Docket: T-1273-14
Citation:
2015 FC 1128
Ottawa, Ontario, September 29, 2015
PRESENT: The
Honourable Mr. Justice Phelan
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BETWEEN:
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RECALL TOTAL
INFORMATION MANAGEMENT INC.
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Applicant
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and
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MINISTER OF
NATIONAL REVENUE AND THE INFORMATION COMMISSIONER OF CANADA
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Respondents
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JUDGMENT AND REASONS
I.
Introduction
[1]
This is a review pursuant to s 44 of the Access
to Information Act, RSC 1985 c A-1 [Act], in respect of the disclosure of a
Contract Amendment of November 22, 2013 [Contract Amendment]. These Reasons
have been prepared in public so that the Court’s reasoning can be understood
without the need for confidential versions of the Reasons.
[2]
This litigation has had the odd twist and turn.
The Applicant [Recall] received notice of an information request in accordance
with s 27 of the Act. It ignored the notice and, in the absence of any
evidence, the Minister through the Canada Revenue Agency [CRA] decided to
release the information requested subject to the redaction of unit pricing.
(The Minister of National Revenue is the relevant Minister for purposes of
CRA’s decision to release information.)
[3]
CRA gave Recall notice that it intended to
release the subject information in the absence of a request for court review
under s 44 of the Act. Recall then filed the relevant s 44 application and
produced evidence to support its position that the information to be released
was subject to s 20(1)(a), (b) and (c) exemptions
from disclosure.
[4]
The litigation proceeded in the usual manner. The
requestor did not participate, but the Information Commissioner of Canada [the
Information Commissioner] was added as a party.
[5]
Upon review of Recall’s evidence filed in this
litigation, the Minister changed her opinion, formed the view that some of the
information should not be disclosed and purported to make a second decision to
release much less information than originally contemplated.
[6]
As the result of a request for a ruling, this
Court in Recall Total Information Management Inc v Canada (National Revenue),
2015 FC 848, held that the Minister could not issue a second decision but could
change its position in the litigation. As a result, the parties filed amended
Memoranda of Fact and Law and proceeded with the s 44 review.
II.
Factual Background – Records at Issue
[7]
On October 26, 2012, CRA published a tender for:
… records management services associated
with the secure off-site storage and management of information records in
paper-based, microform and electronic storage media forms, on an “as and where
required basis”. The CRA requires records management life-cycle services of
accession, storage, retrieval, transportation and disposition for CRA records.
As a consequence of
the tender bids being non-compliant, a second tender was issued.
[8]
Recall won the second tender on May 2, 2013. The
contract [Initial Contract] for $40 million was for a five year term after
which the contract could be renewed annually for a further five years.
[9]
As a result of discussions between CRA and
Recall, it became apparent that CRA had other needs which were not addressed in
the Initial Contract.
The
parties then agreed to a Contract Amendment, which is the subject of this
litigation.
[10]
The Contract Amendment stipulated a new price,
and Recall set out a step-by-step process to scan 2D barcodes into Recall’s
computer base (called IMCS).
Whereas
the Initial Contract set forth what Recall was to do, the Contract Amendment
described how Recall was to do it.
[11]
The document proposed to be released includes
both the new price and this step-by-step process [the Records]. Recall says in
part that insertion of the step-by-step process in the Contract Amendment was
an “inadvertent error”; however, it took no
steps to correct the error, nor did it demand of CRA any corrective steps to
address the error.
[12]
The parties filed in this Court a copy of the
relevant pages (pages 34-40 of the Records), “yellow lined” by the Minister,
showing the information on those pages which should be exempt from disclosure.
That information is largely the step-by-step process.
[13]
Recall takes the position that the information
on these pages, as well as the new price – a large part of the Contract
Amendment – is exempt from disclosure pursuant to s 20(1)(a), (b)
and/or (c) of the Act. The question before the Court is whether Recall has
established that any of those provisions are applicable. The submissions of the
parties primarily focus on whether the step–by-step process description is
exempt from disclosure under s 20 of the Act. As to the contract price, the
issue turns on whether the Contract Amendment price is publicly available.
III.
Analysis
A.
