Canada: Public Courts and Commercial Secrets: A Balancing Act

Last Updated: September 9 2010
Article by Wendy Matheson and Sandra Perri

Originally published in the Commercial Litigation Review, Volume 8, Number 3.

This article explains the different types of orders available to protect commercial secrets, and sets out the appropriate test and limitations of each providing valuable insight for all litigators, and those who face litigation.

Commercial parties involved in civil litigation are often concerned about the possibility that confidential and commercially sensitive information will become public, damaging their commercial interests. There is an inherent tension between the need to protect commercial secrets during civil litigation and our open court system. The Ontario Courts of Justice Act [CJA], R.S.O. 1990, c. C.43, and Rules provide some protection, but it is not automatic and can be difficult to obtain.

The only automatic restriction on the use of material obtained in civil litigation is the deemed undertaking that applies to documents and other information received in the mandatory discovery process. Though helpful, this undertaking is very limited in scope. It does not fully protect confidential information. For effective protection, a party must go to the court for specific orders, including confidentiality orders (also known as "protective orders"), sealing orders and orders that all or part of a hearing be held in private.1 When deciding whether to give these orders the court is tasked with balancing the competing interests of the public (and its right to an open court process) and the commercial litigant (and the importance to it of maintaining confidentiality over its commercially sensitive information).2

Parties may also choose to opt out of the court system entirely to avoid public disclosure problems. Confidentiality is one of the main reasons why commercial parties agree to private dispute resolution — mainly arbitration — though limits remain on the extent of confidentiality, even in that regime.

The various routes to protection of confidential information are discussed below.

The Deemed Undertaking Rule and Its Limitations

The deemed undertaking rule3 limits the use that an opposing party can make of the documents and information obtained through the mandatory discovery process in civil litigation.4 It applies only to the parties to the litigation. They are deemed to have undertaken not to use material obtained from the discovery of the other parties for any purpose other than conducting that litigation. For example, a party cannot use the other side's discovery information to write a book or start a new business.

The deemed undertaking rule applies to documents or information that a party is compelled to produce in the course of civil litigation. As noted by the Ontario Court of Appeal, forced disclosure can compromise a litigant's legitimate interest in maintaining the confidentiality of documents and information.5 While interference with that privacy interest is justified as essential to a fair and accurate resolution of the litigation, a litigant who is compelled by law to produce documents for the purpose of a particular proceeding should not be in peril of having those documents used by the opposite party for some other purpose.6

Although the deemed undertaking provides some protection, it is limited. For example, it does not apply to discovery material that is filed with the court. A simple discovery motion may mean that considerable material becomes available to the public. Significantly, the deemed undertaking applies only to pretrial procedures. It does not restrict the use of the documents and other information at trial, where there is no automatic protection for confidential information.7 The deemed undertaking does not, therefore, fully protect commercial confidential information. Other steps are required.

Confidentiality Orders

There are at least two jurisdictional bases on which a civil litigant may apply for protection for its confidential information in an Ontario court:

  1. Section 137(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which permits a court to order that any document in a civil proceeding be treated as confidential, be sealed and not form part of the public record; and
  2. Rule 30.11, which permits a court to order that a relevant document be "deposited for safe keeping" with the registrar and not be inspected by anyone except with leave of the court.

The same principles are applied when using either basis, and they are often referred to in cases without distinguishing between them.8

Further, confidentiality orders are not necessarily tied to either s. 137(2) or Rule 30.11. The inherent jurisdiction of a superior court to control its own process provides the authority for a wide range of creative and differing orders where protection is deemed necessary.9

Orders protecting material filed in court are an exception to the open court principle, which the Supreme Court of Canada has found to be inextricably linked to freedom of expression and which has been called "the very soul of justice."10 It is therefore not surprising that courts have placed a substantial onus on a party seeking a confidentiality order.

The Sierra Club Test

The leading case on the availability of a confidentiality order remains the Supreme Court of Canada's decision in Sierra Club v. Canada (Minister of Finance).11 The Sierra Club of Canada challenged a $1.5 billion loan given by Atomic Energy of Canada to build two CANDU nuclear reactors in China. The Sierra Club claimed that an environmental assessment was required before the loan could be made. To defend the challenge, Atomic Energy obtained confidential documents from Chinese authorities. It then filed an affidavit in the court proceedings that referred to, but did not attach, the confidential documents. When the Sierra Club sought access to the confidential documents, Atomic Energy agreed on the condition that the documents would be subject to a confidentiality order preventing access by the public.

