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Bulletin

Settlement Privilege is Not Absolute

Fasken
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Overview

Litigation and Dispute Resolution Bulletin

Introduction

On December 17, 2021, in Association de médiation familiale du Québec v. Bouvier,[1] the Supreme Court of Canada considered the exception to settlement privilege that allows communications that would otherwise be privileged to be disclosed in order to prove the existence or terms of the settlement.

In this case, when a family mediation process ended, the mediator recorded his conclusions about the agreements between I and M in a document called “summary of mediated agreements.” I then filed a court action seeking greater financial compensation than was provided for in the summary of mediated agreements. At that point, M wanted to rely on the contract made by the parties during mediation. I objected to the admission of the summary of mediated agreements in evidence on the ground that it was protected by the confidentiality of the mediation process.

The Superior Court of Quebec dismissed the objection, relying on the exception to settlement privilege that applies when one party wants to prove the existence and terms of a settlement, relying, in particular, on the decision of the Supreme Court in Union Carbide Canada Inc. v. Bombardier Inc.[2] (“Union Carbide”). The Court of Appeal then dismissed the appeal on that point, but the judges did not all agree about the application of the principles enunciated in Union Carbide in the family mediation context.

Decision of the Supreme Court of Canada

In a majority decision, the Supreme Court held that it was not desirable to establish a rule of absolute confidentiality in relation to family mediation. Accordingly, the exception to settlement privilege when one party wishes to prove the existence or scope of a settlement will also apply in family mediation.

While this decision discusses the particular context of family law, the Supreme Court points out the importance of the settlement privilege and the exceptions to it that apply in civil and commercial cases.

Settlement Privilege

Settlement privilege protects the confidentiality of communications and information exchanged for the purpose of settling a dispute. Accordingly, discussions in the context of mediation are protected by settlement privilege.

As the Supreme Court stated, settlement privilege is fundamental in order to promote honest and frank discussion between parties: it generally facilitates settlements since the parties can be confident that the content of their discussions will not be used later. The privilege applies automatically without having to be invoked by the parties. The privilege applies to all communications that lead up to a settlement, even after a mediation session has concluded.

Exceptions to the Settlement Privilege

However, settlement privilege is not absolute and is subject to its share of exceptions. In particular, the parties may alter its scope by contract. In addition, confidentiality may be lifted on an exceptional basis, for example where there is fraud by a mediator.[3]

The specific exception that was the subject of the appeal to the Supreme Court, the importance of which was reiterated in Union Carbide, is the exception that may apply where a party wishes to prove the existence or scope of a settlement.

The Supreme Court quoted what Justice Wagner said in Union Carbide: “Once the parties have agreed on a settlement, the general interest of promoting settlements requires that they be able to prove the terms of their agreement.”[4]

However, the Supreme Court pointed out that this exception in no way weakens the privilege, since where a settlement has been agreed to, there is no longer any public order matter that would allow evidence of the settlement to be excluded.[5] In addition, the exception applies only to what is necessary to prove the existence or scope of the settlement.

Because parties are free to contract out of the settlement exception, the Supreme Court analyzed the contract signed by the parties at the beginning of the mediation. The Court concluded that this was a contract containing standard confidentiality clauses and none of those clauses clearly displaced the settlement privilege or the exceptions to it.[6]

Another Possible Objection to the Admission of the Summary of Mediated Agreements

It is worth noting that Justice Hogue, sitting on the Court of Appeal in this case, raised another potential ground of objection to admission of the summary of mediated agreements. She noted that a writing produced to prove a juridical act must meet certain conditions in order to be admissible. Because the summary of mediated agreements is a simple writing and not a contract, I could have objected to it being admitted on the ground that an unsigned summary cannot be admitted in evidence to prove a juridical act. The Supreme Court confirmed that this option would have been possible, but said that because I had not raised it, the trial judge could not have raised that objection of his own motion.[7] The trial judge could therefore admit the summary of mediated agreements in evidence, given that the exception in Union Carbide applied in this case and the other potentially applicable objections had not been raised.

Conclusion

The Supreme Court has thus provided a useful reminder that settlement privilege protects the confidentiality of communications and information exchanged for the purpose of settling a dispute but the privilege is not absolute.

Parties should therefore proceed with caution in settlement negotiations.


[1] 2021 SCC 54.
[2] 2014 SCC 35.
[3] Association de médiation familiale du Québec c. Bouvier, supra, note 1, para. 96.
[4] Id., para. 98.
[5] Id., para. 98.
[6] Id., paras. 99 and 107.
[7] Bisaillon v. Bouvier, 2020 QCCA 115, paras. 91-96; Association de médiation familiale du Québec v. Bouvier, supra, note 1, paras. 89-93.

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