Section 20(1)(a) – Trade Secrets
[14]
Section 20(1)(a) of the Act reads as
follows:
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20. (1)
Subject to this section, the head of a government institution shall refuse to
disclose any record requested under this Act that contains
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20. (1)
Le responsable d’une institution fédérale est tenu, sous réserve des autres
dispositions du présent article, de refuser la communication de documents
contenant :
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(a) trade secrets of a third party;
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a) des secrets industriels de tiers;
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[15]
Recall claims that pages 34-40 of the Records
disclose trade secrets. It submits that the information has industrial
application and was built into Recall’s proprietary tool known as Re Quest Web
for purposes of the Contract Amendment and is proprietary to Recall. It further
claims that it acted with intention to keep the information confidential and
expected CRA to likewise keep the information confidential. Finally, it says
that it has an economic interest in maintaining secrecy because of the
competitive edge it has, both with government and a wider market, by virtue of the
process it developed.
[16]
The Minister takes no position on this matter
but accepts that the yellow lined parts of the Records are exempt from
disclosure under s 20(1)(c). The Information Commissioner submits that
Recall has failed to meet the tests set forth in the jurisprudence.
[17]
The Supreme Court in Merck Frosst Canada Ltd
v Canada (Health), 2012 SCC 3, [2012] 1 S.C.R. 23 [Merck Frosst], laid
out the definition of trade secret:
[112] … A “trade secret” for the purposes
of s. 20(1) of the Act should be understood as being a plan or process, tool,
mechanism or compound which possesses each of the four characteristics set out
in the Guidelines which I have quoted above. This approach is consistent with
the common law definition of “trade secrets” and takes account of the clear
legislative intent that a trade secret is something different from the broader
category of confidential commercial information which is separately and specifically
protected under the Act. This approach is also consistent with the use of “secrets
industriels” in the French version of the Act, as discussed above.
[18]
The four characteristics laid out in the
Guidelines referred to are:
- the information must be secret in an absolute
or relative sense (i.e. known only by one or a relatively small number of
persons);
- the
possessor of the information must demonstrate that he has acted with the
intention to treat the information as secret;
- the
information must be capable of industrial or commercial application;
- the
possessor must have an interest (e.g. an economic interest) worthy of legal
protection. [Annex A]
Merck Frosst at paragraph 109
[19]
As the Supreme Court noted at paragraph 119 of Merck
Frosst, the question on review is simply whether the party claiming the
exemption has established on the balance of probabilities that the records fall
within the Court’s definition of trade secrets. The analysis is a “class of information” exercise as distinct from a “harm caused” analysis as required under s 20(1)(c).
[20]
Upon review of the Records, the step-by-step
process meets the first element of being “a plan, or
process, tool mechanism or compound”.
[21]
Recall has made out that the information was
secret. The process was internally designed, and knowledge of it was limited to
Recall employees. Importantly, only employees of Recall’s IT department had
access to the script and code; neither of which was provided to CRA.
[22]
Where Recall fails is in treatment of the
information as secret. While Recall took some steps to treat the information as
secret, its efforts were inadequate. Other than the standard, bottom-of-e-mail
disclaimer of confidentiality, Recall took no steps, even in the Contract
Amendment, to mark the information as secret or confidential. It provided CRA
with a Word version of the document upon request, an action inconsistent with an
intention of secret treatment.
[23]
Fatally, Recall took no steps to protect the information
when it was “inadvertently” included in the
Contract Amendment. Its silence and inaction until this litigation started is
inconsistent with the actions of a person who intended to treat, and did in
fact treat, the information as secret and requiring special treatment against
disclosure.
[24]
Recall exhibited a casualness towards what it
now claims is a secret process. From taking no action upon insertion of the
information in the Contract Amendment, to ignoring the s 27 notice, to waiting
until this litigation was necessary to claim secrecy, Recall did not exhibit
the requisite intention of secrecy. Recall provides no explanation for its lack
of action or concern.
[25]
As Recall has failed the second characteristic
referred to by the Supreme Court, it is not strictly necessary to deal with the
other issues of industrial/commercial application and an interest worthy of
protection. However, on these points, Recall is on more solid ground.
B.
