IN
THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20100312

Docket:
M121583

Registry: New Westminster

Between:

MARK WILLIAM BURTON

Plaintiff

And

MARC BAKKER, OCEAN TRANSPORT LTD.
and GE CANADA LEASING SERVICES COMPANY SOCIETE DE SERVICES DE CREDIT-BAIL GE
CANADA

Defendants

Before:
The Honourable Madam Justice Bruce

Reasons for Judgment

INTRODUCTION

[1]            
Mr. Burton is the plaintiff in an action for
damages arising out of a motor vehicle accident that occurred on August 2,
2005. The trial of this action is scheduled to commence on April 19, 2010.
However, the defendants have brought this application for a declaration that there
is a binding settlement agreement between the parties and a stay of proceedings
with respect to the trial. In this regard, the defendants rely upon Rules 2(2),
19(24), and 37B of the Rules of Court, s. 8 of the Law and Equity Act,
R.S.B.C. 1996, c. 253, and the inherent jurisdiction of the court.

[2]            
The basis for the defendants’ application is
that on December 7, 2009, their legal counsel, Mr. Unruh, accepted an offer of
settlement forwarded to him on behalf of Mr. Burton on August 27, 2008. Mr.
Burton does not dispute that the offer of settlement remained valid and
outstanding at the time of its acceptance by the defendants. However, Mr.
Burton maintains that the offer of settlement was presented by his former
counsel and its existence was not known to his present legal counsel who failed
to take steps to withdraw the offer due to a misapprehension of the facts, that
is, that there was no outstanding offer in existence. Further, Mr. Burton
argues that Mr. Unruh knew or ought to have known that Mr. Burton’s legal
counsel was unaware of the offer of settlement and that in all of the
circumstances it would be unjust or unfair to enforce the settlement agreement
because the amount does not reflect the real value of his claim for damages.

BACKGROUND

[3]            
On August 2, 2005 Mr. Burton, who is a
firefighter employed by the City of Vancouver, was involved in a motor vehicle
accident. On July 4, 2007 Mr. Burton commenced an action against the defendants
claiming damages arising out of the motor vehicle accident, including damages
for injuries to his spine, head, back, right leg, and neck, as well as sleeplessness
and anxiety. On December 14, 2007, the defendants filed a statement of defence
that placed both liability and quantum of damages in dispute.

[4]            
Mr. Burton originally retained Jason Jones with
the law firm of Bronson Jones & Company to pursue his action for damages.
At this time the defendants’ insurer, ICBC, continued to maintain that Mr.
Burton was at least 25% responsible for the accident and made a formal offer to
settle in the amount of $24,500. Based on the medical evidence available up
until February 4, 2009, ICBC believed this to be a generous offer considering
their position on liability.

[5]            
On August 27, 2008 Mr. Jones forwarded a formal
offer of settlement to the defendants’ counsel, Mr. Unruh, in the amount of
$40,000, after taking into account Part 7 benefits and after any advances paid
to Mr. Burton to date. The medical reports in existence at the time of this
offer are summarized at pages 8 to 10 of Dr. Wade’s report dated March 16,
2009. Mr. Burton’s family physician, Dr. Waiz, wrote on May 2, 2007 that three
days after the accident Mr. Burton had problems of left wrist pain as well as
problems with the neck and lumbar spine and a closed head injury. Dr. Waiz felt
that Mr. Burton at that time required no further treatment; he had no work
issues and was able to exercise and play golf. Dr. Dommisse, an orthopaedic
surgeon retained by ICBC to conduct an independent medical assessment of Mr.
Burton, wrote on December 6, 2007 that he believed Mr. Burton suffered a grade
II strain of the cervical and thoracolumbar spine as a result of the accident
and would make a full recovery. A second medical report from Dr. Waiz dated
August 2, 2008 opined that Mr. Burton suffered a cervical musculoligamentous
strain injury and a lumber musculoligamentous strain injury, as well as a
closed head injury due to the accident. Radiographs of the lumbar spine and SI
joints carried out on May 4, 2007 were normal.

