Privilege, Without Prejudice, Confidentiality Issues and Such

 

Chapter 1 Privilege

Privilege is an important issue in the mediation process. Many counsel believe that the contents of a mediation brief and statements made at mediation are inadmissible in the proceeding or any unrelated proceeding. That position is not a universal truth. It is, hence, important to understand the basic concept of settlement privilege and the exceptions to it.

Equally important is the distinction between settlement privilege and the issue of confidentiality. Typically parties to a mediation will reciprocally covenant that the contents of the mediation are confidential. This is qualitatively different from the issue of settlement privilege and inadmissibility. A breach of confidentiality may lead to an independent action and even a charge of contempt.

Privilege Generally

The most well-known forms of privilege are “legal advice privilege” and “litigation privilege”[1]. There is also a privilege known as “settlement privilege”, discussed momentarily. The grounds of privilege are not firmly closed however.

In 1991 the Supreme Court of Canada[2] considered the issue of whether privilege may attach to communications between a (1) parishioner and both (2) a pastor and (3) a lay counsellor of a fundamentalist Christian church. The case is important in setting out the distinctions between a privilege which is defined as a class or blanket privilege and the second category of privilege which is determined on a case-by-case.

In the latter instance, a court will apply the four components of the Wigmore test which are as follows:

  1.   The communications must originate in a confidence that it will not be disclosed;
  2. The elements of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties;
  3. The relation must be one which in the opinion of the community ought to be sedulously fostered; and
  4. The injury which would inure to the relationship by the disclosure of the communications must be greater than the benefit thereby gained for the correct disposal of the litigation.

A class privilege or blanket privilege or prima facie privilege or common law privilege allows a prima facie presumption of inadmissibility, once the relationship has been shown to fit into the relevant class.

In applying the Wigmore test, the policy reasons for excluding otherwise relevant evidence must be weighed in each instance, this being the fourth and often the most difficult branch of the test to meet. It is the onus of the party seeking that the evidence be admitted as an exception to the general rule.

When a potential for privilege has been found by the successful application of the first three criteria, the court will then struggle to find a fair balancing of the competing interests on the fourth aspect of the test.

Typically the first three components of the test are readily met. The significant substantive difference between a class privilege and the converse hence becomes the onus of proving the fourth branch of the test. A class privilege presumes it and the contrary must prove it. This is a difficult test to pass and thus the class privilege stands in a preferred position for this reason.

Settlement Privilege Generally, aka “The Without Prejudice Rule”

The privilege is itself an exception to the general rule that an admission contrary to interest is always admissible to prove any fact which is so admitted expressly or by implication.[3] This is the public policy origin of the rule.[4] The origin, however is both one of public policy and by contract.[5] While the main objective of the rule is designed to protect against the use of admissions against one’s interest, the rule applies to the entire contents of the communications.[6] [7]

Settlement privilege is a common law evidentiary rule. It applies to negotiations on settlement of litigation or contemplated litigation. It is often also referred to as the “without prejudice” rule.

The purpose of the rule is to allow the parties to take down their guard, make admissions openly and frankly and to make settlement offers. It is hence intended to lead to possible resolution of the claim and not allow for either party to suffer later adverse repercussions within the litigation should the case not settle. The privilege applies not only to negotiations to resolve the claim, but also to documents prepared to assist with mediation designed to settle the action.[8]

To determine whether settlement privilege may apply, the following test must be met:[9]

  1. A dispute which is litigious must exist or be contemplated;
  2. The questioned communication must be made with the express or implied intention that it would not be disclosed in a legal proceeding in the event that the settlement discussions failed to resolve the issue. This intention may be implied from the “potentially compromising nature of the admissions and concessions contained in the communication”.[10] The presence or absence of the label “without prejudice” is not conclusive of the intention, although it may be a potentially relevant factor.[11] If the parties are engaged in negotiating a settlement or “buying peace”, the intentions should be presumed.[12]
  3. The purpose of the communications must be an attempt to resolve the threatened or existing action. Once again, the label or the absence of it is not conclusive.

Settlement privilege is not limited to formal offers to settle nor to mediation communications.[13] All discussions intended to settle litigation real or contemplated are inadmissible in the litigation “at least until after the trial”.[14]

This privilege also applies to the details of the final settlement which has been achieved.[15]

It may also apply even where the parties have met to discuss settlement without the presence of legal counsel prior to the commencement of litigation where it was effected with the express intention of resolution.[16]

Formal offers to settle have been protected by a specific rule in Ontario.[17] Similarly all mediation communications are deemed by the applicable rule to be without prejudice settlement discussions.[18]

The objective of a policy to promote settlements has been well recognized.[19] For that reason, it is in the public interest that the rule not be given a restrictive application.[20]

The rule on settlement privilege applies both to production issues and to admissibility at trial.[21]

It is not necessary for either party to invoke the privilege for it to exist.[22]  The rule applies even in the absence of statutory provisions or the use of such labels on the communications as “without prejudice”. That which is important is the intent of the parties to settle an action or threatened one.[23]

This privilege is not finite as is the case with litigation privilege. It continues to apply even after a settlement has been reached or the action has concluded[24] where no settlement has been achieved.[25]

It is clear that it is improper to refer to such discussions in a pleading, apart from one alleging a settlement agreement. Such a plea will be readily struck.[26]

The trial judge may decide to review the questioned communications to determine whether to uphold the privilege.[27]

There is an issue as to whether that the privilege is lost once the underlying case has concluded by settlement or other final disposition. The question is whether the privilege is finite and hence not applicable to a subsequent suit between the same parties or a stranger, even where the final settlement is not an issue in the later proceedings.

The above is not the preferred view. This issue was discussed and determined[28] that the privilege should apply not only to unfruitful settlement discussions but also to successfully resolved cases, provided that there is no dispute as to the terms of settlement itself.[29] This is the generally accepted view.[30]

Settlement Privilege as a Class Privilege

The first issue which arises in settlement privilege is whether this is a class privilege or one which must be proven by the application of the Wigmore test.

