S.C.C. Court File No. 35008

IN THE SUPREME COURT OF CANADA (ON APPEAL FROM A JUDGMENT OF THE COURT OF APPEAL FOR QUEBEC)

BETWEEN:

UNION CARBIDE CANADA INC. and DOW CHEMICAL CANADA INC. (c.o.b. DOW CHEMICAL CANADA ULC)

APPELLANTS

- and-

BOMBARDIER INC., BOMBARDIER PRODUITS RECREATIFS INC. and ALLIANZ GLOBAL RISKS INSURANCE COMPANY

RESPONDENTS

- and-

ATTORNEY GENERAL OF BRITISH COLUMBIA

- and-

ARBITRATION PLACE INC. INTERVENERS

FACTUM OF THE INTERVENER, ARBITRATION PLACE INC. (Pursuant to Rule 42 of the Rules of the Supreme Court of Canada)

LENCZNER SLAGHT ROYCE SMITH GRIFFIN LLP

Barristers 2600 - 130 Adelaide Street West Toronto, ON M5H 3P5

William C. McDowell (28554G) Jon Laxer (607651) Kaitlyn Pentney (63813A) Tel: (416) 865-2893 Fax (416) 865-2978 Email: wmcdowell@litigate.com

Counsel for the Intervener, Arbitration Place Inc.

DENTONS CANADA LLP Barristers and Solicitors Suite 1420 99 Bank Street Ottawa, ON KIP IH4

K. Scott McLeanl Corey A. Villeneuve (Law Clerk) Tel: (613) 783-9699 Fax: (613) 783-9690 Email: scott.mclean@dentons.com

corey. villeneuve@dentons.com

Ottawa Agent for Counsel for the Intervener, Arbitration Place Inc.

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ORIGINAL TO: The Registrar Supreme Court of Canada 301 Wellington Street Ottawa, ON KIA 011

COPIES TO:

LAVERY, DE BILLY, S.E.N.C.R.L. 1, Place Ville Marie, bureau 4000 Montreal (Quebec) H3B 4M4

Richard A. Hinse Robert W. Mason Odette Jobin-Laberge, Ad. E. Dominique Vallieres Tel: (514) 871-1522 Fax: (514) 871-8977 Email: rhinse@lavery.ca

Counsel for the Appellants

FASKEN, MARTINEAU, S.E.N.C.R.L. 800 Victoria Square, bureau 3700 P.O. Box 242 Montreal (Quebec) H4Z 1E9

Martin Sheehan Stephanie Lavallee Tel: (514) 397-4395 Fax: (514) 397-7600 Email: msheehan@fasken.com

Counsel for the Respondents

LAVERY, DE BILLY, S.E.N.C.R.L. 360 rue Albert, bureau 1810 Ottawa (Ontario) KIR 7X7

Paul K. Lepsoe Tel: (613) 233-2679 Fax: (613) 594-8783 Email: plepsoe@lavery.ca

Agent for Counsel for the Appellants

FASKEN, MARTINEAU LLP 55, rue Metcalfe, bureau 1300 Ottawa (Ontario) KIP 6L5

Stephen B. Acker Tel: (613) 236-3882 Fax: (613) 230-6423 Email: sacker@fasken.com

Agent for Counsel for the Respondents

AND TO:

ATTORNEY GENERAL OF BRITISH COLUMBIA Ministry of Justice

Legal Services Branch 1001 Douglas Street

Victoria, BC V8W 2C5

Jonathan Eades Mark Witten Tel: (250) 387-2789 Fax: (250) 356-8653 Email: jonathan.eades@gov.bc.ca

Counsel for the Intervener, Attorney General of British Columbia

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NOEL ET ASSOCIES, S.E.N.C.R.L. III rue Champlain Gatineau, Quebec

J8X 3RI

Pierre Landry Tel: (819) 771-7393 Fax: (819) 771-5397 Email: p.landry@noelassocies.com

Agent for the Counsel for the Intervener, Attorney General of British Columbia

INDEX

FACTUM

PART I - OVERVIEW

PART II - STATEMENT OF ARGUMENT

(i) The communications must originate in a confidence that they will not be disclosed

(ii) The element of confidentiality must be essential to the maintenance of the relationship in which the communications arose

(iii) The relationship must be one which, in the opinion of the community,

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ought to be "sedulously fostered" 3

(iv) The injury caused to the relationship by disclosure of the communications must be greater than the benefit gained from the correct disposal of the litigation 4

Settlement Privilege 4

Confidentiality Agreements 5

PART III - ORDER SOUGHT 8

PARTS IV and V - N/A

PART VI - TABLE OF AUTHORITIES 9

PART VII - STATUTES AND REGULATIONS 9

PART I - OVERVIEW

1. Confidentiality is a crucial ingredient to mediation discussions. As a general rule of law,

the parties' discussions in mediation are protected by settlement privilege. In addition, the

parties often insist upon signing far-reaching confidentiality agreements as a precondition to

engaging in mediation. Any limit on confidentiality should be carefully circumscribed by the

courts.

