B.C. – settlement privilege applies to arbitration and justifies refusal of access to information request – #356

In White Rock (City) (Re), 2020 BCIPC 25, Ian C. Davis, Adjudicator with the B.C. Information and Privacy Commissioner, held that common law settlement privilege applied to access to information requests, despite omission to include express mention of that privilege as a ground to resist disclosure, and that the privilege applied to arbitration.  Dismissing argument that arbitration was not a “litigious dispute”, Adjudicator Davis also held that settlement privilege is jointly held between parties to settlement negotiations and concluded that procedural fairness required that he consider the other arbitral party’s submissions on settlement privilege even if that other arbitral party was not a party to the access request.

In response to a request by Applicant, the City of White Rock (“City”) withheld access to records relating to negotiations between it and EPCOR Utilities Inc. (“EPCOR”) under provisions of the B.C.’s Freedom of Information and Protection of Privacy Act, RSBC 1996, c 165 (“FIPPA”).  Despite mediation between Applicant and the City, access was not resolved and Applicant sought an inquiry.

EPCOR owned and operated a water utility serving the City.  In 2013, EPCOR and the City began negotiations for the City’s acquisition of the utility.  To do so, the City retained a law firm (“Firm A”) to act on its behalf in the negotiations with EPCOR.

The City and EPCOR entered into a “Two-Way Confidentiality Agreement” (“Confidentiality Agreement”) by which each mutually agree to keep “in strictest confidence” information shared between them in their negotiations.

The City did purchase the utility from EPCOR by way of August 8, 2015 asset purchase agreement (“Purchase Agreement”), the terms of which included an agreement to arbitrate post-closing any disputes on “fair market value” (“FMV”).  See para. 11 for more details.

Following payment of $14,000,000.00, the City and EPCOR did not agree on FMV and began preparations for arbitration. They agreed on an arbitrator and discussed dates for arbitration.  At the time Applicant made his February 2, 2017 request for access, the City and EPCOR were still negotiating.

Copies of all records of the Mayor, Council, City Staff and Agents and/or Service Providers to the City of White Rock related to the City’s water utility purchase negotiations with EPCOR and/or EPCOR’s Agents and Service Providers, and/or other third parties, subsequent to the Asset Purchase Agreement dated August 28, 2015”.

On September 29, 2017, the City and EPCOR executed a settlement agreement and mutual release (“Settlement and Release”), resolving the FMV dispute, which included a confidentiality clause covering all but the final purchase price confidential.

The City invoked four (4) broad grounds to resist access to records: (i) solicitor-client privilege – section 14 of the FIPPA; (ii) common law settlement privilege; (iii) third-party business interests – section 21 of the FIPPA; and, (iv) third-party personal privacy – section 22 of the FIPPA.

To see how Adjudicator Davis set out the scope/nature of the ground to justify non-access, set out the City’s and Applicant’s respective positions, categorized and described sets of records and made specific determinations, see paras 17-54 for (i) solicitor-client privilege, paras 81-88 for (iii) third-party business interest and paras 89-106 for (iv) third-party personal privacy.

Solicitor-client privilege – At paras 55-80, Adjudicator Davis determined the City’s reliance of common law settlement privilege to resist access to specific records.

Referring to Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2008 BCSC 442, Adjudicator Davis stated the following test to establish solicitor-client privilege:

a) A litigious dispute must be in existence or within contemplation;

b) The communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and

c) The purpose of the communication must be to attempt to effect a settlement”.

Applicant disputed the application of the privilege.  He argued that the City and EPCOR were only negotiating and that the dispute was not litigious because they had agreed to an alternative dispute resolution process rather than relying on the courts.

Adjudicator Davis observed that FIPPA does not list settlement privilege as an exception to an access request but that Richmond (City) v. Campbell, 2017 BCSC 331 held FIPPA does not expressly abrogate the privilege and public bodies subject to FIPPA may invoke the privilege to resist access.

Submissions by EPCOR as third-party to inquiry – In his analysis, Adjudicator Davis paused to flag the submissions of EPCOR as an ostensible third-party to the inquiry between Applicant and the City.  He noted that the privilege is “jointly held” and therefore belonged to both the City and EPCOR.

[61] Before turning to an analysis of the records, I note that the OIPC registrar of inquiries invited EPCOR to make written submissions only on ss. 21 and 22 of FIPPA. Although EPCOR was not invited to make submissions on settlement privilege, it did so, and I have considered them. Settlement privilege is jointly held between parties to settlement negotiations. Therefore, if settlement privilege applies at all in this case, it belongs to the City and EPCOR jointly. The issue of settlement privilege directly affects EPCOR’s legal rights. For this reason, I conclude procedural fairness requires that I consider EPCOR’s submissions on settlement privilege, and I have”.

Part one of test for settlement privilege – Adjudicator Davis dismissed Applicant’s argument that settlement privilege did not arise in regard to arbitration.  Citing Nova Scotia Teachers Union v. Nova Scotia (Attorney General), 2019 NSSC 175, aff’d Nova Scotia (Attorney General) v. Nova Scotia Teachers Union, 2020 NSCA 17, he determined that arbitration qualifies as litigious:

[64] I disagree with the applicant that the “litigious dispute” requirement for settlement privilege is limited to disputes to be litigated in court. The rationale for settlement privilege applies equally to matters to be resolved by arbitration. Parties to a dispute are not likely to make the compromises required to reach settlement if they know that those compromises may later be used against them in arbitration. For this reason, courts have recognized that settlement privilege applies to matters to be resolved before “any adjudicative body or third-party decision maker.

