Effective June 16, 2025, Ontario introduced Rule 49.14 to the Rules of Civil Procedure, codifying the common law duty to disclose “partial settlement agreements”. While this disclosure obligation traditionally arises in multi-party civil proceedings, the new statutory rule makes clear that its reach extends to estate proceedings. While it can be seen that codification brings some clarity to the disclosure obligation, it has also raised important questions about the continued role of Handley’s automatic stay sanction, especially in the passing of accounts context.
The Certainty: applicable to estate litigation
Rule 49.01.1 makes clear that Rule 49 applies to actions, applications, and motions. Estate litigators should, therefore, be cautious not to overlook the mandatory disclosure rules set out in Rule 49.14 when their clients enter into a partial settlement agreement.
Under Rule 49.14, a partial settlement agreement is any binding agreement—written or unwritten—between at least one plaintiff and one defendant, where at least one other defendant remains in the litigation. The rule imposes strict timelines for disclosure and requires the use of Form 49E to formally notify the court and all non-settling parties of the agreement’s terms (excluding monetary value). Confidentiality clauses offer no protection from the disclosure duty.
The Uncertainty: Handley application
The enumerated list of potential sanctions for non-disclosure, set out in subrule 49.14(7), ranging from costs to a stay, raises uncertainty about whether the automatic stay rule from Handley remains dominant or whether a judge has discretion to determine a more appropriate sanction.
The automatic stay remedy in Handley has been justified as a powerful deterrent to abuse of process, giving teeth to the disclosure duty—because without severe penalty the settling parties may be reluctant to disclose and the court may lose its ability to enforce and control its own process (see Handley at paragraph 45(iv)). The flexible approach of the new statutory rule may be viewed as diluting that deterrent effect.
However, the shift from the all-or-nothing approach in the case law to a flexible range of sanctions may ultimately prove to be a fair move. In my opinion, a shift from Handley is appropriate if Rule 49.14 is to apply to all proceedings.
In estate proceedings—particularly passings of accounts—a stay could unfairly penalize a non-settling party. Consider a scenario where multiple co-trustees are applicants, and the respondent beneficiaries reach a settlement on compensation with only some of them. Would it be just to stay the entire proceeding for non-disclosure? Such an outcome could deprive the non-settling co-trustee(s) of the opportunity to seek approval of their accounts and claim compensation. Meanwhile, the beneficiaries might have a strategic incentive to exploit disclosure breaches, knowing that a stay could result in no compensation being awarded—ultimately increasing the money pot in their favour. In these circumstances, the flexible range of sanctions under Rule 49.14 would allow the court to impose a more proportionate and just remedy, rather than defaulting to the harsh consequence of Handley.
Answer to Come
Unsurprisingly, the Court of Appeal has already been asked to hear four appeals on this issue—whether the Handley rule should be overruled or whether it remains dominant in the face of Rule 49.14. That decision remains pending.
It will be interesting to see whether the Court of Appeal considers the impact of the Handley rule on passing of accounts proceedings. It does not appear to have come up in case law before Rule 49.14 was introduced.
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By Jordyn Sanford