With the current strain on judicial resources, settlement is a frequent (and frequently encouraged) conclusion to ongoing litigation. In order to incentivise settlement out of court, the concept of settlement privilege developed - the idea being that negotiations will be more productive if parties know that their discussions are without prejudice and cannot be subsequently disclosed. What do you do, then, when there are settlements with multiple parties and you may not want to disclose just how much (or how little) you have settled for?
The Supreme Court of Canada recently addressed this issue in Sable Offshore Energy Inc v Ameron International Corp. In this case, Sable Offshore Energy Inc. (“Sable”) sued a number of defendants who had supplied it with paint intended to prevent corrosion of its offshore structures. Sable entered into Pierringer Agreements with all but two of the defendants. A Pierringer Agreement allows one or more defendants in a multi-party proceeding to settle with the plaintiff by segregating their liability, leaving the remaining defendants to continue the defend against the remainder of the liability.
The terms of the Pierringer Agreements were disclosed to the non-settling defendants, but not the amounts paid by the settling defendants. The two non-settling defendants applied for disclosure of the amounts paid by the settling defendants. In response, the settling defendants argued that the negotiated amounts were protected by settlement privilege and could not be disclosed.
In a unanimous decision, the SCC held that financial terms of settlements do not need to be disclosed in multi-party proceedings. The Court further confirmed that settlement privilege extends to the content of both successful and unsuccessful negotiations and that it protects not just the subject of negotiations, but also the ultimate settlement amount. To rely on an exception to this privilege, the party seeking disclosure must show that, on balance, a competing public interest outweighs the public interest in encouraging settlement.
The SCC’s decision stresses the importance of settlement privilege in promoting settlements. Parties to a multi-party proceeding can now be assured that their discussions during negotiations will be protected from disclosure, whether or not the discussions are fruitful and ultimately lead to a settlement agreement.