Good News/Bad News: Conrad Black Released from Florida Prison; Denied Leave to Appeal Settlement Privilege Decision

Conrad Black, taken in 2011

Conrad Black has a few options to ponder following his release from a Florida prison today. After recently being granted a temporary resident permit by the Harper government, he may still be deported to the U.K., having renounced his Canadian citizenship more than a decade ago to become a British citizen and accepting a Peerage with the House of Lords.

Lord Black of Crossharbour has enjoyed a run of good fortune in the Canadian legal system, of late: See my guest post over at Inforrm’s Blog: The Supreme Court of Canada: internet defamation, choice of law and libel tourism  discussing Black’s successful appeal in his defamation case at the Supreme Court of Canada.

While, for Black, mostly everything is coming up roses, one thorn in his side is the recent Supreme Court of Canada decision which denied his application  for leave to appeal the Ontario Court of Appeal decision in Black, Hollinger Inc. (Re), 2011 ONCA 579 (CanLII).

In Black, Hollinger Inc. (Re), Lord Black appealed a sealing order redacting the amounts to be paid by the respondents, Torys LLP and KPMG LLP Canada, to the respondent, Hollinger Inc., pursuant to two proposed settlement agreements made in the context of a Companies’ Creditor Arrangement Act (“CCAA”) proceeding, subject to court approval.  The sealing order provided for the immediate full disclosure of all terms of the settlements, other than the amounts to be paid, and details as to the manner of payment in the Torys agreement.  The sealing order further provided that any non-settling party was entitled to access to the redacted information upon signing a confidentiality agreement , only to use the redacted information in the settlement approval proceeding.

Hollinger and two related corporations were granted CCAA protection pursuant to a Commercial List order made in August 2007, appointing a Litigation Trustee to deal with the assets available to Hollinger’s creditors, comprised almost entirely of Hollinger’s claims against former officers, directors and advisors, including Black, Torys and KPMG. Black asserted a claim against Hollinger in the CCAA proceedings, as well as claims for contribution and indemnity against Torys and KPMG relating to several claims asserted against him by Hollinger. Settlement discussions and mediations among the parties ensued, resulting in two settlement agreements requiring court approval.  The draft settlement agreements were circulated to all parties with the settlement amounts to be paid redacted.

The motion judge held that litigation settlement privilege applied to the terms of the two settlement agreements, concluding that the onus to establish that a sealing order protecting the confidentiality of the amounts of the settlements was in the public interest had been satisfied and that the test set out in Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41 (CanLII), [2002] 2 S.C.R. 522 (“Sierra Club”) had been met. The Court of Appeal for Ontario (Goudge, Sharpe and Karakatsanis JJ.A. per curiam) agreed and dismissed the appeal. The appeal panel concluded that the sealing order struck an appropriate balance between the public interest in the promotion of settlements and the public interest in the open court principle:

(i)               the public interest in the promotion of settlements and the protection of settlement privileged information and communications was met by the sealing of the redacted portions of the settlement agreements from the public record; and

(ii)            the public interest in the open court principle was met by the public disclosure of all but the redacted terms of the settlement agreements, and the time-limited nature of the sealing order, lasting only so long as the settlements remain contingent on court approval.

Additionally, the Court of Appeal held that the sealing order struck the appropriate balance between the competing private interests of the parties:

(i)   the settling parties’ interest in maintaining the confidentiality of their privileged information was met by the sealing of the redacted portions of the Settlement Agreements;

(ii)  the interests of all non-settling defendants (including Black) were met by the approval of the confidentiality agreement provision affording them access to the redacted portions of the settlement agreements, thus, enabling them to respond meaningfully to the settlement approval motion.

The Court of Appeal decision in Black, Hollinger Inc. (Re) also includes a helpful summary of the legal test for asserting litigation settlement privilege:

[16]         It is well established that in order to foster the public policy favouring the settlement of litigation, the law will protect from disclosure communications made where;

1)     there is a litigious dispute;

2)     the communication has been made “with the express or implied intention it would not be disclosed in a legal proceeding in the event negotiations failed;” and

3)     the purpose of the communication is to attempt to effect a settlement: see

Bryant, Lederman & Fuerst, The Law of Evidence in Canada, 3d ed. (Markham: LexisNexis, 2009) at p. 1033, § 14.322); Inter-Leasing Inc. v. Ontario (Minister of Finance) (2009), 256 O.A.C. 83 (Div. Ct.).

[17]         We agree with the motion judge that those conditions are met here.  We see no error in the motion judge’s conclusion that “[l]itigation settlement privilege … applies in this case at least until the Court either accepts or rejects the settlement”.  In the context of this case, Hollinger, Torys and KPMG have a legally protected interest in being afforded a zone of confidentiality to shelter the most sensitive aspect of their proposed settlement.

[18]         The sealing order protects litigation settlement privilege and thereby fosters the strong public interest in the settlement of disputes and the avoidance of litigation.  “This policy promotes the interests of litigants generally by saving them the expense of trial of disputed issues, and it reduces the strain upon an already overburdened provincial Court system,” (Kelvin Energy Ltd. v. Lee, 1992 CanLII 38 (SCC), [1992] 3 S.C.R. 235, at p. 259, citing Sparling v. Southam Inc. reflex, (1988), 66 O.R. (2d) 225 (Ont. H.C.), at p. 28 (emphasis added by the Supreme Court)).

[19]         The rationale for litigation settlement privilege is that unless parties have an assurance that their efforts to negotiate a resolution will not be used against them in litigation should they fail to resolve their dispute, they will be reluctant to engage in the settlement process in the first place.  A legal rule that created a disincentive of that nature would run contrary to the public policy favouring settlements.

[20]         We agree with the respondents that litigation settlement privilege constitutes a social value of super-ordinate importance capable of justifying a sealing order that limits the open court principle.

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One Response to “Good News/Bad News: Conrad Black Released from Florida Prison; Denied Leave to Appeal Settlement Privilege Decision”

  1. URL Says:

    Yeah bookmaking this wasn’t a bad decision great post!

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