Think Twice Before Settling A Legal Dispute
Most people want to avoid or prolong legal battles. They will expend time, effort and money to end a legal confrontation. There is a reason, however, to give second thoughts before settling a legal dispute and entering into a settlement agreement.
A settlement agreement is final. Courts value the principle of finality and will set aside settlement agreements only in rare and exceptional cases. In other words, if you enter into an agreement that addresses all the essential terms, you will be stuck with it. A recent case, Wilson v Northwest Value Partners Inc. 2015 ONSC 4726, illustrates the finality of such an agreement. Wilson sued his former employer for payment of benefits following termination of employment. The parties reached an agreement to settle the action at a mediation. Shortly thereafter, the former employer discovered that Wilson had obtained employment with a direct competitor. The former employer was a little upset and sued for breach of Wilson's non-compete agreement. The employer argued that the settlement agreement, which dealt with the payment of benefits, should be set aside. It argued that the formal documents memorializing the settlement agreement had never been signed. It further argued that Wilson had failed to disclose a material fact, that he was working for a competitor.
The court rejected these arguments. Based on subsequent correspondence between counsel for the parties, it was clear that the parties intended to enter into a legally binding agreement and that all of the essential terms had been agreed to. The court rejected the argument that Wilson had failed to disclose a material fact regarding his employment on the basis that Wilson was not legally required to disclose this fact. The court then went on to evaluate whether the agreement should be set aside. As there was no risk of injustice, the principle of finality was respected.
If the former employer wanted to make the settlement conditional upon Wilson not working for a competitor, it should have added a provision to that effect.
The Lesson: Before settling a legal dispute, it is prudent to take additional time to consider what additional conditions you may want to add or how different circumstances would affect how you view the settlement. If circumstances, or certain facts, change, would you want a different settlement? If the answer is yes, you should negotiate the settlement with those contingencies in mind. Settlement is meant to be final and second thoughts are not a valid basis to set it aside.
Wilson v Northwest Value Partners Inc. 2015 ONSC 4726 https://www.canlii.org/en/on/onsc/doc/2015/2015onsc4726/2015onsc4726.pdf
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