As was reviewed recently, discussions and documents prepared for mediation are all subject to settlement privilege, a rule of evidence which prevents the use of this information against the parties in the actual or other proceedings.
This privilege is similar to, yet different, from a confidentiality covenant which typically is set out in the mediation agreement. The settlement privilege is subject to numerous exceptions. Understanding these exceptions is vital.
The exceptions to settlement privilege have been developed for public policy reasons. 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.
The persistent balance in the exceptions which follow is the tension between that search for the truth and the preservation of confidence.
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.
The leading authority setting out the “most important instances” of overriding the privilege was set out in an English case.
Examples of Situations Overriding the Privilege
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 or that there is a “compelling or overriding interest of justice”. This “competing public interest” must be one of sufficient substance to outweigh that public interest in promoting settlement.
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.
The exceptions have now been applied by an analytical approach as opposed to a mechanical formula. Generally, the party seeking the exception must show that a “competing public interest outweighs the public interest in encouraging settlement”.
Proving the Settlement
There may be an issue between the parties as to whether the case has, in fact, been settled or what the terms of settlement are.
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, or the interpretation of the settlement agreement where it may be seen as ambiguous.
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 (i.e. privately) to determine the extent of the evidence which will then become public.
Abusive or Dishonourable Conduct
A further exception may be allowed 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”.
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.
A further example of this form of 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. 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.
Explaining Time Delay
The passing of time may be important for many reasons. 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.
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.
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 theme has since been advanced and now accepts that where the request for the production of such documents does not go to the liability issue between the two litigants, the settlement privilege may not apply.
For example, in an employment context, if a plaintiff sued a personal representative of the company for sexual harassment and then again sued the company directly for the same relief, there would be an issue of double recovery which would likely allow the company access to the settlement terms of the first action.
As discussed in our most recent blog, the CRA may gain access to settlement terms and indeed all relevant mediation documents, given a tax issue relevant to the details of the case.
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”.
Be Prepared for Mediation
Whether you be an employer or employee facing mediation, it is important to understand the rules of evidence in the mediation process. It is not a shield for improper conduct. When conducted fairly and honestly, the contents of the mediation and a settlement agreement will remain privileged.
If you have questions about the mediation process, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.
 Union Carbide v Bombardier SCC May 2014; Sable Offshore v Ameron SCC
 Histed v Law Society of Manitoba December 2007, The TDL Group Ltd v Zabco Manitoba Q.B. Joyal J., L’Abbe v Allen-Vanguard
 Unilever plc v The Proctor & Gamble  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.
 Union Carbide v Bombardier SCC May 2014
 Inter-Leasing Inc. v Ontario (Minister of Finance)
 CIBC v The Queen, Sable Offshore v Ameron SCC
 Histed v Law Society of Manitoba Manitoba Court of Appeal December 2007, citing Meyers v Dunphy Newfoundland Court of Appeal
 Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007
 Dos Santos v Sun Life B.C. Court of Appeal
 Union Carbide v Bombardier SCC May 2014. See also Stautlo Fisheries v Sthakwy Fishing January 2016
 Quraishi v Islamic School Board Alberta Human Rights Commission January 2016
 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
 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
 Underwood v. Cox (1912), 26 O.L.R. 303, 4 D.L.R. 66, Divisional Court, as referenced in I. Waxman & Sons v Texaco.
 Re Daintrey as referenced in I. Waxman & Sons v Texaco
Meyers v Dunphy Newfoundland and Labrador Court of Appeal January 2007, referencing Muller v Linsley
 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.
 Stevenson v Reimer  O.J. No. 2440, Mandel J. General Division, leave denied (1993) O.J. No. 2800 OCA
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