Disclosure of Confidential Information in Litigation

Inga and I came across an interesting development recently that has me thinking. In the course of reviewing a statement of claim, we noted that the particulars disclosed various confidential clauses of an agreement that clients of ours had recently entered into. That agreement had the standard confidentiality clauses and our clients were comfortably assured that the details of the agreement would remain secret – but disclosing them in a Statement of Claim meant that they became part of the permanent public record. Further, court proceedings are governed by a so-called “absolute privilege” and so, generally speaking, no action can be taken based on information contained in a statement of claim. So even though there were penalties contemplated in the agreement for a breach of the confidentiality clause, that remedy was no longer available due to the privilege.

The issue has been tackled in the courts from a variety of angles. Once a proceeding has commenced, there are often motions and counter motions about what supporting evidence in the case can be sealed from the public record as confidential. Sometimes the confidential nature of information can lead to it being inadmissible throughout a proceeding. But in the present case, where the information had been disclosed at the outset, there is little that can be done. The information has been publicised, and there is no recourse to the aggrieved party.

Inga suggested, quite rightly, that the problem was in the drafting – proper drafting of the statement of claim would never have included the details of the agreement – essentially it’s fluff, or padding. The statement of claim should have referred to the agreement, and that would have been argued in court, but not filed as part of the public record. Unfortunately, the reason for the confidential information’s inclusion becomes immaterial when we look at recent case law in Ontario which holds that even where the disclosure is malicious or knowingly false, the absolute privilege applies because it is the nature of the court proceeding that requires such protection.

While there really are only a limited number of situations where confidential information could reasonably be included in a statement of claim, this is an important consideration for contracting parties to think about – and one we will be emphasizing in the future when our clients are entering into confidential agreements.

Scott R. Young