CITATION: GEA Group AG v. Flex-N-Gate Corporation, 2009 ONCA 619

DATE: 20090821

DOCKET: C49842 and C49855

COURT OF APPEAL FOR ONTARIO

Weiler, Cronk and Blair JJ.A.

BETWEEN

GEA Group AG

Applicant (Respondent in appeal)

Ventra Group Co. and Timothy Graham

Respondents (Appellants)

And

Flex-N-Gate Corporation

(Appellant)

Bryan Finlay, Q.C. and Marie-Andrée Vermette, for the appellant Flex-N-Gate Corporation William V. Sasso and Jacqueline A. Horvat, for the appellants Ventra Group Co. and Timothy Graham

Peter F.C. Howard and Samaneh Hosseini, for the respondent GEA Group AG

Heard: March 11, 2009

On appeal from the order of Justice Peter A. Cumming of the Superior Court of Justice dated December 9, 2008, with reasons reported at 2008 CanLII 70043 (ON S.C.).

Cronk J.A.:

[1]               This appeal involves the equitable remedy of pre-action discovery, sometimes referred to as a “ Norwich order” based on the principles articulated in Norwich Pharmacal Co. v. Comrs. of Customs and Excise, [1974] A.C. 133 (H.L.).  The main issue concerns the circumstances in which this extraordinary discretionary relief may be obtained in Ontario.

I.          Background

(1)       The Parties

[2]               The appellant, Flex-N-Gate Corporation (“FNG”), is a privately held corporation incorporated under the laws of Illinois.  It produces and supplies components and systems to original automotive manufacturers.  FNG is controlled by its President and the Chair of its Board of Directors, Shahid Khan (“Khan”).

[3]               The appellant, Ventra Group Co. (“Ventra”), is a Canadian automotive supplier.  It was created on the amalgamation in December 2002 of Ventra Group Inc., Ventra International Holdings Inc. and VTA Acquisition Company.  Khan is Ventra’s ultimate beneficial owner.

[4]               The appellant, Timothy Graham (“Graham”), is a lawyer authorized to practise law in Ontario.  He is also a director, officer and employee of Ventra.  At the relevant times, he acted as Ontario counsel to FNG, Ventra and Khan.

[5]               The respondent, GEA Group AG (“GEA”), is a public corporation incorporated under the laws of Germany .  It is a global technology group consisting of more than 250 companies in 50 countries.

(2)       The Sale and Purchase Agreement

[6]               On December 2, 2003, FNG made a preliminary, non-binding offer to purchase a GEA subsidiary company (referred to by the parties as the “Indicative Offer”).  In both the Indicative Offer and a subsequent final offer to purchase made by FNG to GEA on March 17, 2004 (the “Final Offer”), FNG made several statements suggesting that it held substantial assets.  These included claims that:

(i)                FNG’s “operating assets remain 100% owned and operated by FNG”;

(ii)             FNG is a “privately owned manufacturing enter-prise…which owns and directly controls the oper-ations of: Fifteen (15) facilities in the United States; Ten (10) Canadian businesses; Three (3) Mexican plants; Two (2) operations in Brazil; One (1) plant in Argentina; and Six (6) plants in Spain”;

(iii)           FNG owned 100% of 37 operating entities, one of which was Ventra;

(iv)            “in October 2001…FNG acquired control of 100% of the stock of [Ventra], a publicly traded Tier 1 global automotive supplier”;

(v)               “FNG subsequently converted Ventra into a private company under applicable Canadian and securities law procedures”;

(vi)            FNG had several plant locations throughout Ontario; and

(vii)           FNG “currently generates an annual EBITDA [earnings before interest, taxes, depreciation and amortization] of approximately USD $200 million”.

[7]               On May 3, 2004, FNG and GEA entered into a sale and purchase agreement (the “SPA”) regarding FNG’s purchase of the GEA subsidiary.  Graham acted as FNG’s Canadian counsel throughout the negotiations and the parties’ subsequent dealings regarding the SPA. 

[8]               At FNG’s request, the closing date for the transaction contemplated by the SPA was postponed twice.  Ultimately, FNG failed to close the transaction.

(3)       The Arbitration

[9]               In October 2004, as a result of FNG’s failure to close the SPA transaction, GEA commenced arbitration proceedings pursuant to the SPA and under the rules of the German Institute for Arbitration (the “Arbitration”), in which it claimed damages against FNG in an amount in excess of €210 million for alleged breach of contract.   FNG, in turn, counterclaimed against GEA for damages for breach of the SPA.

[10]          The Arbitration was divided into two phases: the liability phase and the damages phase.  On September 15, 2006, the arbitral tribunal ruled in favour of GEA on the issue of liability, holding that FNG had breached the SPA, and dismissed FNG’s counterclaim.  The tribunal held that GEA was entitled to damages in an amount that would put it in the position it would have enjoyed if FNG had fulfilled its obligations under the SPA. 

[11]          FNG thereafter applied to a German appellate court to vacate the tribunal’s liability decision.  The application was denied on the ground of prematurity since the quantum of GEA’s damages had yet to be determined.  Costs of the application were awarded to GEA in the amount of €228,760.  FNG did not appeal this decision.   

[12]          The damages phase of the Arbitration is now in progress.

(4)       Evidence of Alleged Fraud

[13]          Khan testified during the liability phase of the Arbitration.  He said that: (i) Ventra has over $1 billion in sales; and (ii) Ventra is a sister corporation of FNG that is owned by him personally through a Nova Scotia LLC.  The latter assertion conflicted with FNG’s representation, in both the Indicative and Final Offers, that Ventra was a wholly-owned FNG subsidiary.

[14]          On March 8, 2007, a settlement meeting took place in Germany .  FNG was represented at this meeting by Graham and FNG’s German trial counsel, Thomas Weimann (“Weimann”).  GEA’s German trial counsel, Peter Heckel (“Heckel”) and Andreas von Oppen (“von Oppen”), also attended the meeting.

[15]          The parties dispute certain of the events that transpired at the March 8 meeting.  Heckel and von Oppen allege that during the meeting, Graham suggested to GEA’s representatives that: (i) GEA should consider a modest settlement of its claims against FNG since FNG, “with the help of a renowned US law firm”, had been restructured so as to make it difficult for GEA to seize its assets; and (ii) FNG’s enterprise value was only roughly “60 million”. 

[16]          Weimann and Graham strongly deny that Graham made the statements attributed to him by Heckel and von Oppen.  They also allege that the discussions at the March 8 meeting were confidential, a claim denied by Heckel and von Oppen.

[17]          The parties are also divided on what was said during a telephone conversation on January 30, 2008 between Heckel and Weimann.  Heckel claims that he called Weimann on that date to inquire whether FNG was going to pay the outstanding €228,760 costs award made in favour of GEA by the German appellate court.   Heckel maintains that Weimann replied that FNG was not going to pay the costs award and indicated in German that FNG was just “two sheds in the landscape”, suggesting that FNG had no substantial assets.  Weimann denies having made these statements. 

