COURT FILE NO.: CV-12-461053

DATE: 20130712

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: International Oil and Gas Technology Limited (formerly known as Quorum Oil and Gas Technology Fund Limited), (Applicant) and Cassels Brock and Blackwell LLP, (Respondent)

BEFORE: Allen J.

COUNSEL:
J Anthony Caldwell, for the Moving Party, Proposed Intervenor

John Ormston, for the Applicant/Responding Party

Alfred Esterbauer, for the Respondent

HEARD: July 5, 2013

ENDORSEMENT

BACKGROUND

[1] This is a motion brought by Quorum Fund Corporation (“QFC”) under Rule 13.01 of the Rules of Civil Procedure to intervene in an upcoming motion and cross-motion being brought by International Oil and Gas Technology Limited (“IOGT”) and Cassels Brock & Blackwell (“Cassels”).

[2] This motion has its background in litigation in the U.K. The U.K. litigation arises out of a dispute in relation to the termination of an investment management agreement (“the IMA”) involving an investment manager, Quorum Oil and Gas Technology (“QOGT”), the plaintiff in the U.K. action, and IOGT, the defendant in the U.K. action.

INVOLVED COMPANIES

[3] For clarity, I list and briefly describe the various parties and companies involved in the dispute underlying this motion:

• QFC is a corporation set up to manage oil and gas technology private equity funds.

• IOGT is a company established by QFC in November 2007 to be an investment vehicle for companies that provide services and technology to the oil and gas industry.

• QOGT is an Ontario corporation and a subsidiary of QFC.

• QOGT and another firm, previously called Quorum European Partners[^1], an English limited liability partnership (which for simplicity I will refer to as QEP) were jointly retained by IOGT as investment managers in relation to the IMA.

• Cassels, Brock & Blackwell (“Cassels”) was retained as counsel.

THE APPLICATION

[4] On July 1, 2010, IOGT terminated the IMA and entered into a new agreement with QEP as the sole investment manager. QOGT brought an action against IOGT in the U.K. for damages for wrongfully terminating the IMA. In August 2012, IOGT, on the view that Cassels was their lawyer, filed an application (“the Application”) for an order to compel Cassels to produce all documents, communications and other materials in its files pertaining to its retainer on the IMA. QFC did not agree to such an order claiming privilege over the documents as arising from the lawyer/client relationship between Cassels and QFC and its subsidiaries.

[5] Cassels received the Application materials and searched their records to determine which files contained documentation pertaining to legal services given solely for the benefit of IOGT in relation to the IMA. Cassels found two files, file number 38822-4 and file number 38822-1.

[6] File number 38822-4 contains documents pertaining to work started in relation to the offering memorandum and private share placement for IOGT, which was performed before IOGT was launched, on instructions from QFC or one of its subsidiaries. The last entry for work done on file number 38822-4 was March 9, 2009.

[7] File number 38822-1 contains documentation related to investments by IOGT in an Alberta company called Wellpoint Systems Inc. The docket entries for this work ended March 18, 2010. The last invoice is dated June 3, 2010 and includes work ending March 31, 2010. IOGT in part relied on an Acknowledgement, Consent and Waiver form (“the ACW Form”) prepared by Cassels to establish Cassels was IOGT’s counsel. However, the ACW Form was only in draft and was never signed. It is QFC’s position therefore that from March 2010 Cassels acted solely for QFC.

[8] The Application to compel production came before me on October 10, 2012. At the proceeding, IOGT and Cassels consented to an Order dated October 10, 2012 (“the Order”) that Cassels would produce all documents, communications and information in respect of IOGT, QOTC and QFC for the period November 1, 2007 to July 1, 2010. IOGT was represented on the Application by Frank Lamie and Clifton Prophet of Gowlings and Helder Travassos and Matthew Urback of Shibley Righton appeared for Cassels.

