Are Settlement Negotiation Details Permitted Within Lawsuit Documents?
The Pleadings Within a Lawsuit, Being the Claim or Defence Documents, Must Refrain From Disclosing Details of Settlement Efforts to the Court. Where Such Documents Including Offer-to-Settle Details or References to Settlement Negotiations, Such References Are Improper and Should be Struck.
A Helpful Guide For How to Understand Court Rules Regarding Settlement Privilege That Preclude Pleading of An Offer-to-Settle
As a legal dispute develops, it is common that a party to the dispute will attempt to resolve the matter without the need to begin court proceedings. During the efforts to resolve the issues prior to launching a court action, settlement offers may be exchanged. Ultimately, where the settlement offers are unaccepted, and thus early resolution efforts fail and the dispute proceeds to a court matter, details of the early resolution efforts, meaning settlement offers and related discussions, must be excluded from any subsequent court documents, especially the pleadings.
The rules of pleading documents within the course of litigation, whether as claims or defences, precludes settlement discussion details including the specifics of any offer-to-settle, release terms, and the like. The rules in this respect are found within the common law which deems the pleading of settlement details as scandalous; and accordingly, such scandalous pleading should be struck in accordance to Rule 12.02(1)(b),(c) of the Rules of the Small Claims Court, O. Reg. 298/98 or Rule 25.11(b) of the Rules of Civil Procedure, R.R.O. 1990, Regulation 194. These rules were applied within Renzone v. Onyx Homes Inc., 2020 ONSC 7722 as well as 2030945 Ontario Ltd. v. Markham Village Shoppes Limited, 2013 ONSC 1020, among others, whereas such cases confirm the view that the pleading of settlement details is scandalous to the litigative process. These cases also provide the formal legal test as to what constitutes as settlement details. Specifically, the doctrine within these cases states:
 I begin with Rule 25.11. This Rule allows the Court to “strike out or expunge all or part of a pleading…with or without leave to amend on the ground that the pleading…is scandalous, frivolous or vexatious…”.
 It is settled law that referring to settlement offers or discussions, which are thus subject to “settlement privilege”, may well be considered scandalous, frivolous or vexatious, leading to that part of the pleading being struck given that such communications are inadmissible. See, in that regard, 2030945 Ontario Ltd v. Markham Village Shoppes Ltd 2013 ONSC 1020 at para. 8.
 I agree with the defendant that references to settlement offers, discussions and negotiations should not be included in a pleading. The law in this regard is summarized by Master Beaudoin (as he then was) in Canadian Gateway Development Corp. v Canada (National Capital Commission),  O.J. No. 3167 (S.C.J. – Master) at paragraphs 8 and 9 where he states as follows:
8 A Master had jurisdiction pursuant to Rule 25.11(b) to strike out a pleading on the ground that the pleading is scandalous, frivolous or vexatious. Although the defendant correctly submits that a Master cannot generally strike out a defence as being untenable, that it not the nature of the motion here. The law is clear that evidence of privileged communications, such a settlement discussions, should not be before the Court. (See I. Waxman & Sons v. Texaco Canada Ltd., 1968 CanLII 178 (ON SC),  1 O.R. 642 (H.C.J.), aff'd 1968 CanLII 327 (ON CA),  2 O.R. 452 and Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 2nd Edition, Vancouver, Butterworths, 1999). If such discussions are inadmissible in a civil proceeding, any reference to them in a party's pleadings can be considered scandalous, frivolous or vexatious and should be struck from their pleading.
9 Per Sopinka and Lederman at p. 810, there are three conditions under which settlement discussions will be considered privileged and inadmissible:
(a) a litigious dispute must be in existence or within contemplation;
(b) the communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and,
(c) the purpose of the communication must be to attempt to affect a settlement.
Court documents such as claims or defence pleadings, among various others, must exclude references to settlement negotiations such as the details of offers and discussions intended to resolve the dispute. Where references or details to settlement negotiations are improperly included within court documents, such should be struck and kept from view of the court.