(5)       The Norwich Order

[18]          Based on the foregoing, GEA concluded that sometime after the December 2, 2003 Indicative Offer and before the January 30, 2008 telephone discussion between Weimann and Heckel, FNG transferred all its assets to Khan or other unknown persons in an effort to become judgment proof, thereby making it impossible for GEA to collect its anticipated damages award in the Arbitration from FNG.

[19]          On July 7, 2008, about five months after Heckel and Weimann’s telephone conversation, GEA applied to the Superior Court of Justice in Ontario for ex parte relief in the nature of a Norwich order against Ventra and Graham.  In its notice of application, GEA alleged that it required evidence from Ventra and Graham concerning “an apparent fraud being perpetuated [sic] by FNG to shield itself from a substantial claim asserted against it by GEA in [the Arbitration]”.  GEA claimed that the order sought would allow it “to determine the circumstances of and prosecute FNG’s wrongdoing in respect of its assets”, that Ventra and Graham were “the only practicable source of information available to GEA in order to investigate FNG’s fraud and determine its legal remedies”, and that the interests of justice favoured granting the relief sought. 

[20]          In support of its application, GEA relied in part on an affidavit sworn on June 20, 2008 by GEA’s legal counsel in Germany , Torsten Kunz-Aue.  In that affidavit, Kunz-Aue outlined the nature of the wrongdoing alleged and the purpose of the relief sought by GEA:

3. The Norwich Pharmacal Order would provide GEA with an equitable right of discovery to obtain evidence from [Ventra] and…[Graham] relating to an apparent fraud being perpetuated [sic] by FNG and its principals to shield itself from any recovery by GEA.  As set forth below, substantial evidence exists that from October 2004 to present FNG has transferred assets to other persons or entities to attempt to make itself judgment proof.

….

21. It is thus apparent that transfers of assets were made by FNG, including, apparently, the transfer of [Ventra] shares from FNG to a Nova Scotia company controlled by Khan personally in anticipation of GEA obtaining an arbitral award and, for the express purpose of making it difficult or impossible for GEA to collect its expected judgment.

….

25. It is thus evident that at some point between December 2, 2003, when FNG stated that it was the sole owner of numerous plants and businesses…and January 30, 2008, when FNG purported to have virtually no assets, FNG in effect transferred to Khan or other persons as yet unknown all its assets, in an effort to make it impossible for GEA to collect its expected judgment in the Arbitration.  Moreover…it may be that FNG disposed of some “60 million” in value between those dates alone.

[21]          GEA’s application for a Norwich order was thus premised on allegations of wholesale fraudulent conveyances by FNG, in particular, FNG’s alleged wrongful transfer of its interest in Ventra.  GEA therefore sought a widely cast Norwich order that would require:

(i) Ventra to disclose and produce “all documents relating to the transfer of its shares from [FNG] to other persons or entities”;

(ii) Graham to attend an examination by GEA to answer questions with respect to “any and all conveyances, transfers or transactions whereby FNG’s assets, including those of [Ventra] or its subsidiaries, were transferred from FNG to other entities”; and

(iii) Graham to disclose and produce to GEA all documents relating to the alleged conveyances.  [Emphasis added.]

[22]          On July 9, 2008, Wilton-Siegel J. granted the requested Norwich relief (the “ Norwich Order”).  However, contrary to the broad ambit of the order sought by GEA, above-described, the Norwich Order was restricted to “any and all conveyances, transfers or transactions whereby FNG’s interest in [Ventra] was transferred from FNG to other entities” (emphasis added).

[23]          Under the Norwich Order, among other matters:

(i)                 Ventra was required “to forthwith disclose and produce to [GEA] all documents relating to the transfer of the interest of [FNG] in [Ventra] to other persons or entities (the “Conveyances”), the particulars of which are within [Ventra’s] know-ledge”;

(ii)              Graham was required “to attend an examination by [GEA] to answer questions with respect to any and all conveyances, transfers or transactions whereby FNG’s interest in [Ventra] was transferred from FNG to other entities and to forthwith disclose and produce to [GEA] all documents relating to the Conveyances”;

(iii)            Ventra and Graham and “any other party that has or obtains knowledge” of the application or any resulting order were prohibited from disclosing the existence of the application, order, or any act or conduct undertaken in compliance with the order to any other person or party, except for the limited purpose of complying with the order or obtaining legal advice with respect to compliance with the order;

(iv)             until further order of the court, the court file was sealed to protect the confidentiality of the appli-cation, any resulting order, and the conduct taken in compliance with any order; and

(v)                any affected party was authorized to apply for directions in respect of the order or to vary or set aside the order on notice to counsel for GEA.

[Emphasis added.]

[24]          GEA did not appeal from the application judge’s decision to restrict the scope of the Norwich Order. 

[25]          On July 22, 2008, Ventra and Graham moved to set aside the Norwich Order.  In support of their motion, they filed an affidavit sworn by Graham on July 21, 2008 in which he outlined FNG’s role in the acquisition of Ventra and the share ownership of the various involved companies.  In his affidavit, Graham denied that he had ever been a director of FNG.  However, he confirmed that he was a director, employee and officer of Ventra and that he had acted as legal counsel to Ventra, FNG, Khan and other companies within the “FNG Group” from time to time.  In the latter capacity, Graham said, “nothing in this affidavit is intended to waive solicitor-client, litigation work product, or other legal privileges of those entities”.

[26]          Significantly, Graham also swore in his affidavit that: “FNG has never owned Ventra shares even indirectly”; “No representation (guarantee) was made in the SPA concerning FNG’s ownership of Ventra shares”; and “FNG held no ownership interest in Ventra at the time of or at any time following the SPA.”    

(6)       Variation Orders

[27]          In advance of the argument of their motion to set aside the Norwich Order, Ventra and Graham sought to vary the confidentiality provision of that order, above-quoted, to allow disclosure of the Norwich proceeding and the Norwich Order to FNG.  They claimed that to respond to GEA’s Norwich proceeding, they needed evidence from Graham that could only be obtained on disclosure of that proceeding to FNG, in order that Graham, as FNG’s counsel, could obtain instructions from FNG. 

[28]          By order dated September 3, 2008, C. Campbell J. granted the requested variation of the Norwich Order, permitting disclosure to FNG of the Norwich application, the orders made thereunder, and the related proceedings and evidence (the “September Order”).  Under paragraph one of the September Order, the variation granted was subject to certain conditions, including:

…

b)   [GEA, Ventra, Graham] and FNG are free to use the information provided, and the documents and transcripts generated in these proceedings in other proceedings that [GEA] may initiate either in Ontario or elsewhere and whether it be in court or in a private dispute resolution proceeding; and

c)         notwithstanding paragraph (b) above, no cause of action will be commenced or maintained by any of [Ventra, Graham], FNG and/or any of their shareholders, directors, officers, employees, agents or counsel (including, without limitation, Shahid Khan) with respect to the publication or disclosure of the materials generated, or information disclosed, in this proceeding by [GEA] or any of its directors, officers, employees, agents or counsel, including without limitation that any statements made are, under the law of defamation, accorded absolute privilege.

[29]          Pursuant to paragraph two of the September Order, the conditions imposed under that order were stated to be without prejudice to FNG’s right to move before the court to vary or set aside the conditions.

