Are Settlement Negotiation Details Permitted Within Lawsuit Documents?

The Pleadings Within a Lawsuit, Being the Claim or Defence Documents, Must Refrain From Disclosing Details of Settlement Efforts to the Court. Where Such Documents Including Offer-to-Settle Details or References to Settlement Negotiations, Such...


Understanding Court Rules Restricting Pleading of Details About An Offer-to-Settle Due to Settlement Privilege

Lawsuit Document When a dispute that may develop into a legal action within a court of law, the parties to the dispute often try to resolve the issues prior to actually commencing a court proceeding.  During efforts to resolve the dispute, settlement offers including negotiation discussions are often exchanged.  Subsequently, if the settlement discussions were unsuccessful and a court proceeding begins, the settlement negotiation details must remain undisclosed to the court and therefore be omitted from all court documents including the claim and defence pleadings.

The Law

Court rules require the omission of settlement discussion details from litigation documents, such as the claims documents or defence documents. These rules are provided by the common law which deem the inclusion of settlement discussion details within certain court documents, such as pleadings, as scandalous and potentially prejudicial; and accordingly, scandalous pleadings should be struck from the record as per Rule 12.02(1)(b),(c) of the Rules of the Small Claims Court, O. Reg. 298/98, or Rule 25.11(b) of the Rules of Civil Procedure, R.R.O. 1990, Regulation 194.  These rules were applied within Renzone v. Onyx Homes Inc., 2020 ONSC 7722, as well as 2030945 Ontario Ltd. v. Markham Village Shoppes Limited, 2013 ONSC 1020, among others, whereas such cases confirm the view that the pleading of settlement details is scandalous to the litigative process. These cases also provide the formal legal test as to what constitutes as settlement details.  Specifically, the doctrine within these cases states:


[14]  I begin with Rule 25.11. This Rule allows the Court to “strike out or expunge all or part of a pleading…with or without leave to amend on the ground that the pleading…is scandalous, frivolous or vexatious…”.

[15]  It is settled law that referring to settlement offers or discussions, which are thus subject to “settlement privilege”, may well be considered scandalous, frivolous or vexatious, leading to that part of the pleading being struck given that such communications are inadmissible. See, in that regard, 2030945 Ontario Ltd v. Markham Village Shoppes Ltd 2013 ONSC 1020 at para. 8.


[8]  I agree with the defendant that references to settlement offers, discussions and negotiations should not be included in a pleading. The law in this regard is summarized by Master Beaudoin (as he then was) in Canadian Gateway Development Corp. v Canada (National Capital Commission), [2002] O.J. No. 3167 (S.C.J. – Master) at paragraphs 8 and 9 where he states as follows:

8  A Master had jurisdiction pursuant to Rule 25.11(b) to strike out a pleading on the ground that the pleading is scandalous, frivolous or vexatious. Although the defendant correctly submits that a Master cannot generally strike out a defence as being untenable, that it not the nature of the motion here. The law is clear that evidence of privileged communications, such a settlement discussions, should not be before the Court. (See I. Waxman & Sons v. Texaco Canada Ltd., 1968 CanLII 178 (ON SC), [1968] 1 O.R. 642 (H.C.J.), aff'd 1968 CanLII 327 (ON CA), [1968] 2 O.R. 452 and Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 2nd Edition, Vancouver, Butterworths, 1999). If such discussions are inadmissible in a civil proceeding, any reference to them in a party's pleadings can be considered scandalous, frivolous or vexatious and should be struck from their pleading.

9  Per Sopinka and Lederman at p. 810, there are three conditions under which settlement discussions will be considered privileged and inadmissible:

(a) a litigious dispute must be in existence or within contemplation;

(b) 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; and,

(c) the purpose of the communication must be to attempt to affect a settlement.

