CITATION: 2249492 Ontario Inc. v. Donato, 2017 ONSC 4975 COURT FILE NO.: CV-16-11394-CL CV-17-578440-CL
DATE: 20170822
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2249492 ONTARIO INC.
Applicant/ Appellant in Appeal
– and –
PAUL DONATO, ANDREA DONATO, 2258823 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1573091 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1592722 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1683794 ONTARIO LIMITED and any affiliated bodies corporate and their shareholders and 2249487 ONTARIO LIMITED d.b.a. BALLROOM
Respondents/ Respondents in Appeal
Arthur Hamilton and Ted Frankel, for the Applicant/Appellant in Appeal
Gerald L.R. Ranking and Kimberly Potter, for the Respondents/Respondents in Appeal
HEARD: August 11, 2017
Cavanagh J.
Reasons for judgment
Introduction
[1] The parties participated in an arbitration (the “Arbitration”) before the Honourable Donald R. Cameron, Q.C. (the “Arbitrator”) who released the arbitral award on January 5, 2017 (the “Arbitral Award”). In two separate decisions issued March 24 and June 8, 2017 (collectively, the “Confidentiality Decision”) the Arbitrator found the Arbitral Award to be confidential based upon the terms of the Arbitration Agreement that the parties entered into on October 17, 2016 (the “Arbitration Agreement”).
[2] 2249492 Ontario Inc. (“224”) appealed the Confidentiality Decision and, for reasons given in a decision that I am releasing with my decision on the within motion, I dismissed 224’s appeal. The appeal was heard on the same day as I heard this motion.
[3] The moving parties on this motion, Paul Donato, Andrea Donato, 2258823 Ontario Inc., 1573091 Ontario Inc., and 1592722 Ontario Inc. (the “Donato Parties”), move for an order (a) enforcing the Confidentiality Decision, and (b) sealing the Arbitral Award such that it does not form part of the public record for (i) 224’s appeal of the Confidentiality Decision, (ii) the appeal by the Donato Parties and 224’s cross-appeal of the Arbitral Award; and (iii) 224’s application for an order enforcing the Arbitral Award.
[4] For the following reasons, the Donato Parties’ motion is dismissed.
Additional Background Facts
[5] The parties agreed in paragraph 1 of the Arbitration Agreement that the Award may be appealed “on questions of law, questions of fact, and/or questions of mixed fact or law without leave of the court”.
[6] Paragraph 6 of the Arbitration Agreement provides “[t]he parties agree to be bound by the ADR Chambers Arbitration Rules, as amended from time to time …”.
[7] Rule 16 of the ADR Chambers Arbitration Rules (the “ADR Rules”) provides:
- PRIVACY AND CONFIDENTIALITY OF ARBITRATION
16.1 Subject to Rule 16.2, all arbitrations held under these Rules are private and confidential. The Parties and their Representatives may attend at the arbitration. Other persons may attend only with the consent of the Arbitral Tribunal. The Arbitral Tribunal may require the sequestering of any witness or witnesses during the testimony of other witnesses.
16.2 No information concerning the existence of the arbitration or anything which occurs or is disclosed within the arbitration shall be disclosed or used outside of the arbitration proceedings or for any other purpose by a Party except:
a. for the purpose of conducting the arbitration itself including, where necessary and appropriate, interviewing and preparing witnesses, obtaining document and other support services, and the administration of the arbitration;
b. in connection with an application to a court for interim relief or to set aside, recognize or enforce an award;
c. where a Party is required to do so by law or by a court or competent regulatory body; or
d. for educational purposes, provided the disclosure does not indicate the names of any Party or sufficient facts to allow the listener to determine the identity of a Party or identify the dispute.
16.3 Where a Party makes disclosure as permitted by Rule 16.2 it shall only do so:
a. by disclosing no more than what is legally required;
b. by obtaining, where possible, an undertaking or order of confidentiality consistent with the Rules; and
c. by furnishing to the Arbitral Tribunal and to the other Party, if the disclosure takes place during the arbitration, or to the other Party alone, if the disclosure takes place after the termination of the arbitration, details of the disclosure and an explanation of the reasons for it.
[8] In the Confidentiality Decision the Arbitrator granted the following relief:
a. a declaration that the Award, all materials delivered in the course of the arbitration after October 16, 2016, and any written and oral communications made in the course of the arbitration after October 16, 2016, are private and confidential, save and except for the Order and other disclosures relative to the hearing before Mr. Justice Newbould on November 29, 2016 and steps taken in the Arbitration to implement or enforce the Award;
b. a declaration that the terms of the ADR Rules, which are incorporated by reference in paragraph six of the Arbitration Agreement, form part of the Arbitration Agreement and that the Claimant is bound by s. 16 of the ADR Rules; and
c. a permanent injunction enjoining the Claimant, and any persons acting under the instructions of the Claimant, including the Claimant’s counsel Cassels Brock, from bringing an application in court to set aside, recognize or enforce the Award except as permitted by s. 16.2 and 16.3 of the ADR Rules.
