Saskatchewan – absent party bound by disputed settlement terms signed by authorized solicitor/agent – #352

In Bakken v. Bakken, 2020 SKQB 127, Madam Justice Brenda R. Hildebrandt held defendant to a mediated settlement regarding sale of land, holding that defendant authorized counsel to attend as her solicitor/agent and consulting her by telephone during the mediation prior to counsel’s signature. Disagreement between the parties regarding the settlement lead to litigation to enforce purportedly unclear terms documented by the settlement.  Litigation, filed May 20, 2010, was resolved ten (10) years later by trial judgment on May 7, 2020.  Hildebrandt J.’s reasons explore possible, but unsuccessful, defenses to a breach of settlement claim, including frustration and three (3) types of contractual mistake: common mistake, unilateral mistake, mutual mistake.

Two (2) brothers, Kerry and Kim, and their mother, Sharon, disputed ownership of farmland (“NW16”). Kerry claimed that Sharon had agreed to sell him NW16 as confirmed in minutes of settlement issuing from an August 4, 2010 mediation (“Minutes of Settlement”).  (This note adopts the same style of reference used by Hildebrandt J. to distinguish between individuals bearing the same surname and not as a sign of familiarity or lack of respect). See para. 21 for the terms of the Minutes of Settlement.

Despite reference in the Minutes of Settlement to Kerry’s purchase of NW16 from Sharon, Kerry subsequently learned that prior to the mediation Sharon had transferred NW16 to Kim on February 5, 2010.  Kerry initiated litigation seeking transfer of NW16 or, following amendments, in the alternative, general damages for breach of the Minutes of Settlement “if the Defendants cannot comply with the Minutes of Settlement”.  The procedural history listed at para. 5 includes an initial May 20, 2010 claim against Sharon alone, the August 4, 2010 mediation, an amendment on September 20, 2010 adding Kim and Sharon’s solicitor and agent (“DC”) acting at the mediation for Sharon and a March 15, 2017 discontinuance against DC.

At the August 4, 2010 mediation, Kerry and Kim attended in person but Sharon did not.  Unable to attend in person, Sharon had authorized DC to be her solicitor and agent.  In addition to attending the mediation in person, DC consulted with Sharon by telephone during the mediation prior to signing as Sharon’s “solicitor and agent”.  Hildebrandt J. noted that Kim held a power of attorney for Sharon but asserted that he only attended the mediation in his personal capacity.

Hildebrandt J. reviewed the terms and observed that “[o]n the face of the Minutes of Settlement, there is a written agreement respecting the transfer of the NW16 to Kerry”.  She later characterized the agreement as being “tri-partite in nature” at para. 97.

Testimony regarding contents of Minutes of Settlement – Hildebrandt J. commented on Sharon’s testimony at paras 17-20.  Based on inconsistencies, including Sharon’s inability to recall events and documents, Hildebrandt J. determined that she could not consider that evidence to be reliable.

At paras 23-26, Hildebrandt J. commented on Kim’s testimony.  Kim claimed that (i) NW16 should not have been an issue in the mediation, (ii)  the mention of money in regard to NW16 may had to do with rent owing by Kerry to Sharon, (iii) he did not “fully read” the Minutes of Settlement, and “skimmed some of it” without his glasses on, (iv) he was only concerned with provisions affecting him.  Hildebrandt J. considered that, in the circumstances, these assertions/positions were “unbelievable”, “disingenuous” and “incomprehensible”.

Hildebrandt J. concluded that Kim’s testimony ‘begged the question’ of “whether his failure to clarify the status of the NW16 was simply inadvertent or in furtherance of an intent to defeat Kerry’s claim to that land”.  She then noted that no evidence was adduced regarding the mediation discussions, an absence “in keeping” with section 43 of The Queen’s Bench Act, 1998, SS 1998, c Q-1.01.

Section 43 – Except with the written consent of the mediator and all parties to the action or matter in which the mediator acted, the following types of evidence are not admissible in any action or matter before any court:

(a) evidence arising from anything said in the course of mediation;

(b) evidence of anything said in the course of mediation;

(c) evidence of an admission or communication made in the course of mediation”.

Despite the key held by such evidence, Hildebrandt J. accepted that it as “[a]ppropriately” not before her.  “Thus, what representations were made regarding the NW16 at that time are not known”.

Hildebrandt J. also addressed Kerry’s testimony, especially the lack of knowledge that NW16 had been transferred by Sharon to Kim before the mediation.  See paras 32-39. At para. 41, she confirms that her assessment of the testimony and evidence supported Kerry’s version of being unaware at the time of the mediation that NW16 had been transferred.

[39] Kerry did not exhibit the anger and impatience that Kim did under questioning. Kerry was forthright in his responses, acknowledging where he did not fully understand things or may have been mistaken, and I consider his testimony to be both credible and reliable.

[40] Indeed, where the evidence diverges, I must prefer the evidence of Kerry to that of either Sharon or Kim. This is due to the cumulative effect of my concerns regarding the reliability of Sharon’s evidence, my disbelief of Kim on key issues such as his assertion that he had not read the Minutes of Settlement in their entirety, my observations of Kerry, and the consistency between Kerry’s testimony and the dates and contents of the pleadings and other documents”.

Hildebrandt J. determined that a binding agreement existed between the parties for the sale of NW16 from Sharon to Kerry.  See paras 46-52.

Frustration – Hildebrandt J. then turned to consider Defendants’ argument that the Minutes of Settlement had been frustrated.  See paras 53-57.  She dismissed the defense.

