WorldCare International, Inc. v. Health Care Services International Inc., 2018 ONSC 713

CITATION: WorldCare International, Inc. v. Health Care Services International Inc., 2018 ONSC 713

SUPERIOR COURT FILE NO.: CV-18-590047

DATE: 20180129

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

B E T W E E N:

WorldCare International, Inc.

Applicant / Respondent

– and –

Health Care Services International Inc.

Respondent / Moving Party

BEFORE: F.L. Myers J.

COUNSEL: Brendan van Niejenhuis and Carlo Di Carlo, lawyers for the Moving Party

Albert G. Formosa and Macdonald Allen, lawyers for the Respondent

HEARD: January 29, 2018

endorsement

[1] Health Care Services International Inc. (“Novus”) moves for an urgent stay pending appeal of the interim injunction order made by Monahan J. on January 25, 2018. The order requires Novus to shut down its call-centre business line and to transfer the business to WorldCare pending the return of an interlocutory hearing of the motion in a month.

[2] Novus seeks leave to appeal the interim injunction to this court. It seeks a stay pending an expedited hearing of its leave to appeal application.

[3] For the reasons that follow, I grant the stay pending appeal on an interim basis until a panel of this court renders its decision on the leave to appeal application. If, in its notice of application for leave to appeal, Novus seeks a further stay to the hearing of the appeal, that can be addressed at the same time that the panel disposes of the leave application. Moreover, with the authority of the Team Leader Thorburn J., I expedite the leave to appeal application and impose the schedule set out below.

Brief Background

[4] Manulife is a well-known insurer in Canada. WorldCare is the assignee of a contract with Manulife under which WorldCare agrees to provide call-centre services to Manulife and its customers.

[5] Novus has a contract with WorldCare (or of which WorldCare is assignee) under which Novus has, since around 2009, provided the actual call-centre services in relation to the insured health care needs of certain of Manulife’s customers.

[6] Under the terms of the head contract and the subcontract, Manulife “owns” the customers’ confidential health information and the telephone numbers used by Novus for the call-centre. Moreover, article 12 of the head contract, which is incorporated into the sub-contract with Novus, prohibits Novus from collecting confidential information about the customers without the consent of Manulife.

[7] In November, 2017, Manulife advised WorldCare that Manulife proposed to slash the price it pays to WorldCare to less than 25% of what Manulife previously paid to it. WorldCare turned around and told Novus that WorldCare would be slashing the price that it pays to Novus by a like amount.

[8] Novus refused to accept WorldCare’s right to reduce its price under the subcontract between them. WorldCare says that by refusing to accept the price decrease, Novus thereby terminated the subcontract. As a result, under the termination and confidentiality provisions of the subcontract, Novus must immediately stop operating as Manulife’s call-centre, stop receiving customer confidential health information, and Novus must transfer its business as WorldCare directs.

[9] WorldCare relies on the term of the subcontract that says:

[WorldCare] acknowledges that [Novus’s] consent is required in advance of any material changes being agreed to with Manulife. Otherwise, [Novus] shall have the right to terminate this Agreement as of the date on which changes…take effect without [Novus’s] consent.

[10] The wording of this clause provides Novus with a consent right before WorldCare is entitled to agree to changes with Manulife that affect Novus’s business. Moreover, the clause gives Novus a right to terminate the agreement if WorldCare makes a change with Manulife that affects Novus without Novus’s consent.

[11] Novus denies that it terminated the subcontract or that WorldCare has any right to terminate the agreement and enforce the confidentiality provisions against it at this time. It says that a demand that it decrease its price is a repudiation or an anticipatory repudiation by WorldCare. Novus says that, to this point, it has simply declined to accept the repudiation and thereby kept the contract alive.

[12] WorldCare says that the consent term is binary – that Novus must accept the change or terminate the subcontract. WorldCare denies that Novus has a right to refuse consent without terminating the agreement.

[13] The actual motivating business issues among the parties are all about price. Both sides have tried to cloak their positions in Manulife’s customers’ privacy interests in their health information. There is no evidence of any actual risk to any customer’s information. There is no suggestion that Novus will not continue handling the information properly under its subcontract (if it is still on foot as it claims) or that, if the business goes to WorldCare or its designee, that they will not continue to protect and handle properly the customers’ sensitive information. The dispute has not been brought about by any change in the way Novus properly handled sensitive information for the past decade or so. Nor is there an air of reality to Novus’s overwrought concerns that unless controlled by Novus, customers’ information might get into the hands of a US business and be subject to intrusive US government surveillance through it Homeland Security laws or similar concerns.