Atomic Energy sought a confidentiality order on the basis of its commercial interests. Without such an order, it would have been in breach of its contractual obligations to the Chinese authorities and "would suffer a risk of harm to its competitive position."12 At the same time, withholding these documents would disadvantage the Sierra Club by limiting its ability to challenge the affidavit and more generally hinder its "right, as a civil litigant, to present its case."13

The Supreme Court held that a confidentiality order should be granted only when two conditions are met:

  1. The order must be necessary 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
  2. The salutary effects of the confidentiality order, including the effects on the right of civil litigants to a fair trial, must 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

The Court further found that 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 ... Finally, 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.15

In the Sierra Club case, the Supreme Court granted the order. It balanced the various rights and interests engaged, and found that the salutary effects of the order outweighed its deleterious effects.16

Given Sierra Club, there should be no question that confidentiality orders can be obtained to protect commercial confidential information. As a practical matter, however, it will generally not be sufficient for the party seeking the order to simply argue that it meets the Sierra Club test. Similarly, consent is not determinative. Normally, the court requires evidence, usually in the form of an affidavit, particularly with respect to the existence of a real and substantial risk to a commercial interest.

Further, courts appear more favourably disposed to granting an order when the documents sought to be protected are identified with particularity and kept to a minimum. The proposed order should minimally impede the public interest in an open court process. Further, if the parties can agree to a process to protect the confidential information, no order would be necessary unless and until confidential information had to be filed with the court. As a result, the need to seek an order can be delayed and perhaps avoided altogether, depending on how the case unfolds.

Intellectual Property Cases

Not surprisingly, confidentiality orders are frequently made in intellectual property litigation. If the very subject matter of the case is a trade secret, for example, justice would be denied altogether if the secret were forced into the public domain as a result of the litigation process.17 For example, the courts have protected trade secrets about manufacturing processes18 and recipes.19

Given the types of cases that fall within the jurisdiction of the Federal Court, such as patent cases, confidentiality orders are often sought and granted in that Court.20

The Federal Court has generally been willing to grant confidentiality orders when it is satisfied that a party's commercial, business or scientific interests may be seriously harmed by public disclosure of patentable secrets.21

Other Commercial Cases

Outside intellectual property litigation, confidentiality orders have been granted to protect a range of commercial confidential information. For example, orders have been granted to protect business plans, principal and employee compensation, technical reports regarding products and pricing information.22 When the confidential information could give a competitor an unfair advantage, an order should presumptively be required unless the opposite party would be unduly prejudiced by the order.23

These issues often arise in cases against departed employees, whose former employers try to prevent use of confidential information. The price of litigation should not include public disclosure of the very confidential information the former employer seeks to protect.24

For regulated businesses, confidentiality obligations may also arise by statute. Not surprisingly, when sensitive reports are prepared for regulatory oversight, legislation may expressly require that the documents be treated as confidential and in some instances not be disclosed at all.25

Terms of Confidentiality Orders: "Counsel's Eyes Only"

Confidentiality orders are often complex. They usually set out a procedure for designating confidential information, who can access it and how, as well as how the confidential information must be dealt with when it is filed with the court and how the "confidential" designation can be challenged. An order may be granted for pretrial steps only, so that the scope of the order is revisited when a second order is sought for the trial.

In some cases, confidentiality may include a term limiting disclosure "for counsel's eyes only." Courts are reluctant to grant these orders and have done so only in "very unusual circumstances,"26 noting that when litigation involves technical or scientific information, counsel may be unable to use this information effectively without consulting with his or her client.27 But this term may be essential to the protection of competitively sensitive information when the opposing party is itself a competitor.

Sealing Orders

A sealing order is a particular type of confidentiality order that a party can pursue with respect to documents that it wishes to keep out of the public court record. The confidential information that must be filed with the court is filed under seal and not available to members of the public who request access to the court file.

The authority for having documents sealed comes from s. 137 of the CJA, which allows a party to apply for an order that any document filed in a civil proceeding be treated as confidential, be sealed and not form part of the public record. Like all confidentiality orders, sealing orders are not readily granted, given the importance placed on an open court system. The Sierra Club principles apply. Therefore, sealing orders should be available to protect commercial confidential information.

