ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 13-58620

DATE: 20140923

BETWEEN:

IRVING SHIPBUILDING INC.
Plaintiff

– and –

JOHN SCHMIDT
Defendant

Andrew J. McCreary/Siobhan M. O’Brien, for the Plaintiff (Moving Party)

Janice Payne/Steven Levitt, for the Defendant

Thomas G. Conway/Chris Hutchison, for Chantier Davie Canada Inc. (non-party)

HEARD: July 3, 2014 (Ottawa)

Amended REASONS FOR DECISION

This is an amendment to the Reasons for Decision originally released on September 3, 2014. The amendment occurs at the first word of the last sentence of paragraph 58. Davies is changed to ISI.

beaudoin J.

Nature of the Motion

[1] On August 23, 2013, the Plaintiff, Irving Shipbuilding Inc. (“ISI”) obtained and executed an Anton Piller Order (“APO”) on an ex-parte basis to search the Defendant, John Schmidt’s (“Schmidt”) residence. Schmidt had recently left his employment at ISI in order to commence a new position with a competitor of ISI, Chantier Davie Canada Inc. (“Davie”).

[2] Following a two day de novo hearing on December 11 and 12, 2013, I set aside the APO on March 7, 2014 and on the following grounds:

a) There was no evidence of serious damage;

b) There was no real risk of evidence being destroyed;

c) ISI misstated the facts in its supporting materials seeking the APO, in particular, relating to the Terry Fox bid. ISI stated as an unequivocal fact that Davie was submitting a competing bid. At best, ISI suspected that Davie might be submitting a bid. Davie did not in fact bid on that project;

d) ISI presented a distorted picture of its competitive position vis-à-vis Davie’s; and

e) ISI failed to disclose its intention to serve the APO to former employees who had left ISI to join Davie.

[3] Originally, ISI sought leave to appeal my Decision and a date to argue that motion was obtained. ISI now seeks leave to re-open the motion to set aside the APO in order to introduce fresh evidence and vary my decision. My decision setting aside the APO has not been issued and entered. ISI submits that it has obtained fresh evidence following the de novo hearing and argues that the fresh evidence only became available after that date and if the Court had had the benefit of that evidence, it would have changed the result of that hearing.

ISI’s Position

[4] ISI maintains that the fresh evidence demonstrates that Schmidt and Davie misled the Court at the de novo hearing as to:

a) Davie’s competitive activities and intentions;

b) The Defendant’s role at Davie and his plans to pursue competition with ISI;

c) The relevance of the documents misappropriated from ISI to the Defendant’s competitive activities; and

d) The threat created by the Defendant’s misappropriation of ISI’s documents and information.

[5] ISI argues that the fresh evidence demonstrates the harm, actual or potential, created by the Defendant’s misappropriation of the Plaintiff’s documents and information. ISI submits that the fresh evidence demonstrates that there was a real risk of destruction absent the granting of the APO. Finally, ISI argues that the fresh evidence demonstrates that ISI did not mislead the Court with respect to Davie’s status as a competitor and ISI’s good faith belief that Davie was in the process of bidding on the Canadian Coast Guard Ship Terry Fox Request for Proposal (“Terry Fox RFP”).

[6] ISI maintains that Schmidt and Davie misled the Court and that in relying on that evidence I concluded that:

a) The allegation of future damages or potential loss of contracts was purely speculative;

b) Given their respective resources and business circumstances, there was no reasonable prospect that the two companies would be in competition with one another for the foreseeable future and that Davie never did bid or considered submitting a bid on the Terry Fox RFP because it lacked the necessary repair capability and certifications.

[7] ISI has not set out in detail the allegedly misleading evidence that was put before the Court at the de novo hearing. In its argument, ISI continually refers to my written decision and my conclusions on the evidence. A distinction needs to be made between my findings and the evidence that was put before me. If I misapprehended the evidence, that is an issue for appeal.

[8] In my Decision, I cited the evidence of Schmidt and of Mr. Alan Bowen (“Bowen”), the C.E.O. of Davie that Davie and ISI were not in the same market of the shipbuilding industry. I also referred to the evidence of Schmidt and Bowen that Schmidt’s new role at Davie was related to new commercial construction and that he did not manage any government programs or contacts. I noted the evidence proffered by Schmidt that ISI, as Canada’s sole source supplier to build 30 billion dollars of naval combat vessels, could not bid for any other government new ship construction work and that Davie could not be in competition with ISI for new Government construction work.

[9] ISI refers to Schmidt’s evidence that the ISI documents he downloaded regarding the National Shipbuilding Procurement Strategy (“NSPS”) were historical and were of no use to Davie after the NSPS competition closed in July 2011. Schmidt also stated in his affidavit that ISI had a guaranteed commitment from the Government of Canada to build 30 billion dollars’ worth of combat vessels over 35 years that would keep its Halifax shipyard full.

[10] ISI submits that I relied on that evidence to determine that there was no reasonable prospect for competition in the foreseeable future with respect to ISI and Davie. ISI further cites my conclusion at para. 154:

At best, Davie was a past and potentially future competitor to ISI. The one million dollar value of the Terry Fox contract was insignificant to the 30 billion dollar value of the NSPS contract awarded to ISI and to Seaspan.