The significance is important as the party seeking production or admissibility must show that an exception applies. When the Wigmore test is applied the party declining production must show the test, particularly the fourth branch which is the most difficult.[31]

The Divisional Court in reviewing the request for documents under Ontario’s privacy legislation concluded that the issue of settlement privilege was not a class privilege and hence such a question was to be determined by the application of the Wigmore test.[32] (“Magnotta”) This decision became controversial as it contradicted many prior decisions.[33]

This same issue came again before the Divisional Court[34] which concluded that settlement privilege was indeed a class privilege. It made no reference to Magnotta. The same conclusion was reached, in a further case, specifically rejecting Magnotta, in again seeing this privilege as a class privilege,[35] a view which was also shared by the Nova Scotia Court of Appeal.[36]

In what must be the final word on this subject, Perell J. found the view of the Nova Scotia Court of Appeal “very persuasive” and agreed with it, concluding that settlement privilege is a class privilege and has been so for over a century.[37] This view is consistent with that of the Supreme Court of Canada which described this policy underscoring this privilege was one based on “an overriding public interest in favour of settlement”.[38]

A class privilege has the same consequence whether the proceeding be civil or criminal.[39] However, in a criminal case different issues arise in a context where the material provided to the prosecuting body was alleged to be subject to settlement privilege,[40] particularly where the information came from parties who were not subject to any potential prejudice as they faced no criminal or civil exposure. Further the material provided in this instance was “front and centre” to prosecute the named defendants.[41]

Mediation Generally

Solutions may be achieved through mediation which are simply not possible through a traditional trial process. An apology or expression of remorse may often be an effective means of compromise. Damage allocations which allow for a potential easing of a tax burden or reducing an EI repayment are often considered. A letter of reference and a commitment to follow its contents verbally when asked for a reference from a potential employer are also objectives which a court will not order.

 

Mediation Privilege

The Ontario Rule[42] codifies the principle that communications made without prejudice in attempt to resolve a dispute are not admissible into evidence, unless such communications have resulted in a concluded settlement. The rule does not make mediation confidential. It only makes the discussions inadmissible.[43]

This view hence promotes open and frank settlement discussions from subsequent disclosure at any step of the litigation process, should the mediation fail to resolve the case.[44] At least, this is the theory behind the rule.

The question of whether a mediation contains an implied term of confidence, however, remains a live issue.[45]

One decision has suggested that the implied undertaking rule which codified Goodman v Rossi may be applicable to materials disclosed in mediation.[46] Such was the view also expressed by the Court of Appeal in the separately concurring reasons of Abella J.A.[47] Indeed the rule itself may apply.[48]

If so, contempt is not the sole means of enforcing a breach of the rule. It could be effected by separate action.[49]

The purpose of the rule is one intended to encourage settlement discussions. The parties must have confidence in the confidentiality of the process. Where mediation is mandatory, the parties must have such belief in the integrity of the process so as not to treat it as a perfunctory step.[50]

The failure to protect the confidences of the parties to the mediation would lead to its ultimate destruction.

Just as is the case with settlement privilege absent mediation, the mediation discussions may be compelled to prove the existence of a final agreement reached at mediation.[51] Most mediations are subject to an agreement by which the terms of the mediation are stated to be in confidence. The question then arises as to whether such an agreement may be argued to deny access to the mediation materials to prove a disputed mediated settlement.

It is well stated that the issues of privilege and confidence fundamental to the mediation process should not be lightly disturbed. This being said, in one case in which there was a dispute over which of the originally sued defendants had agreed to the settlement terms and the minutes were written by the mediator with input from respective counsel, an initial order was made allowing for the mediator’s evidence to be given on the motion.[52]

The Divisional Court reversed,[53] holding that the issue reviewed on first review was flawed as Lederman J. applied only the test of settlement privilege and not the Wigmore test. The fourth branch of the test was satisfied, noting that the ability of the parties to engage in fulsome discussions was fundamental to the mediation process which trumped the interest of disclosure.

It is to be noted that the issue in this case was the subpoena requested of the mediator. It was clear that counsel were free to offer evidence to prove or deny the agreement. This is so even if the settlement agreement is not signed.[54] The parties may then introduce evidence of the events of the mediation to prove the settlement.[55]

 

The Mediation Agreement

Often the parties will enter into a mediation contract, a common term of which will state that the communications made in the course of the mediation will agreed to be confidential. There is no issue that the parties may, by such a contract, agree that the rules of confidentiality may differ from those protections offered to such discussions by common law.[56] The very existence of such a contract does not “automatically” displace the settlement privilege and its exceptions. It remains theoretically possible for such an agreement contract to contract-out of the “settlement agreement” exception to settlement privilege.[57] Why any party would agree to such a term remains a mystery.  Such a term in the agreement would prevent the contracting parties from enforcing the contracted settlement. The purpose of the rule and indeed this exception to it, is designed to further the overall ambition of resolution of the claim.

Mediation and settlement privilege may often, but not always, walk hand-in-hand. Confidentiality is a significant factor in promoting mediation. Communications between the parties at mediation are clearly intended to settle the claim and hence are covered by settlement privilege. The Rule codifies this conclusion.

The mediation agreement may allow not only for a variation of the common law settlement privilege, but also provide for a remedy in contract for a breach of the confidentiality provision.[58]

There may be many reasons for the parties at mediation to request a confidentiality term, beyond the immediate desire to settle the claim. However, the confidentiality term in a mediation agreement may have a purpose well beyond that of the settlement privilege, the sole ambition of which is the resolution of the case.

Such other objectives of the mediation agreement may include the confidentiality of terms other than those designed to settle the case.

Settlement privilege is a rule of evidence. The confidentiality of the mediation contract is a covenant between the parties. The consequences of a breach of each leads to separate and distinct consequences.[59]

These factors may include the revelation of information that could be used by other parties which could lead to additional litigation or public authorities, or the information could prove to be publicly humiliating,[60] or the need to protect trade secrets.

The issue may arise as to what remedy may lie against a party who has breached such a confidentiality clause. This issue arose in the context of the mediation in a defamation action against a community newspaper.[61] The mediation agreement contained the usual confidentiality provision.

