Court Upholds Minutes of Settlement Calling for Increased Payment Upon Default:
In 1504641 Ontario Inc. v. 2225902 Ontario Inc., 2022 ONCA 175
the Court was faced with an issue involving the enforcement of Minutes of Settlement .
The MOS had a clause which said that the defendants was to pay $40,000 in four equal instalments and, if they defaulted on any payment, they consented to a default judgement in the sum of $120,000 less any payments made.
Surprise, the defendants paid only $30,000 and the Plaintiff’s moved for judgement on the remaining $90,000.
The MOS was enforced, despite the Defendants argument that the payment was a penalty. This is what they said.:
[12] The appellants also argue that the $90,000 award amounts to a penalty. We do not accept that argument. The parties entered into Minutes of Settlement as a compromise to avoid a trial. As part of that compromise, the respondents agreed to reduce their claim to finally resolve the matter without additional costs if the reduced amount was paid in a timely way. In these circumstances, the amount required to be paid under the consent to judgment in the event that all of the instalment payments were not made is not a penalty. amount was a penalty
My Comments :
This is a common settlement structure where the defendant needs time to pay. It creates a great incentive to honour a MOS. I am pleased that the Court upheld the deal because to do otherwise would eat away at the vital importance of enforcing settlements.
the Court was faced with an issue involving the enforcement of Minutes of Settlement .
The MOS had a clause which said that the defendants was to pay $40,000 in four equal instalments and, if they defaulted on any payment, they consented to a default judgement in the sum of $120,000 less any payments made.
Surprise, the defendants paid only $30,000 and the Plaintiff’s moved for judgement on the remaining $90,000.
The MOS was enforced, despite the Defendants argument that the payment was a penalty. This is what they said.:
[12] The appellants also argue that the $90,000 award amounts to a penalty. We do not accept that argument. The parties entered into Minutes of Settlement as a compromise to avoid a trial. As part of that compromise, the respondents agreed to reduce their claim to finally resolve the matter without additional costs if the reduced amount was paid in a timely way. In these circumstances, the amount required to be paid under the consent to judgment in the event that all of the instalment payments were not made is not a penalty.
amount was a penalty
My Comments :
This is a common settlement structure where the defendant needs time to pay. It creates a great incentive to honour a MOS. I am pleased that the Court upheld the deal because to do otherwise would eat away at the vital importance of enforcing settlements.
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