In Haas v. Viscardi, 2018 ONSC 2883 (CanLII) the plaintiff settled a claim of $200,000 based on fraudulent misrepresentation with three defendants. The settlement agreement provided for various payments by the defendants on specified dates. The settlement agreement required Viscardi to make payments of $30,000 in three installments. If Viscardi failed to make the payments on the dates provided, the settlement agreement provided that Viscardi would consent to judgment for $60,000 (the “Consent Judgment Clause”).
Viscardi made one payment of $10,000, but failed to make the remaining two payments, in breach of the settlement agreement. He then refused to consent to judgment. The plaintiff commenced a claim to enforce the settlement agreement, and brought a motion for summary judgment.
The motion judge rejected Viscardi’s argument that the Consent Judgment Clause was an unenforceable penalty clause. The judge considered the test for whether a liquidated damages clause is an unenforceable penalty: whether the amount stipulated is “extravagant” and whether the clause is “unconscionable”.
The judge found that the Consent Judgment Clause amount was not extravagant – it was approximately ⅓ of the initial $200,000 claim against the three defendants, which claim the plaintiff had compromised by settlement. The motion judge also found that the Consent Judgment Clause was not “unconscionable”: Viscardi was represented by a lawyer who participated in negotiations. He appeared to be a sophisticated businessman, who entered freely into the settlement agreement.
The motion judge found that the Consent Judgment Clause was enforceable and found Viscardi liable for $60,000.