court will generally not refuse to enforce a concluded settlement agreement unless doing so will create a real risk of a clear injustice.

The Court concluded in the 2020 Ontario Superior Court decision of Wilson v. John Howard Society of Windsor-Essex County, that in assessing a real risk of a clear injustice, the Court may consider, in part, the following: (a) evidence of mistake; (b) the reasonableness of the agreement; (c) the prejudice to the party seeking to uphold the settlement if the settlement is not enforced; (d) the prejudice to the party that seeks to set aside the settlement if judgement is granted to the party that seeks to uphold the settlement; (e) the prejudice to the parties of enforcing or not enforcing the settlement agreement; (f) the impact on third parties of not enforcing the settlement agreement; and (g) other special circumstances that point away from enforcement.

In assessing the prospects of success of a motion to enforce a settlement, it is important to keep the above-noted cases in mind, as well as the specific and unique facts of the matter at issue, which will invariably inform the Court’s ultimate decision.