CITATION: Trillys v. Pittman, 2016 ONSC 7532
COURT FILE NO.: 15-63591
DATE: 2016/12/13
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Trillys Systems Inc., Plaintiff
AND
Steven Pittman and Raymond Chabot Grant-Thornton, Defendants
BEFORE: Aitken J.
COUNSEL: Edward C. Conway, for the Plaintiff
Heather J. Williams, for the Defendants
HEARD: November 25, 2016
ENDORSEMENT
Nature of Proceedings
[1] The Plaintiff corporation seeks a sealing order in respect of a 34-page document (“the document”) containing information relating to its finances which the Plaintiff states was earlier provided to the Defendant Pittman in the course of divorce proceedings relating to Richard Laurence and his wife, Karen Bridge. Mr. Laurence is the principal of the Plaintiff corporation.
[2] The Plaintiff corporation is content for the Defendants’ lawyer and an expert retained by the Defendants to have access to the document, under conditions, but the Plaintiff corporation does not want either of the Defendants to be permitted to see the document.
[3] The information contained in the document is relevant to the defence of the Plaintiff’s action.
[4] The Defendants are prepared to consent to an order:
• Sealing the document, in the sense that the document would not form part of the public record; and
• Providing that the Defendant corporation shall not be given or shown copies of the document.
Factual Framework
[5] The Plaintiff corporation is a software and professional information technology service company. It engages in bidding on tender processes issued by public sector institutions. The president and owner of the Plaintiff corporation, Richard Laurence, has been involved in divorce proceedings with his wife, Karen Bridge, for several years. One issue that arose during the divorce proceedings was the value of Mr. Laurence’s interest in the Plaintiff corporation. Disclosure regarding the Plaintiff corporation was stalled pending agreement on the terms of a confidentiality agreement. Mr. Laurence demanded that Ms. Bridge and the Defendant Pittman, whom Ms. Bridge had retained to do a business valuation, enter a very strict and specific confidentiality agreement not usually seen in family law proceedings. Ms. Bridge and the Defendant Pittman refused to do so. At the time, the Defendant Pittman was a partner in the Defendant corporation.
[6] At a case conference on July 16, 2014 dealing with the issue of financial disclosure in the divorce proceedings, Macleod J. (then a Master) made a detailed endorsement allowing Ms. Bridge to retain the Defendant Pittman to do a business valuation of the Plaintiff corporation and stipulating how the Plaintiff’s concerns regarding confidentiality of information would be handled. Ms. Bridge and the Defendant Pittman were to sign a standard non-disclosure agreement. If either required the production of information in addition to the Plaintiff’s financial statements and tax returns, which were ordered produced, and if Mr. Laurence believed that he could not disclose such information without breaching federal legislation or his (or his company’s) obligations under the Plaintiff’s contracts with the federal government, then Mr. Laurence could designate that information “secret” and refuse to produce it pending further court order or agreement.
[7] On July 22, 2014, the Defendant Pittman submitted a detailed list of the disclosure he would require in order to be able to prepare a business valuation of the Plaintiff corporation.
[8] On August 19, 2014, Mr. Laurence’s lawyer, Edward Conway, provided to Ms. Bridge’s lawyer, Andrea Camacho, some of the documentation ordered to be produced by Macleod J. on July 16, 2014. Included in this package was a 34-page document described at the time as: “Trillys contract data, customers, payments etc.” Ms. Camacho provided the disclosure package to the Defendant Pittman on August 27, 2014. At no time prior to providing this 34-page document to the Defendant Pittman through Ms. Camacho did Mr. Laurence or the Plaintiff corporation ever designate the information contained in that document to be “secret” necessitating a further court appearance.
[9] On September 6, 2014, the Defendant Pittman wrote to Ms. Camacho stating that he could not commence the business valuation due to the inadequacy of the financial disclosure made to date. In his letter, he noted the following in regard to the disclosure he had received:
The summary of revenues since 2009 appears to be a list of client fees up to a period sometime in 2014. It has been “sanitized” to remove the names of clients in light of the sensitive nature of the clientele. Ultimately, we will have to speak to Mr. Laurence to ensure it enables us to identify client concentration, which is relevant to the valuation. Nevertheless, the information we asked for was a breakdown of revenue for the five year period from 2007 to 2011, which is the relevant period for the valuation.
