Settlement Privilege

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Union Carbide Canada Inc. v. Bombardier Inc., 2014 SCC 35 (CanLII)

[31] Settlement privilege is a common law rule of evidence that protects communications exchanged by parties as they try to settle a dispute. Sometimes called the “without prejudice” rule, it enables parties to participate in settlement negotiations without fear that information they disclose will be used against them in litigation. This promotes honest and frank discussions between the parties, which can make it easier to reach a settlement: “In the absence of such protection, few parties would initiate settlement negotiations for fear that any concession they would be prepared to offer could be used to their detriment if no settlement agreement was forthcoming” (A. W. Bryant, S. N. Lederman and M. K. Fuerst, The Law of Evidence in Canada (3rd ed. 2009), at para. 14.315).

[32] Encouraging settlements has been recognized as a priority in our overcrowded justice system, and settlement privilege has been adopted for that purpose. As Abella J. wrote in Sable Offshore, at para. 12, “[s]ettlement privilege promotes settlements.” She explained this as follows, at para. 13:

Settlement negotiations have long been protected by the common law rule that “without prejudice” communications made in the course of such negotiations are inadmissible (see David Vaver, “‘Without Prejudice’ Communications — Their Admissibility and Effect” (1974), 9 U.B.C. L. Rev. 85, at p. 88). The settlement privilege created by the “without prejudice” rule was based on the understanding that parties will be more likely to settle if they have confidence from the outset that their negotiations will not be disclosed. As Oliver L.J. of the English Court of Appeal explained in Cutts v. Head, [1984] 1 All E.R. 597, at p. 605:

. . . parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations . . . may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J in Scott Paper Co v. Drayton Paper Works Ltd (1927) 44 RPC 151 at 157, be encouraged freely and frankly to put their cards on the table.

What is said during negotiations, in other words, will be more open, and therefore more fruitful, if the parties know that it cannot be subsequently disclosed.

York Region Condominium Corporation No. 890 v. Market Village, 2019 ONSC 4835 (CanLII)

[33] It is established law that settlement privilege is a class privilege for which there is a prima facie presumption of inadmissibility: Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 at para. 12. Settlement privilege is a privilege belonging to both parties to the communication, so cannot be unilaterally waived by one party, but rather must be waived by both parties: Hallman v. Pure Spousal Trust (Trustee of), 2009 ONSC 49643 at para. 14. The party asserting waiver has the onus of establishing it by showing express or implied intent to waive or by satisfying the court that fairness requires that it be waived: Hallman, supra at pars. 15-16.

[34] The argument advanced by Market Village is essentially that if Pacific Mall would have been satisfied with monetary compensation during negotiations, then that would support the defence position at trial that a permanent injunction was not contemplated and/or is not an appropriate remedy. However, Market Village’s argument is, in my view, a slippery slope. Assuming for a moment that the substance of the pre-litigation discussions was acceptable monetary compensation, it is not implausible for Pacific Mall to have opposed the proposed encroachment into its easements, yet been willing to consider monetary compensation on a without prejudice basis, but when those discussions fell apart maintained to its position that encroachment was unacceptable. The protection afforded by settlement privilege exists precisely to encourage and permit parties to explore alternative, creative and even non-linear options that could resolve a dispute. It is a key aspect of settlement privilege that willingness to explore other options is not subsequently used as a sword against a party after the fact.

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[37] I also do not accept Market Village’s argument that waiver should be found as a matter of necessity. There must be a competing public interest here outweighing the public interest in encouraging open settlement discussions: Sable Offshore, supra at para. 19. I do not accept Market Village’s arguments that unfairness in these circumstances implicates a broader prejudice to litigants in general. If there is unfairness to Market Village (and I am not satisfied there is such unfairness), then it is limited to this litigation. I do not see a broader public policy issue arising from reliance on settlement privilege in the manner done by Pacific Mall.

[38] Market Village’s question was plainly seeking the content of the parties’ settlement discussions. While Market Village wishes to waive settlement privilege over the pre-litigation meetings and discussions, Market Village has not met its onus of demonstrating intentional waiver by Pacific Mall or necessity for such waiver. Based on that determination, I need not consider relevance. Pacific Mall’s refusal of Q1453 and Q1454 was proper and answers need not have been given.