Mediation Confidentiality At Risk?

Rudd v. Trossacs Investments Inc. [1]

Last July, Justice Lederman of the Ontario Superior Court of Justice surprised many in making an exception to mediation confidentiality by ordering a mediator to be examined as a witness on a pending motion. Recently, the Divisional Court has granted leave to appeal Lederman J.’s ground-breaking decision in Rudd v. Trossacs Investments Inc.[1]

Kaiser, one of a number of defendants in a lawsuit started by the plaintiffs, brought a motion for summary judgment, resulting in the action being dismissed against him on consent and awarding him over $39,000 in costs. The plaintiffs took the position that the cost award was based on a clerical error and the motion judge agreed to hear further submissions on this issue. While this decision was under reserve, the plaintiffs and the remaining defendants proceeded to mandatory mediation. Following two mediation sessions, a settlement was reached. While drafting the terms of settlement, the mediator, who prepared the minutes of settlement by cutting and pasting names from the title of proceeding, did not include Kaiser’s name in the minutes of settlement. The remaining parties all signed the minutes of settlement, settlement monies were paid, releases exchanged and an order taken out dismissing the action. None of the documents referred to Kaiser.

Two months after the dismissal of the action, the motions judge released a revised costs award. Kaiser’s counsel sought to enforce the award against the plaintiffs on the basis that Kaiser had not been included in any settlement. The plaintiffs refused, arguing that the parties’ intention during the settlement negotiations had been to bind Kaiser to the settlement. The plaintiffs brought a motion for rectification of the written minutes of settlement and sought an interim order requiring the mediator to testify as to what had been the intention of the parties when they signed the minutes of settlement. The defendants took the position that the settlement discussions entered into by the parties were privileged and confidential and, accordingly, the mediator could not testify.

Lederman J. granted the plaintiffs’ motion, holding that if the settlement discussions resulted in a consensual agreement, then communications with the mediator could be tendered as proof of settlement or the existence or interpretation of the agreement in issue. He stated that privilege and confidentiality are critical to the success of the mediation process and should not be disturbed without some evidence to demonstrate that the mediator’s evidence is likely to be probative of the issue and that the benefit gained by disclosure for the correct disposal of the litigation will be greater than the injury to the mediation process by the disclosure of discussions that took place.

This case is of obvious importance – there is virtually no case law under the mandatory mediation rule, which has been in effect for case managed actions in Toronto and Ottawa since January 1999. Concerns arising from this case are twofold. First, requiring the mediator to testify disrespects the confidentiality agreement entered into by the parties prior to the mediation. Second, it forces the mediator to become a witness against one of the parties. The chilling effect this decision could have on mediation is profound.

The appeal court will have the opportunity to answer critical questions about the extent of confidentiality in mediation. The Ontario Bar Association has been granted leave to intervene in the appeal. The matter is likely to be heard by the early fall of this year[2].

Published April 6, 2005