When Mediation and Arbitration Are Not Really Confidential or Private

In most cases, privacy and confidentiality are recognized as important benefits of mediation and arbitration, but they are not unconditional.

In a recent family law case, the Supreme Court of Canada has again reminded us that there are limitations to the confidential nature of mediation. In particular, mediation communications may be disclosed to prove the existence and terms of a mediated settlement.

Association de médiation familiale du Québec v. Bouvier, 2021 SCC 54, involved a dispute between former spouses over a number of separation, child custody and support issues. In Quebec, the provincial government makes mediation widely available to married, civil union and common law couples. Costs are subsidized and the mediations are conducted by certified mediators.

In this case, Isabelle Bisaillon and Michel Bouvier participated in several family mediation sessions with a certified mediator to resolve disputes about their children’s care, support, the family home and other matters. At the end of the process, the mediator prepared a document known as a “summary of mediated agreements” that explained how the parties had agreed to settle these matters.

Ms. Bisaillon later made a claim in Quebec’s Superior Court for more money than set out in the summary. Mr. Bouvier relied on the terms agreed to during mediation and set out in the summary. Ms. Bisaillon denied the existence of a contract and objected to the summary being admitted in evidence. She said the summary was protected by a rule of absolute confidentiality.

The Superior Court rejected that argument and held that mediation confidentiality is not absolute. It relied on the 2014 decision of the Supreme Court of Canada in Union Carbide Canada Inc. v. Bombardier Inc. which acknowledged the confidentiality of the mediation process, but recognized a “settlement exception”. Although Union Carbide was a commercial mediation case, the Quebec Court said the same principles apply to family mediation.

The implication, I think, is that the same exception would apply in any area of mediation, unless there were over-riding circumstances.

Ms. Bisaillon’s appeal to the Quebec Court of Appeal was not successful. She did not appeal further, but the Association de médiation familiale du Québec obtained leave to appeal to the Supreme Court of Canada in order to clarify the issues around mediation confidentiality.

The Association argued that discussions during family mediation and the summary of mediated agreements prepared by a mediator should have absolute confidentiality. This is necessary for such a process to function fairly and effectively. Without confidentiality, mediation would entail risks for vulnerable spouses.

Justice Nicholas Kasirer, writing for the majority in the Supreme Court, recognized that there are unique aspects to family law mediation. The issues in dispute are critically important to the family members and, unlike most commercial or other civil disputes, they are often highly charged. He also recognized the unique aspects of the Quebec family mediation process, where lawyers are not involved in the mediation. Although the process results in a written summary prepared by the mediator, it is not usually signed by the parties. It is not a binding contract. The parties are encouraged to seek independent legal advice after the mediation before formalizing an agreement. They may agree to the mediated terms, or agree to change those terms if they wish.

In this case, the trial judge found that the parties had expressed their intention in communications after the mediation to be bound by the terms in the mediator’s summary. Therefore, evidence regarding communications both during and after the mediation was admissible in order to prove what those terms were.

The Supreme Court agreed that the principle in Union Carbide, that there is an exception to mediation confidentiality to the extent necessary to establish the existence and terms of a mediated agreement, also applies in this situation.

Another decision from 2021 highlights some of the issues relating to confidentiality of settlement agreements and arbitration proceedings.

Stewart v Stewart, 2021 BCSC 1212, involved a long-running dispute among siblings and a group of family businesses they controlled. The parties entered into a settlement agreement, involving the sale of various assets and distribution of money and property to the family members, but further disputes arose over the implementation of the agreement. Certain valuation issues were submitted to arbitration which was ongoing at the time of the court application to enforce the settlement.

As the Court noted, “a large volume of private, sensitive, financial information and documents were provided by the defendants during the arbitration, in addition to the information and documents previously provided.”

The defendants sought a sealing order from the court to preserve the confidentiality of that information. The BC court had already issued two sealing orders in connection with previous litigation which led to the settlement and the arbitration. The Court had to decide whether information disclosed in the arbitration was confidential by virtue of the arbitration process, and whether a further sealing order should be made.

Rule 27 of the Domestic Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre, which applied to the arbitration in question, expressly protects the confidentiality of the arbitration. It says:

(1) Unless:
(a) otherwise agreed by the parties,
(b) required by law, or
(c) necessary to enforce or challenge an award,
all hearings, meetings, evidence, documents (produced or exchanged), Awards and communications shall be private and confidential as between the parties, the arbitration tribunal and the Centre.

The Court applied the test for confidentiality orders set out by the Supreme Court of Canada in Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, and concluded that the information sought to be protected was confidential and commercially sensitive. Disclosure would harm the business and financial interests of the parties involved. Most significantly, from an arbitration perspective, the Court stated at [129]:

In the terms of the Sierra Club test, the disclosure of this information would be likely to undermine the public policy in this jurisdiction of encouraging arbitrations by defeating the parties’ reasonable expectations of privacy in an on-going arbitration.

The Court granted the requested sealing order.

It seems ironic that, in these and other cases where the parties end up in court despite agreeing to mediate or arbitrate their disputes, it is the very fact of going to court that threatens the privacy and confidentiality of the process.

While this may be necessary to protect a party’s interests, the court must balance the “open court” principle against the desire of the parties to keep their dispute private. And it must balance the confidentiality of the mediation and arbitration process against the principles of fairness and equity which require that the court (or private adjudicator) have all of the relevant information needed to enforce a settlement or award.

Parties and counsel must recognize these principles when considering the benefits and limitations of mediation and arbitration confidentiality. And maybe they should give more thought up front as to how to protect their privacy and confidentiality if the process doesn’t go they way they may have hoped.