Sabre Inc. v. International Air Transport Association, 2011 ONCA 747
CITATION: Sabre Inc. v. International Air Transport Association, 2011 ONCA 747
DATE: 20111130
DOCKET: C53268
COURT OF APPEAL FOR ONTARIO
Doherty, Laskin JJ.A. and Hackland J. (ad hoc)
BETWEEN
Sabre Inc. and Sabre International, Inc.
Plaintiffs (Appellants)
and
International Air Transport Association, Lufthansa Systems AG and Lufthansa Systems Airlines Services GmbH
Defendants (Respondent)
Malcolm M. Mercer, Steven Mason and Moya Graham, for the appellants
Robert S. Harrison, Paul F. Monahan and Emmeline Morse, for the respondent
Heard: November 14, 2011
On appeal from the judgment of Justice James M. Spence of the Superior Court of Justice, dated January 11, 2011, with reasons reported at 2011 ONSC 206.
Doherty J.A.:
[1] The appellants (herein referred to as “Sabre”) sued the International Air Transport Association (“IATA”) for breach of confidence in connection with IATA’s alleged misuse of certain information provided to it by Sabre. The evidence was detailed and made almost impenetrable by the host of acronyms used to describe various entities in the evidence. In his reasons dismissing the claim, the trial judge has provided an excellent summary of the evidence and I will refer to the evidence in broader terms and only to the extent necessary to address the grounds of appeal.
[2] Sabre operates a worldwide service that is referred to in the travel industry business as a global distribution system (“GDS”). A GDS is a computerized system that allows travel agents and those using travel agency websites to access current airline scheduling and pricing information for the purpose of booking and purchasing airplane tickets. Sabre has developed sophisticated databases that allow it to collect, assemble, select, compile, verify, structure, organize, and arrange ticket related information.
[3] Sabre contracts for services with travel agencies around the world. Generally, those agencies do not pay for the service. However, individual airlines pay a fee for each ticket booked on their airline through Sabre’s services. Sabre’s GDS generates millions of dollars in revenue for Sabre.
[4] The booking data as obtained and assembled by Sabre through its GDS is commercially valuable information. Sabre has used that information to create data products that provide information to those in the air travel industry. One of those data products is referred to as MIDT. The sale of MIDT and other data products is also a significant source of income for Sabre.
[5] IATA is a trade association of airlines that represents and services airlines around the world. As of 2007, IATA had some 270 airline members around the world, including all of the major airlines.
[6] IATA has established a passenger agency conference (the “PAConf”) made up of member passenger airlines. The PAConf is responsible for the relationship between and among member airlines, accredited travel agents, and intermediaries, including GDS providers such as Sabre. PAConf members adopt resolutions that govern IATA, member airlines, accredited agents, and GDSs.
[7] IATA provides a number of services to its members, including the establishment and maintenance of billing and settlement plans (“BSP”) for the settlement of ticket transactions between airlines and accredited agents. There are approximately 87 BSPs operating around the world. The BSPs assist airlines and accredited agents with the flow of data and the billing and settlement of payments associated with the purchase and sale of airline tickets. Airlines are not required to participate in a BSP. However, the service provided by a BSP is a valuable one for airlines as it significantly enhances the flow of payments between individual airlines and accredited agents.
[8] When an accredited agent uses a GDS, such as the Sabre GDS, to book a flight, the GDS transmits data files containing information relating to the ticket sale to a data processing centre contracted by IATA. The transmission is pursuant to a BSP agreement between the GDS and an individual BSP. The data is sent on a daily basis by the GDS in a format established by IATA. The data is referred to as a RET file and contains a daily compilation of all of the data referable to all ticket sales involving a particular GDS settled through a specific BSP. The RET files contain only data for issued tickets, that is tickets actually paid for by the traveller.
[9] IATA processes the data received from the GDSs and produces reports that are sent to the airlines and accredited agents. The data reports sent to the airlines are referred to as HOT files and show all individual transactions made for that airline on a given day. The files forwarded to a particular airline refer only to the tickets purchased from that airline. Files forwarded to a particular accredited agent show all transactions for a given week by that accredited agent, but do not show any data relating to transactions involving other accredited agents in the BSP.
