Shell – Tax Court grants a confidentiality order respecting JV documents whose public disclosure would breach a confidentiality agreement

Shell realized a capital loss on its disposition of its interest in a partnership to Canadian subsidiaries of PetroChina in connection with establishing a joint venture with the PetroChina group for the development and production of natural gas. Shell and PetroChina did not wish their competitors to know the details of their JV and, to that end, made various confidentiality agreements and covenants.

CRA denied the above capital loss pursuant to GAAR and, in order to challenge this assessment in the Tax Court, Shell needed to disclose various JV documents. It brought a motion for a confidentiality order pursuant to s.16.1 of the general-procedure Tax Court rules so that such documents could be disclosed to the Crown on discovery, but shielded from public view.

After referring to the “open courts” principle set out inter alia in Sherman Estate, and before allowing the motion, Sommerfeldt J stated:

I am satisfied that Shell has established that, if a confidentiality order is not granted, there will be a serious risk to one or more of the following important public interests:

(a) the general commercial interest of preserving confidential information;

(b) the general public interest of protecting the right to a fair trial, also described as the public interest of enabling “commercial litigants to vindicate their legal rights without exposing themselves to the real risk of harm”;

(c) the public interest of enabling a litigant, when “compelled by the rules of discovery to divulge sensitive and confidential information, ... to maintain the confidentiality of that information”;

(d) the public interest of promoting commercial certainty and protecting proprietary information; and

(e) the public interest of protecting fair competition.

He also referred sympathetically to the dilemma faced by Shell that “in order to put its best foot forward in this Appeal, Shell will need to breach the confidentiality agreements” absent the motion being granted.

Neal Armstrong. Summary of Shell Canada Limited v. The Queen, 2022 TCC 39 under Tax Court of Canada Rules (General Procedure), s.16.1(1).