




CITATION:
Sabre
          Inc. v. International Air Transport Association, 2011 ONCA 747



DATE: 20111130



DOCKET: C53268



COURT OF APPEAL FOR ONTARIO



Doherty, Laskin JJ.A. and Hackland J. (
ad hoc
)



BETWEEN



Sabre Inc. and Sabre International, Inc.



Plaintiffs (Appellants)



and



International Air Transport Association
,
          Lufthansa Systems AG and Lufthansa Systems Airlines Services GmbH



Defendants (Respondent)



Malcolm M. Mercer, Steven Mason and Moya Graham, for the
          appellants

Robert S. Harrison, Paul F. Monahan and Emmeline Morse, for
          the respondent







Heard:  November 14, 2011

On appeal from the judgment of
          Justice James M. Spence of the Superior Court of Justice, dated January 11,
          2011, with reasons reported at 2011 ONSC 206.

Doherty J.A.:



[1]

The appellants (herein referred to as Sabre) sued the International
    Air Transport Association (IATA) for breach of confidence in connection with
    IATAs alleged misuse of certain information provided to it by Sabre.  The
    evidence was detailed and made almost impenetrable by the host of acronyms used
    to describe various entities in the evidence.  In his reasons dismissing the
    claim, the trial judge has provided an excellent summary of the evidence and I will
    refer to the evidence in broader terms and only to the extent necessary to
    address the grounds of appeal.

[2]

Sabre operates a worldwide service that is referred to in the travel
    industry business as a global distribution system (GDS).  A GDS is a
    computerized system that allows travel agents and those using travel agency
    websites to access current airline scheduling and pricing information for the
    purpose of booking and purchasing airplane tickets.  Sabre has developed
    sophisticated databases that allow it to collect, assemble, select, compile,
    verify, structure, organize, and arrange ticket related information.

[3]

Sabre contracts for services with travel agencies around the world.  Generally,
    those agencies do not pay for the service.  However, individual airlines pay a
    fee for each ticket booked on their airline through Sabres services.  Sabres
    GDS generates millions of dollars in revenue for Sabre.

[4]

The booking data as obtained and assembled by Sabre through its GDS is
    commercially valuable information.  Sabre has used that information to create
    data products that provide information to those in the air travel industry. 
    One of those data products is referred to as MIDT.  The sale of MIDT and other
    data products is also a significant source of income for Sabre.

[5]

IATA is a trade association of airlines that represents and services
    airlines around the world.  As of 2007, IATA had some 270 airline members
    around the world, including all of the major airlines.

[6]

IATA has established a passenger agency conference (the PAConf) made
    up of member passenger airlines.  The PAConf is responsible for the
    relationship between and among member airlines, accredited travel agents, and
    intermediaries, including GDS providers such as Sabre.  PAConf members adopt
    resolutions that govern IATA, member airlines, accredited agents, and GDSs.

[7]

IATA provides a number of services to its members, including the establishment
    and maintenance of billing and settlement plans (BSP) for the settlement of ticket
    transactions between airlines and accredited agents.  There are approximately
    87 BSPs operating around the world.  The BSPs assist airlines and accredited
    agents with the flow of data and the billing and settlement of payments
    associated with the purchase and sale of airline tickets.  Airlines are not required
    to participate in a BSP.  However, the service provided by a BSP is a valuable one
    for airlines as it significantly enhances the flow of payments between
    individual airlines and accredited agents.

[8]

When an accredited agent uses a GDS, such as the Sabre GDS, to book a
    flight, the GDS transmits data files containing information relating to the
    ticket sale to a data processing centre contracted by IATA.  The transmission
    is pursuant to a BSP agreement between the GDS and an individual BSP.  The data
    is sent on a daily basis by the GDS in a format established by IATA.  The data
    is referred to as a RET file and contains a daily compilation of all of the
    data referable to all ticket sales involving a particular GDS settled through a
    specific BSP.  The RET files contain only data for issued tickets, that is
    tickets actually paid for by the traveller.

[9]

IATA processes the data received from the GDSs and produces reports that
    are sent to the airlines and accredited agents.  The data reports sent to the
    airlines are referred to as HOT files and show all individual transactions made
    for that airline on a given day.  The files forwarded to a particular airline
    refer only to the tickets purchased from that airline.  Files forwarded to a
    particular accredited agent show all transactions for a given week by that
    accredited agent, but do not show any data relating to transactions involving
    other accredited agents in the BSP.