[10] In the summer of 2005, IATA began to market to the airline industry data products referred to as PaxIS. PaxIS is a comprehensive airline market intelligence database that uses information referable to ticket sales. That information comes from the RET files accumulated through the information provided to IATA data processing centres by GDSs, including Sabre. The PaxIS product includes data analysis, calibration and market intelligence, together with a web tool created for access to the PaxIS data. Its purpose is to provide accurate market data to those in the airline industry. The PaxIS product competes with the MIDT product sold by Sabre.
The Nature of the Dispute
[11] In the lawsuit, Sabre contends that IATA breached its obligation of confidence with respect to Sabre’s information by using information provided exclusively for purposes relevant to the BSPs to create data products that would compete with Sabre’s existing data products.
[12] Sabre acknowledges that individual passengers, airlines and travel agents have access to the same information in respect of individual transactions involving a particular airline, travel agent or passenger. Sabre contends, however, that its compilation of all of the data relating to the individual transactions renders the totality of that information confidential, at least as regards IATA.
[13] Clearly, the compilation of the data gives Sabre’s data value that data referable to the individual transactions would not have. One of the questions for the trial judge was whether it also imbues that data with a confidentiality that data referable to an individual transaction would not have.
[14] The trial judge, relying on Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574 and Cadbury Schweppes Inc. v. FBI Foods Ltd., 1999 CanLII 705 (SCC), [1999] 1 S.C.R. 142, identified the three elements that must be proved to establish a breach of confidence claim:
• Did the information conveyed have the necessary quality of confidence?
• Was the information communicated in confidence?
• Was the information misused by the party to whom it was communicated?
[15] As I read the reasons, the trial judge, at paras. 56-66, did not decide whether the information had the necessary quality of confidence. He was prepared to assume that it did given his finding that the second requirement – that the information be communicated in confidence – was not established by Sabre. This appeal focuses on that finding made by the trial judge.
Sabre’s Arguments
[16] Counsel for the appellant, in his submissions, accepts that the trial judge asked himself the correct question in determining whether the information was communicated in confidence. The trial judge relied on the well known passage from Coco v. A. N. Clark (Engineers) Ltd., [1969] R.P.C. 41 (Ch.). At p. 48, Megarry J. wrote:
It seems to me that if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realized that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence. [Footnotes omitted.]
[17] Like other manifestations of the reasonable person analysis found in the common law, this inquiry is necessarily contextual and sensitive to the specific assembly of facts and circumstances presented by the evidence in an individual case. The trial judge’s analysis correctly reflects the fact-sensitive nature of the analysis required.
[18] In assessing whether IATA would reasonably have understood that the Sabre information was communicated in confidence, the trial judge placed considerable emphasis on the terms of the agreements governing Sabre’s participation in various BSPs. Sabre first entered into a BSP agreement in 1995 and has entered into many similar agreements since then. The agreements contain a confidentiality clause obliging Sabre to keep the airlines’ information confidential. There was no confidentiality clause in favour of Sabre. The trial judge said, at para. 81:
In considering whether it had a duty of confidentiality to the TSPs [Sabre] in respect of the information it received from them, IATA would reasonably consider that the absence of such a clause made it unlikely that the TSPs were entering into the agreement on the assumption of a duty of confidentiality unless there is some other reason that would make it likely that that assumption was held. It would be relevant to this assessment that the parties to the ETSPAs [the BSP agreements] are sophisticated business companies which can reasonably be taken to be well acquainted with the use of confidential clauses in agreements for the disclosure of information. [Emphasis added.]
[19] In reference to the confidentiality clause, the trial judge said, at para. 80:
A reasonable person in the position of IATA when it was engaged in settling the agreement might well have considered that, in view of a clause dealing with confidentiality having been added to the draft agreement, if Sabre or British Airways had any confidentiality concerns on their own behalf they would have raised them as matters to be dealt with in the agreement.
