Updated Rules of Civil Procedure: “Obligation to Promptly Disclose” a Partial Settlement Agreement and the Immediacy of Disclosure

The new Ontario Regulation 50/25, which amends the Rules of Civil Procedure, has taken effect as of June 16, 2025. A key change is the new Rule 49.14, which codifies the duty to disclose partial settlement agreements. In this article, we summarize the new Rule and consider past case law, which will continue to be important to understanding the scope of the obligation to “promptly” disclose partial settlements. 

Key Takeaway

We expect Rule 49.14 to have two major impacts on the duty to disclose.

First, Rule 49.14 softens the consequences of any failure to disclose a partial settlement agreement. Before, failure to immediately disclose a partial settlement agreement generally resulted in severe consequences, including dismissal of the case. The new Rule 49.14 provides for a wide range of relief, not just dismissal. We can accordingly expect that the consequences for failing to immediately disclose will be less harsh, with the court granting parties a “second chance” even if they fail to disclose.

Second, while Rule 49.14 codifies the need to disclose, it does not stipulate exactly when such disclosure must be made. The interpretation of “prompt” or “immediate” disclosure, and the prior case law that has considered this point, will continue to be important. 

Summary of Rule 49.14

Partial settlement agreements, where the plaintiff reaches a settlement with some (but not all) of the defendants, are common in multi-party litigation. Such settlements are considered to “change the litigation landscape,”^[1] as they can significantly impact the potential outcome of the dispute.

The new Rule 49.14(1) defines a partial settlement agreement as an agreement that involves at least one plaintiff and one defendant as parties, and there is at least one other defendant that is not a party to the agreement.^[2] Under the new Rule, parties involved in a partial settlement agreement must disclose the terms of such an agreement to other parties who are not a party to the agreement.^[3]

Disclosure occurs as follows:

• If the hearing of the proceeding has started, such a disclosure must happen “immediately” once the partial settlement agreement is reached.
• If the hearing has not started, the disclosure must be on the earlier of (i) seven days after the agreement is reached or (ii) when a party to the partial settlement agreement takes any further step in the proceeding.^[4]

Failure to disclose will attract consequences. Subrule (7) of Rule 49.14 provides the court with the discretion to:^[5] 

(a)   make an order for costs, regardless of the outcome of the proceeding;

(b)   order or permit further examinations for discovery, to be conducted at the plaintiff’s expense;

(c)   order additional disclosure or production of documents;

(d)   strike out all or part of a party’s evidence, including any affidavit made by the party;

(e)   adjourn a hearing or other step that permits or requires the attendance of the parties;

(f)    stay the proceeding; or

(g)   make such other order as is just.

In the past, failure to disclose often led to an automatic stay of proceedings, which was seen as harsh, particularly when the failure to disclose was inadvertent or did not prejudice the non-settling defendants. We expect that the discretion introduced by the new Rule will mean that such inadvertent or non-prejudicial failures to disclose will attract lesser sanctions, with fewer instances of an action being automatically stayed.   

Form 49E

The new Rule also introduces Form 49E. The plaintiff must record the terms of the partial settlement (other than the monetary value) in Form 49E, serve a copy of the form on every other party, and file it.^[6] Failure to submit Form 49E triggers the same consequences as listed under Rule 49.14(7) and discussed above.

The Court’s Evolution in the Interpretation of the Immediacy of Disclosure

Rule 49.14 states that if the hearing of the proceeding has commenced, disclosure must be given “immediately after the agreement is reached.” As immediate disclosure is not defined in the Rule, the court will likely look to past cases, including the 2024 decision in Oakdale, as guideposts on what counts as immediate disclosure. 

Below, we summarize the jurisprudence that has recently developed in respect of the immediacy of disclosure. 

1. Tallman and Waxman: The Standard of Disclosure is “Immediate” 

In Tallman Truck Centre Limited v. K.S.P. Holdings Inc., the court found that the standard of the immediacy of disclosure is clearly “immediate,” and not “eventually” nor “when it is convenient.”^[7] The decision was upheld in Waxman v. Waxman, 2022 ONCA 311,^[8] where Sossin J.A. added that any confidentiality clause within a settlement agreement does not preclude the settling parties from disclosing the agreement. That waiver of confidentiality is now expressly codified in Rule 49.14(6).

2. CHU de Québec-Université Laval: Disclosing Key Features of the Partial Settlement Agreement Satisfies Immediacy

The CHU de Québec-Université Laval case determined that where the key terms of the settlement agreement are disclosed immediately, but without providing the signed final copy, this satisfies the immediacy element.^[9] While the court had previously held in Tallman that “functional disclosure” is not enough to satisfy the duty of immediate disclosure, CHU de Québec-Université Laval is distinguishable since the disclosure revealed the key features that would change the litigation landscape, such as the settling defendant’s intent to cooperate with the plaintiff.^[10]

3. Oakdale Drywall: Settling Party Not Required to Disclose an Unexecuted Draft Partial Settlement Agreement to the Non-settling Party

With the decision from CHU de Québec-Université Laval that the element of immediacy in settlement disclosure may be satisfied with the disclosure of key elements rather than the delivery of an executed and signed copy of the agreement, the correct “timing” of disclosure came into question. Should a settlement agreement be disclosed only once it has been signed and executed by all parties, or when it has been informally agreed by the parties but not yet signed? 

An answer was provided in Oakdale Drywall & Acoustics ltd. v. Providence St. Joseph’s, where the court held that the settling party is not required to disclose an unexecuted and unenforceable draft of a settlement agreement to the non-settling party.^[11] Why? Some of the settling parties continued to request changes and, until it was finally signed by all, the agreement was not “final.” Obtaining the express agreement of all parties by having them sign off was necessary, and was not a mere formality.^[12] As the court in Oakdale found, “no Ontario authority requires that parties disclose an unexecuted, unenforceable draft of a settlement agreement to the non-settling defendants in advance of it being finalized and executed.”^[13]

4. Southwell: Duty to Disclose May be Satisfied Through Conduct, Not Documents

Despite the ruling in Oakdale, there may be situations where the duty to immediately disclose may not require the exchange of executed documents. This may occur where there is sufficient evidence that the content of an agreement was agreed upon by both parties, based on assessing the conduct of the parties.

This was considered in John Richard Southwell v. Carlgate Development Inc., Julie Anne Reis and Isabelle Margaret Southwell, 2024 ONSC 822, which concerned a dispute over corporate ownership. The applicant argued that the respondents had no ownership rights, because the respondents never signed a share purchase agreement and there was no formal appointment process to name the respondents as directors of the corporation.^[14] Nevertheless, the court decided that there was sufficient evidence that both parties acted as if the shares had been transferred to the respondents. Thus, even without a formally executed version of the share purchase agreement, the past conduct of the parties was enough to deem that the agreement was indeed in effect.^[15] 

The distinguishing factor between the Southwell and Oakdale cases is that the signing of the settlement agreement was a mere formality in Southwell, as all parties had been acting as if the agreement was already in effect. In Oakdale, the settling parties continued to request amendments to the agreement and planned to sign only the final version.

We expect that all of the above decisions will continue to provide guidance on the “immediacy” requirement in cases where a settlement agreement is reached but the hearing of the proceeding has started.

The Litigation & Dispute Resolution Group at Aird & Berlis LLP will continue to monitor developments with respect to civil practice and procedure. Please reach out to the authors or a member of the group to learn more regarding strategic advantages for your litigation needs.