[6]            
Mr. Burton’s action was set for trial on October
1, 2008 and the defendants served a jury notice on November 7, 2008.
Examinations for discovery were set down but had not yet been conducted at this
time.

[7]            
In January 2009 Mr. Burton retained Mr. Howard
Smith to act on his behalf in respect of the action for damages in place of Mr.
Jones. By letter dated January 19, 2009, Mr. Smith advised Mr. Jones of the
fact that he had now been retained and Mr. Jones responded by letter dated
January 23, 2009, indicating he would be willing to transfer his file upon
payment of his disbursements as well as certain undertakings as to his fees. On
February 5, 2009, Mr. Smith received Mr. Burton’s file from Mr. Jones’s office.
There was no copy of the settlement offer made by Mr. Jones in the file and the
correspondence accompanying the file made no reference to this offer.

[8]            
On January 19, 2009, Mr. Smith corresponded with
ICBC with respect to Mr. Burton’s action and advised that he had been retained
as new counsel in place of Mr. Jones. Ms. Browne, a claims representative for
ICBC, responded by letter dated February 4, 2009. Although this letter referred
to the defendants’ settlement offer of $24,500, it did not mention any offer of
settlement made by Mr. Jones on behalf of the plaintiff, Mr. Burton. The
discoveries, which had been set down previously, were cancelled and new dates
fixed.

[9]            
After interviewing Mr. Burton and reviewing the
file materials received from Mr. Jones’ office, Mr. Smith determined that the
injuries were more significant than Mr. Jones had suspected. Mr. Smith arranged
for Mr. Burton to have an MRI of his lumbar spine and to be independently
assessed by Dr. Wade, who is specialist in rheumatology. Mr. Burton had not
previously been examined by a specialist other than the one retained by ICBC.

[10]        
Dr. Wade’s report dated March 16, 2009 indicates
the following opinion concerning Mr. Burton’s accident related injuries:

As a direct
result of a motor vehicle accident of August 2, 2005 Mark Burton sustained a
probable moderate musculoligamentous injury of the cervical spine and a
moderate to marked musculoligamentous injury to the lumbar spine. In addition,
he sustained a probable soft tissue injury or ligamentous injury to the left
wrist. It is unclear whether he could have sustained a bony injury of the left
wrist as a result of the motor vehicle accident of August 2, 2005.

[11]        
After reviewing the MRI taken on February 19,
2009, Dr. Wade concluded as follows:

This MRI showed
mild disc narrowing at L3-L4. If further showed a possible annular tear at
L3-L4 with a small broad based central disc bulge indenting the thecal sac. It
further showed a small broad based central disc bulge at L4-L5. This disc
protrusions at both these levels were indenting the thecal sac but there was no
neural compression noted. There was further a posterior annual tear at L5-S1
with a small broad based central bulge. There was no stenosis demonstrated
either in the central canal or intervertebral foramen. It was noted that there
were mild degenerative changes in the facet joints.

[12]        
In an addendum report dated April 25, 2009, Dr.
Wage indicated that his review of the MRI confirmed that there was no
indication of inflammatory lumbar spondylitis in Mr. Burton’s spine and that
there was a low likelihood that his low back pain was due to inflammatory back
disease. In his view, the low back pain suffered by Mr. Burton was mechanical
and possibly partially discogenic in nature.

[13]        
On or about June 4, 2009, the City of Vancouver
advised Mr. Smith that Mr. Burton’s wage loss up to that date was $17,518.16. Although
Mr. Burton was paid while off work due to the accident-related injuries, the
City of Vancouver had a subrogation agreement with respect to any monies
received in settlement of this claim. By letter dated June 10, 2009, Mr. Smith
forwarded to Mr. Unruh Mr. Burton’s employment records showing the days he was
absent from work due to accident-related injuries and the amount of salary and
benefits claimed through the subrogation agreement up to that date.

[14]        
On August 27, 2009 and September 28, 2009,
counsel conducted examinations for discovery with respect to both parties.

