Settlement Privilege, Limitation Periods and the Meaning of Without Prejudice

by Bennett Jones LLP
Contact

In Bellatrix Exploration Ltd. v Penn West Petroleum Ltd., 2013 ABCA 10, the Alberta Court of Appeal explains the key principles of settlement privilege and confirms the important protection this provides. The Court addresses significant issues including the scope of the protection, whether putting the "without prejudice" label on correspondence will on its own turn a document into a privileged one, and if there is any exception to settlement privilege in order to respond to a limitation period defence.

Background

The primary dispute in this case derived from a gas processing plant operated by Penn West, to which Bellatrix sent gas for processing. Bellatrix's predecessor had, in June 2007, asserted to Penn West that adjustments needed to be made to processing fees allocated to Bellatrix. Bellatrix asserted that the requested adjustments would result in a significant repayment to Bellatrix.

Much correspondence was exchanged between the parties, including letters, meetings minutes, and e-mails, with some of it being labeled as "without prejudice". By 2010, the discussions had not resolved the issues to Bellatrix's satisfaction. Bellatrix commenced an action for monies it alleged Penn West owed to it. Penn West defended, and pleaded that portions of Bellatrix's claims were out of time under the Limitations Act.1 In response, Bellatrix pleaded that some of the correspondence between the parties constituted an acknowledgement of Bellatrix's claim and effectively extended the limitation period under the Limitations Act. It is this pleading that gave rise to the Court applications. Penn West argued that the correspondence that Bellatrix relied on as an "acknowledgement" of the claim was protected by settlement privilege and therefore inadmissible for any purpose, including for purposes of establishing an acknowledgement of a claim under the Limitations Act.

Penn West applied for a declaration from the Court of Queen's Bench on what aspects of the correspondence were covered by settlement privilege. A Master of the Court of Queen's Bench ruled the correspondence was indeed privileged, but it was still admissible for the limited purpose of allowing Bellatrix to respond to the limitations defence. An appeal of that decision to a Justice of the Court of Queen's Bench was dismissed. Penn West appealed to the Alberta Court of Appeal, with a corresponding cross-appeal by Bellatrix.

Discussion

Three main types of privilege are solicitor client privilege, litigation privilege and settlement privilege.2 This case deals with settlement privilege, which provides that communications between the parties made in furtherance of settlement are protected and cannot later be used against that party during the litigation.

The generally accepted test for establishing settlement privilege is (a) the existence, or contemplation of a litigious dispute, (b) an express or implied intent that the communication not be disclosed to the Court if the negotiations fail, and (c) the purpose of the communication is to attempt to effect a settlement.

In this case, the Court of Appeal considered the scope of settlement privilege, including the underlying policies for granting the protection, and identified the following key principles:

  • Settlement privilege is premised on the public policy goal of encouraging the settlement of disputes without the need to resort to litigation.
  • The protection afforded by settlement privilege is intended to allow parties to freely discuss and offer terms of settlement in an attempt to reach a compromise.
  • The protection given by settlement privilege ensures that admissions made during the course of settlement negotiations are not admitted into evidence. If it were otherwise, parties would rarely, if ever, enter into settlement negotiations.
  • Communications must contain at least a hint of potential compromise or negotiation in order to trigger the privilege.
  • Communications which are simply an assertion of rights, such as a demand letter, will not fall within the scope of settlement privilege.
  • Once a communication satisfies the test for settlement privilege, the protection is broad in scope. The privilege will include communications that are reasonably connected to the negotiations.
  • Settlement privilege belongs to both parties, and cannot be unilaterally waived by either of them. However, some of the generally recognized exceptions in which one party may unilaterally use otherwise privileged communications are: (a) to prevent double recovery, (b) where the communications are unlawful, such as threats or fraud, (c) to prove that a settlement was reached and its terms, and (d) to examine the "settlement posture of the parties" for the purpose of costs.

On the question of whether putting the "without prejudice" label on correspondence will turn a document into a privileged one, the Court of Appeal explained that:

  • The "without prejudice" label is not determinative.
  • It is the content of a communication – not the "without prejudice" label itself – that determines whether a communication is privileged.
  • Putting the words "without prejudice" on correspondence will not turn a non-privileged document into a privileged one.
  • Likewise, if the document is truly privileged, failing to include the words "without prejudice" will not matter.

In this case, the Court concluded that settlement privilege applied to the bulk of the correspondence between the parties and that an exception to the privilege did not apply. The Court did, however, conclude that two pieces of correspondence, which it described as simply statements of position and provided no hint of compromise, did not fall within the scope of the settlement privilege notwithstanding the "without prejudice" label.

On the question of whether the Court should waive privilege to permit a party to answer a limitations defence, the Court of Appeal concluded that the privilege should not be waived. The Court explained that "[t]o recognize an exception in this case would unnecessarily weaken and undermine the integrity of this important privilege, and other mechanisms, such as a standstill agreement, are available for such purposes."3 The Court concluded that "we do not say that the privilege may never yield for this reason, though any proposed exception to settlement privilege must be justified on the basis that it promotes an alternative policy objective that clearly outweighs the underlying objective of the settlement privilege. There are no exceptional circumstances to justify doing so here."4

In the result, Penn West's appeal was allowed, and the orders of the chambers judge and Master were set aside.

Conclusion

Bellatrix Exploration Ltd. v Penn West Petroleum Ltd. is a welcome decision of the Court of Appeal which confirms the important principles of settlement privilege and the policy reasons for this protection. It also confirms the integrity of settlement discussions and ensures they cannot later be used against a party during litigation absent exceptional circumstances. This case also illustrates that although the "without prejudice" label might be useful as an indication of a party's intention when analyzing communications, the label itself is not determinative of privilege. The "without prejudice" label alone cannot protect a piece of correspondence. Most importantly, this case strongly suggests that, as a best practice, parties ought to avail themselves of mechanisms, such as standstill agreements or tolling agreements, in order to stop the limitation clock in situations where the expiry of a limitation period is a potential issue.

Notes

  1. Limitations Act, RSA 2000, c L-12.
  2. Other generally-accepted types, or classes, of privilege include spousal privilege, the privilege protecting third-person records in criminal cases, the privilege protecting an informant's identity, and public interest immunity (which is not a privilege per se, but has been referred to variously in the past as parliamentary privilege or Crown privilege). The courts also have a limited power to establish "case-by-case" privilege where the circumstances so provide.
  3. Para. 39.
  4. Ibid.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bennett Jones LLP | Attorney Advertising

Written by:

Bennett Jones LLP
Contact
more
less

Bennett Jones LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!