ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-10-410442
DATE: 20120229
BETWEEN:
SURJIT BABRA Plaintiff – and – ACQUISITION SL LLC (FORMERLY M2 ACQUISITION LLC) and MARK MASSAD Defendants
V. Ross Morrison , for the Plaintiff
David S. Steinberg , for the Defendants Ronald Chapman , for the non-party, SkyLink Aviation Inc. Cindy Chiu , for the non-party, Walter Arbib
HEARD: December 19, 2012
T. Mcewen j.
Reasons for decision
Background
[ 1 ] There were initially four motions before the Court as follows:
(i) The Defendants’ underlying motion for relief from the non-disclosure Agreement (“the NDA”) and for the right to make and obtain full disclosure in accordance with Rule 30;
(ii) The Plaintiff’s amended motion for a sealing order, in the event the Defendants’ motion is granted;
(iii) A further motion by the Defendants to strike the affidavit of Jan Ottens delivered by the non-party SkyLink Aviation Inc. in support of the Plaintiff’s motion for a sealing order; and
(iv) A motion by the Plaintiff for a time-table to govern the discovery process.
[ 2 ] I was advised by counsel at the commencement of the motion that the parties were not proceeding with motions (iii) and (iv). With respect to (iv), I was advised that the timetable issue could be dealt with by way of letter to me and it was left on that basis.
[ 3 ] Firstly, the Defendants Acquisition SL LLC (formerly M2 Acquisition LLC) (“Acquisition”) and Mark Massad (“Massad”), seek production of documents currently subject to the NDA. The Plaintiff, Surjit Babra (“Babra”) and Acquisition were parties to the NDA, as well as SkyLink Aviation Inc. (“Skylink”) and Walter Arbib (“Arbib”), who are non-parties in the action (collectively “the non-parties”). All agree that the documents referred to in the NDA are easily identifiable.
[ 4 ] Acquisition and Massad also seek production of the financial statements of SkyLink for the year ending December 31, 2008 (“the financial statements”).
[ 5 ] Babra and the non-parties resist production of the NDA documents and the financial statements claiming that they are irrelevant to the issues in the lawsuit. They further submit that if the documents are produced they ought to be produced under seal.
The Issue of Relevance
[ 6 ] The NDA documents and the financial statements are in Babra’s possession. Babra, Acquisition and Massad are in possession of the documents that are the subject matter of the NDA.
[ 7 ] Acquisition and Massad submit that the documents sought are relevant, and in order to fully establish their defence, it is essential that the documents be produced so that they can rely upon them in the litigation.
[ 8 ] The facts as set out in the Statement of Claim are fairly straightforward. Babra alleges that Acquisition borrowed $1.5 million from him. Babra also pleads that Massad executed a security agreement and guarantee in respect of this loan and is therefore also responsible for the repayment of the monies loaned to Acquisition. The monies have not been repaid.
[ 9 ] Acquisition and Massad, in their Statement of Defence, claim that Babra entered into a rather complicated agreement with them whereby it was agreed that Acquisition was simply a conduit through which the monies would pass and that ultimate liability for repayment would remain with SkyLink, not Acquisition.
[ 10 ] In order to establish the defence, Acquisition and Massad submit that it is essential to review the financial statements and the NDA documents because these documents establish their theory of the case.
[ 11 ] Acquisition and Massad explain this complex defence in their Statement of Defence at paragraphs 18-36.
[ 12 ] Babra argues, primarily, that the defence is an extremely weak one and accordingly this undermines the claim of relevance. In this regard, however, I adopt the reasoning of Sachs J. in S tate Bank of India v. Kothari , [2002] O.J. No. 1203 , that the Court ought not to take a position as to the strength of the Defendants’ case in determining relevance.
[ 13 ] Whether the defence will ultimately succeed will be determined at trial. I do agree, however, that the pleadings contained in the Statement of Defence raises issues that render the requested documents relevant. The documentation is to be produced.
[ 14 ] With respect to the exact nature of the documents that are to be produced, the parties assured me at the hearing of the motion that they were well known to them and did not have to be itemized by me.
The Sealing Order
[ 15 ] I agree with Babra and the non-parties that the documents that I have ordered produced ought to be subject to a sealing order.
