2024 ONSC 2756
COURT FILE NO.: CV-20-921-0000
DATE: May 14, 2024
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
CANADIAN FLIGHT ACADEMY LTD
Plaintiff/Responding Party
AND:
THE CORPORATION OF THE CITY OF OSHAWA
Defendant/Moving Party
Counsel: A. Formosa, P. Wallner, and C. Chaloux for the Defendant/Moving Party R. Huang and A. Wong for the Plaintiff/Responding Party
BEFORE: wOODLEY, J.
ADMISSIBILITY OF “WITH PREJUDICE” SETTLEMENT OFFER
Overview
[1] By this action the Canadian Flight Academy Ltd (CFA) seeks declaratory relief relating to their continued occupation of certain leased property located at the Oshawa Airport and/or CFA’s right to receive compensation for leasehold improvements in the event the lease is determined terminated.
[2] During the litigation, and on August 28, 2023, CFA served a “With Prejudice” offer upon the City of Oshawa “in order to avoid the costs and expenses associated with the trial”.
[3] The settlement offer details the proposal for the detangling of the business relationship between CFA and the City and in particular provides as follows:
a. The City will purchase CFA’s leasehold improvement for the amount of $5.2 Million plus HST on a certain payment schedule;
b. The City will pay CFA’s relocation costs fixed at $200,000 plus HST;
c. CFA will vacate the leased lands and transfer the ownership of the leasehold improvements to the City on December 31, 2025;
d. The City will not restrict CFA’s business on the lands;
e. The City will not require CFA to pay “landing fees” that are the subject of a separate application before the Divisional Court;
f. The parties will exchange mutual full and final releases including a release by CFA to recover any overpayment of rent, building permit fees, and development charges;
g. The parties will bear their own legal fees with respect to this action and the application before the Divisional Court;
h. There shall be no costs payable in relation to Justice Dawe’s pending costs decision; and
i. The parties will sign a non-disclosure agreement with respect to the settlement and any public disclosure regarding the settlement or litigation shall be approved by both parties.
[4] The offer is available for acceptance until it is withdrawn in writing. The offer has not been withdrawn and no response to CFA’s offer has ever been provided by the City of Oshawa.
[5] The City of Oshawa objects to the introduction of the “With Prejudice” offer at trial on the basis that the communication contains settlement privileged information and/or the communication is irrelevant to the issues at trial.
ISSUE
[6] Is the Plaintiff entitled to disclose the “With Prejudice” settlement offer during the trial proceeding?
THE LAW AND ANALYSIS
[7] Settlement privilege is an important pillar of the justice system which has long been protected by the courts. It operates to protect communications made during the course of settlement negotiations so that parties can reach a resolution of their dispute knowing what is communicated cannot be used against them and is inadmissible in any court proceedings.
[8] Settlement privilege is based on the overriding public interest in favouring settlements; Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, [2013] 2 S.C.R. 623 and Union Carbide Canada Inc. v. Bombardier Inc., 2014 SCC 35, [2014] 1 S.C.R. 800, at para. 31.
[9] In determining whether the privilege applies such that the communication in issue should be protected from disclosure, the Court of Appeal in Re Hollinger Inc., 2011 ONCA 579, 107 O.R. (3d) 1, at para. 16 set out the following three-part test:
there is a litigious dispute;
the communications were made with the express or implied intention that they would not be disclosed in a legal proceeding in the event negotiations failed; and
the purpose of the communications is to attempt to effect a settlement.
[10] In Bellatrix Exploration Ltd. v. Penn West Petroleum Ltd., 2013 ABCA 10, 542 A.R. 83, the Alberta Court of Appeal stated at paras. 27 and 28:
It is to be remembered that the rationale for the privilege is not limited to the notion that it would be unfair to subsequently prejudice one of the parties by admitting any admissions made during settlement negotiations. The rule is also intended to allow parties to freely and openly discuss the potential for a settlement, and while doing so, the parties should not have to carefully monitor the content of their discussions. As noted by Lord Walker in Unilever plc v. The Procter & Gamble Co. (1999), [2001] 1 All ER 783 at para 35, [2000] 1 WLR 2436 (CA):
The protection of admissions against interest is the most important practical effect of the rule. But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties.
In other words, the rule's protection is not meant to be limited to the prejudice that an admission may have at trial specifically, but on the potential impairment on settlement discussions as an important element of the litigation process generally.
Accordingly, for the rule to operate properly, not only must the ambit of the settlement privilege be broad, but the exceptions to the exclusionary rule must be narrowly construed and only be given effect where another policy objective can be shown to outweigh any impact that may arise to the settlement objective. [Citations omitted.]
[11] As noted by Justice Slatter of the Queens Bench of Alberta in Leonardis v. Leonardis, 2003 ABQB 577, at paras. 5 and 6, there are two important things to note about settlement privilege. The first is that the privilege belongs to both parties, and it cannot be unilaterally waived by either one. Therefore, no party can unilaterally purport to waive privilege and attach such privileged materials to an affidavit or otherwise mention them in court. Secondly, it is the content of the communication that determines if it is privileged not the way it is labelled. If the contents of a communication is in furtherance of settlement and therefore privileged, it makes no difference whether the communication is marked “with prejudice” or “without prejudice”.
[12] The fact that a letter is marked “With Prejudice” does not change its character as a communication in furtherance of settlement. If the letter sets out a proposal for settlement – it is privileged.
[13] Further, failing any specific reference that such offer would be disclosed in the legal proceeding, it is understood and implied that such correspondence would not be disclosed in the proceeding, except in accordance with the Rules.
[14] I reject CFA’s submission that an offer to settle on its own without a response is an exception to the rule regarding settlement privilege. An offer – even one offer – if communicated in furtherance of settlement is sufficient to trigger settlement privilege. As noted, the privilege belongs to both parties and cannot be unilaterally waived by either one.
[15] The fact that an offer has been made but not responded to by the opposing party does not transform the document – if the letter sets out a proposal for settlement – it is privileged.
[16] In the present case, the letter dated August 28, 2023, is very clearly an offer to settle the litigation. As such, the letter is subject to litigation settlement privilege.
[17] Pursuant to Rule 49.06 of the Rules of Civil Procedure, where an offer to settle is not accepted, as in the present case, no communication respecting the offer shall be made to the court at the hearing of the proceeding until all questions of liability and the relief to be granted, other than costs, have been determined.
[18] For these reasons, the August 28, 2023, letter shall not be admitted as evidence at the trial of this matter.