The conduct which was alleged to be contemptuous was an article which stated that the mediation had taken place and did not result in a settlement.[62]

A motion for contempt followed, not only for the breach of the mediation covenant but also for a violation of the deemed undertaking rule relating to the discovery which followed. A finding of contempt was made in the original application on the mediation violation.

The Court of Appeal reversed noting that the rule[63] which allows for contempt requires as a foundation a court order which has been violated. The second argument[64] advanced to support the contempt in either instance was the inherent jurisdiction of the court. To this issue, the appellate court[65] noted that the conduct in violation, referenced as the “actus reus” must be shown to have a “significant adverse effect on the administration of justice”. The articles came closest, Borins J.A.  noted, to the form of contempt[66] which seeks to avoid the prejudice of a fair trial by avoiding the publication of material to such a consequence. Nothing in the questioned article was seen to have such a consequence.[67]

In separately concurring reasons, Abella J.A. noted the significance of the confidentiality of the mediation as fundamental to its success. Given the rules do mandate the parties’ participation, there remains the potential to seek the remedy of contempt where “the circumstances are clear and beyond reasonable doubt,” a view which was also shared by Borins J.A.[68]

It has also been suggested that a remedy may lie for a breach of confidentiality covenant by separate action.[69]

 

Proving the Settlement Generally

To establish a binding settlement, there must be shown to be (1) offer and acceptance where the terms of the offer are matched by the terms of acceptance and (2) the acceptance is unequivocal. All essential terms must be resolved.

There may be found to be an enforceable contract to settle, even where the parties contemplate the execution of a more formal agreement. Negotiations which ensue to establish such a formal document do not, in themselves, lead to the conclusion that an offer or acceptance has been repudiated.[70]

The settlement agreement must be shown to be one which was the subject of the intent to create legal relations, examined objectively. No formality is required. A binding agreement may arise from “impromptu, informal communications in relaxed, non-business settings”.

There must be consideration. The terms must be sufficiently clear.[71]

The controversy will likely centre on what terms may be considered essential. The test is that of an “honest, sensible business person when objectively considering the parties’ conduct would reasonably conclude that the parties intended to be bound or not” by the relevant terms.[72]

Where non-essential terms have not been agreed to, the court will enforce the agreement and imply the missing terms. Such examples include the execution of a release, the manner and time of payment.

The impact of the term “subject to contract” or “subject to formal agreement” is “vexed” as the significance of such words will turn on the construction of the communications between the parties. The parties may have already committed themselves to a binding agreement if all the essential terms are agreed.

If there is a particular term which the party subjectively considers “essential” to the bargain, it should state so in every offer it communicates.[73]

The question is whether the parties have only reached “an agreement to later agree on essential provisions” or “to defer the binding nature of the agreement until the execution of the proposed subsequent formal contract”. The issue is one of construction. Is the future contract and its execution a condition of the agreement or is it a “mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through”.

The test is applied objectively.[74] The actual state of mind of or the subjective intention of the parties is irrelevant.[75]

The communication of the relevant position from legal counsel will bind the client, absent a specific qualifier to the contrary, such as “subject to my client’s approval”.[76]

The terms of the minutes of settlement are obviously to be agreed upon between the parties. One issue which has arisen is whether the minutes which have arisen from confidential discussions, be these through confidential mediation or settlement privilege without mediation may be said to be implicitly confidential, or whether such a term must be bargained for.

A 2002 decision of the Ontario court concluded that a “complete and final release” as was agreed does not imply that the release document will be permitted to contain a non-disclosure clause.[77] This settlement did not arise from a mediation. This has generally become an accepted principle. An agreed to exchange “mutually agreeable releases” cannot be interpreted to allow for the argument that the release should contain a confidentiality clause when this has not been previously negotiated as a discrete term of settlement.[78]

One case determined that the issue was sufficiently uncertain to warrant a trial even when a mutual release was provided which contained a confidentiality provision, which was accepted without dispute. It had not, however, been directly negotiated as a settlement term within the minutes. It was clear from the context that the defendant, a law firm, whose staff was accused of contriving accidents, was intent on minimizing adverse publicity.

Once a release is signed, the executed release provides a presumption of validity.[79] It is the party seeking to avoid the release who must demonstrate some exceptional release for so doing.

 

Proving the Settlement and Settlement Privilege

It is clear, that absent a contractual term to the contrary, settlement discussions may be admissible to prove that a binding agreement was reached through the settlement process,[80] or the interpretation of the settlement agreement where it may be seen as ambiguous.[81]

A mediation agreement may specify that this exception does not apply and hence the parties may contract out of this exception to the common law settlement privilege.[82]

Where the exception to the settlement privilege to prove the agreement to settle does apply, the parties may lead only such evidence to prove the settlement. If this is disputed, the evidence may be first heard in camera to determine the extent of the evidence which will then become public.[83]

When the settlement terms are disputed, the post-settlement assertions of either party are of no consequence.[84] The test to be applied to determine whether the case was settled is that of a reasonable objective bystander, given an awareness of the relevant context.[85]

The first step in the analysis is to determine whether the parties have reached an agreement on the essential terms of the bargain. Typically those basic elements are a payment of funds by one party to another, a promise directly or implicitly to provide a release in favour of the paying party and a consent to dismiss the action.[86] This analysis is based on the mutual intention of the parties to create a binding agreement on such essential terms.[87]

The fact that a formal written contract must follow does not prevent the assertion that this agreement has been made.[88]

The second step is the implementation of the settlement agreement. Either party may tender to the other documents designed to conclude the settlement without fear of rescinding the terms of settlement which have been achieved. If such a release document, for example, has been accepted and executed, the bargain has been struck.

