Court File and Parties
COURT FILE NO.: CV-20-00651820-00CL DATE: 2022-01-19 SUPERIOR COURT OF JUSTICE – ONTARIO COMMERCIAL LIST
RE: BLUEMOON CAPITAL LTD., Applicant AND: CERIDIAN HCM HOLDING INC., MORNEAU SHEPELL LTD. AND MORNEAU SHEPELL INC., Respondents
BEFORE: L. A. Pattillo J.
COUNSEL: Eli S. Lederman and David Salter, for the Applicant Julie Rosenthal and Mark Leonard, for the Respondent Ceridian HCM Holding Inc. Laura Fric and Carla Breadon for the Respondents Morneau Shepell Ltd. and Morneau Shepell Inc.
HEARD by Videoconference: July 28, 2021
ENDORSEMENT
Introduction
1There are three matters for determination before the court.
2The applicant, Bluemoon Capital Ltd. (“Bluemoon”) seeks an order for pre-trial discovery (a Norwich order) requiring the respondents, Ceridian HCM Holding Inc. (“Ceridian”) and Morneau Shepell Ltd. and Morneau Shepell Inc. (collectively “Morneau Shepell”) to provide documents and information relating to 2018 transactions in which Ceridian distributed its interest in LifeWorks Corporation Ltd. (“LifeWorks”) to its shareholders prior to its initial public offering followed by the subsequent acquisition of LifeWorks by Morneau Shepell some two months later for an amount in excess of the amount Ceridian had valued it for the distribution.
3In addition, Morneau Shepell has brought a motion seeking orders quashing the rule 39.03 Notice of Examination served by Bluemoon on Stephen Liptrap, President and CEO of Morneau Shepell Inc. and for security for costs of the application.
4Finally, Ceridian brings a motion for a sealing order in respect of what it submits is confidential information contained in the affidavit of Timothy Farley, filed in response to the application.
5For the reasons that follow, I dismiss Bluemoon’s application. I am not satisfied, in the circumstances of this case, that such an order is necessary or in the interests of justice. Bluemoon does not meet the test required for a Norwich order.
6Further, I am satisfied that the sealing order requested should be granted. In my view, disclosure of Ceridian’s detailed, highly confidential tax information which was provided for the sole purpose of enabling Ceridian to respond to Bluemoon’s application, presents a serious risk to an important public interest. The benefits of such an order outweigh its negative effects.
7Following the argument of Morneau Shepell’s motion to quash the rule 39.03 Notice at the outset of the hearing, I advised the parties that the motion was allowed, for reasons to follow and excused Mr. Liptrap from attending. I did not consider that such an examination should be permitted to occur in advance of a determination on the merits of the Norwich order application. Further, as I have dismissed Bluemoon’s application, it is moot.
8Finally, as I was advised by the parties at the outset that the issue of security for costs had been resolved between them, there is no need to consider that aspect of Morneau Shepell’s motion.
Background
The Parties
9Bluemoon is incorporated in the British Virgin Islands. Its sole shareholder and directing mind is Iouri Chliaifchtein, a Russian resident of Monaco with property in the UK. Bluemoon is a shareholder of Ceridian, having purchased 2,100 shares (600 on the Toronto Stock Exchange (“TSX”) and 1,500 on the New York Stock Exchange (“NYSE”)) on July 11, 2018.
10Ceridian is incorporated in the State of Delaware in the U.S., with its corporate headquarters located in Minneapolis, Minnesota. Ceridian provides services and software designed to help employers manage payroll, payroll-related tax filing, human resource information systems, employee assistance programs, recruitment, and applicant screening.
11Ceridian was privately owned until April 2018 when it held its initial public offering on both the TSX and the NYSE.
12Morneau Shepell Inc. is a human resource consulting and technology company headquartered in Toronto, Ontario. It is listed on the TSX and publicly traded. Morneau Shepell Ltd. is the principal Canadian operating subsidiary of Morneau Shepell Inc.
13WorkAngel Technology Ltd. (“WorkAngel”) is not a party but is involved in the story. It was founded in 2012 by Jamie True (its CEO) and others. Located in the UK, it carried on the business of leveraging digital tools to provide employee assistance, wellness, recognition, and incentive programs in the U.S., Canada, and the UK.