[30]          After the September Order, both the Norwich proceeding and the Norwich Order were disclosed to FNG.  At that point, Ventra’s and Graham’s motion to set aside the Norwich Order remained outstanding.  Promptly thereafter, by motions dated September 24, 2008 and October 15, 2008, FNG moved to set aside the conditions in the September Order and the Norwich Order itself. 

[31]          In addition, on November 7, 2008, GEA moved for various relief, including an order continuing and varying the Norwich Order to permit the discovery of Graham on the issue of the failed 2004 SPA transaction between GEA and FNG.  In this variation motion, GEA relied on the same grounds in support of the Norwich Order as it had advanced before Wilton-Siegel J.  However, for the first time, it also alleged that it had been induced to deal with FNG in respect of the SPA based on fraudulent misrep-resentations by FNG regarding its assets.  GEA argued that the interests of justice favoured allowing it to pursue pre-action discovery with respect to this “different, but equally blameworthy conduct by FNG”.  It also claimed that:

[T]he information provided, and the documents and transcripts generated in this proceeding will enable GEA to assess its legal remedies against FNG and/or its principals or employees and initiate proceedings as against them.

            (7)       Motions Judge’s Decision

[32]          The parties’ duelling motions were heard together by Cumming J.  By order dated December 9, 2008, he dismissed the motions brought by Ventra, Graham and FNG and granted GEA’s motion to vary the Norwich Order (the “December Order”). 

[33]          In his reasons, the motions judge expressed the view that, based on the evidential record, “one of two alternative possibilities must logically be the reality”:

[27]     The first possibility is that [Ventra] was in fact a wholly-owned subsidiary of FNG at the time of the SPA but later removed from FNG after the abortive closing through a restructuring by January, 2008 when GEA learned that FNG would not satisfy the costs award.  If this is true then GEA may have a cause of action against FNG, [Ventra] and [Khan] for a fraudulent conveyance to defeat GEA as a contingent creditor.

…

 [29]    The second possibility is that [Khan] and FNG misled GEA through intentional misrepresentations (as to [Ventra] being a subsidiary of FNG) into entering into the SPA in May 2, 2004, and that [Ventra] was a mere sister or affiliate corporation to FNG by that point in time, both being indirectly owned by [Khan].  Perhaps [Khan] caused FNG to transfer the shares of [Ventra] to a third party at some point after FNG acquired [Ventra] but prior to making the Indicative Offer to GEA.  If this is the situation then the evidence suggests [Khan] and FNG may have committed a fraud against GEA through the misrepresentations made to induce GEA to enter into the SPA.

[34]          The motions judge continued: “With either possibility, the evidence suggests a possible fraud on the part of [Khan], indirectly the owner of both FNG and [Ventra], against GEA” (at para. 30).

[35]          With respect to the need for a Norwich order, the motions judge held:

[35]     The information sought through the Norwich Order in the situation at hand is necessary to determine whether an action exists in respect of [Ventra], to identify wrongdoers, to find and preserve evidence that may substantiate or support an action against wrongdoers and to trace and preserve assets.  [Citations omitted.]

….

[38]     The evidentiary record suggests that third parties (i.e. parties beyond FNG and Mr. Khan), being Mr. Graham and [Ventra] may be fraudulently involved in the transfer of assets from FNG or that Mr. Graham was a participant in fraudulent misrepresentations made to GEA.

[39]     [Ventra] and Mr. Graham are the only practicable source of information available to GEA in order to investigate and determine its legal remedies.  Mr. Graham is an officer and legal counsel of [Ventra].  He has said he is the trustee owner of the shares of the corporation that indirectly controls [Ventra].  The record indicates Mr. Graham has an intimate knowledge of the history of [Ventra] and its relationship to FNG.  [Ventra] and Mr. Graham are residents of Canada .  The corporate documents of [Ventra] and the financial statements over the period 2003 to 2006 would quite possibly in themselves provide the information sought.

…

[41]     The evidentiary record establishes that GEA quite possibly has suffered a loss because of the unlawful actions of one or more of FNG, Mr. Khan, Mr. Graham and [Ventra].  The objective of a Norwich Order is to ensure that a person who has been wronged will not be prevented from obtaining legitimate redress for that wrong.  Taking into account the interests of all the protagonists to the situation at hand, and balancing those interests, the interests of justice favour upholding the Norwich Order.

[36]          The following two key paragraphs are contained in the December Order:

3.         The Respondents, Ventra and Graham are hereby required to forthwith disclose and produce to the Applicant [GEA] all documents relating to: (i) any and all conveyances, transfers or transactions whereby the interest of FNG in Ventra was transferred to other persons or entities, and/or the payment of any dividends relating to Ventra by FNG (the “Conveyances”), (ii) the failed transaction between the Applicant [GEA] and FNG in 2004 (the “Transaction”), insofar as they relate to Ventra and its involvement therein, including the statements made by FNG about its assets and financial condition in the possession of Ventra or Graham, (iii) the financial statements of FNG from 2001, and (iv) the ownership and/or control of Ventra from August 2001 to date.

4.         The Respondent, Graham, is hereby required to attend an examination by the Applicant [GEA] to answer questions with respect to: (i) the Conveyances, (ii) the Transaction, insofar as they relate to Ventra and its involvement therein, including the statements made by FNG about its assets and financial condition, (iii) the financial statements of FNG from 2001, and (iv) the ownership and/or control of Ventra from August 2001 to date.

[37]          In separate appeals, FNG and Ventra and Graham (collectively, the “appellants”) appeal from the December Order.  They seek to set aside the Norwich Order in its entirety, as well as conditions 1(b) and (c) of the September Order.  In the alternative, they seek to narrow the scope of the pre-action discovery permitted by the Norwich Order.

[38]          Pending the determination of the appeals, the Norwich Order was stayed, on consent, by order of this court dated January 16, 2009.  The terms of the stay order provided that the parties would enter into a tolling agreement and, subject to further order of this court, that the court files on these appeals would be sealed pending the determination of the appeals.  On May 21, 2009, the sealing order was vacated by this court on the application of GEA, without objection by the appellants.

 II.       Issues

[39]          As framed by the appellants, there are five issues on appeal:

(1)          What is the appropriate standard of review on appeal from a Norwich order?

(2)          Did the motions judge misapprehend and misapply the test for a Norwich order:

(i)                 by failing to conclude that the information sought by GEA is not necessary to enable it to plead its case;

(ii)              by holding that the interests of justice favour the obtaining of the disclosure sought; and

(iii)            by upholding the Norwich Order in the absence of a request for assistance from a foreign court to obtain evidence relevant to proceedings pending in the foreign juris-diction?

(3)          Did GEA meet the established requirements for entitlement to a Norwich order?

(4)          Should conditions 1(b) and (c) of the September Order be set aside?

(5)          If the Norwich Order is sustained, what measures should        apply to maintain FNG’s solicitor-client privilege and to       safeguard the use of the documentation and information         obtained by GEA from Ventra and Graham?

III.       Analysis

(1)              Norwich Relief

[40]          I begin with consideration of the origins and nature of Norwich relief and the test for the granting of such relief in Ontario. 