It is a well-accepted proposition that settlement implies that a release will follow, unless there is an agreement to the contrary. This being said, a complex or unusual release must be negotiated as a settlement term.[89]

If the release document is rejected, due to a reference for example, to a non-disparagement or confidentiality provision, which was not previously cited as a settlement term, further discussions must ensue. In such event, “neither party has been released or discharged[90] unless the other party has demonstrated an unwillingness to be bound by the agreement by insisting upon terms and conditions which have not been agreed upon or are not reasonably implied in these circumstances”.[91]

This being said, the court will examine the settlement discussions and relevant written materials to determine whether certain settlement terms may be said to be implied in the bargain. This will involve a review of the “normal business practice and common sense”.[92]

 

Exceptions to Settlement Privilege & Mediation Privilege

This being said, settlement privilege, unlike other class privileges such as legal advice privilege, is subject to numerous exceptions. It is not as absolute as that of legal advice privilege.[93]

The rule is subject to the exceptions which follow.[94] This privilege will be excepted more readily in the search for truth. The persistent balance in the exceptions which follow is the tension between that search for the truth and the preservation of confidence.[95]

It is not a substantive rule of law or a fundamental civil right and hence on questions of production only, a court is more likely to conduct a balancing of interests.[96]

One case in Manitoba considered and allowed a letter written by a lawyer which commented derogatively on certain judges who had been proposed for a case management issue. The letter was found to be not covered by settlement privilege, but the Court of Appeal noted that it would have allowed the letter into evidence as an exception showing abusive conduct in any event.[97]

The exceptions to settlement privilege have been developed for public policy reasons.[98] The inherent protection afforded to settlement discussions is one intended to shield the participants from prejudice or risk of subsequent admissions or settlement offers advanced in this process. Should the use of this material not expose these parties to such prejudice, the reason for the privilege no longer exists.[99]

The general rule is that communications which have led to a settlement agreement between A and B are privileged not only between A and B, but also in an action brought by a stranger C against A.[100]

The leading authority setting out the “most important instances” of overriding the privilege was set out in an English case cited by both the Newfoundland Court of Appeal and the Manitoba Queen’s Bench.[101] These were set out as follows:

  1. The privilege communications resulted in a binding agreement;
  2. The agreement reached is disputed due to misrepresentation, fraud or undue influence;
  3. A clear statement was made by one party to another in the negotiations, on which the receiving party is intended to act and does to its prejudice. This refers to an estoppel plea. The authority notes that this discussion “may” be admissible in this context.
  4. If the privilege would lead to the exclusion of evidence would otherwise prove perjury, blackmail, or “other unambiguous impropriety”. This exception should be used in “the clearest of cases of abuse”.
  5. The exception may apply to explain a delay or “apparent acquiescence” in responding to an application for want of prosecution. The admissibility of such communications should be limited to fact that such letters were written and to prove the relevant dates, as opposed to the substantive content.

“Where the claimant has acted reasonably to mitigate his losses in his conduct and conclusion of negotiations for the compromise of proceedings brought by him.”

  1. “Where an offer is expressly made ‘without prejudice except as to costs’”.[102]

The exceptions have now been applied by an analytical approach as opposed to a mechanical formula.[103] Generally the party seeking the exception must show a “competing public interest outweighs the public interest in encouraging settlement”.[104]

Many of the exceptions are based not on the truth of what has been said, but rather simply on the fact the communication was made. Such is the example of the letters forming a settlement agreement, or a threatening remark made in a letter intended to be made without prejudice, or such a letter containing a statement which was seen as an act of bankruptcy.

Similarly, the fact that certain letters were sent on a specific date can be used to explain a delay where required to do so. It is not the contents of the letter but rather the date of the communication and the fact that the communication was made.[105]

When such an issue is raised where the passing of time is material, the fact that settlement discussions took place on a specific date may be admitted to speak to the issue of delay. In such a context what is said in the communications may not be relevant.[106]

Apart from the issue of the formation of a settlement agreement, generally the exceptions involve the need to prove some issue of unfairness or impropriety. To exclude such evidence due to the privilege, would lead to an abuse of it.[107]

The party seeking the exception must show that the material is relevant and that the disclosure is required to either to show that there was an agreement concluded between the parties[108] or that there is a “compelling or overriding interest of justice”.[109] This “competing public interest” must be one of sufficient substance to outweigh that public interest in promoting settlement.[110]

One such example of the latter exception is a settlement offer containing a “dishonourable threat” in which instance the offer was shown to have been made in bad faith and hence subject to production.[111] A second example was cited in the same case, where the discussions constituted an act of bankruptcy and was highly prejudicial to the opposing party.[112]

Generally speaking the privilege will give way where its enforcement would lead to an abuse of process or “another compelling or overriding interest of justice” will necessitate the exception.[113]

Similarly a pleading referring to a settlement offer made in bad faith will be allowed to stand. In one instance, the plea referenced an offer made by the employer to withdraw its complaint against the plaintiff in a wrongful dismissal case to her professional regulator.[114] The same result would follow, the court hypothecated, had such an offer been made at mediation.

One apparent exception is a fact situation in which the parties have agreed that evidence will be provided in the relevant litigation.[115] Additional exceptions in the same case were noted as fraud, or the questioned communications were required to meet “a defence of laches, want of notice, passage of a limitation period or other similar matters which might displace the privilege”.[116]

There has developed an issue of “double recovery” as an exception to the settlement privilege. The central theme of this exception is that the terms of the settlement in a prior settled action may have an impact on the related second proceeding.

The principle behind this exception first rests upon the purpose of the settlement privilege. A passage from Sopinka & Lederman is often used as the starting point of this analysis.[117] It reads as follows:

The aforesaid exceptions to the rule of privilege find their rationale in the fact that the exclusionary rule was meant to conceal an offer of settlement only if an attempt was made to establish it as evidence of liability or a weak cause of action, not when it is used for other purposes.

The theme has since been advanced and accepted that where the request for the production of such documents does not go the liability issue between the two litigants, the settlement privilege may not apply.[118]

One example of this is cases involving claims in the second action in which it is apparent that there is an issue of potential double recovery and hence the details of the settlement in the first action will be relevant to the disposition of the second.