Assuming that the sanitized client list provided by Mr. Laurence will meet our needs following discussion with Mr. Laurence, we will need schedules similar to the one provided but for the 2008 to 2013 fiscal years.
[10] On September 9, 2014, Ms. Camacho wrote to Mr. Laurence’s counsel requesting the additional information. The Defendant Pittman never received any further documentation from Mr. Laurence or the Plaintiff corporation.
[11] In October 2014, it came to light that both the Defendant corporation and the Plaintiff corporation were on a list of companies (“TBIPS”) that had been invited to bid on a particular government contract. In essence, this meant that the Defendant corporation was a competitor of the Plaintiff corporation. Once this information came to light, there was agreement on all sides that the Defendant Pittman should remove himself from the file and not complete a business valuation of the Plaintiff corporation in the course of divorce proceedings between Mr. Laurence and Ms. Bridge. The Defendant Pittman stated that it was the consulting arm of the Defendant corporation that was on the TBIPS list, that the Defendant Pittman had no involvement with the consulting arm of the Defendant corporation, that his office was in a different location from that of the consulting arm, that he used a separate server to store all of his electronic files, and that only he and his staff had access to that server. He also confirmed that, before accepting the retainer from Ms. Bridge, he had circulated a conflict request form within the Defendant corporation but no conflicts had been identified.
[12] On November 5, 2014, the Defendant Pittman confirmed, in writing, that he and the Defendant corporation were removing themselves from working on the file and that “all documents, data, productions and information have been returned to [Ms. Camacho] and that neither [the Defendant Pittman] nor [the Defendant corporation] have retained any copies of same”. The Defendant Pittman also confirmed that “all electronic files, including back-ups, have been destroyed”. Finally, it was confirmed that the non-disclosure agreement earlier prepared by Ms. Camacho had been returned to her.
[13] Included in the documentation returned to Ms. Camacho by the Defendant Pittman was the 34-page document in question in this litigation. The evidence is that the Defendant Pittman did not retain a copy – in any format – of this, or any other documentation, that he had received from Ms. Camacho.
[14] In approximately January 2015, the Defendant Pittman ceased to be a partner in the Defendant corporation. He now works with a different accounting firm.
[15] In October 2014, the Plaintiff retained Roger Wright as an expert to report on what critical business information could be derived from data contained in a 34-page document and an Excel spreadsheet containing a “Summary of Contracts (Trillys) 2009-2014” provided to him by the Plaintiff. Mr. Wright’s report went on to reference some of the financial information contained in the spreadsheet and to provide various calculations based on the information that he had received. Mr. Wright’s report is now in the public record, even though the Plaintiff alleges that some of the very information contained in that report is so confidential that it cannot be produced to the Defendants and requires a sealing order. The evidence is that the Defendant Pittman did not receive an Excel spreadsheet with the disclosure provided to him in the divorce proceedings, though he did receive a 34-page document.
[16] The Plaintiff commenced this litigation in March 2015. At the time this motion was heard, motions for summary judgment on behalf of the Plaintiff and the Defendants were pending. Cross-examinations on the affidavits filed in support of such motions have not yet been held. Counsel for the Defendants will not produce her clients for questioning until the Plaintiff has produced all documentation on which he is relying on the summary judgment motions.
Issues
[17] The issues on this motion are:
• Should a sealing order be granted in relation to the document?
• Should the Defendant corporation be entitled to see the document?
• Should the Defendant Pittman be entitled to see the document?
Legal Framework
[18] Under s. 137(1) of the Courts of Justice Act, R.S.O. 1990, c. C. 43 (“Act”), a person is entitled to see any document filed in a civil proceeding in a court, unless legislation or an order of the court provides otherwise. Under s. 137(2) of the Act, a court may order that any document filed in a civil proceeding be treated as confidential, sealed, and not form part of the public record.