[41]          The remedy of pre-action discovery derives from the ancient bill of discovery in equity.  Contemporary consideration of this type of equitable relief began with the 1974 decision of the House of Lords in Norwich Pharmacal, a case of suspected patent infringement.  Norwich Pharmacal holds that, in certain circumstances, an action for discovery may be allowed against an “involved” third party who has information that the claimant alleges would allow it to identify a wrongdoer, so as to enable the claimant to bring an action against the wrongdoer where the claimant would otherwise not be able to do so.  In a passage frequently quoted in subsequent authorities, Lord Reid described the basic principle at p. 175:

[I]f through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers.  I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did.  It may be that if this causes him expense the person seeking the information ought to reimburse him.  But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration.

[42]          In his concurring speech in Norwich Pharmacal at p. 199, Lord Cross of Chelsea rejected the suggestion that the recognition of an action for discovery to permit disclosure of the names and addresses of alleged wrongdoers would open the door to meritless “fishing requests” by prospective plaintiffs who sought to collect evidence or information from persons who had no relevant connection with the person to be sued or the events at issue.  In so doing, he also identified the following factors as relevant to the determination of whether pre-action discovery of a third party should be allowed in the exercise of the court’s discretion:

(i)     the strength of the applicant’s case against the unknown alleged wrongdoer;

(ii)  the relationship between the alleged wrongdoer and the respondent (the person from whom discovery is sought);

(iii)  whether the information could be obtained from another source; and

(iv)    whether the provision of the information “would put the respondent to trouble which could not be compensated by the payment of all expenses by the applicant”.

See also, to substantially the same effect, the speech of Lord Kilbrandon in Norwich Pharmacal, at p. 205. 

[43]          In Norwich Pharmacal, pre-action discovery was sought for a narrow purpose – to identify suspected wrongdoers where it was known that a wrong had occurred, in order to permit the injured parties to sue for redress.  To achieve this focused objective, discovery was allowed against an “innocent” third party against whom the appellants had no direct cause of action.

[44]          However, following Norwich Pharmacal, the reach of the equitable action for discovery in England was significantly expanded.  In subsequent cases, pre-action discovery was granted where a cause of action against the respondent from whom discovery was sought was asserted on the basis of the respondent’s own alleged wrongdoing (see British Steel Corpn. v. Granada Television Ltd., [1981] A.C. 1096 (H.L.)), as well as where the object of the relief was to permit the tracing and freezing of assets (see Bankers Trust Co. v. Shapira, [1980] 3 All E.R. 353 (C.A.); A. v. C., [1980] 2 All E.R. 347 (Q.B.)).  In addition, in P. v. T., [1997] 4 All E.R. 200 (Ch D), Norwich relief was granted to permit an applicant to determine if, in fact, he had a cause of action against a suspected wrongdoer. 

[45]          Moreover, in Ashworth Hospital Authority v. MGN Ltd., [2002] 4 All E.R. 193 (H.L.), it was held at para. 44 that the “ Norwich jurisdiction” was not linked “to any requirement that the information should be available to the individual who had been wronged only for the purpose of enabling him to vindicate that wrong by bringing proceedings”.  In other words, the court in Ashworth accepted that a Norwich order could be obtained in the absence of a settled intention to sue the alleged wrongdoer or the person from whom discovery is sought.  See also Norwich Pharmacal, at p. 175, per Lord Reid.  The rationale for this expansive approach to Norwich relief was explained by Lord Woolf C.J. in Ashworth at para. 57:

New situations are inevitably going to arise where it will be appropriate for the jurisdiction to be exercised where it has not been exercised previously.  The limits which applied to its use in its infancy should not be allowed to stultify its use now that it has become a valuable and mature remedy.

[46]          The availability of pre-action discovery has also been codified in the applicable rules of court in England .  For example, Rule 31.16 of the Civil Procedure Rules 1998 (U.K.), SI 1998 No. 3132 (L. 17), provides that a court may order disclosure against a respondent who is “likely to be a party to subsequent proceedings” under certain circumstances in order to: “(i) dispose fairly of the anticipated proceedings; (ii) assist the dispute to be resolved without proceedings; or (iii) save costs”.    Further, under Rule 31.17, an order for disclosure by a person who is not a party to proceedings may be made by a court where: “(a) the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and (b) disclosure is necessary in order to dispose fairly of the claim or to save costs”.  Finally, Rule 31.18 provides that Rules 31.16 and 31.17 “do not limit any other power which the court may have to order – (a) disclosure before proceedings have started; and (b) disclosure against a person who is not a party to proceedings”.

[47]          In contrast, as in most provinces in Canada , the Ontario Rules of Civil Procedure make no provision for equitable relief in the nature of a Norwich order.[1]  Moreover, Norwich orders have been considered in only a limited number of cases in Canada to date.

[48]          In Glaxo Wellcome plc v. Minister of National Revenue, [1998] 4 F.C. 439 (C.A.), leave to appeal refused [1998] S.C.C.A. No. 422, on facts similar to those in Norwich Pharmacal, a pharmaceutical patent holder applied to the Minister of National Revenue under the Customs Act, R.S.C. 1985, c. 1, (2nd Supp.) for disclosure of the names of various drug importers who were said to have infringed the applicant’s intellectual property rights.  As in Norwich Pharmacal, disclosure of the requested information was denied on the ground of confidentiality.  The drug company then applied to the Federal Court of Canada for judicial review of that denial and for an order permitting it to examine the Minister on discovery to obtain the importers’ identities.  Both applications were dismissed.  On appeal to the Federal Court of Appeal, the appeal from the dismissal of the judicial review application was dismissed but the appeal from the dismissal of the application for an equitable bill of discovery was allowed.

[49]          Following a detailed review of the decision in Norwich Pharmacal, Stone J.A. held at p. 461 that there are two threshold requirements for obtaining the discretionary remedy of an equitable bill of discovery: (i) the applicant must have a bona fide claim against the alleged wrongdoers; and (ii) the applicant must share some sort of relationship with the respondents.  Justice Stone explained that the first requirement is intended to ensure “that actions for a bill of discovery are not brought frivolously or without any justification”, while the second requirement reflects the principle that “a bill of discovery may not be issued against a mere witness or disinterested bystander to the alleged misconduct”.  Justice Stone then identified two additional requirements for granting a bill of discovery: (iii) the person from whom discovery is sought must be the only practicable source of information available to the applicant; and (iv) the public interests both in favour and against disclosure must be taken into account.

[50]          A similar approach to Norwich orders has been adopted in Alberta.  In Alberta (Treasury Branches) v. Leahy (2000), 270 A.R. 1 (Q.B.), aff’d (2002), 303 A.R. 63 (C.A.), leave to appeal refused [2002] S.C.C.A. No. 235, after an extensive review of the relevant authorities in England and Canada, Mason J. described the variety of situations in which Norwich relief has been granted by the courts (at para. 106):

(i)                where the information sought is necessary to identify wrongdoers;

(ii)              to find and preserve evidence that may substantiate or support an action against either known or unknown wrongdoers, or even determine whether an action exists; and

(iii)           to trace and preserve assets.

