Legal Blog

Settlement – Penalty Clause

Haas v. Viscardi 2018 Ont SCJ

Plaintiff claimed $200,000 in damages, but settled for $30,000 payable in 3 equal instalments on 3 separate dates. The minutes of settlement stated that if the defendant failed to make any one of the payments, then the defendant would be liable for liquidated damages of $60,000 (in effect, regardless of the number of payments that had previously been made). The defendant made the first $10,000 payment and then defaulted. The plaintiff sued for $60,000. The judge held that the amount to be paid was not a penalty; it was slightly less than one-third of the original $200,000 claim. The judge further held that the liquidated damages clause was not unconscionable; there was no inequality of bargaining power and the terms of the agreement did not have a high degree of unfairness. Finally, the judge declined to give relief from the forfeiture under section 98 of the Courts of Justice Act because, the payment was not a penalty and, even if it were, it was not extravagant or unconscionable for reasons already given. The judge granted judgment for $60,000.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.