[20] Counsel for the appellant accepts that the terms of an agreement referable to the relationship between the parties giving rise to the sharing of information can constitute part of the factual matrix to be examined in deciding whether a reasonable person would understand that the information received came to that person in confidence: see Cadbury Schweppes, at pp. 166-67. Counsel submits, however, that the trial judge failed to consider the true nature of the BSP agreements, the actual parties to those agreements, and the purpose of those agreements. He argues that the agreements were not made between Sabre and IATA, but were made between Sabre and the various airlines who were parties to any particular BSP. Counsel contends that the agreements, properly understood, were not commercial contracts in the normal sense, but were rather technical intra-industry agreements designed to create narrow and clearly delineated “zones of cooperation” among airlines in what was in most other respects a fiercely competitive business. Counsel further submits that the agreements had nothing to do with the use of the information provided pursuant to those agreements outside of the operation of the BSPs.
[21] The trial judge did not make the error attributed to him in this submission. With respect, counsel’s interpretation of the BSP agreements favours form over substance. IATA was intimately involved in the creation and operation of the BSPs from the outset. IATA was also directly involved in the creation of the relevant agreements, to the extent that even on the evidence of one of the appellant’s witnesses, IATA lawyers probably drafted the confidentiality clause. Prior to 1999, the agreements were executed by IATA on behalf of the participating airlines. After 1999, when IATA took over direct day-to-day operation of the BSPs, the agreements were executed directly by a representative of IATA. Either way, it is accurate to describe IATA as a party to the agreements.
[22] It was open to the trial judge to take the view of the BSP agreements that he did. On that view, the existence of a unilateral confidentiality clause in favour of the participating airlines was properly regarded by the trial judge as an important consideration in determining whether IATA would reasonably have regarded the information provided by Sabre pursuant to those agreements as confidential between Sabre and IATA.
[23] I would add that even on Sabre’s view of the nature and scope of the BSP agreements, those agreements undercut Sabre’s confidentiality claim. As I understand Sabre’s position, it acknowledges that individual airlines could use Sabre’s data for purposes other than the BSP without infringing any confidentiality obligation. That acknowledgement seems to me to make it difficult to assert that IATA should have reasonably regarded the information in its hands to be confidential, even though the information was not confidential in the hands of the individual IATA members.
[24] Counsel next submits that the trial judge erred in law in failing to place a “heavy onus” on IATA to rebut the conclusion that the information was imparted in confidence. Counsel relies on a passage from Coco, at p. 48:
In particular, where information of commercial or industrial value is given on a business-like basis and with some avowed common object in mind, such as a joint venture or the manufacture of articles by one party for the other, I would regard the recipient as carrying a heavy burden if he seeks to repel a contention that he was bound by an obligation of confidence.
[25] That passage was cited with approval in the reasons of both Sopinka J., at pp. 612-13, and LaForest J., at p. 642, in Lac Minerals. Counsel describes this passage as “doctrine”, declaring as a matter of law that the legal or ultimate burden moves from the plaintiff to the defendant where certain factual prerequisites are established.
[26] I do not read the passage as intending to move the legal burden of proof. In my view, an approach that would shift the burden upon certain facts being established would undermine the fact-sensitive inquiry demanded by the determination of whether a reasonable person in the circumstances would understand that the information was given in confidence. The evidentiary weight to be given to any particular fact or constellation of facts must depend on the trier of fact’s assessment of the entirety of the factual picture. To regard certain facts as always shifting the legal burden of proof is to distort the reasonable person inquiry.
[27] I think Megarry J. in Coco was describing his assessment of the impact of certain important facts on the confidentiality claim made in the case before him. His Lordship was satisfied that the value of the information, the business-like basis upon which the information was provided, and the joint venture nature of the discussions in which the information was provided, combined to place a heavy evidentiary burden on the defendant. Megarry J. was responding to the evidence he heard and the nature of the confidentiality claim made in that case. He was not pronouncing any legal doctrine. Nor do the references to the passages from Coco in Lac Minerals elevate Megarry J.’s comments to the status of legal doctrine.
