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The Secret Corporate Source: Protected or Not?

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Defamation & Media Bulletin

The Ontario Court of Appeal has allowed the identity of a media source within a corporation to remain secret in a related civil action.  The Court has made clear, however, that in future cases disclosure of secret corporate sources may be required.

"This was a difficult case," Justice Juriansz stated in 1654776 Ontario Limited v. Stewart and The Globe and Mail Inc.[1]  "Corporate executives who engage in the dangerous practice of providing journalists with information anonymously during the course of sensitive negotiations should understand the courts may not uphold a journalist's assurances of confidentiality."[2] 

In Stewart, the numbered company was the plaintiff in a proposed class action under the Securities Act.  After The Globe and Mail reported that a leveraged buy-out of BCE Inc. would be delayed for a lengthy period of time, the value of BCE securities fell.  The plaintiff disposed of BCE securities at a loss.  Shortly thereafter, BCE announced that the transaction would proceed.  The value of the securities rebounded. 

The plaintiff claimed the Globe's sources had misrepresented the status of the BCE negotiations to the Globe for their own advantage.  The plaintiff said it relied on the sources' statements in disposing of its BCE securities, and sought damages.  It brought an application for an order requiring the Globe to disclose the sources' identities.  The newspaper resisted, as its reporter had promised the sources their identities would remain secret.

It has been established that in an application for discovery of third party information in civil litigation, a party must show that (1) it has a bona fide claim, which is not frivolous or a mere 'fishing expedition';  (2) the party from whom disclosure is sought is somehow involved in the acts complained of, even though it may not be at fault;  (3) the party from whom disclosure is sought is the only practical source of the information;  (4) that the party can be indemnified for the costs of disclosure;  and (5) the interests of justice favour obtaining the disclosure.[3]

Juriansz J. held that factors (1) to (4) had all been met.[4]  As to the fifth requirement, he held that where the potential disclosure of a journalist's confidential source is in issue, the court should consider whether the source should be protected under the 'Wigmore' test applicable to such disclosure generally.[5]  Justice Juriansz held that where the Wigmore test is not satisfied, it will probably be in the interests of justice to require disclosure of a secret corporate source.[6]

The onus of proving that the Wigmore test has been met is on the party resisting disclosure.[7]  It must be established that (1) the communication originated in a confidence that the source's identity will not be disclosed;  (2) anonymity is essential to the relationship giving rise to the communication;  (3) the relationship is one that should be encouraged in the public interest;  and (4) the public interest in protecting the identity of the source outweighs the public interest in determining the truth of the information provided by the source.[8]

Juriansz J. held that elements (1) and (2) were satisfied because the Globe's journalist had promised the source confidentiality, and the promise of secrecy was essential to the journalist/source relationship.[9]  Juriansz J. held element (3) to be satisfied because the relationship between professional journalists and their sources should generally be encouraged.[10] 

Juriansz J. acknowledged that the public has an interest in receiving information on matters of public interest, that freedom of expression must always weigh heavily in the balancing exercise, and that these circumstances favoured continued confidentiality.  He also observed, however, that the information was sought to advance the plaintiff's lawsuit.  The lawsuit would serve the important public interest of fostering compliance with securities laws.[11]  He also acknowledged that disclosure is important for the correct disposal of civil litigation and the administration of justice.[12]  He also observed that this was not a case in which confidentiality was needed to protect a corporate 'whistle-blower'.[13]

For Juriansz J., the balanced tipped against disclosure on an assessment of the strength of the plaintiff's case.  He made clear that while the plaintiff's claim was not a frivolous one (and hence bona fide) the court may consider the substantive merits of a claim further in deciding whether the interests of justice require disclosure.  On further consideration, the plaintiff's claim appeared to be weak.  There was no evidence that the statements to the Globe's reporter were false or misleading, or that the sources had ulterior motives, so that the action appeared unlikely to succeed.[14]  In the absence of disclosure, the plaintiff would still be able to proceed with its action as against BCE, and thereby continue to advance the public interest in ensuring compliance with securities laws.[15]  Although Juriansz J. considered that the result may well have been different if the plaintiff's case had been compelling, the absence of a compelling case and the heavy weight to be granted to freedom of expression interests justified continued protection of the source.[16]

 "It could not be plainer," Juriansz J. cautioned, that in future cases "journalists and sources must understand that the courts may refuse to uphold the type of absolute promise of confidentiality that [the journalist] made in this case."[17]  It is also apparent that results in future cases will depend on a careful analysis of the specific facts.  Any prediction of the result in future cases can only be made with caution.

[1] 2013 ONCA 184.

[2] 2013 ONCA 184 at para. 147.

[3] 2013 ONCA 184 at paras. 25, 50 to 60 and 75.  These principles of third party discovery were established in Norwich Pharmacal Co. v. Commissioners of Customs and Excise, [1974] A.C. 133 (H.L.). 

[4] 2013 ONCA 184 at paras. 75 and 76.

[5] As recognized by the Supreme Court of Canada in R. v. National Post, [2010] 1 S.C.R. 477 and Globe and Mail v. Canada (Attorney General), [2010] 2 S.C.R. 592.

[6] 2013 ONCA 184 at para. 78.

[7] 2013 ONCA 184 at paras. 79 to 81.

[8] 2013 ONCA 184 at para. 82.

[9] 2013 ONCA 184 at para. 83.

[10] 2013 ONCA 184 at paras. 84 to 95;  see also Globe and Mail v. Canada (Attorney General), [2010] 2 S.C.R. 592 at para. 57, per Binnie J.

[11] 2013 ONCA 184 at paras. 84 to 95;  see also Globe and Mail v. Canada (Attorney General), [2010] 2 S.C.R. 592 at para. 57, per Binnie J.

[12] 2013 ONCA 184 at paras. 134 to 137.

[13] 2013 ONCA 184 at para. 139.

[14] 2013 ONCA 184 at paras. 142 to 144.

[15] 2013 ONCA 184 at paras. 137 to 138.

[16] 2013 ONCA 184 at paras. 137 to 138.

[17] 2013 ONCA 184 at para. 125.

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