GEA Group AG v. Ventra Group Co. et al.,

• Jurisdiction: Ontario
• Judge: Weiler, Cronk and Blair, JJ.A.
• Neutral Citation: 2009 ONCA 878,2009 ONCA 619
• Date: 11 March 2009
• Court: Court of Appeal (Ontario)

GEA Group AG v. Ventra Group Co. (2009), 254 O.A.C. 198 (CA)

MLB headnote and full text

Temp. Cite: [2009] O.A.C. TBEd. AU.036

GEA Group AG (applicant/respondent in appeal) v. Ventra Group Co. and Timothy Graham (respondents/appellants) and Flex-N-Gate Corporation (appellant)

(C49842, C49855; 2009 ONCA 619; 2009 ONCA 878)

Indexed As: GEA Group AG v. Ventra Group Co. et al.

Ontario Court of Appeal

Weiler, Cronk and Blair, JJ.A.

August 21, 2009 and December 11, 2009.

Summary:

In German arbitration proceedings, Flex-N-Gate Corp. (FNG) was found liable to GEA Group AG for breaching an agreement to purchase a subsidiary of GEA. GEA claimed that at some point, FNG had fraudulently transferred all its assets to its owner, Khan, to make itself judgment proof. Thereafter, GEA applied for ex parte relief in the nature of a "Norwich order" (i.e., for the equitable remedy of pre-action discovery), against Ventra Group Inc. (a company allegedly related to FNG) and Graham, a director, officer and employee of Ventra and who acted as counsel to FNG, Ventra and Khan.

The Ontario Superior Court (Wilton-Siegel, J.), granted the requested Norwich relief, but restricted the scope of the order to "any and all conveyances, transfers or transactions whereby FNG's interest in Ventra was transferred from FNG to other entities". The order contained a confidentiality provision. Ventra and Graham moved to set aside the Norwich order. In advance of their motion, Ventra and Graham sought to vary the confidentiality provision of the Norwich order to allow disclosure of the Norwich proceeding and the order to FNG.

The Ontario Superior Court (Campbell, J.), granted the requested variation (the September order), permitting disclosure to FNG of the Norwich application and proceedings subject to certain conditions (i.e., paragraph 1(b) which permitted all parties to use the disclosed information in any court proceedings initiated by GEA and paragraph 1(c) which prohibited Ventra, Graham, FNG and Khan, from commencing defamation proceedings against GEA as a result of the disclosure). Following 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. FNG moved to set aside the conditions in the September order (i.e., paragraphs 1(b) and (c)) and the Norwich order itself. GEA then 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 sale and purchase transaction (SPA) between GEA and FNG. In the variation motion, GEA relied on the same grounds 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 misrepresentations by FNG regarding its assets. GEA argued that the interests of justice favoured allowing it to pursue pre-action discovery with respect to this "diffferent, but equally blameworthy conduct by FNG". It also claimed that the information provided, and the documents and transcripts generated in this proceeding, would enable GEA to assess its legal remedies against FNG and/or its principals or employees and initiate proceedings as against them.

The Ontario Superior Court (Cumming, J.), in a decision reported [2008] O.T.C. Uned. S49, dismissed the motions by Ventra, Graham and FNG to set aside the Norwich order or the conditions and granted GEA's motion to vary the Norwich order. The motions judge believed that there was a suggestion of fraud on the part of Khan, who was indirectly the owner of both FNG and Ventra, against GEA, and broadened the scope of the Norwich order (i.e., varied the order). FNG, Ventra and Graham appealed, seeking to set aside the Norwich order in its entirety, as well as conditions set out in paragraphs 1(b) and (c) of the September order.

The Ontario Court of Appeal allowed the appeal in part and set aside the Norwich order. The court declined to vary the impugned conditions of the September order.

