T-2696-80
Smith, Kline & French Laboratories Limited,
Smith, Kline & French Canada Ltd., Graham
John Durant, John Colin Emmett and Charon
Robin Ganellin (Plaintiffs) (Respondents)
v.
Attorney General of Canada (Defendant) (Appli-
cant)
INDEXED AS: SMITH, KLINE & FRENCH LABORATORIES LTD. v.
CANADA (ATTORNEY GENERAL) (T.D.)
Trial Division, MacKay J.—Ottawa, November 2,
1988 and March 10, 1989.
Practice — Privilege — Undertakings given on discovery as
to confidentiality of documents, testimony — Documents
subsequently sealed as confidential in action as to validity of s.
41(4) Patent Act — M.N.R., not party to action, now seeking
access to documents for audit — Presumption of openness of
Court records reflected by R. 201(4) insufficient ground for
altering confidentiality order — Review of tax liability, nei
ther change in circumstances, nor compelling reason — Inter
ests of justice requiring variation of confidentiality order in
exceptional cases only — Granting of access leading to non-
disclosure by parties in proceedings by or against Crown.
Income tax — Practice — M.N.R. seeking, for audit pur
poses, access to documents ordered sealed as confidential in
action concerning validity of Patent Act provision — Changed
circumstances or compelling reason required to vary confiden
tiality order — Review of tax liability not change in circum
stances but new circumstance — M.N.R.'s public interest not
compelling reason to vary order.
This is an application by the Attorney General, on behalf of
the Minister, for an order permitting officers of the Depart
ment of National Revenue to have access to certain documents
which were ordered by the Trial Division and by the Court of
Appeal to be sealed as confidential in an action for a declara
tion that subsection 41(4) of the Patent Act was ultra vires and
contrary to the Canadian Bill of Rights and the Canadian
Charter of Rights and Freedoms. The Minister of National
Revenue was not a party to that action.
The reason for the Attorney General's application lies in the
audit that the Minister of National Revenue is conducting with
respect to the returns of one of the respondents, Smith, Kline &
French Canada Ltd., for the years 1981 to 1983. Pursuant to
their mandate, the auditors are required to examine any infor
mation that might relate to prices paid by that company for a
medicine known generically as cimetidine, purchased from
non-arm's length non-resident suppliers.
The confidentiality orders which the applicant seeks to have
varied were made following pre-trial undertakings between
counsel that documents and information produced on discovery
would be kept confidential.
Held, the application should be dismissed.
The presumption of openness or public access to Court
records, on which the applicant relies, although generally appli
cable in judicial proceedings, is of no assistance to a party who
has consented to an order for sealing documents as confidential,
and subsequently seeks access for purposes admittedly not
considered at the time of the order. In such a case, the burden
of satisfying the Court that access should be provided is on the
party who seeks to have the order varied.
The applicant has failed to meet the test set out by Reed J. in
Apotex Inc. v. Attorney-General of Canada et al. (1986), 10
C.P.R. (3d) 310 (F.C.T.D.) for varying the terms of a confi
dentiality order. According to Reed J. the principle of open
judicial proceedings reflected in Federal Court Rule 201(4) is
not sufficient for altering a confidentiality order. In the words
of her Ladyship, "some changed circumstances, or compelling
reason not directly considered when the order was given" must
be advanced as a reason for altering a confidentiality order".
The reason for varying a confidentiality order should be truly
compelling, especially where the purpose for access is unrelat-
ed—and is, in that sense, collateral or ulterior—to the action in
which the documents are filed and sealed, and where the order
granted involves the Attorney General as a party. The review of
the respondent's tax liability is not a change in circumstances in
relation to the issues in the action for which the information
was produced. It is a new circumstance in the sense that review
of tax liability had not been considered at the time the confi
dentiality orders were made. It does not constitute a compelling
reason to vary the orders.
If counsel for the Attorney General consents to an order that
evidence be maintained in confidence, or if he is subject to such
an order even without consent, that order should not be varied
merely because there arises some other public interest, collater
al to the action in which the order is made. Otherwise, the
interests of justice served by the modern discovery process
would tend to be frustrated: parties engaged in actions by or
against the Crown would seek to avoid disclosure of informa
tion which might at some future date, regardless of the out
come of the original action, be sought for use by the Crown for
some purpose unrelated to the original action.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Canadian Bill of Rights, R.S.C. 1970, Appendix III.
Canadian Charter of Rights and Freedoms, being Part I
of the Constitution Act, 1982, Schedule B, Canada Act
1982, 1982, c. 11 (U.K.).
Federal Court Rules, C.R.C., c. 663, RR. 201, 319.
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 69(2),
152(1),(4),(7), 241.
Patent Act, R.S.C. 1970, c. P-4, s. 41(4).