Settlement Privilege Exceptions

As explained within the cases above, it is the general rule that pleading statements containing details of settlement discussions are improper and such statements should be struck from the pleading; however, in some circumstances a pleading containing settlement discussion details is permitted, and may be permitted regardless of whether the discussions occurred prior to, or during, the litigative process.  The exceptions to the rule against pleading settlement discussions are explained by the Supreme Court in Sable Offshore Energy Inc. v. Ameron International Corp., [2013] 2 S.C.R. 623, as well as Bank of Montreal v. Saidani, 2023 ONSC 4216, Welling v. Doug & Partners Inc., 2021 ONSC 5064, and Prior v. Sunnybrook and Women's College Health Sciences Centre, 2006 CanLII 17329, among other cases, whereas within each case the courts specifically stated:


[11]  Settlements allow parties to reach a mutually acceptable resolution to their dispute without prolonging the personal and public expense and time involved in litigation.  The benefits of settlement were summarized by Callaghan A.C.J.H.C. in Sparling v. Southam Inc. (1988), 1988 CanLII 4694 (ON SC), 66 O.R. (2d) 225 (H.C.J.):

. . . the courts consistently favour the settlement of lawsuits in general. To put it another way, there is an overriding public interest in favour of settlement. This policy promotes the interests of litigants generally by saving them the expense of trial of disputed issues, and it reduces the strain upon an already overburdened provincial court system. [p. 230]

This observation was cited with approval in Kelvin Energy Ltd. v. Lee, 1992 CanLII 38 (SCC), [1992] 3 S.C.R. 235, at p. 259, where L’Heureux-Dubé J. acknowledged that promoting settlement was “sound judicial policy” that “contributes to the effective administration of justice”.

[12]  Settlement privilege promotes settlements.  As the weight of the jurisprudence confirms, it is a class privilege.  As with other class privileges, while there is a prima facie presumption of inadmissibility, exceptions will be found “when the justice of the case requires it” (Rush & Tompkins Ltd. v. Greater London Council, [1988] 3 All E.R. 737 (H.L.), at p. 740).

[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, [1984] 1 All E.R. 597, at p. 605:

. . . 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.

[14]  Rush & Tompkins confirmed that settlement privilege extends beyond documents and communications expressly designated to be “without prejudice”.  In that case, a contractor settled its action against one defendant, the Greater London Council (the GLC), while maintaining it against the other defendant, the Carey contractors.  The House of Lords considered whether communications made in the process of negotiating the settlement with the GLC should be admissible in the ongoing litigation with the Carey contractors.  Lord Griffiths reached two conclusions of significance for this case.  First, although the privilege is often referred to as the rule about “without prejudice” communications, those precise words are not required to invoke the privilege.  What matters instead is the intent of the parties to settle the action (p. 739).  Any negotiations undertaken with this purpose are inadmissible.

[15]  Lord Griffiths’ second relevant conclusion was that although most cases considering the “without prejudice” rule have dealt with the admissibility of communications once negotiations have failed, the rationale of promoting settlement is no less applicable if an agreement is actually reached.  Lord Griffiths explained that a plaintiff in Rush & Tompkins’ situation would be discouraged from settling with one defendant if any admissions it made during the course of its negotiations were admissible in its claim against the other:

In such circumstances it would, I think, place a serious fetter on negotiations . . . if they knew that everything that passed between them would ultimately have to be revealed to the one obdurate litigant. [p. 744]

[16]  Middelkamp v. Fraser Valley Real Estate Board (1992), 1992 CanLII 4039 (BC CA), 71 B.C.L.R. (2d) 276 (C.A.), subsequently endorsed the view that settlement privilege covers any settlement negotiations.  The plaintiff James Middelkamp launched a civil suit against Fraser Valley Real Estate Board claiming that it had engaged in practices that were contrary to the Competition Act, R.S.C. 1985, c. C-34, and caused him to suffer damages.  He also complained about the Board’s conduct to the Director of Investigation and Research under different provisions of the Act, resulting in an investigation by the Director and criminal charges against the Board.  The Board negotiated a settlement with the Department of Justice, leading to the criminal charges being resolved.  Middelkamp sought disclosure of any communications made during the course of negotiations between the Board and the Department of Justice.  McEachern C.J.B.C. refused to order disclosure of the communications on the basis of settlement privilege, explaining:

. . . the public interest in the settlement of disputes generally requires “without prejudice” documents or communications created for, or communicated in the course of, settlement negotiations to be privileged. I would classify this as a “ʻblanketʼ, prima facie, common law, or ‘class’” privilege because it arises from settlement negotiations and protects the class of communications exchanged in the course of that worthwhile endeavour.