[51]          Justice Mason then offered the following formulation of the test for a Norwich order (at para. 106):

The court will consider the following factors on an application for Norwich relief:

(i)                Whether the applicant has provided evidence sufficient to raise a valid, bona fide or reasonable claim;

(ii)              Whether the applicant has established a relationship with the third party from whom the information is sought such that it establishes that the third party is somehow involved in the acts complained of;

(iii)           Whether the third party is the only practicable source of the information available;

(iv)             Whether the third party can be indemnified for costs to which the third party may be exposed because of the disclosure, some [authorities] refer to the associated expenses of complying with the orders, while others speak of damages; and

(v)               Whether the interests of justice favour the obtaining of the disclosure.

[52]          In Ontario, this court has held that the equitable action for discovery lies in this jurisdiction and that it co-exists with the Rules of Civil Procedure: Straka v. Humber River Regional Hospital (2000), 51 O.R. (3d) 1, at paras. 27 and 32.  In Straka, Morden A.C.J.O. observed at para. 36: “The real question with respect to an action for discovery is: in what circumstances does it properly lie?  We are concerned with an equitable remedy and, accordingly, the exercise of a discretion is involved.”  Justice Morden went on to accept Stone J.A.’s analysis in Glaxo of the prerequisites to the obtaining of an order for pre-action discovery.[2] 

[53]          The holding in Straka that the equitable remedy of a bill of discovery is preserved in Ontario law and that it operates in concert with the Rules of Civil Procedure was reaffirmed by this court in Meuwissen (Litigation Guardian of) v. Strathroy Middlesex General Hospital (2006), 40 C.P.C. (6th) 6, at paras. 3-4 and 9.  The remedy was also recently considered in Isofoton S.A. v. Toronto Dominion Bank (2007), 85 O.R. (3d) 780 (Sup. Ct.), in which the court expressly adopted the Leahy test for the granting of Norwich relief.

[54]          Thus, many of the general principles applicable in Ontario to the granting of Norwich relief are well developed.  That said, the following observation by Morden A.C.J.O. in Straka at para. 51 remains apposite: “[t]he nature and scope of the Norwich Pharmacal principle is far from settled.”

[55]          Against this brief jurisprudential backdrop, I turn to the issues on these appeals.

(2)       Standard of Review

[56]          The first issue in contention concerns the standard of review applicable on appeal from the motions judge’s December Order.  FNG, supported by Ventra and Graham on slightly different grounds, argues that the motions judge erred in his appreciation and application of the test for a Norwich order.  It therefore contends that the standard of correctness applies.  In the alternative, it submits that even if the more stringent and deferential standard of palpable and overriding error is engaged, that standard is met in this case.

[57]          In contrast, GEA maintains that as these appeals involve appellate scrutiny of a discretionary and equitable order, and as the December Order involved the application of a legal standard to a set of facts, the operative standard of review is palpable and over-riding error.  GEA contends that the motions judge’s decision is unassailable on this standard.  Alternatively, GEA asserts that if the applicable standard of review is that of correctness, the motions judge’s decision is correct.

[58]          The recent decision of the Alberta Court of Appeal in B. (A.) v. D. (C.) (2008), 429 A.R. 89 is instructive on this issue.  In B.(A.), on appeal from an ex parte decision of a chambers judge denying a Norwich order, the appellant argued that the appeal was a de novo hearing, thus triggering the correctness standard of review.  Alternatively, if the hearing was not de novo, the standard of review for pure questions of law was correctness, and for errors of mixed fact and law, palpable and overriding error.  In respect of these submissions, the Alberta Court of Appeal indicated at para. 10:

Orders involving the exercise of judicial discretion, such as whether the interests of justice warrant the granting of a Norwich order, are generally evaluated on a standard of reasonableness.  Absent a material error in principle, a significant misapprehension or disregard of the evidence, or a decision which is clearly wrong, an appellate court will not interfere with an exercise of discretion…In assessing whether a decision is clearly wrong, an error in the interpretation or application of the law to found facts will attract appellate review.  A decision though discretionary will be clearly wrong when it involves an erroneous interpretation of the law.  In other words, where the exercise of discretion rests first on pre-conditions to the exercise of the discretion which themselves involve points of law, the standard of review of the Chambers Judge’s conclusions on those points of law is correctness.  That is what the appellant asserts occurred here.  However, an appeal court will not interfere merely because it would have exercised the discretion differently.  [Citations omitted.]

[59]          In my view, these observations accurately reflect the principles of appellate review articulated by LeBel J., writing for the majority of the Supreme Court of Canada, in British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371, at para. 43:

As I observed in R. v. Regan, [2002] 1 S.C.R. 297, 2002 SCC 12, however, discretionary decisions are not completely insulated from review (para. 118).  An appellate court may and should intervene where it finds that the trial judge has misdirected himself as to the applicable law or made a palpable error in his assessment of the facts.  As this Court held in Pelech v. Pelech, [1987] 1 S.C.R. 801, at pp. 814-15, the criteria for the exercise of a judicial discretion are legal criteria, and their definition as well as a failure to apply them or a misapplication of them raise questions of law which are subject to appellate review.  [Emphasis added.]

[60]          I conclude that on the main ground of appeal raised by the appellants, namely, the issue whether the motions judge misapprehended and misapplied the test for a Norwich order, the standard of correctness applies.  

(3)       Appellants’ Attack on the December Order

(i)        Preliminary Observations

[61]          I make the following preliminary observations. 

[62]          First, the appellants accept that equitable relief in the nature of a Norwich order is available in Ontario in a proper case.  They also accept that the factors set out in Glaxo and Leahy (Q.B.) govern the determination of whether to grant pre-action discovery.  I agree. 

[63]          The appellants argue, however, that: (i) the test for a Norwich order requires consideration of whether the discovery sought is “necessary” for the applicant to plead – a requirement that the appellants say is a matter of first impression for this court; (ii) a Norwich order is neither appropriate nor necessary in this case since GEA has more than enough information in its possession to commence proceedings and plead its case without Norwich discovery; and (iii) in the alternative, the Norwich Order is overly broad and open-ended, and should be subject to restrictions.

[64]          Second, FNG’s position regarding the motions judge’s approach to the test for a Norwich order differs from that of Ventra and Graham in two respects.

[65]          Before the motions judge, the appellants argued that GEA had failed to demonstrate a bona fide claim sufficient to ground Norwich relief.  Ventra and Graham, unlike FNG, renew that argument on appeal.  In contrast, FNG focuses on what it terms the “requirement of necessity” for the granting of a Norwich order, the satisfaction of which, it says, is a prerequisite to obtaining Norwich relief.  FNG contends that the application judge misapprehended and misapplied the test for a Norwich order by failing to recognize and apply the requirement of necessity to the facts of this case.   

[66]          In support of this contention and while our decision on these appeals was under reserve, the appellants moved for leave to introduce fresh evidence of civil proceedings commenced on April 30, 2009 by GEA against FNG and Khan in Illinois.  The appellants assert that this evidence conclusively establishes that the information sought by GEA under the Norwich Order is not necessary to enable it to plead its case and that Ventra and Graham are not the only practicable sources of the information sought. 

