In Union Carbide, the parties to a private mediation
signed the mediator's standard-form mediation agreement
containing a confidentiality clause. That clause established a
blanket ban on alleging, referring to or putting into evidence in
any proceeding anything that transpired in the mediation. After the
mediation, the parties disagreed on whether they had reached a
deal, and, if they had, what the terms were. Did the
confidentiality clause really prevent the party who thought it had
an agreement from referencing what happened at mediation to make
Answering this question required the Supreme Court to address
the interaction between confidentiality clauses and the common law
evidentiary rule known as "settlement privilege", which
also protects the confidentiality of settlement discussions.
Settlement privilege, also known as the "without
prejudice" rule, protects communications exchanged by parties
in the process of trying to settle litigation from being disclosed
without the consent of the parties. It applies even if no statute
or contract assures confidentiality. But one of the limited
exceptions to settlement privilege is that a communication
"that has led to a settlement will cease to be privileged if
disclosing it is necessary in order to prove the existence or the
scope of the settlement" (para 35).
The potential for the scope of a contractual confidentiality
clause to differ from that of settlement privilege required the
Supreme Court to consider, first, whether parties could agree under
any circumstances to oust the settlement exception to settlement
privilege, and, second, whether the parties in this specific case
had done so.
The Supreme Court held that parties are free to agree to
confidentiality clauses that differ from the ordinary scope of
settlement privilege, even to the extent of barring themselves from
having recourse to communications made in the course of mediation
to prove the fact of a settlement agreement or its terms. The
"will of the parties" in this regard should
"presumptively be upheld absent such concerns as fraud or
illegality" (para 49).
However, it will not be presumed that a confidentiality clause
in a mediation agreement "automatically displaces settlement
privilege, and more specifically the exceptions to that privilege
that exist at common law" (at para 3). Where parties have
agreed to greater confidentiality "in order to foster frank
communications and thereby promote a settlement", it cannot be
presumed that they also intended to "displace an exception to
settlement privilege that serves the same purpose" (para 54).
A specific contract might effect this result, but it would have to
be clear in its expression of this intent (ibid). Absent
an express provision to the contrary, it may be "unreasonable
to assume that parties who have agreed to mediation for the purpose
of reaching a settlement would renounce their right to prove the
terms of the settlement" (para 65).
Whether in any given case the parties intended to displace
settlement privilege falls to be determined in accordance with the
applicable principles of contractual interpretation. As Union
Carbide arose in Québec, the Supreme Court applied that
province's law of contractual interpretation. In the result,
the Court held that the parties had not intended to sign away the
potential to prove that they had reached a settlement. They had
entered their mediation contract with the express purpose of trying
to reach settlement, and it was a standard-form contract provided
by the mediator that they both signed without modification.
Union Carbide confirms that parties to mediation have
wide latitude to shape the extent of confidentiality that applies
to mediation, and even to oust the exceptions to settlement
privilege entirely if they wish.The case further confirms that the
strong public policy of giving parties every opportunity to resolve
their dispute prior to commencing, or before continuing, litigation
is furthered by permitting parties to customize the terms on which
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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