Pricewaterhousecoopers Llp v. Canada (Minister Of Canadian Heritage), 2001 FCT 1040

Date: 20010920

Docket: T-1785-99

Neutral citation:2001 FCT 1040

Toronto, Ontario, Thursday the 20^th day of September, 2001

PRESENT:      The Honourable Mr. Justice Campbell

BETWEEN:

PRICEWATERHOUSECOOPERS, LLP

Applicant

- and -

MINISTER OF CANADIAN HERITAGE

Respondent

                     REASONS FOR ORDER AND ORDER

CAMPBELL J.:

[1]    In 1998, the Department of Canadian Heritage ("Canadian Heritage") contracted the Applicant's services for the purpose of reviewing, analyzing, and recommending changes to its documents being used to contract-out or "outsource" elements of its work. This "assignment" was conducted within a relationship that had as a fundamental feature a concern for the confidentiality of two reports produced constituting the results of the assignment.         

[2]    The present application concerns a decision made by Canadian Heritage to disclose the two reports as a result of an application made pursuant to the provisions of the Access to Information Act, R.S.C. 1985; c. A-1 (the "Act").

A.        The issue

[3]    It is agreed that the present application is a trial de novo to determine whether the reports entitled "Review of Draft ASD RFP and Contract for Corporate Shared Systems Project" dated March 31, 1998, and "Best Practices Review Update" dated May 12, 1998 ("the Reports") are records to which s.20(1) of the Act applies. This provision reads as follows:

B.        The evidence

[4]    The key evidence with respect to the issue is found within the following: the affidavits of Mr. Paul Kocher, sworn November 19, 1999 (Applicant's Application Record ("AAR"), Tab 3 ) and Mr. Tudor Negrea, sworn March 20, 2000 (Applicant's Supplementary Application Record ("ASR"), Tab 7) provided on behalf of the Applicant; the agreement between the Applicant and Canadian Heritage (Exhibit "A" to the Affidavit of Mr. Kocher); and the Reports themselves ( Sealed Exhibits "D" and "F" to the Affidavit of Mr. Kocher).

1.         The agreement

[5]    The agreement dated March 19, 1998 contains requirements respecting the activities of the Applicant, the deliverables expected, the time frame for completion of the assignment, and, of note, the following statement:

We understand that all work will be conducted with full confidentiality in a safe and secure environment, with utmost urgency, and with full independency and objectivity. (AAR, p. 27.)

2.         Affidavit of Mr. Paul Kocher

[6]    Mr. Kocher's affidavit contains the following paragraphs:                        

E.             PwC's Proprietary Information and Best Practices

22. In order to perform the Assignment, and as outlined in our Engagement Letter and the Agreement, (see Exhibits "A" and "B"), PwC applied to its own proprietary methodologies and information to review, analyze, and make recommendations to Canadian Heritage.

23.           These proprietary tools include PwC's Alternate Service Delivery ("ASD") methodology which analyzes outsourcing, applies contract management methodology, evaluates ASP programs against particular criteria, makes recommendations, and compares the existing documents to PwC's own "best practices". "Best practices" themselves are defined as PwC's past experiences, other deals of which PwC's is aware, and practices espoused by other authorities. In this affidavit I refer to both PwC's ASD methodologies and PwC's Best Practices as the "Proprietary Methodologies and Analysis".

24.           The Proprietary Methodologies and Analysis were developed by PwC over a period of time of more than five years, and are held in the strictest of confidence. The Proprietary Methodologies and Analysis are used and disclosed in PwC's other ASD assignments only where PwC's clients agree to hold the information in strict confidence and not disclose it to any other person.

25.           The Proprietary Methodologies and Analysis are used only by and access is restricted to PwC partners and staff.

26.           As it does with other proprietary products, PwC protects the Proprietary Methodologies and Analysis from disclosure by enforcing firm policies on confidentiality. In addition, PwC's letters of employment demand confidentiality, and all partners and staff annually sign declarations to ensure confidentiality of PwC's proprietary products and secrets, including our client's secrets.

27.           At all times, when PwC uses the Proprietary Methodologies and Analysis in its other assignments, PwC ensures that the documents derived therefrom are confidential, maintained in confidence, and not disclosed to any one other than the client.

