In Ontario, courts have consistently required parties in multi-party litigation to promptly disclose any partial settlement agreements to both the court and the non-settling parties. Failure to do so can result in severe consequences, such as a stay of proceedings against the non-settling defendants.[1]
Interestingly, not all partial settlements trigger the requirement to disclose.[2] Immediate disclosure is only required when the settlement significantly changes the “litigation landscape”.[3] In practice, the “litigation landscape” may be changed where the terms of the settlement transform an adversarial relationship into a cooperative one,[4] as in the case of Mary Carter agreements[5] and Pierringer agreements.[6]
Although Ontario courts have traditionally required immediate disclosure, the 2024 Ontario Court of Appeal decision in Kingdom. has opened the door to a potentially more flexible definition of “immediate”.
The court in Kingdom reasoned that ‘immediate’ should be interpreted based on the intent to conceal the settlement rather than a strict timeframe.[7] This means that the focus should be on the impact of the settlement on the litigation and the settling parties’ intentions, rather than just the time elapsed between the settlement and its disclosure.
Pre-Kingdom Interpretation
As stated in Aecon Buildings v. Stephenson Engineering Limited,[8] the duty to disclose is "clear and unequivocal" and any failure is considered an abuse of process, warranting serious consequences.[9]
In Laudon v. Roberts,[10] the term “immediate” was defined as meaning “as soon as [the settlement agreement] is concluded.”[11] Similarly, in Tallman Truck Centre Ltd v. KSP Holdings Inc,[12] “immediate” was clarified to mean that it should not be “eventually” or “when it is convenient”.
The court in Laudon emphasized that immediacy is crucial for justice and fairness, as a partial settlement can immediately affect (1) the strategy and procedural actions of non-settling defendants and (2) the court’s oversight of the litigation process.[13] Examples of failures to disclose immediately include:
- Disclosure of the agreement “several” months after its execution, only after the plaintiff independently discovered it;[14]
- Disclosure about eight months post-execution, with the plaintiff’s belief that the settlement was irrelevant;[15]
- Disclosure three weeks after execution, following a court order;[16]
- Disclosure “piecemeal” over about five months, with the full terms finally revealed only after extensive discussions.[17]
Post-Kingdom Interpretation
The decision in Kingdom has introduced a more nuanced approach to the concept of ‘immediate’ disclosure. Although there are similarities to the ‘piecemeal’ disclosure in Handley, the disclosure in Kingdom was deemed compliant based on its specific circumstances.
In Kingdom, the sequence of events was as follows:[18]
- On March 1, 2021, Kingdom’s counsel informed the non-settling defendants that a settlement agreement was “expected”
- On March 4, 2021, the Minutes of Settlement were executed
- On March 11, 2021, in response to an inquiry from a non-settling defendant, Kingdom’s counsel confirmed the settlement and mentioned that the settling defendant’s counsel would be updating the other parties.
- On March 29, 2021, a letter from one of the settling defendants detailed:
- The conclusion of the settlement between specific parties.
- The discontinuance of the plaintiff’s action against the settling defendants.
- The transfer of the plaintiff’s action against the non-settling defendants to the insurance company through subrogation.
- Finally, on March 30, 2021, in response to a direct request, the full terms of the Minutes of Settlement were disclosed.
The court in Kingdom concluded that ‘immediate’ should be interpreted “purposively.” A stay should be considered only if there is an effort to conceal the settlement.[19] If the litigation remains "dormant" between settlement and disclosure, and there is no substantial impact on (1) the non-settling parties’ strategy and procedural steps or (2) the court’s management of the case, a stay would not serve justice and fairness.[20]
In essence, Kingdom shifts the focus from a strict time-based analysis to a more context-specific evaluation. This approach considers the actual impact of the settlement on the litigation and the intent behind the disclosure process, rather than imposing a rigid timeframe. Each case will require a detailed examination of its unique facts, rather than a blunt application of time limits.[21]
[1] Kingdom Construction Limited v. Perma Pipe Inc, 2024 ONCA 593 [Kingdom] at para 1.
[2] Kingdom, supra note 1 at para 31.
[3] Kingdom, supra note 1 at para 1.
[4] Handley Estate v. DTE Industries Ltd, 2018 ONCA 324 [Handley] at para 1.
[5] Laudon v. Roberts, 2009 ONCA 383 at para 36.
[6] Handley, supra note 4 at para 39.
[7] Kingdom, supra note 1 at para 33.
[9] Aecon, supra note 8 at para 16.
[10] 2009 ONCA 383 [Laudon]
[11] Laudon, supra note 10 at para 39.
[12] 2022 ONCA 66 [Tallman].
[13] Laudon, supra note 10 at para 39.
[14] Aecon, supra note 8 at para 14.
[15] Skymark Finance Corporation v. His Majesty the King in Right of Ontario et al., 2023 ONCA 234 at para 34.
[16] Tallman, supra note 12 at paras 1, 10.
[17] Handley, supra note 4 at para 3, 14-21.
[18] Kingdom, supra note 1 at paras 21-28.
[19] Kingdom, supra note 1 at para 33.
[20] Kingdom, supra note 1 at para 33.
[21] Kingdom, supra note 1 at para 33.