Section 20(1)(b) – Commercial/Technical – Confidential
Treatment
[26]
Section 20(1)(b) of the Act reads as
follows:
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20. (1) Subject to this section, the head of a government institution
shall refuse to disclose any record requested under this Act that contains
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20. (1)
Le responsable d’une institution fédérale est tenu, sous réserve des autres
dispositions du présent article, de refuser la communication de documents
contenant :
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…
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…
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(b)
financial, commercial, scientific or technical information that is
confidential information supplied to a government institution by a third
party and is treated consistently in a confidential manner by the third
party;
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b) des renseignements financiers,
commerciaux, scientifiques ou techniques fournis à une institution fédérale
par un tiers, qui sont de nature confidentielle et qui sont traités comme
tels de façon constante par ce tiers;
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[27]
There is no serious debate that the critical
information – the step-by-step process – is more technical in nature than
commercial, as discussed in Brainhunter (Ottawa) Inc v Canada (Attorney
General), 2009 FC 1172, 182 ACWS (3d) 244.
[28]
With respect to whether the information is “confidential information treated in a confidential manner”
as described by Justice MacKay in Air Atonabee Ltd v Canada (Minister of
Transport) (1989), 27 FTR 194 at paragraph 42, 16 ACWS (3d) 45, and adopted
in Merck Frosst at paragraph 133, the criteria for “confidential information” is:
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.
[29]
The test is an objective one, and merely
repeating the words of the statute or asserting confidentiality without
concrete evidence of such treatment is not
sufficient.
[30]
The Minister took no position on this issue and
the Information Commissioner limited itself to an argument that the Records
should be considered as documents arising from a bidding or tendering process. This
would make the documents more susceptible to disclosure.
[31]
The difficulty with the Information
Commissioner’s position is that the Contract Amendment did not arise from a bidding
or tendering process. The Contract Amendment arose from a request, after the
tendering phase was completed, to amend the Contract to meet CRA’s new needs.
There is no suggestion that the Contract Amendment was a guise to avoid
disclosure requirements or an artifice to undermine contractual disclosure
requirements which might support the Information Commissioner’s view that it
was in reality part of the tendering process.
There is no factual or
legal basis supporting the Information Commissioner’s argument.
[32]
There is no evidence to suggest a conclusion
that the Records were publicly available. Nor is there any question that the
information was supplied to the government by the “third
party”.
[33]
As to the issue of whether the information
originated and was communicated in a reasonable expectation of confidence,
Recall may have assumed as much, but it did not behave in a manner consistent
with that assumption. There is no evidence of a basis for this assumption.
[34]
As outlined in the discussion of s 20(1)(a),
Recall’s actions were significantly deficient, on an objective view, with that
of a party who considered the information confidential.
[35]
On the question of whether the relationship is “not contrary to the public interest and will be fostered for
public benefit by confidential communication”, Recall’s submissions are
bereft of any indication of how the relationship would be fostered for the
public benefit. It is not for the Court to substitute arguments supporting the
public benefit arising from confidential treatment.
[36]
In AstraZeneca Canada Inc v Canada (Minister
of Health), 2005 FC 189, 275 FTR 133 at paragraph 69 (affirmed 2006 FCA
241) [AstraZeneca], this Court pointed to a way in which that public
interest might be addressed:
[69] To meet this test, one must have
regard for the nature of the relationship between the government and the third
party… The expectation of confidentiality must be less where a third party is
attempting to persuade government to grant it some concession or licence, then [sic]
where the third party is assisting government in carrying out its mandate.
However, Recall has
provided virtually no substance to this element of s 20(1)(b).
[37]
The Federal Court of Appeal addressed a
situation similar to this case in the following words:
… However, in the case at bar, NAV CANADA
has provided no supporting explanation as to how or why the maintenance of
confidentiality serves the public interest, in the circumstances of the records
at issue. A bald assertion in this regard is insufficient to overcome the
general right of access established by the Access Act.
Information Commissioner of Canada v
Canadian Transportation Accident Investigation and Safety Board, 2006 FCA 157 at paragraph 78
[38]
Recall has not made out a case for exemption
from disclosure under s 20(1)(b) of the Act.
C.
