Settling a lawsuit usually comes with relief. There will be no more court dates and no more legal bills, and there is a firm date on which the money should arrive. Then the date comes and goes. The other party stops returning calls, or they claim that they never really agreed to the deal, or they send back the release with changes you never discussed.
A settlement is a contract. If one side fails to live up to it, you are not necessarily back at square one. Ontario’s court rules provide fairly direct ways to turn a deal into something enforceable, and the courts generally favour holding people to their settlements. How you proceed depends on how the settlement was reached, where the case stands and what the document says.
This is general information and not legal advice, and the right step can depend heavily on the wording of your agreement. Family law settlements and settlements for minors or people under a disability follow additional rules, and they are mostly outside this article’s scope.
First, Was There Actually a Binding Deal?
Before enforcing a deal, you need to establish that one exists. People frequently underestimate how early a settlement may become binding. It does not always need a formal signed agreement, and the exchange of letters or emails between lawyers can be enough. Conversely, an exchange that looks like a deal might only be negotiation.
Courts apply ordinary contract principles. They ask whether the parties reached agreement on all essential terms and intended to be bound. The analysis often looks at questions such as:
- Was an offer clearly accepted? A response that adds a new essential term is typically a counter-offer and not an acceptance.
- Were the essential terms settled? In a money dispute, this is usually the amount and the release of the claim. Timing can also be essential, depending on the context.
- Was it subject to something? A phrase such as “subject to client approval” or “subject to a formal agreement satisfactory to our client” may keep the matter open.
- Did the lawyer have authority? A lawyer on the record generally has at least apparent authority to settle a case, so a client’s change of heart after their lawyer accepted an offer can be a weak argument, depending on the circumstances.
The ordinary terms of a release often do not prevent a binding settlement from existing. Once parties have agreed to settle, a term that a release will be signed is commonly implied, and a dispute over its wording usually doesn’t unravel the agreement, unless the wording itself goes beyond what the parties agreed. Keep every email, text and draft, since a judge will look at the whole exchange.
The Two-Step Test
The Court of Appeal in Olivieri v. Sherman, 2007 ONCA 491, set out the approach to enforcement motions in two stages. First, the court asks whether the parties reached a settlement. Second, the court decides whether to enforce it, considering all of the evidence.
That second stage is a safety valve, not a second kick at the can. Commentators have described refusal at that stage as rare. Something such as real injustice is typically required. It helps to know what doesn’t usually count: a party’s second thoughts, a later belief that the deal was too low, or a new document turning up that changes their view of the case. Settlements would have no value if buyer’s remorse could undo them.
Situations that may be examined more closely include a settlement entered into by a person who was unrepresented and clearly did not understand it, a party who lacked capacity, a true mistake about something fundamental, or genuine fraud or duress. Pressure from a difficult negotiation is not the same as duress in law.
Rule 49.09: When an Offer Was Accepted in a Superior Court Case
Where the settlement came from an accepted offer in a Superior Court proceeding, Rule 49.09 of the Rules of Civil Procedure gives you two choices if the other party fails to comply with the terms. You may:
- Make a motion to a judge for judgment in the terms of the accepted offer; or
- Continue the proceeding as if there had been no accepted offer.
The choice is a strategic one. Judgment gives you an enforceable court order on the agreed terms, without having to prove your original case. Continuing with the lawsuit may look attractive if the deal was far below your claim, but it reopens all the risk, cost and delay of litigation. Most plaintiffs who settled for a fair number will prefer judgment.
Rule 49.07(6) also allows the court to incorporate terms of an accepted offer into a judgment. A court may also apply the same approach and the broader two-step test in other settlement situations, even if the deal did not come through the formal Rule 49 forms. In many cases, a party simply brings a motion to enforce within the existing action, as long as the action has not been dismissed.
The Court of Appeal has looked at this in the context of accepted Rule 49 offers, for instance in Hashemi-Sabet Estate v. Oak Ridges Pharmasave Inc., 2018 ONCA 839, confirming that an offer may only be withdrawn in writing. A party who says they withdrew their offer during a telephone call may therefore have a difficult position, assuming the acceptance arrived before a written withdrawal.
The Small Claims Court Version
Small Claims Court has a parallel provision. Under Rule 14.06 of the Rules of the Small Claims Court, if a party to an accepted offer to settle fails to comply with its terms, the other party may make a motion to the court for judgment in the terms of the accepted offer, or continue the proceeding as if there had been no offer. Terms of settlement can be recorded in Form 14D.
For a typical Brampton claim, this motion is brought at the same courthouse at 7755 Hurontario Street. You will need a hearing date from the clerk and must serve your notice of motion and supporting affidavit (Form 15A) at least seven days before the hearing, and file it with proof of service at least three days before. Attach the settlement document, proof of what has not been paid, and proof of any demand you made.
