Court File and Parties

COURT FILE NO.: CV-17-11727-00CL DATE: 2022-03-15 SUPERIOR COURT OF JUSTICE – ONTARIO (Commercial List)

RE: SS&C TECHNOLOGIES CANADA CORP. Applicant

AND:

THE BANK OF NEW YORK MELLON CORPORATION and CIBC MELLON GLOBAL SECURITIES SERVICES COMPANY Respondents

BEFORE: Koehnen J.

COUNSEL: Chris Paliare, Ren Bucholz, Glynnis Haw, Catherine Fan for the Applicant Eli Mogil, Brandon Kain, Erin Chesney, J. Thomas Curry, Brian Kolenda, Christopher Yung for the Respondents

HEARD: March 9 and 10, 2022

Endorsement

Overview

[1] The applicant (“SS & C”) asks me to vary my reasons for judgment in this matter dated April 14, 2021, and indexed as 2021 ONSC 2657. That matter proceeded as an application. In my reasons, I found the respondents liable for breach of contract but directed that the assessment of damages proceed before me by way of a trial.

[2] SS & C asks that I change my reasons in two ways. First, it asks that I change the finding in paragraph 19 of my reasons about who the beneficiaries of the Mellon Trust agreement are. Second, SS & C asks that I replace my finding that the respondent CIBC Mellon Global Securities Corporation (“CIBC Mellon”) is liable for breach of contract with a finding that CIBC Mellon is liable for knowing receipt.

[3] For the reasons set out below, I decline to make the change SS & C requests to paragraph 19. I will vary my reasons to remove the finding that CIBC Mellon is liable for breach of contract and will add a statement to the effect that CIBC Mellon was not entitled to receive Market Data provided by SS & C. I decline, however, to make any finding to the effect that CIBC Mellon is liable for knowing receipt because that relief was not sought before me on the initial application.

A. The Test to Vary An Order

[4] The circumstances in which a judge may correct an order after reasons have been issued but before the order has been entered (as is the case here) was explored by the Divisional Court in Brown v. The Municipal Property Assessment Corp. [1]. In paragraph 20 of that decision, the Divisional Court stated:

I acknowledge that there is a fairly broad power, in a judge, to change an order after it has been announced but before it has been signed and entered. Any such change should only be made, however, if it is either technical (e.g. to correct an arithmetic error) or it is necessary to avoid a miscarriage of justice. Even then, if a change is to be made, it must be fully explained to ensure that the authority is not abused. The concern that arises from changes being made by a judge to an order, that has already been pronounced, has been expressed in other cases. For example, in Montague v. Bank of Nova Scotia (2004), Goudge J.A. said that, notwithstanding the very wide discretion a judge has to change his or her judgment before it is entered, that discretion had to be exercised cautiously and for very good reasons. He commented, at para. 40: (citations omitted)

Any change to a judgment once given, no matter how soundly based, runs the risk of evoking suspicions of abuse on the part of those adversely affected. It is at the least disquieting, and to that extent can put a cloud over the administration of justice. A judge exercising this discretion bears a significant onus to explain the change.

[5] Two principles emerge from this passage. First, the jurisdiction should be exercised cautiously because of the cloud that it could place on the administration of justice. Second, the jurisdiction is limited to technical errors or errors that are necessary to avoid a miscarriage of justice.

B. The Proposed Change To Paragraph 19

[6] The issue with respect to paragraph 19 arises out of a data sharing agreement that the predecessor of SS & C entered into with “Mellon Trust” as of September 1, 1999.

[7] I put quotation marks around Mellon Trust because it is not a legal entity, but a brand name under which the predecessor of the respondent The Bank of New York Mellon Corporation (“BNY”), Mellon Financial Corporation, operated its custodial businesses. Given that Mellon Trust was not a legal entity, one core issue underlying the application was to identify who could access the data that SS & C provided under the Mellon Trust agreement.

