In the receivership proceedings of
The Receiver also sought a sealing order to exclude the Settlement Agreements from being disclosed to the public as part of the documents filed with the Court. Notably, each of the Settlement Agreements contained confidentiality provisions that reflected the parties' agreement not to disclose its terms.
Although the sealing order was ultimately granted, the Court issued a word of caution against assuming that courts will seal a document solely on the basis that it contains a confidentiality clause or a provision that the parties will seek a sealing order.
The Court's decision also sheds further light on the recently refined legal test for the granting of sealing orders.
Background
Following the commencement of DIG's receivership proceedings in
In its motion for the Court's approval of the Settlement Agreements, the Receiver requested that the Settlement Agreements be sealed given that they contained financial settlement terms and commercially sensitive information. The Settlement Agreements also contained provisions requiring the parties to keep the terms confidential.
Sealing orders
In considering whether to grant a sealing order, courts must weigh the public interest of protecting confidential or sensitive information against the negative effects of restricting access to proceedings and files that would normally be available to the public. The principle of allowing public access to court proceedings (known as the open court principle) reflects the right to freedom of expression under the Canadian Charter of Rights and Freedoms and has long been recognized as an important public interest.
The legal test for the granting of a sealing order was established by the
- a sealing order is necessary to prevent a serious risk to an important interest, including a commercial interest, because alternative measures would not prevent the risk; and
- the positive effects of the sealing order outweigh the negative effects, including the public interest in open court proceedings.
The
- court openness poses a serious risk to an important public interest;
- the sealing order is necessary to prevent this serious risk to the identified interest because reasonably alternative measures will not prevent this risk; and
- as a matter of proportionality, the benefits of the sealing order outweigh its negative effects.
For a more fulsome discussion of
The decision of the court
In its decision to grant the sealing order, the Court in DIG found that all three prerequisites set out in
The Court further held that the requested sealing order, which would seal the entirety of the Settlement Agreements, was proportionate given the complexity of the proceedings, the multitude of parties and the presence of commercially sensitive information throughout the agreements that made it impractical to redact only certain provisions. The Court acknowledged that the Settlement Agreements were the product of hard fought negotiations between multiple claimants defending different business interests and competing for settlement proceeds. The Court further noted that the sealing order was not absolute and could be modified or lifted by the Court in the future.
Finally, the Court determined that the public interest of promoting settlements, especially complex multi-party and multi-proceeding settlements involving parties seeking to protect their commercially sensitive and private information through confidentiality clauses, outweighed the negative impact that the sealing order would have on the open court principle in this case.
However, although the Court recognized that the confidentiality provisions reflected the parties' intention and agreement not to disclose the settlement terms, it warned against assuming such confidentiality provisions would guarantee a sealing order.
In DIG, the lengthy negotiations and the multitude of parties and complex proceedings were key factors that supported a sealing order, as well as the commercial and financial sensitivities to which the Non-Settling Defendants should not be privy. In all cases, the granting of a sealing order must be based on a principled analysis guided by the legal test.
Key takeaways
Contracting parties should be aware that in circumstances where their agreement may be subject to public disclosure (such as in the context of insolvency proceedings), there is no guarantee that a court will grant a sealing order simply because the parties have contractually agreed to keep the terms confidential. Parties seeking to seal their agreement must be able to demonstrate legitimate concerns about disclosure of the contents that outweigh the public interest in open court proceedings.
Even then, parties will be expected to structure their agreements in a way that would allow for limited redactions, as opposed to a sweeping order that seals the entire agreement. This is especially the case where parties enter into negotiations with the knowledge or expectation that any agreement they reach will be subject to court proceedings - for instance, in the case where the agreement must be disclosed to the court in an insolvency proceeding or for purposes of enforcement.
Interestingly, in DIG, the Court took into account the fact that one of the Settlement Agreements contained personal information with respect to former executives of DIG and their spouses. This reflects the Court's recognition in
In
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