[14] There is an arbitration clause in the subcontract that has been invoked by the parties. The propriety of the alleged termination will be dealt with by the arbitrators in due course.

[15] Last week, WorldCare applied to the Superior Court for urgent interlocutory relief pending the appointment of the arbitrators.

[16] On January 25, 2018, the judge heard the parties on an interim basis. He ordered that pending the return of the interlocutory application on February 22, 2018, Novus must cease breaching the confidentiality clause as incorporated into its subcontract by receiving customer information without Manulife’s consent; to immediately transfer registration of the call-centre telephone lines to WorldCare; to cease operating as a call-centre for Manulife customers; and to transfer its patient information to WorldCare.

[17] It should be noted that while Manulife is not a party and has not filed any evidence, WorldCare has provided two letters in which Manulife is said to withdraw Novus’s authority to collect its customers’ information.

This Motion

[18] The parties agree that the test for a stay pending appeal is the regular three-part injunction test under RJR MacDonald Inc. v Canada (Attorney General), 1994 117 (SCC), [1994] 1 SCR 311. However, the issue is not the merits per se, but whether Novus is entitled to a stay pending leave to appeal.

There are Serious Issues for Leave to Appeal

[19] In Norris v Norris, 2017 ONSC 3515, Beaudoin J. summarized the tests applicable on an application for leave to appeal to the Divisional Court from an interlocutory order of a judge:

[16] The test for granting Leave to Appeal under rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.

[17] Under rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court), and that it is, in the opinion of the judge hearing the motion, “desirable that Leave to Appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 7405 (ON SC), 7 O.R. (3d) 542 (Div. Ct.).

[18] Under rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that Leave to Appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co., 2003 40868 (ON SC), [2003] O.J. No. 3442 (S.C.J.); Ash v. Lloyd’s Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282 (Gen. Div.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: Rankin v. McLeod, Young, Weir Ltd. (1986), 1986 2749 (ON SC), 57 O.R. (2d) 569 (H.C.J.); Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SC), 65 O.R. (2d) 110 (H.C.J.)(Div. Ct.).

[20] It is not my task on this motion to determine if leave to appeal ought to be granted. Rather, under RJR, the test is simply whether there is a serious, or arguable, reasonable issue on either branch of the leave to appeal tests.

[21] In my respectful view, there are serious issues as to whether there are conflicting decisions and reason to doubt the correctness of the decision.

[22] There may be conflicting decisions on whether the arbitration is governed by the provincial or federal arbitration statutes. In this case, the judge held that although WorldCare is a US corporation, the parties were entitled to elect to utilize the Ontario arbitration law. In Epicor Software Corp. v. RB Packing & Seals Inc., 2017 ONSC 5959, the opposite outcome was reached. It is not clear that this issue is at the core of the case if the court has authority to grant interim relief pending arbitration under both statutes. However, the tests for court interjection may not be the same.

[23] There also may be conflicting decisions on the question of proof of irreparable harm. The judge relied upon the decision of Newbould J. in International Steel Services Inc. v. Dynatec Madagascar S.A., 2016 ONSC 2810, to reject the proposition that irreparable harm need be proven by evidence that is clear and not speculative. Instead (see page 22, line 24 of the decision below), he relied upon Dynatec for the proposition that only a significant risk of irreparable harm need be shown. I do not see those two standards as alternatives. While irreparable harm need not be absolutely proven and a real risk of such harm will suffice, the nature and proof of the harm must also be real and not speculative. Here there is no doubt that there is money in issue between the parties. The question of whether anyone will suffer risk to their information or reputations as among these three parties who know each other well is more speculative and hypothetical in my view. If Newbould J. meant to reduce the need for clarity of the type of harm that suffices as a part of the interlocutory injunction calculus, that would mark a significant shift in the law in my view.

[24] There are other issues raised in Novus’s factum that bear on the correctness of the decision concerning, among others, the test for urgency, the role of the status quo in the balance of convenience analysis, the analysis of anticipatory breach, and the test applicable for mandatory injunctions. The issues are reasonably raised on leave to appeal and, if accepted, are reasonably capable of being found to be of sufficient importance to support a leave decision.

Irreparable Harm

[25] The effect of the order is to shut down a piece of Novus’s business and to put the business out of its reach by a mandatory transfer to WorldCare. Damages for loss of a business or a line of business is both clear and irreparable. It is possible that the value of a lost business line will be susceptible of proof in damages despite consequential loss of employment and goodwill. If the matter proceeds to an interlocutory hearing, evidence can be developed and this may well be argued. Until then, there is no speculation that if the matter proceeds as ordered, Novus will be out of the business altogether.