[19] Under r. 30.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, every document relevant to any matter in issue in an action that is, or has been, in the possession, control, or power of a party to the action shall be disclosed and shall be produced for inspection if requested. Where privilege is claimed in regard to a document, the party claiming privilege may not use the document at the trial, except to impeach the testimony of a witness or with leave of the trial judge. Under r. 53.08(1), leave shall be granted on such terms as are just and with an adjournment if necessary, unless to do so would cause prejudice to the opposite party or would cause undue delay in the conduct of the trial.
[20] Under r. 30.1.01(3): “all parties and their lawyers are deemed to undertake not to use evidence or information to which this Rule applies for any purposes other than those of the proceeding in which the evidence was obtained”. This rule applies to evidence obtained pursuant to documentary discovery and examination for discovery.
[21] In Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, [2002] 2 S.C.R. 522, at para. 53, the Supreme Court of Canada identified the fundamental question on a motion of this sort as being whether the right to freedom of expression should be compromised in the circumstances of the case. A confidentiality order should only be granted when:
(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.
[22] These two requirements must be met even in circumstances where all litigants consent to the granting of a sealing order (Himel v. Greenberg, 2010 ONSC 2325, at para. 55).
[23] Three elements are subsumed under the first branch of the test. First, the risk in question must be real and substantial, in that the risk is well grounded in the evidence, and poses a serious threat to the commercial interest in question. Second, “in order to qualify 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 a public interest in confidentiality.” Third, “the phrase ‘reasonably alternative measures’ requires the judge to consider not only whether reasonable alternatives to a confidentiality order are available, but also to restrict the order as much as is reasonably possible while preserving the commercial interest in question” (Sierra, at paras. 54-57).
Analysis
[24] Any documentation relating to the Plaintiff corporation that was provided to the Defendant Pittman by Mr. Laurence was always treated by Mr. Laurence and by the Defendant Pittman as confidential documentation. It was the subject of endless negotiations between counsel for Mr. Laurence and Ms. Bridge, not as to whether or not it was confidential, but as to the specific wording required in a confidentiality agreement in order to ensure that it remained confidential. There was no dispute at the case conference before Macleod J. during the course of matrimonial proceedings between Mr. Laurence and Ms. Bridge that the documentation in question was confidential, and Macleod J. ordered Ms. Bridge to sign a standard form non-disclosure agreement proposed by Ms. Bridge’s counsel – an agreement that also would be binding on the Defendant Pittman. The documentation was disclosed to the Defendant Pittman on the basis that it was confidential and its confidentiality would be protected by a written agreement and the deemed undertaking rule. The Defendants were prepared to provide such a written agreement to the Plaintiff – albeit in a format which the Plaintiff considered inadequate.
[25] The context in which the Plaintiff corporation does business is the highly competitive and regulated field of government contracts where pre-screened competitors bid in response to Requests for Proposals issued by the government. The bulk of the Plaintiff’s clients are national security connected government organizations requiring high level security clearances for the Plaintiff’s employees and onerous security and confidentiality protocols. There were confidentiality agreements between the Plaintiff corporation and the federal government in regard to all contracts entered into by those parties, and the information provided to the Defendant Pittman included relating to federal government contracts.
[26] There is evidence, yet to be tested, that the documents provided by the Plaintiff to its expert, Mr. Wright, enabled Mr. Wright to perform calculations that could provide competitors of the Plaintiff corporation with information concerning some of its billing rates. That information, if in the hands of a competitor, could pose a threat to the Plaintiff’s commercial interests. It could also indirectly provide information to third parties about government contracts with the Plaintiff – something prohibited under the confidentiality agreements between the Plaintiff corporation and the federal government. There is evidence, again untested, that one of the documents provided to Mr. Wright was the 34-page document that had earlier been provided to the Defendant Pittman and that this is one and the same as the document that is the subject of this litigation and the subject of the confidentiality orders now being sought by the Plaintiff.