[15]        
In the fall of 2009 Mr. Burton was referred to a
spinal decompression program through his chiropractor. This program lasted
three months at a cost of $4,500. Mr. Burton found this program relieved some
of his back pain symptoms. Because he was off work during this three month
period, Mr. Burton’s wage loss claim increased to a total of $58,000.

[16]        
Without any prior notice to Mr. Smith, on
December 7, 2009, Mr. Unruh accepted the August 27, 2008 offer of settlement
made by Mr. Jones. He communicated the defendants’ acceptance of his offer by
letter of the same date. Mr. Unruh deposed that he did not have actual or
constructive knowledge that Mr. Smith had revoked the offer of settlement.

ARGUMENT

[17]        
The defendants argue that there is a binding
settlement agreement between the parties as a result of the acceptance of the
outstanding formal offer to settle. The defendants maintain there are no
circumstances justifying a conclusion that this agreement should not bind the
parties. In support of their submission, the defendants rely upon the following
authorities: Robertson v. Walwyn Stodgell Cochrane Murray Ltd., [1988] 4
W.W.R. 283, 24 B.C.L.R. (2d) 385 (C.A.) [Robertson cited to B.C.L.R.], Moric
v. Handspiker (1985), 65 B.C.L.R. 74, [1985] B.C.J. No. 1698 (C.A.), Thom
v. Conner, 2005 BCSC 451, 138 A.C.W.S. (3d) 259 [Thom], and Nazmdeh
v. Ursel, 2010 BCSC 136, [2010] B.C.J. No. 175.

[18]        
Mr. Burton argues that the settlement agreement
is not binding on the parties due to a unilateral mistake that was or should
have been known to the defendants’ counsel at the time he accepted the offer.
Further, Mr. Burton argues that the offer was made at a time when the true
nature of his injuries and his wage loss were unknown and thus represent far
less than his actual damages. Lastly, Mr. Burton argues that, in the
circumstances, it would be unjust to permit the defendants to rely upon the
dated and unknown offer to settle. In support of his submission, Mr. Burton
relies upon Hawitt v. Campbell, [1982] 6 W.W.R. 448, 40 B.C.L.R. 110, aff’d
(1983) 148 D.L.R. (3d) 341, 46 B.C.L.R. 260 (C.A.) [Hawitt].

DECISION

[19]        
The defendants’ application relies upon the
inherent jurisdiction of the court, certain Rules of Court, and s. 8 of
the Law and Equity Act. Thus it is important to establish the court’s
jurisdiction to entertain this application and identify the remedies available
in the circumstances.

[20]        
The enforcement of settlement agreements is not
a separate field of law exempt from the ordinary principles of contract law and
the rules of procedure. The various means of enforcing a settlement agreement
may involve equitable principles, discretionary remedies, and rules regarding
the entry of consent orders; however, this does not oust the general principles
of contract law. This proposition of law is amply supported by the reasoning of
the Court of Appeal in Robertson where Lambert J.A. says at 386:

 The law in
relation to the enforcement of settlement agreements by stays of proceedings
brings together principles of contract law, principles of the law of agency as
they apply to barristers and solicitors, rules of equity as they apply to
discretionary remedies, and rules of procedure as they apply to the
pronouncement and entry of consent orders. In each case, the issues between the
parties must be dealt with in accordance with those principles. The
effectiveness and the enforcement of settlement agreements does not constitute
a separate field of law to which the ordinary principles of contract law,
agency, and equity, and the ordinary rules of procedure, do not apply.

[21]        
It is because the enforcement of settlement
agreements involves such a collage of legal and equitable principles that the
remedies available to the court have become somewhat muddied. On the one hand,
it is apparent that the Rules of Court and in particular, Rules 37A and
37B addressing settlement offers, are not a complete code that have ousted the
principles of contract law in respect of the enforcement and interpretation of
settlement agreements. As Madam Justice Ross says in Thom at paras. 33
to 34:

[33] In my view, the decision in Acadia
Hotels did not have the effect contended by counsel for the respondent of
completely ousting the principles of mistake from a consideration of Offers to
Settle.