The NDA Documents
[ 16 ] Acquisition and Babra submit that based upon the decision of the Supreme Court of Canada in S ierra Club of Canada v. Canada (Minister of Finance) , [2002] 2 S.C.R. 552 , a sealing order should not be granted since there is no general principle at stake. It is not enough for Babra and the non-parties to argue that the document should not be made public because to do so may cause them to lose business, thus harming their commercial interests.
[ 17 ] Babra, Acquisition, SkyLink and Arbib all entered into the NDA. The relevant documents arise from disclosures that SkyLink and Arbib made to the Canada Revenue Agency in contemplation of a share sale. This share sale involved Babra selling 51% of his share holding in SkyLink to Acquisition and other co-investors for $54 million and other consideration. I accept the submissions of Babra and the non-parties that the documents contain confidential and sensitive financial information about SkyLink and its key personnel. The documents include correspondence with the Canada Revenue Agency, tax returns of SkyLink and reports and working papers of SkyLink.
[ 18 ] I am also prepared to accept that the documents contain confidential and sensitive financial information about SkyLink based on the affidavit evidence filed in this matter by Jan Ottens, the Chief Executive Officer of SkyLink. Although at his cross-examination he was somewhat equivocal in this regard, I have concluded that all of the parties to the NDA have a valid concern about the publication of the documentation otherwise the confidentiality agreement would not have been signed. Furthermore, for purposes of this motion, I accept that Mr. Ottens has a valid concern that Acquisition and Massad’s desire to be released from the confidentiality obligation may be rooted in their desire to establish leverage over Babra and SkyLink with respect to Babra’s claim against them. Mr. Ottens was not challenged on this belief in his cross-examination in any meaningful way.
[ 19 ] The test for determining whether a sealing order should be granted was set out by the Supreme Court of Canada in S ierra Club and further explained by Nordheimer J. in Prendiville v. 407 International Inc. , [2002] O.J. No. 2548, at paras 8-10 .
The authority to seal a portion of any court file arises from section 137(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43 which states:
“A court may order that any document filed in a civil proceeding before it be treated as confidential, sealed and not form part of the public record.”
The issue of sealing a court file involves very much the same considerations as the decision to hold an in camera hearing or to grant a non-publication order. The approach to such restrictions on the normal rule that matters which take place before our courts will be conducted in an open and public manner has been the subject of various decisions of the Supreme Court of Canada including MacIntyre v. Nova Scotia (Attorney General) , 1982 14 (SCC) , [1982] 1 S.C.R. 175 and Dagenais v. Canadian Broadcasting Corp., 1994 39 (SCC) , [1994] 3 S.C.R. 835. Sealing orders, or confidentiality orders as they are called under the Federal Court Rules, 1998, SOR/98-106 , have specifically, and recently, been considered by the Supreme Court of Canada in Sierra Club of Canada v. Canada (Minister of Finance) (2002), 2002 SCC 41 , 211 D.L.R. (4 th ) 193 (S.C.C.) In that case, Mr. Justice Iacobucci, at para 53, laid out a two-part test for the granting of such orders:
“(a) such an order is necessary in order to prevent a serious risk to an important interest, including a commercial interest, in the context of litigation because reasonably alternative measures will not prevent the risk; and,
(b) the salutary effects of the confidentiality order, including the effects on the right of civil litigants to a fair trial, outweigh its deleterious effects, including the effects on the right to free expression, which in this context includes the public interest in open and accessible court proceedings.”
Mr. Justice Iacobucci went on to make clear what was meant by the expression “important commercial interest”. He said, at para. 55:
In order to quality as an important commercial interest, the interest in question cannot merely be specific to the party requesting the order; the interest must be one which can be expressed in terms of public interest in confidentiality. For example, a private company could not argue simply that the existence of a particular contract should not be made public because to do so would cause the company to lose business, thus harming its commercial interests. However, if, as in this case, exposure of information would cause a breach of a confidentiality agreement, then the commercial interest affected can be characterized more broadly as the general commercial interest of preserving confidential information. Simply put, if there is no general principle at stake, there can be no important commercial interest for the purposes of this test.”
[ 20 ] In considering the two-part test it is important to consider the comments of Iacobucci J., above, where he discussed the implications of exposing information where such exposure would cause a breach of a confidentiality agreement. In such a case, as he pointed out, the commercial interest affected can be characterized more broadly as “the general commercial interest of preserving confidential information.”
[ 21 ] It is undisputed in this case that SkyLink is one of the leading international providers of global aviation, transportation and logistic services. It runs an international business which includes providing aircraft in countries enduring major natural disasters, wars and pandemics. It is a multimillion dollar business involving equipment and aircraft costing millions of dollars.