[8] SS & C submitted that the Mellon Trust agreement applied only to the signatory, that is to say Mellon Trust. To the extent that this interpretation made the agreement a nullity because Mellon Trust was not a legal entity, the agreement applied to Mellon Financial Corporation. The evidence before me, however, was that Mellon Financial Corporation was a holding company which itself would have no use for the data.

[9] SS & C received approximately USD $4,586,272 under the Mellon Trust agreement. To restrict the beneficiaries of the data under it to Mellon Trust or Mellon Financial Corporation would, in effect mean, that they received no benefit from the agreement because neither operated a custodial business. SS & C says that is a necessary consequence of having a non-legal entity enter into a contract.

[10] BNY on the other hand took the position that the data could be shared with all entities within the BNY Mellon group, even those that were created or acquired by way of merger after the contract was entered into. The record disclosed that that was up to approximately 674 different entities around the world.

[11] The evidence on the application indicated that there were two forms of data sharing agreements: line of business agreements and enterprise agreements. Line of business agreements allowed an entire line of business within a corporate family to share the data. Enterprise agreements allowed only the signatory of the contract to use the data.

[12] I analysed that issue in paragraphs 15 to 19 of my reasons. I concluded that the Mellon Trust agreement was an enterprise agreement that did not allow data sharing beyond the entity named in the agreement but then continued with the concluding sentence of paragraph 19 to the effect that:

In the case of the Mellon Trust agreement, that meant the custodial entities of Mellon Financial Corporation as they existed in 1999.

[13] SS & C asks that I change that sentence to read:

In the case of the Mellon Trust agreement, that meant none of the custodial entities of Mellon Financial Corporation as they existed in 1999.

[14] This is far more than a technical change. SS & C submits that the change is required to avoid a miscarriage of justice. I do not agree. The wording of the concluding sentence of paragraph 19 reflected an intentional decision which gave commercial meaning to the existence of the Mellon Trust agreement. Had I adopted the position of SS & C, the contract would have had no commercial purpose because it would mean that SS & C would have been paid USD $4,586,272 over 17 years without the counter party to the agreement receiving any benefit. That would result in a commercial absurdity which is not consistent with the principle of contractual interpretation which holds that:

“[A]n interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result.” [2]

[15] At the same time, the interpretation that BNY advanced would have let it expand the use of the data to an unknown and unlimited extent. That too struck me as commercially unreasonable.

[16] In my view, the way to give commercial meaning to the contract for both sides was to allow the data to be shared by those custodial entities of Mellon Financial Corporation that were in existence at the time the contract was entered into. [3]

[17] In paragraph 19 I also stated that the language of the agreement, the factual matrix and the conduct of the parties was consistent with my interpretation. It is fair to say that my analysis of those issues between paragraphs 20 and 64 focused on explaining why the agreement was an enterprise agreement and did not extend to a potentially unlimited number of entities rather than a line of business agreement. I did not expressly tie my analysis about contractual language, factual matrix and party conduct back to my conclusion in paragraph 19. I agree that it would have been preferable to have done so.

[18] Paragraphs 20 to 30 of the reasons address contractual language. SS & C focuses in particular on paragraph 29 which states:

There is no evidence to suggest that the respondents ever communicated to SS & C or its predecessor that it viewed the reference to Mellon Trust as including all present and future affiliates and subsidiaries in the Mellon/BNY family until after the breaches arose.

[19] SS & C interprets this as meaning that the agreement did not include any present or future entities. I can see how SS & C could read the sentence in that way without my having explained in more detail why I came to the conclusion that I did in paragraph 19. It would have been preferable for me to have included such an explanation and/or to have italicized the “and” to make the paragraph read:

There is no evidence to suggest that the respondents ever communicated to SS & C or its predecessor that it viewed the reference to Mellon Trust as including all present and future affiliates and subsidiaries in the Mellon/BNY family until after the breaches arose.

[20] Paragraphs 31 to 41 of my reasons address the factual matrix. That analysis also focuses on why the agreement was an enterprise agreement as opposed to a line of business agreement.