“[54] The plea of frustration to render the Minutes of Settlement unenforceable cannot succeed. The doctrine of frustration renders a contractual obligation incapable of being performed due to an unforeseeable event that was not contemplated by the parties at the time they entered into the contract. The frustrating event must have occurred after the formation of the contract. In this case, the suggested frustrating event, which was the transfer of the NW16 from Sharon to Kim, occurred prior to the Minutes of Settlement being signed”. …

[57] As demonstrated in the above-noted case law, frustration occurs when a situation has arisen after the contract has been formed that renders the contract incapable of being performed, or radically changes the essence of the contractual obligations. Frustration does not occur when the alleged frustrating event occurs before the contract was formed, as is claimed by the defendants, Sharon and Kim. If the frustrating event occurred prior to the agreement, it would be a foreseeable contingency to consider when drafting the document. In this situation, the alleged frustrating event, the transfer of land from Sharon to Kim, occurred months prior to the contract formed by the Minutes of Settlement. This renders the doctrine of frustration inapplicable”.

Mistake – Hildebrandt J. then considered Defendants’ argument that contractual mistake rendered the Minutes of Settlement unenforceable.  See paras 58-95. 

Hildebrandt J. reiterated her earlier determinations of fact regarding DC’s role at the mediation to act on behalf of Sharon and her dismissal of Kim’s claims that he did not know the full contents of the Minutes of Settlement.  See paras 60 and 61.  As a result of those determinations, Hildebrandt J. concluded soon into her analysis of the defence of mistake that the defence was unavailable on the facts and she could “dispense with a detailed analysis of the doctrine of mistake” as undertaken in Wang v. Laura W. Zhao Personal Real Estate Corporation, 2019 BCSC 1624.

Having determined that her determinations were “sufficient to determine the matter”, Hildebrandt J. did address three (3) types of mistake “none of which operate to assist the defendants in this case” despite the fact that “in neither the pleadings nor the closing argument was the type of the alleged contractual mistake specified”. Her additional reasons therefore serve to amplify her initial determination that the defense did not apply.  She considered: Common Mistake – paras 65-67; Unilateral Mistake – paras 68-82; and, Mutual Mistake – paras 83-94

Remedy – Among the remedies sought by Kerry, reproduced at para. 96 of her reasons, specific performance was not one of them.  “[M]indful that the pleadings frame the litigation”, Hildebrandt J. held that Kerry’s action did not seek specific performance.

The May 26, 2011 amended statement of claim does not expressly plead a claim of specific performance, although the earlier iterations of the claim did. Similarly, a request for an order vesting title of the NW16 in Kerry was deleted in the May 26, 2011 amendment. Accordingly, Kerry’s counsel frankly acknowledged that the latest version of the claim was operative”.

In the balance of her reasons, Hildebrandt J. explored the current value of NW16, less the purchase price not paid by Kerry, and issued a damage award in favour of Kerry for a monetary amount.  She added an award of pre-judgment interest under the Pre-judgment Interest Act, SS 1984-85-86, c P-22.2 calculated from the day after the Minutes of Settlement.

urbitral note – First, Hildebrandt J.’s concise evaluation of the testimony given by the three (3) principal witnesses demonstrates how decision makers can assess credibility, assign weight to evidence and explain why the adopt one version over another competing version.  Her comments are clear but not exhaustive and permit a reader to understand the conclusions drawn by someone who viewed the viva voce testimonies first-hand.

Second, DC’s role as Sharon’s solicitor and agent was decisive in confirming the binding effect of the Minutes of Settlement.  A binding settlement can be made on behalf of an absent party.

Third, DC’s role did not carry into other aspects of the case.  An August 19, 2010 letter Exhibit D-8 from DC to Kerry’s counsel was given “limited evidentiary weight”.  First, DC was no longer a party to the action following the March 2017 discontinuance.  Second, DC’s letter purports to describe conversations to which DC was not party.  Third, DC’s description contradicted testimony given by Kerry on cross-examination.

Fourth, note the key role played by legislation preventing parties from adducing evidence regarding discussions during the mediation.  Much of the analysis focused on competing/contradictory readings of the Minutes of Settlement. Despite the utility of such discussions, their exclusion lead to lengthy litigation.  Parties to negotiations should focus on accurately drafting the terms of their agreement and not anticipate that any disagreements can be explained later.  Attempts to explain contested terms face strict limits on their admissibility.

Fifth, the remedy awarded fell within the terms sought by Kerry.  Hildebrandt J. acknowledged being constrained by the pleadings.  The pleadings stemmed from the terms of the Minutes of Settlement.

Sixth, pre-judgment interest was granted from the day after the parties had entered into their settlement and underlined the value of having a definitive date from which to calculate breach of contract.

Seventh, disagreement between the parties lead to litigation to enforce purportedly unclear terms agreed to by the parties and documented by the Minutes of Settlement.  Query whether clearer terms might have avoided the litigation filed May 20, 2010 and resolved, at first instance, ten (10) years later by judgment on May 7, 2020.

Eighth, see the earlier Arbitration Matters note “Settlement rescinded based on innocent misrepresentation of material fact unknown to Defendant” regarding In Deschenes v. Lalonde, 2020 ONCA 304.  In that decision, Ontario’s Court of Appeal upheld rescission of a settlement on the basis of Defendant’s innocent misrepresentation regarding a fact material to Plaintiff’s decision to settlement.  Defendant’s actual or constructive knowledge that the representation was false was unnecessary.  The Court distinguished rescission based on innocent misrepresentation from rescission based on unilateral mistake. Despite the strong presumption favouring finality of settlements, the Court reiterated that the ways to “upset” a settlement are the same as those applicable to other contracts, including fraud, misrepresentation, duress, undue influence, unconscionability, or mutual or unilateral mistake.