The Nature of the Fresh Evidence

[11] In support of this motion, ISI has filed two affidavits of Mr. Ross Langley, (“Langley”) the Vice Chairman of ISI. He points to a number of publications and relies heavily puts particular focus on the Contract for the Refit of the Canadian Coast Guard Ship Louis St. Laurent (the “L.S.L.”).

[12] The first article mentioned by Langley was published in the Canadian Defence Review (“CDR”) in May 2014 entitled “Davie’s Shipyards: Research and Builder looks at naval opportunities.” According to Langley, readers of CDR are senior officers in the Canadian military, senior Government officials and parliamentarians, as well as executives in the defence, airspace and security and related industries. The Defendant Schmidt is identified as the first key contact in the article followed by Mr. Alex Vicefield, Davie’s chairman. Langley points to this particular passage from the article:

However, as those in the industry know, the NSPS umbrella agreement is merely a framework to negotiate future contracts and the two shipyards must meet the timeframes and budgets which were originally set. The Government is under no obligation toward contracts especially if they do not provide best value to Canada or meet the needs of Canada’s national security.

[13] Langley relies on the articles’ quotations from Mr. Vicefield which include statements such as:

The NSPS scenario of 2010 does not recognize the reality of shipbuilding in Canada today in the reactivated capacity of the country’s largest shipbuilder.

Mr. Vicefield argues that Davie, which is ready to hit the ground running with this existing facility’s infrastructures, could play a role in the [NSPS] process as other shipyards will require significant upgrades in order to be able to move forward with sufficient alacrity.

A productive shift could involve bringing in more players to compete on individual components when possible. We can get a lot more done, for a lot less money if shipbuilding capacity was enhanced by using Davie to build some of the vessels. We are working on this today and have been well received in Ottawa.

[14] The article sets out five sub-headings under the title “Where Davie could add value to NSPS.” Langley goes back to his affidavit sworn August 22, 2013 where he maintained that the documents misappropriated by Schmidt included ISI’s strategy with respect to its goal to become the prime contractor for the Canadian Service Combat and Ships in NSPS.

[15] The next article referred was published in Canadian Sailings magazine dated March 20, 2014 on the opening of Davie’s Ottawa office which was to have a small staff, the most senior member being Schmidt. That article quotes Mr. Vicefield as stating that Davie had made the decision to open an office in Ottawa in the fall of 2013. He speaks of the signing of a strategic alliance between Davie and Babcock Canada Inc. (“Babcock”) and that the two companies were working together to develop and exploit opportunities pertaining to federal fleet renewal and programs such as NSPS.

[16] In cross-examinations on the affidavits filed in support of this motion, Bowen agreed that it was expected that Schmidt would lead the development and exploitation of opportunities related to NSPS. Bowen further agreed that Schmidt is, in part, pursuing NSPS related activities on behalf of Davie. ISI maintains that evidence in relation to these activities could not be adduced by ISI at or in advance to the motion being argued on December 11 and 12 as the Defendant denied these facts and Davie produced no documents in this regard.

[17] ISI also relies on the fact that Davie has now hired a professional lobbying firm, Fleishman-Hillard Canada to pursue activities on Davie’s behalf. As a lobbyist, Fleishman-Hillard Canada had to be registered with the Office of the Commissioner of Lobbying of Canada and confirmed that it had been retained by Davie to pursue activities on its behalf. The scope of these activities was described as arranging meeting to discuss the status of NSPS and the possibility of any business opportunities for Davie as the NSPS is implemented as well as shipbuilding related procurement opportunities.

[18] On May 21, 2014, Mr. Brian Mersereau of Hill and Knowlton Strategies, another professional lobbying firm, registered with the Office of the Commissioner of Lobbying of Canada and confirmed having been retained by Davie to pursue activities on its behalf. The scope of these activities was described as shipbuilding and ship repair contracts, with institutions to be lobbied including Public Works and National Defence.

The Contract for the Refit of the Canadian Coast Guard Ship Louis St. Laurent (the “L.S.L.”)

[19] On March 27, 2014, ISI was advised by Public Works and Government Services Canada (“PWGSC”) that it had lost its bid on a refit on the L.S.L. and that the contract had been awarded to Babcock, the only other bidder, for the sum of $5.91 million dollars. ISI was told that its bid could not be accepted because of the proposed docking dates in its bid. On April 17, 2014, a press release confirmed that the L.S.L. contract award had been given to Babcock and that the shipyard work would be sub-contracted to Davie and performed at Davie’s shipyard. In an internet publication dated April 22, 2014 allNovaScotia.com reported that Babcock would sub-contract the work to Davie and it said that it interviewed Mr. Vicefield. According to Mr. Vicefield, a ship that his company was building in its Champlain dry dock was moved out allowing space for the L.S.L.

[20] According to Langley, the L.S.L. contract award provides evidence of the very concern that ISI had in seeking to obtain the APO. It is conceded by Langley that the request for proposal for the L.S.L. refit was sent only to ISI and Davie and was not tendered more broadly. According to Langley, this work was of similar nature and required similar qualifications as the Terry Fox RFP. Both were refits of icebreakers for the Federal Government and the same trades required to do the work. The L.S.L is a larger and older ship than the Terry Fox and it also involved the installation of sonar but Langley maintains the work was similar in nature.

