All About Information

I presented today on managing employee use of social media applications at the Human Resources Forum of the Information Technology Association of Canada. I followed a presentation on social media use in human resources by the wonderful Connie Crosby and an enlightening presentation by Sheldon Silverman on the system AMD uses to mitigate the risks associated with its innovative social media marketing program.

My slides are below, and if you click through to my Slideshare page you can download a version with notes. It’s similar to presentations I’ve done in the past but I’ve added a couple slides to identify the complex issues related to wage and hours claims.

On August 13th, the British Columbia Court of Appeal declared that defendants to a defamation action were not restricted from “publicizing” documents adduced as evidence at trial by the plaintiff.

In March 2008 in Juman v. Doucette, the Supreme Court of Canada made clear that a litigant’s implied undertaking of confidentiality terminates once information is adduced as evidence in open court. Even though the defendants’ motion for a permissive declaration was heard after Juman, the motions judge was sympathetic to the plaintiff’s confidentiality claim. The motions judge stressed that the law was not settled at the time of trial and recognized that the plaintiff had a genuine and ongoing interest in keeping its information confidential even though it had not asked for a protective order at trial.

The Court of Appeal held that the motions judge erred and granted a declaration that the defendants were released from their confidentiality undertaking vis-a-vis the documents in question. It held that, ambiguities in the law aside, “courts do not change the law but declare it.” It also held that the policy reasons favouring a continuing undertaking could not possibly apply given the plaintiff had entered the documents into evidence itself. According to the Court of Appeal, the plaintiff should have asked for a protective order.

International Brotherhood of Electrical Workers, Local 213 v. Hochstein, 2009 BCCA 355.

On May 5th, the Alberta Court of Queen’s Bench for affirmed an Anton Piller order that permitted a search of business premises and private residences and seizure of materials and information related to a departing employee claim.

There is a three-part test for the making of an Anton Piller order: (1) there must be an extremely strong prima facie case; (2) the potential or actual damage to the applicant must be very serious; and (3) clear evidence that the defendants have incriminating evidence in their possession and that there is a real possibility they may destroy such material.

The Court examined the mixed jurisprudence on the “serious harm” element and held that it requires proof of procedural rather than financial harm. That is, an applicant must demonstrate that its proposed order will preserve evidence without which it could not prove its case. The Court reasoned that the purpose of the extraordinary order is to preserve evidence and that irreparable financial harm can be addressed through an ordinary injunction:

As discussed, the adverse financial impact approach considers potential harm that may be visited upon the plaintiff as a result of the use of the proprietary or confidential information that the defendant has or may have in its possession. If this is the type of damage that the plaintiff seeks to enjoin, then an injunction may suffice without the need for the court to exercise the extraordinary power of granting an Anton Piller Order. As noted by Hoffmann J. in 1268 Lock International Plc. v. Beswick and Others, [1989] 1 W.L.R. 1268 at 1281, Anton Piller orders reside at the “absolute extremity of the court’s powers”. For that reason, they should only be granted in circumstances which demand their imposition. Those circumstances would have to include more than the desire to enjoin certain activities which could be accomplished through much less intrusive methods. They must include a need to preserve evidence without which the plaintiff’s claim could not be proven.

The Court held that the applicant met its burden of proving serious harm even though it had copies of the information taken and (presumably) evidence showing it was taken. The Court suggested that the applicant would also need forensic evidence about how its information was stored and maintained on the defendants’ computers to prove misuse of confidential information: “[Making out its case] would include showing where the information was taken and how it was used or altered.”

