Ontario Court Of Appeal Overturns Handley Estate And Applies A More Flexible Standard In The Context Of Disclosure Of Partial Settlement Agreements

Since it was handed down in 2018, the Ontario Court of Appeal’s decision in Handley Estate v. DTE Industries, 2018 ONCA 324 (“Handley Estate”) — where the Court held that the failure to “immediately” disclose certain partial litigation settlements was an abuse of process warranting an automatic stay of proceedings,¹ without exception — has been a source of controversy and frequent litigation within the legal profession.

In a recent decision, 1086289 ON Inc. (Urban Electrical Contractors) v. Welland (City), 2026 ONCA 352 (“Welland”), the Ontario Court of Appeal reversed course, finding that Handley Estate was wrongly decided, and overturning the decision in favour of a much more flexible framework focused on the particular circumstances of the case. The Court also considered, for the first time, Rule 49.14 of the Rules of Civil Procedure, which was promulgated in 2025 as a direct legislative response to Handley Estate.

Background - the Handley Estate Rule: In Handley Estate, the Court articulated a new rule governing disclosure of partial litigation settlement agreements: where a partial settlement agreement changes the “adversarial landscape” of the litigation, it must be “immediately” disclosed to the non-settling parties and the court. Failure to do this constitutes an abuse of process, and a stay of proceedings is the only available remedy. Prejudice need not be shown.² 

Despite the obvious benefits of mandating disclosure of partial settlements, the automatic and exceptionless nature of the rule in Handley Estate had been seen by many (including lower courts tasked with applying it) as unduly harsh and potentially leading to unfair and punitive outcomes. As the Court in Welland observed, the rule had become a “trap for the unwary” and a tool for those seeking to take advantage of minor slips and inadvertent non-compliance. This is very arguably not what had been intended by the Court in Handley Estate.

Rule 49.14: To address confusion and potential abuse relating to the Handley Estate rule, the Ontario Civil Rules Committee established Rule 49.14 in 2025. The rule prescribes timelines for the mandatory disclosure of partial settlements and empowers courts to grant a range of discretionary remedies for non-compliance (including remedies short of a stay, such as an award of costs).

Rule 49.14 requires that whenever there is a partial settlement agreement, “all terms other than the monetary value of the settlement must be disclosed” by the earlier of 7 days after the partial settlement is made, or the taking of further steps in the proceedings. Special timelines apply where the partial settlement requires court approval.³

Rule 49.14 arguably displaced the Handley Estate rule at least in part. However, the Court in Welland observed that Handley Estate would likely continue to apply to partial settlements that changed the “adversarial landscape” of the litigation. As such, the Court emphasized the importance of revisiting Handley Estate and clarifying the common law.⁴

The Court of Appeal overturns Handley Estate: In Welland, the Court outlined numerous challenges created by the Handley Estate rule. The rule was at odds with the discretionary, contextual approach generally applied by courts under the abuse of process doctrine.⁵ The mandatory, exceptionless stay requirement had proven especially counterproductive in two scenarios: where the prejudicial effects of the non-disclosure are disproportionate to a stay, and where litigants use the Handley Estate rule strategically “to take advantage of minor slips”.⁶

In the years since Handley Estate, lower courts had attempted to qualify the rule to limit its scope, but modifications only intensified the ambiguity. In 2022, the rule was refined by the Court of Appeal itself to require that the agreement changing the adversarial landscape “significantly alters the dynamics of the litigation”.⁷ These revisions added to ongoing challenges in interpreting satisfactory timing for immediate disclosure, and identifying which terms specifically impact the adversarial landscape and accordingly require disclosure.⁸

The Court of Appeal’s revised rule for partial settlement disclosure: The Court overturned Handley Estate in favour of a flexible framework where the "determination of whether there has been an abuse of process involving partial settlement non-disclosure, and the selection of a remedy, are matters for the informed discretion of the court, to be exercised in light of all the relevant circumstances".⁹

Unlike under Handley Estate, litigants must demonstrate that delayed disclosure of the settlement agreement constitutes an abuse of process, and that the remedy sought is proportionate to the effect of the non-disclosure. The court also highlighted that “prejudice either to the parties or to the administration of justice is now a significant consideration in the [analysis]”.¹⁰ This too is a significant departure from Handley Estate where prejudice was not required to be shown.

Partial settlement non-disclosure is once again assessed under the abuse of process framework, which asks whether the non-disclosure is motivated by improper intent, has resulted in prejudice, oppression, or unfairness, or has otherwise undermined the integrity of the administration of justice.¹¹

Practical guidance for appeals: The four appeals decided jointly in Welland offer practical guidance as to where the new test for abuse of process will be satisfied.

For example, in the Evertz Technologies Ltd. v. Providius Corp., et al. appeal, the Court found that the conduct grounding a stay at first instance – misleading, piecemeal, and delayed disclosure to the other litigants and the court – would receive the same remedy under the revised, discretionary approach.¹² In contrast, the 1086289 Ontario Inc. v. Welland (City) appeal was remitted for a rehearing because the reasons were “directly tied to the analytic framework of Handley Estate” such that the key questions under the revised approach could not be answered from the trial judge’s decision.¹³

The court also clarified the appeal routes for remedies to partial litigation settlements. Where an abuse of process is found by the Superior Court of Justice and addressed by interlocutory remedy, it may be appealed to the Divisional Court with leave. An appeal from the Superior Court concerning the granting of a stay is a final order, and therefore heard by the Court of Appeal.¹⁴ Appeals of non-findings of abuse of process are also dealt with by the Divisional Court, with leave.¹⁵ Once a correct legal foundation is established, both the finding and discretionary remedy “attract appellate deference”.¹⁶

Takeaways

• The rule in Handley Estate is no longer the law in Ontario: disclosure of partial litigation settlements are now governed by the new framework articulated in Welland, and by Rule 49.14 of the Rules of Civil Procedure.
• Prejudice and proportionality are now central considerations in determining a remedy for agreement nondisclosure.
• Rule 49.14 establishes uniform and rigorous standards for disclosing partial settlements, but the court may address technical noncompliance with discretion.

Footnotes

1 Handley Estate v. DTE Industries, 2018 ONCA 324 at para 45.

2 1086289 ON Inc. (Urban Electrical Contractors) v. Welland (City), 2026 ONCA 352, at para 15 [Welland].

3 Welland at para 49.

4 Welland at para 58.

5 Welland at paras 16-17.

6 Welland at para 44.

7 Welland at para 41.

8 Welland at para 42.

9 Welland at para 6.

10 Welland at para 105.

11 Welland at para 25.

12 Welland at para 125.

13 Welland at para 103.

14 Welland at para 80.

15 Welland at para 85.

16 Welland at para 31.