In Ontario, it is well-established that litigants must promptly disclose partial settlement agreements. Otherwise, they risk facing adverse consequences. Rule 49.14 of the Rules of Civil Procedure was amended in June of 2025 to codify the requirement to disclose partial settlements. It sets out a variety of remedies that the Court may impose in the event of a failure to disclose.
Prior to that amendment to the Rules, Courts regularly held that a failure to disclosure a settlement that specifically changed the adversarial position of parties into a co-operative one must result in a stay of the non-disclosing party’s claim. In the recent case of Smialek et al. v. Status Construction Ltd. et al., 2025 ONSC 5229, the Honourable Justice Paul B. Schabas held that Rule 49.14 does not override or alter the remedy that the Court ought to apply in the face of non-disclosure of a settlement that changes the adversarial position of parties into a co-operative one. In those cases, the non-disclosing party’s claim will still presumably be stayed.
The Handley Estate Decision
The Ontario Court of Appeal’s decision in Handley Estate v. DTE Industries Limited, 2018 ONCA 324, is an authoritative decision on the disclosure of partial settlement agreements. The Ontario Court of Appeal ruled that any agreement between or amongst parties to a lawsuit that has the effect of changing the adversarial position of the parties set out in their pleadings into a co-operative one must be disclosed immediately. Importantly, it also ruled that the only appropriate remedy in the face of such non-disclosure is to stay the claim of the non-disclosing party. The Court summarized a paragraph 45 key principles that have emanated from prior case law:
- The obligation of immediate disclosure of agreements that change entirely the landscape of the litigation is clear and unequivocal – they must be produced immediately upon their completion.
- The absence of prejudice does not excuse the late disclosure of such an agreement.
- Any failure of compliance amounts to abuse of process and must result in consequences of the most serious nature for the defaulting party.
- The only remedy to redress the wrong of the abuse of process is to stay the claim asserted by the defaulting, non-disclosing party. Why? Because sound policy reasons support such an approach.
Rule 49.14
On June 16, 2025, Rule 49.14 was amended to codify the requirement of immediate disclosure of partial settlement agreements. Rule 49.14 applies to partial settlement agreements broadly. It is not limited to agreements that necessarily change parties’ adversarial positions into cooperative ones. Rule 49.14 (7) specifically sets out the various remedies that the Court may grant in the event of a breach of the disclosure requirements under Rule 49.14:
- make an order for costs, regardless of the outcome of the proceeding;
- order or permit further examinations for discovery, to be conducted at the plaintiff’s expense;
- order additional disclosure or production of documents;
- strike out all or part of a party’s evidence, including any affidavit made by the party;
- adjourn a hearing or other step that permits or requires the attendance of the parties;
- stay the proceeding; or
- make such other order as is just.
The Smialek et al. Decision
The interaction between Rule 49.14 and Handley was addressed in Smialek et al. v. Status Construction Ltd., 2025 ONSC 5229. The Court found that the plaintiffs failed to make proper immediate disclosure of an agreement which had the effect of changing entirely the landscape of the litigation. On the issue of what remedy to apply, the plaintiffs argued that given the broad range of remedies available under Rule 49.14, the Court was no longer bound to stay the plaintiffs’ claim.
The Court rejected the plaintiff’s argument. Although it acknowledged that a stay is a harsh and drastic result, it held that Rule 49.14 does not overrule or change the remedy applied in the Handley Estate decision, in the face of settlements that change the adversarial landscape. Justice Schabas provided a paragraph 25:
[25] Rule 49.14 applies broadly to any “partial settlement agreement.” It is not limited to settlements which change the adversarial landscape, and does not address that situation at all. In these circumstances, I do not read Rule 49.14 as overruling or changing the remedy compelled by Handley.
The Smialek et al. decision serves as a reminder that litigants can face harsh consequences in the event they fail to promptly disclose partial settlement agreements, particularly ones that change the adversarial landscape between parties. It behooves litigants to strictly observe the disclosure requirements set out in Rule 49.14 and emanating from the Handley Estate decision.
If you require advice or assistance navigating partial settlement agreements, please contact any member of our litigation team for more information.
About the Author: Stéphane MacLean joined Soloway Wright as a litigation associate in December 2024. He attended law school at the University of Ottawa and articled at a full-service firm in Toronto. He carries on a general litigation practice with an emphasis on commercial disputes.
