Court File and Parties

COURT FILE NO.: CV-21-669764

DATE: 20230209

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mizrahi Development Group (The One) Inc.

AND:

Apple Canada Inc.

BEFORE: J.T. Akbarali J.

COUNSEL: Wolfgang Kaufmann and Phillip Wallner, for the applicant/responding party Dorothy Charach and Rachel Chan, for the respondent/moving party

HEARD: January 31, 2023

ENDORSEMENT

Overview

[1] The parties to this litigation entered into a lease agreement on March 23, 2016, under which the respondent/moving party was to put a flagship retail store in the proposed tallest building in Canada, with the applicant/responding party as its landlord. For reasons that are not relevant to this motion, the respondent refused to take possession of the premises and indicated it was terminating the lease.

[2] The parties have brought cross-applications related to the lease, and in particular, whether the respondent was entitled to terminate the lease. A fifteen-day summary trial is scheduled to commence in April 2023.

[3] On this motion, the respondent seeks a confidentiality order[^1], arguing that disclosure of certain information is not necessary for the determination of the issues in this litigation, but that disclosure could harm the respondent by helping others gain a competitive advantage over it. The respondent relies on a confidentiality provision in the lease. The applicant opposes the confidentiality order, arguing that it is inconsistent with the parties’ contract, contrary to the public interest in an open and transparent court system, and would prejudice the applicant, by complicating the summary trial unduly.

The Legal Test for a Confidentiality Order

[4] In Sherman Estate v. Donovan, 2021 SCC 25, at para. 1, the Supreme Court of Canada wrote:

This Court has been resolute in recognizing that the open court principle is protected by the constitutionally‑entrenched right of freedom of expression and, as such, it represents a central feature of a liberal democracy. As a general rule, the public can attend hearings and consult court files and the press — the eyes and ears of the public — is left free to inquire and comment on the workings of the courts, all of which helps make the justice system fair and accountable.

[5] The Court confirmed the “strong presumption in favour of open courts”, but allowed that exceptional circumstances arise in which competing interests justify a restriction on the open court principle. In such cases, the applicant must demonstrate first, “as a threshold requirement, that openness presents a serious risk to a competing interest of public importance” – a high bar that serves to maintain the strong presumption of open courts: Sherman Estate, paras. 2, 3, 37.

[6] The court has inherent jurisdiction to make a confidentiality order, and jurisdiction under s. 137(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43, to make an order sealing documents. The parties agree on the legal test to grant a confidentiality order, set out by the Supreme Court of Canada in Sherman Estate at para. 38. There are three prerequisites that a party must establish when it is asking a court to exercise its discretion in a way that limits the open court principle:

a. Public disclosure would pose a serious risk to an important public interest;

b. No reasonable alternative means would prevent this risk; and

c. The benefits of the order outweigh any negative effects.

[7] The Supreme Court of Canada held that only when all of these prerequisites are met can a discretionary limit on openness be ordered. The test applies to all discretionary limits on court openness, such as publication bans, sealing orders, an order excluding the public from a hearing, or a redaction order, subject only to valid legislative enactments: Sherman Estate, at para. 38.

Would public disclosure pose a serious risk to an important public interest in this case?

[8] This branch of the test requires that the interest the moving party seeks to protect be one that can be expressed in terms of a public interest in confidentiality: Sierra Club, 2002 SCC 41, at para. 55. The Supreme Court of Canada explained:

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. Or, in the words of Binnie J. in F.N. (Re), [2000] 1 S.C.R. 880, 2000 SCC 35, at para. 10, the open court rule only yields “where the public interest in confidentiality outweighs the public interest in openness” (emphasis added in Sierra Club).

[9] The Supreme Court of Canada found that the commercial interest at stake in Sierra Club related to the objective of preserving contractual obligations of confidentiality, which was a sufficiently important commercial interest to pass the first branch of the test “as long as certain criteria relating to the information are met”: para. 59.