The Court also engaged in a detailed analysis of the evidence to determine whether the applicant had established a “real possibility” of destruction based on a “compelling inference.” There is a policy lesson in this part of the judgement for employers who are likely to be faced with claims by departing employees who take electronically-stored confidential information and claim they deleted it because they realized that taking it was wrong. In the face of such a defence, the Court drew an inference that destruction of evidence was a possibility based partly on the applicant’s good information management practices. It said:

I am satisfied that on all of the circumstances in relation to this point there is a basis upon which to draw a strong inference of dishonesty. Particularly compelling is the fact that Higham took the documents in the face of his supervisor’s warning and an employment agreement he executed prohibiting him from copying or transmitting “[a]ll notes, records, working papers, files, research material or literature accumulated or developed” while at CCS…

Secure argued that the e-mails Higham deleted and the CD-Rom he destroyed was not “evidence” when it was destroyed because there was no Statement of Claim yet issued or because the litigation had not yet commenced. Belzil J. in Netsmart considered the destruction of documents before litigation had commenced in relation to this arm of the test. In any event, Higham knew he was in possession of documents that he should not have had and he chose to destroy them. Even if the destruction was in good faith as he claims, a point upon which I make no finding, it does not mitigate the risk of his destroying further CCS documents in his possession. In other words, he was given to destroying documents that were improperly in his possession. Regardless of his motives the fact that he did this at least twice indicates that it may well happen again. As stated by Richard A.C.J. in Adobe, at para 89: “It cannot now be argued that the plaintiffs should be denied an Anton Piller type order preserving evidence when that evidence was in fact destroyed.”

While this passage highlights the applicant’s good information management practices, the applicant also suffered for agreeing to give another of its departing employees his work laptop in return for a promise to make a charitable donation and then failing to wipe the laptop when requested by the employee. The Court held that it could not draw any negative inference from the employee’s deletion of over 4,000 e-mails in these circumstances because the this action was consistent with the actions of an honest employee who wanted to rid himself of his employer’s e-mails. As a result, the Court revised the order to exclude the laptop.

The plaintiff brought a cross-motion to deal with the scope and form of production of information from a number of seized hard drives. The award discusses the protcol by which the parties will deal with production but is not very directive as it appears they were in substantial agreement on how to proceed.

CCS Corp. v. Secure Energey Services Inc., 2009 ABQB 275 (CanLII).

On August 1, the Supreme Court of Nova Scotia granted a motion for the production of a information relating to a “private client” of an expert because the expert said that she used the information to support the reasonableness of an assumption. Though the expert attempted to discount the significance of the private client’s information to her opinion, the Court held that it must be produced as an essential fact upon which her opinion was based. It also rejected an argument that a case-by-case/”Wigmore” privilege applied.

South West Shore Development Authority v. Ocean Produce International Ltd., 2008 NSSC 240.

On May 9th, the Alberta Court of Appeal issued a split judgement that touches on the scope of confidentiality that is waived by the act of filing an expert report in court. The majority held the filing of a report only waives confidentiality as between the litigant and its expert in the content of the report itself. The minority held that a person filing an expert report waives confidentiality in all information in the custody of the expert that is relevant and material to the dispute in which the report is filed.

This was a case about an expert report written by an accounting firm for a woman engaged in a child support and custody dispute (the “complainant”). The firm traced her husband’s assets and drafted a preliminary report, which the complainant filed in court in support of her position in two proceedings. This action, which the firm claimed she did not have authorization to take, led to a series of events that culminated in complaint by the woman to the Institute of Chartered Accountants of Alberta.

After viewing the report, the husband (also an accountant and familiar to the firm) then called the author of the report to complain about its quality. The author wrote an e-mail to the managing partner which stated, “If Danny feels we have slighted his reputation, we have not.” Soon after, the firm decided to withdraw the report. It took the position that withdrawal was justified because the report was filed without its authorization and the complainant’s account was unpaid. It told the husband around the same time it sent a letter to the wife, who heard about the withdrawal through the husband’s counsel before she received the letter. Later, in response to a summons issued by the husband, an accountant from the firm swore an affidavit to confirm the withdrawal.

In an award written by Picard J.A., the majority of the Court of Appeal affirmed the Institute’s findings of professional misconduct on a “reasonableness” standard of review. She first affirmed a finding that the author’s e-mail, despite being sent internally, was “false and misleading” and constituted a breach of the professional rule against making such statements. Picard J.A. read the rule broadly; since it didn’t exclude internal communications, she held that it applied to them.

