Settlements are designed to bring finality to litigation, but without careful consideration, they can raise practical questions making resolution more difficult. In a recent decision from the Ontario Court of Appeal, the Court tackled the narrow but consequential issue of whether a plaintiff is entitled to post-judgment interest following a settlement agreement. The case offers a reminder that unless parties secure a formal court order or expressly incorporate interest provisions into their settlement, the statutory provisions of the Courts of Justice Act will not necessarily be engaged. This decision not only underscores the importance of precision in drafting settlement terms but also reinforces the limits of judicial intervention when disputes arise after the handshake.
In Rajic v. Spivak, 2025 ONCA 363, the Court grappled with the question of whether post-judgment interest applies when parties settle litigation but delay finalizing documentation. The appellant, having settled a negligence action against his former counsel for mishandling a personal injury claim, sought post-judgment interest on the agreed-upon settlement sum of $100,000. The Court's answer was a firm no.
The parties had reached a settlement on November 6, 2023, for a lump sum including interest, with costs left to be resolved separately. However, post-settlement friction emerged: the appellant insisted on a release that expressly included payment of post-judgment interest, whereas the respondents maintained no such term had been agreed to. As a result, neither the release was signed nor the funds forwarded.
In March 2024, the appellant brought a motion seeking judgment in accordance with the settlement terms, while claiming post-judgment interest from the date the agreement was made. However, the motion judge ruled that section 129(1) of the Courts of Justice Act, which allows post-judgment interest from the date of a court order, did not apply here. The parties had settled voluntarily; no court order requiring payment had been made, and therefore no entitlement to post-judgment interest had arisen.
On appeal, the Ontario Court of Appeal upheld that ruling. The court emphasized that while the settlement included standard implied terms, including the execution of a full and final release and dismissal of the action, it did not include post-judgment interest, and the statute could not be stretched to insert such a term retroactively.
The appellant also challenged the lower court's failure to award interest on costs. Yet, by the time of the appeal, he had made no effort to have his costs assessed or fixed. The panel noted that under section 129(4) of the Act, post-judgment interest on costs is only triggered from the date they are assessed, which had not occurred.
Ultimately, the court dismissed the appeal and awarded the respondents costs. In doing so, it offered a practical reminder that settlement is not judgment. Absent a court order or assessed costs, statutory interest provisions are not engaged. Litigants must finalize paperwork promptly and not use interest demands as leverage post-agreement.
This case serves as a cautionary tale for litigators: clarity in settlement documentation is paramount. While parties may feel the matter is resolved once a deal is struck, unresolved terms – particularly around costs and interest – can lead to costly delays and unnecessary litigation. Counsel should ensure that all critical terms, including the timing and scope of interest payments, are explicitly addressed in writing. Moreover, litigants must take proactive steps to finalize settlements, such as executing releases and resolving costs promptly, rather than relying on courts to fill in the gaps.
For parties to a lawsuit, this case underscores the importance of acting reasonably and efficiently once a settlement has been reached. Litigation is emotionally and financially taxing, and prolonging matters post-settlement, whether through inflexible demands, refusal to execute standard documents, or holding out for terms not expressly agreed upon, undermines the finality that settlement is meant to achieve.
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