Failure to Disclose a Settlement Agreement During Litigation
Contrary to popular belief, litigation is not the most effective mode of dispute resolution. While parties usually get a decision at the end of the litigation, the process can be tedious and expensive. For this reason, many disputes settle before the final hearing.
A dispute settles when the parties reach a mutual agreement. In most cases, parties put the terms of resolution in writing, forming a settlement agreement. A settlement agreement is a legally binding and enforceable contract that outlines the terms of the resolution of a dispute.
As a party to a settlement agreement, you might be wondering how it might impact an active case. Are you obligated to disclose a settlement agreement to other defendants? Do you have to tell the Court about a settlement agreement? What could happen if you do not disclose a relevant settlement agreement in litigation?
The article below will answer these questions and explain how a lawyer can help you understand your obligations while protecting your interests.
When Do You Have To Disclose a Settlement Agreement During Litigation?
In Ontario, the courts established a bright-line rule requiring parties in a lawsuit to immediately disclose a settlement agreement to the courts and any other parties that will alter the course of litigation. The court will examine the pleadings of the parties, relevant evidence, and other factors to determine when disclosing a settlement agreement would alter the course of litigation.
There’s a variety of ways a settlement agreement could arguably alter the course of litigation, but common scenarios include:
- Where there are multiple plaintiffs or defendants in litigation;
- Where there is a party under disability in litigation; and
- Where the settlement agreement is a relevant and material fact to the legal proceeding.
One of the most common scenarios where a party is obligated to disclose a settlement agreement to other parties and the Court is where there are multiple plaintiffs or defendants. This is because a settlement agreement can impact the strategy and next steps for the non-settling parties. One example of such a situation is where a settlement would change the relationship between a plaintiff and defendant from adversarial to cooperative.
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In Ontario, settlement agreements with a party under disability must be approved by the Court. This is generally done with a motion in civil proceedings, requiring disclosure of the settlement’s terms to assess if they are reasonable. The settlement agreement in this scenario will not be legally binding without disclosure of the settlement agreement and the Court’s expressly ordered approval.
Finally, there are many cases where a settlement agreement is relevant to a dispute at issue. For example, if the subject of a settlement agreement’s enforceability is at the heart of a dispute, a party should disclose the settlement to other parties to the litigation and the Court.
Each case is different, and not every unique variation of the scenarios described above may require disclosure of a settlement agreement. However, failure to disclose a settlement agreement when you should have could result in severe consequences.
What Are the Consequences of Failure to Disclose a Settlement Agreement?
The consequences for failure to disclose a settlement agreement will depend on the unique circumstances of each case. Courts have significant discretion to make orders to address such scenarios, including orders:
- For disclosure of the settlement agreement:
- For other parties’ legal costs and possibly more severe consequences against the party who failed to disclose a settlement agreement; and
- Dismissing or staying a lawsuit altogether.
It is highly improper to knowingly mislead a Court and continue with a proceeding when a settlement agreement’s disclosure could have shortened or changed the course of how the litigation moved forward. The courts are strict with parties who fail to meet this disclosure obligation, even if they are self-represented.
In light of the severe consequences of failure to disclose, litigants should reveal the settlement agreement immediately where the disclosure is required. Even if the settlement agreement does not seem to impact the litigation, it is important to consult with an experienced litigation lawyer as soon as possible to determine if disclosure is necessary.
How a Lawyer Can Help
While you may represent yourself in negotiation and draft a settlement agreement, the whole process can become quite stressful and confusing. While you might save some costs in proceeding without legal representation, such a decision could hurt your case.
A lawyer can review the facts of your case, understand the nature of the dispute, and consider your goals to advise on your settlement entitlements. They can negotiate with the other side on your behalf and ensure your rights are protected throughout the dispute resolution process.
A self-represented party may make mistakes or leave out important information while drafting the settlement agreement. A lawyer can use their knowledge and expertise to prepare or review the settlement agreement. They can ensure the document is complete in all respects and is legally enforceable.
As mentioned above, the courts have sent a clear message to litigants concerning their disclosure obligation in cases where a settlement agreement between the parties may significantly alter the course of litigation. A litigation lawyer can help you determine if you should disclose a settlement agreement, and otherwise assist with navigating the legal process.
A lawyer is a trained legal professional who knows the parties’ obligations to the Court and each other. They can ensure that the client complies with their disclosure and other obligations. A lawyer can use their knowledge of the law and legal process to protect the client’s interests at each stage of litigation.
Conclusion
When many people think about the legal system, they imagine lawyers debating an important issue in front of a jury. While litigation is a traditional dispute resolution process, there is always the possibility of negotiating a settlement agreement.
Parties are generally required to disclose a settlement agreement to others and the Court where it may change the course of litigation. This is commonly the case where there are multiple parties involved, where a party is under disability, or where the settlement agreement itself is relevant to the case.
Failure to disclose a settlement agreement could result in significant legal consequences, including orders to disclose the agreement, cost awards against you, and dismissing or staying a lawsuit. A party who is aware of a settlement agreement that might relate to their ongoing case should promptly speak with a litigation lawyer to determine the next steps.
Parties to a dispute may benefit from legal representation during negotiations. A lawyer can use their negotiation and advocacy skills to advance your case. They can help ensure compliance with the disclosure obligations at all relevant stages of the matter and maximize your chances of achieving your desired result.
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If you have questions about your disclosure obligations during litigation or need help with drafting and reviewing a settlement agreement, our team of experienced litigation lawyers at Achkar Law can help.
Contact us by phone toll-free at 1 (800) 771-7882.