The Transactions
14In 2016, Ceridian and WorkAngel entered into a joint venture which operated through LifeWorks Corporation Ltd. (“LifeWorks”). LifeWorks was owned 50% by Ceridian and 50% by WorkAngel. Ceridian’s half interest in LifeWorks was divided among three different entities:
a) 79.97% was owned by Ceridian directly;
b) 17.53% was owned by Ceridian Canada Ltd.; and
c) the remaining 2.5% was owned by Ceridian Global UK Holding Company.
15On December 12, 2017, Morneau Shepell and LifeWorks entered into a non-disclosure agreement relating to the potential acquisition of LifeWorks by Morneau Shepell.
16In early 2018, Ceridian began the process of undertaking an IPO on both the TSX and the NYSE. The IPO was completed on April 26, 2018, with the sale of 21 million shares of its common stock at a price of US$22 per share.
17In each of its public filings in relation to the IPO, Ceridian repeatedly stated that, concurrently with the IPO, it would be disposing of its interest in LifeWorks by distributing it to all of its pre-IPO shareholders, “on a pro rata basis, in accordance with their pro rata interests” in Ceridian. Ceridian also clearly stated that the members of the public who were purchasing shares in the IPO (or thereafter) would “not receive any interest in LifeWorks”.
18As part of the above disclosure, Ceridian stated that the value of its interest in LifeWorks was approximately $96 million, and that, as the distribution was a taxable event, it anticipated it would incur approximately $3.2 million of foreign taxes and use approximately $96 million of its U.S. federal net operating losses to offset the tax gain in the U.S. in connection with the distribution.
19The distribution of Ceridian’s interest in LifeWorks followed by its IPO proceeded in late April in accordance with its public disclosure. The value of Bluemoon’s shares has nearly quadrupled since its initial offering.
20On July 9, 2018, Morneau Shepell announced that it would acquire all the issued and outstanding shares of LifeWorks for a total purchase price of $325 million. The acquisition was completed on July 27, 2018.
Bluemoon’s Inquiries
21On April 15, 2020, Bluemoon’s U.S. counsel sent letters to Ceridian and Jamie True identifying Bluemoon only as a shareholder and requesting production of 11 different categories of documents relating to the distribution of LifeWorks and its subsequent acquisition by Morneau Shepell.
22On June 19, 2020, Bluemoon sent virtually identical letters, this time from its Canadian counsel.
23On October 9, 2020, an identical letter was sent to Morneau Shepell, again by counsel for Bluemoon, but this time on behalf of a company named Pensacola Dynamic Trading Limited. The letter identified Pensacola only as a shareholder of Morneau Shepell. During the course of the application, it was disclosed that Mr. Chliaifchtein is the sole shareholder of Pensacola.
24On November 23, 2020, Bluemoon commenced the application.
25The application seeks an order requiring the respondents to produce 11 categories of documents broadly relating to the 2018 distribution by Ceridian of its interest in LifeWorks and the subsequent July 2018 acquisition of LifeWorks by Morneau Shepell together with related valuation and tax matters. The documents sought are extensive and involve confidential information.
Subsequent Events
26On October 21, 2021, while my decision was under reserve, Bluemoon issued a Statement of Claim, under the Class Proceedings Act, 1992, S.O. 1992, c.6, against Ceridian, certain of its current and former directors, Morneau Shepell Inc. and Morneau Shepell Ltd. (now LifeWorks Inc. and LifeWorks (Canada) Ltd.) and Jamie True.
27Bluemoon’s claim is for damages under the Securities Act, R.S.O 1990. C. S. 5 (the “Act”), for primary and secondary market misrepresentation based on the transactions previously discussed in April 2018. In addition, Bluemoon has brought a motion pursuant to s. 138.8 of the Act seeking leave to commence the action pursuant to s. 138.3 of the Act.
A Norwich Order
28A Norwich order is an order which has its origin in equity. It provides for pre-action discovery of third parties who, through no fault of their own, have been mixed up in the tortious acts of others and who may have information concerning those tortious acts. It is an intrusive, extraordinary remedy which must be exercised with caution.
29The court’s jurisdiction to issue a Norwich order is grounded in s. 96(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 which requires the court to administer concurrently all rules of equity and common law.
30The factors a court must consider in whether to grant a pre-action discovery order are as follows:
Does the applicant have a valid, bona fide, or reasonable claim?
Is the third party somehow involved in the acts complained of?
Is the third party the only practical source of information available?
Can the third party be indemnified for costs? and
Do the interests of justice favour obtaining the disclosure?
