In Union Carbide Canada Inc. & Dow Chemical v Bombardier Inc., 2014 SCC 35, the Supreme Court of Canada considered whether mediation confidentiality protected confidential communications from disclosure in court, even where the parties had a dispute over the terms of their settlement.
Bombardier installed gas tanks, manufactured by Dow Chemical, on models of Sea-Doo it manufactured and sold. An issue arose over the fitness of those gas tanks. Litigation ensued and the parties agreed to mediate their differences. On the eve of mediation the parties signed a mediation agreement containing the following confidentiality clauses:
2. Anything which transpires in the Mediation will be confidential. In this regard, and without limitation:
(a) Nothing which transpires in the Mediation will be alleged, referred to or sought to be put into evidence in any proceeding;
(b) No statement made or document produced in the Mediation will become subject to discovery, compellable as evidence or admissible into evidence in any proceeding, as a result of having been made or produced in the Mediation; however, nothing will prohibit a party from using, in judicial or other proceedings, a document which has been divulged in the course of the Mediation and which it would otherwise be entitled to produce;
(c) The recollections, documents and work product of the Mediator will be confidential and not subject to disclosure or compellable as evidence in any proceeding.
Though the mediation ended in a resolution, the parties disagreed over the scope of the settlement – they differed over whether the entire dispute or only a portion of it had been resolved. Bombardier applied to court to prove and to have the court ratify what it believed were the terms of settlement. In its application Bombardier referred to certain information produced during the mediation which Dow considered to be confidential. Dow made a motion to strike out those paragraphs of Bombardier’s application that referred to the confidential matters.
The Supreme Court of Canada identified the issues as follows:
- Can a confidentiality clause in a mediation agreement “override the exception to the common law settlement privilege that enables parties to produce evidence of confidential communications in order to prove the existence or the scope of a settlement” (at paragraph 27); and
- If yes, did the mediation agreement confidentiality clause override that exception in this case?
SETTLEMENT PRIVILEGE – A RULE OF EVIDENCE
The Court stated that settlement privilege was a rule of evidence. Statements made during the course of settlement were inadmissible in evidence in any subsequent litigation. By protecting those discussions in this manner, settlement privilege encouraged frank resolution discussions between litigants. The privilege, however, had limited exceptions, one arising when the parties differed over the terms of settlement. The Court stated that “settlement discussions ceased to be privileged if disclosing them was necessary to prove the existence or the scope of the settlement” (at paragraph 35).
MEDIATION AGREEMENT CONFIDENTIALITY CLAUSES – A MATTER OF CONTRACT
A confidentiality clause in a mediation agreement differed from settlement privilege because the former was not a rule of evidence but a matter of contract. The Court held that where the “parties contract for greater confidentiality protection than is available at common law, the will of the parties should presumptively be upheld absent such concerns such as fraud or illegality” (at paragraph 49). The parties can, by contract, create their own rules regarding confidentiality that “entirely displace the common law settlement privilege” (at paragraph 51). In other words, a mediation agreement could prohibit the parties from referring to or relying on confidential mediation information in court, even where the terms of settlement were at issue.
The court held, at paragraph 54:
Where an agreement could have the effect of preventing the application of a recognized exception to settlement privilege, its terms must be clear. It cannot be presumed that the parties have contracted for greater confidentiality … Parties are free to do this but they must do so clearly. [Emphasis Added]
In reviewing the mediation agreement confidentiality clauses, the Court found that the settlement exception to the settlement privilege rule was not addressed. That exception was not mentioned in the agreement. The Court held, at paragraph 66:
I therefore find that the mediation contract does not preclude the parties from producing evidence of communications made in the course of the mediation process in order to prove the terms of a settlement. However, I would note that this exception is a narrow one. Parties may produce such evidence only insofar as it is necessary in order to prove the terms of the settlement.
THE TAKE AWAY – IS MEDIATION CONFIDENTIAL?
Mediation can be as confidential as the parties wish them to be. It is a matter of contract. Confidentiality clauses can override most of the common law exceptions to the rule of settlement privilege (it is doubtful that confidentiality clauses could be drafted to prevent review in the case of fraud or duress, for example). The trick is to have a properly worded confidentiality clause in the mediation agreement.
The Supreme Court’s decision did, however, raise the bar in terms of Mediation practice. Rote standard confidentiality clauses in mediation agreements may not be sufficient. Mediators and the parties have to turn their mind to whether the exceptions to settlement privilege rule should apply. For example, if parties agree that the exception, allowing them to refer to mediation information to prove the existence of the settlement, should apply, the parties may nevertheless wish to make absolutely confidential certain aspects of the mediation. A properly worded confidentiality clause in the mediation agreement ought to be able to achieve that goal. These are the kinds of issues which the parties and the mediator must now consider in drafting the confidentially provisions of the mediation agreement.