COURT FILE NO.: CV-18-605247-00CL

DATE: 2022-06-08

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: EDGETECH HVAC SERVICES LTD., 2307188 ONTARIO INC., 2399704 ONTARIO INC., JASWINDER SINGH UBHI, 9123164 CANADA INC., JAMES HUANG and SURINDERJIT SINGH, Plaintiffs

AND:

CHARANJIT ANEJA, ANEJA HOLDINGS INC., 2388792 ONTARIO LTD., ANEJA PROFESSIONAL CORPORATION, RANDY TAYLOR, SHAYNE TAYLOR, MEL RAVINSKY, NUTECH FIRE PREVENTION INC., NEWLOOK CAPITAL INDUSTRIAL SERVICES LP and NEWLOOK INDUSTRIAL SERVICES GP I INC., Defendants

BEFORE: Justice Cavanagh

COUNSEL: Michael Bookman for the Plaintiffs Beverley C. Jusko for the Defendants Nutech Fire Prevention Inc., Newlook Capital Industrial Services LP, Newlook Industrial Services GP I Inc. and Shayne Taylor Gary Boyd for Defendant Melvin Ravinsky

HEARD: April 13, 2022

ENDORSEMENT

Introduction

[1] The plaintiff Edgetech HVAC Services Ltd. (“Edgetech”) appeals from the order of Associate Justice Graham dated December 14, 2021 dismissing its motion for a protective order over the production of Edgetech’s financial statements to the defendant Nutech Fire Prevention Inc. (“Nutech”).

[2] Edgetech and Nutech are competitors in the gas detection business.

[3] On its motion for a protective order that would limit disclosure of Edgetech’s financial statements to Nutech’s external counsel and experts retained by counsel for this action, Edgetech submitted that evidentiary record showed that its financial statements contain confidential, proprietary, and commercially-sensitive information. Edgetech submitted that it had satisfied the test for a protective order to be granted.

[4] The motion judge held that Edgetech had not met the heavy onus required to persuade the court to make an order that would deprive the Nutech defendants of the ability to, themselves, review Edgetech’s financial statements. The motion judge dismissed Edgetech’s motion for a protective order.

[5] In addition to its appeal from the Order of the motion judge, Edgetech moves for leave to admit fresh evidence on this appeal.

[6] For the following reasons, Edgetech’s motion and appeal are dismissed.

Factual Background

[7] Edgetech is an authorized sales and service distributor for gas detection products. The other plaintiffs are Edgetech shareholders and Edgetech-related companies.

[8] The defendant, Shayne Taylor, is a former employee of Edgetech. His employment with Edgetech ended on or around March 24, 2017. Since February 2018, Shayne Taylor has been employed by Nutech.

[9] Edgetech (and other plaintiffs) commenced this action against Shayne Taylor and Nutech (among others) in February 2019 alleging that Shayne Taylor was in possession of Edgetech’s confidential information and had been using it to solicit Edgetech’s clients to Nutech.

[10] Edgetech’s representative, Jaswinder Singh Ubhi, was examined for discovery on October 13, 2020. On his examination for discovery, Mr. Ubhi was asked to produce Edgetech’s financial statements and HST and PST returns from 2017 to the date of trial in order to substantiate Edgetech’s claim for damages. On his examination for discovery, Mr. Ubhi took this question under advisement. Edgetech refused to produce these financial statements and returns.

[11] Nutech and another defendant, Randy Taylor, moved for an order requiring Edgetech to produce financial statements from 2017 to trial. Edgetech opposed this motion and moved for a protective order (that would limit disclosure of the financial records to disclosure on a “counsel’s eyes only” basis) if the statements were ordered to be produced.

[12] This motion was heard on September 23, 2021. By order dated September 23, 2021, Associate Justice Graham ordered production of Edgetech’s financial statements from 2017 onwards. The motion judge held that production is subject to any protective order. The hearing of Edgetech’s motion for a sealing and protective order was adjourned until December 1, 2021.

[13] December 1, 2021, the motion judge heard Edgetech’s motion for a sealing and protective order. The parties consented to the sealing order. Nutech opposed the motion for a protective order.

[14] On December 14, 2021, the motion judge released his decision granting a sealing order but refusing to grant a protective order.

[15] Edgetech brings this appeal from the motion judge’s December 14, 2021 Order.

[16] Edgetech also brings a motion for an order that certain evidence be admitted as fresh evidence on this appeal.

Analysis

[17] The issues on this appeal and motion are:

a. Did the motion judge err in law by misstating and misapplying the test for granting a protective order?

b. Did the motion judge make a palpable and overriding error in his consideration and understanding of the evidence in the motion record, such that the appeal should be allowed and a protective order granted?

c. Should Edgetech’s motion for an order that fresh evidence be admitted on this appeal be granted? If so, when the fresh evidence is considered together with the motion materials that were before the motion judge, should the Order of the motion judge be set aside and a protective order made in its place?

