Class Action Settlements in Ontario: What Non-Settling Defendants Can Expect

Can a Non-Settling Defendant Demand Disclosure of a Class Action Settlement?

Yes — but the timing and mechanism are governed by the Class Proceedings Act (CPA), not by a free-standing common-law right. In McCartney v. CDSPI Advisory Services Inc., 2026 ONCA 578 (CanLII), the Court of Appeal confirmed that the CPA’s approval regime effectively absorbs the disclosure question: what matters is that the non-settling defendant receives meaningful disclosure and a genuine opportunity to participate before the court approves the settlement — not the moment a deal is inked.

What Is the Handley Estate Rule, and Does It Apply to Class Actions?

The Handley Estate rule historically required prompt disclosure of settlements between co-defendants so that non-settling parties could adjust their litigation strategy. The Court of Appeal confirmed that this rule has since been overturned in Welland (City) and, in any event, does not operate in class proceedings the way it does in ordinary multi-party litigation. In a class action, the CPA’s settlement approval process — with its built-in notice requirements and court oversight — is the mechanism that protects non-settling defendants. A non-settling defendant that actually received disclosure and participated in the approval process cannot claim it was ambushed.

Does a Partial Settlement in Related Individual Actions Trigger Separate Disclosure Rights?

Not automatically. The Court of Appeal addressed a second argument: that settlements reached in individual actions (separate from the class proceeding) gave rise to an independent disclosure entitlement because the non-settling defendant was not a party to those individual files. The court rejected this. A conditional link tying those individual settlements to class approval did not merge the agreements into a single deal, and the non-settling defendant’s right to disclosure did not arise simply because related proceedings existed. Critically, disclosure was in fact provided before the approval hearing — so even if a right had existed, no prejudice resulted.

When Does a Bar Order Cause Real Prejudice to a Non-Settling Defendant?

A bar order causes real or practical prejudice only when it eliminates a contribution claim that the non-settling defendant could actually collect on. Courts apply a ‘zone of reasonableness’ analysis when approving class action settlements. Here, the settling defendants’ available insurance had already been exhausted. The ‘financial well’ was dry. Cutting off the non-settling defendant’s contribution claim therefore caused no real economic harm — there was nothing to recover in any scenario. The approval order stood.

This is an important line to understand. The court is not saying bar orders are automatically harmless. It is saying that the prejudice analysis is grounded in economic reality, not theoretical entitlement.

How Do Courts Handle Costs When a Non-Settling Defendant Loses on Multiple Issues?

Costs orders are discretionary, and appellate courts set a high bar before interfering with them. The Court of Appeal declined to reduce the costs award even though the non-settling defendant had partial success on one procedural motion (an undertakings issue). Costs follow the event overall, and the non-settling defendant’s opposition to the settlements had elevated the costs incurred by the other parties. Partial success on a side issue does not automatically justify a proportionate reduction in costs.

What Is the Interaction Between Rule 49.14 and the Class Proceedings Act?

Rule 49.14 of the Rules of Civil Procedure deals with disclosure of settlement offers in ordinary litigation. The Court of Appeal confirmed that where the CPA’s settlement approval regime applies, it effectively subsumes the disclosure obligations that might otherwise arise under r. 49.14. The CPA framework — court approval, notice to class members, and the opportunity for objectors (including non-settling defendants) to be heard — is the governing structure. A settlement is not binding on anyone until court approval is granted, which is precisely why disclosure before the approval hearing is the relevant benchmark.

Practical Takeaways for Non-Settling Defendants in Ontario Class Actions

• Track the approval timeline closely. Your right to disclosure and participation is anchored to the court approval process. If you are not receiving notice of approval hearings, bring that to the court’s attention immediately — do not wait.
• Assess bar orders in economic terms. If you intend to oppose a bar order, gather concrete evidence that the settling defendants have assets or insurance you could realistically recover from. A theoretical contribution claim is not enough.
• Participate actively before approval, not after. Once a settlement is court-approved, your ability to challenge it narrows sharply. File objections and attend the approval hearing.
• Expect costs consequences for broad opposition. Opposing a settlement on multiple fronts and losing elevates the costs you may owe. Prioritize your strongest arguments.
• Get litigation counsel involved early. The interplay between the CPA, the Rules of Civil Procedure, and evolving case law on Handley Estate is complex. Our Ontario litigation lawyers can help you map out your rights before a partial settlement is finalized.

If you are based in the Greater Toronto or Hamilton area and are involved in a class action as a defendant, insurer, or other interested party, our team also serves clients from our Burlington litigation office and across the region including Toronto.

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UL Lawyers Professional Corporation offers a free initial consultation from our Burlington office and serves clients across Ontario. If you have questions about class action procedure, settlement approval, or your rights as a non-settling defendant, reach out to our civil litigation team to discuss your situation.

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This article is automated commentary on a public court decision and is for general information only — not legal advice. Decisions rely on facts unique to each case. If you are affected by a similar issue, contact a lawyer for advice specific to your situation.