CASES JUDICIALLY CONSIDERED
APPLIED:
Apotex Inc. v. Attorney-General of Canada et al. (1986),
10 C.P.R. (3d) 310 (F.C.T.D.).
DISTINGUISHED:
Attorney General of Nova Scotia et al. v. Maclntyre,
[1982] 1 S.C.R. 175; Samuel Moore & Co. v. Commis
sioner of Patents, [1980] 2 F.C. 350; (1979), 45 C.P.R.
(2d) 185 (C.A.); Atwal v. Canada, [1988] 1 F.C. 107
(C.A.); Amp of Canada, Ltd. v. The Queen (1987), 87
DTC 5157 (F.C.T.D.).
CONSIDERED:
Halliburton Co. et al. v. Northstar Drillstem Ltd. et al.
(1982), 65 C.P.R. (2d) 122 (F.C.T.D.); Algonquin Mer
cantile Corp. v. Dart Industries Canada Ltd., T-831-82,
McNair J., order dated 4/11/83, not reported; Control
Data Canada Ltd. v. Senstar Corp., T-1583-84, Giles
A.S.P., order dated 6/5/88, not reported; affd by Jerome
A.C.J., order dated 6/6/88, not reported.
REFERRED TO:
Smith, Kline & French Laboratories Limited v. Attorney
General of Canada, [1986] 1 F.C. 274; (1985), 24 D.L.R.
(4th) 321 (T.D.); affd [1987] 2 F.C. 359 (C.A.); leave to
appeal to the Supreme Court of Canada refused [ 1987] 1
S.C.R. xiv; Smith, Kline & French Laboratories Ltd. et
al. v. Attorney-General of Canada (1984), 1 C.P.R. (3d)
268 (F.C.T.D.); rev'd A-957-84, Mahoney J., judgment
dated 11/1/85, not reported; Smith, Kline & French
Laboratories Ltd. v. Attorney General of Canada, A-909-
85, Heald J., judgment dated 25/8/86, not reported;
Smith, Kline and French Canada Ltd. v. Frank W.
Horner, Inc. (1982), 70 C.P.R. (2d) 128 (F.C.T.D.);
Distillers Co (Biochemicals) Ltd y Times Newspapers.
Ltd, [1975] 1 All ER 41 (Q.B.D.); Riddick v. Thames
Board Mills Ltd., [1977] 1 Q.B. 881 (C.A.); Crest
Homes plc y Marks, [1987] 2 All ER 1074 (H.L.); Home
Office y Harman, [1982] 1 All ER 532 (H.L.); Lac
Minerals Ltd. v. New Cinch Uranium Ltd. et al. (1985),
50 O.R. (2d) 260 (H.C.).
COUNSEL:
Gordon F. Henderson, Q.C., Emma A. C. Hill
and Guy Du Pont for plaintiffs (respondents).
Robert McMechan for defendant (applicant).
SOLICITORS:
Gowling & Henderson, Ottawa, for plaintiffs
(respondents).
Deputy Attorney General of Canada for
defendant (applicant).
The following are the reasons for order ren
dered in English by
MACKAY J.: This was an application by the
Attorney General of Canada, on behalf of the
Minister of National Revenue for an order permit
ting officers of the Department of National Reve
nue to inspect and obtain photocopies of certain
exhibits which were ordered by this Court and by
the Court of Appeal to be sealed as confidential in
the course of trial and appeals in the original
action between the same parties.
In the action, initiated by the plaintiffs in 1980,
the Attorney General of Canada, as defendant,
contested the claim of the plaintiffs to a declara
tion that subsection 41(4) of the Patent Act
[R.S.C. 1970, c. P-4] (now subsection 39(4) of
that Act, R.S.C., 1985, c. P-4) was invalid. That
subsection provides for compulsory licensing by
the Commissioner of Patents, upon application, of
patents relating to the process for production of
medicines, the basis of authority for lawful pro
duction of so-called "generic drugs" by others than
the patent owner or those licensed by the owner.
The individual plaintiffs in the action were the
inventors of two inventions which formed the pro
cess for production of a medicine known generical
ly as cimetidine. They were employees of and had
assigned their rights in the inventions to Smith,
Kline & French Laboratories Limited, a United
Kingdom company, which owns the Canadian pat
ents for these processes. Smith, Kline & French
Canada Ltd. is a Canadian company licensed by
the patent owners to sell the medicine in Canada
which it does under the name Tagamet as a pre
scription drug. Both of the companies are parts of
a larger corporate enterprise, both being wholly-
owned subsidiaries of a United States company
which in turn is a subsidiary of another United
States company. At the time action was com
menced by the plaintiffs, cimetidine was the sub
ject of a number of compulsory licences issued to
others in Canada pursuant to then subsection
41(4) of the Patent Act.
In the original action the plaintiffs sought a
declaration that this provision of the Patent Act
was invalid, as ultra vires the legislative authority
of Parliament, as contrary to the Canadian Bill of
Rights [R.S.C. 1970, Appendix III], and as in
violation of the Canadian Charter of Rights and
Freedoms [being Part I of the Constitution Act,
1982, Schedule B, Canada Act 1982, 1982, c. 11
(U.K)]. At trial Strayer J. dismissed the plaintiffs'
action ([1986] 1 F.C. 274; (1985), 24 D.L.R.