If your settlement was reached at a settlement conference, check what happened then. A judge’s endorsement, a consent order or signed terms can make the next step simpler.
When the Lawsuit Has Already Ended
Timing and paperwork can create a harder situation. Maybe you agreed that you would dismiss the claim once the first instalment arrived. Perhaps the matter settled before any lawsuit began. If no proceeding remains open, you may need to start a fresh action for breach of the settlement contract, or to bring an application if the case fits. Claims up to $50,000 belong in Small Claims Court, and larger ones in the Superior Court. A fresh action adds time and cost, but your task should be simpler, since you are proving the settlement and not the original dispute.
Remember that a settlement is subject to its own limitation period. Generally, you have two years from discovering the breach under the Limitations Act, 2002. If the settlement calls for instalments, each missed payment may raise its own question, although an acceleration clause may affect how that clock runs. By contrast, a court judgment is in a stronger position, as the Act does not place a limitation on proceedings to enforce an order of a court, subject to any other enforcement rules that apply. This is one reason why it often makes sense to have settlements reflected in a court order.
Evidence to Assemble
A motion to enforce generally turns on documents. Before you speak to a lawyer, try to collect:
- The signed agreement, accepted offer or email chain, in full and in date order.
- Any release, consent dismissal or draft that was exchanged.
- A record of payments received, along with bank statements if needed.
- Copies of letters demanding payment or compliance.
- The court file number and any order or endorsement.
- Notes on any discussion of the settlement, including who took part.
Settlement discussions are generally privileged, but that privilege gives way when you are proving that a settlement exists or enforcing its terms. However, be careful about sharing them more widely than the motion requires. Your agreement may also include a confidentiality term, and you will want to consider how it affects what you can file in a public court record, and whether a sealing or redaction request is appropriate.
Non-Monetary Terms and Collecting After Judgment
Not all settlements involve money. A dispute might end with a promise to remove a fence, to stop using a business name, to deliver a reference letter or to transfer a vehicle. These can also be enforced, but the remedy may require a Superior Court order, because Small Claims Court generally deals with the payment of money and recovery of personal property. A breach might sometimes be compensated with damages, while on other occasions a party may seek an order directing them to perform. A breach of a court order may also have more serious consequences than the breach of a private promise.
Vague wording is a recurring problem with these terms. “The parties will act respectfully” or “the defendant will fix the driveway” can easily lead to a second dispute. Clear, measurable obligations are much easier to enforce.
A judgment on the settlement can be enforced in the same way as any other. Options include garnishing wages or bank accounts, filing a writ of seizure and sale against land or personal property, and an examination of the debtor to learn about income and assets. Winning a motion doesn’t produce money by itself, and if the other party has no assets, your practical recovery may be limited. Interest and enforcement costs are also part of the picture.
If the debtor goes bankrupt, the situation changes. An unsecured settlement debt may be compromised in a bankruptcy, and you may need to file a proof of claim with the trustee.
Drafting a Settlement So You Need Not Enforce It
If you are still negotiating, this is the moment to prevent the problem. Practical protections include:
- A consent to judgment held in escrow by the plaintiff’s lawyer, to be filed if there is a default.
- Minutes of settlement that spell out the exact amount, the payment dates, how payment will be made and what counts as a default.
- An acceleration clause making the full balance due on a missed instalment.
- A default amount. Take advice on this, because a sum that operates as a penalty might not be enforced.
- A notice-and-cure clause that gives a short, clearly defined opportunity to fix a default, which can reduce arguments.
- Security, such as a personal guarantee from a company’s owner or a charge on land.
- A dismissal only when paid. Consider having the action dismissed, and the release given, only when the payment has cleared.
- A clear statement about authority and legal advice, confirming each party had the opportunity to get independent advice.
A hypothetical example shows why this matters. A Brampton supplier settles an $80,000 debt for $60,000, paid in six instalments. Without an acceleration clause or consent judgment, a default after the first payment might lead to a dispute over what is now owed and how soon. With those terms in place, the path to judgment for the unpaid balance is much clearer.
Moving Forward
If a settlement has gone off the rails, resist the temptation to write angry emails or threaten to tell customers or relatives. Send a clear written reminder of the term that was breached, the amount due and a short deadline, then diarize the date. Check any notice-and-cure clause before you act. Take advice before you accept a late or partial payment, as this may carry implications if it is not properly documented.
You can read more about our civil litigation work and the civil motions and applications that are often used in this setting. If you have a signed agreement that is not being honoured, you are also welcome to contact our Brampton office with your documents. A deal you negotiated in good faith should not have to be fought over twice, and an early step is often all that’s needed to find out whether it will be.