Settlement discussions often require parties to consider compromises they would not accept as a court’s assessment of their rights. In Sable Offshore Energy, the Supreme Court of Canada explained why those discussions receive legal protection.

The dispute concerned allegedly defective paint used on offshore structures and onshore facilities. The plaintiff settled with some defendants while continuing its claims against others. The remaining defendants sought disclosure of the settlement amounts.

The Supreme Court held that the amounts were protected by settlement privilege. This protection encourages parties to negotiate by generally preventing settlement communications from being introduced as evidence.

The Court explained that the protection applies whether negotiations succeed or fail. A completed settlement does not automatically lose protection, and its negotiated amount can remain privileged.

However, settlement privilege is not absolute. An exception may apply where a competing public interest outweighs the public interest in encouraging settlement. In this case, the remaining defendants had not established a sufficient basis to require disclosure of the amounts.

What this could look like in practice

Consider a hypothetical dispute over renovation work. A homeowner claims $40,000, while the contractor disputes responsibility. Both may nevertheless want to avoid the cost, disruption, and uncertainty of continuing the lawsuit.

The homeowner might consider accepting a smaller amount for prompt payment. The contractor might consider paying something to bring the disagreement to an end. Those proposed compromises serve a different purpose from the positions each would ask a judge to accept.

Before making an offer, useful questions include whether the proposal addresses payment timing, any remaining work, releases, legal costs, and what happens if payment is missed. A settlement figure alone may leave important practical questions unanswered.

The takeaway

A productive negotiation begins with a clear understanding of the desired outcome. Decide what must be resolved, what flexibility exists, and which terms need to be recorded. Legal guidance can help parties assess both the protection surrounding their discussions and whether the proposed agreement actually brings the dispute to an end.

The information on this page is provided for general educational purposes only and does not constitute legal advice. These summaries highlight selected principles and do not address every issue or subsequent legal development. The application of any decision depends on the facts and applicable law. Reading this page or contacting our firm does not, by itself, create a lawyer-client relationship. If you have further questions or require advice about your situation, please contact us.