[10]

In the summer of 2005, IATA began to market to the airline industry data
    products referred to as PaxIS.  PaxIS is a comprehensive airline market
    intelligence database that uses information referable to ticket sales.  That
    information comes from the RET files accumulated through the information
    provided to IATA data processing centres by GDSs, including Sabre.  The PaxIS
    product includes data analysis, calibration and market intelligence, together
    with a web tool created for access to the PaxIS data.  Its purpose is to
    provide accurate market data to those in the airline industry.  The PaxIS
    product competes with the MIDT product sold by Sabre.

The Nature of the Dispute

[11]

In the lawsuit, Sabre contends that IATA breached its obligation of
    confidence with respect to Sabres information by using information provided exclusively
    for purposes relevant to the BSPs to create data products that would compete
    with Sabres existing data products.

[12]

Sabre acknowledges that individual passengers, airlines and travel
    agents have access to the same information in respect of individual
    transactions involving a particular airline, travel agent or passenger.  Sabre
    contends, however, that its compilation of all of the data relating to the
    individual transactions renders the totality of that information confidential,
    at least as regards IATA.

[13]

Clearly, the compilation of the data gives Sabres data value that data
    referable to the individual transactions would not have.  One of the questions
    for the trial judge was whether it also imbues that data with a confidentiality
    that data referable to an individual transaction would not have.

[14]

The trial judge, relying on
Lac Minerals Ltd. v. International Corona
    Resources Ltd.
, [1989] 2 S.C.R. 574 and
Cadbury Schweppes Inc. v. FBI
    Foods Ltd.
, [1999] 1 S.C.R. 142, identified the three elements that must be
    proved to establish a breach of confidence claim:

·

Did the information conveyed have the necessary quality of
    confidence?

·

Was the information communicated in confidence?

·

Was the information misused by the party to whom it was
    communicated?

[15]

As I read the reasons, the trial judge, at paras. 56-66, did not decide
    whether the information had the necessary quality of confidence.  He was
    prepared to assume that it did given his finding that the second requirement 
    that the information be communicated in confidence  was not established by
    Sabre.  This appeal focuses on that finding made by the trial judge.

Sabres Arguments

[16]

Counsel for the appellant, in his submissions, accepts that the trial
    judge asked himself the correct question in determining whether the information
    was communicated in confidence.  The trial judge relied on the well known
    passage from
Coco v. A. N. Clark (Engineers) Ltd.
, [1969] R.P.C. 41 (Ch.). 
    At p. 48, Megarry J. wrote:

It seems to me that if the circumstances are such
    that any reasonable man standing in the shoes of the recipient of the
    information would have realized that upon reasonable grounds the information
    was being given to him in confidence, then this should suffice to impose upon
    him the equitable obligation of confidence. [Footnotes omitted.]

[17]

Like other manifestations of the reasonable person analysis found in the
    common law, this inquiry is necessarily contextual and sensitive to the
    specific assembly of facts and circumstances presented by the evidence in an
    individual case.  The trial judges analysis correctly reflects the
    fact-sensitive nature of the analysis required.

[18]

In assessing whether IATA would reasonably have understood that the
    Sabre information was communicated in confidence, the trial judge placed
    considerable emphasis on the terms of the agreements governing Sabres
    participation in various BSPs.  Sabre first entered into a BSP agreement in
    1995 and has entered into many similar agreements since then.  The agreements
    contain a confidentiality clause obliging Sabre to keep the airlines
    information confidential.  There was no confidentiality clause in favour of
    Sabre.  The trial judge said, at para. 81:

In considering whether it had a duty of
    confidentiality to the TSPs [Sabre] in respect of the information it received
    from them,
IATA would reasonably consider that the absence of such a clause
    made it unlikely that the TSPs were entering into the agreement on the
    assumption of a duty of confidentiality unless there is some other reason that
    would make it likely that that assumption was held.  It would be relevant to
    this assessment that the parties to the ETSPAs [the BSP agreements] are
    sophisticated business companies which can reasonably be taken to be well
    acquainted with the use of confidential clauses in agreements for the
    disclosure of information.
[Emphasis added.]

[19]

In reference to the confidentiality clause, the trial judge said, at
    para. 80:

A reasonable person in the position of IATA when it
    was engaged in settling the agreement might well have considered that, in view
    of a clause dealing with confidentiality having been added to the draft
    agreement, if Sabre or British Airways had any confidentiality concerns on
    their own behalf they would have raised them as matters to be dealt with in the
    agreement.