[21] Paragraphs 42 to 64 address the conduct of the parties. Although I do not expressly tie the analysis in those paragraphs back to my conclusion in paragraph 19, there are a number of factors in those paragraphs that support analysis to the effect that the parties intended for the data to be used by corporate entities rather than by a brand name. By way of example those paragraphs referred to letters in which BNY expresses an understanding that the data sharing agreement was between Mellon Financial Corporation rather than with Mellon Trust; correspondence that indicated an understanding that BNY assumed all rights and obligations under the agreement; and a letter dated May 11, 2007, advising SS & C of an impending merger between Mellon Financial Corporation and BNY stating:

At [the] present time we do not know of any expansion in the use of the data that would be needed. If it becomes apparent that the scope of data use will change we will notify you.

[22] That letter implicitly recognized the need to advise SS & C of any expanded use of the data. The question then again becomes use expanded beyond what? My assessment of the “beyond what” was addressed in paragraph 19.

[23] SS & C relies in particular on paragraph 64 of my reasons which states:

Here, the object of the contracts was to sell data to the respondents. A contractual interpretation that allows parties to share the data broadly in the face of contractual language that restricts use of the data would defeat the objective underlying a data sale contract. The underlying concept behind the contract and its language was to make data available to the purchaser on a limited basis. The logical limitation is that it be restricted to the parties signing the contract, unless the contract provides otherwise. The language of the contract is consistent with that constraint. Interpreting the contract to limit use of the data to the contracting party promotes a sensible commercial result. Doing otherwise would have the vendor cannibalize its business by selling data to an unknown group of current and future entities. The language of the agreement, the factual matrix and the conduct parties support this view.

[24] I agree on rereading the reasons that paragraph 64 should have been tied back to my conclusion in paragraph 19 and reconciled with that conclusion. Like the other analysis in my reasons, its focus is one whether the Mellon Trust agreement is an enterprise or business line agreement, not on what the effect is of an agreement with a legal nullity. The concern I expressed in paragraph 64 is that of selling to an unknown group of current and future entities. The management of that concern is as articulated in paragraph 19.

[25] Finally, SS & C submits that paragraph 19 inadvertently expands the scope of liability articulated in paragraph 7 which states:

I have concluded that the respondents did breach their agreements. The language of the agreements, the factual matrix and the conduct of the parties are all consistent with an understanding that the data was to be used by the entity named in the contract. In the case of “Mellon Trust”, that was Mellon Financial Corporation.

[26] Paragraph 7, however is found in the Overview section of the reasons. It is meant to be a high level summary of what follows. Paragraph 19 develops further what was summarized in paragraph 7.

[27] I do not agree that the refusal to change paragraph 19 will result in a miscarriage of justice. It was my express intention in drafting the reasons to interpret Mellon Trust in the agreement as meaning the custodial entities of Mellon Financial Corporation as they existed at the time the agreement was signed.

[28] I am also mindful of the risk that these reasons may give rise to the concern expressed in Brown and Montague in that they run “the risk of evoking suspicions of abuse” by those adversely affected by them. The parties had approached me in earlier case conferences to seek directions about the timing of the damages trial in light of the fact that the respondents were appealing the liability decision. I asked the parties not to advise me of any grounds of appeal so as to avoid even the perception that I might use my findings in the damages trial to shore up anything that a party viewed as an error in my reasons on liability. The parties have now advised me of at least some of the grounds of appeal by the respondents and now, potentially other grounds of appeal by the applicants, thereby giving rise to the risk that I had hoped to avoid. I do not say that critically of either party. Both parties are quite properly and professionally advancing the best interests of their clients. I did not feel, however, that I could do justice to the applicant’s request without providing reasons. I will leave it to others to determine what use or weight, if any, should be given to them on any appeal.

C. Breach of Agreements

[29] The second change SS & C requests arises out of my finding that CIBC Mellon breached its agreement with SS & C. That issue arises out of paragraphs 2 and 7 of my reasons which read in part as follows:

[2] …The applicant submits that the respondent CIBC Mellon Global Securities Services Company (“CIBC Mellon”) breached its agreement by terminating the agreement and then obtaining for free from BNY, the data it formerly obtained from the applicant for a fee.