Standard of Review

[18] Associate judges are subject to the same standard of review as Superior Court judges. A decision of an Associate Judge will be interfered with on an appeal if he or she made an error of law, exercised his or her discretion on the wrong principles, or misapprehended the evidence such that there is a palpable and overriding error.

[19] Where the Associate Judge has erred in law, the proper standard of review is correctness. Where the Associate Judge has misapprehended the evidence, the proper standard of review is whether there was a palpable and overriding error. See Zeitoun v. Economical Insurance Group, 2008 CanLII 20996 (Ont. Div. Ct.), at paras. 40-41; aff’d 2009 ONCA 416.

Did the motion judge err in law by misstating and misapplying the test for granting a protective order?

[20] Edgetech submits that the motion judge erred by misstating and misapplying the test for granting a motion for a protective order. Edgetech submits that having done so, the motion judge erred in his consideration and understanding of the evidence and misapplied the evidence.

[21] In Sinopoli v. General Motors Company, 2021 ONSC 244, Dunphy J., at para. 4, set out the factors to be applied on a motion for a protective order, quoting from the decision of Master Glustein (as he then was) in Eisses v. CPL Systems Canada Inc., 2008 CanLII 1946, at para. 5. In Eisses, Master Glustein described these factors as the principles that apply to the court’s analysis of whether to grant a protective order.

[22] These principles, as stated in Eisses and set out in Sinopoli, are:

(i) The presumption is that the parties ought to have access to the other side’s productions. Consequently, the burden of demonstrating that the court ought to deviate from such a presumption rests upon the person who would deny the existence of that right.

(ii) Accordingly, a confidentiality order is exceptional in nature.

(iii) However, the court has inherent jurisdiction, as well as jurisdiction under section 137 (2) of the Courts of Justice Act and Rule 30.11 of the Rules of Civil Procedure to grant an order restricting the production of documents in circumstances where unlimited production will prejudice a party.

(iv) An order restricting the access to and use of documents in a proceeding may be made if a party would risk serious financial harm should the information be available to a competitor. The making of such an order is designed to strike a balance between the disclosure necessary for the conduct of an action and a party’s bona fide right to protection of confidential and sensitive information.

(v) To be entitled to a restrictive order the moving party must show that the risk of harm is real and substantial. Speculation is not sufficient. An adequate factual basis must be provided.

(vi) If the court is satisfied that the information is confidential, that it is commercially sensitive, and that a competitor could obtain an unfair advantage through its release, the moving party will be prima facie entitled to a protective order unless the responding party would be unduly prejudiced by such an order.

(vii) Where the information at issue is such that disclosure would allow a competitor to improve its competitive position, it is appropriate that a protective order be issued to guard against such effect.

(viii) Where the information that is at issue is such that it would allow a competitor to improve its competitive position, it is not enough to suggest that the parties are protected by the deemed undertaking will, because this rule would not prevent the use of the information by a competitor so long as it does not use the information to commence a new lawsuit, but simply seeks to improve its competitive position.

(ix) Further, the deemed undertaking rule does not apply to evidence filed in court or referred to in the hearing. Also, the rule only applies to parties, their counsel and experts, but not to 3^rd parties that would have access to material filed with the court.

[23] In Sinopoli, at para. 5, Dunphy J. added the following as additional considerations on a motion for a protective order:

a. The “open court” principle is a “cornerstone of the common law” and is a principle not of convenience but of necessity.

b. It follows from this that departures from this principle should be undertaken only in clear cases and to the minimum extent necessary after an appropriate balancing of interests.

c. Overbroad and blanket orders are to be avoided, particularly where applied to hypothetical situations as opposed to actual documents and actual circumstances.

[24] In his endorsement, the motion judge, at para. 12, cited the factors identified in Eisses and set out in Sinopoli.

[25] In his endorsement, at para. 17, the motion judge identified the issue with respect to the protective order sought by Edgetech:

Based on the factors considered in Eisses, Sinopoli and Skyservice, supra, the issue with respect to the “counsel’s eyes only” protective order sought by the plaintiffs against the Nutech defendants is whether the plaintiffs have demonstrated a real and substantial risk of serious financial harm to them if the Nutech defendants themselves were to be able to review the financial documents they have been ordered to produce.

[26] Edgetech submits that when the motion judge came to apply these factors to the evidence on the motion, he misstated the test for granting a protective order. Edgetech submits that the motion judge elevated its evidentiary burden beyond what the law requires and, in so doing, erred in law.

