Implied undertakings and the duty to keep discovered information confidential.

 

This article discusses the law dealing with the implied undertakings that arise when information is disclosed during the discovery stage of civil litigation. According to the implied undertaking, which arises when a lawyer for a party receives documents and information in the discovery process, lawyers and their clients are bound to keep such information confidential and to not use it, without the owner’s permission or leave of the court, for a collateral purpose. It is clear that implied undertakings arise in British Columbia when discovery information is obtained, but it is unsettled whether the undertaking ends upon the information subsequently being disclosed in court.

 

Lawyers take undertakings very seriously, as they should; lawyers can be subject to disciplinary conduct for failing to fulfil them. Therefore, lawyers are very careful to limit express undertakings to events within their control. However, aside from express undertakings, lawyers may in certain circumstances be bound by implied undertakings. Breach of an implied undertaking is also a very serious matter and therefore it is critical for lawyers to be aware of the implied undertakings they may be subject to.

 

There is an implied undertaking that litigators in British Columbia are bound by, and should be careful to not underestimate: the obligation to not use (without the owner's permission or the court's leave) discovery documents and information other than in the proceedings in which they were produced. Prior to 1995 there was no such implied undertaking in British Columbia. On the contrary, the position prior to 1995 was that unless the court ordered otherwise, a party receiving discovery information was entitled to use that information for other purposes. This article summarises the change to the law in 1995, reviews some more recent cases discussing the implied undertaking and considers whether the implied undertaking ends to the extent the information covered by the undertaking is subsequently disclosed in open court.

 

In Kyuquot Logging Ltd. v. B.C. Forest Products Limited (1986), 5 B.C.L.R. (2d) 1 (C.A.) [Kyuquot] the British Columbia Court of Appeal considered what collateral use a party could make of information it obtained on discovery. In that case three vendors delivered logs to the defendant purchaser. Before the logs were delivered, they were weighed by the Crown (also a defendant) to determine the amount to be paid for the logs by the defendant, and the royalties to be paid to the Crown. Irregularities were discovered with the scales used to weigh the logs, and the vendors sued for the amount they were underpaid by the purchaser, and overpaid to the Crown.

 

Each of the vendors brought separate actions. After one of the vendors, Kyuquot, obtained documents and information during discovery of B.C. Forest Products Limited, it wanted to share that information with the other two vendors. Those other vendors had settled their cases against B.C. Forest Products Limited and so were not able to obtain that same information on their own discovery. However, the other plaintiffs wanted to use that information in their continuing cases against the Crown. Kyuquot was concerned that it was subject to an implied undertaking of confidentiality which would be breached by sharing the information with the plaintiffs in the other actions. As such, Kyuquot applied for a court order permitting it to disclose the information.

 

McLachlin J.A. (as she then was) reviewed the law in British Columbia, and held (Esson J.A. dissenting) that there was no implied undertaking of confidentiality and that Kyuquot was free to disclose the information to the other plaintiffs.

 

The issue in Kyuquot was what the default position should be regarding information received on discovery: should it be that the receiving party is not allowed to use the information for collateral purposes, and absent permission to do so from the disclosing party can apply for a court order allowing disclosure, or should it be that the receiving party is allowed to use the information for collateral purposes, and absent cooperation (in the form of an express undertaking) from the receiving party the disclosing party can apply for a court order enjoining disclosure for collateral purposes. McLachlin described this choice between alternatives as follows at para. 36:

 

The question is this. Is the difficult question of striking the proper balance between [the] conflicting objectives in particular cases best resolved by a blanket undertaking to use the discovery only in the case in which it is taken unless the court otherwise orders? Or is it better resolved by imposing no general restrictions on the use of discovery other than those already embodied in the rules, but permitting parties to apply for additional protection in particular cases?

 

As noted, McLachlin J.A. held that the default position should that there was no implied undertaking, but that the disclosing party could request the court to impose an undertaking of confidentiality on the party receiving the information in appropriate circumstances. McLachlin J.A. explained that an advantage of this arrangement was that an unsuspecting lawyer would not accidentally breach an undertaking he or she did not know about, and possibly be found in contempt of court.

