Handley Rule Overturned: A New Test for Post-Settlement Disclosure and Abuse of Process
A Recent Case Reverses a Controversial Settlement Doctrine
In a recent decision, the Ontario Court of Appeal (“ONCA”) overruled a 2018 rule, which declared that, in a multi-party dispute, settlements reached between parties must be immediately disclosed to any non-settling parties (the “Handley Rule”).[1] In 1086289 Ontario Inc. (Urban Electrical Contractors) v Welland (City) (“Welland”), ONCA concluded that the Handley Rule was improper because it violated the basic principles of determining abuse of process, which rely heavily on discretion.
The Handley Rule originates from the 2018 decision in Handley Estate v DTE Industries Limited (“Handley”). The Handley Rule stipulated that any settlement agreement that “changed the landscape of the litigation” needed to be disclosed to non-settling parties; a failure to disclose was sufficient to stay (pause) the proceedings, which is the only remedy Handley provided.[2] Already widely controversial for its broad qualification for abuse of process, as well as being overly strict, ONCA overturned Handley with the Welland decision, which eliminated the Handley Rule.
The New Rule Provides New Remedies and a More Reasonable Test
The Handley Rule wrongly defined the abuse of process doctrine as being decided by categorical considerations.[3] As ONCA put it, the Handley Rule is an axe, but the test for abuse of process needs to be a scalpel.[4] “Abuse of process”, generally, depends on factors such as improper intent, unfair results, or harm to the justice system’s reputation. Assessing these factors requires close attention to the context of the case, which the Handley Rule failed to accomplish, due to its rigid approach to disclosure and abuse of process.[5] Removing the Handley Rule also prevents bad-faith actors from taking advantage of accidental failures to disclose by asking the courts to stay the proceedings against them.
Even before Welland formally overturned Handley, a new rule for settlement disclosure had been introduced. Rule 49.14 of the Rules of Civil Procedure expands the scope of remedies for non-disclosure, such as ordering new examinations or striking out certain evidence.[6] This new approach means that a stay of proceedings is no longer the only response to an undisclosed settlement.
Additionally, Rule 49.14 sets out far clearer terms for the disclosure, stating that “all terms other than the monetary value” must be disclosed before the earlier of:
- seven days after the agreement, or;
- the start of the next step in the proceeding.
These procedures are more well-defined and leave more room for nuanced analysis than the broad definitions in Handley. They also avoid confusion over what counts as “changing the litigation landscape”, since they apply to all partial settlements regardless of their effect. Once abuse of process is proven, courts have discretion to remedy the abuse based on what is proportionate, with a stay of proceedings only awarded in the “clearest of cases.”[7]
Rule 49.14 is now the main framework for settlement disclosure in multi-party cases. While clearer than the Handley test, it preserves the responsibility for settling parties to disclose their agreement to non-settling parties.
Addendum to Our Past Article
In a previous article, we explained how a lawsuit can be stayed if a settlement agreement between other parties which subjects non-settling defendants to higher risk is not swiftly disclosed. That particular section no longer applies now that the Handley rule is overturned.
It is important to obtain legal advice before into a settle agreement, especially in multi-party proceedings. If you have questions about your rights regarding settlement, please reach out to Walker Law’s experienced litigation team for an initial consultation.
[1] 1086289 Ontario Inc. (Urban Electrical Contractors) v. Welland (City), 2026 ONCA 352 [Welland]
[2] Handley Estate v. DTE Industries Limited, 2018 ONCA 324.