Parties who seek to ensure the ongoing confidentiality of
communications in furtherance of settlement through mediation
should take heed of the Supreme Court of Canada's recent
unanimous decision in Union Carbide Inc. v. BombardierInc., 2014 SCC 35. The Court's decision
addresses the narrow issue of whether and when a confidentiality
clause in a mediation contract can displace the common law rule
that evidence regarding settlement communications may be disclosed
in certain circumstances, and the case offers broad lessons in the
benefits of planning for mediation.
Settlement privilege is a rule of evidence that applies to all
settlement negotiations and which prevents parties from
disclosing communications exchanged in an attempt to settle a
dispute, even after a settlement is reached. The privilege is
intended to promote out-of-court settlements by incentivizing
parties to have honest and frank discussions. There are
exceptions to the privilege; where fraudulent or unlawful
communications are made to procure a settlement, threats are
uttered, to prevent double recovery in cases involving multiple
defendant, and to prove the existence or scope of a settlement.
Only the last exception is addressed by the Court in Union
The facts of the case are straightforward. After decades of
litigation, Union Carbide (now Dow Chemical) and Bombardier decided
to mediate their dispute concerning defective gas tanks on Sea-Doo
watercraft. On the eve of the mediation, the parties signed a
standard form mediation agreement provided by the mediator, which
stated that, "Nothing which transpires in the Mediation will
be alleged, referred to or sought to be put into evidence in any
proceeding." Dow Chemical made a settlement offer, which
Bombardier accepted after the mediation had concluded. The
parties later disagreed on the scope of the settlement, and Dow
Chemical did not pay the settlement amount. Bombardier
brought a motion to enforce the settlement, relying on evidence of
what occurred both during and after the mediation. Dow
Chemical moved to strike out certain allegations in the notice of
motion on the basis that they disclosed evidence of what took place
in the confidential mediation process.
Writing on behalf of the unanimous Court, Wagner, J. determined
that the allegations should not be struck from the notice of
motion, reasoning that only through express and explicit language
may parties contract out of the common law rule of settlement
privilege and its exceptions. The confidentiality clause in
the standard form mediation agreement signed by the parties,
although broadly worded, did not do so.
Parties who wish to maintain complete confidentiality of their
mediation negotiation (i.e., those who wish to oust the settlement
privilege exceptions) now have clear guidance on the necessary
steps to follow. Clearly worded mediation contracts that leave
no doubt that the parties intend to waive their right to rely on
communications made at mediation for the purpose of enforcing a
settlement (or for purposes of any of the other exceptions to the
settlement privilege rule) are required. Language in standard
form mediation contracts is unlikely to suffice.
As a result of this decision, prudent mediating parties and
their counsel will add confidentiality to the list of
considerations that they discuss before mediation. Advance
consideration of these issues will promote clear communication at
the mediation, and ensure all parties understand what information
they reveal at a mediation might be subject to later
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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