 

At para. 42 of Kyuquot McLachlin J.A. summarised the law, as it then was, and set out a framework for determining whether, on application by the disclosing party, an undertaking of confidentiality should be imposed (citations omitted): 

 

Esson J.A. disagreed with the conclusion reached by McLachlin J.A. and dissented in Kyuquot. Esson J.A. said the following at para 67:

 

I do not, with all respect to those of contrary opinion, see the question as one which we can decide on grounds of policy. In arguing that the law should be that there is no restriction in the absence of an order or express undertaking, counsel for the appellant urged that such a rule would be more practical and less cumbersome than one requiring the party obtaining discovery to apply for an exemption. It is not obvious to me that, if it were open to us to decide the matter on that basis, the course urged by the appellant would be advantageous. Our rules for discovery of documents are very broad. The reality, in many cases, is that great volumes of paper must be disclosed. That disclosure is often made, in practice, without much consideration to the question whether some parts of it could be damaging or embarrassing to the person making production. Under the present law, there is not much point in considering those questions. If the documents can only be used for the proper purposes of the action in which they are produced, it does not matter whether they are prejudicial or embarrassing - that is a cost required by the rule. So there is no practical reason for the party giving production to make the effort, which will sometimes be very great, to cull out any potentially embarrassing material. But if the party receiving production is to be free to make any use it wishes unless and until the owner of the documents obtains a special order or undertaking, that kind of effort will have to be made in every case. That will not further the ends of keeping costs to a reasonable minimum and of bringing about a broad, open and reasonably expeditious discovery.     

 

In Hunt v. Atlas Turner Inc. (1995), 4 B.C.L.R. (3d) 110 (C.A.) [Hunt] a five member panel of the British Columbia Court of Appeal reconsidered the decision in Kyuquot, and changed the default position to one of there being an implied obligation to keep discovered information and documents confidential.

 

The plaintiff in Hunt was suing an asbestos products manufacturer, as were many other plaintiffs in separate actions against the same defendant. The many plaintiffs, in a number of different jurisdictions, wanted to work together and share discovered information. Considering himself bound by Kyuquot, the chambers judge, Wetmore L.J.S.C., held that documents disclosed to the plaintiffs in this action could be made available to the plaintiffs in the other British Columbia actions, and to the plaintiffs in the Texas actions against the same defendant. The defendant asbestos product company appealed that decision.

 

The five member panel of the Court of Appeal overruled Kyuquot and stated that the default position is now that a party cannot use discovered information without permission of the owner, or leave of the court:

 

[W]e would uphold the obligation which the law has generally imposed upon a party obtaining discovery of documents, and we would require such party, in appropriate cases, to obtain the owner's permission or the courts leave to use the documents other than in the proceedings in which they are produced.

(Hunt at para. 64).

 

The defendant in Hunt argued that s. 8 of the Canadian Charter of Rights and Freedoms protects litigants from unreasonable search and seizure of private documents, and that those rights would be infringed by allowing unrestricted sharing of disclosed documents. The Court said that it would not decide the matter on Charter grounds, although, guided by Dolphin Delivery Ltd. v. R.W.D.S.U., Local 580, [1986] 2 S.C.R. 573 and R. v. Salituro, [1991] 3 S.C.R. 654, it would decide this civil case in accordance with Charter values.   

 

The court in Hunt reviewed the merits of each of the alternative default positions, and ultimately adopted Essen J.A.’s view:

 

[W]e prefer the dissenting views of Esson J.A. in Kyuquot, mainly because we think it anomalous to recognize a right of privacy and an obligation to use discovery documents only in the proceedings in which they are produced, but then to require the owner to take steps to prevent a breach of that obligation. As has been pointed out in many cases, that party will not always know there is or will be an intention not to honour the obligation. It is true that the obligation is enforceable by injunction, but quia timet applications should be reserved for unusual cases, and not as part of the regular discovery process.

 

The Court of Appeal then provided some guidance on the scope of the implied undertaking and “proper use” by saying that it would not be a breach of the undertaking to disclose discovered documents to advisors such as expert witnesses. Furthermore, the Court said that the implied undertaking should not be construed rigidly and in a way that curtailed other legal, social, or moral duties. For example, said the Court, the implied obligation of confidentiality would not prevent a lawyer from fulfilling his or her duty to report fraud or professional misconduct disclosed in discovery production. 

 

A number of British Columbia cases have referred to the implied obligation rule arising from Hunt.

 

In Discovery Enterprises Inc. v. Ebco Industries Ltd., (1997) 42 B.C.L.R. (3d) 192 at para. 16 (S.C.) [Discovery Enterprises], Williams C.J.S.C. confirmed that the implied undertaking of confidentiality applies even to documents not specifically requested, but actually received, in the discovery process:

 

[T]he implied undertaking applies not only to materials which the recipient party has sought disclosure of, but even to materials of which it did not seek disclosure but which were nonetheless produced.