[21] Langley submits that confidential ISI information was used by the Defendant in Davie in their submission for the bid. On February 27, 2014, a Bidders Conference was held in relation to the L.S.L. RFP. Subsequently, PWGSC released Amendment No. 2 to the L.S.L. RFP which identified questions and answers asked by bidders. Included among these was the following question and answer:

Q. The sourcing strategy used by PWGSC in this procurement was to send a RFP to shipyards with the capability to Dock the CCGS Louis St. Laurent. Consequently RFPs were sent to Chantier Davie and Irving Shipbuilding Inc. (ISI). It has come to our attention that the Nova Dock at Halifax Shipyard has since become unusable and will not be capable of drydocking the ship during the period required. Also, the Graving Dock at Halifax Shipyard is not available due to ISI commitments on FELEX. If this is correct then only one bidder should have the opportunity to bid. Can PWGSC kindly confirm that ISI has the capability to bid for this work?

A. Canada has established the requirements for this work and we are anticipating that suppliers will respond in accordance with those requirements.

[22] Langley says this question was not submitted by ISI and that it contained confidential operational information belonging to ISI. ISI submits that since there were only two bids invited and ISI did not ask the question, ISI believes it was submitted by Davie, whether in conjunction with Babcock or not. ISI maintains that information with respect to the availability of the shipbuilder’s docks and future date is sensitive and confidential information. While it may be possible to confirm that a ship is in fact in dock on a given day, this does not indicate whether it will remain so.

[23] Langley maintains that ISI had every intention of bidding on and securing the L.S.L. refit contract. He adds that ISI believed that at all times, until approximately February 28, 2014, it would be in a position to dock the L.S.L. on the proposed dates of April 16, 2014 to June 11, 2014. However, on or about February 21, 2014, ISI determined that its Nova Dock would require some upgrading to permit its use according to ISI’s expectations. It determined that these could not be affected in advance of April 16, 2014. As an alternative, ISI considered the use of its Graving Dock which had actually been used in the past for the refit of the L.S.L.

[24] In order to do this, ISI would float a Frigate presently located within the Graving Dock and move it dockside for continued work. On or about March 11, 2014, ISI determined that this was also not feasible. As a final alternative to these options, ISI proposed the performance of the work after October 15, 2014. ISI believed that there was a possibility that the proposed docking times could be adjusted by the Crown to permit ISI to perform the work at a lower cost and better value to the Crown.

[25] Langley adds that Amendment No. 2 provided a revised Pricing Data Sheet by which bids were to be financially evaluated. He maintains that the information misappropriated by Schmidt, if used by him at Davie in the L.S.L RFP, would have put ISI at a competitive disadvantage. According to him, Davie could structure the Babcock/Davie bid so as to provide the highest cost to the Crown short of leading it to determine that the contract should not be awarded to Babcock/Davie. Although Langley concedes that the Babcock/Davie bid was in fact higher than that submitted by ISI, he maintains that it was apparently not so much higher as to lead the Crown to that determination.

[26] In addition, Langley maintains that the documents misappropriated by Schmidt included highly sensitive documents that disclosed confidential financial information, in particular, those that disclose profit analysis and rate negotiation information about ISI’s financial affairs about the FELEX Program in 2011 and 2012. FELEX is a ship repair and refit program for the Government of Canada.

[27] ISI maintains that the L.S.L. contract award evidences the very concern that ISI had in seeking to obtain the APO. Evidence in relation to this contract could not be tendered to the Court at or in advance of the motion being argued in December 2013. ISI repeats that it had reason to believe that Davie could compete on the Terry Fox work. At that time, Schmidt and Davie had argued that Davie could not compete on the Terry Fox bid because of a vessel that was presently placed in its dock. This vessel, the CECON Pride was, in fact, moved out of Davie’s dock for the L.S.L work.

[28] Finally, ISI refers to the fact that the Defendant and Davie have retained Ship Repair Agents “Rainmaker” to seek out ship repair jobs for Davie. ISI submits that all of this evidence, which only became available after the hearing de novo, gave rise to a fundamentally different case, one in which ISI submits, that it changed the result. ISI submits that if the Court had had the benefit of this evidence before the ruling had been made, the assessment would have been different.

The Position of the Defendant, Schmidt

[29] Schmidt states that the fresh evidence is not relevant to the determination of the issues that were before the Court in relation to the granting of the APO and the vacating of the APO, nor does the information, in any way, relate to the stated purpose of the APO which is to preserve evidence of past misconduct.

[30] Schmidt concedes that the “fresh evidence” did not exist at the time of the hearing de novo in 2013 and is therefore not relevant to the issuance and execution of the APO on August 23, 2013 or the hearing de novo; since the “fresh evidence” did not exist, it can certainly have no bearing on the preservation of evidence of past wrongful conduct.

[31] Moreover, Schmidt argues that the “fresh evidence” ISI is now attempting to adduce is not actually new or “fresh.” He says that the evidence, at best, consists of further examples of evidence regarding potential future competition with ISI that was already before the Court. Davie’s interest in future government work was admitted in evidence and was part of the record before me.

