settlement agreements and the failure to disclose an offer

Failure to Disclose a Settlement Agreement During Litigation: Obligations, Risks and Consequences

Date: June 8, 2026

Settlement agreements are a routine and often desirable outcome in civil litigation. Most commercial disputes settle before reaching trial, and a well-negotiated settlement can save both parties significant time, cost, and uncertainty. But settling part of a multi-party case, or reaching an agreement with one party while litigation continues with others, creates a disclosure obligation that many parties underestimate.

Ontario courts have established clear rules about when a settlement agreement must be disclosed to the court and to the other parties in a proceeding. Failing to comply with those rules can have serious consequences, including cost awards and dismissal of the lawsuit. This article explains when disclosure is required, what can happen if it is not made, and how to navigate these obligations correctly in commercial litigation.

The core rule
If a settlement agreement reached during ongoing litigation could alter the course of that litigation, it must be disclosed immediately to the court and all relevant parties.

Not every settlement requires disclosure. A complete settlement that ends the entire proceeding is typically filed as a consent dismissal or consent judgment. The disclosure obligation arises primarily in multi-party proceedings where one party settles while the litigation continues, fundamentally changing the dynamics of the case for those who remain.

What is a settlement agreement in litigation?

A settlement agreement is a legally binding contract in which the parties to a dispute agree to resolve some or all of their claims on agreed terms, without proceeding to a court decision. In straightforward two-party litigation, a settlement ends the proceeding entirely: the parties execute the agreement, the action is dismissed, and the matter is concluded.

In multi-party litigation, settlement becomes more complex. One defendant may settle with the plaintiff while the action continues against other defendants. One plaintiff may settle while the claims of other plaintiffs remain live. A third party may be brought into the proceeding and settle separately from the main action. In each of these situations, the settlement changes the alignment of the parties and the dynamics of the ongoing case in ways that may not be apparent from the face of the pleadings.

It is in these multi-party and partial settlement situations that disclosure obligations arise most acutely and where the consequences of non-disclosure are most severe.

When disclosure of a settlement agreement is required

Ontario courts have addressed settlement disclosure obligations in a series of decisions that establish a clear principle: where a settlement could materially affect the ongoing litigation, it must be disclosed. The specific circumstances that trigger this obligation include the following.

Multi-party proceedings Where there are multiple plaintiffs or defendants, a partial settlement can fundamentally shift the dynamics of the case. A settling defendant who agrees to cooperate with the plaintiff against the remaining defendants has effectively changed sides. The remaining defendants are entitled to know this.
Mary Carter agreements A Mary Carter agreement is a partial settlement where one defendant settles with the plaintiff but remains a nominal party, often with their liability capped and an obligation to cooperate with the plaintiff. Ontario courts treat these as requiring mandatory disclosure because they create a hidden alignment that distorts the adversarial process.
Parties under disability Where a party to a settlement is under a legal disability, such as a minor or a person who lacks legal capacity, the settlement must be approved by the court. This requires disclosure of the settlement terms so the court can assess whether they are fair and in the interests of the person under disability.
Material relevance to the dispute Where the terms or enforceability of a settlement agreement are themselves in issue in the ongoing litigation, those terms must be disclosed. Withholding terms that are directly relevant to the court's determination of the remaining issues is misleading conduct.
Class proceedings Settlements in class actions under Ontario's Class Proceedings Act, 1992 require court approval. The court must be satisfied that the settlement is fair, reasonable, and in the best interests of the class members, which requires full disclosure of the settlement terms.
Court-ordered disclosure Where a court orders production of a settlement agreement or its terms, compliance is mandatory regardless of any confidentiality clause in the agreement. A confidentiality clause does not override a court order.
When in doubt, disclose. Courts do not penalize parties for disclosing a settlement agreement that did not strictly need to be disclosed. Courts do penalize parties for withholding one that did. If there is any uncertainty about whether a partial settlement could affect the ongoing litigation, the safer position is always disclosure.

Consequences of failing to disclose

Courts treat the withholding of a required settlement disclosure as a serious matter. Continuing to litigate while concealing an agreement that changes the fundamental alignment of the parties is a form of misleading conduct that courts respond to firmly. The remedies available are broad and can be severe.

Compelled disclosure

The most immediate consequence is a court order compelling the production of the settlement agreement and its terms. The court may also order the parties to disclose the circumstances of the settlement, including any cooperation arrangements that flow from it. Once disclosure is ordered, there is no longer any advantage to having withheld the agreement, and the non-disclosing party has also acquired a record of improper conduct.

Cost awards

Courts regularly award costs against parties who fail to comply with disclosure obligations, including the costs of any motion brought to compel disclosure. In cases of deliberate concealment, enhanced cost awards are available. These costs fall on the non-disclosing party regardless of the eventual outcome of the litigation.

Stay or dismissal of proceedings

In serious cases, courts have the power to stay or dismiss the proceedings of a party who has concealed a material settlement agreement. Where the non-disclosure has compromised the integrity of the litigation or prejudiced the other parties, dismissal is a genuine risk. This is the most severe consequence and represents a complete loss of the claim regardless of its underlying merits.

Impact on credibility

Beyond the specific remedies available, a finding that a party deliberately withheld required disclosure damages their credibility with the court for the remainder of the proceeding. Courts make credibility assessments throughout litigation, and a demonstrated willingness to mislead the court by omission affects how evidence is received and how arguments are weighed at trial.