[28] The facts of this case, particularly the nature of the information in issue, the prospective nature of the information-sharing contemplated by the parties, and the existence of an agreement speaking directly to confidentiality, make this a very different case from Coco. It is not surprising that the analysis of the relevant evidence in this case bears little similarity to the analysis of the relevant facts in Coco.
[29] Counsel next argues that the trial judge erred in law in imposing a requirement that Sabre “clearly communicate” to IATA the assertion that its information provided through the BSP agreement was given in confidence. The trial judge said, at para. 71:
Because the focus is on the reasonable understanding of the person to whom the information is being imparted, that party will not be found to have breached any obligations of confidence if the disclosing party does not, through words or conduct, clearly communicate that the information is to be held in confidence or does not communicate that the subsequently complained of use was not permitted.
[30] I agree that if the above-quoted passage is understood as a general statement of a legal principle applicable in all cases, the statement is somewhat overbroad. I do not read it that way. I understand the passage to be directed at the fact situation encountered by the trial judge. The trial judge was faced with a case in which all parties were sophisticated business entities. They were aware of the nature of the information being provided and the potential commercial use of that information, and they had turned their minds specifically to the question of the confidentiality of the information. Sabre’s failure to assert, by word or conduct, any confidentiality claim was part of the factual matrix. It was open to the trial judge, as the trier of fact, to give that silence considerable weight in deciding whether Sabre had shown that IATA would reasonably understand that the information conveyed to it by Sabre was conveyed in confidence.
[31] Counsel next submits that the trial judge erred in holding that no duty of confidence could arise unless a reasonable person would have in mind the particular misuse of the information which ultimately led to the dispute. Counsel submits that this requirement doomed Sabre’s case as PaxIS did not even exist when the information in issue began to flow from Sabre to IATA.
[32] Having referred to the essential elements of a breach of confidence claim in the abstract, the trial judge put them in terms of the specifics of this case, at para. 74:
In the present case, the test may be stated as follows: would IATA, on entering into the ETSPA [the BSP agreements] have realized, if it were acting reasonably, that the information which the [TSP] participants [Sabre] would henceforth be transmitting to the DPC [the data processing centre] be given on the confidential basis alleged by Sabre, i.e. that the information was to be used only by the DPC and only for billing and settlement purposes?
[33] I think the trial judge captured the nature of the claim. He did not impose an obligation on Sabre to show that IATA had in mind the use of the information to compete with Sabre’s data products at the time it obtained the information. As the trial judge observed, the outcome of this case depended on whether a reasonable person would understand that Sabre’s information was to be used only in the context of the BSPs.
[34] Counsel for Sabre has industriously advanced the arguments on behalf of Sabre. Each focuses on an individual component of the trial judge’s analysis. Appellate review must focus on the analysis as a whole and must have regard to the nature of the case placed before the trial judge.
[35] The legal principles were not in dispute in this case. The elements of the claim were not in dispute. Most of the primary facts were not in dispute. The question, essentially a factual one, was whether a reasonable person in IATA’s position would in all the circumstances appreciate that the information from the ticket sales was given to it in confidence by Sabre. The trial judge reviewed at length the several factors relevant to that question. It was for him to decide the relative significance of the various factors. His findings reflect a reasonable assessment of those factors. This court cannot redo that exercise. I would not interfere with the trial judge’s finding.
[36] Sabre raised other grounds of appeal. However, as I would not interfere with the trial judge’s finding that the evidence was not imparted in confidence, it is unnecessary for me to address those other arguments. I do not propose to do so.
[37] I would dismiss the appeal. IATA is entitled to its costs of the appeal fixed at $40,000, inclusive of disbursements and all applicable taxes.
RELEASED: “DD” “NOV 30 2011”
“Doherty J.A.”
“I agree John I. Laskin J.A.”
“I agree Hackland J. (ad hoc)”