In Sherman Estate v. Donovan, released on June 11, 2021, the Supreme Court of Canada refined the common law test for the granting of sealing orders in civil matters and, in particular, recognized privacy as an important public interest that may warrant sealing relief. This post considers the reasoning behind the Supreme Court's decision and also reviews several subsequent Ontario and British Columbia sealing order rulings that have applied Sherman Estate's refined common law test in commercial contexts.

Background

The open court principle

It is a fundamental element of Canadian law that court proceedings are open to the public. Courts have long recognized the importance of the open court principle in preserving the constitutionally protected rights to freedom of expression and freedom of the press under section 2(b) of the Charter of Rights and Freedoms.

Nevertheless, courts have the jurisdiction to order that documents, or information filed in court proceedings, be sealed from the public record in certain circumstances. In determining whether to grant such relief, referred to as a "sealing order", courts must weigh the positive effects of protecting confidential or sensitive information against the negative effects arising from restricting access to court files.

History of the proceeding

In 2017, a prominent couple was found dead in their home. Following the couple's death, their estate trustees sought sealing orders over the court files related to the probate of the couple's estates (the "Probate Files").

The Ontario Superior Court of Justice granted the sealing orders for a period of two years, finding, among other things, that the harmful effects of the sealing orders were outweighed by their beneficial effects on the privacy of the affected individuals, including the beneficiaries of the estates.

A journalist and the newspaper for which he wrote appealed the Ontario Superior Court decision, arguing that the sealing orders violated the open court principle and the constitutional rights of freedom of expression and freedom of the press.

The sealing orders were unanimously lifted by the Ontario Court of Appeal (2019 ONCA 376), which concluded, among other things, that the privacy concerns of the estate trustees were insufficient to justify the sealing orders that had been granted.

The Court of Appeal's order setting aside the sealing orders was stayed pending the disposition of the appeal to the Supreme Court of Canada, which was brought by the estate trustees.

The Supreme Court of Canada's Decision

Central to the appeal was the issue of whether protecting the privacy of the individuals affected by the Probate Files amounts to an important public interest that could justify the sealing of the Probate Files under the applicable legal test for discretionary limits on court openness. Established by the Supreme Court of Canada in Sierra Club of Canada v. Canada (Minister of Finance), that test requires a party seeking a sealing order to show that:

  • a sealing order is necessary to prevent a serious risk to an important interest, including a commercial interest, because alternative measures would not prevent the risk; and
  • the positive effects of the sealing order outweigh the negative effects, including the public interest in open court proceedings.

The Supreme Court's analysis

In Sherman Estate, the Supreme Court found that the Sierra Club test requires that three "core prerequisites" be established in order to obtain a sealing order:

  • court openness poses a serious risk to an important public interest;
  • the sealing order sought is necessary to prevent the serious risk to the identified interest because reasonably alternative measures will not prevent this risk; and
  • as a matter of proportionality, the benefits of the sealing order outweigh its negative effects.

Since Sierra Club, the jurisprudence has established that a sealing order will only be granted if the interest sought to be protected has a public component (such as, for instance, the public interest in upholding confidentiality agreements or in protecting the integrity of judicial proceedings).

Notably, the Supreme Court in Sherman Estate recognized an aspect of privacy, namely the preservation of individual dignity, as an important public interest, and held that this interest is sufficiently important that it may justify an exception to the open court principle. The Supreme Court characterized dignity as "the right to present core aspects of oneself to others in a considered and controlled manner".

Writing for a unanimous Court, Justice Kasirer cautioned that the presumption in favour of open courts cannot be overcome lightly, and reasoned that the public interest in preserving dignity will only be at risk where the information sought to be protected:

...strikes at what is sometimes said to be the core identity of the individual concerned: information so sensitive that its dissemination could be an affront to dignity that the public would not tolerate, even in service of open proceedings.

The Court went on to note that examples of such sensitive information include stigmatized medical diagnoses, stigmatized work, sexual orientation, and subjection to sexual assault or harassment.

