Court of Appeal Overturns “Handley Estate Rule” in Major Decision Following Successful Appeals by Lerners LLP and Others
May 21, 2026
Announcements
A five-judge panel of the Ontario Court of Appeal has overturned the “Handley Estate rule,” introducing a more flexible and principled approach to the requirement to disclose partial settlement agreements in civil litigation.
The decision, 1086289 Ontario Inc. (Urban Electrical Contractors) v Welland (City), 2026 ONCA 352, replaces a rigid framework that imposed automatic and severe consequences for non-disclosure, assessed based on relatively uncertain parameters, with a fairness-based approach grounded in judicial discretion. with a fairness-based approach grounded in judicial discretion.
Lerners partners William Pepall, Earl Cherniak, and Rebecca Shoom acted for the appellants in one of the four appeals considered by the court, advocating for a more balanced and practical approach to assessing partial settlement disclosure.
“The Court of Appeal’s decision is very welcome to lawyers in Ontario,” said Shoom. “The Handley Estate rule gave rise to a significant amount of uncertainty and inconsistent judicial application, with lawyers struggling to identify which partial settlement agreements were subject to mandatory disclosure, which portions of agreements needed to be produced, and how quickly they needed to be produced.”
Under the former Handley Estate rule, parties were required to immediately disclose any partial settlement agreements (arrangements where some, but not all, parties resolve their dispute) that changed the adversarial landscape of the litigation. Failure to do so automatically constituted an abuse of process, with the only available remedy being a permanent stay of proceedings; effectively bringing the case to a halt regardless of the circumstances and whether any prejudice actually resulted from the non-disclosure.
The court found the rule to be unduly rigid and capable of producing disproportionate outcomes, noting it had become a trap for the unwary that generated unnecessary litigation and encouraged parties to exploit minor procedural slips. Instead, the court confirmed that alleged non-disclosure should be assessed under ordinary abuse of process principles, requiring a contextual and discretionary analysis. In doing so, the court emphasized that the law must operate with precision and flexibility, favouring a “scalpel” rather than an “axe” in determining the appropriate remedy. Courts will now assess whether non-disclosure of a partial settlement agreement caused actual unfairness or prejudice and tailor remedies accordingly.
While a stay of proceedings remains an available remedy, it is now reserved for the clearest of cases rather than imposed automatically, aligning this area of the law with the broader principles of abuse of process and the availability of stays of proceedings.
The decision also clarifies the role of Rule 49.14 of the Rules of Civil Procedure, which was introduced in mid-2025 and provides clearer guidance on the timing and scope of partial settlement disclosure obligations. The rule establishes defined timelines for disclosure and confirms that courts may impose a range of proportionate remedies in response to non-compliance.
The court further clarified the appropriate appeal routes. Orders granting a stay in this context are final and appealable to the Court of Appeal, while lesser remedies or decisions declining relief are generally interlocutory and proceed to the Divisional Court with leave. Cases already in the appeal queue will not be affected by this framework.
This decision reflects a broader move toward proportionality and fairness in civil litigation, reinforcing that procedural rules should support just outcomes rather than produce technical or punitive results.
The decision may yet be the subject of a leave application to the Supreme Court of Canada. Lerners LLP will continue to monitor developments closely.
About Lerners LLP
Lerners LLP is one of Ontario’s largest law firms, with offices in London, Toronto, Waterloo Region, and Strathroy. With over 90 years of successful client service and representation, our team of more than 140 exceptionally skilled lawyers provides deep experience across a full range of practice areas.
For media inquiries, please contact:
Alysia Christiaen
Chief Brand & Strategy Officer
Lerners LLP
achristiaen@lerners.ca