(4th) 321 (T.D.)). That decision was upheld on
appeal by the plaintiffs to the Federal Court of
Appeal ([1987] 2 F.C. 359 (C.A.)), and leave to
appeal to the Supreme Court of Canada, sought by
the plaintiffs, was refused ([1987] 1 S.C.R. xiv,
application refused 9.4.87).
It might have been considered that that was the
end of the matter. Now, however, the Attorney
General of Canada, defendant in the original
action as defender of the general federal public
interest, makes application pursuant to Rules 201
and 319 of the Federal Court [Federal Court
Rules, C.R.C., c. 663] for access to documents
sealed as confidential by orders of the Court, on
behalf of the Minister of National Revenue, who
was not a party and who had no particular interest
to be represented in the original action.
The reason for this unusual application is that
the Minister of National Revenue is conducting an
audit of the returns of one of the original plain
tiffs, Smith, Kline & French Canada Ltd., for the
taxation years 1981, 1982 and 1983. In the course
of that audit, which the Minister has authority and
responsibility to undertake (Income Tax Act,
R.S.C. 1952, c. 148, subsections 69(2), 152(1),
152(4) and 152(7), as amended by S.C. 1970-71-
72, c. 63, s. 1), auditors are concerned to examine
any information that might relate to prices paid by
that plaintiff for cimetidine purchased from non-
arm's length non-resident suppliers. In February
1988 auditors on behalf of the Minister of Nation
al Revenue wrote to the Canadian corporate plain
tiff requesting consent to release of the exhibits
now in issue or of the information contained in
them but the company declined to consent.
Thereafter, in August 1988 this application was
initiated. It is opposed by the plaintiffs, respon
dents in this matter, on several grounds. Before
turning to argument some further review of the
history of this action with reference to the exhibits
sealed as confidential is essential.
The Action—Pre-trial
In the course of discovery before trial there were
certain undertakings by counsel for the Attorney
General in relation to confidentiality of testimony
or documents produced on discovery in the case of
at least one of the individual plaintiffs and of one
or more of the officers representing one or both of
the corporate plaintiffs. From the transcript of
discoveries the undertakings appear to be broad in
their scope.
In discovery of one of the individual plaintiffs
counsel for the plaintiffs placed on record that:
... there is an undertaking as to confidentiality between us, and
that is that the documents and information that are discussed
and come forward during this examination are to be kept
confidential. We would want the transcript sealed, that is, not
to be used. Information is not to go to anyone who is not
working directly on the case and only used for the purposes of
the action, the same nature of the undertaking.
Then counsel for the defendant, the Attorney Gen
eral of Canada, responded:
I can certainly ... give you an undertaking that the informa
tion given on this discovery, either orally or in the form of
documents, will not be passed on to people outside the Justice
Department or Consumer and Corporate Affairs, in particular,
the Patent Office, and will not be used by the defendant for
purposes unrelated to this action.
Following this there was a further exchange be
tween counsel:
(For the plaintiffs): When you are discussing the information
with other than the legal profession involved in the action, the
restraint that the information is confidential and is not to go
beyond them would be passed on to such people so that they
would be aware of it.
(For the defendant): Yes I will undertake to do that as well.
In discovery of one of the officers of the English
corporate plaintiff counsel for the plaintiffs placed
on record the undertaking as to confidence made
in the earlier discovery and asked that it apply as
well to this further discovery and counsel for the
defendant acknowledged that the same undertak
ing as to confidentiality would apply to the evi
dence whether oral or written.
There was one other exchange in discovery of
one of the individual plaintiffs where, after the
witness declined to answer on the basis that the
information was confidential, counsel for the par
ties engaged in the following exchange:
(For the Defendant): I must ask that you [reveal the informa
tion] because, of course, there isn't any special privilege attach
ing to that kind of information.
(For the Plaintiffs): I would think that would be highly confi
dential information, highly pertinent to competitors to know
whether or not facilities are being expanded, cut back or
maintained to the status quo. You made your request of record,
and we will take it under consideration
(For the Defendant): I appreciate it might well be confidential,
and I thought that was why you extracted an undertaking from
me before we proceeded.
(For the Plaintiffs): There are certain aspects where informa
tion will be contained in documents that you will be seeing.
(For the Defendant): You and I know ...
(For the Plaintiffs): There is no need to expand the risk by
contributing to it beyond what is necessary.
(For the Defendant): This is my opportunity to examine [the
individual plaintiff] on the subject, and he does seem to have
personal knowledge of the subject. I am asking him now to tell
me what he knows about it.
In this application this last exchange is relied
upon by the applicant for the conclusion, based on
the recollection and belief of one of the original
counsel for the defendant in the action, that the
reason advanced by the plaintiffs for seeking
undertakings about confidentiality of evidence in
discovery, and for subsequent correspondence,
referred to below, was concern for confidentiality
vis-Ã -vis competitors in the industry.