[20]

Counsel for the appellant accepts that the terms of an agreement referable
    to the relationship between the parties giving rise to the sharing of
    information can constitute part of the factual matrix to be examined in
    deciding whether a reasonable person would understand that the information
    received came to that person in confidence:  see
Cadbury Schweppes
, at
    pp. 166-67.  Counsel submits, however, that the trial judge failed to consider
    the true nature of the BSP agreements, the actual parties to those agreements,
    and the purpose of those agreements.  He argues that the agreements were not made
    between Sabre and IATA, but were made between Sabre and the various airlines who
    were parties to any particular BSP.  Counsel contends that the agreements, properly
    understood, were not commercial contracts in the normal sense, but were rather
    technical intra-industry agreements designed to create narrow and clearly
    delineated zones of cooperation among airlines in what was in most other
    respects a fiercely competitive business.  Counsel further submits that the
    agreements had nothing to do with the use of the information provided pursuant
    to those agreements outside of the operation of the BSPs.

[21]

The trial judge did not make the error attributed to him in this
    submission.  With respect, counsels interpretation of the BSP agreements favours
    form over substance.  IATA was intimately involved in the creation and
    operation of the BSPs from the outset.  IATA was also directly involved in the
    creation of the relevant agreements, to the extent that even on the evidence of
    one of the appellants witnesses, IATA lawyers probably drafted the
    confidentiality clause.  Prior to 1999, the agreements were executed by IATA on
    behalf of the participating airlines.  After 1999, when IATA took over direct
    day-to-day operation of the BSPs, the agreements were executed directly by a
    representative of IATA.  Either way, it is accurate to describe IATA as a party
    to the agreements.

[22]

It was open to the trial judge to take the view of the BSP agreements
    that he did.  On that view, the existence of a unilateral confidentiality
    clause in favour of the participating airlines was properly regarded by the
    trial judge as an important consideration in determining whether IATA would
    reasonably have regarded the information provided by Sabre pursuant to those
    agreements as confidential between Sabre and IATA.

[23]

I would add that even on Sabres view of the nature and scope of the BSP
    agreements, those agreements undercut Sabres confidentiality claim.  As I
    understand Sabres position, it acknowledges that individual airlines could use
    Sabres data for purposes other than the BSP without infringing any
    confidentiality obligation.  That acknowledgement seems to me to make it
    difficult to assert that IATA should have reasonably regarded the information
    in its hands to be confidential, even though the information was not
    confidential in the hands of the individual IATA members.

[24]

Counsel next submits that the trial judge erred in law in failing to
    place a heavy onus on IATA to rebut the conclusion that the information was
    imparted in confidence.  Counsel relies on a passage from
Coco
, at p.
    48:

In particular, where information of commercial or
    industrial value is given on a business-like basis and with some avowed common
    object in mind, such as a joint venture or the manufacture of articles by one
    party for the other, I would regard the recipient as carrying a heavy burden if
    he seeks to repel a contention that he was bound by an obligation of
    confidence.

[25]

That passage was cited with approval in the reasons of both Sopinka J., at
    pp. 612-13, and LaForest J., at p. 642, in
Lac Minerals
.  Counsel
    describes this passage as doctrine, declaring as a matter of law that the
    legal or ultimate burden moves from the plaintiff to the defendant where
    certain factual prerequisites are established.

[26]

I do not read the passage as intending to move the legal burden of
    proof.  In my view, an approach that would shift the burden upon certain facts
    being established would undermine the fact-sensitive inquiry demanded by the
    determination of whether a reasonable person in the circumstances would
    understand that the information was given in confidence.  The evidentiary
    weight to be given to any particular fact or constellation of facts must depend
    on the trier of facts assessment of the entirety of the factual picture.  To
    regard certain facts as always shifting the legal burden of proof is to distort
    the reasonable person inquiry.

[27]

I think Megarry J. in
Coco
was describing his assessment of the
    impact of certain important facts on the confidentiality claim made in the case
    before him.  His Lordship was satisfied that the value of the information, the
    business-like basis upon which the information was provided, and the joint
    venture nature of the discussions in which the information was provided, combined
    to place a heavy evidentiary burden on the defendant.  Megarry J. was
    responding to the evidence he heard and the nature of the confidentiality claim
    made in that case.  He was not pronouncing any legal doctrine.  Nor do the
    references to the passages from
Coco
in
Lac Minerals
elevate
    Megarry J.s comments to the status of legal doctrine.

