Settlement Privilege. Idea Notion Development Inc. v. CTO Boost Inc.
In Idea Notion Development Inc. v. CTO Boost Inc. (Ont CA, 2021) the Court of Appeal stated an exception to settlement privilege:
 Normally, “without prejudice” communications made in the course of settlement discussions are inadmissible. They are, however, admissible if disclosure is necessary to prove “the existence or scope of the settlement”: Union Carbide Inc. v. Bombardier Inc., 2014 SCC 35, at para. 35.. Association de médiation familiale du Québec v. Bouvier
In Association de médiation familiale du Québec v. Bouvier (SCC, 2021) the Supreme Court of Canada reviewed the nature of settlement privilege and some exceptions (contracting-out and resultant-settlement), here in a Quebec family law context:
 I will now consider the evidentiary rule that divided the Court of Appeal: the rule of settlement privilege.. Fono v. Canada Mortgage and Housing Corporation
 Settlement privilege is a rule of evidence that protects the confidentiality of communications and information exchanged for the purpose of settling a dispute (Union Carbide, at paras. 1 and 31; Globe and Mail v. Canada (Attorney General), 2010 SCC 41,  2 S.C.R. 592, at para. 80; Lafond and Thériault, at No. 3‑9). It is recognized as fundamental to the making of an agreement between parties (Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37,  2 S.C.R. 623; Union Carbide, at para. 1) because it promotes honest and frank discussions, which can make it easier to reach a settlement in all types of mediation (Union Carbide, at para. 31). The privilege applies in the general law of mediation without having to be invoked by the parties, because it [translation] “presupposes that all discussions in the course of mediation between the parties are protected at all times” (Piché, at Nos. 1284‑86; see also Union Carbide, at para. 34). Unlike a confidentiality clause in a contract, “settlement privilege applies to all communications that lead up to a settlement, even after a mediation session has concluded” (Union Carbide, at para. 51). This common law rule, often called the “duty of confidentiality” in Quebec law, has been codified in art. 4 N.C.C.P. since the reform of the Code of Civil Procedure (D. Ferland and B. Emery, Précis de procédure civile du Québec (6th ed. 2020), vol. 1, at No. 1‑41). The new Code of Civil Procedure also sets out the principle that mediators and mediation participants are non‑compellable (art. 606).
 Settlement privilege is not absolute, however. For one thing, the parties can change its scope by contract (Union Carbide, at paras. 39, 54 and 58), as long as they do not deprive a court of its supervisory jurisdiction over matters of public order. There are also some exceptions developed by the courts or established by law that allow confidentiality to be lifted on an exceptional basis, for example where there is fraud or professional misconduct by a mediator (Sable Offshore, at para. 19; Union Carbide, at paras. 34 and 49; art. 606 N.C.C.P.; 2016 Guide, at p. 11).
 In Union Carbide, this Court reiterated the importance of another exception developed by the courts, the settlement exception, which is central to this appeal. This exception allows protected communications to be disclosed in order to prove the existence or scope of a settlement arising from mediation (Union Carbide, at paras. 35‑36; Roberge (2017), at p. 104). It applies even where an agreement is not entered into until after mediation (Union Carbide, at para. 34). In keeping with its purpose, the exception applies only to what is necessary to prove the existence or scope of the settlement (ibid., at para. 35).
 In Union Carbide, Wagner J., as he then was, explained that the settlement exception serves the same public interest as the privilege itself, that is, the promotion of settlements: “Once the parties have agreed on a settlement, the general interest of promoting settlements requires that they be able to prove the terms of their agreement” (para. 35). It is in this sense, as Wagner J. observed, that disclosure to prove the terms of an agreement promotes settlements generally. It follows that the exception in no way weakens the principle of privilege in mediation. As noted by Paul M. Perell (now a justice of the Ontario Superior Court), “where the without prejudice settlement offer has been accepted, there is no longer any public policy reason to exclude the evidence, the goal of the policy having been achieved” (“The Problems of Without Prejudice” (1992), 71 Can. Bar Rev. 223, at p. 234). Within the limits of public order, this logic applies, in my view, both in family mediation and in civil and commercial mediation when parties opt for confidentiality to serve their primary objective of reaching a settlement. As the trial judge wrote: [translation] “Prohibiting the submission of such evidence based on the principle of confidentiality would make it impossible to homologate such an agreement once its existence is contested, which would make little sense” (para. 41).