[67]          GEA resists the appellants’ fresh evidence motion, arguing that:

(i)                the fresh evidence is not directed at any of the issues that were before the motions judge and, therefore, that it could not reasonably be expected to have affected the outcome of the proceedings before the motions judge;

(ii)              the fresh evidence is not conclusive of any issue on these appeals; and

(iii)           the interests of justice do not favour the admission of the fresh evidence.

[68]          We directed that the fresh evidence motion proceed on the basis of written submissions.  I will refer to those submissions in the context of the issues on appeal to which they relate.

[69]          Finally, I note a second contrast in the positions of FNG and Ventra and Graham on appeal.  Ventra and Graham argue that the Norwich Order should not have been granted without a request from the arbitral panel in Germany or a German court for discovery in aid of the Arbitration.  I do not understand FNG to join in this submission.

(ii)      Alleged Misapprehension and Misapplication

of the Test for a Norwich Order

[70]          In my view, it is sufficient for the disposition of these appeals to consider only the appellants’ claim that the motions judge erred by misapprehending and misapplying the test for a Norwich order.  For the reasons that follow, it is my opinion that, in the context of the application as presented to him, the motions judge failed to consider properly whether the disclosure sought was a necessary measure in all the circumstances to permit GEA to pursue its rights against FNG.  This was an error in principle, reviewable on the correctness standard.

[71]          The motions judge recognized that a Norwich order is a form of equitable relief that, if granted, requires a third party to a potential action to disclose information that is otherwise confidential.  He observed, correctly, that the jurisdiction of the courts in Ontario to grant such relief “is grounded in s. 96(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43”, which states that “[c]ourts shall administer concurrently all rules of equity and common law.”

[72]          The motions judge also addressed the rationale for a Norwich order and the approach of Canadian courts to the granting of such relief.  Citing Norwich Pharmacal  and Isofoton, he stated at para. 9 of his reasons:

The fundamental principle underlying such an Order is that the third party against whom the order is sought has an equitable duty to assist the applicant in pursuing its rights…The remedy has been extended in Canada such as to allow the Court to grant an order compelling the disclosure of all information vital to the plaintiff’s ability to commence an action from any party involved in the wrongful conduct of the defendant or potential defendant.  [Citations omitted.]

[73]          The motions judge then turned to the test for a Norwich order.  He identified and accepted the factors outlined in Isofoton as those that govern the availability of pre-action discovery in Ontario.  As I have said, these factors represent the adoption in Ontario of the test for a Norwich order articulated in Leahy (Q.B.).  They are also consistent with, although arguably more comprehensive than, the factors set out in Glaxo and Straka.

[74]          FNG argues that the list of factors identified by the motions judge is incomplete and incorrect since it fails to include the requirement of necessity.  This omission, FNG submits, fatally taints the motions judge’s analysis of whether Norwich relief is available and appropriate in this case.

[75]          I agree with FNG that an applicant for a Norwich order is obliged to demonstrate that the requested pre-action discovery is “necessary”.  However, I do not agree that this is a ‘stand-alone’ prerequisite or that it is restricted to the necessity to plead a cause of action.

[76]          The notion of the requirement of a showing of necessity for a Norwich order is not a novel proposition.  It appears to have been a fundamental element of a bill of discovery in equity from the infancy of that remedy.  In Norwich Pharmacal at p. 205, when discussing the nature of the equitable remedy of pre-action discovery, Lord Kilbrandon cited the following passage in Colonial Government v. Tatham (1902), 23 Natal L.R. 153 at p. 158:

The principle which underlies the jurisdiction which the law gives to the courts of equity in cases of this nature, is that where discovery is absolutely necessary in order to enable a party to proceed with a bona fide claim, it is the duty of the court to assist with the administration of justice by granting an order for discovery, unless some well-founded objection exists against the exercise of such jurisdiction.  [Emphasis added.]

[77]          Both Norwich Pharmacal and post-Norwich Pharmacal jurisprudence in England underscore the importance of a showing of necessity in order to invoke extraordinary equitable relief in the nature of a Norwich order.  In Norwich Pharmacal, the court emphasized that if the information sought (the identities and addresses of the wrongdoers) was not made available, no action could ever be brought: see for example, the comments of Lord Reid at p. 174.  In Ashworth, at para. 36, Lord Woolf C.J. explained the “ Norwich jurisdiction” in this fashion:

[T]his is a discretionary jurisdiction which enables the court to be astute to avoid a third party who has become involved innocently in wrongdoing by another from being subjected to a requirement to give disclosure unless this is established to be a necessary and proportionate response in all the circumstances.  [Citations omitted; emphasis added.]

[78]          Lord Woolf C.J. continued at para. 57: “The Norwich Pharmacal jurisdiction is an exceptional one and one which is only exercised by the courts when they are satisfied that it is necessary that it should be exercised” (emphasis added).

[79]          Subsequently, in Mitsui & Co. Ltd. v. Nexen Petroleum UK Ltd., [2005] 3 All E.R. 511 (Ch D) at para. 21, Lightman J. described the pre-conditions to a Norwich order in terms that included proof of the need for an order “to enable action to be brought against the ultimate wrongdoer”.  Citing the above-quoted passage from Ashworth, he said at para. 24:

The necessity required to justify exercise of this intrusive jurisdiction is a necessity arising from the absence of any other practicable means of obtaining the essential infor-mation. 

[80]          Similarly, in Nikitin v. Richard Butler LLP, [2007] EWHC 173 (Q.B.), Langley J. said at paras. 24 and 32:

The questions are whether such information is vital to a decision to sue or an ability to plead and whether or not, even if it is, it can be obtained from other sources.  The purpose of an order is to enable an Applicant to take action which could not otherwise effectively be taken. 

….

[T]he applicants have wholly failed to establish the relevant necessity to justify the relief they seek.  [Emphasis added.]

[81]          Mitsui and Nikitin suggest that the “Norwich jurisdiction” may be exercised where the claimant requires disclosure of “crucial” or “vital” information in order to be able to bring its claim or where the claimant “requires a missing piece of the jigsaw”.  In light, particularly, of the pre-action discovery provisions of the rules of court in England , above described, these cases hold that a Norwich order against an innocent third party is a remedy of “last resort”: Mitsui, at para. 24; Nikitin, at para. 30. 

[82]          This restrictive approach to the availability of a Norwich order was subsequently rejected in R. v. Secretary of State for Foreign and Commonwealth Affairs, [2008] EWHC 2048 (Admin.).  In that case, the court stated at para. 94:

The intrusion into the business of others which the exercise of the Norwich Pharmacal jurisdiction obviously entails means that a court should not, as Lord Woolf in Ashworth made clear, require such information to be provided unless it is necessary.  But in our view, there is nothing in any authority which justifies a more stringent requirement than necessity by elevating the test to the information being a missing piece of the jigsaw or to it being a remedy of last resort.  [Emphasis added.]

[83]          The requirement of necessity also finds some support in the applicable Canadian authorities.  In B.(A.), supra, at para. 16, the Alberta Court of Appeal referred to Ashworth as an example of a case in which “[t]he investigative capacity of Norwich orders was applied…in circumstances of necessity, sufficiency of grounds and proportionality”.  In the view of the Alberta Court of Appeal, these were “legitimate concerns” to be taken into account in determining whether to grant Norwich relief.  In the result, the applicant’s failure in B.(A.) to demonstrate that the information sought would not be available in the normal discovery process was fatal to the application for a Norwich order.

