Court File and Parties

COURT FILE NO.: 05-CL-5965 DATE: 20200331 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ONTARIO SECURITIES COMMISSION Applicant – and – GESTION DE PLACEMENTS NORSHIELD (CANADA) LTÉE/NORSHIELD ASSET MANAGEMENT (CANADA) LTD., NORSHIELD INVESTMENT PARTNERS HOLDINGS LTD./GESTION DES PARTENAIRES D’INVESTISSEMENT NORSHIELD LTÉE., OLYMPUS UNITED FUNDS HOLDINGS CORPORATION, OLYMPUS UNITED FUNDS CORPORATION/CORPORATION DE FONDS UNIS OLYMPUS, OLYMPUS UNITED BANK AND TRUST SCC, GROUPE OLYMPUS UNITED INC./OLYMPUS UNITED GROUP INC. Respondents

No one appearing

Counsel: Avram Fishman, for the Receiver for Gestion de Placements Norshield (Canada) Ltée/Norshield Asset Management (Canada) Ltd. Normand Painchaud and Vincent Blais-Fortin, for the Petitioner/Class Representative/Moving Party Shawn Irving and Frederic Plamondon, for the Royal Bank of Canada and RBC Capital Markets Corporation/Responding Parties

HEARD: February 20, 2020

REASONS FOR DECISION

DIETRICH J.

Overview

[1] In this motion, this court is asked to approve a Memorandum of Agreement (the “Agreement”) regarding the production of information about the Norshield group of related entities, which are respondents in the within receivership. The information is in the hands of the receiver appointed by this court. The class representative of a class action authorized and instituted in the Superior Court of Québec seeks the information.

[2] It is a unique fact that in this proceeding in this court, neither the plaintiff nor the defendants in the Québec class action are parties in the within application. In this motion, context is important.

[3] The class action involves an alleged fraud on some 1,500 Canadian retail investors. On October 30, 2013, Sheila Calder, a resident of Québec, petitioned and was granted authorization to institute class proceedings in the Superior Court of Québec.

[4] The class representative, as plaintiff in the class action, seeks the approval of the Agreement in this court because it appointed the receiver. The order appointing the receiver sets out the scope of the receiver’s powers, including the power to share information with others. The Royal Bank of Canada and RBC Capital Markets Corporation (collectively “RBC”), the defendants in the Québec class action, are neither parties to the Agreement, nor creditors in the receivership. RBC opposes the approval of the Agreement.

[5] The class representative submits that RBC does not have standing to oppose this motion. Alternatively, if it does have standing, she submits that it has no valid complaint about the Agreement.

[6] For the reasons that follow, I find that RBC has standing to oppose this motion. Its objection raises a legitimate question as to whether the appropriate court to grant the approval sought by the class representative is this court or the Superior Court of Québec. I also find that the Agreement is intended to provide for an examination for discovery of a non-party, being the receiver, in the class action commenced in the Superior Court of Québec. The only court with jurisdiction to approve such a process is the Superior Court of Québec.

Background

[7] By Order dated June 29, 2005, and by subsequent orders, this court appointed Richter Advisory Group Inc. (formerly RSM Richter Inc.) as the receiver of the series of related entities, known as the Norshield Entities, and gave the receiver direction. Pursuant to the June 29, 2005 Order, the powers of the receiver extend to reporting to, meeting with and discussing with any secured and unsecured creditors of the debtors, investors in any of the debtors and any of their advisors as the receiver deems appropriate. These powers extend to all matters relating to the receivership and to the sharing of information, subject to such terms as to confidentiality as the receiver deems advisable.

[8] On July 17, 2007, prior to the commencement of the class action, this court approved an “Investor Communications Protocol” that permitted the receiver to share certain information and documentation with the retail investors of the Norshield Entities.

[9] In the class action, it is alleged, inter alia, that: a) the Norshield Entities defrauded the class representative and the class of the value of their investment; b) RBC participated in the creation of the fraudulent scheme and was essential to the fraud; c) RBC facilitated the diversion of assets that would otherwise have benefited the class; and d) by its actions RBC was jointly responsible for the losses caused by the fraud.

[10] RBC has denied the allegations and is defending the class action.

[11] On October 8, 2019, the receiver entered into the Agreement with counsel to the class representative. RBC was not involved in the discussions leading to the Agreement. RBC discovered the Agreement because it was referred to in a report of the receiver as monitor filed in the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 proceedings in this court, which came to the attention of RBC.