Analysis
[9] In Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, the Supreme Court of Canada confirmed that one of the underlying principles of the judicial process is public openness, both in the proceedings of the dispute, and in the material that is relevant to its resolution, and addressed the important issues of when, and under what circumstances, a confidentiality order should be granted: Sierra Club, at para. 1.
[10] 224 submits that the Donato Parties have not satisfied the requirements for a confidentiality, or sealing, order established by Sierra Club and that this motion must be dismissed.
[11] The Donato Parties submit that, out of respect for the autonomy of the arbitral process, courts should enforce confidentiality provisions in an arbitration agreement with the same force as they enforce the parties’ agreement to arbitrate. The Donato Parties submit that to do otherwise would enable one party to unilaterally abrogate its contractual obligations as, they submit, 224 is attempting to do in this case. The Donato Parties submit that they satisfy the Sierra Club requirements for the confidentiality order they seek.
[12] In Sierra Club, the appellant sought a confidentiality order to protect the confidentiality of documents that were the property of authorities of a foreign state and that the appellant was bound not to disclose by its commercial interests (and obligations). If the confidentiality order was denied, the appellant would have had to withhold the documents which would have hindered its ability to make full answer and defence in the litigation.
[13] Iacobucci J., writing for the court, set out, at para. 53, how the test for whether a confidentiality order ought to be granted should be framed in a case such as the one before it:
A confidentiality order under R. 151 [of the Federal Court Rules] 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.
[14] Iacobucci J. added that three important 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, courts must be cautious in determining what constitutes an “important commercial interest.” 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 Club, at paras. 54-57.
[15] With respect to the phrase “important commercial interest”, Iacobucci J. added the following clarification:
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. 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 interests” for the purposes of this test. Or, in the words of Binnie J. in Re N. (F.), [2000] 1 S.C.R. 880, 2000 SCC 35 (S.C.C.), at para. 10, the open court rule only yields “where the public interest in confidentiality of ways the public interest in openness” (emphasis added by [Iacobucci J.]).
Iacobucci J. observed that in the balancing that takes place under the second branch of the rule, courts must be alive to the fundamental importance of the open court rule.
[16] A question similar to the one before me on this motion was addressed by Farley J. in 887574 Ontario Inc. v. Pizza Pizza Ltd., 1994 CarswellOnt 1214. In that case, a party to a commercial arbitration that was confidential until the final award was filed in court (by agreement, by order of the arbitrator, and by a court order) moved for a sealing order covering appeal materials in respect of the appeal and cross-appeal of the arbitral award to the court. The moving party did not adduce evidence that any particular documents were confidential and should be sealed pursuant to s. 137(2) of the Courts of Justice Act, but relied on the court to make an order so as to extend the confidentiality, which the parties had in their arbitration, to the appeal. Farley J. observed that the parties clearly contemplated the possibility of appeal to court, and both availed themselves of that opportunity where, he assumed, each side fully recognized the openness of court proceedings. Farley J. saw no public policy grounds for making an order extending the confidentiality that applied to the arbitration to the appeal, and dismissed the motion: Pizza Pizza, at paras. 11, 12, and 14. Leave to appeal to the Court of Appeal was refused.
[17] 224 submits that the decision of Farley J. in Pizza Pizza has been repeatedly cited and consistently followed by courts in Ontario and that it should be followed in this case. In support of this submission they cite Imperial Oil Ltd. v. Canada (Director appointed under the Canada Business Corporations Act), 1996 CarswellOnt 2315 at para. 9; Kaybar Fluid Power Ltd. v. Danfoss A/S, [2000] O.J. No. 1692, at para. 8; Kanda Tsushin Kogyo Co. v. Coveley, 1998 CarswellOnt 1412, at para. 9; and Dodd v. Cossar, 1998 CarswellOnt 289, at para. 6-8.
[18] With respect to the Pizza Pizza case, the Donato Parties submit:
a. Pizza Pizza is distinguishable because in that case the Arbitrator’s confidentiality order provided that the award would be made public when the matter was in court.
b. Pizza Pizza was decided in the early days of the expansion of commercial arbitration in Ontario and Canada and, therefore, does not and cannot take into account the evolution of commercial arbitration in these jurisdictions over the past twenty-three years.
c. Since Pizza Pizza was decided, Canadian courts have continuously confirmed Canada’s status as an “arbitration-friendly” jurisdiction and that Canadian courts are adopting a more nuanced, case-by-case, approach to requests for sealing orders arising out of arbitral proceedings that balances the two competing public policy goals of, on the one hand, a public court process and, on the other hand, encouraging arbitration and the parties’ expectations of privacy. The Donato Parties cite the decision in Telesat Canada v. Boeing Satellite Systems International Inc., 2010 ONSC 22 as an example of this approach.