[84]          On my reading of the authorities in Canada and England, it is unclear whether the requirement of a showing of necessity for pre-action discovery properly forms part of the court’s inquiry as to whether the third party from whom discovery is sought is the only practicable source of the information available (as held in Mitsui at para. 24) or as to whether the interests of justice favour disclosure or non-disclosure (as argued by FNG before this court).  However, there is no suggestion in the established jurisprudence that it is a stand-alone requirement for the granting of a Norwich order.  Nor do I regard it as such.

[85]          In my opinion, the precise placement of the necessity requirement in the inventory of factors to be considered on a Norwich application is of little moment.  The important point is that a Norwich order is an equitable, discretionary and flexible remedy.  It is also an intrusive and extraordinary remedy that must be exercised with caution.  It is therefore incumbent on the applicant for a Norwich order to demonstrate that the discovery sought is required to permit a prospective action to proceed, although the firm commitment to commence proceedings is not itself a condition precedent to this form of equitable relief.

[86]          FNG relies especially on this court’s decision in Meuwissen to submit that the requirement of necessity means that the information sought by an applicant for a Norwich order “must be required to plead a case”.  FNG emphasizes Sharpe J.A.’s comment at para. 7 of Meuwissen that: “[t]he motions judge did not find that pre-action production was required to enable the respondents to plead.  Moreover, on this record, it would be impossible to make such a finding.”

[87]          In my view, FNG’s suggested interpretation of the necessity requirement casts the purpose of Norwich orders too narrowly.  The developed Norwich jurisprudence does not confine pre-action discovery to only those cases where it is established that the information sought is necessary to plead, or even to those situations where the applicant is determined to sue.

[88]          Recall that in Norwich Pharmacal, the appellants knew that their patent had been infringed.  But in P. v. T., the applicant obtained an order for pre-action discovery in circumstances where he was uncertain whether a tort had been committed so as to give rise to a cause of action.  Similarly, in Straka, the appellant did not know whether he had a cause of action against the respondents.  The appellant therefore sought to determine what facts could have given rise to the wrongdoing alleged “so that he might take steps to clear his name through legal proceedings if this should prove necessary” (at para. 52) (emphasis added).  And in Isofoton, pre-action discovery was ordered where its purposes included the obtaining of information required to determine whether a legal proceeding was appropriate (see, in particular, paras. 47, 50 and 59).  See also Leahy (Q.B.), at para. 106.

[89]          It is true that on the facts in Meuwissen, this court held that a Norwich order was inappropriate as the information in the possession of the respondents at the time of the application was sufficient to permit them to formulate and plead their case (at para. 9).  That does not mean, however, that where information is required to determine the preliminary question of whether a cause of action even exists, Norwich relief is unavailable.  I do not read Meuwissen as holding to the contrary.

[90]          The purpose of an action for discovery “is to enable justice to be done”: Straka at para. 36.  It would defeat the object of an action for discovery if, other prerequisites to obtaining such relief having been satisfied, a Norwich order is automatically precluded because the applicant seeks to justify the order on grounds other than necessity to plead.

[91]          On the contrary, in my opinion, the limits of the necessity criterion for a Norwich order must be established in the context and on the facts of each particular case.[3]  While an applicant for Norwich relief must establish that the discovery sought is needed for a legitimate objective, this requirement may be satisfied in various ways.  The information sought may be needed to obtain the identity of a wrongdoer (as in Norwich Pharmacal), to evaluate whether a cause of action exists (as in P. v. T.), to plead a known cause of action, to trace assets (as in Bankers Trust and Leahy), or to preserve evidence or property (as in Leahy).  The crucial point is that the necessity for a Norwich order must be established on the facts of the given case to justify the invocation of what is intended to be an exceptional, though flexible, equitable remedy. 

[92]          Thus, the critical issue in this case is whether the Norwich Order was required for any of these legitimate purposes.  In my view, it was not.  I say this for the following reasons.   

[93]          The motions judge concluded that a Norwich order was “necessary” on four grounds.  For convenience, I repeat what he said at paragraph 35 of his reasons:

The information sought through the Norwich Order in the situation at hand is necessary to determine whether an action exists in respect of [Ventra], to identify wrongdoers, to find and preserve evidence that may substantiate or support an action against wrongdoers and to trace and preserve assets.  [Citations omitted.]

[94]          In the first ground cited by him, the motions judge appears to have focused on the issue whether the information sought was required by GEA to investigate whether it had a cause of action against Ventra.  But this suggested objective of a Norwich order went beyond the four corners of the relief sought by GEA and lay outside the objects of the requested Norwich relief advanced by it.

[95]          Neither in its original notice of application for the Norwich Order nor in its November 2008 variation motion, did GEA identify a possible cause of action against Ventra as a ground for the equitable relief that it sought.  Nor did it suggest that one of the purposes of the requested Norwich order was to permit the investigation of whether it had a potential actionable claim against Ventra or other prospective defendants apart from FNG and its principals or agents.

[96]          GEA’s notice of application instead focused on alleged fraudulent conveyances by FNG and the investigation of “FNG’s fraud”.  GEA claimed that a Norwich order would allow it “to determine the circumstances of and prosecute FNG’s wrongdoing in respect of its assets”.  Similarly, in its notice of motion for variation of the Norwich Order, GEA maintained that the discovery sought would enable it “to assess its legal remedies against FNG and/or its principals or employees and initiate proceedings as against them”.  There was no suggestion of a potential claim as against Ventra or, indeed, as against Graham.

[97]          Yet nowhere in his reasons does the motions judge assess whether a Norwich order was required to permit GEA to pursue its rights against FNG, including to permit GEA to plead its case against FNG, the alleged wrongdoer.  By failing to consider this question, the motions judge misdirected himself and failed to undertake a key aspect of the requisite necessity inquiry.  With respect, this was reversible error.

[98]          In my opinion, a Norwich order was not needed for GEA to pursue its rights against FNG.  On the materials before the motions judge, two potential types of fraud by FNG and/or Khan were identified: fraudulent conveyances and fraudulent misrep-resentations.  Many of the critical facts necessary to advance such causes of action were in GEA’s possession, at the latest, following the January 30, 2008 telephone call between Heckel and Weimann.  By that time, GEA knew of: (i) FNG’s statements in the Indicative and Final Offers concerning its assets and financial position; (ii) Khan’s admissions under oath regarding the real ownership of Ventra; (iii) Graham’s alleged statements about FNG’s enterprise value; and (iv) Weimann’s alleged statements concerning FNG’s worth and asset position. 

[99]          This information was sufficient to support GEA’s assertion that a potential fraud or frauds had been perpetrated on it by FNG and/or Khan.  While full particulars of the mechanics of the potential fraud or frauds were unknown to GEA, the nature, timing and apparent purpose of the frauds were known, as was the identity of the suspected wrongdoer or wrongdoers. 

