A Mary Carter agreement is a settlement agreement between a plaintiff and defendant in which the defendant remains an active party to the litigation and the claim also proceeds against other parties. The Courts have always insisted that a Mary Carter agreement be immediately disclosed to all parties. But what happens if a Mary Carter agreement is not immediately disclosed to all parties? The Ontario Court of Appeal recently faced this situation.

The decision is a reminder of the drastic remedies available to the Courts if litigation is conducted unfairly. While Mary Carter agreements are most often used in personal injury or medical malpractice actions, they can also be used to settle construction litigation. When they are, the parties must be scrupulous to ensure that the agreement is immediately disclosed. Otherwise, any further claims in the action may well be dismissed.