[9] Following the issuing of the Order the scope of the Order became a source of dispute. IOGT seeks production of files that QFC claims sole ownership of and over which they claims privilege. QFC asserts the production IOGT seeks exceeds the scope of the Order.

FURTHER FILES DISCOVERED

[10] On October 15, 2010 a lawyer with Cassels, Emily Larose, undertook a search of Cassel’s files looking for the ACW and found it did not exist in the 38822-4 and 38822-1 files. A broader search turned up a further file, file number 22963-16, entitled “2010 Shareholder Matters” (“the March 2010 file”). Ms. Larose found in the documents various references to IOGT.

[11] Ms. Larose found two types of documents in file number 22963-16 and it is QFC’s position they are categorized as follows:

(a) documents that do not involve IOGT in any way; and

(b) documents that appear to have been created after March 18, 2010 by, for or on behalf of QFC and/or its subsidiaries and are not part of the joint retainer between QFC and IOGT, consisting of communications between representatives of QFC and/or its subsidiaries and their lawyers.

ISSUE ON THIS MOTION

[12] At the heart of the dispute is IOGT’s position that the scope of the Order includes the documents in 11b), above, and QFC’s refusal to consent to production of those documents on the basis they belong solely to QFC as not being under the joint retainer and as such are outside the scope of the Order. IOGT has brought a motion to enforce the Order which has not yet been heard. IOGT will bring a cross-motion to vary or set aside the Order. QFC wishes to intervene and be a party on those motions.

[13] Rule 13.01permits the court to add a person as a party to a proceeding. The Rule states:

13.01(1) A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,

(a) an interest in the subject matter of the proceeding; or

(b) that the person may be adversely affected by a judgment in the proceeding; or

(c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding.

ANALYSIS

Mr. Travassos’ Affidavit

[14] Rule 39.01 provides general guidance for the contents of affidavits:

39.01

(4) An affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit.

(5) An affidavit for use on an application may contain statements of the deponent’s information and belief with respect to facts that are not contentious, if the source of the information and the fact of the belief are specified in the affidavit.

[15] QFC relies on an affidavit by Mr. Travassos to establish the basis for its claim to intervene in the motions. The evidence Mr. Travassos swears to in his affidavit is based on his own personal knowledge from his involvement as a partner with Shibley Righton, the law firm that previously represented Cassels. He states where he does not have personal knowledge he forms his belief based on information from lawyers from Cassels.

[16] Mr. Travassos attests to his personal involvement with Cassels lawyers. Mr. Tavassos speaks of their investigation of Cassel’s files to determine if any files were subject to a joint retainer with QFC and IOGT and to identify any files that were under a retainer solely with QFC or its subsidiaries. Mr. Travassos states that file numbers 38822-4 and 38822-1 were discovered through that investigation.

[17] As noted earlier, Ms. Larose discovered file number 22963-16 through an investigation in October 2012. Mr. Travassos attests to being informed by Ms. Larose of her discovery of file 22963-16 while she was looking for the ACW Form. He states his belief about the contents of file number 22963-16 and that a portion of the file was delivered to IOGT. He attests to his belief that the balance of the file contains what is identified in paragraph 11 a) and b), above.

[18] I find Mr. Travassos’s affidavit complies with the requirements of Rule 39.01(4). Rule 39.01(4) pertains to motions and does not restrict evidence on information and belief to only non-contentious facts such as is the case with applications under Rule 39.01(5). In any event, I see no contentious facts on this motion. Although QFC’s position on the production of the March 2010 file differs with IOGT’s, there is no contention as to what QFC’s position is.

[19] Important to QFC’s interest in intervening on the motions is the fact Mr. Travassos identified Ms. Larose as the source of the information on the portions of Cassels’ file number 22963-16 that QFC claims were created under their sole retainer with Cassels and ought not be produced to IOGT. I find Mr. Travassos properly distinguishes the information that came from

his own personal knowledge from that which he derived from information and belief. He provides the names of the sources of the information that form the basis of his belief about critical facts.

