Enforcing Confidentiality Agreements: When Proving a Breach May Not be Enough

In Ontario, suing for breach of contract without proof of actual harm may put a plaintiff on the hook for the full amount of the defendant’s legal costs. Following the Supreme Court of Canada’s decision in 1704604 Ontario Ltd. v. Pointes Protection Association (“Pointes”), a prospective plaintiff in a claim arising from the breach of a non-disclosure or confidentiality agreement should stop and consider whether the claim has more than technical merit. If the subject of the breach engages any matter of public interest, the claim could come to a swift and costly end.

In the five years since the Province of Ontario amended the Courts of Justice Act to discourage strategic litigation against public participation (“SLAPP”), the great majority of anti-SLAPP proceedings have involved defamation claims. Yet any claim that arises from an expression may fall withing the ambit of SLAPP legislation, so long as it relates to a matter of public interest.

An expression for these purposes is incredibly broad. It could be private. It does not even have to be directed towards any person or entity. Likewise, the Court’s decision in Pointes affirms that “relation to a matter of public interest” will be interpreted generously - the idea being to keep the threshold low.

As in Pointes, an expression can give rise to a breach of contract where a party speaks out contrary to a settlement agreement or a non-disclosure agreement. In this case, a settlement agreement prohibited a conservation group from giving evidence at an assessment hearing of a land development application.

The Pointes Protection Association (“PPA”) is a not-for-profit corporation dedicated to the conservation of a wetland in Sault Ste. Marie. 1704604 Ontario Ltd. (“170”) had submitted an unsuccessful application to the regional conservation authority to develop certain conservation lands. When the conservation authority approved 170’s second application, the PPA sought judicial review. Yet the review never took place. When the PPA could not post security for costs, it reached a settlement with 170 that included an agreement barring the PPA from advancing the position that the proposed development was illegal or contrary to statute in any future proceeding before the Ontario Municipal Board.

The following year, the PPA president testified before the Board in opposition to the proposed development. In response, 170 brought a claim against the PPA for breach of contract.

Undeterred, the PPA struck back with an anti-SLAPP motion. As shown by the PPA’s earlier inability to provide security for costs, it was not a deep-pocketed litigant. Lack of funds had put a stop the PPA’s application for judicial review and led to the settlement agreement at the heart of the contract claim. This time, the disparity in the parties’ resources only underscored the type of power imbalance that anti-SLAPP legislation was designed to redress.

An anti-SLAPP motion provides a powerful remedy. Where the moving party succeeds, the court will dismiss the underlying action and will generally award full indemnity costs against the plaintiff, not only for the motion but also for the underlying action.  

Once the defendant has met the low bar of establishing that the action arises from an expression that relates to some matter of public interest, the burden shifts to the plaintiff to show that its proceeding has substantial merit, that the defendant has no valid defense and that the public interest in allowing its claim to continue outweighs the public interest in protecting the expression.

In Pointes, the Court upheld the appellate decision to grant the relief sought on the PPA’s motion and dismiss 170’s contract claim. Although the companion decision released with Pointes affirms the public interest in allowing actions to proceed where the case has substantial merit, Pointes reminds us that “substantial merit” will not be easily met.  While a plaintiff’s ability to demonstrate harm is not typically required in order to enforce a contract, Pointes suggests that it may be determinative when courts assess “substantial merit”. 

It remains to be seen how the Pointes precedent will impact breach of contract proceedings in Ontario. Given the low threshold for an expression related to the public interest, we may see more defendants in contract claims taking a chance on an anti-SLAPP motion.  With that in mind, plaintiffs should consider the following:

  • Has the breach caused me or my organization actual harm?
  • Is the cost of litigation out of proportion with the harm caused or with the likely award?
  • How does the public interest in ensuring that I can enforce this particular contract provision stack up against the public interest in freedom of expression and public participation?

For more information about the article, please contact Tamara Watson.

To download the full article, click 'Download PDF' on the upper right side of the page.