The Supreme Court's decision

Applying this framework, the Supreme Court dismissed the appeal on the basis that, among other things, the information at issue in the Probate Files was not of such a highly sensitive character that it engaged the dignity of the affected individuals.

Notably, Justice Kasirer remarked that even if a serious risk to a privacy interest had been established, it would likely not have justified a sealing order because alternative measures, such as a publication ban, would likely have prevented this risk.

Application of Sherman Estate to Recent Sealing Order Requests

Ontario

While Sherman Estate did not address sealing order requests made in the commercial context, a number of recent decisions of the Ontario Superior Court of Justice (Commercial List) (the "Ontario Court") have cited ShermanEstate in considering whether to grant sealing order relief, including:

  • In the receivership proceedings of Canadian investment management firm Bridging Finance Inc. (Ontario Securities Commission v. Bridging Finance Inc., 2021 ONSC 4347), Chief Justice Morawetz applied the Supreme Court's analysis in Sherman Estate in approving the sealing of: (i) a key employee retention plan containing confidential and personal information with respect to the compensation of each eligible employee; and (ii) information regarding the receiver's recommended course of action in connection with a proposed repayment transaction whose terms were confidential.
  • In the Companies' Creditors Arrangement Act (the "CCAA") proceedings of Guardian Financial Corporation and certain related entities - affiliates of a U.S. company that operates a network of co-working spaces in the United States and Canada - Justice Dietrich relied on Sherman Estate in approving the sealing of a lease amending agreement, finding that it contained commercially sensitive information about lease negotiations.
  • In the CCAA proceedings of Laurentian University of Sudbury ("Laurentian") (Re Laurentian University of Sudbury, 2021 ONSC 4769), Chief Justice Morawetz considered whether to seal an unredacted version of a proposal prepared by a real estate advisor sought to be engaged by Laurentian. According to Laurentian, the proposal contained commercially sensitive and proprietary information that could jeopardize the business of the real estate advisor if disclosed publicly and made available to competitors. Drawing on the Sherman Estate decision, Chief Justice Morawetz expressed concerns about the scope of the sealing relief sought, noting that certain aspects of the proposal did not appear to contain commercially sensitive and proprietary information. Counsel to Laurentian subsequently disclosed certain portions of the proposal related to the real estate advisor's pricing and budget, thereby narrowing the scope of the requested sealing order, which order was granted.

British Columbia

The British Columbia Supreme Court (the "B.C. Court") has also drawn on the Sherman Estate decision in deciding whether to grant a sealing order. In the recent decision of United States v. Meng, 2021 BCSC 1253, the B.C. Court declined to seal certain bank documents in the extradition proceedings of Wanzhou Meng, the Chief Financial Officer of Huawei, a telecommunications company. The extradition proceedings involved allegations that Ms. Meng misled a bank into facilitating certain transactions in violation of U.S. sanctions against Iran. The documents sought to be sealed included bank reports and high-level bank communications relating to strategy and decisions about its business with Huawei.

In considering the sealing request, the B.C. Court acknowledged that commercial information may engage privacy interests that may give rise to an important public interest. Applying the Sherman Estate analysis, the B.C. Court reasoned that the commercial confidentiality interest at issue did not engage an important public interest as it was specific to the bank. The B.C. Court further held that, even if the bank's interest in preserving the confidentiality of its internal documents could be characterized as an important public interest, that interest was not shown to be at serious risk from the publication of the documents since some of the documents had already been summarized in the proceedings and were heavily redacted. Notably, the B.C. Court held that it expected the identities and contact information of the bank representatives in the documents to be redacted in accordance with an earlier "media protocol" established in the proceedings.

Key Take-aways

  • The Supreme Court's decision in Sherman Estate emphasizes the importance of the open court principle as a reflection of the constitutionally-protected right of freedom of expression.
  • As such, and in keeping with the recent decisions noted above, there may be greater judicial scrutiny of sealing order requests going forward, including in the commercial context.
  • Parties seeking sealing relief in the future should bear this in mind, and may want to consider whether alternative measures, such as redaction, could be used to prevent the disclosure of commercially sensitive information.

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.