22 Sep 2014

“Without Prejudice”: Not an Absolute Protection of Settlement Discussions

By Ashley Kandestin

ZSA Recrutement Juridique

The Superior Court recently ruled
that settlement privilege is not breached where allegations relating to
settlement discussions are made not to demonstrate one party’s admissions or
concessions on relevant issues, but rather to prove that party’s bad faith. In Ludmer c. Canada (Attorney General), 2014 QCCS
4352, Justice Hamilton was asked to address the validity of
amendments to the plaintiff’s motion to institute proceedings relating to the
defendants’ settlement offer. The defendants contested the amendments based on
settlement privilege (the “without prejudice rule”) and proportionality.

Justice Hamilton refers to a
recent Supreme Court of Canada decision,
explaining that settlement privilege, as a rule of evidence, encourages frank
discussions between parties to a litigation by cloaking their communications
from the courtroom, where they could be used to one party’s detriment by
influencing the trial judge. Reminding us that the right to amend under article
199 of the CCP is the rule rather than the exception and that authorized
amendments do not bind the trial judge, Justice Hamilton boils the motion to
amend down to one question:

[18]       
The question is whether the
proposed amendments are « useless » because they cannot be proven at
trial without relying on inadmissible evidence relating to settlement
discussions, or « contrary to the ends of justice » because the
breach of the settlement privilege would have the effect of discouraging
settlement discussions.
Justice Hamilton answers the
question by referring to a string of cases holding that the privilege is not
absolute and does not apply where settlement discussions are disclosed for the
purpose of demonstrating a party’s bad faith or abuse of procedure. He states
that:

[27]       
… I will refuse authorization
to amend only if it is clear that the proposed amendments involve a clear
breach of the settlement privilege, in that they announce an intention to use
the settlement discussions to prove a concession made by the CRA on an issue
relevant at trial.  In case of doubt, I will authorize the amendments and
the issue will be dealt with by the trial judge.
Not ruling on the existence or
not of bad faith in the defendants’ settlement offers, and leaving that
analysis to the trial judge, Justice Hamilton authorizes the plaintiff’s
amendments, holding, under a liberal interpretation of article 199 CCP, that
the plaintiff has the right to at least make the argument.

The full decision can be read here

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