A settlement is designed to bring finality to insurance and tort claims. Occasionally, however, after the event, a claimant later rethinks the decision and challenges the validity of the settlement. In effect, he or she attempts to rewrite the end of the chapter. A recent British Columbia Supreme Court case, Sandhu v. Insurance Corp. of British Columbia et al., illustrated just such an effort.
The facts leading to the case
The beginning to the case was an unfortunate but all-too-common event. In May 1997, Mr. Sandhu, while on foot, was struck by a car backing out of a parking spot. Litigation started in 1999 with Mr. Sandhu variously represented by counsel or acting for himself throughout.
In January 2002, with the assistance of a lawyer, Mr. Sandhu settled his claim for $12,500 “new money” against both the driver and the Insurance Corporation of British Columbia, and signed a release and a consent-dismissal order.
Over seven years later, in September 2009 (the date is important as we explain below), Mr. Sandhu launched an action against both ICBC and his former counsel. He claimed his lawyer had been negligent and wanted the settlement set aside on the grounds that he did not understand it and that it was unfair. He maintained that he was mentally incompetent from clinical depression when he signed the settlement and had difficulty understanding English, his second language. Further, he believed the settlement was simply a reinstatement of statutory insurance benefits. He contended that he had not instructed his lawyer to settle the entirety of his claims.
Did the plaintiff understand the nature of the settlement?
Mr. Sandhu had signed the settlement in the office of his lawyer who did not speak Punjabi and did not have an interpreter present. At trial, Mr. Sandhu, speaking through an interpreter, claimed this as a reason for not understanding the nature of the settlement. However, following the testimony of both counsel involved in the settlement (with defence counsel’s files to aid in recollection), Mr. Justice Myers did “not accept that Mr. Sandhu’s knowledge of English prevented him from knowing what he was agreeing to.”
Both counsel testified that, on more than one occasion, they could sufficiently communicate with Mr. Sandhu in English. In addition, his own counsel testified that he was experienced in representing clients with head injuries and was, therefore, alive to the issue of mental capacity when dealing with clients.
Was the plaintiff mentally competent when he signed the settlement?
As to the plaintiff’s mental competence at the time, there was evidence that Mr. Sandhu was being treated by psychiatrists and psychologists for severe clinical depression that prevented him from working. However, the Court noted that that fact is legally distinct from mental incapacity to enter a contract in that, with respect to the latter, persons claiming to be mentally incapable must prove that they are not capable of appreciating their own interests. Following testimony from the counsel involved in the settlement and Mr. Sandhu’s general practitioner, Mr. Justice Myers found that Mr. Sandhu “[n]ot only [had] the capability, but he did, in fact, understand the advice and the settlement.” [Emphasis in original.]
Did the limitation period restriction apply?
The deciding factor in this case was that Mr. Sandhu brought the action to set aside the settlement agreement outside the limitation period. The Court found that, since Mr. Sandhu was not mentally incompetent at the time of the settlement and that he understood its nature, the limitation period began on the date of the settlement—January 4, 2002.
Since the action to set aside the settlement agreement is an action in contract, the limitation period is six years and so elapsed on January 4, 2008. Mr. Sandhu did not begin his new action until September 2009 and therefore brought the action too late.
That was not the end of the analysis, however. Mr. Sandhu was being treated for severe clinical depression and claimed he was mentally incompetent. Given those contentions, the Court considered if the limitation period should have been postponed due to mental disability pursuant to Section 7 of the Limitation Act which permits a limitation period to stop running if a person “is in fact or is substantially impeded in managing his or her affairs . . . .”
While Mr. Sandhu did suffer from clinical depression for an extended period of time and was hospitalized for depression for approximately one week in 2003, the Court did not find evidence that Mr. Sandhu’s judgment was impaired for legal purposes. Thus, Mr. Sandhu’s claim was dismissed on all grounds, including being commenced outside of the six-year limitation period.
*Mr. Jones represented the Insurance Corporation of British Columbia in this case.
Read other articles from the Fall 2011 Letter of the Law
Delaying Disclosure Has Consequences for Strata Developers by Mark Thompson and Mitch Dermer
Court SLAPPs Lay Litigant with Special Costs by Scott Brearley and Carmen Hamilton
Collecting a Judgment by Mark Stacey and Mitch Dermer
A Settlement Agreement Successfully Defended by Ian Jones
Hiring Foreign Workers for Your Construction Projects by Melanie Samuels and Carmen Hamilton
The Rules Have Changed But Litigation Remains the Same by Stephen Berezowskyj and Daniel Barber
Disclose Out-of-Court Agreements Immediately – Or Else! by Scott Brearley
Editor’s Note by David Perry
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