[10] Those criteria were that (i) the information in question has been treated at all relevant times as confidential; (ii) on a balance of probabilities, the moving party’s proprietary, commercial and scientific interests could reasonably be harmed by the disclosure of the information; and (iii) the information in question must be of a confidential nature in that it has been accumulated with a reasonable expectation of it being kept confidential (the “Three Criteria”): Sierra Club, at para. 60.

[11] The respondent argues that:

a. the confidentiality clause in the lease applies, and constitutes an important commercial interest that can be expressed in terms of a public interest in confidentiality that satisfies the first branch of the test,

b. even if the confidentiality clause does not apply, a confidentiality clause is not necessary to establish an important commercial interest that can be expressed in terms of a public interest in confidentiality as long as the information in question meets the Three Criteria;

c. the information in question does meet the Three Criteria.

[12] The applicant argues that the confidentiality clause in the parties’ lease does not apply to this litigation. It argues that without an applicable confidentiality clause, there is no important commercial interest which can be expressed in terms of a public interest in confidentiality of the information, such that the motion must fail.

[13] In arguing that a contractual confidentiality clause is not required to find an important commercial interest that can be expressed as a public interest in confidentiality, the respondent relies only on Sierra Club. It has not provided me with any case in which the Three Criteria were applied to find an important commercial interest which can be expressed in terms of a public interest in confidentiality without an existing confidentiality clause.

[14] I do not accept the respondent’s interpretation of the Court’s decision in Sierra Club. Nowhere does the Court say that meeting the Three Criteria is enough to meet the first branch of the test in the absence of a contractual confidentiality clause, or at least, in the absence of a public interest in confidentiality, established separately from the Three Criteria. Nowhere does the Court say that establishing the Three Criteria establishes a public interest in confidentiality that outweighs the public interest in open courts. To the contrary, the Three Criteria set out in para. 9 above can be met when there is only a private interest in confidentiality. In my view, something more is required that merely meeting the Three Criteria; it is the public interest in confidentiality that is key to meeting the requirements of the first branch of the test. I repeat the Court’s words: “the open court rule only yields ‘where the public interest in confidentiality outweighs the public interest in openness’”.

[15] I conclude that the requirement for an important commercial interest that can be expressed in terms of a public interest in confidentiality is required in addition to the Three Criteria.

[16] The respondent argued that the confidentiality clause in the parties’ lease applies and creates a public interest in confidentiality in this case. The applicant argues the clause does not apply to litigation between the parties. It is thus necessary to interpret the confidentiality clause. It provides:

34.12 Confidentiality. Each party agrees that this Lease and the terms contained herein and information furnished by or obtained from Tenant will be treated as strictly confidential and neither party shall disclose the same to any third party, except:

(a) for information in any registered Notice of Lease pursuant to Section 28 or that Tenant must disclose in order to obtain any necessary permits and approvals;

(b) to such party's lawyers, partners, lenders, advisors, consultants and accountants, who shall be required to maintain strict confidentiality, and in the case of Tenant, Tenant's assignee(s) and subtenant(s), provided that such persons or entities agree in writing (using a form of confidentiality agreement that is reasonably acceptable to Landlord and Tenant which shall include, without limitation, a provision stating that Landlord and Tenant are intended beneficiaries of such confidentiality agreement and entitled to enforce the same) to be bound by the obligation herein to keep such information confidential;

(c) in any lawsuit between Landlord and Tenant concerning this Lease or the Premises, and

(d) as may be required by law, subpoena or other legal process. If either party is required by law, subpoena or other legal process to provide this Lease or disclose any of its terms, such party shall give the other prompt notice of such requirement prior to making disclosure so that such other party may seek an appropriate protective order. If failing the entry of a protective order, the requested party is compelled to make disclosure, such party shall disclose only the portions of this Lease such party is required to disclose and will exercise reasonable efforts to obtain assurance that confidential treatment will be accorded to the information so disclosed.[^2]

[17] The respondent argues that the phrase at the outset of the clause —“to any third party” —refers, in the context of the applicable exemption in subparagraph (c), to individuals like witnesses that a party may have to consult or interview in the course of litigation. It argues that interpreting the clause to mean that there would be no confidentiality obligations in the context of litigation between the parties would be an absurd commercial result, when the parties took such care to set out the confidentiality obligations that would bind them and obviously intended to treat the information as confidential.