Subsequently, in recognition of the undertak
ings, counsel for the defendant advised in writing
that he anticipated a need for assistance of others
to whom it might be necessary to show exhibits
regarded by the plaintiffs as confidential and he
undertook to ensure that "anyone with whom I
discuss the matter is aware of the undertaking I
have given to the need to keep the information in
strict confidence". Counsel later advised in writing
that he proposed to convey information, provided
in confidence on discovery of an officer of the
Canadian corporate plaintiff, to the Minister of
Consumer and Corporate Affairs, and by inference
I assume sought to extend the umbrella for con
veying information acknowledged to have been
provided in confidence.
In argument in relation to this application coun
sel for the plaintiffs submitted that the Court
could not relieve counsel of their obligations
assumed by pre-trial undertakings, a submission
with which I agree but one that, in my view, is not
directly germane to the application.
At a later stage in pre-trial proceedings, the
defendant sought certain documents from the cor
porate plaintiffs, referred to in discovery of officers
of the companies, apparently including certain
financial information. The application for produc
tion of the documents in question was refused by
Strayer J., (Smith, Kline & French Laboratories
Ltd. et al. v. Attorney-General of Canada (1984),
1 C.P.R. (3d) 268 (F.C.T.D.)). Thereafter, the
Court of Appeal ordered that the documents
sought, having already been produced and marked
in discovery, be produced "subject to such meas
ures to protect their confidentiality as the parties
may agree or, failing agreement, the Trial Division
may order". (per Mahoney J. for the Court,
unreported, F.C. A-957-84, January 11, 1985).
The Action—"Confidentiality Orders"
Thereafter, by order of the learned Associate
Chief Justice, made February 14, 1985, pursuant
to Rule 324 with the consent of counsel, provision
was made for the documents to be produced and
retained in confidence, including the following
terms, after defining "confidential information" in
terms of certain documents and "trial counsel" by
naming then counsel for the Attorney General "or
any other particular solicitor, employed by Deputy
Minister of Justice, who has conduct of this
action":
3. Each document of the confidential information shall be
marked with a notice stating that the document is subject to
this confidentiality order.
4. If used in Court, all confidential information shall be filed in
sealed envelopes or other appropriate sealed containers on
which shall be endorsed the caption of this litigation, an
indication of the nature of the contents of such sealed envelope
or other container, the word "Confidential" and a statement
substantially in the following form:
"This envelope is not to be opened nor the contents thereof to
be displayed or revealed except by order of the Court or
consent of the parties".
5. All confidential information shall be retained in the custody
of trial counsel at their personal offices and shall not be used by
trial counsel for any purpose other than in connection with this
action subject to the provisions of this order and shall not be
disclosed by trial counsel except that, and solely for the purpose
of this action, any document or information may be disclosed
by trial counsel to such persons, including outside experts, as
trial counsel deems necessary. The confidential information
may be delivered to the offices of such persons, subject to the
provisions of this order.
6. Before any authorized confidential disclosure is made to a
person as provided in para. 5, such person shall have acknowl
edged, in writing duly executed and returned to trial counsel,
that he has read and understands the terms of this order and
agrees to comply with and be bound by this order. At all times
such person shall ensure that the confidential information is
maintained in a secure place and is only shown to persons who
have acknowledged this order in writing.
7. Trial counsel and such person to whom confidential informa
tion is disclosed pursuant to paras. 5 and 6 of this order shall
not directly or indirectly disclose any confidential information
or the subject matter or contents thereof to any other person,
firm or corporation without further order of the Court, or the
consent in writing of the plaintiffs.
8. Trial counsel and such person to whom confidential informa
tion is disclosed pursuant to paras. 5 and 6 of this order shall
not use any confidential information or the contents or the
subject matter thereof for any purpose other than in connection
with this action subject to the provision of this order.
9. Upon final termination of this litigation, the defendant and
each other person subject to the terms hereof shall be under an
obligation to assemble and return to the plaintiffs all confiden
tial information and all copies thereof.
10. Nothing in this order nor anything done in compliance with
this order constitutes any waiver by the plaintiffs as to the
confidentiality of any information or document subject hereto.
When the matter came on for trial, counsel for
the plaintiffs after a brief opening description of
the case to be presented referred to the matters in
confidence in the following terms, as recorded in
the transcript:
... there is a protective order in this case, and the protective
order is particularly applicable to the dollars and cents aspect
of the case. My learned friend and I both agree that the
protective order should apply to the trial as well as to the
pre-trial proceedings.
It may be that if and when we come to that matter of
sensitivity, we may ask your Lordship to hear that part of the
evidence in camera. I take it my learned friend is in accord with
that proposition.
Counsel for the defendant acknowledged he had no
objection to that and the learned Trial Judge
agreed that this was in order. On this basis the
trial proceeded, some testimony was heard in
camera and documents subject to the order of
February 14, 1985 continued throughout to be
treated as sealed in confidence and some other
documents, including two here sought, were sealed
as confidential in the course of the trial.