[27] In this context, I find that a confidentiality order is necessary to prevent a serious risk to the public interest of maintaining the integrity of the government procurement process and maintaining confidentiality in regard to sensitive government information relating to security issues. Although these public interests were not specifically pleaded in the Plaintiff’s motion materials, they were raised in the affidavit materials filed in support of the motion.
[28] The possibility of using various levels of confidentiality orders was raised during argument on this motion. The Plaintiff is seeking a sealing order which would remove the document from the public domain and prevent any potential competitor of the Plaintiff from accessing it. There does not appear to be any reasonable alternative to such an order. The evidence is that the 34-page document provided to the Defendant Pittman by Mr. Laurence had already been redacted by removing the names of clients. Similarly, the document provided to Mr. Wright by the Plaintiff was redacted. Despite the redaction, there is some evidence in the form of the Wright report to the effect that valuable commercial information could be obtained from the documents provided to Mr. Wright (which, according to the Plaintiff’s evidence, included the document). Thus a sealing order to prevent the document falling into the hands of a competitor would appear necessary.
[29] In regard to the issue of proportionality, the salutary effects of the confidentiality order, including the impact on the litigants’ right to a fair trial, must be weighed against the deleterious effects of the confidentiality order, including the impact on freedom of expression and the principle of open and accessible court proceedings.
[30] Here, the litigation is about the document. It is hard to imagine how the Plaintiff could pursue this litigation in the absence of a sealing order because, to do so, would require the Plaintiff to make the document public and risk jeopardizing its commercial interests and reneging on its obligations under confidentiality agreements with its clients. That would not be fair to the Plaintiff and would undermine society’s interest in allowing litigants the opportunity to pursue their civil rights in court. In the same vein, the sealing order would ensure that the subject-matter of the litigation, namely the document in question, together with the parties’ handling of it and the impact of such handling, could be fully canvassed in court. This is supportive of freedom of expression and the search for the truth through the trial process. The sealing order would have minimal impact on the open court principle in that the public would still have access to the court room during proceedings and would simply not have access to one document of a commercial nature. The document does not impact on political issues of importance to the community at large. It is not the type of document in which the public, writ large, is interested. In fact, it is hard to identify who, aside from the Plaintiff’s competitors, would have a genuine and serious interest in seeing the document, beyond the general societal interest to be fully informed of what transpires in our court rooms.
[31] In addition to a sealing order affecting the public’s access to the document, the Plaintiff is seeking an order preventing both Defendants from seeing the document. This is a highly unusual order. Although the Federal Court Rules, SOR/98-106 expressly allow for a “counsel eyes only” order (r. 151(1), 152(2)(a)), and although such orders have been made in Federal Court matters in the past, there is no corresponding rule in the Rules of Civil Procedure, and I have not been referred to cases in the Ontario Superior Court of Justice in which such orders have been made in civil proceedings (in the absence of parallel Federal Court proceedings and confidentiality orders). Although this court has the discretion to make such an order, it should be done sparingly.
[32] The Defendant corporation is prepared to consent to an order to the effect that it shall not be allowed to see or have copies of the document. Presumably the Defendant corporation is consenting to such an order because it and the Plaintiff corporation are competitors, and it accepts that the Plaintiff would not want the information in the document to be available to competitors. Implicit in the consent of the Defendant corporation is its acceptance that it does not need to see the document in order to properly defend this action. The Plaintiff is not asking for an order preventing counsel for the Defendant corporation from seeing the document. Counsel for the Defendant corporation will have the opportunity to review the document and question witnesses in its regard. This compromise allows limited access to the document in a way that respects, albeit to a very limited extent, the public’s right of access to documents in court files while at the same time protecting the public interest in the confidentiality of commercially sensitive documents and in the protection of the integrity of the government procurement process.
