Settlement privilege applies during settlement negotiations and could potentially extend to completed settlement agreements (Sable Offshore Energy Inc. v Ameron International Corp., 2013 SCC 37). However, including a confidentiality provision in a settlement agreement is preferable to relying on settlement provision due to the certainty and specificity that a properly formulated confidentiality provision will provide. The confidentiality provision can outline exactly what is to remain confidential, how long it is to remain confidential, and the consequences for a party’s failure to keep confidentiality. Stacey Ball at Ball Professional Corporation is experienced Toronto employment lawyer to deal with these cases.

Repayment Provision: A Forfeiture Clause or a Penalty Clause?

In Wong v The Globe and Mail Inc., 2014 ONSC 6372, the court discussed whether a repayment provision (i.e., a provision requiring a party to repay the lump sum, or a portion of the lump sum if they breach the confidentiality agreement) is a forfeiture provision or a penalty clause. The court provides a description of both clauses to clarify the distinction between the two (paras 44-45). Penalty provisions intend to compel a party to abide by the stipulations under the threat of paying money for failure to do so. A “penalty” requires proof of damages. Forfeiture provisions involve the loss of money which is held as security for the enforcement of an obligation. Peachtree II Associates – Dallas, L.P. v 857486 Ontario Ltd. (2005), 76 OR (3d) 362 (CA), suggests that courts should avoid classifying contractual clauses as penalties. Where a clause could be classified as either a penalty or a forfeiture, the court should favour classifying it as a forfeiture. Accordingly, the court found that the repayment provision in Wong was a forfeiture provision.

Subjective Understanding of the Agreement Does Not Matter

Another issue that arose in Wong was the party’s subjective understanding of the terms of settlement. The applicant argued that there was no breach because they had abided by the terms of the agreement as they understood it. However, in Dumbrell v Regional Group of Companies Inc. (2007), 85 OR (3d) 616 (CA), the court made it clear that it is the language and meaning of the words within the contract itself, not the subjective understanding or intention of the parties that determine the interpretation of the agreement.

Allusions Could be a Violation

Alluding to the terms of settlement, or to a monetary payment could be sufficient for a finding that the confidentiality agreement has been breach. While different confidentiality provisions could have varying levels of strictness, it is better to err on the side of caution when party to a confidentiality agreement. In Acadia University v Acadia University Faculty Association 2019 47957 (ON Lab Arb), a party was found to have breached the confidentiality provision by commenting that he had “left with a big grin on [his] face” – making the allusion that he had been paid significant amount of money.

Direct or Indirect Violations

It is important to note that confidentiality provisions could restrict a party from divulging information about the settlement either directly or indirectly. This means that a breach could be found even if it is someone directly party to the settlement that alludes to the terms of settlement. For example, if the spouse of a person party to the settlement agreement makes an allusion to receiving money from the settlement, then that could be considered a violation of the agreement.

Stacey Reginald Ball is an experienced Toronto employment lawyer with the Ball Professional Corporation. Our office handles various employment law matters, including wrongful dismissal, and often negotiate settlements. If you have any questions regarding settlement agreements, please consult a lawyer.