Executive Summary: Key Legal and Evidentiary Issues

• Both parties agreed that the disputed documents were relevant and producible, but disputed the terms and scope of disclosure during pre-trial discovery.
• Central allegations include misappropriation of confidential information, diversion of business opportunities, and the solicitation of employees by former Powertech personnel who founded a competing company.
• Defendants sought a "counsel's eyes only" (CEO) designation to restrict access to highly sensitive commercial and technical documents, citing the risk of competitive harm in a small, specialized market.
• Powertech opposed the CEO restrictions, arguing that the implied undertaking rule provided sufficient protection and that access limitations would impair its ability to instruct counsel and advance its claims.
• The court assessed each document category separately, finding that while some materials warranted enhanced protection, none justified a blanket CEO regime.
• Source code and engineering designs were identified as the most technically sensitive materials, warranting controlled access through a tiered protective order rather than outright exclusion of the plaintiff.

Facts of the case

Powertech Labs Inc. ("Powertech"), a subsidiary of BC Hydro, operates in the hydrogen fueling systems industry. The individual defendants — Angela Das and Ronald Klopfer — were former employees of Powertech who, in 2022, established Hyfluence Systems Corp. ("Hyfluence"), a competing company in the same industry. Powertech alleges that, while still employed and in some instances prior to departing, the individual defendants took proprietary engineering knowledge, confidential information, and strategic business materials developed during their employment, and used or incorporated that information in the development of Hyfluence's hydrogen fueling systems. Powertech further alleges that the defendants acted in concert to divert business opportunities, recruit key personnel, and position Hyfluence to compete directly against it. The defendants deny these allegations, maintaining that their business and technology were independently developed and that any knowledge relied upon reflects general industry expertise rather than proprietary information.

Scope of the disclosure dispute

The dispute arose during document discovery under Rule 7-1 of the Supreme Court Civil Rules, B.C. Reg. 168/2009. After initial first-tier disclosure, Powertech took the position that the defendants' production was incomplete and filed an amended Notice of Application dated April 17, 2025, seeking second-tier production of additional materials. As the scope of the requested production expanded, the defendants sought broader confidentiality protections, including a CEO designation for certain document categories. The parties were unable to reach a confidentiality agreement, leading to two cross-applications before the court: one by Powertech seeking further production, and one by the defendants seeking to restrict the terms of disclosure. The court organized the disputed documents into six functional categories: (1) marketing and proposal materials; (2) requests for proposals and pricing materials; (3) business plans and strategic documents; (4) product design and engineering materials; (5) source code and control systems; and (6) communications and correspondence.

Legal framework and analysis

The court applied the legal framework governing protective orders in civil litigation. Under the implied undertaking rule, documents obtained on discovery are restricted to use in the litigation in which they are produced. However, the court retains discretion to impose a protective order where exceptional circumstances are established, particularly where disclosure to a competitor could provide an unfair advantage that the implied undertaking rule cannot adequately address. The test for a protective order, drawn from Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, requires the party seeking protection to establish, on a balance of probabilities, that the information has been treated as confidential, that it is in fact confidential in nature, and that there is a reasonable probability that disclosure would cause harm to proprietary, commercial, or scientific interests. A CEO designation is a more restrictive form of protection available only in unusual circumstances, with a heavy burden on the party seeking it, as established in Lundbeck Canada Inc. v. Canada (Health), 2007 FC 412.

Applying these principles on a category-by-category basis, the court found that the evidentiary foundation for confidentiality and risk of harm varied significantly across document types. For Categories 1 (marketing materials) and 6 (communications and correspondence), the court was not satisfied that the defendants had established a basis for protection beyond the implied undertaking rule, noting that marketing materials are largely outward-facing and that the risks alleged regarding operational correspondence were framed at a level of generality and were speculative. For Category 2, the court drew a distinction between completed or historical bids — where the risk of competitive harm is diminished and probative value is high — and current or prospective bids, where disclosure to a direct competitor could reveal active pricing strategies and give rise to a real and substantial risk of harm. For Category 3, the court found that earlier business plans, particularly those from 2022 and 2023 created in close temporal proximity to Hyfluence's formation, were centrally relevant and should be disclosed under ordinary rules, while forward-looking strategic materials warranted moderate protection. Categories 4 and 5 — product design, engineering materials, source code, and control systems — were recognized as the most technically sensitive materials, engaging legitimate confidentiality concerns, though the court found that even these did not justify excluding the plaintiff altogether. The court noted that these materials are central to the plaintiff's core allegation that its confidential systems were appropriated, and that a regime preventing technically informed review would undermine the fairness of the proceeding.

Ruling and overall outcome

The court granted Powertech's application for further production, ordering that all disputed document categories are relevant and producible under Rule 7-1. The defendants' application for a blanket CEO designation was dismissed. In its place, the court imposed a tiered protective order calibrated to the varying sensitivity of the documents. Categories 1 and 6, along with historical bid materials from Category 2 and earlier business planning materials from Category 3, are subject only to ordinary disclosure under the implied undertaking rule. Current and ongoing bid materials from Category 2 and forward-looking strategic documents from Category 3 are classified as Tier 1 — Confidential Information, accessible to counsel, retained experts, and no more than two designated representatives of the plaintiff who are not involved in competitive decision-making. Categories 4 and 5 are classified as Tier 2 — Highly Confidential Technical Information, restricted to counsel, independent experts not involved in the plaintiff's competitive operations, and no more than one designated technical reviewer approved under the order and required to execute a written undertaking to the court. The result of the applications was mixed, and costs were left to be spoken to in the absence of agreement. Powertech was the substantially successful party on the applications; no monetary award was ordered.