Truth and Consequences
The Implied Undertaking Rule Protects Pre-Trial Privacy
Litigation lawyers sometimes find that clients are justifiably apprehensive about exposing their private or business lives to public scrutiny in civil litigation. Business clients may be reticent to disclose confidential financial information or trade secrets, particularly when engaged in litigation against a competitor. Individual clients may be sensitive about disclosing details of their private or domestic lives.
In the pre-trial stages of a civil action the parties engage in the discovery process, consisting of documentary discovery, in which each party discloses to the others the documents in its control, and examination for discovery, in which witnesses for the parties are formally questioned under oath before a court reporter by the lawyers representing the other side.
A party or witness cannot refuse to disclose information in discovery on the basis that it is personal, private or confidential. Only privileged, irrelevant or immaterial information is exempt from discovery.
To address these concerns about privacy and confidentiality while at the same time serving the truth-finding purpose of discovery, the courts have developed the “implied undertaking rule” which states that any party receiving confidential information from another party in discovery is subject to an undertaking to the court to keep that information confidential and not to disclose it or use it for any purpose other than advancing or defending the civil action. The undertaking is “implied” in that it arises automatically without any party having to make an express undertaking to the court and it exists even if the party deemed to have given it is unaware of the undertaking. The undertaking binds the party to litigation, its legal counsel and any other advisors (such as expert witnesses) that are engaged to assist the party in the civil action. The lawyers involved are subject to additional ethical obligations under the Code of Professional Conduct with respect to maintaining confidentiality and honouring undertakings in any form. Once the discovery evidence is used in open court it becomes part of a public record and is no longer subject to the implied undertaking. However much of the information disclosed in discovery is never used in open court and remains subject to the implied undertaking even after the suit is adjudicated, settled or otherwise disposed of.
In its recent decision in Juman v Doucette 2008 SCC 8, the Supreme Court of Canada has unanimously reaffirmed the importance of the implied undertaking. On the balancing of the need for broad discovery against the privacy interest of the party or witness giving discovery, Mr. Justice Binnie remarked:
… pre-trial discovery is an invasion of a private right to be left alone with your thoughts and papers, however embarrassing, defamatory or scandalous. At least one side in every lawsuit is a reluctant participant. Yet a proper pre-trial discovery is essential to prevent surprise or “litigation by ambush”, to encourage settlement once the facts are known, and to narrow issues even where settlement proves unachievable.
The public interest in getting at the truth in a civil action outweighs the examinee’s privacy interest, but the latter is nevertheless entitled to a measure of protection. The answers and documents are compelled by statute solely for the purpose of the civil action and the law thus requires that the invasion of privacy should generally be limited to the level of disclosure necessary to satisfy that purpose and that purpose alone. …
For good reason, therefore, the law imposes on the parties to civil litigation an undertaking to the court not to use the documents or answers
for any purpose other than securing justice in the civil proceedings in which the answers were compelled….
There are situations where a party will be relieved of its implied undertaking and allowed to use information obtained through discovery for a
collateral purpose, but it must usually get the court’s approval first (or obtain the consent of the party that disclosed the information in discovery). The situations in which the court should grant relief are narrow. In Juman Justice Binnie remarked:
An application to modify or relieve against an implied undertaking requires an applicant to demonstrate to the court on a balance of probabilities the existence of a public interest of greater weight than the values the implied undertaking is designed to protect, namely privacy and the efficient conduct of civil litigation.
For example, if police arrive at the offices of a party’s lawyer to serve a search warrant that covers files relating to the civil action, the implied undertaking does not prevent the lawyer from disclosing discovery evidence to the police. Also, if there are parallel proceedings to the civil action in which a witness has given testimony that contradicts his or her discovery evidence in the civil action, the implied undertaking rule will not prevent the discovery evidence from the civil action from being used to impeach the credibility of the witness in the parallel proceeding. In this case the privacy interest of the witness is trumped by the higher public interest not to “permit a witness to play games with the administration of justice”.
Any breach of the implied undertaking, by a party, its lawyers or advisors, can be penalized by the court. The nature of the penalty will be within the discretion of the court and will vary from case to case depending on the severity of the breach. Penalties can include staying the action where the plaintiff is in breach, or striking the defence where the breaching party is a defendant.
In some cases the litigation lawyer and the client may conclude that the implied undertaking is not adequate on its own to protect the confidentiality of the client’s discovery evidence. The lawyer may send a letter to the lawyers on the other side reminding them of the implied undertaking and stating that the client and lawyer demand strict observance of it. However, additional protection can be sought from the court in cases where the client has justifiable concerns that the confidentiality of discovery evidence will not be respected by the adversary in litigation. This arises particularly in cases where the client needs to protect trade secrets or financial information the release of which would prove damaging to its business. In some cases discovery information will only be disclosed once a party and its counsel have given a formal undertaking not to misuse the information. In extreme cases the court will grant a Confidentiality Order which severely restricts who is entitled to view the discovery information within and outside the receiving lawyer’s office. Some Confidentiality Orders specify that information obtained through discovery is for counsel’s eyes only, subject to the need to share it with experts retained for the purposes of the litigation. In more severe cases the Order requires the court’s further consent to allow discovery evidence to be shared with experts. To get a Confidentiality Order it is necessary to persuade the Court that there is a real risk of the adverse party misusing the discovery evidence. In any event, even if a Confidentiality Order is not granted, the exercise of applying for one may bring home to the adverse party the seriousness of the implied undertaking and the privacy interest it protects.
In any case where a client has particular concerns about the possible misuse of its confidential information disclosed in the course of discovery, these concerns should be addressed with legal counsel at an early stage, certainly prior to making any disclosure in discovery. While it may not be possible to avoid disclosing confidential information in the discovery process, additional steps may be appropriate to ensure that those to whom disclosure is made respect the client’s privacy interest. In all other cases the implied undertaking rule exists to protect the client from having its confidential information circulated any further than is needed for the purposes of the lawsuit.