Mediation Confidentiality Preserved: Rudd v. Trossacs Investments

Mediators breathed a collective sigh of relief when the Ontario Divisional Court upheld the confidentiality of mediations by refusing to compel a mediator to testify about communications between parties at a mediation. Last year, my case commentary Mediation Confidentiality at Risk? addressed the Ontario Superior Court decision compelling a mediator to appear as a witness on a pending motion in Rudd v. Trossacs Investments[1]. That decision was appealed to the Divisional Court .

The dispute in Rudd v. Trossacs Investments arose between investors in a limited partnership, the general partner and its related companies and the investors’ accountants. As part of this lawsuit the investors made claims against the principal of the general partner, Mr. Kaiser, in his personal capacity. Kaiser’s summary judgment motion seeking the dismissal of the claims made against him personally was unopposed and the dismissal was granted. Kaiser was also awarded costs. Counsel for the plaintiffs asked the summary judgment motion judge to reconsider the costs order as he believed she had made a clerical error. While the costs matter was being reconsidered, the litigation continued.

The parties attended a mandatory mediation session over two days. Kaiser was present on the first day and attended by telephone on the second day. Prior to the start of the mediation, all parties executed a mediation agreement containing a confidentiality clause. The confidentiality clause stated:

The parties agree that all communications and documents shared, which are not otherwise discoverable, shall be without prejudice and shall be kept confidential as against the outside world, and shall not be used in discovery, cross examination, at trial, in this or any other proceeding, or in any other way.

The mediator’s notes and recollections cannot be soepenaed (sic) in this or any other proceeding.

A settlement was reached on the second day of the mediation. The Minutes of Settlement were largely handwritten. The style of cause on the Minutes was typed, as it had been cut from another document and attached to the Minutes. Kaiser’s name was included in the style of cause.

However, the defendants listed as signatories to the Minutes did not included Kaiser. The Minutes were signed by the plaintiffs and the defendants’ counsel on behalf the corporate clients.

A document called a “Settlement and Mutual Release” was signed by the plaintiffs. The “Settlement and Mutual Release” was signed by all the corporate defendants. Kaiser, in his personal capacity, was not listed as a signatory to this document.

An order dismissing the action against the corporate defendants was obtained on February 19, 2004 .

On March 5, 2004 , the summary judgment motion judge amended her costs order. Kaiser’s counsel sought to enforce the costs order.

Counsel for the plaintiffs alleged that it was a mistake that Kaiser had been left out of the settlement. Counsel for the plaintiffs brought a motion seeking an order to compel the mediator to testify about the communications at the mediation, for rectification of the Minutes and enforcement of the settlement. Lederman J. ordered that the mediator be examined as a witness on a pending motion. That decision sent a chill through the legal profession.

The Divisional Court disagreed with the motion judge and set aside the order. Swinton J., writing on behalf of the panel, found that the motion judge failed to conduct an analysis based on the Wigmore criteria for privilege. Rather, he focussed solely on without prejudice settlement privilege.

Applying the Wigmore criteria, namely that the communications must originate in a confidence that they will not be disclosed, confidentiality must be essential to the maintenance of the relationship in which the communications arose, the relationship must be one which ought to be “sedulously fostered” and the injury caused by the disclosure of the communications must be greater than the benefit gained, the Divisional Court found that the communications at the mediation were, in fact, protected by privilege.

This is a very important decision – it is one of the only cases under the mandatory mediation rule which came into force for case managed actions in Toronto and Ottawa in 1999. Mediators, lawyers and clients alike are relieved that the confidentiality of mediations has been upheld. Participants in mediations can continue to expect confidentiality, which is the hallmark of the process.

Published May 25, 2006