Her Majesty the Queen v. Ichi Canada Ltd., [1991] 2 CTC 230

Reed, J.:—The defendant brings a motion to require the plaintiff to produce an officer to be examined for discovery. The dispute between the parties arises out of uncertainty as to the status of information obtained as a result of an examination for discovery which takes place pursuant to the Federal Court Rules.

The plaintiff put forward an officer for discovery but sought an undertaking from counsel for the defendant that information obtained thereby would not be used for any purpose extraneous to the proceeding for which it was obtained. Counsel for the defendant refused to give such an undertaking. There is other litigation allegedly in progress to which such information might be relevant.

The issue raised is whether discovery proceedings undertaken pursuant to the Federal Court Rules and practice are governed by the British Columbia Court of Appeal decision in Kyuquot Logging Ltd. v. British Columbia Forest Products Ltd. (1986), 5 B.C.L.R. (2d) 1 [1] . The Kyuquot case held that there was no implied undertaking requiring parties to use information obtained from the opposite party on discovery, only for the purposes of that litigation. In the Kyuquot case it was decided that all such information automatically became public unless specific orders or undertakings had previously been given to the contrary.

Position Generally Re: Use of Discovery Materials

The position taken in the Kyuquot decision differs from that which exists elsewhere. In the United Kingdom there is an implied undertaking, which accompanies disclosure on discovery, requiring the party who obtains documents or information not to use them for any purpose collateral or ulterior to the litigation in issue: see particularly Alterskye v. Scott, [1948] 1 All E.R. 469 (Ch. Div.). The Saskatchewan Court of Appeal concluded in 1987 that the practice in that province was the same as in England: Layton Holdings Ltd. v. Certain Non-Marine Underwriters (1987), 56 Sask. R. 152; [1987] 2 W.W.R. 570 (C.A.). In Ontario, various first instance cases reveal that such an implied undertaking operates in that province: Anderson v. Anderson (1979), 26 O.R.

(2d) 769 (H.C.); Lac Minerals Ltd. v. New Cinch Uranium Ltd. (1985), 50 O.R. (2d) 260 (H.C.); Reichmann v. Toronto Life Publishing Co. (1988), 28 C.P.C. (2d) 11 (H.C.); National Gypsum Co. v. Dorrell (1989), 68 O.R. (2d) 689 (H.C.) .

In Alberta, Manitoba, and New Brunswick, the courts, at least at the trial level, apply the principle of an implied undertaking: Ed Miller Sales & Rentals Ltd. v. Caterpillar Tractor Co. (1986), 43 Alta L.R. (2d) 299 (Q.B.); Wirth Ltd. v. Acadia Pipe & Supply Corp. (1991), 79 Alta L.R. (2d) 345 (Q.B.); Blake v. Governors and Co. of Adventurers of England Trading into Hudson's Bay, [1988] 1 W.W.R. 176; 22 C.P.C. (2d) 95 (Man. Q.B.); Rocca Enterprises Ltd. v. University Press of New Brunswick Ltd. (1989), 103 N.B.R. (2d) 224 (Q.B.). The existence of such an implied undertaking was recently recognized in a decision of the Associate Senior Prothonotary of this Court: Re Lubrizol Corp. and Imperial Ltd. (1990), 33 C.P.R. (3d) 49 (F.C.T.D.). See also Smith, Kline & French Lab. Ltd. v. Canada, [1989] 3 F.C. 540 at 555-6, for discussion of the issue.