[7] I have concluded that the respondents did breach their agreements.

[30] Both parties agree that those passages are erroneous in that SS & C never claimed breach of contract against CIBC Mellon. I therefore amend my reasons to remove from paragraph 2 the sentence quoted above and revise the first sentence of paragraph 7 to read:

I have concluded that the respondent BNY did breach its agreement with SS & C.

[31] SS & C also asks that I substitute the references to breach of contract against CIBC Mellon with a finding the CIBC Mellon is liable for knowing receipt. I decline to do so.

[32] Very little, if any, time was spent during oral argument on the legal theory of liability. Almost all of the time was spent on the factual underpinning of the liability and damages claims. Although the Notice of Application referred to the concept of knowing receipt, it was not mentioned in the applicant’s factum on the hearing nor do my notes of the hearing indicate that it was raised at any time in oral argument.

[33] The relief requested in paragraph 81 of SS & C’s factum specifically asks for an order to the effect that BNY breached the Mellon Trust agreement and seeks damages of $881,752,087 from BNY for that breach. The only relief the factum seeks against CIBC Mellon is found in paragraph 81 (b) which asks for an order:

that CIBC Mellon Global was not entitled to receive the Market Data provided by SS & C under the Mellon Trust Agreement;

[34] I grant that order.

[35] Some may see a contradiction between granting the order that CIBC Mellon was not entitled to receive the data even though I have found that the Mellon Trust agreement applied to all custodial entities of Mellon Financial Corporation at the time the Mellon Trust agreement was signed. In my view, this is not a contradiction but an effort to operationalize the legal proposition that contracts are to be interpreted in a way that gives force to the intentions of the parties rather than in a way that defeats the intentions of the parties.

[36] The CIBC Mellon agreement was entered into on April 1, 1999. CIBC Mellon continued to make payments under that agreement until it was cancelled on January 26, 2011. The Mellon Trust agreement was entered into on September 1, 1999. In the absence of contrary evidence, the court should presume that the parties intended to enter into the agreements they did and intended those agreements to have force and effect. Here the parties intended to enter two agreements for the provision of data. Those intentions should be given effect. The CIBC Mellon agreement should not be abrogated simply because Mellon Financial Corporation entered into an agreement with SS & C five months later. Although the parties differed on this, at least some of the evidence suggests that the data supplied under the two agreements was different. [4] The fact that the Mellon Trust agreement granted access to different data than did the CIBC Mellon agreement, gives force to the proposition that the parties intended to have two different agreements governing different entities for different services.

[37] In my view, it would not be appropriate to replace the breach of contract finding against CIBC Mellon with a finding of knowing receipt because SS & C never requested such a finding. I am granting SS & C the precise relief against CIBC Mellon that it sought in its factum and in oral argument before me.

[38] SS & C is represented by sophisticated counsel. They presumably had good reason for not seeking a finding of knowing receipt against CIBC Mellon. There was no suggestion before me that this was an inadvertent omission.

[39] To add a finding of knowing receipt would go further than correcting a technical error and would not avoid a miscarriage of justice but risk creating one. By doing so I would be finding liability on a basis that was not requested and in respect of which the respondents have not had an opportunity to defend. On the case conference before me, the respondents submitted that SS & C had not made out the elements required for knowing receipt. The applicant submitted that it had made out the elements of knowing receipt.