[32] The Defendant refers to his October 2, 2013 affidavit, where he explicitly stated that Davie was potentially interested in future shipbuilding work which was not allocated to the NSPS yards or a large Canadian Coast Guard (“CCG”) ship modernization. Such products are funded by the Federal Government. Schmidt noted that no such RFPs had been announced and that none were anticipated until sometime in 2014 at the earliest (the same time as the L.S.L. contract).

[33] Prior to the hearing on December 11 and 12, Langley, Schmidt and Bowen were extensively cross-examined. Bowen, on behalf of Davie, confirmed Davie’s interest in obtaining government work should an opportunity arise[1].

[34] Schmidt puts particular reliance on Langley’s own evidence regarding future competition with Davie and Davie’s interest in lobbying for government work:

A. The importance of that is the knowledge he would gain in connection with seeing our proposal is relevant to in-service support work that's going to be bid in 2014/2015, which we know Babcock and Davie are going to compete for.

Q. How do you know Davie is going to compete for that work?

A. Because they're aligning themselves with Babcock. Babcock has been quite open that they want that in-service support work. Davie and Babcock have signed an in-service support contract -- teaming agreement. Right now it's on Coast Guard work, it will merge into NSPS work. We know it's on the street that Babcock wants that work. That's their ---

Q. That's what people are saying?

A. Yes. Babcock has hired a capture manager who's working in Ottawa, who's working on this, and

Q. And is that going to be support work to ISI?

A. No. ISI has to bid for that work. It's not part of NSPS, but it's to support the maintenance and in-service support work for the NSPS ships that a rebuilt.

Q. And there is no request for proposal out for any of that work yet?

A. No, there's industry consultation on it now. Government is conducting industry consultation on -- and talking to industry partners, industry participants, about the in-service support. It will be -- an RFP is expected out on the street in the next -- you know, there'll be an expression of interest, it's in -- underway.

Q. When do you realistically expect to see an RFP for that work?

A. Probably 2015.

Q. 2015.

A. That's our best guess.

Q. Mr. Langley, is there any aspect of the shipbuilding industry in which currently, today, Davie is competing with Irving?

A. There's not today a job that we're both bidding for, but Davie is a competitor for any job that comes up.

Q. A potential competitor?

A. Absolutely.

Q. That would be a fair way to put it?

A. Yeah. They're always a potential competitor for us, and they're a competitive threat in the sense that we know that they're seeking government work and they're seeking in-service support work, and they're seeking in-service support work specifically on Coast Guard now, and so they would be lobbying and talking to people in Ottawa trying to get their foot in the door to get work that we will compete for.

Q. But they are not currently bidding on any project on which you are bidding?

A. Well, there's no bids to bid on right now that ---

Q. When was the last time Davie bid on any project on which you were bidding?

A. Well, they've just started up, so I don't believe they've been active until recently.

Q. They haven't bid on anything since they came out of bankruptcy protection on which you've been bidding?

A. I don't know that.

Q. Well, you can't give me an example of a project on which they bid that you also bid on since they came out of bankruptcy protection?

A.I can't give you an example today, but as I say, they're a competitive threat on all of the upcoming government work.

Q. Potentially?

A. Well, they are. We know that they're -- they've hired -- they're working with Babcock on in-service support, so it's not potential, it's real, and Babcock has hired a capture manager in Ottawa.

Q. And you're expecting those RFPs to start coming down in 2015?

A. Well, that's one aspect of the work. That's the NSPS in-service support.

Q. Yes.

A. But Davie is chasing with Babcock this teaming agreement, in-service support for Coast Guard work. That work could come up any time.

Q. But it isn't presently available to bid on?

A. Well, I mean, you can always go -- and this is what people do -- go to Ottawa and try and get sole-source work. So, they know something, presumably, that we don't, because they've just signed up with Babcock for in-service support for Coast Guard work. So, there's something -- the government is talking about some of this work, maybe in-service support work for the mid-shores that we're building and John was involved in.

Q. But you're speculating here, you don't know any of this? You're guessing?

A. But that's the way the business works. You chase every angle you can chase. That's why they’ve got --

Q. But just answer my question. You are speculating, you can't tell me that for sure Babcock and Davie are getting ready to bid on anything?

A. No, that's not speculation, that's -- they've hired this Marasinski fellow who works for John Schmidt, he's responsible for government work. They've teamed with Babcock, Babcock has hired a capture manager in Ottawa. Their teaming agreement relates to in-service support work for Coast Guard. Babcock has indicated they want government in-service support work in Canada, they've told me that directly. They used to approach John while he worked for us and he would try and get us to meet with Babcock. We know Babcock is going to be a competitor. Everybody is out there circling. There's other competitors, they're all circling for government work. There's going to be work, Coast Guard work, there's going to be Navy in-service support work.

Q. But nothing to bid on right now?

A. Today? There's no open bid right today. They've also said that they're standing by waiting to get NSPS work if Irving or C-Span fails, so we know they're a competitive threat in that regard and they're a current competitive threat.

