Negotiations undertaken with intent of settling action inadmissible

DISCOVERY

Negotiations undertaken with intent of settling action inadmissible

Appellant owned gas project. Paint system used for corrosion protection on structures supplied by respondent. Appellant alleged that paint not suitable for use and failed prematurely. In absence of contractual relationship, appellant commenced action based in negligence, negligent misrepresentation and breach of collateral warrant against respondent and other contractors and applicators responsible for supplying, fabricating and preparing steel and for applying paint coatings. Appellant entered into three Pierringer Agreements, allowing settling defendants to withdraw from litigation and leaving remaining defendants responsible only for loss they actually caused. Terms of agreements disclosed to respondent but not amounts paid by settling defendants. Respondent’s application for production of settlement amounts dismissed, but appeal to Nova Scotia Court of Appeal allowed. Appellant’s appeal allowed. Settlement privilege is class privilege subject to prima facie presumption of inadmissibility. Privilege clearly applies to “without prejudice” communications, but precise words not required. Any negotiations undertaken with intent of settling action inadmissible. Exceptions will be found when justice of case requires it. Non-settling defendants argued there should be exception to privilege for settlement amounts because information required for them to conduct litigation but no tangible prejudice created by withholding settlement amounts which could be said to outweigh public interest in promoting settlements. Pierringer Agreements developed to address obstacles to settlement that arose in multi-party litigation and routinely include additional protections for non-settling defendants. Settlement required that plaintiffs get production of all relevant evidence from settling defendants and make evidence available to non-settling defendants on discovery. No restriction on non-settling defendants’ access to experts retained by settling defendants and agreements specified that non-financial terms would be disclosed to court and non-settling defendants. Non-settling defendants’ had assurance they would not be held liable for more than their share of damages and appellant agreed to disclose settlement amounts at end of trial, once liability determined. Further, inherent in Pierringer Agreements that non-settling defendants can only be held liable for their share of damages and will be severally, not jointly, liable with settling defendants, so not clear how knowledge of settlement amounts materially affected ability of non-settling defendants to know and present their case.
Sable Offshore Energy Inc. v. Ameron International Corp. (Jun. 21, 2013, S.C.C., McLachlin C.J.C., LeBel J., Abella J., Cromwell J., Moldaver J., Karakatsanis J., and Wagner J., File No. 34678) Decision at 210 A.C.W.S. (3d) 348 was reversed.  228 A.C.W.S. (3d) 78.