Written By: Brandon Pedersen, Associate, and Rosanna Zitoli, Student-At-Law
5 Minute Read
Introduction
Legal proceedings can strain many areas of a person’s life after an accident, particularly their finances. When bills begin to pile up and a settlement remains out of reach, clients may consider litigation loans to fund their treatment and overall lifestyle after an accident, when their ability to earn income may be compromised.  However, these loans often carry high interest rates that accumulate quickly. Once a settlement is reached, the loan is typically repaid from the settlement funds – but only after those funds are received by the plaintiff’s firm. So, what happens when payment is unreasonably delayed and the plaintiff continues to incur interest after settlement? Who should bear that additional cost?
The traditional rule in Ontario is that the principal and interest on litigation loans are generally not recoverable. In Giuliani, the Court focused on the unreasonableness of shifting high-interest litigation financing charges to the defendant, further emphasizing the public policy concerns about encouraging predatory or usurious lending practices. The decision in Mann supports the same general rule, framing the issue in terms of remoteness and foreseeability due to the unique nature of litigation loans. Since litigation loans typically arise as a result of the plaintiff’s personal financial circumstances, it is not a reasonably foreseeable consequence of the defendant’s conduct in a typical situation unless they are made abundantly aware. Furthermore, in Davies, the Court declined recovery of the litigation loan, reinforcing that a plaintiff seeking litigation loan interest must be able to clear a high evidentiary bar, showing necessity, reasonableness, and a connection between the loan and the litigation expense claimed.
The 2026 decision in Selleck v. Stanutz (Estate) et al. therefore points to a narrow avenue for recovery where delayed payment of settlement funds forces the plaintiff to continue carrying a litigation loan longer than necessary.
Background
While litigation loans are intended to provide clients with financial stability during litigation, the loan does not disappear once a file settles. Repayment usually depends on the release of settlement funds, and in the meantime, interest can continue to accumulate at high rates, including rates such as 19.9%. In Selleck v. Stanutz (Estate) et al., the plaintiff was seriously injured in a collision involving a dump truck. The action was commenced in 2019, and the plaintiff had taken out a litigation loan during the proceedings. The matter ultimately settled on December 22, 2025, for $1,195,100.00.
Although the matter settled, the funds were not released promptly and were only paid after a court order was obtained, which is far from the usual course. It is also worth noting that, in this case, the defendant was aware of the borrowing rate, as the plaintiff had asked for an advance payment of funds, which the defendant refused. On April 17, 2026, the court confirmed that the parties had entered into a binding settlement agreement and ordered payment of the settlement funds.
The plaintiff therefore sought interest reflecting the continued borrowing cost caused by the delayed payment of the settlement funds, arguing that the defendant should bear at least part of the litigation-loan interest that accumulated while the settlement funds remained unpaid.
Decision
Justice MacLeod held that interest may be payable where there is a substantial delay between settlement and payment. The need for a court order to release the funds was a significant factor in the analysis. The court accepted the litigation-loan rate as a measure of the loss caused by the delay, making the case important for settlement administration and post-settlement delay disputes. The central issue was not whether litigation-loan interest is generally recoverable, but whether the delay caused the plaintiff to incur additional financing costs that were foreseeable and unreasonable.
Interest was ultimately awarded from December 22, 2025, to the date of payment, treating it as post-judgment interest from settlement. Interest was in fact set at the litigation loan percentage of 19.9% on $200,000.00, with the remaining balance at the Courts of Justice Act post-judgment interest rate. Costs were also awarded for the appearance on April 17, 2026, at $11,000.00 on a partial indemnity scale.
Takeaways
A settlement is a binding agreement that requires cooperation from both parties to bring the case to completion. When payment is substantially delayed and the plaintiff is left carrying litigation-loan interest, Selleck suggests the court may grant relief for those additional costs. The case does not make litigation-loan interest routinely recoverable in Ontario; instead, it shows that a court may treat the real borrowing cost as compensable in a fairness-based, fact-specific setting. Although the court retains discretion, Justice MacLeod’s ruling supports the possibility of recovery and has important access-to-justice implications.