Q. But only if you fail?

A. Well, if we don't ---

Q. Only if you can't deliver?

A. We don't have a contract, so I suspect that they're starting to lobby through Quebec politicians for work.

Q. But again, you're guessing; you don’t know that.

A. History repeats itself, and that's what happened in the past.

Q. You are guessing, you are suspecting. Those were your words. They can only bid on NSPS work if you fail, correct?

A. No, not necessarily. The government is currently out consulting with industry on what the contracting model should be for the CSCs. That involves deciding who is going to be the prime contractor for CSC. Irving is not the prime contractor. I would expect Babcock -- and possibly with Davie as a team -- might go and seek that prime contractor status.

Q. But you don't know that yet? You don't know that?

A. Well, you never know what your competitors are doing. You know that they're a competitive threat. You never -- if you knew what they're doing, it wouldn't be much competition.

Q. And you can't point to a specific ---

A. That's why you protect your information.

Q. --- example of anything that you are both presently bidding on, because there ---

A. Well, I'm telling you that we're both chasing in-service support work.

Q. But there's nothing to bid on yet?

A. Well, it's coming.

Q. Right.

A. That's the way the shipbuilding industry works, it's project by project.

Q. It's coming in 2015.

A. It's not like you go out and can sell something every day. There's limited projects and it's a highly competitive industry.

Q. Are there any other projects on which Davie has been bidding in competition to you since August 22nd? I think you told me there are none. Isn't that right?

A. Well, no, what I said -- specific bids on an RFP?

Q. Right. Right.

A. There are -- I said there are none ---

Q. Right. That's all then, that's ---

A.--- but they're a competitive threat and they're always a competitive threat for all the work.

[35] Schmidt refers to paragraph 91 of my decision:

Should an opportunity for obtaining Federal Government of Canada work arise in the future, it (Davie) would consider bidding for these contracts if Davie has sufficient capabilities to meet the work requirements. Davie admitted that if ISI or Seaspan were to “fall down”, it is prepared to step into the market gap.

Schmidt maintains that the issues of competition in the interest and future work were fully canvassed, the subject of extensive cross-examination of all the parties and argued at the hearing and that there is no “fresh evidence.”

[36] Similarly, the fact that Schmidt, and by extension Davie, would have an office in Ottawa was also not “fresh evidence” of anything. ISI had known since its seizure of Schmidt’s employment contract that Davie had planned to have an office in Ottawa for him and Schmidt says the existence of this office is of no relevance at all to the APO. ISI also had the opportunity to explore the issue on cross-examination.

[37] Schmidt maintains that the only new “fresh evidence” sought to be adduced by ISI relates to the L.S.L. RFP. Schmidt argues, however, that Langley’s affidavit of April 24, 2014 provides a misleading account of this process. Schmidt simply says that ISI did not have the capacity to successfully bid on the L.S.L. as its docks were not available during the mandatory docking period required by the government.

[38] Schmidt refers to a call he received on February 6, 2014 from PWGSC that informed him that CCG had to dock the L.S.L. from April 16, 2014 to June 11, 2014. Schmidt was told that there were only two dry-docks capable of physically dry-docking the vessel; namely those owned Davie and ISI. ISI and Davie were being directly sourced to receive a solicitation package. Schmidt was asked to confirm if Davie had a dock available for the mandatory docking period as the work had to be completed so that the L.S.L. could be ready for critical artic mission in July. Schmidt responded in the affirmative. PWGSC stressed the importance of the docking period as the L.S.L. had a tight operation schedule due to the short Artic navigation period. Schmidt says Davie would not have been provided with the solicitation document unless its dock was available. Schmidt was also informed that the work was being completed under a National Security Exception (NSE) due to the confidential and sensitive nature of the sonar dome being installed.

[39] Shortly thereafter, both ISI and Davie were confirmed as being sourced in a solicitation for the L.S.L. Schmidt directed PWGSC to send further correspondence to Mr. Marasinski and he maintains that he had little further involvement in the project. Schmidt points out that the L.S.L. RFP is vastly different from the Terry Fox solicitation which was at the heart of the APO obtained in August 2013. The Terry Fox contract was openly advertised and open sourced on the government procurement website and it used an invitation to tender as the solicitation process. In contrast, the L.S.L contract was directly sourced without advertisement through direct telephone pre-qualification followed by a solicitation that was to only the sourced and pre-qualified bidders. The L.S.L. project was not an open competitive process at all and was directed only to invited participants who had a certified dry-dock available between April 16, and June 11, 2014.

[40] Schmidt adds that the St. Laurent contract used different procurement strategies, solicitation processes and evaluation criteria and was governed by different procurement rules than the Terry Fox bid. The Terry Fox selection criteria was based on lowest priced qualifying bid, while the L.S.L. contract was assessed in accordance with all of the requirements of the bid solicitation including price and technical, management and financial evaluation criteria. A bidder with the lowest price would not necessarily win the L.S.L. work.

[41] Schmidt relies on the PWGSC rules for direct sourcing that requires parties participating in the process to receive the same information. For that reason, Schmidt believes that ISI would have had to also confirm that it had a dock available during the docking period in question. Schmidt disputes the accuracy of Langley’s affidavit. ISI could not have been asked if it was interested in submitting a bid for the L.S.L. contract, but it only would have been asked if it was capable of bidding and whether it had a certified dock available for the docking period. He maintains that the sole purpose of the phone calls received from PWGSC was to source bidders and not to solicit general interest in bidding. Furthermore, Schmidt submits that contrary to Langley’s statement in paragraph 8 of his affidavit, the RFP was never tendered since tendering implies a public notification by the government’s website.