[28]

The facts of this case, particularly the nature of the information in
    issue, the prospective nature of the information-sharing contemplated by the
    parties, and the existence of an agreement speaking directly to
    confidentiality, make this a very different case from
Coco
.  It is not
    surprising that the analysis of the relevant evidence in this case bears little
    similarity to the analysis of the relevant facts in
Coco
.

[29]

Counsel next argues that the trial judge erred in law in imposing a
    requirement that Sabre clearly communicate to IATA the assertion that its
    information provided through the BSP agreement was given in confidence.  The
    trial judge said, at para. 71:

Because the focus is on the reasonable understanding
    of the person to whom the information is being imparted, that party will not be
    found to have breached any obligations of confidence if the disclosing party
    does not, through words or conduct, clearly communicate that the information is
    to be held in confidence or does not communicate that the subsequently
    complained of use was not permitted.

[30]

I agree that if the above-quoted passage is understood as a general
    statement of a legal principle applicable in all cases, the statement is
    somewhat overbroad.  I do not read it that way.  I understand the passage to be
    directed at the fact situation encountered by the trial judge.  The trial judge
    was faced with a case in which all parties were sophisticated business entities. 
    They were aware of the nature of the information being provided and the
    potential commercial use of that information, and they had turned their minds
    specifically to the question of the confidentiality of the information. 
    Sabres failure to assert, by word or conduct, any confidentiality claim was
    part of the factual matrix.  It was open to the trial judge, as the trier of
    fact, to give that silence considerable weight in deciding whether Sabre had
    shown that IATA would reasonably understand that the information conveyed to it
    by Sabre was conveyed in confidence.

[31]

Counsel next submits that the trial judge erred in holding that no duty
    of confidence could arise unless a reasonable person would have in mind the
    particular misuse of the information which ultimately led to the dispute. 
    Counsel submits that this requirement doomed Sabres case as PaxIS did not even
    exist when the information in issue began to flow from Sabre to IATA.

[32]

Having referred to the essential elements of a breach of confidence claim
    in the abstract, the trial judge put them in terms of the specifics of this
    case, at para. 74:

In the present case, the test may be stated as
    follows:  would IATA, on entering into the ETSPA [the BSP agreements] have
    realized, if it were acting reasonably, that the information which the [TSP]
    participants [Sabre] would henceforth be transmitting to the DPC [the data
    processing centre] be given on the confidential basis alleged by Sabre,
i.e.
that the information was to be used only by the DPC and only for billing and
    settlement purposes?

[33]

I think the trial judge captured the nature of the claim.  He did not
    impose an obligation on Sabre to show that IATA had in mind the use of the information
    to compete with Sabres data products at the time it obtained the information. 
    As the trial judge observed, the outcome of this case depended on whether a
    reasonable person would understand that Sabres information was to be used only
    in the context of the BSPs.

[34]

Counsel for Sabre has industriously advanced the arguments on behalf of
    Sabre.  Each focuses on an individual component of the trial judges analysis. 
    Appellate review must focus on the analysis as a whole and must have regard to
    the nature of the case placed before the trial judge.

[35]

The legal principles were not in dispute in this case.  The elements of
    the claim were not in dispute.  Most of the primary facts were not in dispute. 
    The question, essentially a factual one, was whether a reasonable person in
    IATAs position would in all the circumstances appreciate that the information from
    the ticket sales was given to it in confidence by Sabre.  The trial judge
    reviewed at length the several factors relevant to that question.  It was for
    him to decide the relative significance of the various factors.  His findings reflect
    a reasonable assessment of those factors.  This court cannot redo that exercise. 
    I would not interfere with the trial judges finding.

[36]

Sabre raised other grounds of appeal. However, as I would not interfere
    with the trial judges finding that the evidence was not imparted in confidence,
    it is unnecessary for me to address those other arguments.  I do not propose to
    do so.

[37]

I would dismiss the appeal.  IATA is entitled to its costs of the appeal
    fixed at $40,000, inclusive of disbursements and all applicable taxes.

RELEASED:
DD  NOV 30 2011

Doherty J.A.

I agree John I. Laskin
    J.A.

I agree Hackland J. (
ad
    hoc
)