[20] I am required to give more weight to information that derives from an affiant’s direct knowledge than to that which is acquired through information and belief. This applies to the information from Ms. Larose. However, there was nothing presented on this motion that would lead me not to accept Mr. Travassos’ sworn evidence about what he learned from Ms. Larose.

Application of Rule 13.01

[21] QFC made submissions on the court’s jurisdiction under Rule 13.01 to permit a party to be added on a motion. I accept their position as supported by Finlayson v. GMAC Leasco Ltd., 2007 4317 (ON SC), 84 O.R. (3d) 680; 40 C.P.C. (6th) 332 (Ont. S.C.J.). In that case, the court found that “proceeding” is defined under the Rules as an “action” or “application”. Finlayson concludes that where the Rules are silent on a matter, the court can exercise its inherent jurisdiction to control its own process and has the authority under Rule 1.04 (2) to apply a Rule to a matter by analogy.

[22] It is appropriate therefore for the court to allow QFC to be added as a party to the motions particularly in view of their integral involvement in the dispute.

[23] I find it is clear from the evidence that QFC has an interest in the subject matter of the proceeding − the documents in Cassels’ files of which they claims sole ownership. The determination of the issue could have an adverse effect on QFC’s interests if the outcome is unfavourable and they are required to produce documents they believe are privileged.

[24] I must also consider under Rule 13.01(2) whether allowing QFC to intervene will unduly delay or prejudice the determination of the rights of the parties to the proceeding. I have been presented with no evidence of any undue delay or prejudice that would result to the parties’ rights if I allow QFC to intervene.

ORDER TO VARY THE SEALING ORDER

[25] Due to privilege issues pertaining to documents in the record, the record has been subject to a Sealing Order restricting access to only IOGT and Cassels and their lawyers. IOGT has consented to a variation of the Sealing Order exempting QFC and their lawyers. The Sealing Order shall be amended accordingly.

CONCLUSION

[26] For all the reasons cited, I allow the motion.

COSTS

[27] Pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, C. 43, Rule 57.01 of the Rules of Civil Procedure grants the court the discretion to determine which party will be required to pay costs and the extent to which costs are required to be paid. QFC was fully successful on the motion. In accordance with the principle that costs should follow the cause, I award costs to QFC. The question of the quantum of costs is then left to be decided.

[28] The factors set out under Rule 57.01 of the Rules of Civil Procedure assist the court to determine quantum, those factors include: the complexity of the proceeding; the importance of the issues; the conduct of any party that tended to unnecessarily lengthen or shorten the proceeding; whether any step in the process was improper or vexatious; and the experience of the lawyers.

[29] The Court of Appeal set down the principle that the objective of a determination on costs is to fix an amount the unsuccessful party is required to pay that is fair and reasonable rather than an amount reflecting the actual costs of the successful party: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.). Fixing costs does not require the court to undertake a line-by-line analysis of a bill of costs. A balance must be made between the successful party recovering a fair and reasonable amount for services rendered and disbursements incurred and the reasonable expectations of the unsuccessful party.

[30] QFC seeks total partial indemnity costs of $5,836.80 inclusive of disbursements and associated taxes. IOGT’s total partial indemnity costs are $4,966 inclusive of disbursements and associated taxes.

[31] The issue on this motion was not particularly difficult although the factual background to the motion is somewhat challenging. The motion and the steps leading up to the motion ran smoothly with no party causing any unnecessary delays. The counsel are senior lawyers with considerable litigation experience.

[32] I fix costs at $5,000 inclusive of disbursements and appropriate taxes. The quantum of costs is fair and reasonable and in accord with the principles set down in Boucher. Costs shall be paid within 30 days of this Order.

ORDER

[33] Order accordingly.

Allen J.

Date: July 12, 2013

[^1]: This limited liability partnership was later renamed Sefton Partners LLP.