2. However, the ultimate goal of mediation is to reach settlement. The parties must not be

permitted to misuse the guarantee of confidentiality to escape settlement agreements entered into

during mediation by which the parties intend to be bound.

3. On this appeal, the Court is asked to strike the proper balance between these two

competing principles.

4. As intervener, Arbitration Place Inc. ("Arbitration Place") submits that the Court should

adapt the four stages of the Wigmore Test to determine whether and to what extent the

entitlement to confidentiality should yield to the public interest in the enforcement of settlement

agreements freely entered into by the parties. The Wigmore criteria have been applied in this

Court's jurisprudence to a variety of situations, and for ease of reference, they are set out as

follows:

(i) The communications must originate in a confidence that they will not be

disclosed.

(ii) The element of confidentiality must be essential to the maintenance of the

relationship in which the communications arose.

(iii) The relationship must be one which, in the opinion of the community, ought to be

"sedulously fostered."

(iv) The injury caused to the relationship by disclosure ofthe communications must be

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greater than the benefit gained for the correct disposal of the litigation. I

5. Further, this is not an all or nothing proposition: confidentiality should only ever be lifted

to the extent necessary to prove the settlement.

PART II - STATEMENT OF ARGUMENT

(i) The communications must originate in a confidence that they will not be

disclosed.

6. The first stage of the Wigmore Test is whether the communications originate In a

confidence that they will not be disclosed.

7. In Globe and Mail v. Canada (Attorney General), this Honourable Court held that

settlement discussions are inherently confidential, and applied this common law rule in the

context of a civil case from Quebec.2

8. Further, where the parties have signed a confidentiality agreement, it is clear that the

discussions originate in a confidence that they will not be disclosed. 3

(ii) The element of confidentiality must be essential to the maintenance of the

relationship in which the communications arose.

9. Confidentiality is an essential element of mediation.

10. As held by Abella J.A. (as she then was) in her concurring reasons in Rogacki v. Belz,

discussing the importance of confidentiality to mandatory mediation under the Ontario Rules of

Civil Procedure:

t Slavutych v. Baker, [1976] 1 SCR 254 at 260, Book of Authorities of the Intervener ("BOA"), Tab 10. A number of courts have applied the Wigmore Test to determine whether communications during mediation are privileged: see the authorities cited in Rudd et 01. v. Trossacs Investments Inc. et al., [2006] OJ No 922 (Div Ct) at para. 29, BOA, Tab 8. 2 Globe and Mail v. Canada (Attorney General), 2010 SCC 41, [2010] 2 SCR 592 at para. 78, BOA, Tab 1. 3 Rudd et al., supra at para. 31, BOA, Tab 8.

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It is difficult to see how anyone would agree to be open and frank in discussions designed to effect settlement -- discussions they have no choice about participatinf in -- when there is no protection for the confidentiality of the process.

11. As stated by Owen Gray in "Protecting the Confidentiality of Communications In

Mediation":

The parties will be wary and guarded in their communications if they think that the information they reveal may later be used outside of the mediation process to their possible disadvantage. When they have resorted to mediation in an attempt to settle pending or threatened litigation, they will be particularly alert to the possibility that information they reveal to others in mediation may later be used against them by those others in that, or other, litigation. 5

12. A failure to protect confidentiality in mediation may fundamentally undennine its

effectiveness at producing settlement. This may cause parties to avoid mediation, or, where it is

mandatory, cause the parties to treat mediation as a "mere fonnality.,,6

(iii) The relationship must be one which, in the opinion of the community, ought

to be "sedulously fostered."

13. The relationships between the parties in mediation, and between the parties and the

mediator, are relationships that should be "sedulously fostered." Parties' willingness to speak

candidly about resolution of their dispute would wane if not for the assurance that settlement

discussions could not be disclosed, especially where they had contracted for that protection.

14. As recently held by this Honourable Court in Sable Offshore Energy Inc. v. Ameron

International Corp. :

The justice system is on a constant quest for ameliorative strategies that reduce litigation's stubbornly endemic delays, expense and stress. In this evolving mission to confront barriers to access to justice, some strategies

4 Rogacki v. Belz, [2003] OJ No 3809 (CA) at para. 38, BOA, Tab 7. 5 Owen Gray, "Protecting the Confidentiality of Communications in Mediation" (1998),36 Osgoode Hall L.1. 667 at 671, BOA, Tab 14; cited in Kosko c. Bijimine, 2006 QCCA 671 at para. 6], BOA, Tab 3. 6 Rogacki v. Belz , supra at para. 37, BOA, Tab 7, citing Jonnette Watson Hamilton "Protecting Confidentiality in Mandatory Mediation: Lessons from Ontario and Saskatchewan" (1999) 24 Queen's L.J. 561 at p. 574, BOA, Tab 13.

