Application by the insurer for a dismissal of the plaintiffs' action on the basis the disputes were resolved by a binding settlement agreements. The court found the settlement agreements were binding and dismissed the plaintiffs' action. There was no evidence that the plaintiffs were subject to undue influence or that they were not mentally competent when they signed the settlement agreements. Further, the settlement agreements were not unconscionable.

[2014] B.C.J. No. 2539

2014 BCSC 1924

British Columbia Supreme Court

P. Rogers J.

October 10, 2014

Wilfred and Bernice Palaniuk owned unit 211 in the Discovery Bay condominium complex in Kelowna. Their son, Jason Palaniuk, owned unit 329. In the fall of 2005, various defects were identified in the structure of the Discovery Bay complex. The new home warranty was in effect at this time and the defendant insurance corporation acted as agent for the new home warranty. A clause of the warranty provided that if repairs were required under the warranty and the damage to the home or the extent of the repairs made the home uninhabitable, the warranty would cover the reasonable expenses incurred by the owner to find alternative accommodation.

In October 2005, the City of Kelowna revoked the occupancy permits for the Discovery Bay condominium complex. However, it was not until June 2006 that engineering reports were prepared that indicated that the Discovery Bay complex required significant structural repairs and remediation. The plaintiffs moved out of their units shortly after the City of Kelowna revoked the occupancy permits. The insurer took the position the plaintiffs did not qualify for any living out allowances because they moved out of the complex ahead of the date on which repairs and remediation rendered their units uninhabitable.

In February 2007, Wilfred Palaniuk and his counsel negotiated a settlement of the Palaniuks' claim for living allowance for unit 211. Wilfred Palaniuk executed a release and settlement agreement on his own behalf and on his wife's behalf as holder of her power of attorney. In September 2007, Wilfred Palaniuk acted on his authority as holder of his son's power of attorney and negotiated a settlement of Jason Palaniuk's claim for living allowance for unit 329.

The City of Kelowna subsequenlty issued occupancy permits for the units. Remediation in the complex was ongoing and the plaintiffs complained to the insurer that the noise of the ongoing remediation was bothersome to Bernice Palaniuk and interfered with her recovery from a stroke she suffered in February 2007. The Palaniuks asked the insurer to extend payment of the living out allowance while construction was ongoing. The insurer refused their request.

The plaintiffs subsequently commenced an action against the insurer for breach of contract for loss of living out allowance. The insurer brought an application for an order dismissing the plaintiffs' action on the basis the disputes were resolved by binding settlement agreements. The plaintiffs argued the settlements were not binding because the insurer obtained the agreements through an exercise of undue influence.

Regarding Jason Palaniuk's claim, the court noted that a settlement agreement was executed by Wilfred Palaniuk as holder of Jason Palaniuk's power of attorney and subsequently by Jason Palaniuk himself. Jason Palaniuk adduced no evidence that supported the argument that he was subject to undue influence or that he was not mentally competent when he signed the settlement agreement. Neither did he adduce any evidence that suggested that his bargain with the insurer was unconscionable. Accordingly, the court dismissed Jason Palaniuk's action.

Regarding Wilfred and Bernice Palaniuk's claim, Wilfred Palaniuk argued that he was not in his right mind when he signed the settlement agreement on his own behalf and on behalf of his wife because he was overwhelmed by concern for his wife's health and by financial stress brought about as a result of not having received a living out allowance for more than a year. However, Wilfred Palaniuk adduced no evidence that he was not mentally competent to agree to the bargain. Further, there was no evidence from the lawyer who accompanied Wilfred Palaniuk during the negotiation that led to the settlement. The court found that it was not sufficient for Wilfred Palaniuk to simply assert that he was mentally unfit. Parties are required to adduce evidence to establish this argument. The law of contract exists to foster certainty in commercial dealings and a bald assertion is insufficient to vitiate a contract.

In addition, the court considered whether the settlement agreement was unconscionable. The court found that both parties compromised their positions in the course of the settlement negotiations and found that the settlement agreement was not so wholly in favour of the insurer at the expense of the plaintiffs that it was substantially unfair.

The settlement agreements contained an unequivocal release of any and all claims for payments of living out allowance over and above the allowances contemplated in the agreement. Accordingly, the court concluded that the plaintiffs' claims for breach of contract were estopped by the terms of the releases they signed and their claims in the action were dismissed.