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By Tony Poland, LegalMatters Staff • Mediation sessions come with the expectation of confidentiality but a recent judgment shows there are exceptions to the rule, says Toronto-area employment lawyer and mediator Stuart Rudner.
“I often use the analogy, ‘What happens in Vegas, stays in Vegas’ when I welcome the parties to mediation. ” says Rudner, founder and principal at Rudner Law. “However, while what occurs during these sessions is confidential, it is not 100 per cent confidential. There are a couple of exceptions that people should be aware of and if you want to plug those holes, so to speak, you need to ensure that the mediation agreement covers them.”
He points to the Ontario Superior Court decision in Karolidis v. Orthotic Holdings Inc. where Justice William S. Chalmers considered an offer made at mediation when making his costs award.
Many costs could have been avoided
In his ruling, Chalmers states “many of the costs incurred by the Plaintiff could have been avoided if the Defendant had taken a reasonable approach with respect to the settlement of the action.”
“The Plaintiff delivered an offer to settle on March 25, 2021. The Defendant did not accept this offer until 7½ months later and on the eve of the summary judgment motion. After the Plaintiff served his offer, the Defendant did not engage in meaningful settlement negotiations. The Defendant’s lead counsel did not attend the mediation and there were no reasonable offers made by the Defendant on the mediation,” he writes. “In fact, the offer made at mediation was less than the amount offered at the time of termination. Given the fact that the Defendant ultimately accepted the Plaintiff’s offer, it is reasonable to assume that if the Defendant had attended the mediation in a good faith attempt to settle the action, a settlement would have been reached before the parties were required to incur the cost of preparing for the summary judgment motion.”
Rudner tells LegalMattersCanada.ca the decision caught a few lawyers and mediators by surprise.
“I am on the Alternative Dispute Resolution section executive of the Ontario Bar Association and there was a lively debate on this judgment,” he says. “Half of the mediators said there is no danger while the others argued this could be the beginning of the end of confidentiality in mediation. According to some, anything that happens in mediation is supposed to be confidential. If we now have a pre-trial judge asking about what happened, they are infringing upon that confidentiality and basically deteriorating it.
‘Very limited and established examption’
“However, the reality in this case is that this was a very limited and established ‘exception’ to the confidentiality of mediation.”
Rudner explains that while the Rules of Civil Procedure states that all communications at mediation are deemed to be without prejudice, there is a significant difference between what is “without prejudice” and inadmissible.
Offers to settle made during litigation are not to be referenced during a trial since they are inadmissible as evidence when determining liability, he says. However, previous offers are used when assessing costs. The same principle applies to offers made at mediation.
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Rudner says knowing mediation is confidential allows parties to be comfortable and can lead to more candid discussions.
“It enables me to be a more effective mediator as we seek a resolution that everyone can accept,” he says.
There are some mediators who agree that it can be helpful for a pre-trial judge to know what the previous discussions or negotiations have been, so they can help parties settle, says Rudner.
“There’s a practical reason why a judge would ask for it but for some mediators, that’s a problem,” he says.
Rudner says asking for background in a mediation makes sense.
Not an unreasonable request
“When I am acting as a mediator one of the first things I ask is, ‘What have the negotiations been to date?’ It shouldn’t be surprising that a pre-trial judge would ask the same question,” he says. “It absolutely speeds up the process so I don’t think it is an unreasonable request.
Pre-trial judges should be entitled to that information because it makes practical sense. However, it shouldn’t mean that what happened in mediation would then be able to be disclosed in other contexts.”
Rudner says “you don’t want to weaken your position at mediation.”
“For example, say your client was prepared to compromise substantially in order to settle the case but their position has since hardened,” he says. “You may not want the pre-trial judge to know that because it might jeopardize your negotiating position.”
Preparation is vital, Rudner says.
“Part of preparing for pre-trial is turning your mind to the fact that you might be asked what happened at mediation. You have to decide whether you are prepared to reveal that information,” he says.
‘People often minimize the importance of the mediation agreement’
Rudner says “people often minimize the importance of the mediation agreement or don’t bother to read it.”
“This is a reminder that it is important to consider what is in there. If you are really concerned about what information needs to be protected, pay attention to the mediation agreement,” he says.
It is also essential to manage client expectations, Rudner says.
“The overriding message here is that everything that happened in mediation is confidential, with a few exceptions,” he says. “You may want to take the extra minute to explain to the client that if you make an offer, it might be referenced for the purposes of costs assessment after the trial.
“Otherwise, your client may be unhappy if they end up being penalized in a costs award due to an offer made at mediation when they thought that nothing that happened at mediation could be used against them,” Rudner adds.
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