Picard J.A. also affirmed breach of confidence findings that were based on the firm’s direct communications with the husband and its affidavit. She rejected the firm’s reliance on the rule governing litigation privilege that deems privilege to be waived for all information relevant and material to an expert report filed in court. She held this was a rule about litigation privilege and was not incorporated into the Institute’s confidentiality standard, so upheld the Institute’s finding that the firm acted improperly by disclosing information about the terms and reasons for the report’s withdrawal, the state of the complainant’s account and its relationship with the complainant.

Slatter J.A. wrote a very strong dissent.

He first took issue with the internal e-mail finding. He held that the Institute’s interpretation of its “false and misleading” communications standard would create a form of absolute liability for bad opinions and would also prevent firms from discussing the resolution of complaints. His reasoning speaks to a form of privilege:

The decision of the Appeal Tribunal would have a chilling effect on the ability of any firm of accountants to conduct open and frank inquiries about the conduct of its members, and the quality of the work that had been completed for any client. Any partner (like Mr. Nelson) who attempted to defend his work could be found guilty of professional misconduct if it turned out later that he was mistaken. Any partners who shared and repeated the opinion that the work had been properly done would likewise potentially be subject to discipline…

The Complaints Inquiry Committee, the Discipline Tribunal and the Appeal Tribunal all play a key role in maintaining the standards of the accounting profession. However, the first line of defence of the standards of the profession must be with the professionals themselves and with their firms. Accounting firms must be free to make inquiries about the quality of their work and the conduct of their partners, without fear that if they make statements, or express opinions, subsequently found to be inaccurate they would be subject to discipline. Penalizing a firm for such statements is counter-productive.

Slatter J.A. also objected to the confidentiality findings. He held that the Institute’s rules should not be read in conflict with an expert’s duty to the court. He held that the fact that the report had been withdrawn, the terms of the retainer, the fact that there was an alleged breach of the retainer, that the firm had ceased to act for the complainant, that it was prepared by an articling student, its belief in the suitability of the report as evidence and even the status of the complainant’s account were all material and relevant facts in the legal dispute, and therefore were the subject of an implicit waiver of confidentiality. On the timing of the disclosure to the husband, he said:

It is true that Mr. Preston disclosed this information to Mr. Dalla-Longa on the telephone prior to advising the complainant. Mr. Dalla-Longa undoubtedly caught Mr. Preston by surprise when he telephoned to inquire about the report four years after it was prepared. But when Mr. Dalla-Longa advised Mr. Preston that the report had been filed in court, the latter was entitled to proceed on the basis that confidentiality had been waived. Experts should be encouraged to make timely disclosure of the information that underlies their reports, to avoid surprise and adjournments, and to promote settlement discussions. The rules should not be construed to require a court order before an expert discloses his or her working papers, or to require or encourage experts to avoid producing information until they are actually in court, on the stand, and under cross-examination. Providing the limited information involved to Mr. Dalla-Longa was at most a breach of business etiquette that does not warrant discipline.

Also of interest, the majority and minority concluded that a different standard of review applied based on the standard of review analysis recently endorsed by the Supreme Court of Canada in its landmark Dunsmuir decision. The majority supported a reasonableness standard and the minority one of correctness.

Deloitte & Touche LLP v. Institute of Chartered Accountants of Alberta (Complaints Inquiry Committee), 2008 ABCA 162.

On January 31, the Alberta Court of Appeal quashed a procedural appeal brought by a non-party to a longstanding commercial litigation dispute and, in doing so, made some comments on the use of information gathered in the discovery process.

The non-party appealed from an order which granted the plaintiffs partial relief from the implied undertaking and a confidentiality order. The non-party claimed the order caused it prejudice in a second related action, presumably in which it was a defendant. The Court rejected the prejudice argument (emphasis in original):

Since counsel for the appellant argued that he would be prejudiced if his client could not appeal, we went beyond mere status and inquired into the nature of the prejudice or injustice suggested. He seemed to think that the order under appeal put into evidence in the second suit against him, information gathered largely without his participation, even his knowledge, in the first suit.