Equity - Topic 1142

Equitable relief - Practice - Bill of discovery (incl. "Norwich order") - The Ontario Court of Appeal discussed the origins and nature of a "Norwich order" (i.e., the equitable remedy of pre-action discovery, based on the principles articulated by the House of Lords in Norwich Pharmacal Co. v. Commissioners of Customs and Excise (1974)), and the test for granting such relief in Ontario - The court stated, inter alia, that "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" - See paragraphs 40 to 55.

Equity - Topic 1142

Equitable relief - Practice - Bill of discovery (incl. "Norwich order") - The appellants sought to set aside a "Norwich order" (i.e., an equitable order for pre-action discovery), arguing that the motions judge erred in his appreciation and application of the test for a Norwich order - The standard of review was in issue - The Ontario Court of Appeal concluded that on the main ground of appeal raised by the apellants, namely, the issue of whether the motions judge misapprehended and misapplied the test for a Norwich order, the standard of correctness applied - See paragraphs 56 to 60.

Equity - Topic 1142

Equitable relief - Practice - Bill of discovery (incl. "Norwich order") - The appellant (FNG) sought to set aside a "Norwich order" (i.e., an equitable order for pre-action discovery), arguing that one of the requirements of the test for a Norwich order was that the discovery sought was "necessary" for the applicant to plead its case - The Ontario Court of Appeal agreed that an applicant for a Norwich order was obliged to demonstrate that the requested pre-action discovery was "necessary" but disagreed that necessity was a "stand-alone" prerequisite or that it was restricted to the necessity to plead a cause of action - The court elaborated on the necessity requirement in this context - The court stated, inter alia, "... that the limits of the necessity criterion for a Norwich order must be established in the context and on the facts of each particular case. 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 ..., to evaluate whether a cause of action exists ..., to plead a known cause of action, to trace assets ... or to preserve evidence or property ... 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" - See paragraphs 70 to 91.

Equity - Topic 1142

Equitable relief - Practice - Bill of discovery (incl. "Norwich order") - In German arbitration proceedings, Flex-N-Gate Corp. (FNG) was found liable to GEA Group AG for breaching an agreement to purchase a subsidiary of GEA - GEA claimed that at some point, FNG had fraudulently transferred all its assets to its owner, Khan, to make itself judgment proof - Thereafter, GEA obtained a "Norwich order" (i.e., an order for pre-action discovery), against Ventra Group Inc. (a company allegedly related to FNG) and Graham, a director, officer and employee of Ventra and who acted as counsel to FNG, Ventra and Khan - Ventra, Khan and FNG moved to set the Norwich order and GEA sought to vary (expand) the order - A motions judge refused to set aside the order and expanded the order - Ventra, Khan and FNG appealed, arguing that the motions judge erred in his appreciation and application of the test for a Norwich order - The Ontario Court of Appeal allowed the appeal, holding that the motions judge erred by misapprehending and misapplying the test for a Norwich order - The court stated 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 - That was an error in principle, reviewable on the correctness standard - GEA failed to establish that a Norwich order was required in this case - See paragraphs 61 to 112.

Practice - Topic 4160

Discovery - When available - In absence of an action or proceeding - [See all Equity - Topic 1142 ].

Cases Noticed:

British Steel Corp. v. Granada Television Ltd., [1981] A.C. 1096 (H.L.), refd to. [para. 44].

Bankers Trust Co. v. Shapira et al., [1980] 3 All E.R. 353 (C.A.), refd to. [para. 44].

A. et al. v. C. et al., [1980] 2 All E.R. 347 (Q.B.), refd to. [para. 44].

P. v. T. Ltd., [1997] 4 All E.R. 200 (Ch. D.), refd to. [para. 44].

Ashworth Hospital Authority v. MGN Ltd., [2002] 4 All E.R. 193 (H.L.), refd to. [para. 45].

Leahy v. Dr. A.B. (1992), 113 N.S.R.(2d) 417; 309 A.P.R. 417 (T.D.), refd to. [para. 47, foonote 1].