 Nevertheless, parties are free to contract out of the settlement exception. Because a failure to apply the exception “could frustrate the broader purpose of promoting settlements”, parties must express this intention clearly in their mediation contract (Union Carbide, at para. 50; see also para. 54).
In Fono v. Canada Mortgage and Housing Corporation (Fed CA, 2021) the Federal Court of Appeal considered an issue of settlement privilege where a labour mediator expressed view of the merits of the case:
 Further, it is common for labour adjudicators or arbitrators who conduct consensual mediation sessions prior to hearing a case to express tentative views during the mediation as to the potential strengths or weaknesses of parties’ positons with a view to fostering settlement, especially where, as was the case here, the parties are represented by experienced counsel. Such statements are not indicative of bias. See for example Skinner v. Fedex Ground Ltd., 2014 FC 426, 453 F.T.R. 315, at paras 7-10; Santa Fe Masonry v. Bricklayers, Masons Independent Union of Canada, Local 1, 2006 CarswellOnt 8141,  O.J. No. 5099 (QL) (Ont Super Ct J (Div Ct)) at paras 4-10; Richard J. Charney and Thomas E. F. Brady, Judicial Review in Labour Law (Thomson Reuters) (e-looseleaf updated 2021, release 1) ch. 11 at 11.1100-11.1120. By analogy with mediation/arbitration in the family law context, see also Reilly v. Zacharuk, 2017 ONSC 7216, 2017 CarswellOnt 19316, at paras 67-72.. Lucas v. 1858793 Ontario Inc. (Howard Park)
 It would have a chilling effect on employment and labour mediations and undercut their efficacy if statements such as those the appellant alleges were made by the adjudicator were to be placed before the courts. The comments impugned by the appellant merely reflect the adjudicator’s tentative views as to the strength of the offer made by the respondent as compared to risks associated with pursuing the adjudication. This sort of comment is standard fare in a mediation. The Federal Court therefore did not err in declining to interfere with the Prothonotary’s order striking the impugned paragraphs on the basis of settlement privilege.
In Lucas v. 1858793 Ontario Inc. (Howard Park) (Ont CA, 2021) the Court of Appeal considers a fact situation in which settlement privilege was claimed:
 I am also not persuaded by 185’s submission that the application judge should have treated the Bathtub Dispute emails as privileged “settlement communications”. The application judge held, at para. 46 of his reasons, that the emails are not properly characterized as settlement communications:. Union Carbide Canada Inc. v. Bombardier Inc.
This submission has no merit. First, only one email, dated December 19, states it is “without prejudice”. Second, these are not settlement discussions between lawyers; they are communications between the parties regarding their positions on the performance of a continuing contract, including the fulfillment of 185’s obligation to repair and resolve deficiencies in the Unit. There is no basis to treat them as being inadmissible on the basis of settlement privilege. I see no error in that characterization. The emails focused on how the vendor would remedy a construction deficiency with the bathtub: the vendor wanted to patch the bathtub; the Lucases wanted the bathtub replaced. The emails did not purport to compromise the dispute that is the subject-matter of this litigation – namely, whether 185 was entitled to terminate the Agreement because the Lucases had permitted Mr. Duarte to occupy the Unit for a period of time. That litigious dispute was not yet in existence or within contemplation: Losenno v. Ontario Human Rights Commission (2005), 2005 CanLII 36441 (ON CA), 78 O.R. (3d) 161 (C.A.), at para. 21; Sidney N. Lederman, Alan W. Bryant & Michelle K. Fuerst, Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 5th ed. (Toronto: LexisNexis Canada, 2018), at §14.348; Bercovitch v. Resnick, 2011 ONSC 5082, at para. 26, leave to appeal refused, 2011 ONSC 6410 (Div. Crt.). To the contrary, the two options set out in the vendor’s email of December 6, 2018 – reproduced at para. 32 above – specifically contemplated that the Agreement would close even if the Lucases insisted on the replacement of the bathtub.
