Free Trade Medical Network Inc. v. RBC Travel Insurance Company, 2006 CanLII 31447 (ON CA)

DATE: 20060914

DOCKET: C43874

COURT OF APPEAL FOR ONTARIO

RE:

FREE TRADE MEDICAL NETWORK INC. (Appellant/ Plaintiff) – and – RBC TRAVEL INSURANCE COMPANY (Respondent/Defendant)

BEFORE:

MACPHERSON, BLAIR and LAFORME JJ.A.

COUNSEL:

John W. McDonald and J. Mark MacDonald

for the appellant/plaintiff

Peter A. Daley and Amelia M. Leckey

for the respondent/defendant

HEARD & RELEASED ORALLY:

September 7, 2006

On appeal from the judgment of Justice A. Hoy of the Superior Court of Justice dated June 24, 2005.

E N D O R S E M E N T

1Free Trade Medical Network Inc. seeks to set aside the judgment of Hoy J. dated June 24, 2005 dismissing its action for damages and for breach of confidence. The appellant submits that the trial judge failed properly to apply the three part test enunciated by the Supreme Court of Canada in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574.

2Free Trade had an agreement with Community Care Network Inc. (“CCN”) entitling it to market CCN services. It was not an exclusive agreement. CCN is what is known in the medical insurance industry as a Preferred Provider Organization (“PPO”). It provides access to discounted medical and hospital services throughout the United States. These services are important to companies like the defendant RBC which is in the business of providing travel insurance to tourists and others travelling abroad. RBC had had a contractual relationship with a predecessor of CCN through an intermediary but that contract had ended and RBC was seeking a new arrangement with a PPO on a direct contractual basis. It was interested in continuing with CCN.

3Mr. Hitchlock, the principal of the appellant, arranged the meeting on October 31, 1997, with representatives of RBC, a representative of CCN and himself, in order to pitch CCN’s services. Nothing was said at that meeting about the relationship between Free Trade and CCN. In the course of the meeting, Mr. Hitchlock provided RBC with, amongst other things, a directory containing confidential information about CCN’s discounts. This was important information and it enabled RBC to satisfy itself through a test analysis that CCN’s services met their needs. On November 6, RBC entered into a contract directly with CCN.

4The trial judge found that the information in the directory was confidential and that it had been provided to RBC in confidence. She concluded, however, that Free Trade was not entitled to claim breach of confidence because it was not the “owner” of the confidential information. Rather, CCN was. She also found that there had been no misuse of the information.

5The November 6 agreement did not involve Free Trade and was made at a meeting to which Mr. Hitchlock was not invited, even though he had had some further involvement in the test process. In short, Free Trade was cut out of the deal. It failed to obtain redress in an arbitration proceeding against CNN in United States and subsequently, brought this action against RBC.

6As we understand the appellant’s argument, the complaint is that Free Trade provided the confidential information in the directory to RBC and RBC either used it to improperly enter into a deal directly with CCN or used it improperly by disclosing it to their agent Mr. Hodosy whom RBC had retained to help it find a direct deal with a PPO. There is no suggestion that Mr. Hodosy or RBC used the information for anything other than analysing the discounts in the test scenario, which resulted in the RBC/CCN agreement, or that they disclosed the information to anyone other than persons in the RBC/CCN/Free Trade orbit.

7In the result, however, Free Trade obviously feels that it was deprived of a potentially lucrative commercial arrangement.

8The three elements that must be established to make out a claim for breach of confidence, as established in Lac Minerals are the following:

1. The information conveyed must be confidential;

2. The information must have been communicated in confidence, and,

3. The information must have been misused by the party to whom it was communicated to the detriment of the party who confided it.

9On behalf of the appellant, Mr. McDonald argues that the trial judge made a fundamental error in applying the foregoing test by failing to consider the third element and, more particularly, by concluding that a party asserting breach of confidence is not entitled to rely upon a misuse of confidential information unless it is the “owner” of that information. He submits that this error skewed the entirety of the trial judge’s reasons.

10We do not agree. Subject to the following comment, she applied the test correctly and, in the result, there is no reversible error.

11The trial judge relied upon the decision of Lord Denning M. R. in Fraser v. Evans, [1968] Q.B. 349 and the decision of Nordheimer J. in Air Canada v. Westjet Airlines Ltd., [2004] O.J. No. 5627 (S.C.J.). We accept that it may not be accurate in all cases of breach of confidence to say that the person seeking to rely upon a confidence must be the owner of the confidential information. As Lord Denning said in Fraser v. Evans, however,

… the party complaining must be the person who is entitled to the confidence and to have it respected. He must be a person to whom the duty of good faith is owed.

12Free Trade does not fall into that category. RBC had no relationship with Free Trade other than in its capacity as a representative of CCN. The confidential information in the directory was CCN’s confidential information (this was acknowledged in a non-exclusive agreement between Free Trade and CCN). The information was being provided by, or on behalf of CCN, to assist RBC in deciding whether to contract with CCN as its PPO. We can see nothing on the record that would support an argument that Free Trade is the person who is entitled to the confidence and to have it respected (except insofar as necessary to protect CCN) or that RBC owed a duty of good faith to Free Trade in a fashion sought to be established by the appellant.

13In any event, there was no misuse of the confidential information in our opinion. In this regard, the trial judge did not fail to apply the third element of the Lac Minerals test. She made a finding that the confidential information had not been misused. We agree. The discounted information in the directory was used for exactly the purpose intended, namely, to facilitate the negotiation of a contract with CCN. Any disclosure to Mr. Hodosy was justified because he was RBC’s agent and was entitled to deal with CCN on RBC’s behalf. Neither he nor RBC used the information for any other purpose.

14The appeal is therefore dismissed.

15Costs to the respondent fixed at $25,017.99 inclusive of disbursements and GST. The $135,000 (and any accruing interest) posted as security for costs by the appellant is to be released to the credit of the respondent.