[ 22 ] When one has regard to the two-part test set out in Sierra Club , it is my view that the first part of the test is satisfied in this case given the fact that exposing the information would cause a breach of the confidentiality agreement that was entered into by Babra and Acquisition as well as the non-parties. A sealing order is required to prevent a serious risk to the important interests of Babra and the non-parties, particularly SkyLink.
[ 23 ] Counsel for Acquisition and Massad seek to distinguish this case from Sierra Club on the basis that in Sierra Club production of documents would have caused a breach of an agreement with a non-party. While I appreciate the distinction, in my view, the comments of Iacobucci J. equally apply to the fact situation of this case where the agreement was between the parties to the action as well as non-parties to the action.
[ 24 ] In so far as the second part of the test set out in Sierra Club is concerned I appreciate that only an exceptional or unusual circumstance, such as the public interest in confidentiality, will outweigh the public interest in openness. The order sought in this matter would restrict public access and scrutiny of certain documents. In my view, however, the sealing order can be granted on narrow terms, thereby still respecting the public interest in an open and accessible court proceeding: see Re: F.N., [2000] 1 S.C.J. 35.
[ 25 ] As Quigley J. explained in Bernstein et al. v. Seagrist et al. , 2011 ONSC 6058 :
Nevertheless, Iacobucci J. notes at paragraph 46 of the seminal decision in Atomic Energy of Canada Limited v. Sierra Club of Canada et al. , 2002 SCC 41 , [2002] 2 S.C.R. 522, that the court in the New Brunswick case emphasized three important elements that must be established in order to demonstrate the presence of necessity. First, the risk in question must be “a serious risk well-grounded in the evidence .” Second, the phrase “proper administration of justice” must be carefully interpreted so as to not allow the concealment of an excessive amount of information . Finally, the test requires the judge ordering the ban to consider, not only whether reasonable alternatives are available, but also to restrict the ban as far as possible without sacrificing the prevention of the risk. (my emphasis)
[ 26 ] In analyzing this case it is my view that the three important elements can be established as follows:
The risk in question with respect to the confidential information is a serious risk well grounded in the evidence;
The information that is to be concealed only relates to the NDA documents. There is a multitude of other documentation that will not be subject to the sealing order; and
The sealing order will be restricted. In order to ensure that the sealing order does not interfere with the public interest of an open and accessible trial it will remain open to the trial judge to reconsider the issue of whether or not the order ought to remain in place at the opening of the trial of the action.
The Financial Statements
[ 27 ] Although this was not made clear at the motion, it does not appear as though the financial statements form part of the NDA. If they do form part of the NDA, they should be subject to a sealing order for the above reasons. Even if the financial statements do not form part of the NDA, I am still, however, satisfied that based on the evidence with respect to these documents a sealing order is appropriate. Assessing the first part of the test set out in Sierra Club , it is my view that the financial statements are unquestionably linked to the financial state of SkyLink which resulted in the creation of the NDA concerning the underlying documents. Production of these sensitive financial statements could well undermine the purpose of the NDA and the sealing order with respect to those documents captured by the NDA. It is important to note that the financial statements were prepared in or about the time the entire transaction took place and shortly after the NDA was signed.
[ 28 ] With respect to the second part of the test set out in Sierra Club , I am of the view that the three important elements referred to above, in these reasons, equally apply to the financial statements. Furthermore, SkyLink is not a party to the litigation. In light of the type of business it operates, SkyLink’s request for confidentiality is very reasonable.
Disposition
[ 29 ] Based on the above, I therefore grant the order sought by the Defendants for relief from the NDA and an order directing the Plaintiff to disclose in his Affidavit of Documents, any and all documents which are subject to the NDA as well as the financial statements.
[ 30 ] I further order that the documents be produced under seal pending a further order of the trial judge.
[ 31 ] If the parties and non-parties cannot resolve the issue of costs they may make written submissions to me, not to exceed three pages, within 21 days from the release of these reasons.
T. McEwen J.
Released: February 29, 2012
COURT FILE NO.: CV-10-410442
DATE: 20120229
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
SURJIT BABRA Plaintiff – and – ACQUISITION SL LLC (FORMERLY M2 ACQUISITION LLC) and MARK MASSAD Defendants
REASONS FOR DECISION
T. McEwen J.
Released: February 29, 2012