That suggestion of ex parte injustice is not correct. Both the implied undertaking restricting the use of information got through discovery, and confidentiality orders, merely add an extra impediment to attempts to use evidence for purposes outside the original lawsuit. If those impediments are removed, then the information in question simply has the same status as all other information lying about in the great wide world.

The first rule of the law of evidence is that courts will not receive all information as evidence. Much of it is inadmissible: most hearsay, for example, and all irrelevant information. Therefore, waiving the implied undertaking rule, or lifting a confidentiality order, has no effect on such inadmissibility. What is inadmissible as evidence for other reasons other than confidentiality or implied undertakings remains inadmissible. To lift a confidentiality order or the implied undertaking merely allows the parties to another action to tender the information as evidence. It has no influence whatever on the judge or master’s decision about whether to accept it as evidence. The usual common-law rules of evidence (as modified by statute or Rules of Court) still apply.

The Court also noted that the order appealed from gave the non-party an express right to raise the matter of fairness in the second action.

Dreco Energy Services v. Wenzel Downhole Tools, 2008 ABCA 36 (CanLII).

Yesterday, the British Columbia Court of Appeal held that it ought not relieve B.C. Ferries from a confidentiality agreement it had entered into with the Canadian Transportation Investigation and Safety Board as a condition of receiving data from its own hard drive that had been recovered from its sunken vessel and seized by the Board.  So it could respond to the Board’s draft investigation report on the sinking, B.C. Ferries agreed to the following confidentiality covenant:

The [data] will be kept in confidence by BC Ferries and is to be used only for the purposes of responding to the draft report subject to the parties’ agreement to permitted uses prior to the release of [the Board's] final report or order of the court.

B.C. Ferries argued that the Board did not exercise its discretion to grant relief from the confidentiality covenant in good faith.  The majority, in a fact-specific judgement written by Mr. Justice Lowry, held that the clause did not grant a discretion subject to an implicit good faith requirement, but rather, was simply an agreement “subject to further agreement.”  Mr. Justice Hall adopted the majority’s reasons and added that the public interest in the safety of the traveling public might have otherwise justified an order of relief, but that there was insufficient evidence of such an interest on the record.

British Columbia Ferry Services Inc. v. Canadian Transportation Accident Investigation and Safety Board, 2008 BCCA 40.
 
 

What happens when someone puts his or her electronic documents on another’s computer system, gets locked out and then wants the documents back?

This is a common problem today, and often arises in the context of departing employee disputes. It also engages one of the more interesting developing legal issues within this blog’s domain: do the traditional property torts – trespass, detinue and conversion – protect rights associated with intangible property?

While this could be the subject of a good paper, I’d simply like to point out a couple of developments South and North of the border.

In the United States, the New York Court of Appeals recently issued an opinion in Thyroff v. Nationwide Mutual Assurance Company in which it held that the tort of conversion should apply to intangible property – an insurance agent’s customer list in the circumstances in dispute.

There’s no judgement of equivalent strength in Canada yet, but the Prince Edward Island Supreme Court – Trial Division issued a decision in July called HZPC Americas Corp. that is consistent with the direction endorsed in Thyroff. (HZPC has not yet been published on CanLII.) In rejecting the defendant’s motion to strike a conversion claim, the Court challenged the traditional idea that an owner’s ability to control intangible property (including confidential business information) is not sufficient to justify application of the tort. It said:

The Defendants refer to infringement of intellectual property while the Plaintiff refers to conversion of commercial property interests. The Plaintiff’s claim is not based on infringement of a statutory right in intellectual property; but rather is classified by it as a proprietary right in commercial property. It is not necessary for the Plaintiff to plead or rely upon legislative provisions to pursue its claim based on a common law tort. The federal legislation can be viewed as providing additional benefits, and not exhausting a person’s civil remedies.

The Court quoted Professor David Vaver, who says that the traditional view is “pettifoggery” – a sure signal that there will be more on this issue to come.

In this United Kingdom departing employee case from this June, the High Court held that an employer had exclusive ownership of a contact list alleged by an employee to be his personal contact list because it was maintained on its computer system.