Following trial, in proceeding to appeal, the
plaintiffs' counsel applied for and was granted,
with consent of counsel for the defendant, pursu
ant to Rule 324, an order maintaining and extend
ing the earlier order of February 14, 1985 in the
following terms (from F.C. A-909-85, order grant
ed by Heald J., August 25, 1986):
(I) That the terms of the Order (hereinafter "the Confidential
ity Order"), made in this matter by the Honourable Associate
Chief Justice on the 14th day of February 1985, shall continue
to apply during the course of this appeal to each of the
documents mentioned in that Order;
(2) That the portion of the Appeal Case herein that consists of
evidence given in camera before Mr. Justice Strayer at the trial
of this action or of confidential documents admitted in evidence
at the said trial, namely, the volumes marked Confidential
Volume I, Confidential Volume II, Confidential Volume III,
Confidential Volume IV, Confidential Volume V, and Confi
dential Volume VI of the Appeal Case (hereinafter the "Confi-
dential Appeal Case"), be sealed as confidential and not be
opened or inspected by the public except by order of the Court
or consent of the parties; and
(3) That the Respondent's Memorandum of Fact and Law,
and any other document filed in this matter that refers to any
document to which the Confidentiality Order applies or to any
matter forming part of the Confidential Appeal Case, be
marked confidential and sealed and not be opened or inspected
by the public except by order of the Court or consent of the
parties.
The exhibits to which the applicant now seeks
access are subject to the "Confidentiality Orders"
previously granted with consent of counsel for the
defendant. All of the documents except two were
documents that the plaintiffs were compelled by
order of the Court of Appeal to produce subject to
the terms of the "Confidentiality Order" of Febru-
ary 14, 1985. The two exceptions were a report of
an expert witness for the defendant based on anal
ysis of documents which the plaintiffs were
ordered to produce and a transcript of excerpts of
discovery evidence of an officer of the English
corporate plaintiff in which undertakings had been
given by the applicant herein that the information
would be kept confidential and would not be used
for purposes other than the action then underway.
All of the documents in question had been sealed
as confidential at trial and were subject to the
"Confidentiality Order" issued by the Court of
Appeal on August 25, 1986.
The applicant now seeks an order for a repre
sentative of the Minister of National Revenue to
have access to these documents relying upon sever
al grounds, a motion opposed by the respondents.
The Principle of Openness of Court Records
It is urged that the principle of openness to
court records supports the application. Reference
is made to Rule 201 of the Federal Court Rules
and to the common law.
Rule 201 provides for maintenance of Court
files and records and provides in part that:
Rule 201.. .
(4) Any person may, subject to appropriate supervision, and
when the facilities of the Court permit without interfering with
the ordinary work of the Court,
(a) inspect any court file or the annex thereto; and
(b) upon payment ... obtain a photocopy of any document
on a Court file or the annex thereto.
That general rule is an important one, but it
cannot be applicable without approval of the
Court, which the applicant now seeks, where the
Court itself has previously ordered certain exhibits
to be maintained in confidence and so sealed.
In addition to the Rules it is urged that there is
a common law presumption in support of public
access to the courts and court records, and the
burden of persuading the Court that access should
not be provided is upon one who seeks to deny it:
per Dickson J., as he then was, for the majority in
Attorney General of Nova Scotia et al. v. MacIn-
tyre, [ 1982] 1 S.C.R. 175, at page 189. In the
course of his opinion Dickson J. said at
pages 186-187:
In my view curtailment of public accessibility can only be
justified where there is present the need to protect social values
of superordinate importance.
Maclntyre held that access should be provided for
a member of the public to examine search war
rants and supporting documents issued pursuant to
section 443 of the Criminal Code, R.S.C. 1970, c.
C-34, after the warrants had been executed. The
applicant, in stressing the general principle of
"openness" of court records also referred to
Samuel Moore & Co. v. Commissioner of Patents,
[1980] 2 F.C. 350; (1979), 45 C.P.R. (2d) 185
(C.A.) where then Chief Justice Jackett, in an
appeal from a decision refusing a grant of a
patent, refused a motion for sealing as confidential
documents submitted in application for a patent.
Further, reference was made to Atwal v. Canada,
[1988] 1 F.C. 107 (C.A.) where reliance on the
principle led the Court of Appeal to overrule
Heald J. who had dismissed an application, by an
accused in criminal proceedings, to rescind a war
rant, or to provide access to documents supporting
the warrant, where the warrant was issued under
the Canadian Security Intelligence Service Act,
S.C. 1984, c. 21.
The presumption of "openness" of court records
is important and it is generally applicable in judi
cial proceedings. It would have been considered by
counsel and by the Court at the time the orders
now sought to be varied were issued with consent.
