Recently, the Ontario Court of Appeal released its decision 1086289 Ontario Inc. (Urban Electrical Contractors) v. Welland (City), 2026 ONCA 352 in which the five-judge panel overturned a 2018 decision establishing strict consequences for the failure of settling parties to disclose a partial settlement agreement to non-settling parties in multi-party civil proceedings. In doing so, the Court provided useful guidance on the application of the new Rule 49.14 of the Rules of Civil Procedure and why a change to the common law rules was necessary.
This decision arose as a result of the appeal of four separate orders from the Superior Court of Justice, all of which were centered around the application of the Handley Estate Rule. But what is this rule? And why was it overturned? Let’s take a look.
The Handley Estate Rule
In 2018, the Ontario Court of Appeal released its decision Handley Estate v. DTE Industries Limited, in which it established what is referred to as the Handley Estate Rule. This Rule applied to multi-party civil proceedings where a plaintiff settles an action against one or more of the other parties, but not all the other parties, resulting in a partial settlement agreement.
When such a settlement is reached, the Rule requires the settling plaintiff to quickly disclose the existence of the settlement to the non-settling parties and the court. The Rule dictates that a failure to disclose a partial settlement is deemed an abuse of the court’s process, and the Court shall permanently stay the settling party’s claim as a remedy. A party seeking a stay was not required to establish that the failure to disclose a partial settlement caused them actual prejudice. The failure to disclose alone was sufficient.
Rationale of the Handley Estate Rule
The rationale for the Handley Estate Rule is simple: a settlement agreement between some but not all parties to a civil suit can fundamentally alter the relationship between them. What was once a contentious and adversarial dynamic can quickly become co-operative, resulting in a need for the non-settling parties to re-evaluate their strategies moving forward. This could involve necessary changes to a non-settling party’s line of questioning during cross-examination, the evidence they intend on leading, and even what experts they will retain.
As the Court put simply in Handley Estate, agreements which “change entirely the landscape of the litigation” must be disclosed immediately. The Rule seeks to prevent prejudice to non-settling parties by requiring the settling parties to disclose partial settlement agreements. If they fail to disclose a partial settlement, a stay will be imposed, prohibiting them from proceeding with their claim.
The Ontario Court of Appeal’s Decision
The Court identified two major issues with the Handley Estate Rule as the basis for its overturning. The first issue is its broad and disproportionate application. As the Court wrote, “it stipulates that the failure to disclose a partial settlement on a timely basis is an abuse of process, whether there is evidence of unfairness, prejudice or oppression to the parties or prejudice to the administration of justice.” This inflexible application meant it was unable to be tailored appropriately to respond to the circumstances before the courts, often resulting in unduly harsh consequences for a simple failure to disclose.
Second, if an abuse of process is found because of a failure to disclose a partial settlement agreement, the only applicable remedy under the Rule was to stay the proceedings, ending the litigation. As the Court wrote, the Handley Estate Rule is antithetical to the discretionary nature that defines the doctrine of abuse of process and its application.
Abuse of Process: A Flexible Doctrine
The Court’s main point of contention with the Handley Estate Rule was its inconsistency with the doctrine of abuse of process. As it wrote, this doctrine serves to prevent impediments to the judicial process and is applicable to a wide range of conduct. For example, an abuse of process may occur where a party seeks to re-litigate an issue before the courts. It may also occur where a party engages in vexatious conduct or submits abusive pleadings.
A key aspect of this doctrine is that it requires a holistic evaluation of the circumstances before the court, including the intention of the party, prejudice or unfairness, and the effect of the conduct on the administration of justice. As the Court wrote, a finding of an abuse of process “is not governed by categorical pre-determinations.” It requires the courts to be sensitive to the context and circumstances before it.
However, such inflexibility is a core component of the Handley Estate Rule. Failure to disclose a partial settlement is deemed an abuse of process, and the non-settling party may move for the sole remedy of staying the proceedings. This inflexibility is exactly what the Court refused to reconcile with the doctrine of abuse of process. Instead, it determined that the Rule is no longer good law and should be overruled.
Rule 49.14: A Framework for the Disclosure of Partial Settlements
Rule 49.14 of the Rules of Civil Procedure came into force on June 16, 2025, in response to the same issues that the Handley Estate Rule was intended to address. However, it reflects a more nuanced approach to the non-disclosure of partial settlement agreements. As the Court put it, it trades the axe that was the Handley Estate Rule for a more precise scalpel.
First, Rule 49.14 expands the remedies available to the Court. Subsection 49.14(7) provides the court with the ability to order costs, strike a party’s evidence, and order further discovery, among other things. Of course, a stay of proceedings is available too, just not necessary.
Second, Rule 49.14 applies to all partial settlement agreements and not simply those that “change entirely the landscape of the litigation.” Consequently, there will be no disputes as to whether non-disclosure satisfies this requirement.
Third, Rule 49.14 provides clear guidelines on both the content of disclosure and the timeline for doing so. Subsection 49.14(4) provides for a 7-day time limit in regular circumstances, immediately where a proceeding has commenced, and prior to any proceeding that commences within seven days of the agreement. This subsection also provides for the disclosure of “the terms of the agreement, other than the monetary value of the settlement” to all non-settling parties.
In overruling the Handley Estate Rule, the Court noted that there was ambiguity as to whether the implementation of Rule 49.14 eliminated the Handley Estate Rule. In fact, prior court decisions suggest that the Rule continued to apply to partial settlement agreements “that entirely change the litigation landscape”, while Rule 49.14 applied to all partial settlement agreements. If the Court refused to overrule the Handley Estate Rule, it would be possible that future judicial decisions would find it remains applicable and continue to disproportionately punish the failure to disclose.
Conclusion
The failure to disclose a partial settlement agreement to non-settling parties can cause prejudice and prevent the efficient disposition of matters before the courts. As such, the courts have created rules to deal with the non-disclosure of these partial settlements, although not without pushback. Fortunately, Rule 49.14 of the Rules of Civil Procedure now provides a clear framework for the disclosure of partial settlement agreements, limiting the often harsh and punitive effect of the Handley Estate Rule that previously governed these situations. If you are dealing with navigating the requirements for disclosing partial settlement agreements, contact us.
Daniel Hinds is an articling student at ZTGH and the author of this blog. If you have any questions about this blog, please contact Daniel by email at [email protected].