[42] On February 19, 2014, PWGSC directly issued the L.S.L. Laurent RFP to Davie and ISI. The RFP had a closing deadline of 2:00 pm on March 20, 2014. The RFP confirmed the mandatory docking period. Minutes of the February 27 Bidders Conference emphasized the docking period and indicated “Time is of the Essence.” In the questions and answers submitted during the solicitation period, Schmidt notes that PWGSC made it clear to all bidders that there was no flexibility in the working period dates.

[43] Schmidt refers to ISI’s own admission that it knew, at the latest, by March 11, 2014 that it did not have any dock available for the docking period. Despite being aware that its docks were not available, ISI nonetheless responded by submitting a non-compliant proposal and proposing docking dates in October 2014. Langley believed that the Government would vary its docking dates.

[44] On March 27, 2014, the Government advised that Babcock was the successful bidder. PWGSC confirmed that Babcock’s bid was higher than ISI’s by hundreds of thousands of dollars. Furthermore, PWGSC stated that ISI’s bid could not be accepted based on the proposed docking dates that it put forward. Schmidt directs me to Langley’s admission on cross-examination that he was not surprised by the result and that there was no other reason why ISI lost the bid.

[45] Schmidt claims that the status of ISI’s docks is public knowledge in the industry and is not confidential as alleged by Langley. Schmidt says the information as to the availability of those docks is easily determined by contacting ISI and asking if the dock is available. Such inquiries are routinely made by ship owners and agents who have potential work for a shipyard. Furthermore, the two docks are wide open for view 24 hours a day and the status of whether there is a vessel in the dock or not cannot be concealed or hidden. There are also websites which will provide live automated identification systems in minute-by-minute whereabouts of nearly any vessel in any harbour. ISI’s own website announced two dry-docking jobs for its two docks, the Nova Dock and the Graving Dock. The Graving Dock was filled with the FELEX project which is public knowledge and this can be ascertained from the government’s own published FELEX schedule. Schmidt notes that the HMCS St. John entered ISI’s Graving Dock on January 10, 2014 as set out in the government’s own schedule. The St. John remains in the Graving Dock as of the date of Schmidt’s affidavit sworn May 23, 2014 and he further asserts the Graving Dock was not and is still not available to dock a ship the size of the St. Laurent.

[46] In terms of the Nova Dock’s status, two third parties in the industry separately advised Davie that ISI had a problem with the Nova Dock. Independently, Rainmaker advised that they were informed that that the Nova Dock was out of service since early February and for an extended period of time. Babcock was also advised that the Nova Dock was not available. As a result, Schmidt argues that it was publicly known in the industry that ISI’s Nova Dock was out of service and had been since sometime in February, 2014.

[47] Schmidt categorically disputes ISI’s statement that he misappropriated information that would have put ISI at a competitive disadvantage in the L.S.L. bid. He notes that Langley admitted on cross-examination that any ISI information retained by him after his departure had been returned following the execution of the APO and that Langley had no information that any “misappropriated” information had been used. Schmidt reiterates that ISI lost the bid because it had no docks available for the mandatory docking period. Furthermore, ISI’s bid on the St. Laurent was lower than the bid submitted by Babcock.

[48] Schmidt says that ISI was not at any “competitive disadvantage.” If anything, ISI had a built-in competitive advantage as Babcock had never previously docked the L.S.L. as ISI had done in the past. Finally, Schmidt maintains that the L.S.L. and ISI’s failure to win the contract some seven months after the APO was obtained could not be relevant evidence at the time of the ex parte hearing or at the de novo hearing in December. As admitted by Langley on cross-examination, the bidding on the L.S.L. was an example of the potential “future” competition with Davie that was referred to in my Decision.

The Position of Chantier Davie Canada Inc.

[49] Davie’s central position is that ISI continues to misconstrue the circumstances upon which an APO is justified. It is only justified where necessary to preserve evidence of past wrongful conduct. While Davie’s position is that the so-called “fresh evidence” identified by ISI is entirely irrelevant to all aspect to the Celanese test, it certainly has no bearing on the preservation of the evidence of past wrongful conduct. Therefore, its admission into evidence most certainly would not have changed the result and should not be allowed.

[50] Moreover, Davie maintains that nothing in my decision suggests my findings were contingent on Davie refraining from competition with ISI going forward as my decision recognized Davie as a potential future competitor to ISI. Davie says that it and Schmidt were quite transparent about the fact that Davie hoped to compete with ISI in the future. Davie maintains that the “fresh evidence” that Davie and Schmidt misled the Court as to Davie’s competitive position vis-à-vis ISI, Schmidt’s role at Davie, the relevance of the alleged misappropriated documents and the threat created by the alleged misappropriation of ISI information were all arguments that ISI made unsuccessfully at the hearing de novo.