28.           The Proprietary Methodologies and Analysis are not available to the public and cannot be deduced from any public source by mere observation.

29.            The Proprietary Methodologies and Analysis governed PwC's entire approach throughout the Assignment. We analyzed and considered the Assignment and approached our proposed solutions by using the Proprietary Methodologies and Analysis. The Documents, namely the First Draft Report and the Review Update, were created by applying the Proprietary Methodologies and Analysis.

F.             Disclosure would Prejudice PwC's Competitive Position

30.           Disclosure of the First Draft Report and the Review Update would prejudice PwC's competitive position. Disclosure would allow a competitor to reverse-engineer or work deductively to determine the means and analysis PwC uses in its ASD assignments. Competitors could then improve or modify their own methodology based on PwC's approach. Disclosure of the Documents would therefore result in a material financial loss to PwC and a similar material financial gain to any of our competitors with access to the Documents. Given that PwC has invested considerable resources in developing and protecting the Proprietary Methodologies and Analysis, disclosure would be of significant benefit to any competitors.

31.           Just as our competitors do not have access to our working methodologies, PwC does not have access to our competitors' own methodologies. PwC would consider its competitors' methodologies proprietary to our competitors.

32.           The Proprietary Methodologies and Analysis is information that is commercial and technical in nature, and have been consistently treated as confidential by PwC. It was used in the application of the Assignment on the explicit understanding that Canadian Heritage would treat the Documents confidentially. (AAR, pp. 18-20.)

3.         Affidavit of Mr. Tudor Negrea

[7]                 The Affidavit of Mr. Negrea contains the following paragraphs:

B.            Working with Canadian Heritage

3.             Throughout the March - May, 1998 period , PwC was retained by Canadian Heritage to review and analyze Canadian Heritage's draft agreements and Requests For Proposals ("RFPs") relating to outsourcing of Canadian Heritage work for its corporate shared systems project (the "Assignment"). One of my principal contacts at Canadian Heritage was Mr. Michel Trahan.

4.             On or about April 8, 1998, I met with Mr. Trahan in Ottawa to discuss various aspects of the ongoing Assignment. During that meeting, I learned that Mr. Trahan was himself a consultant on contract with Canadian Heritage. I had previously assumed that he was a Canadian Heritage employee. When I learned that Mr. Trahan was also a consultant, I became further concerned that PwC's proprietary methodologies and analysis ("Proprietary Methodologies and Analysis") might be compromised and otherwise used without permission by Mr. Trahan (or other consultants) if PwC's analysis, work product, and documents (collectively, the "Documents") were not kept within Canadian Heritage on a strictly confidential basis.

C.            Confidentiality

5.             Because I am the founding partner who developed PwC's expertise in Alternate Service Delivery ("ASD"), I am always particularly concerned about protecting PwC's Proprietary Methodologies and Analysis in all of its ASD engagements. I personally worked and developed much of PwC's Proprietary Methodologies and Analysis, and I am therefore keenly interested in protecting PwC's intellectual capital.

6.             When I learned that Mr. Trahan was a consultant, I again raised the issue of confidentiality of the Documents.

7.             I emphasized to Mr. Trahan that PwC applies a specific analytical framework (comprised of particular criteria) in its ASD engagements. I explained the framework to Mr. Trahan, and then explained that it could easily be copied by a competitor. As a result, PwC goes to great lenghts to protect it's Proprietary Methodologies and Analysis. I explained that PwC treated very seriously both the confidentiality provisions of our contract with Canadian Heritage and the non-disclosure statement printed on the Documents, prohibiting disclosure of the Documents outside of Canadian Heritage. I explicitly told Mr. Trahan that disclosure of PwC's work products, including the Documents, without written permission would cause material damage to PwC's business. I told Mr. Trahan that the damage would amount to millions of dollars in lost business.

8.             Mr. Trahan agreed. He reassured me that PwC's work product would indeed remain confidential. On behalf of Canadian Heritage, he confirmed that the Documents would be kept confidential. Knowing that he was also a consultant, I understood that Mr. Trahan appreciated the commercial sensitivity in disclosing the Documents. Mr. Trahan also added that Canadian Heritage itself understood and desired strict confidentiality, and that Canadian Heritage would not disclose PwC's Documents or otherwise circulate them outside of Canadian Heritage.