In none of the cases referred to which turn on the
general principle of openness were the decisions
concerned with a situation where the information
sought is confidential by order of the court itself,
made with consent of the parties, and where one
party subsequently applies for the order to be
changed. In this application the social value of
importance at issue is the integrity of the judicial
process itself. We are not concerned with the
interests of a member of the public, though the
applicant in his representative capacity for all
federal public interests now seeks access on behalf
of a particular public interest not at issue in earlier
proceedings. The principle supporting access by a
member of the public is not directly supportive to
one of the parties to an action who, having con
sented to orders for sealing documents as confiden
tial, seeks access for purposes admittedly not con
sidered at the time of the orders. In this case the
burden of persuading the Court that access should
be provided is clearly on the applicant who now
seeks to have varied the orders to which he earlier
consented.
Reasons Inferred for Ordering Documents be
Maintained in Confidence
The applicant submits that the reason for the
respondents seeking confidentiality, both as to
undertakings between counsel and in relation to
orders of this Court in advance of trial, at trial and
in advance of appeal, was concern that disclosure
would harm their interests by revealing matters
the respondents considered confidential and sought
to protect from disclosure to competitors. That
submission is based, apparently, on the recollection
and belief of one of counsel for the defendant in
the original proceedings, with particular reference
to the final exchange between counsel recorded
above from discovery proceedings. It is also based
upon the reason advanced by the Canadian corpo
rate plaintiff in another case where it sought confi
dentiality in relation to evidence in moving for
proceedings to be in camera (Smith, Kline &
French Canada Ltd. v. Frank W. Horner, Inc.
(1982), 70 C.P.R. (2d) 128, (F.C.T.D.) at page
132). The latter inference, drawn from another
action, is irrelevant here.
The former inference based on recollection and
belief is denied by counsel for the plaintiffs. It is
not one that I can accept, based on the transcripts
of discovery as a whole which have been brought
to my attention. In one passage in the transcript
from discovery of one of the parties the undertak
ing is clear that evidence would not be used by the
applicant herein "for purposes unrelated to this
action", and that undertaking is 'specifically
referred to in discovery of an officer of one of the
corporate plaintiffs. Moreover, the subsequent
conduct of counsel for the defendant implicitly
acknowledged that information provided in discov
ery, with undertakings, was for the purpose of the
action then underway when he wrote to advise
that, in extending the umbrella of the undertaking
as to confidence, he would alert any who were
provided with information deemed confidential
that it was to be kept confidential.
It may well be, as averred by one of original
counsel for the defendant, that throughout the
proceedings he did not "hear discussed as a reason
for maintaining the confidentiality of documents
and information, the income tax liability of the
plaintiff Smith, Kline & French Canada Ltd.".
Similarly, a host of other possible reasons for
desiring confidentiality were not apparently dis
cussed and it would be inappropriate to draw any
inference from what was not discussed.
There is no clear evidence from transcripts of
what reasons underlay the concern for and the
giving of undertakings as to confidence, and it may
be that there was no real meeting of the minds on
the reasons. In any event there is no reason on the
record in relation to the orders of the Trial Divi
sion or of the Court of Appeal and those orders
provide in each case a complete ban on access,
except for purposes of the proceedings then under-
way, unless the Court should otherwise order. In
my view, in light of the terms of the orders, the
reasons for which confidential undertakings and
orders were sought and the reasons for which they
were granted at various stages in proceedings be-
tween the parties are irrelevant to the issue raised
by this application.
Other Considerations Not of Direct Relevance
Similarly, I am not persuaded that the following
matters raised in argument are relevant to the
issue herein.
(1) The applicant's submission that mainte
nance of confidentiality from competitors is
irrelevant to the interests of the Minister of
National Revenue in conducting an income tax
audit seems itself to be irrelevant in light of my
conclusion about reasons and the terms of the
orders here in issue. Even if that conclusion is
not shared this submission does not assist the
applicant in seeking to have the Court now vary
the terms of those orders. Confidentiality would
be similarly irrelevant to many other interests
that public officials or private persons might
seek to pursue if given access to the information
here sealed as confidential.
(2) The applicant's submissions that officers of
Revenue Canada, Taxation are bound by the
confidentiality provisions of section 241 of the
Income Tax Act and further that the Court
could impose directions limiting uses of the
information sought if the application herein
were granted, seem to me relevant only to the
conditions upon which variation of the original
orders might be ordered, not to the issue of
whether the orders should now be changed.
Amp of Canada, Ltd. v. The Queen (1987), 87
DTC 5157 (F.C.T.D.), relied upon by the appli
cant as an example of court imposed limitations
on use of information, was a case where access
was sought to financial information and tax
returns of third parties, then in possession of the
Minister of National Revenue not the Court,
upon which the Minister had relied in reassess
ing tax liability of the applicant. One of the
third parties objected to release of the informa
tion sought but the Crown did not contest the
application. That case is not helpful in defining
the grounds for varying court orders as to confi
dentiality. Moreover, section 241 of the Income
Tax Act and further possible confidential orders
of the Court would provide little comfort to the
Canadian corporate respondent here for neither
could provide protection from use of the infor
mation against itself, for that is the very purpose
for which access is now sought, the use of the
information in assessments that can only affect
that respondent.