Balance of Convenience

[26] WorldCare argues that if Novus continues to collect customers’ confidential information, it will be violating s. 6 of the Personal Information Protection and Electronic Documents Act, SC 2000, c.5. It says this is irreparable harm and creates an urgent need to shut Novus down. WorldCare says that since Manulife no longer consents to Novus collecting customers’ information, the customers no longer consent to Novus collecting their information under the statute. There is no longer a proper, authorized purpose as required by s. 6. In my view this argument carries little weight at this stage. There is no evidence of any customer having any real involvement or basis for concern. While lawyers can postulate about consumer rights under PIPEDA, in fact, there is no authority for either side’s claims of breaches of the statute by the other. The customers are deemed to consent to the commercial processes by virtue of Manulife’s documentation with them. The issue of ongoing legal authority is amorphous legal argument with no practical effect or application. The whole issue at play is whether WorldCare and Manulife have the ability contractually to force a price decrease on Novus and, if not, what the legal liabilities and outcome may be. Presuming that Manulife or WorldCare has lawfully withdrawn Novus’s authority at this stage to thereby cause a breach of PIPEDA may just be prejudging the outcome of the arbitration.

[27] WorldCare claims that it is also at risk because Novus is now collecting confidential information in a manner that is unbridled from the terms of the subcontract and is unsupervised. Again this argument misses the legal analysis being put forward by Novus in my view. It does not assert an independent right to proceed unsupervised. Rather, it says that WorldCare has no right to terminate its subcontract because the right to terminate belongs only to Novus in the circumstances. If this argument succeeds, Novus is, was, and remains subject to the terms of its subcontract. WorldCare argues that the agreement is over, but this does not free Novus to use or misuse information free from the contractual structures it must agree remain in place. If Novus is held to be correct, that Manulife and WorldCare have no right to remove its authorization due to its refusal to accept a price decrease, then the agreement will continue. If it is held to have been wrong, then it will be shut down. There is no rogue operation in the interim. There is a bona fide contractual dispute about pricing.

[28] I understand that Manulife has the authority to terminate its contract with WorldCare if Manulife deems its reputation at risk. WorldCare seems to be suggesting in its material that Manulife has grounds to proceed on this basis against it right now due to Novus’s assertions under PIPEDA (the merits of which I discount above). In argument, counsel for WorldCare properly declined to concede that Manulife has a present entitlement to terminate WorldCare’s head contract. Given that Manulife is supporting WorldCare and that both are trying to pressure Novus into dropping its price or, alternatively, to terminate Novus’s rights, on this argument too, I view the issue of reputational risk as being a hypothetical legal construct with little practical reality on the ground.

[29] Manulife had and has the ability to file evidence if it proposes to invoke its rights against WorldCare. If it does so, it will be subject to separate proceedings and disclosure and examination on its involvement and efforts to date no doubt.

[30] Finally, I note that my discussion of irreparable harm and balance of convenience are for the purposes of the tripartite test that is before me. As noted previously, I am not dealing with the leave to appeal application or an appeal. Here, I am dealing afresh with the facts and evidence presented to me today on the issues that are before me as I see them.

[31] I have no idea what the arbitrators will decide months hence. But I am asked to preserve the status quo for four days to allow Novus to seek leave to appeal in circumstances where there seems to be some reasonable basis to seek leave. Absent a stay, Novus will be compelled to transfer its business and its ability to unscramble the egg on a successful leave to appeal application, a successful appeal, or a successful interlocutory hearing of the application on February 22, 2018, will be seriously impaired if not finally determined regardless of the legal outcome.

[32] In my view therefore, the balance of convenience supports maintaining the status quo by granting a brief stay.

Outcome

[33] Justice Monahan granted a stay of his own order until 10:00 a.m. this morning. At the outset of the hearing today at 10:25 a.m., I granted a stay nunc pro tunc from 10:00 a.m. until these reasons are released. Now, I extend the stay until release of the decision of the Divisional Court on Novus’s application for leave to appeal. Novus is to perfect its application by 10:00 a.m. on Wednesday, January 31, 2018. WorldCare is to deliver and file its responding materials by 4:00 p.m., Thursday, February 1, 2018. The application will be read by a panel on Friday, February 2, 2018.

[34] Costs reserved to the panel reading the application for leave to appeal.

F.L. Myers J.

Date: January 29, 2018