[40] What is significant for me is that the issue was not raised when the application was argued before me. Nor do I think it would be appropriate to address that issue during the damages trial. To do so would, in effect, breach the principle of cause of action estoppel. This was to be a single application that determined damages and liability at the same time. The parties were expected to bring forward all claims they wanted to advance. There was no claim for knowing receipt. It would be unfair to allow SS & C to bootstrap itself into a damages award against CIBC Mellon based on an indication in my reasons that I did not view the conduct of CIBC Mellon favourably. The time to raise a cause of action is generally before the hearing, not after. Moreover, when I referred the question of damages to a trial, I also ordered that the damages trial proceed on the same record as the liability trial unless both parties agreed otherwise. The respondents wanted to broaden the record. The applicants did not. Having already declined to broaden the record because of the applicants’ refusal to consent, it would not be appropriate to broaden the record now at the applicant’s request without the respondents’ consent.

D. The Scope of Evidence at the Damages Trial

[41] SS & C asks that it be permitted to pursue evidence (already in the record) during the damages trial that would include evidence of damages on account of data sharing with all custodial entities of Mellon Financial Corporation at the time the agreement was signed despite my finding that those entities were entitled to receive the data. I grant that relief. Having findings on those issues will prevent, or at least reduce, the need to remit issues back for consideration in the event of a successful appeal.

[42] Moreover, as noted, this was initially intended to be a single proceeding in which liability and damages were determined at the same time. In that context, SS & C would have been permitted to lead evidence about damages arising from the sharing of data with any entity it wanted. That should not be any different simply because I determined limited liability on the application and referred damages to a trial, especially not since any appeals on this matter will proceed as a single appeal on both liability and damages.

Disposition

[43] For the reasons set out above,

(i) I decline to make the change to paragraph 19 of my reasons that the applicant requests but change the last sentence of paragraph 19 to read:

In my view, each of those three elements demonstrates that the agreements were intended to benefit only the entity named in it and did not allow data sharing beyond the entity named in the agreement. In the case of the Mellon Trust agreement, that meant the custodial entities of Mellon Financial Corporation as they existed in 1999 with the exception of CIBC Mellon and CIBC Mellon Trust Company.

(ii) I remove the following sentence from paragraph 2 of my reasons:

The applicant submits that the respondent CIBC Mellon Global Securities Services Company (“CIBC Mellon”) breached its agreement by terminating the agreement and then obtaining for free from BNY, the data it formerly obtained from the applicant for a fee.

(iii) I remove the first sentence of paragraph 7 of my reasons and replace it with the following:

I have concluded that the respondent The Bank of New York Mellon Corporation did breach its agreement with SS & C.

(iv) I decline to find CIBC Mellon liable for knowing receipt but add the following sentence to the end of paragraph 7 of my reasons:

I also conclude that CIBC Mellon Global was not entitled to receive Market Data provided by SS&C under the Mellon Trust Agreement.

(v) I order that during the damages trial, the applicant will be entitled to introduce evidence of damages caused by receipt of data by the custodial entities of Mellon Financial Corporation as they existed when the Mellon Trust data services agreement was entered into, even though I have found that those entities were entitled to receive the data.

(vi) I order that the evidence referred to in sub-paragraph (v) above be specifically identified at trial.

(vii) Costs are payable in the cause.

Koehnen J. Date: 2022-03-15

Footnotes

[1] Brown v. The Municipal Property Assessment Corp., 2014 ONSC 7137

[2] Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co. at 901; see also Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, at para. 61.

[3] I appreciate that SS & C may see this as contradicting my statement in para. 34 of my reasons to the effect that “It might be asking too much of an SVC salesperson in Mississauga in 1999 to be aware of the contents of 1993 annual reports or press articles in the United States describing the corporate structure of a potential customer.” That statement, however, was made in relation to the specific submission that SS & C should, in 1999 have known of statements made in a 1993 Annual Report of Mellon Financial Corporation. It did not address how to give meaning to the Mellon Trust agreement.

[4] McGavock Reply Report, dated June 22, 2020, paras 66-72, SS&C Brief, Vol 4, Tab 8; Belanger Cross, Q136-140, BNYM Brief, Vol 5, Tab 20. Although the respondents asserted in their factum at footnote 12 that the data was different under the two agreements, that was not apparent to me from a review of the evidentiary sources cited in that footnote, as a result of which I prefer the evidence of SS & C in this regard.