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Civil Litigation Dicta - Disability - Settlement. S.E.C. v. M.P.
In S.E.C. v. M.P. (Ont CA, 2023) the Court of Appeal considers the open court doctrine contrasted with the inherent confidentiality of solicitor-client privilege, here where R7.08 requires a solicitor's affidavit for a judge to approve a litigation settlement for a person under disability. I think these quotes are key for anyone considering a R7.08 motion::(c) Solicitor-client privilege is an important public interest, but it is not at risk in these appeals
[84] Third and finally, the appellants argue that the public interest prong of the Sherman test is met by the intrusion of r. 7.08 motion records on solicitor-client privilege. The appellants argue that solicitor-client privilege is a principle of fundamental justice and a substantive right that warrants public protection, even where it interferes with the open court principle. They cite, for example, the decision in Law Society of Ontario v. Gupta, 2022 ONLSTH 14, where the Law Society Hearing Division Panel held that the “confidentiality of client information, and client identity, in the context of lawyer-client relationship” constituted an important public interest. The Panel added: “Notably, the Rules of Professional Conduct require maintenance of client confidentiality. Client confidentiality yields to professional regulation but must still be protected in regulatory proceedings in the public interest. Clients should not unnecessarily suffer loss of confidentiality in aid of professional accountability”: at para. 112.
[85] Neither motion judge in these appeals directly addressed the argument that a sealing order was warranted on the basis of solicitor-client privilege. It is unclear if that argument was put to either motion judge, but I note that neither factum on appeal addresses specific, privileged information disclosed as a result of the r. 7.08 motion records. Rather, the argument appears to be a general one with respect to the requirement that an affidavit from plaintiff’s counsel form part of the r. 7.08 motion materials.
[86] There is no question that solicitor-client privilege represents a fundamental right that is in the public interest to protect: Alberta (Information and Privacy Commissioner) v. University of Calgary, 2016 SCC 53, [2016] 2 S.C.R. 555, at para. 34. Because of this, it is clear that as a general principle, solicitor-client privilege constitutes an important public interest under the Sherman test.
[87] There is a question, however, as to whether the protection of that privilege is at serious risk because of the open court principle in the context of r. 7.08 motions. I would conclude that it is not.
[88] Pursuant to the Solicitors Act, in a motion under r. 7.08, the court must be satisfied that the CFA is fair and reasonable: s. 24. The fairness requirement “is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed”: Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, 294 O.A.C. 333, at para. 20, quoting Raphael Partners v. Lam (2002), 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417 (C.A.), at para. 30. Reasonableness is determined by assessing: the time expended by the solicitor; the legal complexity of the matter at issue; the results achieved; and the risk assumed by the solicitor: Henricks-Hunter, at para. 22. Confirming reasonableness and fairness does not require infringing solicitor-client privilege such that public access to the r. 7.08 motion record always jeopardizes an important public interest.
[89] In Descôteaux v. Mierzwinski, 1982 CanLII 22 (SCC), [1982] 1 S.C.R. 860, at p. 875, the Supreme Court established the following principles that are applicable when determining whether there is an attempt to interfere with solicitor client privilege:1. The confidentiality of communications between solicitor and client may be raised in any circumstances where such communications are likely to be disclosed without the client’s consent.
2. Unless the law provides otherwise, when and to the extent that the legitimate exercise of a right would interfere with another person’s right to have his communications with his lawyer kept confidential, the resulting conflict should be resolved in favour of protecting the confidentially.
3. When the law gives someone the authority to do something which, in the circumstances of the case, might interfere with that confidentiality, the decision to do so and the choice of means of exercising that authority should be determined with a view to not interfering with it except to the extent absolutely necessary in order to achieve the ends sought by the enabling legislation.