[12] The terms of the Agreement include a framework within which information and documentation will be provided by the receiver to counsel to the class representative, including documents and records in the receiver’s possession that relate to the claims described in the class action proceeding.

Positions of the Parties

[13] The class representative asserts that she and the other members of the class represent 98.86 percent of the creditors based on the number of class members and 99.98 percent of the creditors based on the value of their claims. As such, she asserts that by providing the documents and information to the class and her counsel, the receiver is not favouring one class of creditors over another class. Further, she asserts that it would be improper to block access to all of the information gathered by the receiver that would be relevant to the class action. Finally, she asserts that the order requested is wholly consistent with the prior orders of this court, including the Order of June 29, 2005 setting out the powers of the receiver.

[14] RBC objects to the approval of the Agreement. It asserts that the class representative, in seeking approval of the Agreement in this court, is seeking to circumvent the rules set out in the Québec Civil Code of Procedure governing discovery of a non-party.

[15] For this reason, RBC also asserts that the Agreement ought to be approved by Justice De Wever of the Superior Court of Québec, as the class action judge.

[16] The receiver, as an officer of the court, confirms that it was appointed by this court and acknowledges that it is not normally necessary for it to seek the court’s approval to undertake legitimate information-sharing within its scope of authority.

Standing

[17] The class representative argues that RBC does not have standing to oppose the motion because it is not a party to the Agreement. RBC argues that it has standing because it is a defendant in the class action.

[18] I am satisfied that RBC has standing because it is the defendant in the class proceeding and it is affected by the Agreement. RBC is on the service list in the receivership proceedings and has an interest in this matter.

Approval of the Agreement

[19] It is well understood from the jurisprudence that no party in a litigation proceeding can claim property in a witness.

[20] I see nothing untoward in the class representative’s approach to the receiver for information and documentation. The role of the receiver is to act in the interests of the creditors for the common good: Canada (Attorney General) v. Reliance Insurance Co., [2007] O.J. No. 3830, at para. 29 (Ont. Sup. Ct. (Comm List)).

[21] I have no concern that the receiver is acting outside its legitimate authority by agreeing to provide the requested information. I accept that it is acting voluntarily.

[22] However, in my view, the class representative’s request for court approval of the Agreement elevates an ordinary solicitation of information from a non-party to a request for approval of a court-authorized examination for discovery of, and production of documents from, a non-party. RBC submits that such approval would be a violation of the Québec Civil Code of Procedure because the examination is without the consent of an opposing party and without approval of the court with jurisdiction.

[23] RBC has not consented to the examination of the receiver and it objects to the scope of what it perceives to be a planned discovery of the receiver, a non-party to the class action. Accordingly, unless RBC and the class representative can agree on the procedure to be followed by the class representative in obtaining information from the receiver, RBC submits that the recourse available to the class representative is an application for approval of the Agreement to Justice De Wever, the class action judge of the Superior Court of Québec.

[24] I agree that Justice De Wever ought to be the sole arbiter of what information is relevant and necessary for the class action. If the Agreement is an attempt to evade restrictions on the scope of relevant inquiries, this determination should be made by Justice De Wever. I have not been asked to make any determination on whether the information to be shared by the receiver with the class representative is relevant, and it would be outside of the jurisdiction of this court to make any such determination.

[25] The limited comment that I am prepared to make in this matter is that it appears that there is nothing in the Agreement to suggest that the willingness of the receiver to share information is anything but appropriate. Entering into an agreement with the counsel to the class representative with respect to access to documents and information in the receiver’s possession is within the scope of the receiver’s authority.

The Costs of the Receiver

[26] RBC submits that the receivership should not be required to fund the fees and disbursements, up to $75,000, of the receiver, and other liquidators who may be asked to provide information to the class representative pursuant to the Agreement, as set out in the Agreement. Since I have declined to approve the Agreement, I do not need to address this particular term.

Disposition

[27] For the foregoing reasons, I decline to grant the class representative’s request to approve the Agreement and I dismiss her motion. This court has no jurisdiction to grant the approval sought.

Costs

[28] The parties have agreed that the successful party shall be entitled to costs of $2,500. RBC was successful on this motion. Costs of $2,500, inclusive of disbursements and HST, shall be paid by the class representative to RBC.

Dietrich J.

Released: March 31, 2020