An application of this exception was found in a case in which the plaintiff had been injured in two car accidents six months apart.[119] The first action settled which prompted the defendant in the second action to gain access to the terms of settlement to allow for details of the basis of settlement and the quantum. The order was granted on the basis that such details were relevant to the issue of avoiding double recovery. The critical issue is relevance to allow for the exception.[120]

Another exception may relate not to the details of settlement proposed in a without prejudice communication but some other underlying fact which may be contained within such a letter. The same theme generally has been applied, namely does the disclosure somehow prejudice the party making an admission in the form of the settlement offer or does it go to some other purpose?

Such was the context in a claim made in a second action in which the plaintiff had stated she could not recall her symptoms from the first settled claim yet which were revealed in the without prejudice communication.[121] The court found the letter privileged yet applied the exception to order production of the relevant parts of the letter as such were relevant to the damage claim made in the second action.

Further exceptions include allegations of misrepresentation and undue influence[122] and preventing a plaintiff from being over compensated. The exception for “overly compensated” has been seen as one limited to “an indemnity-type relationship” by which the defendant would obtain indemnity by the third party with whom the plaintiff has previously settled.[123]

In claims of subrogation, the insurer will be allowed to obtain the details of the previously settled claim made by its insured to assess the value of the claim to be made against the insured.[124]

The exception to settlement privilege was raised in a recent tax case in which CIBC was questioned as to deductions taken from its tax liability, the dispute centring on whether the admitted losses were the liability of the parent bank or its operating subsidiaries.[125]

CRA sought disclosure of details of settlement documents intent on determining the truth of this issue in such means. Many of the questions relating to the settlement issues were ordered to be produced. The court noted, rightly, that such an order could put a “chill” on such settlement discussions and indeed, reflected that the decision could be seen as “putting CRA in the room during the mediation, having access to every relevant document” and that “it seems apparent that CIBC would alter its behaviour during mediation discussions if CRA was in the room with it”.

There are other obvious exceptions such a crime or tort committed in the course of the mediation. A physical assault upon a party present at the mediation cannot be shielded by such a privilege.[126] On rare, exceptional situations the evidence of the events of the mediation may be used to support an assertion that the mediation was abused.[127]

Relief Sought by a Non-Party to the Mediation Agreement

It is true that one objective of the parties in mediation may be to protect the information which is exchanged between them from public knowledge or at least from the knowledge of certain non-parties to the mediation. This objective is noted in Union Carbide case.[128]

However, a stranger to this contract may not be subject to this restriction.[129] The B.C. Court of Appeal stated to the contrary, noting that the privilege applies to both the immediate parties and strangers to the negotiations.[130]

This issue was again considered in 2007 by the B.C. Court of Appeal[131] in which it was determined that the same rule applies to a stranger, even where the mission was to uncover evidence to support its plea[132] and not to undermine an offer made in the negotiations. There was no evidentiary basis offered to buttress the plea. It does not suffice to simply make the plea. The exceptions, the appellate court, noted were “narrowly defined and seldom applied”. No public policy exception, which must be “compelling”[133] could be found to allow for the success of the motion to allow for an exception to one of the “rare class privileges recognized by common law”,[134] which, as found previously, “endorses a near denial of production of settlement documentation”, the converse to which would mean “public policy would be thwarted”.[135]

Also significant was that the court used the test of settlement privilege and the noted exceptions to it and did not apply the Wigmore test.[136]

This exception was found to apply to a context in which a third party was impacted by the settlement agreement.[137] Different considerations apply when a stranger to the settled case seeks production. Where the production is sought for some other purpose other than showing liability of the party to the settlement discussions or from showing the weakness of one party’s claim, the settlement privilege may not apply.[138]

The Alberta Queen’s Bench concluded that such evidence of the mediation communications may be obtained by a stranger to the mediation contract provided that the evidence meets the tests of relevant, trustworthy and probative. It would be excluded only due to a higher cause such as a judicial or public policy which trumps the public interest of disclosure. In this immediate instance, the plaintiff alleged a conspiracy between the mediating parties against it. The mediation communications were ordered to be produced.[139]

Similarly, a plaintiff seeking to enforce his patent right sought production of information covered by a confidentiality agreement in which a third party was hired to and did manufacture products which competed with the plaintiff’s patent. The third party also sued the same defendant and obtained relevant evidence in discovery which was subject to the implied undertaking rule. The defendant appealed the master’s order allowing answers be given to relevant questions in breach of the confidentiality covenant and also relieving the witness from the implied undertaking. The court applied the Wigmore test and upheld the order allowing for disclosure of the material.[140]

A comparable confidentiality covenant, preventing one party to the agreement from disclosing the terms of settlement, was found to be one which was intended to “thwart the search for truth” in advance of trial, even in the context where the proposed witnesses may decline to respond to the request to be interviewed. There are limits to what protections a settlement agreement may allow. In this instance, the decision to set aside the confidentiality term had no impact on the plaintiffs in the original settled action. The clause protected only the original defendant. In this instance the decision did not compel disclosure, but rather it only allowed it where the agreement had forbidden it.[141]

A stranger to the contract seeking production of material subject to its confidentiality provisions must satisfy the Wigmore test before the confidentiality term may be trumped.[142] The search for the truth may ultimately rule the day over private commercial interests but the balancing of the respective interests in the fourth aspect of this test must be weighed.

Similarly settlement discussions which led to the resolution of an Ontario Securities Commission complaint and related civil litigation were required to be produced in resultant tax litigation. The privilege does not attach to a search for the proper interpretation of the settlement agreement by the revelation of the underlying discussions in unrelated litigation.[143]

Settlement privilege is one which does not deny other persons who are part of the same proceedings from access to relevant evidence to which this privilege is asserted.[144]

This same principle is shown in the Supreme Court of Canada decision[145] which refused the non-party to the settlement, a co-defendant in the proceeding, access to the terms of the dollar value of the settlement agreement.[146] All information which the settling defendant had provided to the plaintiff was, however, provided to the non-settling defendant. The refusal to allow the non-settling defendant knowledge of the settlement sum caused it no prejudice.[147] The reason which is put forward to allow for disclosure and the exception must outweigh the policy of refusing it to allow for the promotion of settlement opportunities. In this case, this analysis showed “little corresponding harm” in the denial of the production.