Involved in multi-party litigation and one party has settled? Get advice before continuing.

The disclosure obligations triggered by a partial settlement in ongoing litigation require immediate assessment. Acting without advice in this situation risks the consequences above. Contact Achkar Law before taking any further steps in the proceeding.

Call: 1-800-771-7882 Speak With a Litigation Lawyer

Confidentiality clauses and disclosure obligations

Most settlement agreements contain confidentiality provisions requiring the parties to keep the terms private. These clauses are common and generally enforceable between the parties. However, confidentiality between the settling parties does not override a legal obligation to disclose to the court or to other parties in the litigation.

Where disclosure is legally required, a confidentiality clause in the settlement agreement does not provide a defence to non-disclosure. Courts have consistently held that settlement confidentiality cannot be used as a shield against disclosure obligations owed to the court or to non-settling parties whose interests are affected by the settlement.

Parties who are negotiating a settlement in multi-party litigation should address this tension explicitly in the settlement agreement: acknowledging that the agreement may need to be disclosed to the court or other parties, and defining how that disclosure will be managed, protects both parties from disagreements about the scope of the confidentiality obligation after the agreement is signed.

Questions about settlement disclosure obligations in an ongoing proceeding?

Achkar Law advises businesses, organizations, and individuals across Ontario and BC on commercial litigation strategy, including settlement negotiation, disclosure obligations, and multi-party proceedings.

Speak With a Commercial Litigator Or call us: 1-800-771-7882

Settlement disclosure in British Columbia

BC courts apply the same principles to settlement disclosure obligations. Where a partial settlement in multi-party litigation could affect the dynamics of the ongoing proceeding, it must be disclosed to the court and to the remaining parties. Mary Carter agreements require disclosure in BC for the same reasons as in Ontario.

BC's Class Proceedings Act similarly requires court approval for class action settlements. Settlements involving parties under legal disability require court approval under BC's Law and Equity Act and the Supreme Court Civil Rules.

The practical advice is the same in both provinces: where there is any uncertainty about whether a partial settlement triggers a disclosure obligation, obtain legal advice before continuing the litigation without disclosure.

Practical takeaways

Not every settlement requires disclosure. A complete settlement that ends the entire proceeding is handled through a consent dismissal. The disclosure obligation arises primarily in partial settlements in multi-party proceedings.
Mary Carter agreements, where one defendant settles and agrees to cooperate with the plaintiff while remaining a nominal party, require mandatory disclosure in Ontario. The remaining defendants are entitled to know about the changed alignment.
Settlements involving parties under disability require court approval. The terms must be disclosed to the court so it can assess whether the agreement is fair and in the interests of the person under disability.
A confidentiality clause in a settlement agreement does not override a legal obligation to disclose to the court or to other parties in the litigation.
Consequences of non-disclosure include compelled production, cost awards, a stay or dismissal of the proceedings, and lasting damage to credibility with the court.
When in doubt, disclose. Courts do not penalize parties for unnecessary disclosure. They do penalize parties for withholding required disclosure.

Frequently asked questions

Do you have to disclose a settlement agreement during litigation in Ontario?

Not always, but often yes in multi-party proceedings. Ontario courts have established that where a settlement could alter the course of ongoing litigation, it must be disclosed immediately to the court and all relevant parties. This applies in multi-party cases where a partial settlement shifts the dynamics, where a party under disability is involved, and where the settlement terms are material to the remaining dispute.

What happens if you fail to disclose a settlement agreement in Ontario?

Courts have broad discretion to remedy non-disclosure. Consequences can include a court order compelling disclosure, cost awards against the non-disclosing party, a stay of the proceedings, or dismissal of the lawsuit. Continuing litigation while withholding a material settlement agreement is treated as misleading conduct, and this standard applies to self-represented litigants as well as represented parties.

What is a Mary Carter agreement and why does it require disclosure?

A Mary Carter agreement is a partial settlement in multi-party litigation where one defendant settles with the plaintiff but remains a nominal party, often with their financial exposure capped and an obligation to cooperate with the plaintiff against the remaining defendants. Ontario courts require disclosure because such agreements fundamentally alter the alignment of the parties, and the remaining defendants are entitled to know that a co-defendant has effectively changed sides.

Does a settlement agreement need court approval in Ontario?

In most commercial litigation between parties with legal capacity, court approval is not required. However, settlements involving a party under disability, such as a minor or mentally incapable person, must be approved by the court. Class action settlements under Ontario's Class Proceedings Act, 1992 also require court approval. Both require disclosure of the settlement terms to the court.

Is a settlement agreement confidential in Ontario?

Settlement agreements commonly contain confidentiality clauses, but confidentiality is not absolute. Where disclosure is required by law or court order, a confidentiality clause does not override that obligation. Courts can compel production of settlement terms where they are material to ongoing proceedings. A party who relies on a confidentiality clause to withhold required disclosure faces the same consequences as outright non-disclosure.

Questions about settlement disclosure obligations in your litigation?

Settlement disclosure obligations in multi-party litigation are nuanced and the consequences of getting them wrong are serious. Achkar Law advises businesses, organizations, and individuals across Ontario and British Columbia on commercial litigation strategy, settlement negotiation, and disclosure obligations. We will assess your specific situation and advise on the correct approach before the issue becomes a problem in your proceeding.

Call us at 1-800-771-7882 or fill out the form below and we will be in touch.