 

Recently, in Doucette (litigation guardian of) v. Wee Watch Day Care Systems Inc., 2006 BCCA 262 [Doucette], the British Columbia Court of Appeal considered whether information discovered in civil litigation could be communicated to the police for the purposes of a criminal investigation. In that case, a 16-month-old child suffered an injury at a daycare facility. The Attorney General filed a motion to vary the implied undertaking of confidentiality so as to allow disclosure of the discovery transcript to the police. The chambers judge refused that motion saying that since the daycare worker was required to give evidence on discovery, allowing disclosure of the information for use in criminal proceedings would violate her Charter rights.

 

Before the Court of Appeal the Attorney General argued that the implied undertaking should not apply to evidence of crimes, but that disclosure should be allowed if the examination for discovery "tended to show" that persons were "guilty of a serious offence". The Court of Appeal accepted that argument and held that the implied undertaking did not restrain bona fide disclosure of criminal conduct:

 

[A] party obtaining production of documents or transcriptions of oral examination of discovery is under a general obligation, in most cases, to keep such document confidential. A party seeking to use the discovery evidence other than in the proceedings in which it is produced must obtain the permission of the disclosing party or leave of the court. However, the obligation of confidentiality does not extend to bona fide disclosure of criminal conduct. On the other hand, non-bona fide disclosure of alleged criminal conduct would attract serious civil sanctions for contempt.

(Doucette at para. 56)

 

The Court of Appeal held that while the day care worker’s Charter rights, and the right against self incrimination in particular, may be engaged if criminal proceedings ensued, such had not yet occurred in that case because she had not been charged. The Court of Appeal held that it would be up to the criminal court, if charges were brought, to determine whether the information provided on discovery was admissible in criminal proceedings.

 

The effect of the Court of Appeal decision in Doucette is that a party receiving information on discovery which discloses evidence of a crime, may, if they act in good faith and not for an ulterior purpose, disclose it to the police without applying for a court order allowing them to do so. However, the Court of Appeal clearly stated that non-bona fide disclosure of alleged criminal conduct would attract serious civil sanctions for contempt.

 

Leave to appeal the decision in Doucette to the Supreme Court of Canada was granted on January 25, 2007.

 

Having established that the law clearly imposes an implied undertaking of confidentiality on the party receiving information and documents on discovery, a question arises as to whether that obligation terminates to the extent the confidential documents are disclosed in court proceedings. The main argument in favour of termination of the undertaking is that the purpose of the undertaking is to protect the confidentiality of the information, but once the documents and information have been made public in court proceedings, there is no confidentiality left to protect.

 

This issue was considered by Williams C.J.S.C. in Discovery Enterprises, supra. In that case, the party receiving documents on discovery, Ebco, disclosed them to a third party. Discovery Enterprises Inc. applied for an order that no further disclosure be allowed; it did not seek punitive measures for the wrongful disclosure that had already occurred.. Although Ebco acknowledged that disclosure of one set of documents was improper, it argued that disclosure of most of the documents was justified because they had previously been made public in court proceedings when they were attached to an affidavit filed in a chambers motion. After reviewing the case law and considering various policy considerations, Williams C.J.S.C. held that the implied undertaking does not necessarily end just because the materials have been disclosed in court:

 

From a practical point of view one has to ask whether a receiving party should be able to avoid the implied undertaking by simply filing an affidavit with the documents in some interlocutory matter in Court? I think not.

(Discovery Enterprises at para. 29).

 

Should disclosure in a chambers application, filing in a public registry or even disclosure in open court, all of which are extremely limited disclosures, be a rationale for ending an implied undertaking which came about to protect the disclosing party from those documents being used for extraneous purposes?

(Discovery Enterprises at para. 34).

 

Williams C.J.S.C. said that if the law was to be changed such that disclosure in court was to end the implied undertaking of confidentiality, that change should be made by the Rules Revision Committee. Accordingly, Williams C.J.S.C. ordered that no further disclosure could lawfully be made by Ebco even with respect to the documents that had been attached to the affidavit filed in court.

 

Ebco applied for leave to appeal to the British Columbia Court of Appeal, but leave was refused: (1998) 103 B.C.A.C. 261. Newbury J.A. agreed with Williams C.J.S.C. that such change to the law should be left to the Rules Revision Committee, particularly since the disclosure sought by Ebco was for the benefit of a third party and any finding by the Court of Appeal would not affect the outcome of the litigation in that case.