In my judgment this privilege protects documents and communications created for such purposes both from production to other parties to the negotiations and to strangers, and extends as well to admissibility, and whether or not a settlement is reached. This is because, as I have said, a party communicating a proposal related to settlement, or responding to one, usually has no control over what the other side may do with such documents. Without such protection, the public interest in encouraging settlements will not be served. [Emphasis added; paras. 19-20.]

[17]  As McEachern C.J.B.C. pointed out, the protection is for settlement negotiations, whether or not a settlement is reached.  That means that successful negotiations are entitled to no less protection than ones that yield no settlement.  The reasoning in Brown v. Cape Breton (Regional Municipality), 2011 NSCA 32, 302 N.S.R. (2d) 84, is instructive.  A plaintiff brought separate claims against two defendants for unrelated injuries to the same knee.  She settled with one defendant and the Court of Appeal had to consider whether the trial judge was right to order disclosure of the amount of the settlement to the remaining defendant.  Bryson J.A. found that disclosure should not have been ordered since a principled approach to settlement privilege did not justify a distinction between settlement negotiations and what was ultimately negotiated:

Some of the cases distinguish between extending privilege from negotiations to the concluded agreement itself. . . . The distinction . . . is arbitrary. The reasons for protecting settlement communications from disclosure are not usually spent when a deal is made. Typically parties no more wish to disclose to the world the terms of their agreement than their negotiations in achieving it. [Emphasis added; para. 41.]

Notably, this is the view taken in Alan W. Bryant, Sidney N. Lederman and Michelle K. Fuerst, The Law of Evidence in Canada (3rd ed. 2009), where the authors conclude:

. . . the privilege applies not only to failed negotiations, but also to the content of successful negotiations, so long as the existence or interpretation of the agreement itself is not in issue in the subsequent proceedings and none of the exceptions are applicable. [Emphasis added; §14.341.]

[18]  Since the negotiated amount is a key component of the “content of successful negotiations”, reflecting the admissions, offers, and compromises made in the course of negotiations, it too is protected by the privilege.  I am aware that some earlier jurisprudence did not extend the privilege to the concluded agreement (see Amoco Canada Petroleum Co. v. Propak Systems Ltd., 2001 ABCA 110, 281 A.R. 185, at para. 40, citing Hudson Bay Mining and Smelting Co. v. Wright (1997), 1997 CanLII 11529 (MB KB), 120 Man. R. (2d) 214 (Q.B.)), but in my respectful view, it is better to adopt an approach that more robustly promotes settlement by including its content.

[19]  There are, inevitably, exceptions to the privilege.  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, 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., [2001] 1 All E.R. 783 (C.A. Civ. Div.), Underwood v. Cox (1912), 1912 CanLII 582 (ON SCDC), 26 O.L.R. 303 (Div. Ct.)), and preventing a plaintiff from being overcompensated (Dos Santos).


[20]  Settlement negotiations have long been protected by the common law rule that “without prejudice” communications made during settlement negotiations are inadmissible: Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 at para 13.  The doctrine of settlement privilege is intended to encourage meaningful negotiations on the understanding that parties are more likely to settle by having confidence from the outset that their settlement negotiations will not be disclosed and used to their prejudice in the proceedings: Ibid, citing Cutts v. Head, [1984] 1 All ER 597 at 605.  Settlement privilege is a class privilege that prima facie raises a presumption of inadmissibility, but exceptions will be found when justice requires it: Sable at para 12; Rush & Tompkins Ltd. v. Greater London Council, [1988] 3 All ER 737 (HL) at 740.  The public interest in encouraging settlements may be outweighed by the countervailing public interest in addressing misrepresentations, fraud, undue influence, or a potential overcompensation, among other things: Sable at para 19.


