The Supreme Court of Canada has recently decided an interesting
case regarding the intersection of an absolute confidentiality
clause in mediation with the exception to the common law settlement
privilege that allows a party to rely on what was said in the
mediation to enforce any settlement reached in the mediation.
In Union Carbide Canada Inc. v. Bombardier Inc., 2014
SCC 35, the parties had been involved in lengthy litigation
involving defective gas tanks used on Sea-Doo personal watercrafts.
The parties agreed to mediate the dispute and entered into a
standard mediation agreement that contained the following
confidentiality clause: "Nothing which transpires in the
Mediation will be alleged, referred to or sought to be put into
evidence in any proceeding." The parties proceeded to settle
the matter during the mediation; however, one party thought the
settlement was a global settlement amount whereas the other party
thought the settlement was only in respect of the Montreal
litigation. A dispute arose as to what the settlement terms were
and a motion was filed regarding the issue before the Superior
Court of Quebec. The respondent party to the motion objected to six
paragraphs in the application documents which referred to events
that had taken place during the mediation.
The motion judge ordered that four of the six offending
paragraphs be struck because they referred to discussions that had
occurred in the mediation. The Court of Appeal took a different
approach and found that when mediation results in an agreement,
communications made in the course of the mediation process cease to
be privileged and a party can produce evidence of those
confidential communications in order to prove the existence of a
disputed settlement agreement.
The Supreme Court of Canada held that where an agreement could
have the effect of overriding the established exception to the
common law settlement privilege, its terms had to be clear. A
standard confidentiality clause, like the one in this case, would
not meet that hurdle as it did not evidence an intention to
disregard the usual rule that settlement privilege is overridden
where it is necessary to prove the terms of the settlement. In the
interests of promoting settlements between the parties, it is
necessary that they be able to prove the terms of the settlement.
However, mediation is also a "creature of contract" and
therefore, it was open to the parties to develop their own rules
regarding the confidentiality of the process. If it was clearly
expressed, it would be possible for the parties to override the
exception to the common law settlement privilege and truly ensure
that everything that happens in mediation, stays in mediation.
It is interesting that the Supreme Court of Canada is
sanctioning the ability of parties to contract regarding the extent
of the confidentiality of mediation. However, one would suspect
most litigants will want the ability to prove any settlement that
may arise from mediation and would be wary of closing off this
avenue through a contract they freely entered into. While this case
was an appeal from the Quebec Court of Appeal, given the universal
nature of the subject matter, it is most likely to be applied
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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