(3) The applicant's suggestion in argument that
it would be ironic if information provided in an
action contesting the validity of litigation were
now withheld in an application made to assist
the Minister of National Revenue in the dis
charge of his responsibilities according to law
seems to me irrelevant. Moreover, it overlooks
the fact that the information sought was ten
dered as evidence in the original action by the
applicant, not by the respondent who resisted
production of documents until the Court ordered
their production with provision for them to be
maintained in confidence.
(4) Similarly, there seems to me no direct rele
vance to the issues here of the respondent's
submissions that at common law there is an
implied undertaking that evidence a party is
compelled to produce on discovery will be used
only for purposes of the action for which it is
produced, and that this implied undertaking is
enforceable by the Court.
Authorities cited for these propositions discuss
the balancing of interests, on the one hand the
public interest in open and expeditious judicial
proceedings where all relevant information is
available to the parties in order to ensure that
justice be done between them, and on the other
hand, the public and private interest in main
taining privacy in relation to information, oral
or written. The former interest supports the
process for discovery under which parties may
be compelled to provide all information and
documents available to them that are relevant to
the issues in an action. The latter interest in
maintenance of privacy supports the recognition
of an implied undertaking by counsel and a
party who gain access to information through
discovery that it will not be used for any collat
eral or ulterior purpose and will only be used for
purposes of the action for which it is produced.
Others, not associated with the action for which
information is produced on discovery, who
acquire the information may be enjoined from
using it for any purpose other than the action:
Distillers Co (Biochemicals) Ltd y Times News
papers Ltd, [1975] 1 All ER 41 (Q.B.D.). The
implied undertaking will preclude use of docu
ments obtained in discovery in one private
action from being used as the basis for another:
Riddick v. Thames Board Mills Ltd., [1977] 1
Q.B. 881 (C.A.), though it may not preclude
action for contempt for violation of an Anton
Pillar order issued in an earlier related action
between the parties if information obtained
through a similar later order indicates violation
of the first order: Crest Homes plc y Marks,
[1987] 2 All ER 1074 (H.L.). The undertaking
may be enforced even where documents
obtained through discovery, having been read in
open court, are later used for a collateral pur
pose: Home Office y Harman, [ 1982] 1 All ER
532 (H.L.).
It is unnecessary to decide whether there is as
yet widely recognized in Canadian courts an
implied undertaking to the court, or a general
obligation of counsel and parties, to use infor
mation obtained through discovery only for pur
poses of the action for which it is produced. It
has been referred to in some Canadian decisions,
including Lac Minerals Ltd. v. New Cinch
Uranium Ltd. et al. (1985), 50 O.R. (2d) 260
(H.C.) and Control Data Canada Ltd. v. Sen -
star Corp. (unreported, F.C. T-1583-84, May 6,
1988 per Giles A.S.P., appeal dismissed by
Jerome A.C.J., June 6, 1988). We are here
concerned not with recognition of implied
undertakings and possible release from those.
Rather we are concerned with orders of this
Court and the Court of Appeal which sealed
documents as confidential, thus reinforcing any
express or implied undertakings as to use of the
documents only for purposes of the action then
underway between the parties, and whether
these orders should now be varied.
Varying "Confidentiality Orders"
This Court has dealt with applications to vary
its own "confidentiality orders" on previous occa
sions. In Halliburton Co. et al. v. Northstar Drill-
stem Ltd. et al. (1982), 65 C.P.R. (2d) 122
(F.C.T.D.), Walsh J. refused to amend a confiden
tiality order so far as it related to information
produced on discovery but did approve amending
the order to permit disclosure of other confidential
information to Alberta solicitors for the purpose of
advising with respect to a prospective action in
Alberta, but not for use as evidence in any action.
In Algonquin Mercantile Corp. v. Dart Industries
Canada Ltd., (unreported, F.C. T-831-82, Novem-
ber 4, 1983), McNair J. declined to vary terms of
a confidentiality order, issued on consent of the
parties, to permit persons other than those desig
nated in the order to have access to confidential
information in order to provide advice. In Control
Data Canada Ltd. v. Senstar Corp., supra, Giles
A.S.P., refused to grant an order to permit disclo
sure of information provided on discovery and
other information subject to a confidentiality order
where the purpose of the application was to seek
advice from counsel in the United States about
possible legal action under legislation of that coun
try which action, if successful, might result in
triple damages, an outcome deemed penal in
nature by the Associate Senior Prothonotary.
In Apotex Inc. v. Attorney-General of Canada
et al. (1986), 10 C.P.R. (3d) 310 (F.C.T.D.),
Madame Justice Reed declined to vary terms of a
prior confidentiality order sought by one seeking to
appeal an order rejecting its application to be
added as an intervenor to proceedings. In dealing
with the matter she did not accept the general
principle of open judicial proceedings reflected in
Rule 201(4) as sufficient ground for altering the
original order sealing the court file as confidential.