Businesses have also sought sealing orders to protect broader interests. Ontario courts have generally been unwilling to seal court files when the potential for harm to the corporation or individual involved is no different than the harm generally suffered from the public disclosure that ordinarily accompanies litigation. In MDS Health Group Ltd. v. Canada,28 the Court was asked to seal the court file in an action that involved a dispute concerning supply arrangements between Atomic Energy of Canada Limited and MDS. MDS alleged that public disclosure of the dispute would cause its customers to seek other sources of supply. Noting that the case was not one in which the publicity would destroy the subject matter of the action, the Court held that similar considerations arise in many cases. To give effect to these concerns would undermine the openness of the court system.

Courts have also shown an unwillingness to grant sealing orders sought for the sole reason that public disclosure would result in bad publicity or a loss of confidence, since these may be consequences common to all commercial litigation. In Publow v. Wilson,29 the defendants in a wrongful dismissal action moved for an order to seal motion material that revealed that the parent company was insolvent. The defendants feared that if the detrimental information came to the attention of suppliers and customers, they would withdraw their credit from the company and stop dealing with it. The defendants alleged that this could lead to the collapse of the company and the subsequent loss of 600 jobs. The Court observed that it was, in effect, being asked to disregard the potential harm to the suppliers and customers of the business in favour of the employees whose jobs were at risk. The Court refused, concluding that the case was not an appropriate exception to the rule that the business of the courts should be conducted in the open, where it can be subjected to public scrutiny.30

Hearings Held in Camera

Even if a sealing order is obtained, protecting the information from public access in the court file, there may still be the risk of disclosure when pretrial motions are argued in open court and when the action proceeds to trial. If the confidential information must be referred to in court a further order must be sought so that the particular portion of the hearing is held in camera — that is, with members of the public excluded from the courtroom.

Section 135(2) of the CJA is one basis on which these orders are made. It provides that the court may exclude the public from a hearing when the possibility of serious harm or injustice to any person justifies a departure from the general principle that court hearings should be open to the public. Again, the court must balance these competing interests.

In the commercial context, sealing orders and orders that portions of a hearing be held in camera tend to go hand in hand. That is, if the test for a sealing order is met, it is a natural extension to order that those portions of the hearing in which the sealed evidence will be addressed also be held in camera.31 However, it would be rare for an entire hearing to be held in camera in the commercial civil context. More typically, the courtroom will be closed for only those portions of the hearing during which the sealed evidence is addressed.

Private Dispute Resolution

As an alternative means of avoiding the consequences of public disclosure, commercial parties often agree to opt out of the public court system entirely and instead pursue private dispute resolution (e.g., arbitration). In private dispute resolution, parties can agree to any confidentiality terms they see fit. The entire matter can be determined in private. However, arbitrations may still carry the risk of public disclosure if the arbitration is challenged in court — for example, if an arbitral award is the subject of a statutory appeal. There is no guarantee that the court will uphold the parties' private confidentiality agreement.

In the case of 8875474 Ontario Inc. Pizza Pizza,32 after acknowledging the merits of confidentiality during ADR, Justice Farley held that the onus was nonetheless on the moving party to "demonstrate sound reason for departing from the openness rule." He noted that one must assume that each side recognized the openness of court proceedings when it appealed the award. If they wished to avoid public disclosure, the parties could have chosen not to appeal the arbitrator's award. Justice Farley concluded that there were no public policy reasons for extending that confidentiality to the appeal process, and he denied the order.33


At the heart of this area of law is a recognition of the need to balance the public interest in an open court system with the need to protect commercial confidential information. The price of access to justice should not be the destruction of valuable business information. Nor should a party be forced to give competitors commercial secrets through an open court system that allows anyone access to materials in a court file. We therefore have a regime that requires "a balancing act" in order to give due regard to these competing interests. While the public interest in an open court system is strong, in appropriate cases there are orders available to protect commercial confidential information.


1 Also called "in camera" hearings.

2 Sierra Club of Canada v. Canada (Minister of Finance), [2002] S.C.J. No. 42, [2002] 2 S.C.R. 522 [Sierra Club].

3 Rule 30.01.

4 Including documentary discovery, oral or written examination for discovery, examinations in aid of execution, inspection of property and medical examinations under the Rules.

