Construction professionals are often asked by the project owner for their analysis of a claim made by the general contractor at the end of the project. At issue are delays, impacts, the price of changes, or the refusal to issue change orders. Professionals are generally reluctant to perform such analyses because of their confidential nature and the fear that they might be used against them. Also, it is often the case that the project owner does not want to share this analysis with the general contractor. This however can be a useful step in negotiating a settlement with the contractor. In a judgment rendered in late December 2018 that has received relatively little attention, the Quebec Court of Appeal reassured the parties regarding the confidential nature of such an analysis.
In the matter of Procureure générale du Québec v. Groupe Hexagone1, the Court of Appeal had to rule on the confidentiality of reports prepared by a professional retained by the Ministry of Transport in connection with the contractual procedure for administratively resolving claims provided for in the Ministry’s Cahier des charges et devis généraux (“CCDG”).
Following a disagreement on the extent of work not provided for in the call for tender documents, the general contractor, Groupe Hexagone Inc. (“Hexagone”) resorted to the contractual claim procedure provided for in the CCDG. Pursuant to this procedure, the Ministry had an analysis report on Hexagone’s claims prepared by its professionals, which included their recommendations on payment.
Section 8.8 of the CCDG provides as follows [TRANSLATION]:
The parties agree that all steps taken, all documents filed and anything said in the course of this procedure, including without limitation the claim analysis reports prepared by the Ministry, are without prejudice to either party and cannot be referred to or filed into evidence in court. After analyzing the claim, the Ministry will, if appropriate, make a settlement proposal. Such proposal is without prejudice to the Ministry’s rights and is not to be construed as an acknowledgement or admission of any kind. The Ministry reserves the right to modify the proposal or even withdraw it completely. … ”
Hexagone sought to be provided with the analysis report commissioned by the Ministry, to which the latter objected, based on the wording of section 8.8, the confidential nature of the report, and the settlement privilege. Following the hearing on this objection, the Superior Court ordered the disclosure of the report.
After reviewing section 8.8 of the CCDG and the principles underlying the settlement privilege, the Court of Appeal concluded that the report was confidential and confirmed that it could not be used by the parties in connection with the dispute and therefore could not be disclosed to Hexagone by the Ministry, thus overturning the judgment of the Superior Court.
The Court of Appeal indicated that, as the Supreme Court has pointed out, the purpose of the settlement privilege is to promote a settlement by creating a “protective veil” around the efforts parties make to settle their disputes, and that the privilege, which must be interpreted broadly, also protects the documents prepared ahead of settlement negotiations, such as internal memos and reports.
The Court of Appeal stressed [TRANSLATION] “the crucial importance of the settlement privilege in promoting the resolution of disputes and improving access to justice”2. The analysis report must therefore remain confidential so that the parties begin the settlement process based on the premise that the substance of their negotiations will not be disclosed. This principle also applies to the documents prepared in view of the negotiations, and thus to the report commissioned by the Ministry.
The Court of Appeal also examined the wording of section 8.8 of the CCDG and concluded that it was sufficiently broad to cover the documents prepared in connection with the claims procedure but not disclosed to the other party, including the analysis report. This conclusion highlights the importance for the parties of keeping the report confidential, in addition to the settlement privilege.
Now that the confidentiality of such analyses has been recognized in the context of a contractual confidentiality clause, project owners and construction professionals would be well advised to include a clause similar to paragraph 7 of section 8.8 of the CCDG (reproduced above) not only in the contract with the general contractor, but in the professional services contract. With a clause of this nature adapted to your contract and in light of this judgment of the Court of Appeal, the risks of confidentiality being lifted are greatly reduced. It is still necessary however to carefully tailor this clause to the contractual context of the project. Even in the absence of such a clause, it remains possible to negotiate one when such an analysis is requested by the project owner. This decision of the Court of Appeal is thus positive: it enhances settlement possibilities and allows the parties to express themselves freely and frankly without fear of their transparency being used against them.