 

Noting that Williams C.J.S.C. concluded that the weight of authority was in favour of the continued applicability of the implied undertaking despite disclosure in court, Newbury J.A. pointed out how courts had split on this issue:

 

The Chambers judge in the case at bar also noted the decision of the Federal Court of Appeal in Lubrizol v. Imperial Oil Ltd. (1990) 41 F.T.R. 234, the decision of the Alberta Queen's Bench in Wirth Ltd. v. Acadia Pipe & Supply Corp. (1991), 79 Alta. L.R. (2d) 345, and the decision of the Nova Scotia Court of Appeal in Sezerman v. Youle (1996), 135 D.L.R. (4th) 266. In all three, the court found that the implied undertaking continued notwithstanding disclosure of the documents in court proceedings. On the other hand, the Ontario Court of Appeal in dicta in Goodman v. Rossi (1995) 125 D.L.R. (4th) 613, suggested that the "rule" (i.e., the implied undertaking against disclosure) should cease to apply once the documents in question had been read out in open court.

 

Eight years later in Doucette, supra, at para. 80, Kirkpatrick J.A. writing for the court said:

 

[T]he confidentiality of the discovery process in British Columbia evaporates once the evidence is tendered in court.

 

However, the issue of the undertaking being terminated by disclosure in court was not in issue in Doucette, and the subsequent comments of Huddart J.A. writing for the Court in the subsequent case of Xu v. Foo, 2006 BCCA 525 confirm that Madam Justice Kirkpatrick’s comments in Doucette were obiter:

 

This Court has not considered whether [the implied undertaking] continues after documents have been disclosed at trial, though the Supreme Court of Canada strongly suggested that it does not in Lac d'Amiante du Québec Ltée v. 2858-0702 Quebec Inc., [2001] 2 S.C.R. 743 at para. 70.

 

In Lac d'Amiante du Québec Ltée the Supreme Court of Canada considered whether the implied rule of confidentiality regarding examinations on discovery applied under the Quebec Code of Civil Procedure:

 

The examination on discovery is therefore subject to privacy principles and to an implied obligation of confidentiality.

 

Of course, the right to confidentiality will end if the adverse party decides to actually use the evidence or information obtained on discovery, when that party chooses to use all or part of it in his or her own case. The legislative intent that information be communicated in a civil trial will then prevail, to ensure that the system is transparent. 

(Lac d'Amiante du Québec Ltée at para. 70-71).

 

However, the issue of the undertaking being terminated by disclosure in court was not directly in issue in Lac d'Amiante du Québec Ltée. Therefore, those comments, like the comments in Doucette, were obiter. Therefore, although there is obiter commentary to the contrary, the decision of Williams C.J.S.C. in Discovery Enterprises is the highest authority dealing with that issue directly.

 

Under Rule 64(1) of the Rules of Court, B.C. Reg. 221/90, any person can apply for documents contained in the court file in the registry:

 

(1)   Unless otherwise provided by an enactment, a person may, on payment of the proper fees, obtain from the registry a copy of a document on file in a proceeding

 

However, Rule 64(1)does not apply to exhibits in family proceedings, which are governed by Rule 60(42):

 

(42)   The exhibits produced at the trial or hearing of a proceeding referred to in subrule (41) must be sealed by the registrar in a secure manner and, unless the court otherwise orders, no person other than a party's solicitor, a party or a person authorized by a party or by a party's solicitor, may search the exhibits.

However, just because, in some circumstances, the public is entitled to obtain copies of exhibits filed in court in certain cases, that does not relieve counsel, and the party counsel acts for, from their implied undertaking of confidentiality. This situation may seem anomalous, but counsel should err on the side of caution and until an appellate level court, or the Rules Committee, clarifies this issue, abide strictly by the undertaking.

 

It is clear that counsel, and the clients for whom they act, are under an implied undertaking of confidentiality when they receive information and documents as part of the discovery process. Breach of this undertaking is a serious matter, and failure to abide by it may constitute contempt of court.

 

If evidence of criminal activity is revealed through the discovery process, that information may be disclosed to the police for the purposes of a criminal investigation without a court order. However, such disclosure must be made in good faith. It is advisable to warn the police of the confidential nature of the information, and even after disclosing the information to the police, counsel are not permitted to disclose the information to other sources.

 

It is not settled whether disclosure of discovered information in court ends the implied undertaking and until this matter is definitively settled by a court considering the issue directly, or a rule of procedure decided on by the Rules committee, counsel should err on the side of caution, and seek direction from the court in the event of uncertainty.