Executive Summary: Key Legal and Evidentiary Issues

• The Federal Court of Appeal reviewed whether the Tax Court had jurisdiction to issue an interim confidentiality order before trial.
   
• Discretionary orders of this kind are assessed under the Housen v. Nikolaisen standard, requiring an error of law or a palpable and overriding error of fact.
   
• Confidentiality orders and protective orders serve different purposes and are evaluated using different legal tests.
   
• Open court principles do not apply at the discovery stage, distinguishing this case from decisions involving trial exhibits.
   
• Procedural fairness was not breached even though the confidential documents were not formally filed with the motion record.
   
• Ultimately, the appellate panel found no error warranting appellate intervention and dismissed the appeal.
   

Facts of the case

CAE Inc., the respondent, brought a motion before the Tax Court of Canada seeking an interim confidentiality order to shield certain documents from public disclosure during discovery in two related tax appeals (Tax Court files 2023-1364(IT)(G) and 2023-1851(IT)(G)). The documents in question consisted of eight bid books and a group of financial statements belonging to subsidiaries and joint ventures, described generally in an affidavit from CAE's Head of Financial Reporting (the Stabilé Affidavit) and in Schedule A to the resulting order. The documents themselves were not filed with the motion record but were made available for review by the Court and by His Majesty the King, the appellant, at the hearing. The Tax Court granted the motion on January 16, 2025, permitting the appellant full access to the documents during discovery while restricting broader disclosure. The King appealed that order to the Federal Court of Appeal, and a companion file (A-37-25) was later discontinued, leaving this appeal (A-38-25) to proceed alone.

Policy and legislative provisions at issue

The appeal turned on the interplay between several provisions of the Tax Court of Canada Rules (General Procedure). Rule 67 governs the service and filing of motion materials, requiring that a notice of motion be served together with the affidavits or other documentary material to be used at the hearing. Rules 4(1) and 4(2) give the Tax Court broad authority to interpret its rules liberally and to determine practice where the rules are silent, which the Tax Court relied on, together with its implied jurisdiction, to issue the order before the documents were filed. The appellant argued that Rule 16.1, which contemplates confidentiality orders "at the time of filing of a document," should have constrained the Court's authority. The panel also considered the three-part test for confidentiality orders from Sherman Estate v. Donovan, 2021 SCC 25, and the related test for protective orders described in Canadian National Railway v. BNSF Railway Company, 2020 FCA 45, alongside the implied undertaking rule discussed in Juman v. Doucette, 2008 SCC 8.

Reasoning and analysis

Writing for the panel, Justice Walker found that the Tax Court had jurisdiction to issue the order, since Rule 4(1) affords flexibility to manage proceedings efficiently and the appellant had not identified any specific rule the order violated. The panel accepted that the Tax Court could rely on its implied jurisdiction to address a procedural gap not explicitly covered by Rule 16.1. On the substantive issue, the panel agreed that the open court principle does not apply at the discovery stage, distinguishing the respondent's concerns from those raised in cases involving documents already filed as trial exhibits, such as Elbakhiet v. Palmer, 2019 ONCA 333. The Court acknowledged some blurring in the Tax Court's reasons between the tests for protective orders and confidentiality orders but held that this lack of precision did not amount to a legal error, since the order's practical effect on court openness was minimal given that any future filing of the confidential documents would require a separate motion assessed against the Sherman conditions. The panel also rejected the appellant's argument that the Tax Court should have personally reviewed the confidential documents before issuing the order, noting that the Stabilé Affidavit provided sufficiently detailed evidence of the documents' confidential and competitively sensitive nature, consistent with the approach taken in Gaudreau v. The King, 2023 TCC 115. Finally, the panel found no breach of procedural fairness, observing that the appellant had chosen not to cross-examine the respondent's affiant or file its own evidence, and that Rule 67 did not require the respondent to file the confidential documents themselves as part of the motion record.

Ruling and overall outcome

The Federal Court of Appeal dismissed the appeal, concluding that the Tax Court committed no error of law or palpable and overriding error of fact in issuing the interim confidentiality order. CAE Inc., the respondent, was the successful party, and the appeal was dismissed with costs. The judgment does not specify a dollar amount for those costs.