Section 20(1)(c) – Harm from Disclosure
[39]
Section 20(1)(c) of the Act reads as
follows:
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20. (1) Subject to this section, the
head of a government institution shall refuse to disclose any record
requested under this Act that contains
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20. (1)
Le responsable d’une institution fédérale est tenu, sous réserve des autres
dispositions du présent article, de refuser la communication de documents
contenant :
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…
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…
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(c) information the disclosure of which could reasonably be
expected to result in material financial loss or gain to, or could reasonably
be expected to prejudice the competitive position of, a third party;
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c) des renseignements dont la divulgation
risquerait vraisemblablement de causer des pertes ou profits financiers
appréciables à un tiers ou de nuire à sa compétitivité;
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[40]
The thrust of Recall’s position is that the step-by-step
process is Recall’s property and that competitors could use that information to
commercially harm Recall’s position with CRA. This would arise most particularly
in the bidding for contract renewal.
Recall’s
position on this issue is entwined with its objection to disclosure of page 56
of the Records – the contract price. The Court has dealt separately with the
pricing disclosure issue.
[41]
The Minister essentially agrees with Recall in
regards to the disclosure of the step-by-step process. It was as a result of
the new evidence from Recall on this point that the Minister reversed her position
on release of this information.
[42]
The burden imposed on Recall to establish harm
is set out by this Court in AstraZeneca at paragraph 46 (adopted in
principle in Merck Frosst at paragraph 204):
[46] Recognizing the inherently
speculative nature of proof of harm does not however relieve a party from
putting forward something more than internally held beliefs and fears. Evidence
of reasonably expected results, like forecasting evidence, is not unknown to
courts and there must be a logical and compelling basis for accepting the
forecast. Evidence of past documents of information, expert evidence, evidence
of treatment of similar evidence or similar situations is frequently accepted
as a logical basis for the expectation of harm and as evidence of the class of
documents being considered.
[43]
There must be a clear and direct linkage between
the disclosure of specific information and the harm alleged.
[44]
The understanding of the Information
Commissioner’s position caused some dispute between the parties. It was thought
that the Information Commissioner’s position is that in order to find harm flowing
from disclosure, it was necessary to find that the party resisting disclosure
had a proprietary interest in the information – the information was owned by
that party.
[45]
In argument, the Information Commissioner
clarified its position that where there is a proprietary interest in the
information, it is easier to make out the case of harm from disclosure. In my
view, the merits of that position depends on the facts in each case.
[46]
The Information Commissioner also raised the
issue of whether the information was owned by Recall in part because it was
said to be part of the Statement of Work and therefore paid for and thus owned
by the Minister. The genesis of this argument is the General Conditions that
form part of the contract.
2035 01 (2013-03-21) Interpretation
In the Contract, unless context otherwise
requires:
…
“Work” means all the activities, services,
goods, equipment, matters and things to be done, delivered or performed by the
Contractor under the Contract
…
2035 19 (2008-05-12) Ownership
1. Unless
provided otherwise in the Contract, the Work or any part of the Work belongs to
Canada after delivery and acceptance by or on behalf of Canada.
…
2035 20 (2008-05-12) Copyright
In this section, “Material” means anything
that is created by the Contractor as part of the Work under the Contract, that
is required by the Contract to be delivered to Canada and in which copyright
subsists. “Material” does not include anything created by the Contractor before
the date of the Contract.
Copyright in the Material belongs to Canada
and the Contractor must include the copyright symbol and either of the
following notice on the Material: © Her Majesty the Queen in right of Canada
(year) or © Sa Majesté la Reine du chef du Canada (année).
…
2035 22 (2008-05-12) Confidentiality
…
3. Subject
to the Access to Information Act, R.S., 1985, c A-1, and to any right of
Canada under the Contract to release or disclose, Canada must not release or
disclose outside the Government of Canada any information delivered to Canada
under the Contract that is proprietary to the Contractor or a subcontractor.
…
5. Wherever
possible, the Contractor must mark or identify any proprietary information
delivered to Canada under the Contract as “Property of (Contractor’s name),
permitted Government uses defined under Public Works and Government Services
(PWGSC) Contract No. (fill in Contract Number)”. Canada will not be liable for
any unauthorized use or disclosure of information that could have been so
marked or identified and was not.
…
2035 44 (2012-07-16) Access to Information
Records created by the Contractor, and under
the control of Canada, are subject to the Access to Information Act. The
Contractor acknowledges the responsibilities of Canada under the Access to
Information Act and must, to the extent possible, assist Canada in
discharging these responsibilities…
[47]
On the issue of harm itself, the Information
Commissioner submitted that Recall has not established that there is a market
for the step-by-step process beyond CRA. Further, the Information Commissioner
argues that the harm Recall asserts is from the disclosure that Recall offers
to CRA the service of capturing metadata from its 2D bar code. In other words,
it is knowledge that a service is provided which causes the harm, not the
disclosure of how that service is accomplished.