6.  As a general rule, a party may not plead without prejudice discussions including offers or communications which take place for the purpose of trying to avoid litigation (Clayton v. SPS Commerce Canada Ltd. 2018 ONSC 5017).  The parties agree that the limited exception to this rule is set out in the decision of Master Sugunasiri, as she then was, in Irwin v. Canadian Professional Sales Association 2019 ONSC 7332 at paragraphs 14-16).  Where a party moves to strike references to settlement offers from a pleading, the court should consider: (a) whether the impugned paragraphs contain a reasonable claim to settlement privilege; (b) whether the settlement offer is relevant to the issues at trial other than to prove the weakness of the other party’s case; and (c) if the offer is pleaded in support of allegations of bad faith, mental distress or punitive damages, whether those claims have an air of reality.

7.  The onus is on the party seeking to strike the pleading to establish a reasonable claim to settlement privilege but it is a low threshold.  If the threshold is met, the onus shifts to the responding party to establish the purpose of the pleading and to demonstrate that its bad faith claim has an air of reality to it.


[4]  There can be no doubt that in this jurisdiction settlement discussions and offers are regarded as privileged. A pleading should not refer to a bona fide offer of compromise whether the offer was made before or after the litigation was commenced. The defendant relies on a number of cases.  In Marshall v. Ensill Canada Ltd.[1], for example, the plaintiff’s claim included abuse of process but the court struck out a pleading that referred to an offer to settle the allegedly abusive action for an apology. In Canadian Gateway Development Corp. v. National Capital Commission[2] the court held that a meeting between the litigants without counsel and prior to litigation commencing was with the express intention of fostering settlement and with the implied intention that the contents of the discussion would not be revealed to the court. In Bonneville v. Hyundai Auto Canada Inc.[3] which was a wrongful dismissal action, the court held that where an offer to settle is made without prejudice but simply to buy peace, the fact of such offer should generally not be pleaded. In Hartley v. J.B. Food Industries Inc.[4] the employer had purported to terminate for cause but had offered two months salary in exchange for a release. The court struck out a plea that referred to the offer.  I agree with what was said in these cases and with the results.  Bona fide offers to settle should not find their way into pleadings and should not be treated as admissions of liability.

[5]  In the case at bar, however, the matter is on a different footing entirely.  In the first place the offer cannot be regarded as a bona fide offer to settle the issues between the parties.  This is for two reasons.  Firstly, it was not within the power of the employer to discontinue the proceeding before the governing body.  It would be for the CBCPO to determine how the complaint would be resolved.  Secondly, it is an improper offer.  Either the employer had grounds to allege “a course of dishonest and fraudulent behaviour” or it did not.  Either the complaint to the CBCPO was a legitimate complaint or it was not.  Of course the employer could be mistaken in its original conclusion or the governing body might take a different view of the facts but it cannot be proper to offer to withdraw an allegation of fraud made to an outside body contingent on a release in a civil proceeding.  The court would not countenance a threat to pursue a criminal or quasi-criminal proceeding to obtain an advantage in a civil proceeding.  A discipline process that could affect the livelihood of the other party is in the same category.  I see no difference in quality between a threat to prosecute or an agreement to withdraw a complaint.  Either of these may be indicia of bad faith and neither should attract the protection afforded to bona fide settlement discussions.