Nordheimer J. noted the above issue as consistent with a Mary Carter agreement[148] in which such agreements have been required to be disclosed.[149]

An Ontario decision in 2011[150] considered such a request for mediation documents in a claim made for contribution and indemnity for damages it was required to pay due to the plaintiff’s prior settlement of a class action brought against it.

In assessing the requested exception, the court stated the purpose of the rule was to prevent disclosure of prior offers only when such would disclose an admission of liability or the recognition that its case was weak. Such voluntary disclosure of an admission should not be used against that party by its then opponent or by third parties in future litigation. For that reason the master had conditioned the production order by a redaction of communications which disclosed such an admission against interest. Similarly no prejudice was to be suffered by the plaintiffs in the settled action.

On the contrary side of the argument, the entire claim brought against the defendant for contribution and/or indemnity due to its alleged wrongdoing was based on the mediation process and settlement. It could not defend itself on the action brought against it, otherwise.[151]

Privacy Legislation

The issue has arisen as to whether privacy legislation, such as Ontario’s Freedom of Information and Protection of Privacy Act, offers within its exempting provisions protections to documents prepared for purposes of mediation.

The Ontario statute allows the public authority two exemptions from disclosure.[152] The first is on account of solicitor-client privilege. The second does not specifically define the exception as one of litigation privilege but rather speaks more broadly of documents created “for use in litigation”.[153]

Mediation, whether consensual or mandatory, has been considered to be part of the litigation process and hence covered by the second exception.[154] This is so to encourage settlement of litigation. The word “litigation” referenced in the Act[155] has hence been read to include mediation and settlement discussions, not only to encourage resolution but also due to the wording of the exempting provision which did not exempt documents for “litigation privilege” but used a broader reference. In addition, the Court of Appeal noted that clear and explicit statutory language must be found to support the denial of a fundamental common law privilege, such as settlement privilege.[156]

Administrative Hearings

The overriding provincial statute states clearly that an administrative body created by statute cannot admit into evidence anything which would be inadmissible by reason for any privilege under the law of evidence.[157]

Pre-Trial Conference

Rule 50.03 parallels the mediation rule which precludes disclosure of communications made in the course of the pre-trial at a subsequent trial or motion.[158]

Rule 50.09

Offers to Settle

The Ontario Rule contemplates that an offer to settle may be made which says nothing about costs. Presuming that the offer is not time limited, it may be accepted by the defendant with consequential incremental costs which have accrued to the date of acceptance.[159]

An offer to settle which is silent on costs will mean that the acceptance of it will require costs to be paid through to the date of acceptance even where the offer is stated to be “in full and complete satisfaction of the plaintiff’s claim”.[160]

The interpretation applied to such an offer and the rule is one designed to encourage the litigants to make reasonable offers to resolve the issue and to do so early in the action.

 

[1] The two privileges have a common cause which is the effective administration of justice but they are driven by different legal consequences, as in SCC Blank v Canada, para 33

[2] R v Gruenke In this instance there was no class privilege in such communications as determined on a broad policy basis, nor did the communications meet the first requirement that they originated in confidence that they would not be disclosed.

 

[3] Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007, referencing Muller v Linsley [1994] P.N.L.R. 74, [1994] ADR.L.R. 11/30

[4] Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007, referencing Muller v Linsley

[5]Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007, referencing Unilever PLC v The Proctor & Gamble

[6]Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007, referencing Unilever PLC v The Proctor & Gamble,

[7] There are a number of theories suggestive of the reasoning behind the rule which are discussed in Meyers v Dunphy which appear to be of no consequence today. The privilege has now been clearly defined as a class privilege and the Wigmore test is no longer applied.

[8] CIBC v The Queen

[9]  Inter-Leasing Inc. v Ontario (Minister of Finance)

[10] The TDL Group Ltd v Zabco Manitoba Q.B. Joyal J.

[11] The TDL Group Ltd v Zabco Manitoba Q.B. Joyal J.

[12] The TDL Group Ltd v Zabco

[13] L’Abbe v Allen-Vanguard December 2011

[14] L’Abbe v Allen-Vanguard

[15] Sable Offshore v Ameron SCC

[16] Canadian Gateway v National Capital Commission [2002] OJ No 3167

[17] Rule 49.06

[18] Rule 24.1.15

[19] Union Carbide v Bombardier SCC May 2014

[20] Middelkamp v Fraser Valley Real Estate Board 1992 B.C. Court of Appeal, CIBC v The Queen

[21] Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007, Middelkamp v Fraser Valley Real Estate Board 1992 B.C. Court of Appeal

[22] Union Carbide v Bombardier SCC May 2014

[23] Sable Offshore v Ameron SCC

[24] Union Carbide v Bombardier, CIBC v The Queen

[25] Sable Offshore v Ameron SCC

[26] Rule 49.06(1) Marshall v Ensil Canada March 2005 Master MacLeod; Bonneville v Hyundai Auto 24 CPC (2d) 235, Prior v Sunnybrook

[27] The TDL Group Ltd v Zabco Manitoba Q.B. Joyal J.

[28] This was reviewed in The Law of Evidence, Sopinka, Lederman and Bryant, 3rd edition, referenced in Sabre Inc. v International Air Transport Association March 2009, Pepall J. OSC

[29] That is provided that none of the exceptions to the rule apply.

[30] Clarke v Yorkton Securities Clarke v. Yorkton Securities, [2003] CarswellOnt 4933, [2003] OJ No 4999 (QL), [2003] OTC 1073, 127 ACWS (3d) 427, 46 CPC (5th) 294 , B.C. Children’s Hospital v Air Canada Products Canada (2003) 29 CPC (5th) 16 B.C. Court of Appeal. These cases are reviewed in Sabre Inc. v International Air Transport Association March 2009, Pepall J. OSC

[31] IPEX v AT Plastics Strathy J. August 2011

[32] Ontario Court of Appeal in LCBO v Magnotta upheld this decision of the Divisional Court but did not make any comment upon this analysis of the Divisional Court, made in June 2009.

