Judge finds binding agreement arose from without prejudice negotiations in recent decision
Philip Epstein
Enforceability of Agreements Made During “Without Prejudice” Negotiations - The Court’s Overriding Discretion to Set Aside Parenting Agreements
H. (S.) v. M. (A.), 2016 CarswellNfld 186 (N.L. T.D.) - Richard D. LeBlanc J. This is a very interesting and, I suggest, important decision by Justice Richard LeBlanc of the Supreme Court of Newfoundland and Labrador which contains significant lessons and warnings to counsel who negotiate agreements on behalf of clients. In this case, the lawyers for the parties were negotiating on a “without prejudice” basis the terms of a parenting agreement. The “without prejudice” part relates to emails sent from one counsel to the other which were marked “without prejudice”. However, in the father’s email he made an offer and in the mother’s responding email she accepted the offer. Thus, Justice LeBlanc found there had been an offer and an acceptance and a binding agreement, and the fact that it arose from “without prejudice” correspondence did not affect the fact that a binding agreement had been reached.
There are a host of cases both in Newfoundland and elsewhere that have dealt with this issue before and they are all carefully canvassed by Justice LeBlanc.
There has never been any doubt that a lawyer has authority to make a binding settlement agreement on behalf of a client unless the authority is limited by a client and the limitation is known to the opposing lawyer. See for example Tobin v. Cox, 2015 CarswellNfld 119 (N.L. T.D.), and Scherer v. Paletta, 1966 CarswellOnt 119 (Ont. C.A.).
It does not appear to matter that the agreement arises from “without prejudice” correspondence or off the record discussions once it is clear that there has been a clear offer and acceptance.
Nevertheless, notwithstanding an offer and acceptance, a court still has a discretion in family law matters to decline to enforce the agreement. In Nigris v. Nigris, 44 R.F.L. (4th) 269 (Ont. Gen. Div.) and Trembath v. Trembath, 1993 CarswellOnt 3974 (Ont. Gen. Div.) a court considered the following matters in determining whether to exercise discretion with respect to enforcement.
1. Whether the settlement is unconscionable and improvident.
2. Has the person resiling been subject to an inequality of bargaining power as explained in such cases as Lloyd’s Bank Ltd. v. Bundy, [1974] 3 All E.R. 757 (Eng. C.A.) at 763 and 765?
3. Has a party failed to act in good faith?
4. Did counsel act without authority?
5. Are the terms of the agreement sufficiently clear that an attempt to enforce them will not spawn further litigation?
6. Does the agreement encompass most if not all of the issues in dispute?
7. Was the settlement negotiated with the parties physically in each others presence?
8. What period of time has elapsed between the agreement and notification that a part is resiling?
9. At what stage in the litigation did the negotiations take place?
10. Has the other party suffered a disadvantage as a result of the agreement being abrogated?
As Justice LeBlanc notes with respect to “without prejudice” discussions, Meyers v. Dunphy, 2007 CarswellNfld 7 (N.L. C.A.) makes it clear that communications made on a “without prejudice” basis are admissible to prove that those communications resulted in an agreement.
Now one might think that this decision creates a problem for lawyers trying to negotiate an agreement and exchange views without ever intending that a binding settlement is being reached. It is not unusual for lawyers to send off emails setting out a client’s position without ever intending that the position be accepted by the other side and a binding contract concluded. The risks here are that a lawyer’s musings about what his client may or may not do may result in the other side taking the musing as an offer and accepting it.
Lawyers need to take a lesson from this case and be careful about how they frame their client’s position. If you do not intend to make an offer that can be accepted, but nevertheless want to seriously explore a negotiated settlement, you can always provide in the correspondence or communication that there is no agreement until there is a signed separation agreement in a form satisfactory to the parties and their lawyers and that this is to constitute a true condition precedent to a binding settlement. That kind of language would overcome the difficulty presented in this case.
The problem here was that the father’s lawyer made an offer in which the father gave up sole custody and agreed to annual financial disclosure but left access to this very young child in the complete discretion of the mother. The mother accepted that proposition but the father subsequently changed his mind and wanted specified access.
Ultimately, Justice LeBlanc found that the “without prejudice” communication constituted an offer and acceptance and there was a settlement. Nevertheless, he went on to find that he would not enforce the binding agreement as it relates to parenting time because that was not in the best interests of the child and the courts always have the discretion, which separation agreements cannot oust, not to enforce agreements that are contrary to the child’s bests interests. That discretion arises both from a statutory basis under the various provincial children’s statutes and a parens patriae duty on the part of the court to ensure a child’s best interests. See also section 16(8) of the Divorce Act and see Mellon v. Mellon, 1996 CarswellMan 367 (Man. Q.B.).
Justice LeBlanc also relies on Miglin v. Miglin, 34 R.F.L. (5th) 255 (S.C.C.) to point out that the agreement reached between the parties is not in substantial compliance with the Divorce Act which of course forms part of the second-step test of Miglin when one considers whether an agreement should be set aside. Notwithstanding the hundreds of times that I have been required to write about Miglin, I have never seen it referred to in a parenting case, but there is absolutely no reason why it should not be. I obviously missed O. (M.E.) v. M. (S.R.), 39 R.F.L. (5th) 361 (Alta. Q.B.) where Justice Veit used Miglin to also set aside a parenting plan.
Justice LeBlanc goes on to say the following:
. . . To override an agreement related to their children, the Court must first of all have before it relevant facts prior to intervening. Saying this, however, does not mean that where there is uncertainty as to the impact of an agreement on the best interest of a child involved, the judge should merely endorse the agreement. I see the Court as being responsible for ensuring that the best interests principle is applied and, where necessary, the judge should inquire.
Therefore, while not suggesting that there is a duty to inquire behind every agreement related to children and their best interests, in the circumstances such as those before me, the need to inquire appears obvious.
Justice LeBlanc was not prepared to accept an agreement that limited the father’s parenting time to the complete discretion of the mother. Particularly since the mother, to date, was not permitting access, and there did not appear to be any reasonable prospect that access was going to occur in the future. Accordingly, Justice LeBlanc directed a trial with respect to clause 2 of the agreement that dealt with parenting time. It should be obvious to the parties that when they return to court, absent a settlement, the court is going to order parenting time in some fashion and not leave it to the discretion of the mother.