5 Kitchenham v. AXA Insurance Canada, [2008] O.J. No. 5413, 2008 ONCA 877 at para. 1.

6 Ontario (Securities Commission) v. Norshield Asset Management (Canada) Ltd., [2010] O.J. No. 637, 2010 ONSC 891.

7 Further, the court can remove the obligation altogether, when the interests of justice require it, under Rule 30.1(8).

8 We similarly do not distinguish between them for the purposes of this article.

9 For example, see the special discovery steps imposed regarding the identity of anonymous Internet users (Warman v. Fournier, [2010] O.J. No. 1846, 2010 ONSC 2126 (Div. Ct.)) and in respect of Crown briefs (D.P. v. Wagg, [2004] O.J. No. 2053, 71 O.R. (3d) 229 at paras. 27-28 (C.A.), aff'g [2002] O.J. No. 3808, 61 O.R. (3d) 746 at paras. 48-50 (Div. Ct.)); see also the recognition of the Court's inherent jurisdiction to make a confidentiality order in Eisses v. CPL Systems Canada, [2008] O.J. No. 239, 163 A.C.W.S. (3d) 365 at para. 5.

10 Canadian Broadcasting Corp. v. New Brunswick (Attorney General), [1996] S.C.J. No. 38, [1996] 3 S.C.R. 480 at para. 21.

11 Sierra Club, supra note 2; note that this case was in the Federal Court, but the principles are applied routinely in the Ontario courts and elsewhere in Canada.

12 Ibid. at para. 49.

13 Ibid. at para. 50.

14 Ibid. at para. 53.

15 Ibid. at paras. 54-57.

16 Ibid. at paras. 91-92.

17 CPC International Inc. v. Seaforth Creamery Inc., [1996] O.J. No. 2059 (Ont. Gen. Div.) at para. 35 [CPC International].

18 See, e.g., Dupont Canada Inc. v. Russel Metals Inc., [2000] O.J. No. 2043 (Master).

19 See, e.g., CPC International, supra note 17.

20 Apotex Inc. v. Wellcome Foundation Ltd., [1993] F.C.J. No. 1117, 51 C.P.R. (3d) 305.

21 Laboratories Servier v. Apotex Inc., [2006] F.C.J. No. 1764, 2006 FC 1405 at paras. 6-7.

22 Towers Perrin v. Cantin, [2000] O.J. No. 3514, 50 O.R. (3d) 476 (S.C.J); Shaw v. Shaw, [2007] O.J. No. 4999 (S.C.J.); BASF Canada Inc. v. Max Auto Supply (1986) Inc., [1999] O.J. No. 515 (Ont. Gen. Div.) [BASF Canada].

23 BASF Canada, ibid. at para. 17.

24 See, e.g., GasTOPS v. Forsyth, [2000] O.J. No. 5614, 15 C.P.C. (5th) 116 (S.C.J.).

25 For examples, see s. 22 of the Office of the Supervisor of Financial Institutions Act, R.S.C. 1985, c.18 (3rd supp.), and s. 672 of the Insurance Companies Act, R.S.C. 1991, c. 47 and related regulations.

26 See, e.g., Merck v. Apotex, [2004] F.C.J. No. 684, 2004 FC 567 at para. 8; Deprenyl Research Ltd. v. Canguard Health Technologies Inc., [1992] F.C.J. No. 128, 41 C.P.R. (3d) 228 (F.C.T.D.) [Deprenyl Research]; Zeneca Pharma Inc. v. Canada (Minister of National Health and Welfare), [1994] F.C.J. No. 543, 55 C.P.R. (3d) 1 (F.C.T.D.) [Zeneca Pharma].

27 Deprenyl Research, ibid.; Zeneca Pharma, ibid.; GasTOPS Ltd. v. Forsyth, supra note 24 at para. 9.

28 [1993] O.J. No. 2552, 20 C.P.C. (3d) 137 (Ont. Gen. Div.).

29 [1994] O.J. No. 3036 (Gen. Div.) at para. 18.

30 Ibid. at paras. 8, 20.

31 See, e.g., Imperial Oil Ltd. v. Canada (Director Appointed under the Canadian Business Corporations Act), [1996] O.J. No. 2380, 6 C.P.C. (4th) 170 at para. 4 (Ont. Gen. Div.), in which Blair J. noted that "[t]here would be little point in sealing the Record while at the same time holding the exemption hearing in open court, thereby tipping off the world to the Applicant's potential bid — the very thing the sealing order would be designed to prevent."

32 [1994] O.J. No. 3112 (Ont. Gen. Div.).

33 See also Adesa Corp. v. Bob Dickerson Auction Service, [2004] O.J. No. 4925, 73 O.R. (3d) 787 (S.C.J., Comm. List).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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