4. Acts providing otherwise in situations under paragraph 2 and enabling legislation referred to in paragraph 3 must be interpreted restrictively. [90] In Burns Estate v. Falloon, 2007 CanLII 38558 (Ont. S.C.), Pierce J. commented on the tension between r. 7.08 and solicitor-client privilege:[19] The court relies on counsel to adequately describe an infant settlement. It may refuse to approve a settlement because of insufficient evidence. While local practice has developed such that defence counsel is not usually concerned with the particulars of the infant settlement, nonetheless the clear wording of the rule requires service of the entire motion record on opposing counsel.
[20] An infant settlement represents a unique incursion on solicitor-client privilege.…
[21] In this case there is limited encroachment on the solicitor and client privilege in order to meet the policy concern of protection of infants. Interference with that privilege is circumscribed and occurs when the case has been settled. It does not form part of the discovery process and does not, at the end of the case, prejudice the prosecution or defence of an action. Disclosure is limited to the extent necessary to approve the settlement and does not open to view the rest of the client’s communications with her solicitor. Thus, service of documents required by Rule 7.08(4) must be a true copy. [Emphasis added.] [91] It is worth noting that in Burns Estate, Pierce J. found a sealing order was not warranted. While Pierce J. characterized r. 7.08 as an “incursion” into solicitor-client privilege, I would adopt the caveat on this statement offered by Corthorn J. in Boone v. Kyeremanteng, 2020 ONSC 198.
[92] In Boone, at para. 21, Corthorn J. stated, “I find that the disclosure of privileged information is neither mandated nor inevitable on a motion or an application for court approval of a settlement.” Corthorn J. came to this conclusion in dismissing a constitutional challenge to r. 7.08 on the basis that it lacked a factual foundation. Reflecting specifically on Pierce J.’s comment in Burns Estate, she clarified that r. 7.08 may require an incursion into solicitor-client privilege, but there is nothing in the rule itself requiring it: at paras. 55-64. Rather, what the rule requires is full and frank disclosure of the merits of a settlement. I agree.
[93] In her decision in Rivera v. Leblond, (2007), 44 C.P.C. (6th) 180 (Ont. S.C.), Thorburn J. (as she then was) discussed the type of evidence required to meet the requirement of full and frank disclosure:[23] Rule 7.08(4) and the obligations of the court pursuant to its parens patriae jurisdiction require a party seeking approval to submit sufficient evidence to make a meaningful assessment of the reasonability of the proposed settlement of the claims of a person under a disability.
[24] This is a serious and substantial requirement which cannot be satisfied by the provision of conclusory statements. It requires full disclosure of evidence regarding the material issues. Where there is a conflict in the evidence the conflicting evidence must be disclosed to the court. [94] The evidence required depends on the facts of the case but generally, the moving party must show on the evidence in the record that:a) An appropriate investigation with respect to both liability and damages has been completed;
b) An appropriate assessment of liability issues has been made;
c) An appropriate assessment of damages issues has been made; and
d) The fees and disbursements which the plaintiff’s lawyers propose to charge are reasonable in all the circumstances (Rivera, at paras. 26-28). [95] The OTLA points out MacDonald v. OSPCA, 2023 ONSC 2445, at para. 32, where Broad J. found that legal advice was an important public interest worth of protection under the Sherman test. There, the court accepted that a temporary sealing order was required over pleadings where there was a dispute as to whether the pleadings disclosed communications covered by solicitor-client privilege. The temporary sealing order was justified to preserve the ability of the affected client to make the argument that the solicitor-client privilege had not been waived and would be infringed by including the pleadings in the court record of the action. That serious risk scenario is distinct from the settlement approval context of this appeal.
[96] As Corthorn J. stated in Dickson v. Kellett, 2018 ONSC 4920, at para. 34, in the settlement approval motion context, a statement in counsel’s supporting affidavit that disclosure of the supporting materials would infringe on solicitor-client privilege is generally insufficient to support a sealing order being made. She added that for the majority of settlement approval motions, counsel are in a position to provide the court with the requisite evidence without an unwarranted incursion into either solicitor-client or litigation privilege (para. 42). In part, this is because the issues in a case, and the relative strengths and weaknesses of each party’s case, are typically well understood by the parties and their respective counsel by the time a settlement is reached. Corthorn J. concluded that, “Something more than the potential incursion into solicitor-client or some other form of privilege is required to support a request for an order dispensing with service of the relevant documents on the opposing party.” (para. 43).
