Decision and Reasons: In the Matter of Belteco Holdings Inc. et al.

REASONS FOR DECISION

I. Motion for an Order Staying Proceedings

Peter Arthur Mitchell ("Mitchell"), one of the Respondents in these proceedings, has brought a motion for a declaration that the delivery and filing byCommission staff ("Staff") of without prejudice settlement correspondence between Mitchell and Staff to the Commission and service on the other Respondentsconstituted a breach of Mitchell's settlement privilege and a denial of natural justice and seeks an Order quashing the proceedings as against him.

II. The Facts

1. On March 3, 1997, counsel for Mitchell brought a motion before the Commission (the "March Motion") for a permanent stay of proceedings on the groundsthat Mitchell had been prejudiced because of "inordinate delay". The notice of motion on behalf of Mitchell also alleged that counsel for Staff had made andbreached a "clear and unequivocal undertaking" to provide particulars and on this basis also sought a permanent stay of proceedings.

2. In support of his argument on the March Motion for a stay, counsel for Mitchell filed a privileged letter dated August 26, 1996 (the "August Letter") writtento him by Staff's counsel which was explicitly labelled "without prejudice". The August letter referred to confidential and privileged settlement discussionsbetween Staff and counsel for Mitchell and was relied upon by counsel for Mitchell to support his stay request.

3. In response to this filing, Staff delivered a "Responding Motion Record" and a "Response to Notice of Motion Brought by Mitchell". Both of thesedocuments contained additional correspondence that had been marked "privileged".

4. On the March Motion, the Responding Motion Record and the Response to Notice of Motion Brought by Mitchell were both withdrawn and it is commonground between counsel on this motion that the Commissioners deciding the March Motion had not seen or read either the Responding Motion Record or theResponse to Notice of Motion Brought by Mitchell that had been filed on behalf of Staff, although they had seen and read the August Letter. We have beenadvised that this withdrawal was made on the invitation of the Commission as a voluntary courtesy to the Commission, the Staff expressly reserving its right toargue that the correspondence itself had been properly filed.

5. On this motion, counsel for Mitchell has strenuously argued that the disclosure of privileged communications by Staff, the filing of the privileged material withthe Commission and the serving of the privileged material on other Respondents constituted a breach of Mitchell's settlement privilege and of his right to naturaljustice and that this is so prejudicial to Mitchell that the principles of natural justice require that the proceeding be stayed as against Mitchell.

6. We do not agree.

III. Reasons

7. The August Letter was clearly privileged on its face. It was a letter from Staff to counsel for Mitchell containing reference to confidential settlementdiscussions which Staff intended to be privileged and was, in our view, privileged at law. In our opinion, it was improperly filed by counsel for Mitchell.

8. Counsel for Mitchell made serious allegations against Staff in the March Motion. In our opinion, it was necessary and proper for Staff to file its respondingmaterials to explain the alleged delay and the alleged breach of an undertaking and explain the context in which the August Letter was written.

9. We accept the submission of counsel for Staff that counsel for Mitchell effectively waived any right to claim any settlement negotiation privilege betweencounsel when he filed the August Letter to ground his serious allegations against Staff and he cannot be permitted to complain that Staff filed further privilegedletters to refute on the March Motion the serious allegations that had been made against them.

10. In any event, it is clear from the portions of the transcript of the March Motion filed in this motion that the panel of the Commission hearing the MarchMotion did not see the privileged materials as they were withdrawn by Staff and this was agreed to by counsel on this motion. In our opinion, there was noprejudice to Mitchell from the mere filing of the privileged documents in question with the Commission and serving them on the other Respondents. We notethat the material in question consisted of letters referring to settlement negotiations but did not include the actual proposed settlement agreement. We recognizethat the letters in question are privileged. This is not merely because the words "without prejudice" were included in the letter but because it was the intention ofthe writer of each letter and the contents of the letters themselves that made them privileged as a matter of public policy to encourage the resolution of thedispute before the hearing.⁽¹⁾