[27] In support of this submission, Edgetech relies on the following statement from the motion judge’s endorsement, at para. 19:

The plaintiffs have argued that the Nutech defendants could use information from their financial documents to benefit their competing business. However, the plaintiffs have provided no concrete evidence of what specific types of information in their financial records the Nutech defendants might use to their detriment or how they might use it. The plaintiffs have therefore failed to demonstrate that “disclosure would allow a competitor to improve its competitive position” (see Sinopoli, supra, para. 4) and have therefore failed to meet the heavy onus required to warrant the exceptional order that they seek.

[28] Edgetech submits that a moving party need not demonstrate by evidence how one competitor may make use of another competitor’s confidential information because this would require the moving party to speculate on how the confidential information would be used and would also provide a litigant’s competitor with a roadmap on how to make use of such confidential information by virtue of seeking the protection in the first place.

[29] On Edgetech’s motion for a protective order, Edgetech did not file affidavit evidence from a representative of Edgetech. On this appeal, Edgetech submits that the evidence in the record was sufficient to demonstrate that Edgetech seeks to protect a serious interest – maintaining confidentiality over its internal business workings, and preventing disclosure of such confidential, proprietary and commercially sensitive information to a direct competitor. Edgetech submits that the evidentiary record shows that unprotected disclosure of the financial statements by Edgetech to Nutech would pose a serious risk of financial harm to Edgetech, with immediate benefit to Nutech’s competitive position. Edgetech points to the evidence that before these proceedings were commenced, it protected its commercial interests by entering into agreements with Shayne Taylor and Randy Taylor which expressly protected disclosure of financial statements, client information, and pricing information.

[30] Edgetech submits that by applying an elevated standard for the sufficiency of the evidence needed to obtain a protective order, the motion judge erred in his consideration of the evidence. Edgetech submits that had the motion judge applied the correct test, the existing evidence (and the proposed fresh evidence) are sufficient to justify a protective order.

[31] The motion judge correctly set out in two paragraphs of his endorsement that the issue before him was whether the plaintiffs had provided sufficient evidence to demonstrate a real and substantial risk of serious financial harm to them if the Nutech defendants were able to review the financial documents they were ordered to produce. To discharge its evidentiary burden, the party seeking a protective order must provide an adequate factual basis for the court to find that the risk of harm is real and substantial. As stated in Eisses and Sinopoli, “[s]peculation is not sufficient”.

[32] The motion judge found that the evidence in the record was not sufficient for Edgetech to discharge its heavy onus. The motion judge’s reference to the absence of “concrete evidence of what specific types of information in their financial records the Nutech defendants might use to their [the plaintiffs’] detriment or how they might use it” must be viewed in the context of the issue the motion judge was addressing and the evidence upon which Edgetech relied. This statement followed immediately after the motion judge’s reference to the plaintiffs’ submission “that the Nutech defendants could use information from their financial documents to benefit their competing business”. The motion judge’s statement directly addresses this submission.

[33] Read in context, the motion judge’s statement is a reference to the absence of sufficient evidence, more than speculation, to prove that the risk of harm is real and substantial. By making this statement, the motion judge was not misstating or misapplying the test. The motion judge was giving reasons why the evidence upon which Edgetech relied was insufficient to satisfy the onus of proof for a protective order.

[34] Edgetech has failed to show that the motion judge erred in law by misstating and misapplying the test for the granting of a protective order.

Did the Motion Judge make a palpable and overriding error in his consideration and understanding of the evidence in the motion record?

[35] Edgetech submits that even if the motion judge articulated the test properly, he made a palpable and overriding error by failing to appreciate the body of evidence in the record that, Edgetech submits, justified the granting of a protective order.

[36] Edgetech points to the following evidence:

a. Edgetech and Nutech are competitors;

b. Agreements signed between Edgetech (and other appellants) and Randy Taylor and Shane Taylor that various types of proprietary, confidential, and commercially sensitive information, including financial statements, were to be protected and should not otherwise be divulged or used in any manner;

c. Randy Taylor agreed on cross-examination that Edgetech’s financial statements were confidential and should not be divulged without Edgetech’s consent; and

d. Nutech views the exchange of similar proprietary, confidential, and commercially sensitive information in these proceedings to pose a risk to its business and competitive position.

[37] Edgetech submits that the evidence in the motion materials established that the financial documents were created with Edgetech’s reasonable expectation that they would be confidential and treated as confidential.

[38] Edgetech submits that the evidence in the record - and the fresh evidence it seeks leave to admit on this appeal - raise significant concerns that Nutech has taken advantage of access to Edgetech’s confidential information and that this state of affairs meets the evidentiary threshold in the jurisprudence to justify a protective order.

[39] Edgetech submits that the motion judge erred in his treatment of the evidence.