[97] OTLA urges this court to recognize that, while r. 7.08 may not technically require the infringement of solicitor-client privilege, as a matter of practice counsel on a r. 7.08 motion will need to share their appraisal of the strengths and weaknesses of the case, and in so doing, disclose privileged communications with the client. OTLA also observes that at the time the r. 7.08 motion record is filed, and thereby made subject to public access, the litigation has not yet settled. As a result, the potential for prejudice against the plaintiff in disclosing such privileged assessments could be very real.
[98] While this concern strikes me as well-founded, it does not lead to the conclusion that motion records under r. 7.08 should be presumptively sealed. Rather, it speaks to the need for counsel to be guided by this concern in how they prepare affidavits for r. 7.08 motions, so as to minimize the disclosure of privileged information, and the basis on which they may seek specific redactions in the context of specific cases where such disclosure is viewed as necessary to obtain judicial approval. Further, where there is a basis for a concern that a settlement may not be finalized in the circumstances of a particular case, a motion judge has the option of ordering a temporary sealing order, which would end once the settlement is finalized.
[99] The appellants also highlight the privileged nature of lawyer’s fees, which also must be disclosed and approved in the context of r. 7.08 motions. The amount and breakdown of legal fees are presumptively privileged: Kaiser (Re), 2012 ONCA 838, 113 O.R. (3d) 308, at paras. 21-30. However, that presumption does not operate in the context of settlement approval motions, where the privilege may be waived by the party to permit judicial oversight and approval of the reasonableness of the fees charged. Where necessary to meet the requirements of judicial approval, litigation guardians may instruct counsel, on behalf of the parties, that they waive the privilege or seek to redact privileged information. In either scenario, neither the rule nor the open court principle leads inevitably to reducing a party’s right to solicitor-client privilege.
[100] Even if solicitor-client privilege were not waived in this context, the rationale for the presumption of privilege (that by knowing the amount and breakdown of fees, the party seeking the information could infer or discover privileged communications between the lawyer and their client) generally does not arise once a settlement has been reached. Consequently, I would not accept that the disclosure of legal fees in the r. 7.08 context, in and of itself, constitutes an infringement of solicitor-client privilege that would justify sealing the record.
[101] Here again, the appellants emphasize the alleged unfairness of the requirement to disclose legal advice and legal fees in the r. 7.08 context, as parties who are not minors or under disability are not compelled to waive solicitor-client privilege to settle their litigation. In the Dr. C appeal, for example, the appellants argue that the court should recognize that Dr. C. should not enjoy a “lesser form of privilege” because he must bring a motion under r. 7.08, instead “[h]e has a substantive right not to be compelled to waive his privilege in favour of public disclosure.”
[102] Again, I would reject this characterization of the effect of the open court principle in the context of r. 7.08 motions. First, no party is compelled to bring a r. 7.08 motion. Plaintiffs (or, in this context, litigation guardians) choose to initiate litigation, and may choose to settle. Rule 7.08 is a protective provision to ensure settlements are in the interests of the minors or parties under disability. Rule 7.08, properly construed, is a benefit to the parties to the litigation, not a burden on litigation guardians and counsel.
[103] Solicitor-client privilege is raised by the appellants both as an aspect of the Sherman test, and as a separate basis for a sealing order. For the same reasons that solicitor-client privilege does not meet the Sherman test’s serious risk to an important public interest threshold, it also does not constitute a separate basis for a presumptive sealing order in the r. 7.08 context. In short, fulfilling the requirements of settlement approval under r. 7.08 and the Solicitors Act generally does not compel the infringement of solicitor-client privilege, and where the specific circumstances of a settlement do necessitate the sharing of otherwise privileged communications, this may be resolved either through the waiver of the privilege by the client, or by the partial redaction of the record as a discretionary remedy by the judge hearing the motion. . S.E.C. v. M.P.