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for resolving disputes have proven to be more enduringly successful than others. Of these, few can claim the tradition of success rightfully attributed to settlements. 7

15. This Court has recognized that promoting settlement is "sound judicial policy" which

aids the effective administration of justice. 8

(iv) The Injury Caused to the Relationship by Disclosure of the Communications

Must be Greater than the Benefit Gained from the Correct Disposal of the

Litigation

16. If the first three elements of the Wigmore Test are made out, it is at the fourth and final

st~ge that the Court balances the importance of confidentiality against the need to rely upon the

discussions in mediation to establish a disputed settlement or its terms.

17. The analysis in cases where the parties have signed a mediation agreement differs from

those where the parties only enjoy a settlement privilege. The latter case is considered first.

Settlement Privilege

18. As noted above, mediation discussions are protected by settlement privilege.9

19. However, Canadian courts have held that the common law protection of settlement

discussions ceases to apply once a settlement is reached. The parties are entitled to rely on the

settlement discussions in order to prove that settlement was reached, or to prove the precise

terms of settlement. As held by Borins J .A. in Rogacki v. Belz, settlement discussions are

inadmissible in evidence "unless they result in a concluded resolution of the dispute."lo

20. This is so because the common law protection afforded to settlement discussions is

premised on the theory that a party will be unwilling to engage in those negotiations if the fact of

those discussions could be used to his or her detriment in that very dispute. As held by the

7 Sable Offshore Energy Inc. v. Ameron International Corp. , 2013 SCC 37 at para. 1, BOA, Tab 9. 8 Sable Offshore Energy Inc., supra at para. II, BOA, Tab 9; Kelvin Energy Ltd. v. Lee, [1992] 3 SCR 235 at p. 259, BOA, Tab 2. See also Sparling v. Southam Inc. (1988), 66 OR (2d) 225 (HCJ), BOA, Tab 12. 9 See above at para. 7. 10 Rogacki v. Belz, supra at para. 18, BOA, Tab 7.

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Quebec Court of Appeal in Kosko v. Bijimine, and adopted by this Honourable Court in Globe

and Mail v. Canada (Attorney General):

The protection of the 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.

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. II

21. Conceived in this way, the parties' interest in confidentiality is attenuated once a

settlement is reached. Following settlement, the parties can no longer be prejudiced in the

litigation by the discussions at mediation becoming known. At that point, the balancing at the

fourth stage of the Wigmore Test favours disclosure of the settlement discussion to allow the

settlement to be enforced.

22. Crucially, however, the discussions in mediation remain privileged: the discussions may

only be disclosed if there is a dispute between the parties as to the fact of settlement or the terms

of settlement.

23. Further, this is not an all or nothing proposition. Courts should strive to limit the

confidential discussions disclosed to that which is necessary. As held by McLachlin J. (as she

then was) in M (A.) v. Ryan, "where justice requires that communications be disclosed, the court

should consider qualifying the disclosure by imposing limits aimed at permitting the opponent to

have the access justice requires while preserving the confidential nature of the documents to the

greatest degree possible." 12

Confidentiality Agreements

24. In advance of mediation, parties may contract for confidentiality protections that exceed

11 Kosko v. Bijimine, supra at paras. 49-50, BOA, Tab 3; quoted in Globe and Mail, supra at para. 78, BOA, Tab 1. 12 M.(A.) v. Ryan, [1997] I SCR 157 at para. 37, BOA, Tab 6.

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those afforded at common law. The parties may agree that their discussions will continue to be

confidential, even if needed to prove a disputed settlement.

25. There are myriad reasons why parties may want their settlement discussions to remain

confidential, for at least some purposes, regardless of whether a settlement fol1ows. Professor

Grey discusses some of the reasons why parties may wish to maintain confidentiality in

"Protecting the Confidentiality of Communications in Mediation":

The parties may also be concerned that their communications might be used by other adversaries or potential adversaries, including public authorities, in other present or future conflicts. The possibility of prejudice to legal rights, or of exposure to legal liability or prosecution, may not be a party's only concern. Parties may also be concerned that disclosure of information they reveal in the mediation process may prejudice them in commercial dealings or embarrass them in their personal lives. 13

26. In short, the parties may contract for additional confidentiality simply because they wish

to avoid a prejudice other than prejudice to their position in that very litigation, which is already

the object of settlement privilege.

27. In the Decision under appeal, the Quebec Court of Appeal did not determine whether the

confidentiality guarantee in the mediation agreement exceeded that provided at common law.