[48]
The Information Commissioner was acting in the
public interest in testing the basis of Recall’s claim to exemption; however,
with due respect, raising these issues does not show that Recall’s basis for
concern is not made out.
[49]
On the question of a proprietary interest, the
Minister confirms that it never contemplated ownership of the intellectual
property rights to the step-by-step process. It is also CRA policy as set forth
in the Intellectual Property Ownership Directive that, except in certain
circumstances not applicable here, the intellectual property remains vested in
the owner.
[50]
It is clear from such factors as keeping the
script and codes within Recall, Recall’s control of the computer base, and the
contemplation of the parties, as admitted by the Minister, that Recall retained
its proprietary interest in the process. The Minister was not free to do with
the process whatever it wished after it had paid the contract price.
[51]
On the issue of harm, I find that Recall has
made out its case. While some aspects of the services to be provided are
described in portions to which Recall does not object (as shown in the yellow
lined version of the Records), not all aspects of the services are to be
disclosed. It is important for Recall to be able to negotiate what services it
will provide on a customer by customer basis without each potential customer
knowing what Recall has done in the past or might be prepared to do in the
future.
[52]
Release of certain parts of the Records would undermine
Recall’s position in future negotiations with CRA and others because of the
advantage competitors would gain from disclosure of how Recall addressed CRA’s
problems.
[53]
Further, release of information on the process
would allow competitors (of which there is a small number – 1 or 2) to recreate
the technology developed by Recall’s R&D work. The evidence supporting this
competitive loss is well described in the affidavits of Michaud, Dino, Camp and
Mueller.
[54]
The situation in which Recall finds itself was
addressed at paragraph 219 of Merck Frosst:
…disclosure of information, not already
public, that is shown to give competitors a head start in developing competing
products, or to give them a competitive advantage in future transactions may,
in principle, meet the requirements of s. 20(1)(c). The evidence would
have to convince the reviewing court that there is a direct link between the
disclosure and the apprehended harm and that the harm could reasonably be
expected to ensue from disclosure: [citations omitted]. Even if information
taken in isolation may not seem to fall within the exemption, the information
should nonetheless be examined in its entirety in order to determine the
likely impact of its disclosure. [Emphasis added]
[55]
Recall’s evidence does more than merely repeat
the words of the statute. The evidence discloses how software engineers could
replicate Recall’s technology. Recall further outlines how its competitors
could potentially use this knowledge in bidding on other government contracts. In
addition, the Initial Contract has a five year term which could open up the
field of competitive rebidding using Recall’s technology to undermine either
its service or pricing (especially given that total pricing has been publicly
disclosed).
D.
Contract Pricing
[56]
Recall has objected to disclosure of the
Contract Amendment price. It has failed to make out its case in this regard.
[57]
That price (inclusive of HST) was published on
CRA’s website on or about May 26, 2014. The information objected to at page 56
of the Records discloses the Contract Amendment price minus HST.
[58]
Whatever the difficulties a competitor may face
in discerning the Contract Amendment price amount, it is relatively simple
mathematics to arrive at what is substantially the price. Therefore, the price
is sufficiently publicly disclosed to dispose with any objection from Recall.
IV.
Conclusion
[59]
For these reasons, the Court orders that those
portions marked in yellow in the version of the Contract Amendment, pages 34-40
of the Records, are to be exempted from disclosure.
[60]
The Minister is to circulate to the other
parties a version of the Records reflecting this Court’s disposition. Upon
agreement, that version shall be released by the Minister and a copy thereof
filed with the Court.
In
the event of any disagreement between the parties, the Court will resolve any
outstanding issues.
[61]
Submissions as to costs were made. The
Information Commissioner, on behalf of the requestor and the public interest,
was the principal losing party, while Recall was not successful on the pricing
disclosure issue. However, this litigation was precipitated by Recall’s failure
to make proper submissions to the Minister.
[62]
I conclude that the most equitable result is
that each party bear its own costs except that Recall shall pay costs to both
the Minister and the Information Commissioner on Recall’s motion to file
additional affidavits.
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