In Union Carbide Canada Inc. v. Bombardier Inc. (SCC, 2014) the Supreme Court of Canada expounded on the nature of settlement privilege, the evidentiary rule of law that renders communications made for the purpose of settlement privileged. Here the specific issue was whether a contractual confidentiality clause could override the exception to settlement privilege where a party seeks to prove the terms of the settlement for purposes of enforcement:
 This Court recently confirmed the vital importance of the role played by settlement privilege in promoting the settlement of disputes and improving access to justice: Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 (CanLII), 2013 SCC 37,  2 S.C.R. 623. Settlement privilege is a common law evidentiary rule that applies to settlement negotiations regardless of whether the parties have expressly invoked it. This privilege is not the only tool available to parties, however, as parties like the appellants and the respondents in the case at bar often sign mediation agreements that provide for the confidentiality of communications made in the course of the mediation process. . R v Delchev
 Settlement privilege is a common law rule of evidence that protects communications exchanged by parties as they try to settle a dispute. Sometimes called the “without prejudice” rule, it enables parties to participate in settlement negotiations without fear that information they disclose will be used against them in litigation. This promotes honest and frank discussions between the parties, which can make it easier to reach a settlement: “In the absence of such protection, few parties would initiate settlement negotiations for fear that any concession they would be prepared to offer could be used to their detriment if no settlement agreement was forthcoming” (A. W. Bryant, S. N. Lederman and M. K. Fuerst, The Law of Evidence in Canada (3rd ed. 2009), at para. 14.315).
 Encouraging settlements has been recognized as a priority in our overcrowded justice system, and settlement privilege has been adopted for that purpose. As Abella J. wrote in Sable Offshore, at para. 12, “[s]ettlement privilege promotes settlements.” She explained this as follows, at para. 13:
Settlement negotiations have long been protected by the common law rule that “without prejudice” communications made in the course of such negotiations are inadmissible (see David Vaver, “‘Without Prejudice’ Communications — Their Admissibility and Effect” (1974), 9 U.B.C. L. Rev. 85, at p. 88). The settlement privilege created by the “without prejudice” rule was based on the understanding that parties will be more likely to settle if they have confidence from the outset that their negotiations will not be disclosed. As Oliver L.J. of the English Court of Appeal explained in Cutts v. Head,  1 All E.R. 597, at p. 605: There have been other occasions on which this Court discussed the importance of encouraging parties to settle their own disputes. For example, LeBel J., writing for the Court in Globe and Mail cited Kosko v. Bijimine, 2006 QCCA 671 (CanLII), 2006 QCCA 671 (CanLII), a case in which the Quebec Court of Appeal had commented as follows, at paras. 49-50:
. . . parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations . . . may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J in Scott Paper Co v. Drayton Paper Works Ltd (1927) 44 RPC 151 at 157, be encouraged freely and frankly to put their cards on the table.What is said during negotiations, in other words, will be more open, and therefore more fruitful, if the parties know that it cannot be subsequently disclosed.
The protection of confidentiality of these “settlement discussions” is the most concrete manifestation in the law of evidence of the importance that the courts assign to the settlement of disputes by the parties themselves. This protection takes the form of a rule of evidence or a common law privilege, according to which settlement talks are inadmissible in evidence. Settlement privilege applies even in the absence of statutory provisions or contract clauses with respect to confidentiality, and parties do not have to use the words “without prejudice” to invoke the privilege: “What matters instead is the intent of the parties to settle the action . . . . Any negotiations undertaken with this purpose are inadmissible” (Sable Offshore, at para. 14). Furthermore, the privilege applies even after a settlement is reached. The “content of successful negotiations” is therefore protected: Sable Offshore, at paras. 15-18. As with other class privileges, there are exceptions to settlement privilege:
The courts and commentators have unanimously recognized that, first, settlement talks would be impossible or at least ineffective without this protection and, second, that it is in the public interest and a matter of public order for the parties to a dispute to hold such discussions.
(See also Kelvin Energy Ltd. v. Lee, 1992 CanLII 38 (SCC),  3 S.C.R. 235, at p. 259, citing Sparling v. Southam Inc. 1988 CanLII 4694 (ON SC), (1988), 41 B.L.R. 22, at p. 28.)