The Court simply held that the parties' interest in confidentiality necessarily ceased once a

settlement was allegedly concluded:

L'obligation de confidentialite rattachee aux communications faites durant la mediation n'a plus d'application puisque les raisons qui justifiaient de conserver Ie caractere confidentiel des communications des parties on1 disparu. 14 [emphasis added]

28. It is necessary to determine whether the parties, in clear and precise language, agreed that

confidentiality would apply to preclude the use of the settlement discussions even to try to

establish a settlement that is disputed by the other party.

29. However, even where the parties have agreed to far reaching protections of

13 Owen Grey, "Protecting the Confidentiality of Communications in a Mediation", supra at 671, BOA, Tab 14. 14 Judgment of the Quebec Court of Appeal dated January 9, 2012 at para. 42.

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confidentiality, that is not the end of the analysis.

30. The subsequent conduct of a party may constitute a waIver of that entitlement to

confidentiality, either over all the communications or parts ofthe communications. For instance,

if the parties reach a settlement agreement in mediation, and sign minutes of settlement, that is a

distinct legal act by the parties, which signals that they intend for their settlement agreement to

be enforceable in the courts if necessary. If the parties intend for their settlement agreement to

be enforceable in Court, they must be taken to implicitly have waived the right to keep the

minutes of settlement confidential in enforcement proceedings.

31. In the same vein, if a party makes a formal offer during the course of mediation by which

it intends to be bound if accepted that party may implicitly waive the right to keep that

communication from the courts if it becomes necessary to prove the fact of a settlement. Such a

waiver would be conditional upon the offer being accepted. The factual inquiry in such a case is

(1) whether the party making the offer had full knowledge of its rights under the confidentiality

agreement and (2) whether it had an unequivocal and conscious intention to be bound by the

offer in the event that it is accepted. ) 5

32. Finally, absent a waiver, the Court may still find that the discussions are admissible,

following the Wigmore anlaysis. The agreement between the parties does not bind the Court.

33. One basis for allowing reliance on the mediation discussions despite the parties'

contractual promise of confidentiality is where it is necessary to prove that a party is misleading

the Court and committing something akin to a fraud upon the courts. 16 This appropriately places

a heavy burden upon a party that seeks to rely upon the confidential discussions, while also

ensuring that litigants may not abuse the confidentiality of mediation at common law or in their

agreement to mislead the Court.

15 Saskatchewan River Bungalows Ltd v. The Maritime Life Assurance Co., [1994] 2 SCR 490 at 500, BOA, Tab 10. 16 See, e.g., Landreville v. Town of Boucherville, [1978] 2 SCR 801 at 814, BOA, Tab 4, citing Lazarus &tates Ltd v. Beasley, [1956] 1 QB 702 (CA) at 712, BOA, Tab 5 ("Fraud unravels everything. The Court is careful not to fmd fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever. .. ").

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PARTUI - ORDERSOUGHT

34. Arbitration Place seeks no costs and respectfully requests that none be awarded against it.

Arbitration Place requests that it be allowed 10 minutes to make oral submissions.

ALL OF WHICH IS RESPECTFULLY SUBMITTED this 12th day of November, 2013.

Per:

LENCZNER SLAGHT ROYCE SMITH GRIFFIN LLP

feN- William C. McDowell

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PART VI - TABLE OF AUTHORITIES

Tab Case Paragrapb(s) Referenced

1. Globe and Mail v. Canada (Attorney General), [2010] 2 SCR 592 7,20

2. Kelvin Energy Ltd. v. Lee, [1992] 3 SCR 235 15

3. Kosko v. Bijimine, 2006 QCCA 671 11,20

4. Landreville v. Town ofBoucherville, [1978] 2 SCR 801 33

5. Lazarus Estates Ltd. v. Beasley, [1956] 1 QB 702 (CA) 33

6. M (A.) v. Ryan, [1997] 1 SCR 157 23

7. Rogacki v. Belz et al., [2003] OJ No 3809 (CA) 10,12,19

8. Rudd v. Trossacs Investments Inc., [2006] OJ No 922 4,8

9. Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 14, 15 37

10. Saskatchewan River Bungalows Ltd. v. The Maritime Life Assurance 31 Co., [1994] 2 SCR 490

11. Slavutych v. Baker, [1976] 1 SCR 254 4

12. Sparling v. Southam Inc. (1988), 66 OR (2d) 225 (HCJ). 15

LITERATURE

13. Jonnette Watson Hamilton, "Protecting Confidentiality in Mandatory 12 Mediation: Lessons from Ontario and Saskatchewan" (1999), 24 Queen's LJ. 561

14. Owen V. Gray, "Protecting the Confidentiality of Communications in 11,25 Mediation" (1998), 36 Osgoode Hall LJ. 667

PART VII - STATUTES & REGULATIONS

N/A