In a unanimous (7-0) decision in Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, the Supreme Court of Canada reinforced the need to protect settlement negotiations from being disclosed and encouraged parties to settle cases rather than proceed to trial.

The Plaintiff, Sable, sued a number of Defendants with respect to its purchase of paint that was allegedly capable of preventing corrosion on Sable's offshore structures and onshore facilities. Among the Defendants were not only suppliers of the paint, but also contractors and applicators who prepared surfaces and applied the paint. The paint allegedly failed to prevent corrosion as promised.

Sable later entered into "Pierringer Agreements", perhaps better known as "Proportionate Share Settlement Agreements", with a number of Defendants prior to trial.

Proportionate Share Settlement Agreements are a useful tool in allowing for pre-trial settlements to occur. Typically, the Plaintiff settles with one or more Defendants ("Settling Defendants") in exchange for being released from the lawsuit.

The Non-Settling Defendants, by the very nature of the Agreement, are pursued by the Plaintiff only for the Non-Settling Defendants' proportionate share of liability (several liability as opposed to joint and several liability). The Settling Defendants are insulated from being brought back into the lawsuit by the Non-Settling Defendants. The Non-Settling Defendants in the Sable case sought disclosure of the amount of the settlements that Sable entered into with the Settling Defendants. Sable refused to provide those settlement figures on the grounds that such amounts were privileged and that the Non-Settling Defendants would not be prejudiced by not having access to those settlement figures.

The Supreme Court of Canada agreed with Sable and endorsed the fact that Courts encourage settlement and settlement privilege protects the efforts of parties attempting to settle their disputes by ensuring that communications made in the course of settlement negotiations are not discoverable. The protection is afforded to settlement negotiations, whether or not a settlement is reached, and that means that successful negotiations are entitled to no less protection than negotiations that yield no settlement.

Based on the fact that the Non-Settling Defendants would only be liable for their several share of liability, and that once liability had been determined at the end of the trial, Sable would disclose to the trial judge the amounts it settled for with the Settling Defendants, Justice Abella, speaking for the Court, found that:

It is therefore not clear to me how knowledge of the settlement amounts materially affects the ability of the Non-Settling Defendants to know and present their case. The Defendants remain fully aware of the claims they must defend themselves against and of the overall amount that Sable is seeking. It is true that knowing the settlement amounts might allow the Defendants to revise their estimate of how much they want to invest in the case but this, it seems to me, does not rise to a sufficient level of importance to displace the public interest in promoting settlements.

Later in her decision, Justice Abella indicated that:

A proper analysis of a claim for an exception to settlement privilege does not simply ask whether the Non-Settling Defendants derive some tactical advantage from disclosure, but whether the reason for disclosure outweighs the policy in favour of promoting settlement. While protecting disclosure of the settlement negotiations and their fruits has the demonstrable benefit of promoting settlement, there is little corresponding harm in denying disclosure of the settlement amounts in this case.

Prior to the decision in Sable, some judges, including judges of the Court of Queen's Bench of Alberta, were inclined to require disclosure of settlement amounts to Non-Settling Defendants. That practice will likely now cease based upon the Supreme Court of Canada decision although counsel will want to be certain, as was the case in Sable, to offer to disclose the settlement amounts to the trial judge at the conclusion of trial.

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