[40] In his endorsement, the motion judge noted the reasons for Edgetech’s motion for a protective order based on its position that (i) Edgetech and Nutech are competitors; (ii) there is information to be provided that is commercially sensitive; and (iii) the parties have already agreed to some degree of protection in Randy and Shayne Taylor’s confidentiality agreements signed on March 31, 2017. The motion judge confirmed that Edgetech and Nutech are competitors.

[41] With respect to the second and third reasons given by Edgetech, the motion judge addressed Edgetech’s submission that the financial statements contain confidential information. The motion judge referred to the evidence of the releases signed by Randy Taylor and Shayne Taylor in which they agreed not to disclose confidential information, including financial information, to anyone for any purpose. The motion judge noted that disclosure of the financial statements to the public is not an issue, because a sealing order was made, on consent. The motion judge identified the issue as whether the Nutech defendants, themselves, should be permitted to review the plaintiffs’ financial information.

[42] The motion judge addressed Edgetech’s submission that the Nutech defendants could use information from their financial documents to benefit their competing business. The motion judge addressed the question of whether the evidence tendered by Edgetech was sufficient to show that the risk of harm should information be made available to a competitor is real and substantial, and more than speculation. The motion judge concluded that Edgetech had failed to meet the heavy onus required to persuade the court to make an order that would deprive the Nutech defendants of the ability to review the financial statements.

[43] On the evidentiary record before him, it was open to the motion judge to reach this conclusion.

[44] The motion judge did not make a palpable or overriding error in his assessment of the evidentiary record.

Should the Court grant the Edgetech’s motion to adduce fresh evidence, and should the motion judge’s order be set aside on the basis that he misapprehended the evidence?

[45] Edgetech asks me to receive fresh evidence at this appeal. The fresh evidence consists of a list of nine former Edgetech clients and thirty-nine service locations which are now served by Shayne Taylor and Nutech.

[46] This list was produced by counsel for Nutech as part of an undertaking answered after the Motion Judge’s order giving rise to this appeal. The list was prepared after counsel for Edgetech provided to counsel for Nutech a list of clients that Edgetech had lost. The list produced by Nutech is a list of clients from Edgetech’s list that overlap with Nutech’s list of clients.

[47] Edgetech submits that the overlapping client list is fresh, probative evidence of the risk of harm to Edgetech in disclosing to its competitor, Nutech, information that it regards as confidential, proprietary and commercially sensitive.

[48] The party seeking to introduce fresh evidence must show that the proposed evidence is credible, could not have been obtained by reasonable diligence before the lower court hearing and, if admitted, would likely be conclusive of an issue in the appeal. The admission of the fresh evidence must be in the interests of justice. See Heliotrope Investment Corporation v. 1324789 Ontario Inc., 2021 ONCA 589, at para. 20.

[49] Nutech accepts that the proposed evidence is credible, given that the overlapping list was created by counsel based on information provided by Edgetech and Nutech, and that the proposed evidence could not have been obtained by reasonable diligence before the motion because it was created by counsel after the motion was heard.

[50] Nutech submits that the overlapping list will not be conclusive of the issue on appeal, whether the Order of the Motion Judge should be set aside and a protective order made with respect to production of Edgetech’s financial statements.

[51] Nutech notes that the overlapping list has been recently produced and that it has not been reviewed by the parties, nor have examinations for discovery with respect to the overlapping list been conducted. Nutech contends that the overlapping list is not evidence that Nutech took customers from Edgetech.

[52] The issue on the appeal is concerned with whether production of Edgetech’s financial statements (that have been determined to be relevant documents) should be subject to a protective order that limits access to the records to “counsel’s and expert’s eyes only”. The overlapping list, standing alone, or in combination with other evidence, is not evidence that Nutech has misused Edgetech’s confidential information or that there is a real and substantial risk of serious harm to Edgetech if Nutech has access to Edgetech’s financial statements. The overlapping list shows that Nutech has clients who were formerly clients of Edgetech, but it does not show how these clients were obtained or that Edgetech has already been harmed by disclosure of confidential information, as Edgetech contends.

[53] Edgetech has not shown that the overlapping list, if admitted, would be conclusive or potentially conclusive of an issue on the appeal. For this reason, I do not grant Edgetech’s motion.

Disposition

[54] For these reasons, Edgetech’s appeal and motion are dismissed.

[55] The parties agreed that costs of the appeal and motion would be fixed in the amount of $10,000 plus disbursements and HST and paid by the unsuccessful parties to the successful parties.

[56] Costs of the appeal and motion are fixed in the amount of $10,000 for fees plus disbursements and HST and are to be paid by the plaintiffs to the defendants Nutech, Newlook Capital Industrial Services LP, Newlook Industrial Services GP I Inc. and Shayne Taylor within 30 days.

Cavanagh J.

Date: June 8, 2022