Johnston (Frank) Restaurants Ltd., Re (1980), 33 Nfld. & P.E.I.R. 341; 93 A.P.R. 341 (P.E.I.C.A.), refd to. [para. 47, footnote 1].

Glaxo Wellcome plc v. Minister of National Revenue, [1998] 4 F.C. 439; 228 N.R. 164; 162 D.L.R.(4th) 433 (F.C.A.), leave to appeal refused (1998), 236 N.R. 388 (S.C.C.), refd to. [para. 48].

Alberta (Treasury Branches) v. Leahy et al. (2000), 270 A.R. 1; 2000 ABQB 575, affd. (2002), 303 A.R. 63; 273 W.A.C. 63; 2002 CarswellAlta 578; 2002 ABCA 101, leave to appeal refused (2002), 303 N.R. 392; 327 A.R. 120; 296 W.A.C. 120 (S.C.C.), refd to. [para. 50].

Straka v. Humber River Regional Hospital et al. (2000), 137 O.A.C. 316; 51 O.R.(3d) 1 (C.A.), refd to. [para. 52].

Meuwissen v. Strathroy Middlesex General Hospital et al., [2006] O.A.C. Uned. 574; 40 C.P.C.(6th) 6 (C.A.), refd to. [para. 53].

Isofoton S.A. v. Toronto-Dominion Bank, [2007] O.T.C. Uned. 730; 85 O.R.(3d) 780 (Sup. Ct.), refd to. [para. 53].

A.B. v. C.D. (2008), 429 A.R. 89; 421 W.A.C. 89 (C.A.), refd to. [para. 58].

British Columbia (Minister of Forests) v. Okanagan Indian Band et al., [2003] 3 S.C.R. 371; 313 N.R. 84; 189 B.C.A.C. 161; 309 W.A.C. 161; 2003 SCC 71, refd to. [para. 59].

Colonial Government v. Tatham (1902), 23 Natal L.R. 153, refd to. [para. 76].

Mitsui & Co. v. Nexen Petroleum UK Ltd., [2005] 3 All E.R. 511 (Ch. D.), refd to. [para. 79].

Nikitin & Ors v. Butler LLP & Ors, [2007] EWHC 173 (Q.B.), refd to. [para. 80].

Mohamed v. Secretary of State for Foreign and Commonwealth Affairs, [2008] EWHC 2048 (Admin.), refd to. [para. 82].

R. v. K.G.B., [1993] 1 S.C.R. 740; 148 N.R. 241; 61 O.A.C. 1, refd to. [para. 91, footnote 3].

R. v. Parrott (W.), [2001] 1 S.C.R. 178; 265 N.R. 304; 198 Nfld. & P.E.I.R. 260; 595 A.P.R. 260, refd to. [para. 91, footnote 3].

R. v. Palmer, [1980] 1 S.C.R. 759; 30 N.R. 181, refd to. [para. 102].

Sengmueller v. Sengmueller (1994), 69 O.A.C. 312; 17 O.R.(3d) 208 (C.A.), refd to. [para. 102].

Diplock's Estate, Re; Diplock v. Wintle, [1948] Ch. 465 (C.A.), refd to. [para. 110, footnote 4].

Mareva Compania Naviera SA v. International Bulkcarriers SA, [1980] 1 All E.R. 213 (C.A.), refd to. [para. 111, footnote 5].

Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch. 55; [1976] 1 All E.R. 779 (C.A.), refd to. [para. 111, footnote 5].

Counsel:

Bryan Finlay, Q.C., and Marie-Andrée Vermette, for the appellant, Flex-N-Gate Corp.;

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.

This appeal was heard on March 11, 2009, before Weiler, Cronk and Blair, JJ.A., of the Ontario Court of Appeal. Cronk, J.A., released the judgment of the court on August 21, 2009 and an Addendum and Costs Endorsement were issued by the court on December 11, 2009.