What do you do if your client’s confidential information ends up in the possession of an innocent recipient who may not realize that the information is confidential? Can you stop further dissemination? In some cases it may be too late to regain confidentiality. In others, it may be possible if you have the right circumstances and act early enough.
In Cascade Aerospace Inc. v. AGNL Avionics Abbotsford Nominee, ULC, Docket S197182, July 30, 2019, an unreported decision of the B.C. Supreme Court, Cascade had to provide confidential financial information to its landlord AGNL pursuant to the lease that also required the landlord to keep the information confidential. One day Cascade learned that the financial information had been circulated by AGNL to third parties as part of a marketing package for the sale of a portfolio of assets.
After AGNL refused to provide a distribution list, Cascade sought an injunction (i) enjoining AGNL and anyone else who received any of the confidential information from dealing with it, (ii) requiring AGNL to disclose the names and addresses of all third parties who were provided with the information, (iii) requiring AGNL to serve all recipients with the order and provide an affidavit of service, and (iv) requiring each person who received the confidential information to serve a copy of the order on any person to whom they provided the information and disclose their names and addresses to Cascade.
The parties agreed that the test to granting the injunction was that set out in RJR-MacDonald v. Canada (Attorney General), 1994 CanLII 117 (SCC). At page 334:
First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried. Secondly, it must be determined whether the applicant would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.
On the first question, the Court found that there was a serious question to be tried. Moreover, it went further saying that though in cases of covenants not to disclose confidential information, the required strength of an applicant’s case for an injunction is on the lower end of the spectrum only needing to show that the claim is not frivolous, in this case, Cascade had established a prima facie case for breach of the lease by AGNL. On the second question the Court concluded that Cascade would suffer irreparable harm should the injunction not be granted and moreover that the harm was not quantifiable in monetary terms. As to the third question, all aspects of the matter favoured Cascade and thus the Court granted the injunction leaving it to the arbitration pursuant to the terms of the lease to deal with a specific remedy against AGNL.
Of note, the Court stated that the fact that AGNL had alerted all recipients to the disclosure and obtained NDAs from such individuals after the fact did not negate the initial breach. The Court also stated that in assessing irreparable harm, the fact that the precise nature and extent of the damage is unknown does not mean that the damage is speculative. Last it said that the public interest is served by holding parties who wrongfully disclose confidential information to account.
It may be that the key to a remedy such as this is early discovery of the release to permit it to be dealt with before the information becomes widely known.