British Columbia Position and the Kyuquot Decision

In the light of this jurisprudence it is necessary to consider the Kyuquot decision more closely. In that case, the plaintiff in an action against British Columbia Forest Products Limited ("BCFP") and the Crown wished to disclose documents and other information that it had obtained through its discovery of BCFP to the plaintiffs in another action arising out of the same facts. These other plaintiffs were suing only the Crown, having settled with BCFP, and therefore were not independently entitled to discovery of BCFP. McLachlin, J.A. (as she then was), writing for the majority, first examined the state of English law as of 1858 (the date of reception in British Columbia). She held that in 1858 there was in England no implied undertaking to use documents produced on discovery only in the action in which they were produced. She also surveyed later developments in the law of that country which led to the modern position with respect to the implied undertaking, which she recognized clearly exists in England today. She concluded that:

the idea of an implied undertaking to the court enforceable by contempt did not emerge until Alterskye and was not generally accepted until Harman. Until then, the obligation on a party in possession of discovery documents was enforced by express undertakings or injunctions.

The position in British Columbia was held to resemble the pre-Alterskye position in England.

The second main impetus for the decision appears to have been a policy consideration: that a blanket rule against using information obtained on discovery for purposes outside the case for which it was obtained would lead to excessive litigation.

Jurisprudence in the Nominate Reports

With respect to the British Columbia Court of Appeal’s summary of the English law prior to Alterskye, it is based, at least in part, on certain early decisions contained in the nominate reports [3] . The nominate reports often give rise to conflicting interpretations because they are not official reports but merely notes taken down in court and compiled by the named reporter. With respect, the conclusion which I would draw from these early cases is different from that which was drawn in the Kyuquot decision. For example, the decision in Williams v. The Prince of Wales Life & Co. (1857), 23 Beav. 338; 53 E.R. 133 was characterized as establishing the requirement to obtain express court orders or undertakings to restrict the use of discovery material to the instant case. I do not interpret the decision as establishing that proposition.

In the Williams case the defendants, before preparing a schedule of the documents in their possession (an affidavit of documents), undertook to give the plaintiff access to the documents for inspection. The documents were voluminous. The inspection did not go smoothly. The plaintiff applied to the court for an order requiring production. The plaintiff alleged that the defendants would not rant access to anyone but the plaintiff personally and only for one hour per day. The defendants alleged that the plaintiff's solicitor's clerk was rude and offensive and that the plaintiff was misusing the documents by making them public. The court indicated that both parties were at fault. It was held that the plaintiff and his agents were to be allowed access at all reasonable times and that insofar as the plaintiff's conduct was concerned [4] .

it is not the right of a Plaintiff, who has obtained access to the Defendants' papers, to make them public. The Court has granted injunctions to prevent it, and I myself have done so, to prevent a Plaintiff, a merchant, from making public information obtained under the order for production.

I shall only make the order in this case, upon the Plaintiff's undertaking not to make public or communicate to any stranger to the suit the contents of such documents, and not to make them public in any way.

I do not read the decision in the Williams case as standing for the proposition that an express order or undertaking must be obtained^in order to have use of the documents restricted. Rather implicit in the decision is recognition that an obligation exists not to use discovery documents for purposes extraneous to the action even in the absence of an express court order so requiring. The fact that the judge in that case made an express undertaking a condition of the order he finally gave would seem to have been for "added insurance" rather than as a result of an absolute need to do so.

With respect to Reynolds v. Godlee [5] , a case heavily relied upon in the Kyuquot decision [6] , it must be noted that whatever may have been said about undertakings with respect to discovery documents, it was all dicta. That decision relates to a solicitor-client privilege and it was on that basis that the plaintiff was allowed in the end to refuse to produce the document, while the plaintiff had originally resisted production, not on the basis of solicitor-client privilege, but because he had obtained the document from another defendant by a motion, that is not the basis on which a decision was finally made. Also, insofar as this dicta is concerned, I read the decision as saying no more than that one cannot refuse to produce a document because it has been obtained from another in confidence and if the document has been obtained pursuant to an order for discovery the court is not prevented from requiring its disclosure to others.

With respect to the decision in Tagg v. The South Devon Railway Co. [7] it is not surprising that the Court of Chancery at that time refused to order that documents produced on discovery could not be used in an action at law. Prior to 1854, the only way discovery could be obtained in an action at law was by bringing a bill for discovery in Chancery.