[19] In Telesat, Boeing moved for a sealing order covering an extensive amount of documents filed by Telesat that were comprised of confidential and proprietary information, including arbitral pleadings that contained commercially sensitive, confidential information. Telesat had proposed to file the documents in its application to have the court set aside an interlocutory order of the arbitral tribunal in the arbitration that was then proceeding between the parties. It was accepted by Hackland R.S.J. that Boeing had established that disclosure of much of the documentation would undermine Boeing’s interests in the commercial confidentiality of its operations and that such disclosure would be likely to undermine the public policy in Ontario of encouraging arbitrations by defeating the parties’ reasonable expectations of privacy in an ongoing arbitration. Hackland R.S.J. concluded that the Sierra Club requirements had been met for some of the documents in issue, and he granted a limited sealing order. He concluded that a properly limited confidentiality order would promote the modern approach to the autonomy of the arbitral process and that it would run contrary to the public interest in favour of encouraging private dispute resolution if a party seeking procedural review under the Arbitration Act could defeat the confidentiality of an ongoing arbitration and thereby undo one of the critical advantages of the arbitration process: Telesat, at paras. 1, 2, 17, 20, and 28.
[20] In Telesat, however, unlike in this case, the concern was about disclosure of documents defeating the confidentiality of an ongoing arbitration, which was to be confidential. In this case, the Arbitration is not ongoing. The Donato Parties do not submit that Telesat is authority that directly supports their entitlement to the confidentiality order they seek, but they submit that the reasons of Hackland R.S.J. reflect the more modern approach of courts in Ontario of encouraging arbitrations and preserving the autonomy of the arbitration process, including the parties’ expectations of privacy and confidentiality.
[21] Canadian courts have endorsed the use of arbitration as a dispute resolution mechanism and now encourage its use: Seidel v. TELUS Communications Inc., 2011 SCC 15, at para. 89. I accept that there is a legitimate public policy interest in encouraging private dispute resolution through arbitrations by protecting the autonomy of the arbitral process: Telesat, at para. 26. In order to obtain a confidentiality order, the Donato Parties must, however, still satisfy the Sierra Club test.
[22] With respect to the first branch of the Sierra Club test, the Donato Parties submit that a confidentiality order is necessary to prevent a serious risk to an important interest, the public interest of encouraging arbitrations and respecting the parties’ agreement that the arbitration be private and confidential. They submit that reasonably alternative measures will not prevent the risk. With respect to the second branch, the Donato Parties submit that the salutary effects of a confidentiality order outweigh the public interest in open and accessible court proceedings.
[23] I do not agree that a confidentiality order is needed in order for the court to respect the parties’ agreement that the Arbitration would be private and confidential. The parties to the Arbitration Agreement contracted that the Arbitration would be private and confidential. They did not contract, nor could they, that the record of proceedings on the Arbitration would necessarily remain private and confidential if one or both parties were to appeal the Arbitral Award to the court, or otherwise apply to the court for relief. The parties could have negotiated an arbitration agreement that provided that the award would be final and not subject to appeal, and thereby significantly reduced the risk of disclosure through court proceedings. Alternatively, they could have negotiated for a private and confidential appeal, outside of court, before a privately selected appeal panel. The Arbitration Agreement in this case provides for broad rights of appeal. It does not provide for appeals to a private appeal panel.
[24] The Arbitration Agreement provides for an appeal to the court, and one of the exceptions to the agreement for confidentiality is “in connection with an application to a court … to set aside, recognize or enforce the award”. Another exception is where a party is required to disclose information which occurs or is disclosed within the Arbitration “by law or by a court”. The risk that a confidentiality order may not be made on an appeal is, therefore, one that the parties to the Arbitration Agreement recognized when it was made. [^1]
[25] I agree with the Donato Parties’ submission that the court should approach a request for a confidentiality order, in the context of an award made in a private and confidential arbitration, on a case-by-case basis. The essence of the Donato Parties’ submission is, however, that a confidentiality order should be made as a matter of public policy in cases where the parties to the arbitration have agreed that it will be private and confidential, and where they seek a confidentiality order after the award has been made, to prevent disclosure of the award and materials delivered in the arbitration in an appeal or other court proceedings, perhaps subject to modification or limitation by the court that hears the appeal or other proceeding.
