INTRODUCTION
On May 19, 2026, the Court of Appeal released a landmark decision in 1086289 Ontario Inc (Urban Electrical Contractors) v Welland (City), 2026 ONCA 352, overturning the precedent in Handley Estate regarding the disclosure of partial settlements to non-settling parties.
Handley Estate v DTE Industries Limited, 2018 ONCA 324, provided that where parties enter into a partial settlement agreement that changes the adversarial landscape of the litigation, the agreement must be disclosed immediately to the non-settling parties and the court. Failure to disclose would automatically be found to be an abuse of process and a permanent stay of proceedings was the only available remedy to the court – notably, prejudice was not a considered factor.
In a rare and full-throated unanimous decision, the five-member panel fully overturned Handley Estate, finding that it had been “wrongly decided” and contained “erroneous reasoning”. Going forward, failures to disclose partial settlement agreements are to be assessed under ordinary abuse of process principles, which require careful consideration of the appropriate remedy. A stay of proceedings remains available, but only in the clearest of cases where the prejudice to a party or to the integrity of the judicial process is such that no lesser remedy would suffice. In other cases, courts retain the discretion to impose a range of remedies responsive to the circumstances, including those now reflected in Rule 49.14 of the Rules of Civil Procedure.
THE HANDLEY ESTATE RULE
Handley Estate, released by the Court of Appeal in 2018, rested on six propositions:
1. A plaintiff may settle an action against one or more other parties while leaving the action to continue against the remaining parties.
2. Such a settlement agreement can change the adversarial position of the settling parties as set out in their pleadings into a co-operative one and could “change entirely the landscape of the litigation.”
3. The settlement agreement must be immediately disclosed to the non-settling parties and the court. The disclosure obligation extends to terms of the agreement relevant to the litigation.
4. Failing to disclose such a settlement agreement is an abuse of the process of the court.
5. The party moving for a stay based on a failure to disclose need not prove that the responding party’s failure to disclose prejudiced the moving party. Prejudice is not relevant to the abuse of process inquiry.
6. The “only remedy for this abuse of process is to stay the claim of the non-disclosing party”.
UNCERTAINTY AND CHALLENGE CAUSED BY HANDLEY ESTATE
The Handley Estate rule sat uncomfortably within the abuse of process doctrine within the common law, which requires a contextual assessment of the impugned conduct and a proportionate remedy. The purpose of the abuse of process doctrine is to preserve the integrity of the judicial process across all types of proceedings. Handley Estate removed discretion at both stages of the analysis, requiring an automatic finding of abuse of process where a party failed to immediately disclose a settlement and a permanent stay of proceedings regardless of whether there was any actual prejudice or unfairness to the non-settling parties.
The unduly harsh consequences of the Handley Estate rule resulted in significant satellite litigation (i.e., ancillary disputes over procedural requirements rather than the merits of the underlying case) over its precise requirements. The disclosure obligation applied only to those partial settlement agreements that “change entirely the landscape of the litigation in a way that significantly alters the dynamics of the litigation”. Despite the rule’s requirement of “immediate” disclosure, the precise meaning of immediacy was repeatedly litigated. Parties also litigated the extent of disclosure required, both respecting the types of agreements to be disclosed and the exact terms. The rule created significant uncertainty for lawyers and litigants and interfered with having cases heard and determined on their merits.
OVERTURNING HANDLEY ESTATE
In Welland, the Court heard four separate appeals together, all of which raised the common issue of the disclosure obligation for partial settlement agreements in multi-party litigation. In clear and certain terms, the Court stated that it overruled Handley Estate, and that it had been wrongly decided because it departed from the discretionary approach that is at the heart of the abuse of process doctrine. Now, prejudice to the parties or to the administration of justice is a central consideration in the abuse of process analysis, a factor that had no role under the automatic Handley Estate framework. Courts will now weigh factors such as the nature and extent of the nondisclosure, any resulting prejudice to the non-settling parties, the stage of the proceedings, and the impact on the integrity of the judicial process.
THE COMMON LAW FRAMEWORK AND RULE 49.14 OF THE RULES OF CIVIL PROCEDURE
In response to the concern and controversy caused by Handley Estate, the Civil Rules Committee added a new rule for the disclosure of partial settlement agreements. The new
Rule 49.14 came into force on June 16, 2025. Rule 49.14 requires a party to a partial settlement agreement to disclose the terms of the agreement, aside from the monetary amount, to every other plaintiff and defendant who is not a party to the agreement:
(a) immediately after the agreement is reached, if the hearing has already commenced; or
(b) if the hearing of the proceeding has not commenced, by the earlier of,
(i) seven days after the agreement is reached, and
(ii) the taking of any further step in the proceeding by any party to the agreement.
Rather than an automatic stay, the new subrule 49.14(7) provides a range of possible consequences for breaches of the Rule, including costs, further examinations for discovery, striking evidence, staying proceedings, and other appropriate orders.
Rule 49.14 addresses four key concerns arising from Handley Estate:
(a) the available remedies to address non-disclosure are expanded;
(b) the rule applies to any partial settlement agreement, not merely those that entirely change the litigation landscape; and
(c) the rule clarifies what must be disclosed: all terms of the settlement aside from the monetary amount; and
(d) the rule sets a deadline for disclosure, replacing the “immediacy” requirement that was the source of many motions in the wake of Handley Estate.
In Welland, the Court confirms that Rule 49.14 and the common law are now “consistent with one another” and that the rule reinforces the “discretionary and proportionate approach” that governs the abuse of process analysis.
WELLAND’S APPLICATION IN PENINSULA EMPLOYMENT SERVICES
The Court of Appeal has already applied Welland. On June 17, 2026, the Court allowed the appeal in Peninsula Employment Services Ltd v Castillo, 2026 ONCA 450, setting aside the motion judge’s decision to stay the action due to non-disclosure of a partial settlement agreement. The motion judge had decided the motion prior to the decision in Welland and applied the zero-tolerance approach for failure to immediately disclose that was mandated by Handley Estate and subsequent authorities. The motion was remitted to the motion judge for re-determination based on the current law.
IMPACT ON CONSTRUCTION PARTIES AND OTHER CIVIL LITIGANTS
Welland is a welcome clarification for construction litigation, which is dominated by multi-party disputes and complex webs of interest and adversariness. The Welland appeal arose from exactly this type of dispute over the design and construction of the Welland International Flatwater Centre which involved three main actions, involving counterclaims, crossclaims, and third- and fourth-party claims relating to non-payment, design deficiencies, and construction delays. For construction law practitioners and litigants, Welland replaces procedural uncertainty and its associated risks with principles that support having cases heard on their merits, while still protecting against the abuses Handley Estate sought to deter.