08 January 2018

Is a verbal agreement made between lawyers binding on their clients?

As counsel we have a tremendous responsibility to act not only in the best interests of our clients, but on their instructions.  When lawyers are retained, we are engaged by our clients to do certain things and act for them in a way that accords with the terms of our retainer agreement.  One of the things we are often tasked with is conducting negotiations.  It is crucial for our clients to know that we are negotiating on their behalf, but the decisions, particularly decisions to reach a settlement, that are made must be theirs. 

As counsel, it is as critical to ensure clear communication with our clients to make sure they are properly informed about any proposals and that they provide us clear instructions for responding and settling a case.  In this day and age of high speed internet, deals are often negotiated by email, by phone or on the Courthouse steps, as was the case in Sekhon v. Khangura, 2009 BCSC 670 (CanLII) where two lawyers negotiated and confirmed a settlement on behalf of their clients in person at the Courthouse.  The defendants in the Sekhon later claimed that a deal had not been reached so the matter was set for trial, with both former lawyers as witnesses.  

The Sekhon case provides an interesting overview of the issues that the Court considers when deciding if an agreement has been reached between lawyers, on behalf of their clients.  Were the lawyers properly retained?  Were the clients informed of the proposal and did they authorize their lawyer to accept the proposal on their behalf?  How was the information conveyed to the lawyer and how was it conveyed by the lawyer to the opposing party?  Did the proposal and the agreement need to be in writing? 
One of the defendants, Mrs. Khangura, claimed that a deal had not been reached because she had not instructed the lawyer to accept the proposal on her behalf.  In the alternative, she said at trial, that she told the lawyer she would consider the proposal if it was sent to her in writing, thereby alleging that the acceptance was conditional upon it being reduced to writing and signed.  Mrs. Khangura’s former lawyer testified that he was at all times acting on the basis of instructions from his client to settle the matter has she had been anxious to settle. 

The Court found that the defendants had properly instructed their lawyer to settle the case, and that the terms of settlement had been properly communicated verbally between the lawyers at the courthouse.  The following propositions were clarified at paragraph 110:

  1. A solicitor acting for a party in settlement negotiations is acting as the agent of the client;
  2. The solicitor is presumed to have the authority to bind the client to the terms of settlement;
  3. There is no obligation on other parties to make enquiries regarding a solicitor’s authority to settle a matter on a client’s behalf;
  4. It is in the best interests of the administration of justice that solicitors be free to contemplate settlements with solicitors without having to enquire about or be concerned with the actual authority of the solicitor;

Scherer v. Patella, [1966] O.J. No. 1017 (C.A.)
Harvey v. British Columbia Corps of Commissionaires, 2002 BCPC 69

  1. And from paragraph 117:  “A settlement made between counsel for the parties with their client’s knowledge and consent is enforceable as a binding contract.  The court will give effect to a binding contract, unless there are grounds for setting aside the contract under ordinary principles of contract law, such as fraud, duress, lack of capacity or mutual mistake.”  Robertson v. Walwyn Stodgell Cochrane Murray Ltd., [1988] B.C.J. No. 485 (C.A.).)
  2. An agreement does not need to be reduced to writing in order for it to be enforceable. 

“To my mind the form of the settlement is immaterial. The actual settlement was agreed to between solicitors. There was a settlement from the moment the solicitors reached an accord. The solicitors could have finalized the settlement by an exchange of correspondence or in any other manner they chose. However, the decision of Mr. Ouellette was to have his clients sign the offer to settle and have it accepted. That goes to form only.”   Rottacker Farms Ltd. v. C & M Farms Ltd.1976 ALTASCAD 158 (CanLII), [1976] A.J. No. 453 (S.C. (A.D.)) at ¶25:
And finally, “A complaint about a lawyer’s conduct in circumstances like this, however, is not relevant to the determination of whether there was a binding settlement agreement entered into between the two lawyers on September 22, 2006.  If a lawyer has exceeded his authority, that is matter between the lawyer and his clients: Adamoski at ¶4; Rottacker at ¶28; Baldissera v Baldassi2000 BCSC 1788 (CanLII) at ¶39.” 

So, the answer to the question posed: "Is a verbal agreement made between lawyers binding on their clients?" is yes, if the circumstances of the case are as those in the Sekhon case. 

As always speak to a lawyer if you have questions about your case.