25 May Handley Estate is dead — and it’s about time.
For anyone who has had to navigate the fallout from Handley Estate v. DTE Industries Limited[1], the recent decision in 1086289 Ontario Inc. operating as Urban Electrical Contractors v. Welland (City)[2] (“Urban Electrical”) is a long overdue course correction from the Ontario Court of Appeal (“COA”).
A quick refresher:
In Handley Estate (2018), the plaintiff was suing multiple parties. The Plaintiff settled with one defendant and kept right on suing the others without immediately disclosing the settlement. Those other defendants complained that they had not been informed of the Plaintiff’s side deal and sought redress from the Court.
Everyone expected that the COA would mildly admonish the Plaintiff given the obligation to disclose partial settlements that can affect litigation strategy, evidence, or trial fairness, and maybe even make an award of costs.
But that’s not what happened.
Instead, the COA in Handley Estate sentenced the Plaintiff’s case to death. They killed it completely. The court held that any failure to immediately disclose a side deal was automatically an abuse of process, for which there was only one remedy: the Plaintiff could no longer proceed against the other defendants. It did not matter whether the litigation was affected by the partial settlement. Once the breach occurred, the consequence was fixed: the proceeding would be stayed, and the case was over.
The result was years of disproportionate outcomes. Plaintiffs faced the litigation equivalent of capital punishment for procedural missteps, even where nobody suffered any prejudice at all. Courts repeatedly applied Handley Estate, because the COA left them no choice.
Now, in Urban Electric, the COA has acknowledged what everyone has been saying: “Handley Estate was wrongly decided,” the court wrote in paragraph 4.
In arriving at this forgone conclusion, the Court began by restating the core features of the Handley Estate rule and compared that framework to the established doctrine of abuse of process — and found that the two could not be reconciled.
Abuse of process has always been a flexible, discretionary doctrine. It is concerned with whether conduct results in unfairness, prejudice, oppression, or harm to the integrity of the justice system. It requires a contextual assessment, not a categorical rule. And just as importantly, the remedy is supposed to be proportionate to the wrong.
The Handley Estate rule, the Court concluded, was “the antithesis of the discretionary approach that is at the heart of the abuse of process doctrine”. It effectively imposed a finding of abuse without regard to the circumstances and then required courts to impose the most severe remedy, again without regard to the circumstances.
What replaces Handley Estate is not a new bright-line rule, but rather a return to first principles and the restoration of a framework alongside Rule 49.14 of the Rules of Civil Procedure [3].
Failure to disclose a partial settlement agreement may still amount to an abuse of process, but that conclusion must now be reached through a contextual analysis. The court must consider what actually happened: the nature of the agreement, the timing of disclosure, its effect on the litigation, and whether there was any resulting prejudice or unfairness.
There is no longer any automatic finding of abuse simply because disclosure was not immediate. While a stay remains available where justified, the courts have a range of options, including costs, further discovery, additional disclosure, or evidentiary restrictions.
As the Court put it, the law should allow judges to use “a scalpel instead of an axe”.
In Urban Electric, the Court endorses a much more workable principle: remedies should fit the misconduct. No more automatic capital punishment for trifling errors.
Which brings us back to where we were pre-Handley Estate: If you settle with one defendant in a multi-party action, disclose it promptly. But if disclosure is imperfect or delayed, courts are no longer required to impose the harshest possible sanction without considering the actual circumstances.
A welcome return to proportionality and common sense in civil procedure.
[3] Rules of Civil Procedure, RRO 1990, Reg 194
Gregory Bowden brings over 30 years of expertise in commercial litigation and civil fraud cases, making him a sought-after advisor for businesses facing complex legal disputes. Having built a reputation as a strategic and effective litigator, Gregory represents a wide range of clients, from small business owners to large corporations, in high-stakes litigation, fraud prevention, and asset recovery.