[33] The Defendant Pittman does not consent to an order allowing only his counsel to see the document. There is good reason for the Defendant Pittman to take this position. He has already seen a 34-page document as part of the financial disclosure made in the divorce proceedings. The Plaintiff states that the document that the Defendant Pittman saw was one and the same as the document for which it is seeking a “counsel eyes only” order. In order for the Defendant Pittman to fully answer the Plaintiff’s claim, he needs to see the document to confirm whether it was the 34-page document that he was earlier provided. He also needs to refresh his memory as to the specific contents of that document. The Plaintiff’s counsel has already attempted to cross-examine the Defendant Pittman on his affidavit filed in support of the summary judgment motions, and he intends to pursue cross-examinations after the hearing of this interlocutory motion, in part, to challenge the credibility of the Defendant Pittman and the reliability of his evidence. It would be grossly unfair to the Defendant Pittman to be cross-examined on a document he cannot now see and may only have seen briefly more than two years ago.
[34] There is no evidence that the Defendant Pittman is, or will be, involved in any activities in competition with the Plaintiff. He is no longer associated with the Defendant corporation. There is no evidence that any confidential information relating to the Plaintiff corporation that was received by the Defendant Pittman was made available to anyone else at the Defendant corporation or was improperly used by the Defendant Pittman or the Defendant corporation. The Defendant Pittman is bound by the terms of the order of Macleod J. pursuant to which disclosure was first made in the Laurence/Bridge divorce proceedings. He is subject to his professional rules of conduct regarding confidentiality. Finally, he is bound by the deemed undertaking rule (r. 30.1.01(3) of the Rules of Civil Procedure) and the implied undertaking rule under common law (Lac d’Amiante du Québec Ltée v. 2858-0702 Québec Inc., 2001 SCC 51, at para. 60).
[35] The Plaintiff has not established that a “counsel eyes only” order preventing the Defendant Pittman from seeing the document is necessary in order to prevent a serious risk to an important commercial interest, let alone an important public confidentiality interest.
[36] Furthermore, in order to maintain trial fairness, the Defendant Pittman must be afforded the opportunity of seeing the document and responding to all allegations made by the Plaintiff in its regard. The Plaintiff is basing its case against the Defendant Pittman entirely on that document. In the normal course, for obvious reasons, a party to litigation is entitled to see all documents on which every other party to the litigation is relying (r. 30.02 of the Rules of Civil Procedure), and certainly must see a document that forms the basis of the opposing party’s case. It would bring the administration of justice into disrepute to prevent the Defendant Pittman from seeing a key document in this case on the grounds that this level of confidentiality is required to protect the confidentiality rights of the Plaintiff when such a need is not clearly established by the evidence and a sealing order and non-disclosure order vis-à-vis the Defendant corporation more than satisfies the Plaintiff’s commercial interests, its confidentiality concerns and obligations, and the public interest in protecting the federal government procurement process.
Disposition
[37] The Plaintiff’s motion for a sealing order in regard to the document is granted, thereby prohibiting public access to the document.
[38] The Plaintiff’s motion for an order denying access to the document to the Defendant corporation, but allowing access to the document to counsel for the Defendant corporation, is granted, with the consent of the Defendant corporation.
[39] The Plaintiff’s motion for an order denying access to the document to the Defendant Pittman is denied. The document shall be produced to the Defendant Pittman and his counsel within 7 days of this order.
[40] Production of the document pursuant to this order is covered by the deemed undertaking rule set out in r. 30.1.01(3) of the Rules of Civil Procedure as well as by the implied undertaking of confidentiality at common law.
Aitken J.
Date: December 13, 2016
CITATION: Trillys v. Pittman, 2016 ONSC 7532
COURT FILE NO.: 15-63591
DATE: 2016/12/13
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: TRILLYS SYSTEMS INC., Plaintiff
AND
STEVEN PITTMAN AND RAYMOND CHABOT GRANT THORNTON, Defendants
BEFORE: Aitken J.
COUNSEL: Edward C. Conway, Counsel, for the Plaintiff
Heather J. Williams, Counsel, for the Defendants
ENDORSEMENT
Aitken J.
Released: December 13, 2016