Does every settlement in Ontario civil litigation need to be approved by a court?

Most settlements between capable adult parties in Ontario do not require court approval. Once both sides agree and sign the necessary documents, the settlement is binding. The lawsuit is then closed by filing a consent dismissal or notice of discontinuance.

There are important exceptions. Settlements involving a person under 18 or a mentally incapable person must be approved by the court to ensure the settlement is in their best interests. In those cases, a motion for approval is brought, and the court reviews the terms before they take effect. Similarly, class action settlements in Ontario must receive court approval, which involves notice to class members and a fairness hearing.

In estate litigation, where the estate or a beneficiary lacks the capacity to make independent decisions, approval may also be required. Outside these special categories, however, private parties are free to settle their dispute on whatever terms they agree are fair. Courts will generally hold parties to their bargains and do not re-examine the fairness of settlements between capable adults unless there is evidence of fraud, unconscionability, or a fundamental misunderstanding about the terms.