[51] Unlike the initial APO, Davie points out that the hearing de novo was argued on a substantial record, after days of cross-examination, with ISI’s position represented ably by experienced counsel. Davie claims that ISI simply seeks to reargue that motion under the guise of a motion to produce fresh evidence. Davie concedes that the evidence ISI now seeks to adduce was not available to it in August or December of 2013 but maintains that it is not relevant to the circumstances surrounding the issuance and execution of the APO in August 2013 nor is it relevant to the de novo hearing to set aside the appeal that took place in December 2013.

[52] Davie argues that despite ISI’s serious allegations that Schmidt and Davie had misled the Court, ISI has not identified a single transcript excerpt from Davie or the Defendant which the “fresh evidence” reveals was misleading. Davie notes that ISI had ample opportunity to cross-examine itself and the Defendant with respect to their positions taken on a hearing de novo. ISI did so, argued the motion on a full record, and made extensive submissions on the very points which they now say the Court was misled.

[53] As for the L.S.L contract, Davie says there was no evidence that either party knew of the that opportunity prior to February 7, 2014 and there is no dispute that Babcock was the successful bidder and that ISI’s bid could not be accepted due to its inability to meet the required docking dates.

[54] Finally, Davie emphasizes that there is no dispute that ISI’s bid on the L.S.L. opportunity was lower than the Babcock/Davie bid, notwithstanding ISI’s allegation that Schmidt possessed confidential information capable of allowing Davie and Babcock to structure their bid in such ways that would prejudice ISI. Davie also responded to the allegations ISI makes with respect to the magazine articles. The first article that appeared in the Canadian Sailings magazine on March 20, 2014 refers to a strategic alliance between Davie and Babcock which was disclosed to ISI and to the Court at the hearing de novo. Davie argues it was known to ISI and to the Court as evidenced by the cross-examination of Langley in November, 2013 excerpted above. Davie maintains there is nothing in the Canadian Sailings magazine which is at odds with what was before the Court in December of 2013 and certainly nothing which supports an allegation that Davie and Mr. Schmidt have misled this Court.

[55] As for the article that appeared in the Canadian Defence Review in May 2014, Davie maintains that it is a forward- looking article which speaks of the role Davie hopes to play in the shipbuilding industry in the future. Davie maintains it is entirely consistent with the evidence given by Davie when Bowen was cross-examined in November of 2013. Davie maintains that at no time did it mislead the Court that it did not intend to compete with ISI in the future. Unlike ISI, Davie maintains that it was focused on the sole acceptable purpose of the APO, preservation of evidence of past wrongful conduct rather than the prevention of future conduct.

[56] In conclusion, Davie maintains that the “fresh evidence” does not demonstrate any serious damage arising from Schmidt’s past wrongful conduct; it does not demonstrate that there was any risk of any evidence, a complete record of which ISI possessed, being destroyed; it does not relate in any way to the material misstatements ISI made in its supporting materials seeking the APO; and the “fresh evidence” does not relate to the distorted picture ISI presented of its competitive position vis-à-vis Davie in August 2013, or even December 2013.

Analysis and Conclusion

[57] In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 SCR 983 at para. 62, the Supreme Court of Canada confirmed the two part test applicable on a motion to adduce fresh evidence. First, the moving party must demonstrate that the fresh evidence, had it been available and admitted in the first instance, probably would have changed the result, and second, it must demonstrate that the evidence could not have been obtained before the hearing by the exercise of reasonable diligence.

[58] It had also been held that fresh evidence will only be admitted in circumstances where to do otherwise, would result in a miscarriage of justice. The focus on a motion to adduce fresh evidence is less on an injustice to the parties and more on the undermining of the integrity of the justice system.[2] In this case, ISI specifically alleges that Schmidt and Davie misled the Court at the de novo hearing with respect to Davie’s competitive activities and intentions, and the Defendant’s role at Davie and the relevance of the documents removed from ISI. ISI goes so far as to suggest in paragraph 72 of its Factum at that “where fraud is involved and where the Court has been misled, as is the case here, a judge is justified in departing from the diligence requirement in order to prevent a miscarriage of justice.”

[59] In this case, I am satisfied that the first element of the test cannot be met. The leading and binding authority in Ontario with respect to Anton Piller orders is Factor Gas Liquids Inc. v. Jean, 2010 ONSC 2454, 264 O.A.C. 46 (Ont. Div. Ct.) at para. 32. There, the Divisional Court made it clear that the only acceptable justification for an APO is to preserve evidence of past wrongful conduct, not to prevent future conduct. The precise function of an APO is to ensure that an unscrupulous defendant is not able to circumvent the legal processes by making relevant evidence disappear.

[60] It must be remembered that at the time of the original Anton Piller Decision in 1976, Lord Denning was dealing in a world of paper documents, manuals, drawings and physical evidence. In that case, there had been telex communications between the defendant and a competitor. There was a concern that the documents that provided proof of these communications would be destroyed or sent out of the country if the defendant was given notice and that there would be none in existence by the time that discovery was had in the action. The APO was necessary as it allowed a plaintiff to obtain proof of the defendant’s past misconduct.