[18] The respondent also argues that the inclusion of language allowing either party to seek a protective order in subparagraph (d) speaks to a situation when one party is required to disclose confidential information to a third party, and the focus of subparagraph (d) is on ensuring that the other party to the lease is provided with notice in sufficient time to take appropriate steps (like obtaining a confidentiality order) if their counterpart to the lease is being compelled to disclose. Because litigation between the parties necessarily involves the parties, the respondent says no notice is required. That fact, it says, accounts for the difference in wording between subparagraphs (c) and (d).

[19] The applicant raises the following arguments:

a. “any third party” means any third party, and on a plain reading of the words, includes the public;

b. The exception in subparagraph (b) for “lawyers, … consultants and accountants” already provides an exemption for many of the individuals a party would have to consult in litigation;

c. The exception in subparagraph (d) indicates that the parties were aware that they could take steps to obtain a confidentiality order if there were a requirement to disclose confidential information by law, subpoena or other legal process. The fact that the ability to seek a protective order was omitted from subparagraph (c) is an indication that the parties did not intend the confidentiality obligations to apply to litigation between them.

[20] In interpreting the confidentiality clause, I am guided by the principles of interpretation of contracts described by the Supreme Court of Canada in Sattva v. Creston Molly Corp., 2014 SCC 53, including the requirement to read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. The overriding concern is to determine the intent of the parties and the scope of their understanding: Sattva, at para. 47.

[21] In my view, the confidentiality clause is not ambiguous. It creates obligations of confidentiality, and then provides exceptions to those. It clearly includes an exception for litigation between the parties.

[22] I do not accept the respondent’s argument that “any third party” refers only to witnesses or others that a party may have to consult in preparation of their case. If the parties’ confidentiality obligations were limited in only the way submitted by the respondent, subparagraph (c) would have clearly described the limits to the exception (for example, “in any lawsuit…concerning this Lease…for purposes of identifying and interviewing witnesses and preparing their case”); in other words, the exception would be limited with the kind of detailed language seen in subparagraphs (b) and (d). At the same time, subparagraph (c) would have set out each party’s ability to seek a protective order in respect of the confidential information, as the clause in subparagraph (d) does. Simply put, meaning must be ascribed to the fact that subparagraph (c) is structured differently than subparagraphs (d) and (b).

[23] In my view, the words “any third party” mean, in their ordinary and grammatical sense, anyone who is not one of the parties to the contract, and it includes the public. On its face, the exception in subparagraph (c) is broadly worded. The respondent may not now want a broadly worded exemption to the confidentiality agreement in the event of litigation between the parties, but that is what it, and the applicant, bargained for.

[24] I conclude that the parties’ obligations to keep information confidential do not apply to litigation between themselves.

[25] As a result, without an applicable confidentiality clause, I can find no important commercial interest that can be expressed as a public interest in confidentiality. The first branch of the test for a protective order is not met. It follows that the motion must be dismissed.

Costs

[26] The parties advised me at the hearing that they had reached an agreement that the successful party on this motion would be entitled to $15,000 in costs all inclusive. I thank the parties for their efforts in reaching a consent order as to costs.

Conclusion

[27] In conclusion, I order:

a. The respondent/moving party’s motion for a protective order is dismissed;

b. The respondent shall pay the applicant $15,000 in all-inclusive costs within thirty days.

J.T. Akbarali J.

Date: February 9, 2023

[^1]: Throughout these reasons, I use the terms “confidentiality order” and “protective order” interchangeably.

[^2]: In the lease this clause appears as one block paragraph. I have changed the formatting to make it easier to read.