Court Orders Confidentiality Agreement as Precondition to Obtaining Documentary Discovery

Litigants in Ontario are required to disclose every document in their power, control or possession that is relevant to the lawsuit at hand.

Often times one party is concerned about disclosing documents to the other that may be highly confidential from a business perspective. The “deemed undertaking” rule in Ontario’s Rules of Civil Procedure operates to alleviate some of that concern.

The deemed undertaking rule provides that

“all parties and their lawyers are deemed to undertake not to use evidence or information to which this Rule applies for any purposes other than those of the proceeding in which the evidence was obtained.”

The deemed undertaking rule applies to documentary discovery, oral discovery, inspection of property, medical examinations and examination for discovery by written questions.

A recent decision by the Commercial List Court in Toronto is unique for the fact that the presiding judge ordered that the plaintiff, the plaintiff’s principal, the plaintiff’s counsel and any expert retained by the plaintiff enter into a confidentiality agreement with the defendants before the defendants were required to disclose what very likely would be confidential business information but which was otherwise relevant to the case.

The case dealt with a plaintiff who had sold its insurance business to the defendants. The deal was structured in a way in which the plaintiff would receive additional money if certain revenue targets arising from the book of business it sold to the defendants were met during the three years following the sale.

The plaintiff alleged that the revenue was earned and that the defendants failed to properly disclose and account for the revenue thereby depriving the plaintiff of additional funds under the terms of the agreement.

The defendants made substantial documentary disclosure but refused to produce a specific 12,000 page document referred to as a “Production Report with Lead Sheet.” That document essentially shows all the defendants’ revenues, from all clients, including those included in the purchase agreement.

The defendants took the position that all earnings from the sale had been properly accounted for in their records and that those records had been produced.

The court held that the “defendants should not be permitted to withhold the documents simply [by] alleging there is nothing relevant in them. They are the ones who control the documents.”  The court further noted that it would be manifestly unfair for the defendants to say that it “has made a review of its own documents, it has concluded its position is correct, and it has produced only those documents that support its position, but no others.”

In the result, the court ordered that the Production Report with Lead Sheet be produced, but only after the plaintiff, its principal, its counsel and its experts signed a confidentiality agreement. It is unclear why the court felt that this was necessary given the existence of the deemed undertaking rule (which was referred to in the decision). Perhaps the only reason that a confidentiality agreement was ordered is due to the plaintiff’s stated willingness to enter into such a document in order to obtain disclosure of documents that were properly producible under the procedural rules.

 

 

In Ontario,

Start the discussion!

Leave a Reply

(Your email address will not be published or distributed)