In S.E.C. v. M.P. (Ont CA, 2023) the Court of Appeal considered litigation settlements where a party is under disability:[2] Rule 7.08(1) requires that no settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without the approval of a judge. In order to obtain this approval, a notice of motion or application must be filed that includes: an affidavit of the litigation guardian setting out the material facts, reasons supporting the settlement, and the litigation guardian’s position on the settlement; an affidavit of the litigation guardian’s lawyer setting out their position on the proposed settlement; the minor’s consent if they are over sixteen years old; and a copy of the proposed minutes of settlement: r. 7.08(4). Under the open court principle, these materials are presumptively available to the public. . S.E.C. v. M.P.
In S.E.C. v. M.P. (Ont CA, 2023) the Court of Appeal considered litigation settlements where a party is under disability. The plaintiffs sought sealing orders regarding the details of such settlements, and here the court considered the role of the parens patriae and open court doctrine :(2) The court’s parens patriae jurisdiction is part of the r. 7.08 analysis, but does not grant a freestanding reason for a sealing order
[36] The appellants argue that it was an error in law for the motion judges to fail to consider the court’s parens patriae jurisdiction and its goal of preventing harm to persons under a disability when determining whether to grant a sealing order. They argue that r. 7.08 leads to public, pervasive, and permanent disclosure of information that can harm the party under disability and that it was an error for the motion judges not to consider this below.
[37] However, I find that r. 7.08 and its disclosure requirements emerge from and support the parens patriae jurisdiction. The open court principle does not conflict with, but rather protects the parties under disability on a systemic level by ensuring that court oversight of minor parties and parties under disability is properly maintained. Where harm may result from applying the open court principle, judicial discretion ensures that the best interests of parties under disability remain protected. Whether the interests of the parties under disability were properly considered in this case is reserved for the discussion on the motion judges’ application of the Sherman test.
[38] To begin, it is useful to assess the background and purpose of r. 7.08 motions. Rule 7.08 has been part of the Rules of Civil Procedure since 1990. However, r. 7.08 did not introduce court settlement approval for minor parties or parties under disability. Rather, it codified the common law rules as to the requirement of court approval of settlements involving persons under disability: see Garry Watson and Derek McKay, Holmested and Watson: Ontario Civil Procedure (Scarborough, Ont.: Carswell, 1984), (2023), § 22:4.
[39] The common law rules mean that, as put by Salhany J.: “For centuries, judges of the Superior Court have exercised the parens patriae guardianship of the sovereign to ensure that the rights of infants and others legally disabled are protected”: Ruetz v. Morscher & Morscher (1996), 1996 CanLII 7985 (ON SC), 28 O.R. (3d) 545, (S.C.), at p. 549. In this older case law, settlements from “a next friend” on behalf of an infant were “not binding on the infant or a bar to the further prosecution of the action unless the court can say that it is for the infant’s benefit”: Mattei v. Vautro (1898) 78 L.T. 682; Rhodes v. Swithenbank (1889) 22 Q.B.D. 577. This task was not taken lightly, but rather was understood as “an important and onerous judicial duty”: Poulin et al. v. Nadon et al., 1950 CanLII 121 (ON CA), [1950] O.R. 219, at p. 222.
