Union Carbide v. Bombardier Inc.

The Supreme Court of Canada (SCC) (2014 SCC 35) considered the interaction between the common law privilege that protects settlement discussions and private agreements that provide for confidentiality of the mediation process. Specifically, the SCC considered whether a mediation agreement stipulating the confidentiality of anything said or written during a mediation displaces the recognized exception to the privilege that allows parties to prove that a settlement occurred.

The SCC decided that a confidentiality clause in a mediation contract will not deprive parties of their ability to prove the terms of a settlement unless a court finds that it was the intention of the parties to achieve this purpose. Thus, “where an agreement could have the effect of preventing the application of a recognized exception to settlement privilege, its terms must be clear."

Bombardier Recreational Products (BRP) and Dow Chemical Canada Inc. (Dow) are involved in multi-million dollar litigation in Quebec. The parties agreed to participate in a mediation presided by a private mediator. The mediation agreement signed by the parties provided that “anything” said in mediation would be confidential and that nothing which transpires in the mediation should be alleged in any proceeding. The parties agreed to settle the dispute but disagreed about the scope of the settlement.

BRP filed a motion to homologate the transaction. Dow filed a motion to strike the allegations that referred to events that took place during the mediation on the grounds that they were confidential.

The judge of first instance granted the motion in part, holding that anything said or written in mediation is confidential. The Court of Appeal reversed that decision on the grounds that the alleged discussions fell within the well-known exception to settlement privilege which allows parties to prove that an agreement has been reached.

The SCC confirmed the public policy objective of encouraging the settlement of disputes. It reiterated that settlement privilege applies in Quebec as does the exception to the privilege which allows the proof of a settlement.

The Court noted that parties could, by agreement, modify the common law rules, including the exception to settlement privilege which allows evidence of discussions to prove the existence of a settlement. However, their intention to do so must be express and clear. The signing of a generic mediation agreement providing for confidentiality of the process will not be sufficient to conclude that the parties waived their right to prove the terms of a settlement.

BRP was represented by Martin Sheehan, Stéphanie Lavallée and Catherine Simonet of Fasken Martineau DuMoulin LLP.

Dow Chemical was represented by Richard Hinse, Robert Mason and Dominique Vallières of Lavery De Billy L.L.P.

Jonathan Eades and Mark Witten represented the intervener, the Attorney General of BC; and William McDowell, Jon Laxer and Kaitlyn Pentney of Lenczner Slaght Royce Smith Griffin LLP acted for the intervener Arbitration Place Inc.