Date: 20001206
Docket: T-992-92
OTTAWA, ONTARIO, WEDNESDAY, THE 6TH DAY OF DECEMBER, 2000
PRESENT: THE HONOURABLE EDMOND P. BLANCHARD
BETWEEN:
ALMECON INDUSTRIES LIMITED,
Plaintiff
- and -
ANCHORTEK LTD
Defendant
REASONS FOR ORDER AND ORDER
[1] The defendant Anchortek has brought a motion pursuant to Rule 227 of the Federal Court Rules, 1998, SOR/98-106.
[2] By way of this motion, Anchortek is seeking an order compelling the plaintiff to serve and file an accurate and complete supplementary affidavit of documents, listing in Schedule I thereto all documents in the plaintiff's possession, power and control that are relevant to the most recent amendments to the Further Amended Statement of Claim of Defence of Anchortek Ltd. and Counterclaim, including, but without limiting the generality of the foregoing, draft versions of the settlement agreement between the plaintiff and Austin Powder Ltd. in Federal Court matter T-609-96, related correspondence or other communications, internal memorandum or other notes, etc.
[3] Moreover, Anchortek is seeking an order compelling the plaintiff to serve and file an accurate and complete supplementary affidavit of documents, listing in Schedule I thereto all documents in the plaintiff's possession, power and control that are relevant to the most recent amendments to the Further Amended Statement of Claim of Defence of Anchortek Ltd. and Counterclaim, including, but without limiting the generality of the foregoing, draft versions of the settlement agreement between the plaintiff and Western Explosives Ltd., related correspondence or other communications, internal memorandum or other notes, etc.
Position of the defendant, Anchortek
[4] Essentially, counsel for the defendant argued that:
| (a) Pursuant to Rule 223, a party must list in its affidavit of documents all relevant documents in its possession, power or control. |
| (b) The documents requested are directly relevant to Anchortek's allegation that the plaintiff has made misleading statements contrary to section 7(a) of the Trade Marks Act. |
(c) The documents are relevant to Anchortek's claim for punitive damages.
| (d) Despite the privilege rule applicable to settlement negotiations, such exclusionary rule does not apply in the case at bar. |
[5] In addition, counsel for defendant, Anchortek, argued that the plaintiff did rely on the false and misleading allegation that Anchortek's Energy Plug infringes the `134 patent, and the threat of a legal action with respect thereto, to secure an unlawful and improper agreement from Austin Powder. Moreover, counsel for the defendant argued that such conduct has harmed Anchortek's sales of "non-impugned" plugs which they have been selling since 1996. However, in order to prove such allegations, counsel for the defendant submitted that he will need all draft versions of the settlement agreement between the plaintiff and Austin Powder Ltd. in Federal Court matter T-609-96, related correspondence or other communications, internal memorandum or other notes, etc.
[6] Finally, counsel for the defendant, Anchortek submitted that it is not seeking disclosure of the preliminary documents to demonstrate a weakness in the plaintiff's case or to establish the plaintiff's liability for conduct, but to establish the fact that the misleading statement has hurt the sales of the "non-impugned plugs". For those reasons, counsel for the defendant submitted that all preliminary documents that have led to the agreement between the plaintiff Almecon and Austin Powder are not protected by the privilege of exclusion to favour amicable settlement.