[34] I find
support for this conclusion in Craig Estates and in Vickaryous v.
Vickaryous (2001), 19 R.F.L. (5th) 195, [2001] B.C.J. No. 1343, 2001 BCSC
930 (S.C.) per Garson J. In both decisions, the principles applicable to
unilateral mistake were applied in relation to the acceptance of an Offer to
Settle. Moreover, in 256593 B.C. Ltd., Mr. Justice Donald approved of
the statement of law made by Baker J. in the Craig Estate decision.

[22]        
Thus, on an application for a declaration that a
settlement agreement is binding on the parties, the court may apply the
ordinary principles of contract law to determine the matter and grant or
dismiss the application based on these principles.

[23]        
On the other hand, in an application to enforce
a settlement agreement, the court has a broader range of remedies available to
it that in an ordinary contract case, particularly because of s. 8 of the Law
and Equity Act. This provision authorizes the court to grant a stay of
proceeding in any cause or matter before it if it is just and fit in all of the
circumstances. Alternatively, the court may exercise its discretion to leave
the issue of the settlement agreement to the trial judge. As Garson J. (as she
then was) says in Vickaryous v. Vickaryous, 2001 BCSC 930, 19 R.F.L.
(5th) 195 at paras. 28 to 29:

[28] This application is brought pursuant to
Rules 1, 2, 18A, 27 and 57 of the Rules of Court and s. 8 of the Law and Equity
Act.

[29] In an
application such as this, the court may grant or dismiss the application to
enforce a settlement, pursuant to Rule 18A. Alternatively, pursuant to s. 8 of
the Law and Equity Act the court may exercise its discretion in favour
of granting a stay of the proceedings pending completion of the settlement
agreement. The court also has a discretion to leave the settlement issue to be
resolved at trial. (English v. Storey, [1999] B.C.J. No. 1647 (B.C.S.C.)
and Hawitt v. Campbell (1983), 148 D.L.R. (3d) 341, 46 B.C.L.R. 260
(C.A.).)

[24]        
In Hawitt v. Campell, (1983) 148 D.L.R.
(3d) 341, 46 B.C.L.R. 260 (C.A.) [Hawitt CA], , the Court of Appeal articulated
the circumstances in which the court may refuse a stay of proceedings and held
that the same factors should apply whether the application is for a stay of
proceedings or for summary trial on the issue. These factors are described by
MacFarlane J.A. in Hawitt CA at paras. 20 to 23:

[20] The judge may refuse the stay if:

1.     there was a limitation on the instructions of the solicitor known to
the opposite party;

2.     there was a misapprehension by the solicitor making the settlement
of the instructions of the client or of the facts of a type that would result
in injustice or make it unreasonable or unfair to enforce the settlement;

3.     there was fraud or collusion;

4.     there was an issue to be tried as to whether there was such a
limitation, misapprehension, fraud or collusion in relation to the settlement.

[21] Refusal of a stay would leave the
parties to their remedy in the action or in an action on the settlement.

[22] My fourth point arises from an analogy
between a summary application to stay, and an application for summary judgment.
In either case, if there is a triable issue then the parties ought to be left
to their remedy at trial.

[23] In
exercising his discretion to refuse to grant a stay, a judge will consider not
only whether there was the required misapprehension by the solicitor but
whether the result of that would be unreasonable or unfair to the client. It is
in that sense that I understand the reference to reasonableness and fairness in
the authorities cited.