[6]  A second consideration is the fact that the offer is not part of a settlement discussion.  Rather, as pleaded, it is a unilateral proposal made by one of the parties.  Of course there are frequent examples of unilateral offers being regarded as without prejudice and privileged.  Hartley v. J.B. Food Industries Inc.supra. is an example.  Strictly speaking Hartley and similar cases are not so much cases of blanket privilege as a matter of intention. The letter sent in the Hartley case read in context could not possibly have been read as an admission of liability. Rather it clearly asserted cause for dismissal but “without prejudice to our position” offered the plaintiff the chance to resign with two months pay.  The policy grounds for protecting that kind of offer are clearly articulated in the decision.  My point here is that making a threat to invoke professional discipline – or its counterpart offering to withdraw a disciplinary complaint – if it is improper to do so should not be afforded similar protection.  Unilaterally labeling a proposal as “without prejudice” and calling it an offer should not allow a bubble of privilege to cloak an improper threat or proposal.

[7]  As an aside, even at a settlement meeting or a mediation in which the parties have agreed to meet for a full and frank discussion and an exchange of proposals, there are limits to what is or ought to be protected.[5]  In such cases the parties will have explicitly or implicitly agreed to a zone of privilege.  Hypothetical outcomes, evidentiary weaknesses and creative settlement options ought to be encouraged and protected.  But no one would seriously argue that if an assault or other criminal behaviour took place at such a meeting, it would be protected from disclosure.  Threats of physical violence or other illegal or improper actions ought not be protected either.  If the letter sent by the defendant bears the construction advanced by the plaintiff – that is a threat to continue with a spurious complaint to the governing body if the plaintiff did not settle or (equally reprehensible in my view) to withdraw a complaint that it thought ought to attract discipline in exchange for settlement – I think there is a very real question whether or not it would fall within the protection afforded to a settlement meeting.  I do not have to decide this in the context of the case before me.  Certainly in the case of unilateral communication, the risk of allowing a party to make improper threats or inducements in a letter cloaked as an offer is obvious.

[8]  It is important to point out that a pleaded fact and the inference to be drawn from it remain mere allegations until admitted or proven.  Whether the letter should be construed as improper and proof of bad faith is not a matter to be resolved at the pleading stage. Admissibility of evidence and the weight to be given to particular facts remain matters for trial whatever may be contained in the pleading.  This gives rise to a second ground of attack on the pleading. It is possible to argue that the letter ought to be struck from the pleadings because it is merely evidence and not a material fact. Our rules require parties to plead the material facts on which they rely but not the evidence by which they will be proven.[6]  This distinction between facts and evidence is in principle a clear distinction.  Material facts in a pleading are the important and relevant facts the party intends to prove at trial.  Evidence is the means by which a party actually proves those facts.  Some facts however are material because they prove other facts or because they are material to conclusions about motive and intention.  In addition, a bald pleading may be attacked for lack of particularity. Rule 25.06 (8) requires “full particulars” of an allegation of malice or intent.

[9]  The interrelationship between material facts, particulars and evidence creates overlap and does not admit of rigid distinctions. Finally, where a party intends to prove facts whose admissibility may be controversial, there is merit in putting the other party on notice and including the facts in the pleading.  An example of this principle may be found in the law in relation to pleading of similar facts.  I recently reviewed this in City of Toronto v. MFP Financial Services Inc.[7]   Similar principles support inclusion of this allegation in this pleading.

[10]  For all of these reasons, in the circumstances of this case, I decline to strike the impugned paragraphs. I am of the view that the facts if accurate would not constitute a bona fide offer to settle.  Rather they might constitute an improper threat or inducement and may be material to proving bad faith or malice.  It may also be material to the claim for punitive damages.

Summary Comment

Pleading documents, among others, that including references to, or contain details of, settlement discussions between the parties to a legal dispute are viewed as improper and scandalous, inflammatory, and unfair, and should be struck from the pleadings and therefore from the view of the court.  This includes any communications and information that arise where a litigious dispute is in existence or is in contemplation, where the communication is made with the intent that such would remain undisclosed to the court if negotiations fail, and where the purpose of the communication is an attempt to resolve the legal dispute and achieve a settlement.

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