Divisional Court Says Mediator Can’t Be Forced to Testify

confidential.jpgIn Rudd v. Trossacs Investments Inc., the Divisional Court has ruled that a party to a settlement reached at a mandatory mediation could not examine the mediator as a witness on a subsequent motion seeking rectification of the settlement.

Justices Edward Then, James Carnwath and Katherine Swinton were hearing an appeal from an order made by Superior Court Justice Sidney Lederman. In this lawsuit, the plaintiffs were investors in a limited partnership. They sued the general partner, some related companies and their accountant. One of the defendants, Morris Kaiser, was sued in his personal capacity and was also a principal of some of the corporate defendants. Kaiser brought a motion for summary judgment, seeking dismissal of the action as against him personally. The motion was unopposed and was granted by Justice Susan Himel. Her Honour also awarded costs to Kaiser, in an amount exceeding  $39,000. Counsel for the plaintiffs submitted that Himel J. had made an error in calculating the costs and that a reduction should be made. While Justice Himel was considering this submission, the lawsuit continued against the defendants other than Kaiser.

A mandatory mediation took place, over the course of two days. Kaiser participated as a representative of some of the corporate defendants. There was a confidentiality agreement in place, providing that the mediator’s notes and recollections could not be subpoenaed.

A settlement was reached at the mediation, according to the terms of which “each of the plaintiffs” was to pay $32,000 all-inclusive “to the defendants”. (Yes, you read that correctly. There was a counterclaim in the case, so perhaps the payment(s) related to it.)

An order was taken out, dismissing the action as against specific defendants, but not including the defendant Kaiser.

Justice Himel then released her ruling with respect to costs of Kaiser’s original motion for summary judgment. She reduced to $21,000 the costs payable to him. When counsel for Kaiser sought to collect those costs, counsel for the plaintiffs said “that he had made a mistake and never noticed that Mr. Kaiser had not signed the settlement documents in his personal capacity”. He brought a motion for rectification of the settlement agreement reached at mediation. As part of this motion, the plaintiffs sought leave to examine the mediator as a witness on the motion for rectification. They wanted to question the mediator about the negotiations that had taken place at the mediation. (It is not entirely clear from the reasons of the Divisional Court, but it appears that the plaintiffs wanted to argue that the settlement was intended to encompass the claim against Kaiser personally and that therefore, no costs were payable to him in relation to the earlier motion for summary judgment.)

The matter was of such importance that the Ontario Bar Association sought and was given intervenor status.

Justice Lederman ruled that the mediator could be compelled to testify. His reasoning was that doing so would not offend the confidentiality agreement entered into by the parties, since the questions to be asked of the mediator would not pertain to any admission against interest that might have been made by one of parties, but only to what the parties intended the terms of the settlement to be.

On appeal, the Divisional Court reversed the decision of Lederman J. and held that the mediator could not be compelled to testify. Madam Justice Swinton, who wrote the decision, held that the discussions with the mediator were privileged. In doing so, she applied the four-part “Wigmore conditions”. (John Henry Wigmore was the author of several well-known American legal texts and these four conditions appeared in his book, Wigmore on Evidence.) Swinton J. noted that the Supreme Court of Canada had applied the Wigmore conditions in other contexts.

The four conditions by which to determine if a communication is privileged are:

  1. The communications must originate in a confidence that they will not be disclosed.
  2. The element of confidentiality must be essential to the maintenance of the relationship in which the communications arose.
  3. The relationship must be one which, in the opinion, of the community ought to be “sedulously fostered”.
  4. The injury caused to the relationship by disclosure of the communications must be greater than the benefit gained for the correct disposal of the litigation.

Applying these conditions to the case at hand, Justice Swinton found that all four had been satisfied and that accordingly, the communications to the mediator at the mediation were privileged. The mediator could not be compelled to testify. She disagreed with Justice Lederman’s view, “that the potential harm from disclosure was minimal because the parties had reached a settlement” and the proposed testimony would therefore not involve admissions against interest. Justice Swinton held that preserving confidentiality may be important for reasons other than protection of admissions. For example, parties might disclose some private information at mediation, that they do not wish to be made public.

Justice Swinton said, “The ability of parties to engage in full and frank disclosure is fundamental to the mediation process and to the likelihood that it will lead to resolution of a dispute.  There is a danger that they will be less candid if the parties are not assured that their discussions will remain confidential, absent overarching considerations such as the revelation of criminal activity.”

The Divisional Court was satisfied that these considerations satisfied the fourth of the Wigmore conditions, in that the harm from disclosure would outweigh the benefit from “the correct disposal of the litigation”.

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