The defendant was a journalist who worked in trade publication and conference buisnesses for a number of years before joining the claimant, who operated a similar business. He gave evidence that he maintaned a personal contact list, updated it from time to time, and had over eight years of editorial and industry contacts amassed when he commenced employment with the claimant. Nine years later, and after transferring the list to an MS Outlook database maintained by the claimant and adding work-related contacts, the defendant left with two other employees to start a competing business. In addition to suing to recover damages for the defendant’s pre-departure breach of loyalty and fidelity, the claimant disputed his ownership of the list.

Although it held that the company had not effectively incorporated its computer use policy into the defendant’s contract of employment, the court nonetheless found it had exclusive ownership of the list. It made the following broad statement:

I am satisfied that where an address list is contained on Outlook or some similar program which is part of the employer’s e-mail system and backed up by the employer or by arrangement made with the employer, the database or list of information (depending whether one is applying the Database Regulations or the general law) will belong to the employer…

In all those circumstances, I find that such lists will be the property of the employer and may not be copied or removed in their entirety by employees for use outside their employment or after their employment comes to an end.

Because this is not likely to be appreciated by many employees, it is in my judgment highly desirable that employers should devise and publish an e-mail policy…

In the absence of such a laid down policy, I next have to consider the status of contact details which have been put on to an employer’s system by an employee for their own use outside their employment, in ignorance of the fact that they would thereby become part of the Claimant’s property…

In my judgment it is reasonable to imply in the absence of any laid down guidance a term that an employee will at the end of their employment be entitled to take copies of their own personal information and, where the information is person [sic.] and confidential to them, such as details of their doctor, banker or legal adviser, to remove them from the employer’s system.

Most forms of e-mail system will permit the creation of compartmentalised address books, so that ordinarily an employee will be able to put their own personal contact details of friends, relations, and the like into a personal address book. In those circumstances, in the absence of clear evidence of an e-mail policy, I would be inclined to the view that ownership of that part of the database resided with the employee…

In assessing the facts, the Court held that the defendant copied the entire mixed list for the purpose of competing with the defendant and that it would not be appropriate for it to parse the list. It ordered the sequestered database to be delivered up to the claimant and enjoined the defendant from using it except for contact information “known by other means.”

Pennwell Publishing (UK) Ltd v. Ornstien, [2007] EWHC 1570 (QB).

On August 31, the Alberta Court of Queen’s Bench declared that the plaintiff in a departing employee case was entitled to enforce a default order that allowed it direct access to a number of hard drives it had seized earlier in executing an Anton Piller order.

The plaintiff was granted an Anton Piller order at the outset of litigation. It seized hard drives but did not inspect them.

As the litigation proceeded, a case management judge ordered the defendants to serve and file an affidavit of records by a certain date, failing which the plaintiffs would have direct access to the hard drives (subject to confidentiality terms to be agreed upon or ordered). The parties subsequently consented to a joint confidentiality order.

The Court held that the defendants did not provide an adequate affidavit of records because they did not disclose a number of records related to their involvement in a consortium that had bid successfully for a contract formerly held by the plaintiff and did not disclose all relevant e-mails and deleted files. It also held that the defendants should have produced the passwords, systems files and software necessary to access files in their native format and should have processed the electronic records for export into a litigation support software program.

The Court also rejected the defendants’ justifications. It held that the records pertaining to the consortium would be adequately protected by the implied undertaking rule and the joint confidentiality order. It also held that the defendants had not shown that electronic production (as ordered) would be unduly burdensome. On this point, the Court said:

The unusually high level of disclosure imposed in this case is justified by: the underlying fact that the defendants were employees of the plaintiff when they began working in competition with the plaintiff, the judicial determination that this was an appropriate case in which to issue an Anton Piller order, the size of the claim, which exceeds $50 million, and the great IT expertise of the parties which presupposes that at least some of the work required to provide the required level of disclosure can be done in-house.

Spar Aerospace Limited v. Aerowerks Engineering Inc., 2007 ABQB 543 (CanLII).