[33] For example, that of the Ontario Court of Appeal in 2003 Rogacki v Belz

[34] Inter-Leasing Inc. v Ontario (Minister of Finance) October 2009. This was a motion to strike material from an application record due to settlement privilege.

[35] Johnstone v Locke, J. Mackinnon J. in November 2011

[36] Brown v Cape Breton April 2011

[37] Moore v Bertuzzi June 2012; see also Sable Offshore v Ameron SCC

[38] Kelvin Energy v Lee quoting Sparling v Southam

[39] R. v Nestle Inc.

[40] R. v Nestle Inc. In this instance, the information was provided pursuant to the Competition Bureau’s Immunity Program.

[41] R. v Nestle Inc. The issue in this case was the material provided to the Crown which led to the immunity agreement, not the information provided pursuant to this agreement.

[42] Rule 24.1.14 All communications at a mediation session and the mediator’s notes and records shall be deemed to be without prejudice settlement discussions.

[43]  Rogacki v Belz

[44] Rogacki v Belz October 2003

[45] Baker v Zurich December 2003 B. Wright, J.

[46] Marshall v Ensil Canada March 2005 Master MacLeod

[47] Rogacki v Belz The majority decision did not speak to this issue.

[48] Marshall v Ensil Canada March 2005 Master MacLeod

[49] Marshall v Ensil Canada March 2005 Master MacLeod, referencing Jones v Campbell [2000] O.J. No. 3153

[50] Abella J.A. in concurring reasons in Rogacki v Belz

[51] Rogacki v Belz Borins J.A.

[52] Rudd v Trossacs Lederman J.

[53] Rudd v Trossacs Div Ct

[54] As required by Rule 24.1.15 (3)

[55] OCA Hagel v Giles August 2006

[56] Union Carbide v Bombardier SCC May 2014

[57] Union Carbide v Bombardier SCC May 2014

[58] Union Carbide v Bombardier SCC May 2014

[59] Union Carbide v Bombardier SCC May 2014

[60] Owen V. Gray in “Protecting the Confidentiality of Communications in Mediation” (1998) Osgoode Hall Law Journal 667

[61] Rogacki v Belz Ontario Court of Appeal October 2003

[62] This was the summary of the article as noted by the Court of Appeal. The actual article said more, stating that the plaintiff rejected the proposal of settlement “which might have served as a basis for reconciliation of the parties”.

[63] Rule 60 and in particular Rules 60.05 and 60.11(1)

[64] Both issues were considered on the appeal. The deemed undertaking contempt motion was dismissed on the initial motion from which no cross appeal was brought. The sole issue on appeal was the contempt finding for the breach of the mediation covenant.

[65] As written by Borins J.A., Armstrong J.A concurring. Abella J.A. wrote separate concurring reasons.

[66] The “sub judice” rule.

[67] This was also the case for the second article.

[68] The successful appellant was, however, denied his costs on appeal, in part due to his violation of the covenant. Borins J.A. dissented on this issue. The Court of Appeal in the costs decision noted a proposed amendment to the mediation rule to add a provision that all communications at a mediation session and the mediator’s notes and records shall “be subject to the deemed undertaking as provided in rule 30.1.01”. This amendment has not been effected.

[69] Marshall v Ensil Canada March 2005 Master MacLeod

[70] Apotex v Allergan Federal Court of Appeal May 2016 105 CPR (4th) 371; 440 NR 269; [2012] FCJ No 1467 (QL)

[71] Apotex v Allergan

[72] Apotex v Allergan

[73] Apotex v Allergan

[74] Apotex v Allergan

[75] Apotex v Allergan

[76] Apotex v Allergan

[77] Abouchar v Conseil Scolaire

[78] Excell Stamping v Consolidated Recycling Clarke . March 2008

[79] Quraishi v Islamic School Board Alberta Human Rights Commission January 2016

[80] Union Carbide v Bombardier SCC May 2014. See also Stautlo Fisheries v Sthakwy Fishing January 2016

[81] Quraishi v Islamic School Board Alberta Human Rights Commission January 2016

[82] Union Carbide v Bombardier

[83] This was the rule developed given a mediation contract which did not contract out this exception. The same rule should apply to the proving the settlement exception to the common law rule. Union Carbide v Bombardier

[84] Urban Handyman v Should I Stay B.C. Supreme Court October 2015

[85]  Urban Handyman v Should I Stay B.C. Supreme Court October 2015

[86] Fieguth v Acklands B.C. Court of Appeal

[87] Norwich Union Life v MGM Insurance McCawley J. Manitoba QB

[88] Norwich Union Life v MGM Insurance McCawley J. Manitoba QB

[89] Cellular Rental Systems v Bell Mobility OSC Chapnick J. par 24

[90] That is, from the settlement agreement.

[91] Fieguth v Acklands B.C. Court of Appeal and to the same effect Lacroix v Loewen

[92] Norwich Union Life v MGM Insurance McCawley J. Manitoba QB

[93] R. v Nestle Inc.

[94] Globe and Mail v Canada SCC October 2010

[95] L’Abbe v Allen-Vanguard

[96] Histed v Law Society of Manitoba December 2007, The TDL Group Ltd v Zabco Manitoba Q.B. Joyal J., L’Abbe v Allen-Vanguard

[97] The letter stated “[Justice A], frankly, is a bigot.  [Justice B], although fair, intelligent, and a really nice guy, would not move the matter forward on a timely basis. [Justice C] is not familiar enough with civil proceedings and is too right wing.  [Justice D] is too right wing.” Only the bigot comment was controversial. Histed v Law Society of Manitoba

[98] Union Carbide v Bombardier SCC May 2014; Sable Offshore v Ameron SCC

[99] R. v Nestle Inc.

[100] I. Waxman & Sons v Texaco [1968] 1 O.R. 642 upheld on appeal (1968) 2 O.R. 452; Guarantee Co. of N.A. v Beasse (1991) 150 A.R. 241

[101] Unilever plc v The Proctor & Gamble [2001] 1 All E.R. 783, Robert Walker L.J. in Meyers v Dunphy and The TDL Group Ltd v Zabco Manitoba Q.B. Joyal J. In the particular instance before Joyal J. none of the exceptions were applied. The issue was based on bad faith and misrepresentations but not in the negotiations in question.