9.             As a result of my discussions with Mr. Trahan, I was re-assured and expected that Canadian Heritage would take all steps to keep PwC's Documents confidential, as agreed when the parties entered into the Assignment. [Emphasis added] (SAR, pp. 4-6.)

[8]                 Also of importance with respect to Mr. Negrea's evidence is the following passage from the cross-examination on his affidavit:

When we started, Paul [Kocher] was not a partner of the firm. I brought with me both outsourcing usage experience given the fact that I have negotiated and operated on the buyer side of outsourcing deals.

As such, I have established our own view on what a good outsourcing deal is in the market place, which was novel, unique, powerful, and Paul was the senior practitioner staff that started very early in the development of the practice to work next to me. His role in documenting the originality of our thinking and procedurizing them into proprietary product led to his admission as a partner of the firm. [Emphasis added]. (Cross-examination of Mr. Negrea conducted May 11, 2000, p. 6.)

4.         The Reports    

[9]                 On the face of the March 31, 1998 report, the following words appear:

The information contained herein is of a confidential technical nature and is being supplied on that basis. The non-confidential disclosure of this information could potentially harm Coopers & Lybrand's competitive position and/or materially interfere with ongoing or future contract/tender negotiations.

[10]            On each page of each of the Reports the following words appear:

STRICTLY PRIVATE & CONFIDENTIAL -    NOT FOR DISCLOSURE OUTSIDE PCH [Canadian Heritage].

C. Application of s.20(1) of the Act

1.         Section 20(1)(a)

[11]            The definition of a "trade secret" has been determined by Strayer J. in Société Gamma Inc. v. Canada (Department of Secretary of State), [1994] F.C.J. No. 589 at paragraph 7 to be as follows:

I am of the view that a trade secret must be something, probably of a technical nature, which is guarded very closely and is of such particular value to the owner of the trade secret that harm to him would be presumed by its mere disclosure.

[12]            A strong argument has been made by the Respondent that the results of the assignment do not constitute "technical" information, which has a bearing both on this provision and s.20(1)(b) discussed below.

[13]            The Respondent argues that the results of the assignment constitutes "a work product" which is something different than the "methodology" used to produce it. That is, the Respondent argues that on the facts of the present case, "technical information" means the methodology, not the work product resulting from its application.

[14]            In making this argument, the Respondent agrees that the Applicant possesses a methodology, Heritage Canada contracted for the application of the methodology, the methodology was applied to produce the work product, but Mr. Kocher's evidence, and in particular that contained in paragraph 30 as quoted above, does not go far enough. With respect to paragraph 30, the Respondent argues that the single statement respecting reverse-engineering is self serving and insufficient to prove the point being made. It is submitted that the Applicant should have gone much further to supply detail on how the work product can be reverse-engineered. In response, the Applicant argues that a deliberate decision was made not to provide elaboration of the statement made so as to protect the confidentiality of the methodology, and, in any event, the Respondent did not cross-examine on the statement, nor did it produce evidence to refute it, and, thus, the statement should be taken to be accepted.

[15]            With respect to these arguments, since the statement in paragraph 30 stands unchallenged and unrefuted, I have no reason not to accept it as credible and one deserving of weight. Therefore, I dismiss the Respondent's argument that there is a distinction to be made between the methodology and the work product. I find that the work product is capable of proving the methodology, and, therefore, they are one and the same. Thus, I find that the work done is "something of a technical nature" within Strayer J.'s definition of a trade secret in Société Gamma.

[16]            There is also no question on the evidence that the information was guarded very closely by both the Applicant and Respondent, and I am also satisfied that Strayer J.'s third criteria has been met. That is, the work product was considered by the Applicant to be of such a unique or "peculiar" quality, that its mere disclosure could be presumed to cause economic harm to the Applicant to an undetermined magnitude.

[17]            Therefore, I find that the Reports under review contain trade secrets.

2.         Section 20(1)(b)

[18]            Relying upon the findings made with respect to s.20(1)(a), I find that the Reports under review contain "technical information". I also find that the work done was done as part of a commercial enterprise, and, thus, the Reports can be properly considered as containing "commercial information".