That factor would have been considered at the
time of the original order. In her words [at
page 312]:
Something more than an argument based on the general princi
ple of the public nature of court proceedings must be given as a
reason for altering the original order—some changed circum
stances, or compelling reason not directly considered when the
order was given.
Here the applicant submits that this test is met,
that the changed circumstance is that the Minister
of National Revenue is now trying to determine
the plaintiff's correct income tax liability, a matter
not considered at the time the orders were given.
Further, it is submitted that enabling the Minister
to review the information here sought in further
ance of his responsibilities under the Income Tax
Act is a compelling reason for altering the orders.
In the audit initiated by the Minister the prices
paid by the Canadian corporate respondent for
cimetidine to non-arm's length non-resident sup
pliers are apparently under review. The applicant
infers from the decision of Strayer J. in the trial of
the original action and from information provided
by counsel for the applicant when the appeal was
heard that the Canadian corporate respondent
paid more than the international market price for
the drug but I do not find in the reasons of Strayer
J. or in the Court's own record in prior proceedings
any basis on which that inference can be more
than speculation.
The respondents submit that these circum
stances do not present a compelling reason for
varying the order. They point to the absence of
evidence by the applicant that the purposes sought
by the Minister are not met by other information
available to him now or through powers conferred
by the Income Tax Act without seeking to vary the
orders made to maintain confidentiality. They
point as well to the fact that the information
sought was ordered produced, or was based on
such information, by respondents other than the
Canadian corporate respondent whose tax liability
is of concern to the Minister.
Conclusion
I am not persuaded that the test set out in
Apotex has been met by the applicant. I accept
that review of the tax liability of the Canadian
corporate respondent was not considered at least in
the court action at the time the "confidentiality
orders" were made and in a sense this is a new
circumstance. But it is not a change in circum
stances in relation to the issues between the parties
in the action for which the information was pro
duced. It is a completely new circumstance and I
am not persuaded that it is a compelling reason for
variation of the orders, though I have no doubt
that it would serve the convenience of the Minister
of National Revenue to have access to the docu
ments here sought, which is in the Court's records,
sealed as confidential, as a result of the coinci
dence of the action lawfully begun by the
respondents.
On principle, where the court has ordered, with
consent of the parties, that documents be sealed in
confidence in the interests of seeking justice in the
issues between parties to an action, the reason for
varying the orders should be truly compelling,
especially where the purpose for access is unrelat
ed in any way and is in that sense collateral or
ulterior to the action in which the documents are
filed and sealed. Only in truly exceptional cases
would it be warranted to change a "confidentiality
order" in these circumstances. Indeed, even in the
absence of an order the Court might well preclude
use or access to information arising from discovery
for purposes of a collateral action because of an
implied undertaking that this information is to be
used only for purposes of the action in which it is
produced: Riddick, supra. If it were otherwise,
confidence in the integrity of the judicial process,
including the responsibility of the court to protect
the interests of the parties in litigation, would be
eroded.
This is particularly the case, it seems to me,
where the action in which "confidentiality orders"
are granted involve the Attorney General as a
party. The Attorney General has responsibilities to
represent a vast array of public interests. If coun
sel for the Attorney General consents to an order
that evidence be maintained in confidence, or if he
is subject to such an order even without consent,
that order should not be varied merely because
there arises some other public interest, collateral to
the action in which the order is made. Only the
most exceptional reason would warrant variation
of the order. Otherwise, the interests of justice
served by the modern discovery process would tend
to be frustrated. Parties engaged in actions by or
against the Crown would seek to avoid disclosure
of information which might at some future date,
regardless of the outcome of the original action, be
sought for use by the Crown for some purpose
unrelated to the original action. This might be the
case particularly if information sealed as confiden
tial in court records were to be made available to
the Minister of National Revenue when he is
engaged in reassessing tax liability of any party
who might have been involved in an action with
the Crown.
That responsibility of the Minister, assessing
liability for tax, is an ongoing one, in no way
dependent upon documents or other evidence pro
vided in actions in this or any court. In this case
that responsibility existed in relation to the
Canadian corporate respondent before the original
action was commenced, throughout the proceed
ings and it continues today. It is not a new respon
sibility even though it may be a new circumstance
that a decision has apparently been made to con
duct a special audit of that respondent's tax liabili
ty. This is not, it seems to me, a compelling reason
to now vary the "confidentiality orders" made
earlier in the action between the parties and with
consent of the applicant.
Having reached this conclusion it is not neces
sary to consider whether this Court has authority
to vary an order of the Court of Appeal, an issue
which would only arise if it seemed appropriate to
vary orders of the Trial Division, which, in my
view, it is not in this case.
In the result, the application by the Attorney
General of Canada is dismissed with costs to the
respondents.
At the time of hearing an application was made
by the respondents seeking enforcement of particu
lar provisions in the "confidentiality order" of
Jerome A.C.J., made February 14, 1985, and seek
ing return, under Rules 201(5) and 342, from
court records of confidential information filed in
the case. That application was adjourned sine die
with consent of the parties.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.