Retail Case Update: Impact of Failure to Immediately Disclose Settlement Agreements

Often in litigation we encounter cases where the plaintiff has multiple ongoing actions, or one action with many parties.

Proportionate share settlement agreements provide an effective mechanism to manage multi-party disputes where an agreement with all parties, and/ or on all issues, is not feasible or desirable. Under these agreements, plaintiffs settle with one or more defendants and release those defendants from further liability without releasing the non-settling defendants from liability.

In B.C., the most common method of proportionate share settlement agreements are B.C. Ferry agreements. These agreements typically require a plaintiff to amend the pleadings striking its claims against settling defendants. Because of this requirement, BC Ferries Agreements are disclosed as a matter of course.

However, other types of partial settlement agreements (i.e., Mary Carter) do not require an amendment of pleadings and were traditionally meant to be kept secret. This begs the question, when settlement terms are agreed to between two or more parties within multi party litigation, do the remaining parties involved need to know?

In Ontario, parties are subject to the “Immediate Disclosure Rule”. The immediate disclosure rule is not designed to discourage settlements – far from it. The rule simply states there is a clear and unequivocal obligation of immediate disclosure of agreements that change entirely the landscape of the litigation. Such disclosure is to be immediate, upon completion of the agreement.

Cases from Ontario further confirm this disclosure obligation is not limited to pure Mary Carter or B.C. Ferry/Pierringer agreements. The obligation extends to any agreement between or amongst the parties that has the effect of changing the adversarial position of the parties into a co-operative one, and thus changes the litigation landscape.

In Ontario, failure to disclose such agreements can constitute an abuse of process, resulting in serious remedies such as a stay of proceedings of the defaulting party. There may also be cost consequences.
In B.C., the same duty to disclose has not been as clearly articulated (yet). However, the trend of our recent caselaw suggests that we are headed towards a firm immediate disclosure rule out West, too. Our courts have cautioned litigants that if an agreement (such as settlement) fundamentally changes the litigation’s dynamics and anticipated relationships between the parties from adversarial to cooperative, based on the agreement terms, such an agreement likely needs to be disclosed immediately.

Key Takeaways

Ontario cases present cautionary tale for litigants and signal the importance of the disclosure obligations regarding settlement agreements to non-settling parties, and the consequences if the disclosure obligations are not adhered to.

We expect to see more applications to strike pleadings of parties who refuse (or fail) to produce settlement agreements in a timely manner. We will keep our readers apprised of this area of law as it develops.

Key cases

• Aecon v. Brampton City, 2010 ONCA 898
• Hamilton-Wentworth District School Board v. Zizek, 2022 ONCA 638
• Skymark Finance Corporation v Ontario, 2023 ONCA 234
• Bilfinger Berger v. GCWD, 2014 BCSC 1560
• Northwest Waste v. Super Save Disposal, 2017 BBCA 213
• Kim v. 1048656 B.C. Ltd., 2023 BCSC 192