To come within those exceptions, a defendant must show that, on balance, “a competing public interest outweighs the public interest in encouraging settlement” (Dos Santos Estate v. Sun Life Assurance Co. of Canada, 2005 BCCA 4 (CanLII), 2005 BCCA 4, 207 B.C.A.C. 54, at para. 20). These countervailing interests have been found to include allegations of misrepresentation, fraud or undue influence (Unilever plc v. Procter & Gamble Co.,  1 All E.R. 783 (C.A. Civ. Div.), Underwood v. Cox (1912), 26 O.L.R. 303 (Div. Ct.)), and preventing a plaintiff from being overcompensated (Dos Santos).  The exception to settlement privilege at issue in the case at bar is the rule that protected communications may be disclosed in order to prove the existence or scope of a settlement. This exception is explained by Bryant, Lederman and Fuerst:
(Sable Offshore, at para. 19)
If the negotiations are successful and result in a consensual agreement, then the communications may be tendered in proof of the settlement where the existence or interpretation of the agreement is itself in issue. Such communications form the offer and acceptance of a binding contract, and thus may be given in evidence to establish the existence of a settlement agreement. [para. 14.340]The rule is simple, and it is consistent with the goal of promoting settlements. A communication that has led to a settlement will cease to be privileged if disclosing it is necessary in order to prove the existence or the scope of the settlement. Once the parties have agreed on a settlement, the general interest of promoting settlements requires that they be able to prove the terms of their agreement. Far from outweighing the policy in favour of promoting settlements (Sable Offshore, at para. 30), the reason for the disclosure — to prove the terms of a settlement — tends to further it. The rule makes sense because it serves the same purpose as the privilege itself: to promote settlements.
In this criminal case, R v Delchev (Ont CA, 2015), the Court of Appeal discusses the nature of settlement privilege (aka negotiation privilege) and it's public interest exception:
 Settlement privilege is a class privilege, creating a “prima facie presumption of inadmissibility”: Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 (CanLII),  2 S.C.R. 623, at para. 12. Settlement privilege applies only if the following conditions are met:
(1) A litigious dispute must be in existence or within contemplation. The appellant takes issue with the third of these requirements. He argues the offer was not made for the purpose of achieving settlement or compromise, but rather “with some other object in view and from wrong motives”: Pirie v. Wyld (1886), 11 O.R. 422 (H.C.).
(2) The communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed.
(3) The purpose of the communication must be to attempt to effect a settlement. [A.W. Bryant, S.N. Lederman & M.K. Fuerst, Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 4th ed. Markham: LexisNexis Canada, 2014), at p. 1039; citations omitted.]
 While the Crown’s offer was unusual, I am not prepared to infer that resolving the appellant’s charges was not at least some part of the purpose of the offer. Settlement does not have to be the only purpose of a settlement negotiation in order for privilege to apply. It is not uncommon for a resolution offer to include an agreement that an accused will testify for the Crown in another matter. The resolution discussion here was arranged so that the Crown could make an offer of settlement, albeit a highly unusual one. All the parties involved understood that a settlement discussion was occurring.
 Settlement privilege applies to the discussion and the evidence from the discussion is prima facie inadmissible on the abuse of process motion. However, based on the circumstances of the discussion and the content of the offer, I would conclude the evidence is admissible as an exception to settlement privilege. I will explain.
(c) Does an exception to settlement privilege apply?
 Exceptions to settlement privilege will be found when the justice of the case requires it: Sable Offshore, at para. 12. As the Supreme Court held in Sable Offshore, at para. 19, to justify an exception:
a defendant must show that, on balance, “a competing public interest outweighs the public interest in encouraging settlement”. These countervailing interests have been found to include allegations of misrepresentation, fraud or undue influence, and preventing a plaintiff from being overcompensated. [Citations omitted; emphasis added.] Below, I first consider whether “the public interest in encouraging settlement” would be furthered by preventing admission of the discussion in this case. I then determine whether the appellant’s allegation of prosecutorial misconduct constitutes a “competing public interest” that outweighs the public interest in encouraging settlement as applied to the facts of this case.