[61] In cases such as these, there are two possible types of past misconduct that could justify the issuance of an APO. The actual removal of evidence, often in documentary form and the misuse of that evidence. In this case, we are dealing in a world of electronic documents. When Schmidt left his employment with ISI, he removed and retained a number of documents and preserved them on USB sticks or other portable storage devices. Because of its data loss prevention system, ISI had a complete record of everything Schmidt had in his possession. None of its documents were destroyed. ISI was in a position to prove exactly what documents Schmidt had allegedly misappropriated.

[62] As to any misuse of that information, ISI alleged that Schmidt had retained confidential information that was going to be used by his new employer, Davie, in an imminent bid to refit the Terry Fox Coast Guard vessel. That question was answered as a result of the execution of the APO when the Court was presented with the “fruits of the search.” There was a very extensive record put before the Court at the hearing de novo in December 2013. This was “fresh evidence” as the Court did not have the benefit of all of the evidence when it first granted the APO on August 23, 2013 and that evidence did change the result.

[63] In this sense, this latest motion by ISI to introduce fresh evidence has to be considered an extremely extraordinary step. As a result of the execution of the APO, it was confirmed by the forensic examiners and through extensive cross-examinations that Schmidt had not destroyed any evidence of which ISI already had copies. There had been an extremely limited use by Schmidt of that information; namely for the purposes of creating a new biography; the creation of a contacts list that was largely Schmidt’s own personal information; and the drafting a teaming agreement. All electronic information was returned to ISI. Most critically, Davie did not bid on the Terry Fox contract which was the primary reason for the urgent ex parte APO.

[64] At best, the “fresh evidence” relates to potential future competition between ISI and Davie and this was canvassed in my Decision of March 2014. The fresh evidence does not address the issue of serious damage; either financial or on the procedural impact on ISI’s ability to prove its case. As noted in my Decision, the evidence of serious damage must establish actual business loss. Any evidence of future damage or potential loss must not be purely speculative.

[65] The fresh evidence does not change my conclusion that ISI suffered no serious damage. ISI lost the bid on the Terry Fox contract to another competitor, not Davie. Davie did not bid. ISI did not lose the bid on the L.S.L contract because of any misuse of information by Schmidt or Davie. It simply could not complete the work in the required time.

[66] In addition, the fresh evidence does not address ISI’s failure to provide full and frank disclosure. The failure to provide full and frank disclosure is in and of itself a ground to vacate an APO independent of the four essential conditions set out in Celanese Canada Inc. v. Murray Demolition Corp 2006 SCC 36, [2006] S.C.J. No. 35 (SCC).

[67] In my Decision, I noted ISI’s statement as an unequivocal fact that in August 2013, Davie was submitting a competing bid on the Terry Fox RFP. Nothing in the “fresh evidence” corrects this misstatement made by ISI. At best, the new evidence provides some justification for ISI’s belief that Davie was competing on the Terry Fox bid which was nevertheless presented to the Court as a fact. Davie did not bid on the Terry Fox opportunity and it did have a vessel in its dock at that time. The fact that it was subsequently able to remove that vessel in April 2014 as a result of the L.S.L. contract is irrelevant.

[68] None of the “fresh evidence” identified by ISI is at odds with the competitive picture presented to the Court by the parties in December of 2013. Moreover, it is entirely irrelevant to the competitive positioning of the parties in August 2013 when the APO was issued and entered. ISI characterized Davie as a current competitor in essentially all aspects of the shipbuilding industry without disclosing the true nature of the NSPS arrangement or the status of Davie’s return to the industry after emerging from bankruptcy protection.

[69] Moreover, I’m convinced that none of the evidence is new. Langley already had in his possession of number of articles and website publications in his reply affidavit of September 23, 2013. These publications clearly gave notice that Davie was back in business and hoping to participate in government work. By Langley’s admissions found in the excerpts from the cross-examination cited above, ISI clearly knew in December 2013 that Davie was now keen to compete with it in the future.

[70] ISI has completely misconstrued the purpose of an APO. ISI cannot use this motion as a means of revisiting issues already argued and decided. This is not an appeal and ISI does not meet the test for re-opening my Decision and introducing this evidence.

[71] For these reasons, ISI’s motion is dismissed. I have already received the extensive costs submissions of the parties with respect to my Decision of March 7, 2014. The parties are to supplement these with their additional written submissions with respect to costs of this motion and the earlier refusals motion as follows. The successful Defendant and non-party Davie are to provide their submissions within 20 days of the release of this decision. ISI is to provide its response within a further 20 days of the receipt of those submissions and the Defendant and Davie have the benefit of a further 10 days if they wish to file any reply.

[72] I had previously scheduled a hearing to conduct an assessment of Mr. Schmidt’s damages and the parties are to contact me to schedule a case conference to create a new timetable for that event.

Mr. Justice Robert N. Beaudoin

Released: September 23, 2014

COURT FILE NO.: 13-58620

DATE: 20140923

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

IRVING SHIPBUILDING INC.

Plaintiff

– and –

JOHN SCHMIDT

Defendant

REASONS FOR decision

Beaudoin J.

Released: September 23, 2014

[1] Cross-Examination of Alan William Bowen on November 4, 2013, pp. 106-107.

[2] 1307347 Ontario Inc. v. 1243058 Ontario Inc., [2001] O. J. No. 257 para 9.