While many tenets concerning the protections afforded by
privilege are similar in both Canada and the United States, there
are key differences and treatment when it comes to settlement and
common interest privilege, as some recent cases highlight.
COMMON INTEREST PRIVILEGE IN CANADA
Common interest privilege has been interpreted in Canada to
apply to many communications providing the parties share a
"common interest" in the underlying subject matter.
Typically, a common interest has been applied to enable parties to
communicate frankly between themselves without waiving privilege
where generally the parties have the same self-interest, share a
common goal or are seeking same or similar remedies.
While common interest privilege is most commonly thought to
apply to litigation, arbitration or dispute resolution proceedings,
some Canadian cases have entrenched that protection in the
commercial context in order to allow parties to pursue similar
common interest in commercial transactions. For example, the
British Columbia Court of Appeal in Maximum Ventures Inc. v. De Graaf,
accepted that common interest privilege could be claimed where
legal opinions are shared amongst and between parties who share a
common interest in a transaction as part of due diligence. The
court held that where there is a sufficient interest in common to
extend the common interest privilege to disclosure of opinions,
even in circumstances where no litigation is in existence or
contemplated, that protection is afforded. Other Canadian cases
have echoed that view.
New York Court of Appeals' Ruling
Recently, the New York Court of Appeals held that the common
interest doctrine applies only where a reasonably anticipated
litigation is involved.
In Ambac Assurance Corp. v. Countrywide Home
Loans, Inc., Bank of America and Countrywide claimed
privilege over documents involving pre-closing matters of common
interest between the parties during a period in which parties
signed a merger agreement. The merger agreement in question
contained both a confidentiality clause as well as a common
interest agreement that was intended to protect communications
between the companies regarding matters relating to the merger,
including employee benefit plans, legal advice on tax issues,
While the lower courts allowed the common interest exception to
apply, the court of appeals reversed the broader application of the
common interest doctrine. The end result is that where New York law
applies (as choice of law or otherwise), the common interest
doctrine does not extend to non-litigation disputes.
SETTLEMENT PRIVILEGE IN CANADA
Both Canada and the United States recognize a strong public
interest in favour of maintaining secrecy of matters during
settlement negotiations to foster compromise on dispute settlement.
This serves to ensure parties feel uninhibited in their
communications; however, key differences exist as to the scope and
nature of those protections.
In Sable Offshore Energy Inc. v. Ameron
International Corp.(Sable), the Supreme Court of
Canada (SCC) unanimously affirmed the critical importance of
settlement privilege and confirmed that the privilege's scope
applies to "settlement negotiations and their fruits."
The SCC clarified previously mixed authority in Canada and
confirmed that settlement privilege extends to the content of both
successful and unsuccessful negotiations and also protects not just
the subject of negotiations, but also the ultimate settlement
amount in the case of a successful negotiation.
The SCC indicated that settlement privilege is not absolute and
can be pierced when a defendant shows that, on balance, a
"competing public interest outweighs the public interest in
encouraging settlement." Those circumstances may include
allegations of misrepresentation, fraud or undue influence and
serving as a settlement agreement. Those exceptions are generally
rare and limited in applications with the court favouring a more
broad level of protection from disclosure in Canada.
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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