[102] The quoted references come from the Meyers v Dunphy, a Newfoundland Court of Appeal decision. It is also referenced The TDL Group Ltd v Zabco, the Manitoba Q.B. decision. There was also a further exception from the latter which was not detailed, which related to “matrimonial conciliation”.

[103] Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007

[104] Dos Santos v Sun Life B.C. Court of Appeal

[105]Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007, referencing Muller v Linsley

[106] This is a summary of a passage from The Law of Evidence, Sopinka, Lederman and Bryant, 3rd edition, referenced in Fillmore v The Estate of Earl Ivan Trenholm. Q.B. of New Brunswick December 2013, Rideout J.

[107] Meyers v Dunphy Newfoundland and Labrador Court of Appeal

[108] Union Carbide v Bombardier SCC May 2014

[109] Inter-Leasing Inc. v Ontario (Minister of Finance)

[110] CIBC v The Queen, Sable Offshore v Ameron SCC

[111] Underwood v. Cox (1912), 26 O.L.R. 303, 4 D.L.R. 66, Divisional Court, as referenced in I. Waxman & Sons v Texaco.

[112] Re Daintrey as referenced in I. Waxman & Sons v Texaco

[113] Histed v Law Society of Manitoba Manitoba Court of Appeal December 2007, citing Meyers v Dunphy Newfoundland Court of Appeal

[114] Prior v Sunnybrook

[115] Dos Santos v Sun Life B.C. Court of Appeal

[116] Dos Santos v Sun Life B.C. Court of Appeal

[117] The Law of Evidence in Canada (2d edition), Sopinka, Lederman, Bryant, at page 201

[118] Stevenson v Reimer [1993] O.J. No. 2440, Mandel J. General Division,  leave denied (1993) O.J. No. 2800 OCA

[119] Jones v Appleton (1994) 32 C.P.C. (3d) 367 Ontario General Division, Valin J.

[120] Milicevic v Jakubec Alberta Q.B. Binder J. 2005 ABQB 654, para 31. The issue of the finality of the first action by court decision or settlement led the court to the determination that the disposition of the first action was not relevant and the motion was dismissed. This was a production motion. The court stated that the issue could again be raised at trial. Much to the same end was the decision of Browne J. in Chappel v Dysko, 2008 Canlii 91, Ontario Superior Court December 2007

[121] Morrissey v Morrissey [2002] N.J. 123 (S.C.T.D.) affirmed [2002] N.J. No. 260, 2002 NFCA 58

[122] Sable Offshore v Ameron SCC referencing Unilever plc v Proctor & Gamble [2001] 1 All E.R. 783

[123] 1400467 Alberta Ltd. v Adderley

[124] Dos Santos v Sun Life B.C. Court of Appeal, Confederation Life v Juginovic

[125] CIBC v The Queen, December 2015

[126] Marshall v Ensil Canada March 2005 Master MacLeod

[127] Marshall v Ensil Canada March 2005 Master MacLeod. This is obiter dicta.

[128] Referring to Owen Gray’s article above in Union Carbide v Bombardier

[129] As noted in the Owen Gray article and also by the Alberta Queen’s Bench in Keyland Development v Town of Cochrane

[130] Middelkamp v Fraser Valley Real Estate Board 1992 B.C. Court of Appeal

[131] Heritage Duty Free Shop v A-G Canada April 2005

[132] It was asserted by the plaintiff that the settlement discussions would reveal the terms of an offer made by the Semiahmoo Indian Band and the Crown in the litigation between these parties.

[133] Heritage Duty Free Shop v A-G Canada

[134] Heritage Duty Free Shop v A-G Canada

[135] Heritage Duty Free Shop v A-G Canada

[136] Heritage Duty Free Shop v A-G Canada

[137] Doherty J. Mueller Canada v State Contracting November 1989, Robichaud v Clarica Life September 2007

[138] To the same effect is Chappel v Dysko, 2008 Canlii 91, Ontario Superior Court December 2007

[139] Alberta Queen’s Bench in Keyland Development v Town of Cochrane

[140] Almac Machine Works v Greenwall November 2006 Alberta Queen’s Bench, Marceau J.

[141] Aetna Insurance v Mason and Company December 1998

[142] Husky Oil v Anadarko Canada Alberta Court of Appeal May 2004

[143] Fink v The Queen [2005] 3 CTC 2474 Bonner J., Tremblay v The Queen Little J.,

[144] R. v Nestle Inc.

[145] Sable Offshore v Ameron SCC

[146] This is referred to as a “Pierringer Agreement”.

[147] The plaintiff had agree to advise the trial judge of the sum so received once the liability of the non-settling defendants had been answered.

[148] A Mary Carter agreement is one made between a plaintiff and some, but not all, defendants, in which the parties place limitations on the financial responsibility of the agreeing defendants. Its origin comes from the American case of Booth v. Mary Carter Paint Co. (1967), 202 So. (2d) 8.

[149] R. v Nestle Inc.

[150] IPEX v AT Plastics Strathy J. August 2011

[151] IPEX v AT Plastics Strathy J. August 2011. The court used the Wigmore test as opposed to the class privilege and then also applied the latter to the same effect.

[152] By S. 19

[153]  S. 19 reads allows a refusal to disclose for solicitor-client communications or “that was prepared by or for Crown counsel for use in giving legal advice of or for use in litigation”.

[154] Ontario Court of Appeal in LCBO v Magnotta, upholding the Divisional Court

 

[156] The Court of Appeal did not, however, determine settlement privilege was a “free-standing exemption” under the statute.

[157] Statutory Powers Procedure Acts s. 22

[158] Bell Canada v Olympia & York (1994) 17 OR (3d) 135 OCA

[159] Rule 49.07(5)

[160] Puri Consulting v Kim Orr Barristers Ontario Court of Appeal October 2015. The decision was also contextual as the Court noted that the offer was one made early in the litigation, the defendant was a law firm and would be aware that the offer would decline in value over time, should the opposite interpretation apply.

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