[25]        
Finally, in Robertson the Court of Appeal
clarified that the judgment in Hawitt CA deals with an
application for a stay of proceedings or summary relief and does not address
the legal and equitable principles that ultimately govern whether the
settlement is binding on the parties. The latter question is to be determined
by the ordinary principles of contract law. As Lambert J.A. says in Robertson
at 388:

…But the remarks
made in the course of the reasons in Hawitt v. Campbell that a stay
might be refused if a settlement obtained as a result of a misapprehension was
unreasonable or unfair should not be regarded as introducing a rule that
settlements are not binding if they are unreasonable or unfair. In my opinion,
those remarks were intended to apply to the exercise of the judge’s discretion
upon a summary application for a stay. A judge hearing such an application
might refuse a stay, if there had been a misapprehension of instructions, on
the ground that to allow it might be unjust. The result of a refusal would be
to leave the parties to seek their remedies in the action, in which the
settlement might be pleaded, or to seek them separately in an action on the
settlement. In short, Hawitt v. Campbell deals with the considerations
which apply to the judicial discretion under s. 8 of the Law and Equity Act
to grant or refuse a stay. But those same considerations do not determine
whether a settlement is binding or not.

[26]        
Applying these principles to the case at hand, I
find it would be inappropriate to grant a stay of proceedings or to grant the
summary relief claimed by the defendants. In my view, Mr. Burton has raised a
triable issue that there was a unilateral mistake and unfair reliance upon it
by the defendants. Further, he has raised a triable issue that the offer to
settle was made under a misapprehension of the facts underlying the claim such
that it would result in an injustice to enforce the settlement. The parties
should be left to pursue their remedies in respect of the settlement agreement
at the trial of the action set to commence on April 19, 2010.

[27]        
In coming to these conclusions, I have
considered the following factors. First, the offer to settle was made early on
in the course of the litigation before examinations for discovery were
conducted and without the benefit of any objective tests beyond a radiograph.
While Mr. Burton had been examined by an expert retained by ICBC, he had only
his family doctor’s reports to rely upon. Second, in January 2009 Mr. Burton
dismissed Mr. James and retained new counsel. Neither Mr. James nor ICBC
informed Mr. Howard of the settlement offer made on August 27, 2008 when they
had an opportunity to do so. Third, Mr. Burton continued to pursue his action
with due diligence. He scheduled and carried out examinations for discovery. He
attended for an MRI and independent examination by an expert in rheumatology,
Dr. Wade. He obtained detailed records of his wage loss. Fourth, the wage loss
and employment records were forwarded to Mr. Unruh for review. These documents
indicated a wage loss claim well in excess of $17,000. Lastly, it was after Mr.
Unruh received notification of the wage loss claim showing accident-related absences
that continued up until March 2009 that he notified Mr. Howard that he was accepting
the settlement offer.

[28]        
In my view, it is apparent that Mr. Howard was
acting under a material mistake, that is, that no outstanding offer of
settlement existed in Mr. Burton’s action. Further, based on the factors
described above, there is a triable issue with respect to Mr. Unruh’s actual or
constructive knowledge of this mistake. While the defendants contested
liability for the accident and the accepted offer was greater than the original
offer made by ICBC in the amount of $24,500, it is arguable that Mr. Unruh knew
or ought to have known in the circumstances that Mr. Howard was acting under
the mistaken belief that no such offer of settlement existed. There was a
change in solicitors, the offer was made early on in the action, and the wage
loss claim alone was almost half of the amount reflected in the offer.

[29]        
While it is not my task to evaluate the merits
of the settlement agreement, it is apparent that the medical evidence obtained
subsequent to the offer, and prior to its acceptance by the defendants,
revealed far more significant injuries than originally in the contemplation of
the parties. It is also apparent that the wage loss claim alone is now some
$18,000 in excess of the settlement offer. Thus there are facts of the type
that would result in an injustice if the defendants were granted the summary
relief claimed in this application.

[30]        
Accordingly, I exercise my discretion to deny
the relief claimed by the defendants and permit the enforcement of the
settlement agreement to be addressed at the trial of this action. The
defendants are given leave to amend their pleadings to reflect the settlement
agreement defence and are ordered to file their amended statement of defence on
or before March 19, 2010. The plaintiff has leave to reply to the defendants’
amendment and will have seven (7) days from the date of receipt of the amended
pleadings to do so.

[31]        
Costs shall be in the cause.

“Bruce J.”