Focus on: Alternative Dispute Resolution
Minutes of settlement usually serve as a contract to the agreement. The strength of ADR is that the courts will support the agreement in the event of default providing there are no irregularities.
While decisions arriving out of arbitration are binding and enforced in court under Ontario’s Arbitration Act, settlements arising out of mediation are akin to contracts and are enforceable in court much like a contract.
“When you come out of the mediation where you have a successful agreement, you have a contract and a contract is enforceable in court like any other contract,” says David McCutcheon, director and past president of the ADR Institute of Canada and the ADR Institute of Ontario, and a partner at Dentons Canada LLP in Toronto where he practises environmental and administrative law.
A small percentage of mediated settlements might include a clause instructing that the agreement would be subject to arbitration rather than the court, McCutcheon adds.
That can keep the terms of the agreement confidential and out of the public domain.
But the more natural process would simply be to sue.
“The primary option is to sue on the settlement. That is to say, if the mediation process is successful in achieving a settlement, then the settlement will be embodied in a contract, often called something like minutes in settlement,” says Paul Morrison, a senior litigation partner with McCarthy Tétrault LLP.
“If one party is not fulfilling its obligations under the contract, then they’re in breach of contract and you can sue on the contract.”
But enforcement of mediation settlements is usually amenable to some kind of summary process.
Therefore, the parties can get before the courts fairly quickly to review the process and settlement, and when one of the parties isn’t living up to the agreement, the court can enforce it.
For the most part, getting support to enforce the settlement is fairly straightforward, although Morrison says it’s not often necessary.
Most who agree to settle in a case honour the agreement and rarely renege. When it does happen, courts, which are eager to encourage settlements, move fairly quickly.
“It doesn’t happen frequently, but it does happen,” says Morrison of defaults.
Markham, Ont.-based personal injury lawyer Darryl Singer says he likes to build a provision into a resolution at mediation that requires performance by one party.
The agreement often lays out the terms of the payment, either as a lump sum or as incremental monthly payments over the course of several months or years.
A strong agreement will lay out the terms of the settlement that one party consents to the other holding the judgment.
“Typically, the most common method, in my experience, is you build in what’s called a consent to judgment,” says Singer.
“So I will essentially have a judgment prepared that will be consented to by counsel for the other party and it’s written into the minutes of the settlement that I don’t issue that judgment, I don’t file and issue that judgement at the court, I hold it in escrow.
“But if there is a default in the performance of the settlement terms, then I’m at liberty to go and flop that judgment down on the counter at the courthouse and get it sealed and then I can enforce it the same way I can any other judgment,” says Singer.
Default on a mediated agreement is not common, largely because it’s an outcome agreed upon by both parties through a non-adversarial process.
Ontario does have a Commercial Mediation Act setting out a process that involves taking an agreement under commercial mediation to court where it is registered for enforcement, similar to what happens in an arbitration award. But it applies only to commercial cases.
Default can and occasionally does happen and there needs to be a plan in place to deal with it when it does, says Brampton, Ont.-based arbitrator and mediator Colm Brannigan.
“You could have a wee bit of a problem because you really then are into a litigation process, which, of course, is what you were trying to avoid in the first place,” says Brannigan.
The minutes of settlement can be made into a judgment or a lawsuit could be launched through the contract process. Brannigan says it’s a little easier to enforce a settlement that comes out of a case already in litigation.
In the event of a default, a motion might be brought to enforce the settlement.
“One of the things I strongly recommend is when lawyers come to mediation they bring some kind of draft agreement with them with the terms that are really important to them,” says Brannigan, adding that the parties can use it to crossreference later to avoid buyer’s remorse that could lead to further dispute or default.
“You can do amazing things if everyone’s on board.”
Arbitrated decisions also require some kind of default mechanism, says Mitchell Rose, who prefers to spell out what happens in the event of a default instead of relying entirely on the Arbitration Act.
“If the agreement is silent as to what happens in the event of the breach, then the rules do come into play,” says Rose.
In the case of a monetary settlement, the terms of the process could spell out interest or larger settlement amounts if it is not paid by a certain time as security.
“It also stands as a dispute resolution mechanism because if you don’t fulfil to the terms of the settlement, the parties have agreed to judgment without having to go through the formal trial process and it also provides an incentive,” says Rose.