Though settlement privilege does not apply where parties are simply negotiating terms of a commercial contract, the privilege can arise when the parties are in a dispute prior to commencing legal proceedings.  See Langley (Township) v. Witschel, 2015 BCSC 123 paras 34-40, applying Belanger v. Gilbert, 1984 CanLII 355 (BC CA), Maillet v. Thomas Corner Mini Mart & Deli Inc., 2017 BCSC 214 paras 1-17 and Jeffrie v. Hendriksen, 2012 NSSC 335 paras 37-39.

Examining the records in issue, Adjudicator Davis held that “on the very specific facts of this case” those records revealed that the City and EPCOR were in a litigious dispute.  See para. 67. 

Part two of test for settlement privilege – Adjudicator Davis determined that the City and EPCOR had intended that their exchanges would not be disclosed to the arbitrator.  He dismissed Applicant’s argument that the records would have been disclosed in court or before the arbitrator.  He looked to the context and substance of the exchanges and not the labels given to them.

[69] I accept that the disputed communications were made with the intention that they would not be disclosed to the arbitrator. The context and the substance of the communications, not a label that they are “without prejudice”, are the deciding factors. The context was that the City and EPCOR knew they would be required to go to arbitration if their negotiations failed. I am satisfied by this context and the content of the records themselves that the City and EPCOR intended their post-closing communications and information-sharing to be without prejudice. In particular, I am satisfied by the substance of the records that the parties intended, at least for the purposes of post-closing negotiations, that their expert valuation reports were to be shared on a without prejudice basis”.

Part three of test for settlement privilege – Applicant challenged the City’s claim that the purpose of the exchanges was to settle a dispute over valuation.  He argued that the Settlement Agreement dealt with liability and not valuation and therefore the true dispute was liability.

Adjudicator Davis disagreed with that interpretation of the Settlement Agreement. “The main effect of the Settlement Agreement was that the City and EPCOR would release each other of any claims related to the arbitration, the purchase price, or the Purchase Agreement in consideration for EPCOR paying the City the difference between $14,000,000 and the fair market value of the water utility”. He added that the fact that the Settlement Agreement also addresses liability by way of including a mutual release of claims does not eliminate the fact that it also resolves the valuation dispute.

Based on the above determinations regarding the role of settlement privilege in the context of an agreement to arbitrate FMV and related negotiations, Adjudicator Davis determined that the City was not authorized or required under that privilege to grant access to the records covered by that privilege. See para. 108 for that determination and others raised by the inquiry.

urbitral note – First, in Richmond (City) v. Campbell, 2017 BCSC 331 referred to by Adjudicator Davis, the following passages speak to the importance of settlement privilege:

[71] As discussed in para. 38 of [Liquor Control Board of Ontario v. Magnotta Winery Corporation, 2010 ONCA 681], settlement privilege is a fundamental common law privilege, and it ought not to be taken as having been abrogated absent clear and explicit statutory language. There is an overriding public interest in settlement. It would be unreasonable and unjust to deprive government litigants, and litigants with claims against government or subject to claims by government, of the settlement privilege available to all other litigants. It would discourage third parties from engaging in meaningful settlement negotiations with government institutions.

[72] FIPPA does not contain express language that would abrogate settlement privilege and, accordingly, it should not be interpreted to have done so”.

Second, in Nova Scotia Teachers Union v. Nova Scotia (Attorney General), 2019 NSSC 175 referred to by Adjudicator Davis, two (2) paras explain how settlement privilege applies beyond court litigation:

[40] The requirement for litigation or contemplated litigation suggests that the privilege does not apply in circumstances where for example parties are negotiating a standard commercial transaction, with no thought to litigation. The concept has been broadened however beyond formal litigation commenced or to be commenced in court. Litigation as such is not required and the privilege can apply in the context of settling other disputes. Examples might include matters being heard or potentially heard by a labour relations board, a human rights tribunal, a professional regulatory tribunal, or any number of other administrative tribunals in which parties appear for the purpose of resolving disputes. Parties in the labour relations context often seek to achieve the settlement of labour board or collective agreement arbitration matters through without prejudice negotiations. Settlement privilege would apply, even though they are not litigious matters, in the sense of being before a court”.

[46] The second feature of settlement privilege is that the communication must have been made with the express or implied intention that it would not be disclosed in court if the negotiations failed. That is not limited to a formal court process. It would include disclosure to any adjudicative body or third-party decision maker. But the purpose of the privilege is to prevent the negotiations from being put before the ultimate decision maker or the body adjudicating the dispute. The negotiations that the privilege protects relate to the settlement of the dispute to be resolved by the body from which those negotiations are privileged. If negotiations failed to reach a collective agreement there was then no court or other adjudicative body from which those negotiations were intended to be kept, as privileged. Here, the Province is seeking to protect the negotiation of one matter, the collect agreement, from an adjudicator, the court, that is resolving an entirely different matter, the Charter litigation”.

Third, for similar precedents in other jurisdictions for access to information requests, see Alberta’s University of Alberta (Re), 2018 CanLII 1820 (AB OIPC) para. 30 and P.E.I.’s Prince Edward Island (Department of Justice and Public Safety) (Re), 2020 CanLII 33893 (PE IPC) para. 52.