 The public interest in and rationale behind settlement privilege was summarized by the Supreme Court in Union Carbide Canada Inc. v. Bombardier Inc., 2014 SCC 35 (CanLII),  1 S.C.R. 800, at para. 31:
Settlement privilege is a common law rule of evidence that protects communications exchanged by parties as they try to settle a dispute. Sometimes called the “without prejudice” rule, it enables parties to participate in settlement negotiations without fear that information they disclose will be used against them in litigation. This promotes honest and frank discussions between the parties, which can make it easier to reach a settlement: “In the absence of such protection, few parties would initiate settlement negotiations for fear that any concession they would be prepared to offer could be used to their detriment if no settlement agreement was forthcoming” (A. W. Bryant, S. N. Lederman and M. K. Fuerst, The Law of Evidence in Canada (3rd ed. 2009), at para. 14.315). In other words, settlement privilege is important because parties would be reluctant to engage in settlement discussions if those discussions could be admitted at trial as evidence of concessions. The exceptions to this general privilege are justified where evidence of the settlement or negotiations is intended for use other than illustrating the weaknesses of one party’s case: see Sopinka, Lederman & Bryant: The Law of Evidence in Canada, at pp. 1044-1045; R.W. Hubbard, S. Magotiaux & S.M. Duncan, The Law of Privilege in Canada, vol. 2, loose-leaf (Toronto: Thomson Reuters Canada, 2014), at pp. 12-96.1 to 12-96.2 (September 2014). If a party is not seeking to admit the settlement offer or negotiations as evidence of a concession, an exception to settlement privilege would do little to detract from the “public interest in encouraging settlement”.
 In the instant case, the appellant was not attempting to adduce the Crown’s settlement offer as evidence that the Crown had a weak case. While the respondent notes that the appellant did attempt to use the offer for such a purpose on his sentence appeal, the issue here is whether the contents of the settlement discussion are admissible to allege abuse of process. The allegation of abuse of process is unrelated to the merits of the Crown’s case against the appellant. Admission of the settlement offer on the abuse of process motion would have a minimal effect, at most, on the goal of encouraging settlement.
 I turn now to whether there is a “competing public interest” that militates in favour of an exception to settlement privilege. As stated above, these competing “interests have been found to include allegations of misrepresentation, fraud or undue influence, and preventing a plaintiff from being overcompensated”: Sable Offshore, at para. 19. In my view, an allegation of prosecutorial misconduct constitutes an analogous countervailing interest.
 An allegation of prosecutorial misconduct is analogous to the examples provided by the Supreme Court in Sable Offshore of misrepresentation, fraud and undue influence. These examples all suggest that one party has engaged in wrongdoing that may have led to an unjust settlement or that may have tainted the conduct of the litigation itself. It is in the interests of justice for a person who has been wronged to be able to present evidence of the alleged wrongdoing before the court.
 This policy objective is amplified when the alleged wrongdoing is an abuse of process by the Crown. While the stakes may be high in many civil proceedings, in the criminal context, the risk that an accused person may be deprived of his or her liberty in circumstances amounting to an abuse of process is very serious indeed. As stated by L’Heureux-Dubé J., writing for the majority of the court in R. v. O'Connor, 1995 CanLII 51 (SCC),  4 S.C.R. 411, at para. 63:
It would violate the principles of fundamental justice to be deprived of one's liberty under circumstances which amount to an abuse of process and, in my view, the individual who is the subject of such treatment is entitled to present arguments under the Charter and to request a just and appropriate remedy from a court of competent jurisdiction. I would note that there is a distinction between whether the Crown must justify its exercise of discretion and whether an exception to settlement privilege applies such that the accused can put the statements made to him by the Crown before the court. An accused is permitted to give evidence of a settlement offer made by the Crown in order to argue that the settlement offer constituted an abuse of process; by contrast, the Crown will only exceptionally be required to justify that exercise of discretion.
 In my view, the appellant has raised a countervailing public interest – alleged prosecutorial misconduct amounting to an abuse of process – that outweighs the public interest in promoting settlement in the circumstances of this case.