[26] The Donato Parties have not pointed to any particular confidential information that is included in the appeal materials, or in the Arbitral Award to be filed, and explained why the public interest favours a confidentiality order in respect of such information. The Donato Parties have simply included evidence, on information and belief, that publication of the Arbitral Award could tarnish their reputations, and they submit that the Arbitral Award contains sensitive commercial and personal information about the Donato Parties and their business, without any specificity. The Arbitral Award that, the Donato Parties submit, contains such information was not included in the materials before me on this motion.
[27] If the confidentiality order sought by the Donato Parties were to be granted simply on the ground that the court proceedings involve a private and confidential arbitration, and that the public interest favours such orders to promote arbitrations and protect the expectations of privacy and confidentiality of the parties to the arbitration, the consequence would be that, in many such cases, one or more of the parties could be expected to seek a sealing order. In this regard, I agree with the statement made by Spence J. in Publow v. Wilson, (1994), 1994 CanLII 7421 (ON SC), 36 C.P.C. (3d) 33 (ONSC), at para. 18, that widespread granting of sealing orders “could tend to diminish public confidence in the administration of justice”.
[28] I do not agree that a confidentiality order is necessary, generally, in order to prevent a risk to the interests of parties to a private and confidential arbitration in having such privacy and confidentiality maintained in subsequent court proceedings or that reasonably alternative measures will not prevent the risk. This risk can be addressed on a case-by-case basis on a record that allows the court to identify the particular information that a party seeks to protect from public disclosure as confidential, and that would allow the court to weigh the interest in protecting the information from disclosure against the public interest in open and accessible court proceedings. The Donato Parties did not provide evidence, in this case, to support the existence of a serious risk to an important interest in respect of any particular information. In my view, the Donato Parties have not satisfied the first branch of the Sierra Club test.
[29] With respect to the second branch of the test in Sierra Club, I am mindful of the statement by Iacobucci J. that a confidentiality order involves infringement on freedom of expression and that, in undertaking the balancing exercise under this branch, courts must be alive to the fundamental importance of the open court rule. I see no public policy grounds on the record before me for making an order extending, generally, the privacy and confidentiality that applied to the Arbitration to the court proceedings that relate to the Arbitral Award or the Confidentiality Decision. In my view, the Donato Parties have not shown that the salutary effects of the broad confidentiality order that is requested in this case, that would markedly change the law that has previously been applied in Ontario (reflected in, for example, Pizza Pizza), outweigh its deleterious effects. The Donato Parties have not, in my view, satisfied the second branch of the Sierra Club test.
[30] Because of my conclusion that the requirements of the Sierra Club test have not been met, I do not need to address the submissions made by 224 that the Donato Parties waived any entitlement to confidentiality of the Arbitral Award, such that its enforcement and appeals of the Arbitral Award cannot be confidential.
Disposition
[31] For the foregoing reasons, the Donato Parties’ motion is dismissed.
[32] If the parties are unable to resolve costs, 224 may make brief written submissions within 20 days, the Donato Parties may make brief responding submissions within 15 days of receipt of 224’s submissions and, if so advised, 224 may make brief reply submissions within 5 days thereafter.
Cavanagh J.
Released: August 22, 2017
CITATION: 2249492 Ontario Inc. v. Donato, 2017 ONSC 4975 COURT FILE NO.: CV-16-11394-CL CV-17-578440-CL
DATE: 20170822
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2249492 ONTARIO INC.
Applicant/ Appellant in Appeal
– and –
PAUL DONATO, ANDREA DONATO, 2258823 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1573091 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1592722 ONTARIO INC. and any affiliated bodies corporate and their shareholders, 1683794 ONTARIO LIMITED and any affiliated bodies corporate and their shareholders and 2249487 ONTARIO LIMITED d.b.a. BALLROOM
Respondents/ Respondents in Appeal
REASONS FOR JUDGMENT
Cavanagh J.
Released: August 22, 2017
[^1]: The Donato Parties submit that Rule 16.3 of the ADR Rules (to which the parties agreed to be bound in the Arbitration Agreement) and the Confidentiality Decision provide that 224 shall only make disclosure [of information which otherwise would be confidential] in connection with a court application by “obtaining, where possible, an undertaking or order of confidentiality consistent with the [ADR] Rules”. 224 submits that an application to set aside an award is different from an appeal, and that it did not contract to obtain, where possible, a confidentiality order on an appeal of the Arbitral Award. I do not need to decide whether 224 contracted to obtain, where possible, such an order because the Donato Parties have also appealed, and they are seeking to obtain a confidentiality order on this motion.