‘Secret’ tools and traps to keep in mind in settlement negotiations

Mitchell Rose
As a civil litigator now practising as a settlement counsel and mediator in Ontario, I discovered certain legal tools that are useful for promoting early dispute resolution. However, ignorance of these provisions may prove hazardous and turn the tools into traps. As these provisions are not well known, I think of them as “secret.” I am revealing just three to you, but there are many others.

Duty to settle

Most of us are aware of the tension between zealous advocacy and civility. However, did you know about the professional obligation to encourage settlement and to consider the use of alternative dispute resolution?

Under Rule 3.2-4 of the Law Society of Upper Canada’s Rules of Professional Conduct, lawyers are obliged to:

1.    advise and encourage clients to compromise or settle a dispute whenever possible on a reasonable basis;

2.    discourage clients from commencing or continuing useless legal proceedings; and

3.    consider the use of ADR, inform clients of ADR options, when appropriate, and, if so instructed, take steps to pursue those options.

Other provincial law societies have similar rules.

This comes close to imposing a “duty to settle” (or, at least, to make reasonable efforts to settle) and to create the right environment for settlement to occur (i.e., through mediation or negotiation). This duty goes beyond mere strategy, such as making offers to settle to maximize the chances and quantum of a costs award or to simply comply with mandatory or contractual mediation requirements.

In light of the above, consider the following:

1.    Suggest mediation to your client and to the other side as early as possible. While there are some situations where mediation is inappropriate, this is rarely the case. The usual reasons given to avoid mediating (i.e., the parties are too far apart in their positions or cost) are usually the very reasons why mediation is useful and effective.

2.    When in a private caucus at mediation, and at various points of a proceeding, set out for clients (ideally, in writing) the advantages and disadvantages of settling or not settling.

Time out!

According to s. 11 of Ontario’s Limitations Act, 2002:

Attempted resolution

     (1) If a person with a claim and a person against whom the claim is made have agreed to have an independent third party resolve the claim or assist them in resolving it, the limitation periods established by ss. 4 and 15 do not run from the date the agreement is made until:

    (a) the date the claim is resolved;

    (b) the date the attempted resolution process is terminated; or

    (c) the date a party terminates or withdraws from the agreement.

    (2) For greater certainty, a person or entity that provides resolution of claims or assistance in resolving claims, on an impartial basis, is an independent third party no matter how it is funded.

Thus, “basic” (s. 4) and “ultimate” (s. 15) limitation periods do not run from the date both sides of a dispute agree to have a mediator assist them in resolution.

This statutory “time out” is useful if you act for a plaintiff — but perhaps not if you act for a defendant (or, at least, one should be wary of s. 11 since, as noted above, there is still the “duty to settle”).

Note, however:

1.    A formal mediation agreement is not required to trigger s. 11 (Sandro Steel Fabrication Ltd. v. Chiesa, 2013 ONCA 434 ); and

2.    Section 11 does not apply to the deadline for preserving construction liens (Logger Town Homes Ltd. v. Sadeghian, 2013 ONSC 6056).

Now say you’re ‘sorry’!

Many North American jurisdictions have apology legislation. Yet, I am amazed how many practitioners don’t know about its existence and implications — and how it’s a valuable settlement tool.

The operative sections of Ontario’s Apology Act, 2009 for civil disputes are so short that I am setting them out below (omitted sections should be reviewed though, especially s. 4 as it relates to limitations):


1.    In this Act,
“apology” means an expression of sympathy or regret, a statement that a person is sorry or any other words or actions indicating contrition or commiseration, whether or not the words or actions admit fault or liability or imply an admission of fault or liability in connection with the matter to which the words or actions relate.

Effect of apology on liability

2.    (1) An apology made by or on behalf of a person in connection with any matter

(a) does not, in law, constitute an express or implied admission of fault or liability by the person in connection with that matter;

(b) does not, despite any wording to the contrary in any contract of insurance or indemnity and despite any other Act or law, void, impair or otherwise affect any insurance or indemnity coverage for any person in connection with that matter; and

(c) shall not be taken into account in any determination of fault or liability in connection with that matter.

Evidence of apology not admissible

(3)    Despite any other Act or law, evidence of an apology made by or on behalf of a person in connection with any matter is not admissible in any civil proceeding, administrative proceeding or arbitration as evidence of the fault or liability of any person in connection with that matter.

(4)    However, if a person makes an apology while testifying at a civil proceeding, including while testifying at an out of court examination in the context of the civil proceeding, at an administrative proceeding or at an arbitration, this section does not apply to the apology for the purposes of that proceeding or arbitration.

The key takeaway is that apologizing for a perceived wrong often reduces the likelihood of civil legal proceedings. Even if proceedings ensue, an apology can promote settlement. In any event, an apology (not made when testifying) cannot be used as evidence of fault or liability. Be mindful of this when advising a client who has called you in a panic, during early negotiations and at mediation (where an apology could have dual protection of the Act and confidentiality provisions of a mediation agreement).

Finally, consider the cost of not apologizing: If your clients were aware of this legislation, would they be open to saying “sorry” instead of potentially incurring the cost and risk of a lawsuit?

Mitchell Rose is a mediator and lawyer with Stancer Gossin Rose LLP in Toronto. He believes in the art of skilled advocacy in both the courtroom and the boardroom. Mitchell can be reached at [email protected].

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