Canada: Securities Class Action Setback – Court Of Appeal Refuses To Compel Disclosure Of Journalist’s Confidential Sources

In the recent ruling of 1654776 Ontario Limited v. Stewart, 2013 ONCA 184, the Ontario Court of Appeal has dismissed an appeal of a party who was seeking disclosure of the identities of a journalist's confidential sources in order to support a proposed class action by that party against BCE Inc. and others under the secondary market disclosure regime of the Securities Act. In so doing, the Court of Appeal has not only struck a blow to the prosecution of the putative class action, it has also resuscitated the fragile "journalist-source" privilege asserted by members of the press.

For the most part, journalists have sought to assert "journalist-source" privilege in the context of responding to subpoenas in both civil and criminal trials, in which case they run the risk of being found in contempt of court and jailed for refusing to disclose their confidential sources. In this case, however, the applicant had sought a "Norwich order" against the respondent, Sinclair Stewart, a reporter for The Globe and Mail, to require Mr. Stewart to disclose the names of the confidential sources used by him to report on the troubled negotiations pertaining to the takeover of BCE Inc. in June of 2008. More specifically, the applicant was seeking an Order requiring Mr. Stewart to disclose the identities of the anonymous executives who were referenced in his newspaper article and who were involved in these negotiations, it being the applicant's intention to then name these executives and pursue them in the proposed class action involving allegations of and corresponding liability for non-compliance with the ongoing disclosure requirements of the Securities Act

In considering whether to uphold "journalist-source" privilege and deny the request for the "Norwich order", the appellate court had to consider both the legal test for a "Norwich order" and the "Wigmore analysis" of privilege. In terms of the legal test for seeking a "Norwich order", the applicant had to first demonstrate that:

  1. it had a valid, bona fide, or reasonable claim;
  2. the respondents were somehow involved in the acts complained of;
  3. the respondents were the only practical source of the information;
  4. the respondents could be indemnified for any costs of the disclosure; and
  5. the interests of justice favoured the obtaining of disclosure.

The Court of Appeal recognized that the fifth factor, the "interest of justice", was a broad factor that would encompass the interests of each of the applicant, the respondent, the alleged wrongdoer and the administration of justice at large. The court also noted that "the interests of the respondent and the greater public interest sweep in their claim of journalist-source privilege" such that the privilege claim had to be determined by application of the Wigmore test, and in this way, the Norwich and Wigmore tests intersected. 

In terms of the "Wigmore analysis" for establishing "journalist-source" privilege, the court set out the basic principles for establishing such privilege as follows:

  1. the communication had to originate in confidence on the basis that the source's identity would not be disclosed;
  2. anonymity was essential to the relationship in which the communication arose;
  3. the relationship was one which should be sedulously fostered in the public interest; and
  4. the public interest served by protecting the identity of the source outweighed the public interest in getting at the truth. 

In applying this analysis to the facts of this case, the Court of Appeal stated that the public interest in a free press is clear and, more specifically, "the public has an interest in being informed about matters of importance that may only see the light of day through the cooperation of sources who will not speak except on the condition of confidentiality". On the other hand, the Court of Appeal also recognized the applicant's argument that the proposed class action and the identification of alleged wrongdoers would likewise serve the public interest by promoting compliance with the continuous disclosure regime of the Securities Act. Ultimately, however, the appellate court held that the lack of evidence submitted by the applicant to show that the statements made by the confidential sources to Mr. Stewart were false or materially misleading led the court to conclude that the applicant's proposed class action against these sources was not likely to be successful, which tipped the scales in favour of upholding the journalist-source privilege and denying the applicant's request for a "Norwich order". 

Members of the press should continue to be wary in terms of the sanctity of the journalist-source privilege despite this ruling. In fact, the Court of Appeal warned that the privilege may have been snubbed had the strength of the applicant's case against the confidential sources been more compelling. In short, the court continues to retain its discretion to disregard the journalist-source privilege where the merits of the case are strong or where there is some overriding public interest in requiring disclosure of a journalist's confidential sources.

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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