While many tenets concerning the protections afforded by privilege are similar in both Canada and the United States, there are key differences and treatment when it comes to settlement and common interest privilege, as some recent cases highlight.

COMMON INTEREST PRIVILEGE IN CANADA

Common interest privilege has been interpreted in Canada to apply to many communications providing the parties share a "common interest" in the underlying subject matter. Typically, a common interest has been applied to enable parties to communicate frankly between themselves without waiving privilege where generally the parties have the same self-interest, share a common goal or are seeking same or similar remedies.

While common interest privilege is most commonly thought to apply to litigation, arbitration or dispute resolution proceedings, some Canadian cases have entrenched that protection in the commercial context in order to allow parties to pursue similar common interest in commercial transactions. For example, the British Columbia Court of Appeal in Maximum Ventures Inc. v. De Graaf, accepted that common interest privilege could be claimed where legal opinions are shared amongst and between parties who share a common interest in a transaction as part of due diligence. The court held that where there is a sufficient interest in common to extend the common interest privilege to disclosure of opinions, even in circumstances where no litigation is in existence or contemplated, that protection is afforded. Other Canadian cases have echoed that view.

New York Court of Appeals' Ruling

Recently, the New York Court of Appeals held that the common interest doctrine applies only where a reasonably anticipated litigation is involved.

In Ambac Assurance Corp. v. Countrywide Home Loans, Inc., Bank of America and Countrywide claimed privilege over documents involving pre-closing matters of common interest between the parties during a period in which parties signed a merger agreement. The merger agreement in question contained both a confidentiality clause as well as a common interest agreement that was intended to protect communications between the companies regarding matters relating to the merger, including employee benefit plans, legal advice on tax issues, etc.

While the lower courts allowed the common interest exception to apply, the court of appeals reversed the broader application of the common interest doctrine. The end result is that where New York law applies (as choice of law or otherwise), the common interest doctrine does not extend to non-litigation disputes.

SETTLEMENT PRIVILEGE IN CANADA

Both Canada and the United States recognize a strong public interest in favour of maintaining secrecy of matters during settlement negotiations to foster compromise on dispute settlement. This serves to ensure parties feel uninhibited in their communications; however, key differences exist as to the scope and nature of those protections.

In Sable Offshore Energy Inc. v. Ameron International Corp. (Sable), the Supreme Court of Canada (SCC) unanimously affirmed the critical importance of settlement privilege and confirmed that the privilege's scope applies to "settlement negotiations and their fruits." The SCC clarified previously mixed authority in Canada and confirmed that settlement privilege extends to the content of both successful and unsuccessful negotiations and also protects not just the subject of negotiations, but also the ultimate settlement amount in the case of a successful negotiation.

The SCC indicated that settlement privilege is not absolute and can be pierced when a defendant shows that, on balance, a "competing public interest outweighs the public interest in encouraging settlement." Those circumstances may include allegations of misrepresentation, fraud or undue influence and serving as a settlement agreement. Those exceptions are generally rare and limited in applications with the court favouring a more broad level of protection from disclosure in Canada.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.