In its recent decision in Hamilton-Wentworth District School Board v. Zizek, the Court of Appeal for Ontario (the “ONCA”) reiterated that parties who enter into a settlement agreement which alters the litigation landscape have an obligation to immediately disclose the agreement. Applying the principles set out in its 2010 decision Aecon Buildings v. Stephenson Engineering Limited, the ONCA confirmed that the obligation to disclose such settlements is not a matter of discretion, context, or factual analysis. The decision enforces the clear “bright line” principle of immediate disclosure, barring which consequences of the “most serious nature” for the defaulting party must result – a stay of the action.
The underlying action commenced in October 2016 involved a claim of fraud against the Hamilton-Wentworth District School Board (the “Respondent”). In September 2019, the Respondent settled its claim against all of the defendants except for the appellant, Casey Zizek (“Zizek”).
The settlement agreement required the settling defendants to provide evidence for the Respondent’s claim against Zizek. The court held that the Respondent knew that the settlement would impact the litigation, including expanding the scope of the alleged fraud.
Zizek only became aware of the settlement when the Respondent served a motion for directions to implement the settlement in December 2019. Upon learning of the agreement, Zizek brought a motion to stay on the basis of abuse of process for failure to disclose the settlement. The motion judge accepted the Respondent’s argument that the three-month delay in disclosure was justified because the Respondent needed to seek directions from the court about the implementation of the settlement and dismissed the motion. Zizek appealed to the ONCA.
The Appeal Decision
The ONCA allowed the appeal and granted an order staying the proceeding. The court held that the motion judge misunderstood, and thus failed to properly apply, the central principle in the disclosure obligation. The ONCA noted that motion judge engaged in a detailed analysis of the abuse of process concept and its origins, which was unnecessary to address the disclosure requirement applicable to the settlement agreement at hand, and the consequences where immediate disclosure is not made. The ONCA held that “the principle itself is clear. The requirement that a settlement agreement must be disclosed immediately means exactly what it says. This is not a matter of discretion, nor is it a matter of ‘context’, nor of factual analysis.”
Further, the ONCA expressly rejected the motion judge’s finding that it would be “unjust” to the Respondent to stay its action. The ONCA reiterated that a showing of prejudice is not a requirement in these situations, quoting MacFarland J.A. in Aecon:
Here, the absence of prejudice does not excuse the late disclosure of this agreement. The obligation of immediate disclosure is clear and unequivocal. It is not optional. Any failure of compliance amounts to abuse of process and must result in consequences of the most serious nature for the defaulting party.
In the circumstances, the court found that “if there [was] any failure of justice, it [was] entirely of the respondent’s own making.”
Parties must immediately disclose the existence of a settlement agreement that alters the litigation landscape. This is a bright-line requirement with no room for discretion. Any failure to disclose such a settlement by itself constitutes an abuse of process and will lead to a stay of the action.
 2022 ONCA 638 [Zizek].
 2010 ONCA 898 [Aecon].
Zizek at para. 10.
Zizek at para. 9, citing Aecon at para. 16.
Zizek at para. 9.