Coping with the Implied Undertaking Rule

Recent decisions in the Federal Court deal with the scope of the implied undertaking rule.

The Rule 

The basic rule is that where a party to a proceeding has obtained information by means of court-compelled production of documents or discovery testimony, which information could not otherwise have been obtained by legitimate means independent of the litigation process, the party impliedly undertakes to the court that the private information so obtained will not be used, vis-à-vis the producing party, for a purpose outside the scope of the litigation for which the disclosure was made, without consent of the producing party or with leave of the court. A failure to comply with the undertaking will be contempt of court. A codification of the rule applies in the Ontario Courts. 

The Supreme of Canada supports this rule. The Court said pre-trial discovery is an invasion of privacy but the public interest in getting at the truth in a civil action outweighs the examinee’s privacy interest, although the latter is entitled to a measure of protection. The answers and documents are compelled only for the purpose of the civil action and the law requires that the invasion of privacy should generally be limited to the level of disclosure necessary to satisfy that purpose and that purpose alone. The general idea is that whatever is disclosed in the discovery room stays in the discovery room unless eventually revealed in the courtroom or disclosed by judicial order. 

Where the party being examined does not consent, a party bound by the undertaking may apply to the court for leave to use the information or documents otherwise than in the action. The application for leave must be brought before using the information and the applicant must specify the purposes of using the information and the reasons it is justified. Both parties must be heard. 

Where the subject matter of two proceedings between the same or related parties is similar, and where evidence obtained during one proceeding might be relevant in the other, the implied undertaking rule still applies and prevents the use of information obtained on discovery in one proceeding being filed in the other, unless the party who provided the information consents or the court allows the evidence to be filed in the second proceeding. However, in such cases, the prejudice to the party providing the information is generally less and a court will typically look favorably on a request for leave to use the information obtained in one proceeding in the other proceeding. 

The implied duty of confidentiality ends when the information obtained on discovery becomes part of the public record.

GE Renewable Energy Canada Inc. v. CANMEC Industrial Inc. 2025 FC 478

Here plaintiff sought to amend the statement of claim to add many allegations of copyright infringement that had been recently revealed on the examination for discovery of the defendant’s representative and to add an additional defendant. The court refused to allow the amendments because they raised substantial new issues, and the trial was scheduled to take place shortly.

The plaintiff brought a motion indicating that it wished to bring a new action in the Quebec Superior Court against the existing defendant and the proposed defendant concerning the matters alleged in the disallowed amendments. Whether the implied undertaking applied to the discovery evidence obtained in the Federal Court proceeding became a key issue as the existing defendant refused to consent.

In a detailed decision the Judge concluded the implied undertaking ends when information or documents are filed in open court as part of the court record, including on an interim motion or other procedure, and not only at trial. The Judge noted that in Ontario, Manitoba, and Prince Edward Island, the codified “deemed undertaking” rule does not prohibit the use of evidence that is “filed with the court” or “given or referred to during a hearing,” without limitation on whether it is filed on a motion or at trial.

The Judge also granted leave to use the evidence not simply because the proposed litigation involved the same parties and the same or similar issues. Rather, it was the combined circumstances of the case, including the nature of the allegations, the nature of the information and the extent to which it is already in the public court file, the lack of material prejudice to the defendants, and the circumstances in which the issue arose in the context of the plaintiff’s motion to amend its pleadings that led him to conclude that leave should be granted.

Seylynn (North Shore) Development Limited Partnership v. Denna Homes Group 2025 FC 491

Here the plaintiff sued the defendants for trademark infringement. The personal defendant asserted it owned the plaintiff’s trademark which had been licenced to the plaintiff and which licence was revoked because of the defendant’s ouster from the board of directors of the plaintiff. The defendant, through a separate company he controlled, then brought action in the Supreme Court of British Columbia seeking oppression remedies against several parties who were not involved directly in the infringement action.

The plaintiff’s representative had been examined for discovery for two days and the defendant sought the leave of the court granting relief from the implied undertaking. The defendant relied on the decisions that established if discovery material in one action is sought to be used in another action with the same or similar parties and the same or similar issues, the prejudice to the examinee is virtually non-existent and leave should be granted.

The Court did not accept this argument as the discovery transcripts were created in the context of a trademark proceeding. While that proceeding might tangentially touch on issues that may also be live in the Oppression proceeding, fundamentally the relief sought in each proceeding was different. 

In addition, the Court noted that the defendant did not file evidence as to how the transcripts were to be used. If they were to be used for impeachment, they had not put the alleged inconsistencies to the witness and allowed him to explain them. This created an obvious potential for prejudice.

The implied undertaking rule plays an important part in litigation. Counsel and the parties should know its impact and how it works.

If you have questions, please contact me at mckeown@gsnh.com 

John McKeown

Goldman Sloan Nash & Haber LLP

480 University Avenue, Suite 1700 

Toronto, Ontario MSG 1V2

Direct Line: (416) 597-3371

Fax: (416) 597-3370

These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.

A version of this article originally appeared in the Law360 Canada published by LexisNexis Canada Inc.