11. As was pointed out by the Manitoba Court of Appeal in Bruneau v. 2779928 Manitoba Ltd.⁽²⁾, unconcluded settlement discussions are not admissible asevidence on any of the issues which the parties were intending to resolve but that does not mean that the discussion is not relevant and admissible in other issues.In the present case, had the privileged letters been considered by the Commission, they would have been admissible to refute the serious allegations by counselfor Mitchell against Commission Staff. However, it appears from the evidence that they were not considered by the Commission at the March Motion hearing.We accept the submission of counsel for Staff that, even if the Commission had seen the materials withdrawn by Staff on the March Motion, the appropriateremedy would have been to exclude the inadmissible materials from evidence.

12. The principal case cited by counsel for Mitchell was Wylie v. B.C. Police Commission et al.⁽³⁾ In the Wylie case, the British Columbia Court of Appeal foundthat a police disciplinary tribunal had founded its decision in part on evidence contained in telephone conversations between the police officer and his wife whichhad been intercepted by a legal wire tap. Communications between spouses are privileged as a result of the combined effect of s. 167.16(5) of the CriminalCode and s. 4(3) of the Canada Evidence Act and the British Columbia Court of Appeal found that the action of the police disciplinary tribunal in admitting suchevidence and relying on it in reaching its conclusion that the policeman should be dismissed constituted a breach of natural justice. However, in the present case,the privileged material in question was withdrawn by counsel for Staff before it was considered by the Commission and was not relied upon.

13. In R. v. Power⁽⁴⁾, the Supreme Court of Canada held that a stay of proceedings for abuse of process should only be granted in the clearest of cases which, inthe opinion of L'Heureux-Dubé, J. "amounts to conduct which shocks the conscience of the community and is so detrimental to the proper administration ofjustice that it warrants judicial intervention" and this requires "overwhelming evidence that the proceedings under scrutiny are unfair to the point that they arecontrary to the interest of justice". This test was adopted by the Commission in Re Glendale Securities Inc., Louis Shefsky and Westall Parr⁽⁵⁾. The evidencebefore the Commission in this application falls far short of this test.

IV. Conclusion and Order

14. Accordingly, we find the action of Staff in filing and serving "without prejudice" material in response to the allegations of counsel for Mitchell did notconstitute a breach of Mitchell's settlement privilege or a denial of natural justice and his application for an Order quashing the proceedings against Mitchell isdismissed.

15. Following the hearing of this motion, the panel withdrew to consider its decision. Upon the return to the hearing room to announce our decision with thesereasons to follow, we were met with an application by counsel for Mitchell that the hearing be held in camera. Since the hearing had already been held, wedeclined to grant an Order that the hearing be held in camera and that this decision be sealed. Counsel for Staff took no position with respect to this application.However, we are prepared to grant an Order that the Motion Record, the Written Submissions of Staff and the Book of Authorities filed on behalf of each ofMitchell and Staff in this motion all be sealed until such time as all matters presently in dispute between the Commission and all the Respondents have beenresolved. We believe that the effect of such an Order will be that the "without prejudice" letters that were the subject of this motion will not receive widercirculation than they have already received.

Dated at Toronto, Ontario the 15th day of April, 1997.

"H. M. Meyer" "Stephen N. Adams"

1. See Eccles v. McCannell (1984), 44 C.P.C. 43 at 44-45 (Ont. Div. Ct.) and J. Sopinka, S. N. Lederman and A. W. Bryant, The Law of Evidence in Canada(Toronto: Butterworths, 1992 at 721).

2. [1994] M.J. No. 415 at paras. 10-11 (Q.L.).

3. [1985] 5 W.W.R 326 (B.C.C.A.).

4. [1994] 1 S.C.R. 601 (S.C.C.) at 615.

5. (1996) 19 O.S.C.B. 3874 (O.S.C.) at 3878-3879.