Other Considerations

With respect to the references to the position in the United States which is referred to in Kyuquot it should be noted that the Federal Rules of Procedure in the United States require that many of the documents exchanged by the parties during the discovery process prior to trial be filed with the court; the documents thereby become part of the public record, this is undoubtedly one of the reasons why discovery is not subject to implied restricted use undertakings in the United States [8] . Transcripts of discovery proceedings are not automatically filed as part of the Federal Court's public record. They are only filed when introduced by the parties at trial, or when portions thereof are attached to affidavits for the purpose of certain pre-trial motions. Until made part of the public record the discovery process conducted pursuant to the Federal Court Rules is a non-public proceeding.

With respect to the argument that a general rule preventing use of documents and information obtained on discovery for purposes outside the context of the litigation will lead to excessive litigation, the opposite view is also a credible one. In fact, the general rule seems to have been operating in various jurisdictions for many years Without much litigation arising therefrom. This is evident from the lack of reported jurisprudence in the United Kingdom between the early nominate reports and the Alterskye decision of 1948. While the existence of an implied undertaking is noted in a number of older texts such as Hare on Discovery [9] , Bray on Discovery™ [10] and Seton's Judgments and Orders", [11] there is little else referring to the practice in those early years. One can conclude that there are not many reported decisions on this subject because the principle of an implied undertaking was clearly established, well understood and operated smoothly.

Reference should be made to one other case: Harman v. Secretary of State for the Home Department, [1983] 1 A.C. 280; [1982] 1 All E.R. 532 (H.L.). Reference must be made to this case because it is a rather strange decision and it was referred to in the Kyuquot decision. The Harman decision was concerned with determining when an undertaking respecting restricted use expired. The decision refers to the existence of implied undertakings although the undertaking, in fact, in that case was express. The decision is strange because it held that counsel's disclosure to a journalist of a document even after the document had been read in open court constituted a breach of the undertaking and was therefore contempt of court. It is reasonable to conclude that the courts of this country would be reluctant to follow the Harman decision, in the absence of a Supreme Court ruling which adopted it as correct. In fact, the English rules of court were amended in 1987 (post-Harman) to explicitly provide that any undertaking with respect to the use of a document obtained on discovery expires upon the reading of or reference to the document in open court [12] .

Federal Court Proceedings

What then of the position with respect to information obtained on discovery from the opposing side in a Federal Court proceeding?

In my view, an implied undertaking restricting the use of information (transcripts and documents) obtained on discovery applies to the Federal Court discovery process. As had already been noted, discovery materials do not become part of the public record in this Court until they are filed with the Court. Secondly, the operation of an implied undertaking likely reduces the number of pre-trial motions which might otherwise be brought. Thirdly, the jurisprudence in other jurisdictions, particularly the provinces, other than British Columbia, and that in the United Kingdom is persuasive.

Rule 5 of the Federal Court Rules provides that where a matter arises which is not dealt with by the rules, the Court may give directions to adopt the practice and procedure in force for similar proceedings in the courts of the province to which the subject matter most particularly relates (the gap rule). Counsel have not sought such directions in this case and indeed if they had I would not have been inclined to adopt the British Columbia jurisprudence. I do not think a gap exists to which Rule 5 might apply and I assume counsel did not think so either since they did not raise it.

An order will therefore issue requiring the plaintiff to produce a representative for discovery. The defendant will know from the text of these reasons that an implied undertaking automatically arises so that information obtained on discovery is to be used only for the purposes of the litigation for which it is obtained. this does not, of course, restrict the use of any information which subsequently is made part of the public record. Nor does it affect the use of information which while obtained on discovery may also have been obtained from some other source. An implied undertaking cannot operate to pull under its umbrella documents and information obtained from sources outside the discovery process merely because they were also obtained on discovery. In addition, the implied undertaking does not prevent a party from applying, in the context of collateral litigation, for release from the implied undertaking, so that information obtained on discovery might be used in that litigation. This, however, is a matter to be determined in the context of that proceeding and not in this proceeding.

Order accordingly.