Court of Appeal for Ontario

Date: 20221214 Docket: C70355

Before: Benotto, Roberts and Harvison Young JJ.A.

Between:

Bluemoon Capital Ltd. Applicant (Appellant)

And

Ceridian HCM Holding Inc., Morneau Shepell Ltd. and Morneau Shepell Inc. Respondents (Respondents)

Counsel: Eli S. Lederman, Brian Kolenda, and David Salter, for the appellant Julie Rosenthal and Mark Leonard, for the respondent, Ceridian HCM Holding Inc. Laura Fric, Karin Sachar and David Williams, for the respondents, Morneau Shepell Ltd. and Morneau Shepell Inc.

Heard: November 24, 2022

On appeal from the judgment of Justice Laurence A. Pattillo of the Superior Court of Justice, dated January 19, 2022, with reasons reported at 2022 ONSC 301.

Reasons for Decision

[1] The appellant appeals the dismissal of its application for the equitable remedy of a Norwich order in aid of pre-action discovery of the respondents with respect to documents and information relating to various transactions, and the quashing of its rule 39.03 notice of examination on the President and CEO of Morneau Shepell Inc.

[2] The appellant is a shareholder of Ceridian HCM Holding Inc. (“Ceridian”). In its Norwich application, it sought information and documents with respect to the allegedly concerning circumstances surrounding Ceridian’s 2018 distribution to its shareholders of shares of its former subsidiary, LifeWorks Corporation Ltd., and the latter’s subsequent sale to Morneau Shepell. Its principal allegation is that Ceridian seriously and deliberately undervalued LifeWorks in its final prospectus issued in connection with Ceridian’s public Canadian offering, resulting in losses to its shareholders. The appellant acquired a small number of shares in Ceridian after Morneau Shepell had disclosed its purchase of LifeWorks at a price of more than three times the value disclosed by Ceridian in its prospectus. The appellant commenced a class action against the respondents while the application judge’s decision was under reserve.

[3] The application judge concluded that the appellant did not meet the test for a Norwich order because he was not satisfied in the circumstances of the case that such an order was necessary or in the interests of justice. He therefore dismissed the application. He also quashed the appellant’s notice of examination; he determined that it was moot given his dismissal of the application.

[4] The appellant submits that the application judge made the following reversible errors:

i. He applied the wrong standard in assessing the merits of the potential claims proposed by the appellant;

ii. He erred in finding that the appellant did not require pre-action discovery in order to commence a class action against the respondents or seek to commence a derivative claim on behalf of Ceridian;

iii. He relied on irrelevant considerations and an inadequate evidentiary foundation in determining that the Norwich application was not being brought for a legitimate purpose;

iv. He quashed, on unprincipled grounds, the notice of examination and thus denied the appellant its prima facie right to call the evidence of its choosing.

[5] We are not persuaded that the application judge made any reversible error. In essence, the appellant is asking this court to replace the application judge’s findings with its own. Absent reversible error, that is not our task.

[6] First, the application judge referenced and applied the correct legal principles under s. 96(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 and the relevant case law in determining whether to issue the exceptional remedy of a Norwich order. Among other cases, the application judge referenced this court’s articulation of the applicable factors in GEA Group AG v. Ventra Group Co. (2009), 2009 ONCA 619, 96 O.R. (3d) 481, at paras. 62, 91 and 1654776 Ontario Limited v. Stewart, 2013 ONCA 184, 114 O.R. (3d) 745, at paras. 47-59, leave to appeal refused, [2013] S.C.C.A. No. 225. The application judge determined that the appellant had failed to persuade him that it had a valid, bona fide or reasonable claim, that the requested pre-action discovery was necessary, and that the interests of justice favoured obtaining the disclosure.

[7] We disagree that the application judge applied a prima facie case standard to the merits of the appellant’s claims or made any final determination of the issues, including the issue of alleged damages. As required, the application judge weighed the nature and apparent strength of the appellant’s claims together with the other relevant factors noted in the above case law and, without definitively analyzing its merits, came to the view that the appellant faced difficulties in advancing its various claims and assessed its claims as weak. He did not consider the strength of the appellant’s claims in isolation of the other relevant factors he was required to assess. He made no error in his approach. His opinion that the claims were weak was open to him on the record.

[8] The application judge next determined that the appellant had “more than enough information to bring its alleged claims” and that the Norwich order was therefore not necessary. As he stated, “[t]his is not a case where the applicant does not know who the alleged wrongdoers are or if it has a cause of action.”

[9] The application judge also observed that the fact that the appellant had subsequent to its application issued a class action on behalf of all shareholders against the respondents was “further confirmation … that it has sufficient information to commence such a claim against the respondents without the pre-action discovery it seeks” and that “[t]o the extent it requires further information, it can obtain it from the discovery process in the action.”

[10] Similarly, with respect to the proposed derivative claim the appellant might seek to bring on behalf of Ceridian, the application judge concluded that the appellant had sufficient information to plead that various executive officers and directors of Ceridian, who were known to the appellant, in breach of their fiduciary duty, “knowingly” undervalued the shares that were the subject of the impugned transactions for alleged gain, the extent of which was also known to the appellant.

[11] The application judge was entitled to reach those conclusions based on the record before him. We see no basis to interfere with them.

[12] The application judge determined, based “on all the circumstances” that were before him on the record, that the appellant’s real objective in seeking the Norwich order was not legitimate because its purpose was to obtain financial and other information about the former son-in-law of the appellant’s principal shareholder who had been involved in family law proceedings with the shareholder’s daughter. While the family law proceedings had concluded on the cusp of the appellant’s application, the appellant failed to confirm whether any further proceedings were threatened.

[13] The purpose of a Norwich order is to facilitate access to justice by victims of suspected or unknown wrongdoers: 1654776, at para. 58; GEA, at paras. 49-53. As a result, and in order to ensure it is brought for a legitimate purpose, “[j]udicial treatment of the Norwich application procedure should reflect its nature as an equitable remedy”: 1654776, at para. 58.

[14] The application judge’s overarching assessment of whether it would be in the interests of justice to grant the extraordinary remedy of the requested Norwich order was properly informed by his consideration of the bona fides and the strength of the appellant’s action, as well as appellant’s need for the information.

[15] As a result of his findings, which were grounded in the record, the application judge determined that it would not be in the interests of justice to issue the requested order. We see no error in the application judge’s consideration of the evidence or his conclusions. The application judge’s determination not to grant the requested order involved the exercise of his discretion and is subject to appellate deference: Straka v. Humber River Regional Hospital (2000), 51 O.R. (3d) 1 (C.A.), at para. 53.

[16] Finally, we see no error in the application judge’s discretionary decision to quash as moot the appellant’s notice of examination. It flowed logically and reasonably from his dismissal of the application. There is no prejudice to the appellant. As already noted, the appellant has commenced a class action against the respondents and can exercise its examination and discovery rights in that proceeding, including during the certification process.

[17] Accordingly, the appeal is dismissed.

[18] As agreed, the respondents are entitled to their costs of the appeal from the appellant in the total amount of $75,000, inclusive of disbursements and applicable taxes. The respondents will determine the division of the costs between them.

“M.L. Benotto J.A.”

“L.B. Roberts J.A.”

“Harvison Young J.A.”