Analysis
[7] It is undisputed that an exclusionary rule or privilege applies to protect documents given and prepared by parties in negotiations leading to settlement. As stated in The Law of Evidence in Canada:
| It has long been recognized as a policy interest worth fostering that parties be encouraged to resolve their private disputes without recourse to litigation, or if an action has been commenced, encouraged to effect a compromise without a resort to trial. In furthering these objectives, the courts have protected from disclosure communications, whether written or oral, made with a view to reconciliation or settlement. In the absence of such protection, few parties would initiate settlement negotiations for fear that any concession that they would be prepared to offer could be used to their detriment if no settlement agreement was forthcoming.1 |
[8] Such privilege has been recognized by our Court on numerous occasion, notably by
Cullen J. in Canadian Media Corp. v. Canada:
| The privilege is founded upon the compelling public policy goal of encouraging parties to settle their differences before going to trial. If such communications were not privileged, attempts at settlement would be hampered by the fear that statements made in the spirit of compromise would constitute evidence against them in the form of admissions should negotiations fail and a trial ensue.2 |
[9] The Court has every interest in encouraging parties to resolve their differences by communicating openly and without fear that their statements would subsequently be used against them. This desirable public policy does not extend to situations where parties advance their interests at the expense of another. Nor does the rule operate to shield evidence of misrepresentation or of dishonest dealing. As stated by Hugessen J. in Bertram v. Canada (C.A.) :
| These quotations make it plain in my view that the concern of the Courts is to protect parties from being embarrassed by attempts at concession or compromise or even by confessions of weakness. In short, what parties say against their interest during negotiation is without prejudice in the sense that it cannot subsequently be used against them. The purpose of the rule, however, is not to protect dishonest dealing and there is no policy reason for excluding what one party puts forward in its own interest and to the prejudice of the other. (...) Once there is a prima facie indication of such an attempt to mislead, as there clearly is in the present record, questions designed to elicit information and admissions about such attempt and the circumstances surrounding it are admissible.3 |
[10] The Bertram case is highly pertinent to establish the threshold necessary to be met by the defendant Anchortek for the privilege to be waived. However, I must distinguish the present case from the Bertram decision, the facts in that case were quite different. As stated by Hugessen J.:
| In the present case, and bearing in mind that the meeting in question took place in the context of a self-assessing tax system where the taxpayer has an obligation to make full and open disclosure to the taxing authorities and where it is common for taxpayers and their advisers to meet with the latter with a view to attempting to persuade them that no, or no greater, tax is due, I would require much clearer evidence than exists in this record to persuade me that a meeting qualifies as a settlement negotiation so as to shield everything that takes place from subsequent use by either side.4 |
[11] In Bertram, the defendant purposely altered a brochure to remove any reference to condominium conversion, an act that went to the very heart of the issue before the Tax Court. The Appeal Court found on the facts that there was a prima facie indication of an attempt to mislead, and waived privilege.
[12] In the case at bar, the facts are quite different, the plaintiff Almecon and Austin Powder were engaged in a lawsuit, and the evidence before the Court suggests that the parties were also engaged in a genuine negotiation with the view of settlement. In the context of business relationships, it is expected that parties conduct hard negotiations in order to obtain the most favourable conditions. It is quite normal that Almecon pursued its interests and negotiated favourable conditions before reaching an agreement.
[13] The test, before excluding evidence is the one stated by Hugessen J. in Bertram:
| Before excluding relevant evidence and preventing either party from invoking it a court must be entirely satisfied that the purpose of the meeting was in fact an honest mutual attempt to negotiate a settlement and not something else. Where the purpose of the meeting is ambiguous or multiple, or where the notion of settlement or compromise only arises incidently or casually, the whole of the meeting is not protected. A party cannot keep to itself its view that the meeting is intended to negotiate a compromise; the intention must be common to both participants.5 |
[14] Despite the ably articulated submissions by counsel for the defendant, I must come to the conclusion that privilege applies. Having reviewed the file and having heard counsel's submissions, I am satisfied that the purpose of the settlement between the plaintiff, Almecon and Austin Powder was an honest mutual attempt to negotiate a settlement.
[15] I have no evidence before me to suggest that the plaintiff, at the time of negotiating the settlement with Austin, had anything but an honest belief that there was a patent infringement. I am, therefore, convinced that the settlement was not based upon a misleading statement but based on two parties conducting hard negotiations and coming to a mutually acceptable settlement agreement.
[16] Finally, having analysed the arguments presented before me, I conclude that counsel for the defendant has not made a prima facie case that would permit the Court to allow an exception to the privilege claimed by the plaintiff.
[17] For the above reasons, the motion is denied on both issues, namely, the documents requested in regards to the Austin Powder settlement agreement and documents requested in regards to the purported Western Explosives Ltd. agreement.
ORDER
THIS COURT ORDERS that:
| 1. The motion is denied. |
| 2. Costs in the cause. |
Judge
__________________1 John Sopinka, Sidney N. Lederman, Q.C. & Alan W. Bryant, The Law of Evidence in Canada (Toronto and Vancouver, Butterworths, 1992), at p. 719.
2 (1991), 48 F.T.R. 68 (F.C.T.D.), at p. 71.
3 Bertram v. M.N.R. (1995), 191 N.R. 218, at p. 226.
4 Id. at p. 223.
5 Ibid.