[100]      In these circumstances, GEA was positioned to formulate a pleading against FNG (and/or Khan) if it elected to do so.  If an action had been commenced, discovery of the circumstances of the alleged frauds would be available to GEA under the normal discovery practice mandated by the Rules of Civil Procedure.  Further, once an action was initiated, information from Ventra and Graham regarding the asserted frauds would be available to GEA under the rules in Ontario.  If that information warranted an action against Ventra and/or Graham, a motion for the necessary pleadings amendment could be brought.

[101]      I note that in his June 20, 2008 affidavit, Kunz-Aue acknowledged that “substantial evidence” existed concerning FNG’s alleged fraudulent conveyances.   Further, Khan’s admissions under oath, Graham’s alleged statements to Heckel and von Oppen in March 2007, and Weimann’s alleged comments in January 2008, provided a foundation for GEA’s assertion of fraudulent misrepresentations.

[102]      I also agree with the appellants that the fresh evidence regarding the civil proceedings commenced by GEA in Illinois strongly undercuts GEA’s suggestion that pre-action discovery in Ontario from Ventra and Graham is required in order for GEA to determine and address its legal remedies against FNG and/or Khan.  The fresh evidence, which I regard as relevant and admissible under the principles outlined in R. v. Palmer, [1980] 1 S.C.R. 759 and Sengmueller v. Sengmueller (1994), 17 O.R. (3d) 208 (C.A.), supports the claim that GEA was positioned at the time of the motions before the motions judge to commence proceedings against FNG and/or Khan if so advised.  It also suggests that GEA now has access to wide-ranging discovery rights against FNG and Khan in the State of Illinois.

[103]      In its complaint filed in the Illinois court, GEA stated at paragraph 6:

This case involves alternative theories of liability…At this time, GEA does not know which of these two theories of liability will prove to be the correct theory [fraudulent conveyances or fraudulent misrepresentations], but both theories are actionable and are supported by representations made and/or conduct undertaken by or on behalf of Khan and FNG.  [Emphasis added.]

These allegations mirror those advanced by GEA against FNG and Khan in Ontario.

[104]      I reiterate that pre-action discovery is rare and extraordinary discretionary relief.  It is not intended nor should it be permitted to serve as a substitute for the normal discovery regime mandated by the Rules of Civil Procedure.  As noted by the Alberta Court of Appeal in B.(A.), supra, at para. 16: “[a] Norwich order is not intended as a device to circumvent the normal discovery process which can effectively achieve the same result.”  I agree. 

[105]      I recognize that GEA did not seek pre-action discovery merely to plead.  GEA’s counsel responsibly acknowledged during oral argument that GEA was “not very far away” from being able to plead one or more causes of action arising from FNG’s  alleged wrongdoing.  In fact, this understates the situation.  As in Meuwissen, GEA has ample information in hand to formulate and plead its case.  Norwich relief is not available simply to assist GEA in perfecting its prospective pleading or to obtain further evidence to aid in proving the facts of the two potential frauds already identified.

[106]      I also do not accept GEA’s claim that it should be afforded pre-action discovery to ascertain whether FNG or its agents engaged in a third, as yet unknown fraud.  The suggestion of a third cause of action in fraud is speculative.  To grant a Norwich order for this purpose would countenance an overt ‘fishing expedition’.

[107]      Nor do I agree that the other grounds identified by the motions judge warrant a Norwich order in this case. 

[108]      This is not a case, like Norwich Pharmacal, where such relief is necessary to identify the suspected wrongdoer.  GEA’s claims arise from FNG’s breach of the SPA and its alleged subsequent actions to defeat GEA’s legitimate interests as an anticipated creditor in the Arbitration and as a creditor in respect of the outstanding costs award made in GEA’s favour by the German appellate court.  The identity of the principal alleged wrongdoer – FNG – is known.  An action against it and its agents is already available to GEA.

[109]      Similarly, I am not persuaded that a Norwich order is necessary to preserve evidence.  There is no indication on this record of the risk of potential destruction of relevant evidence by any of the appellants or by Khan in the absence of a Norwich order or that such destruction has already occurred.

[110]      Nor, in my opinion, is this a tracing case.  On the record before this court and the motions judge, GEA has no existing proprietary or personal claim or other beneficial entitlement to assets formerly or at present in the possession of any of the appellants or, indeed, Khan.[4]  This case is therefore factually distinguishable from the tracing cases relied on by GEA.  At most, GEA is an unpaid and unsecured creditor of FNG in respect of its outstanding costs award and a prospective unsecured creditor of FNG in relation to unquantified damages to be awarded in phase two of the Arbitration. 

[111]      GEA did not argue before this court that pre-action discovery is required in this case in aid of a Mareva injunction or an Anton Piller order.[5]  Moreover, in contrast to other cases in which Norwich orders have been sought or obtained, in this case the alleged wrongdoer (FNG) eventually received notice of the Norwich application and participated in the Norwich proceeding.  Further, Ventra and Graham are closely connected both to FNG and the wrongdoings alleged by GEA.  In that important respect, they are “involved” but scarcely “innocent” third parties.

[112]      I therefore conclude that GEA failed to establish that Norwich relief is required in this case.  On this ground alone, the Norwich Order cannot stand.  It is therefore unnecessary to address the appellants’ remaining grounds of attack on the Norwich Order.

(4)       Appellant’s Challenge to the September Order

[113]      It remains to consider the appellants’ challenge to the impugned conditions of the September Order.  For three reasons, I would reject that challenge.

[114]      First, on the record before this court, Ventra and Graham did not appeal the September Order, although they sought relief concerning it on these appeals.

[115]      Second, the September Order was granted on the consent of GEA.  The reasons of C. Campbell J. indicate that the conditions imposed were suggested by GEA in its factum on the appellants’ motions.  Thus, the relief obtained was based on a compromise by GEA that accrued to the direct benefit of Ventra and Graham and, by virtue of the disclosure authorized by the September Order, ultimately to FNG’s benefit as well.  Fairness therefore dictates that the appellants should not lightly be permitted to disturb the foundation on which GEA’s consent was forthcoming.

[116]      Finally, only Ventra and Graham attack the condition in paragraph 1(b) of the September Order, while all the appellants challenge the immunity from suit condition contained in paragraph 1(c).  I see nothing objectionable in the former condition.  In respect of the latter condition, the record reveals that FNG has a history of commencing proceedings in relation to the alleged violation of the confidentiality of the Arbitration.  The immunity from suit provision of the September Order was designed to foreclose a similar lawsuit by FNG arising from the disclosure in the Norwich proceeding of the facts and the issues in the Arbitration.   This was a reasonable precaution in the circumstances and I see no basis to interfere with it.

IV.       Disposition

[117]      I would therefore allow the appeals in part by setting aside the Norwich Order.  I would award FNG the costs of its appeal and of the earlier stay motion before this court, in the total amount of $35,000, inclusive of disbursements and GST.  I would also allow Ventra and Graham the costs of their appeal and of the stay motion, in the aggregate amount of $22,000, inclusive of disbursements and GST.

RELEASED: 

“AUG 21 2009”                                            “E.A. Cronk J.A.”

“KMW”                                                         “I agree K.M. Weiler J.A.”

                                                                       “I agree R.A. Blair J.A.”