[40] The protective purpose of settlement approval for parties under disability has been repeatedly affirmed in this court’s jurisprudence. Perhaps this court’s most significant statement was in Wu, Re, 2006 CanLII 16344 (ON CA), at para. 10, where this court held:The requirement for court approval of settlements made on behalf of parties under disability is derived from the court’s parens patriae jurisdiction. The parens patriae jurisdiction is of ancient origin and is “founded on necessity, namely the need to act for the protection of those who cannot care for themselves…to be exercised in the ‘best interest’ of the protected person…for his or her ‘benefit or ‘welfare’”. The jurisdiction is “essentially protective” and “neither creates substantive rights nor changes the means by which claims are determined”. The duty of the court is to examine the settlement and ensure that it is in the best interests of the party under disability. The purpose of court approval is plainly to protect the party under disability and to ensure that his or her legal rights are not compromised or surrendered without proper compensation. [Citations omitted.] [41] Similarly, in Krukowski v. Aviva Insurance Company of Canada, 2020 ONCA 631, at para. 24, this court affirmed that court approval of settlements is designed to protect the interests of the party under disability. In Tsaoussis (Litigation guardian of) v. Baetz, 1998 CanLII 5454 (ON CA), this court found that “[t]here can be no doubt that a court is obliged to look to and protect the best interests of minors who are parties to legal proceedings” and that these supervisory powers “are most clearly evinced by the requirement that the court approve any consent judgment to which a minor is a party and the closely aligned requirement that the court approve any settlement of a minor's claim before that settlement will bind the minor (rule 7.08)”: at pp. 14-15. While overturning the decision, this court agreed with a motion judge’s statement that “[t]he protection of parties under disability is a vital concept in our civil justice system. Insisting upon strict compliance with r. 7.08 is an important safeguard in maintaining that fundamental principle”: Ryan v. Hebert, 2022 ONCA 750, at para. 15.
[42] This jurisprudence makes clear that r. 7.08 is explicitly designed to protect parties under disability by providing court oversight of settlements that the parties under disability can not themselves shape and agree to. These cases demonstrate that, rather than being an unfair imposition on parties under disability, r. 7.08 motions are best characterized as remedial and protective of those parties’ interests.
[43] To achieve its protective purpose and oversight, motions under r. 7.08 must be accompanied by evidence. This includes, for example, records of medical or expert evidence underlying the settlement, as well as affidavit evidence from the litigation guardian and counsel as to the basis and justification of the settlement, including the amount of the settlement and legal fees involved, among other disclosures.
[44] There is no question that the information included in the record in a r. 7.08 motion could − and generally will − include sensitive and personal information about the party whose claim is being settled. Further, I accept the appellants’ claim that, in light of advancing search and sharing digital technology, personal information made part of a public court record may be vulnerable to wider and more permanent circulation than ever before. This risk may give rise to specific and concerning harms for the parties involved.
[45] However, r. 7.08 addresses these potential harms by affording judges significant discretion to protect the parties’ information. That discretion may be exercised to anonymize, order a publication ban, partially redact, or completely seal some or all of the record in a r. 7.08 motion. The appellants themselves have cited cases where these remedies were deployed on the basis of concern for the interests of minor parties: see, for example, the discussion below of Mother Doe v. Havergal College, 2020 ONSC 2227.
[46] While disclosure may, in some cases bring about the harms the appellants warn of, in my view, the appellants have failed to demonstrate why the existing discretion to address specific situations where limits to the open court principle are justified is insufficient. In exercising that discretion in the context of r. 7.08 motions, the court’s parens patriae jurisdiction is always engaged. The r. 7.08 motions are designed in accordance with parens patriae and the interests of the party under disability are taken into account.
[47] Further, the argument urged by the appellants would, in effect, render all motions under r. 7.08 presumptively confidential. This would screen an important role of the courts from public view in a sweeping fashion. In my view, this would be contrary to the parens patriae purpose of r. 7.08 and the rationale for the open court principle. Where the protection of judicial oversight is provided to vulnerable parties, public oversight of this vital discretionary role through the open court principle arguably becomes even more important.
[48] As the CBC emphasized in its submissions, the open court presumption advances values of particular importance in cases dealing with vulnerable parties: that judges are seen to be acting fairly and in a manner consistent with societal values; that similarly situated people can gain an understanding of how they may be treated by the judicial process; and that the public may learn more about the place of the courts in a democracy generally. For these reasons, while parens patriae may favour sealing orders in some circumstances, it also favours shining a light on the judicial approval settlement agreements through the open court presumption.
[49] Therefore, the argument that sealing orders generally are presumptively justified by the parens patriae jurisdiction must fail.
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