[19]            With respect to whether the Reports contain "confidential information", I find that they do on the test for interpreting the meaning of this phrase as found in MacKay J.'s judgment in Air Atonabee Ltd. v. Canada (Minister of Transport),[1989] F.C.J. No. 453 as follows:

...whether information is confidential will depend upon its content, its purpose and the circumstances in which it is compiled and communicated, namely:

a) that the content of the record be such that the information it contains is not available from sources otherwise accessible by the public or that could not be obtained by observation or independent study by a member of the public acting on his own,

b) that the information originate and be communicated in a reasonable expectation of confidence that it will not be disclosed, and

c) that the information be communicated, whether required by law or supplied gratuitously, in a relationship between government and the party supplying it that is either a fiduciary relationship or one that is not contrary to the public interest, and which relationship will be fostered for public benefit by confidential communication.

[20]            Given the extent to which the Applicant has gone to keep the technical and commercial information under review confidential, it is clear that it is not accessible to the public by any means. Therefore, I easily find that the (a) (b) criteria set out in the test quoted above have been proved. With respect to criteria (c), the Respondent argues that the general objective of the Act, being the release of information, somehow comes into play in determining the "public benefit" element mentioned.    I do not agree. To me, it is obvious in the test cited by MacKay J. that what is required to be established is only the type and workings of a relationship which exists in the present case: a relationship producing confidential advice and guidance with respect to the public's business in order to ensure more beneficial governmental management very much to the public's benefit.

[21]            It is agreed that the Applicant has consistently treated the information contained in the Reports under review in a confidential manner.

[22]            Therefore, I find the Reports meet the requirements of s.20(1)(b).

3.         Section 20(1)(c)

[23]            With respect to the requirement of proof of "material financial loss" outlined in this provision, MacKay J. in SNC -Lavalin Inc. v. Canada (Minister of Public Works), [1994] F.C.J. No. 1059 at paragraph 43 has decided that what is required is proof of "a

reasonable expectation of probable harm". On the evidence, and in particular with respect to paragraph 30 of Mr. Kocher's affidavit as considered above, I find that the test in this provision is met.

4.         Section 20(1)(d)

[24]            The Applicant makes no serious argument with respect to the applicability of this provision.      

ORDER

1.                    Accordingly, for the reasons provided, pursuant to s.51 of the Access to Information Act, I order the head of Canadian Heritage not to disclose the Reports entitled "Review of Draft ASD RFP and Contract for Corporate Shared Systems Project" dated March 31, 1998, and "Best Practices Review Update" dated May 12, 1998.

2.                    With respect to costs, as agreed between counsel for the Applicant and Respondent, unless an agreement can be reached within 30 days of the issuance of this order, I direct that the issue of costs be determined upon further application before me.

                                                         "Douglas R. Campbell"

____________________________                                                                                                          J.F.C.C.                       

Toronto, Ontario

September 20, 2001

FEDERAL COURT OF CANADA

Names of Counsel and Solicitors of Record

COURT NO:                                                        T-1785-99

STYLE OF CAUSE:                                            PRICEWATERHOUSECOOPERS, LLP

Applicant

- and -

MINISTER OF CANADIAN HERITAGE

Respondent

DATE OF HEARING:                           WEDNESDAY, SEPTEMBER 19, 2001

PLACE OF HEARING:                                      TORONTO, ONTARIO

REASONS FOR ORDER

AND ORDER BY:                                               CAMPBELL J.            

DATED:                                                                THURSDAY, SEPTEMBER 20, 2001

APPEARANCES:                                              Mr. Ian C. Whan Tong

For the Applicant

Ms. Shelly Quinn

                                                                For the Respondent

SOLICITORS OF RECORD:                       Fasken, Martineau, DuMoulin

Barristers & Solicitors

Box 20

Toronto-Dominion Bank Tower

Toronto-Dominion Centre

Toronto, Ontario

M5K 1N6

For the Applicant

Morris Rosenberg

Deputy Attorney General of Canada

For the Respondent

FEDERAL COURT OF CANADA

                              Date: 20010920

                                                                                                     Docket: T-1785-99

Between:

PRICEWATERHOUSECOOPERS, LLP

Applicant

- and -

MINISTER OF CANADIAN HERITAGE

Respondent

REASONS FOR ORDER

AND ORDER