See: Alberta (Treasury Branch) v. Leahy, 2000 ABQB 575 at para. 106 (affirmed 2002 ABCA 101); Isofoton S.A. v. Toronto Dominion Bank (2007), 2007 CanLII 14626 (ON SC), 85 O.R. (3d) 780 (OSCJ) at para. 40; GEA Group AG v. Ventra Group Co. et al., (2009), 2009 ONCA 619, 96 O.R. (3d) 481 at para. 62.
31In GEA, the Court held that, while not a ‘stand-alone’ prerequisite, an applicant for a Norwich order is obliged to demonstrate that the requested pre-action discovery is “necessary”. In discussing the limits of the necessity criterion, Cronk J.A. stated in part at para. 91 of the decision:
While an applicant for Norwich relief must establish that the discovery sought is needed for a legitimate objective, this requirement may be satisfied in various ways. The information sought may be needed to obtain the identity of a wrongdoer (as in Norwich Pharmacal [[1973] 2 All E.R. 943 (H.L.)]), to evaluate whether a cause of action exists (as in P. v. T. [ [1997] 4 All E.R. 200 (Eng. Ch. Div.)]), to plead a known cause of action, to trace assets (as in Bankers Trust [[1980 3 All E.R. 353 (Eng.C.A.)] and Leahy), or to preserve evidence of property (as in Leahy). The crucial point is that the necessity for a Norwich order must be established on the facts of the given case to justify the invocation of what is intended to be an exceptional, though flexible, equitable remedy.
Analysis
(a) Bona Fide Claim
32Step one of the test for a Norwich order requires that the applicant establish a valid, bona fide, or reasonable claim. The nature and apparent strength of the applicant’s potential action must be weighed together with other relevant factors to ensure the application is not brought frivolously and without justification. See: 1654776 Ontario Ltd. v. Stewart, 2013 ONCA 184, 114 OR (3d) 745 (ONCA) at paras. 47-59.
33In its Notice of Application and Factum, Bluemoon states that it is seeking the information in order to investigate two potential claims:
i. A proceeding to be brought against Ceridian under Part XXIII.1 of the Act, in relation to misrepresentation in Ceridian’s secondary market disclosure; and
ii. A derivative claim in the name of Ceridian or one or more of its affiliates against current or former Ceridian officers and/or directors in connection with:
a) Potential tax consequences Ceridian may incur as a result of its disposal of its interest in LifeWorks; and
b) The directors and officers knowingly undervaluing Ceridian’s interest in LifeWorks and distributing it to shareholders, including themselves.
Securities Act Claim
34Part XXIII.1 of the Act creates civil liability for secondary market disclosure. Section 138.3 creates a statutory cause of action for damages suffered by secondary market investors who acquire or dispose of an issuer’s securities between the time that the issuer releases a document that contains a misrepresentation and the time when the misrepresentation is publicly corrected. The constituent elements of the cause of action are:
a) There must be a misrepresentation (an untrue statement of material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading – s.1 of the Act) which would reasonably be expected to significantly affect the market price of the securities : McKenna v. Gammon Gold Inc., 2010 ONSC 1591 at para. 32, var’d 2011 ONSC 641.
b) The claimant must have acquired or disposed of his or her shares between the time the misrepresentation was made and the time it was publicly corrected (s. 138.3(1) of the Act); and
c) The claimant suffered damages resulting from the misleading disclosure based on a decline in the market value of the security (s. 138.5 of the Act).
35While earlier cases held that a subsequent public correction was an essential element of a s. 138.3 claim (see: Mark v. Silvercorp Metals, 2015 ONSC 5348 at paras. 29-30; aff’d 2016 ONCA 641), the recent Court of Appeal decision in Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund v. Barrick Gold Corporation, 2021 ONCA 104 was not prepared to make that finding. Nevertheless, the Court stated that the price following the public correction is integral to the statutory damages’ formula for secondary market misrepresentation (see para. 66 and foot note 7 thereto).
36Bluemoon submits that Ceridian’s statement of the value of its interest in LifeWorks in its disclosure relating to its IPO was a misrepresentation. Ceridian takes issue with that allegation and submits that in any event the alleged misrepresentation was corrected by Morneau Shepell’s public announcement of its purchase of LifeWorks for $325 million on July 9, 2018 and Bluemoon has accordingly suffered no damages as a result. For this reason, the respondents submit that Bluemoon’s proposed claim pursuant to the Act is frivolous and vexatious.
37Given that Bluemoon has now issued a Statement of Claim in respect of a s. 138 claim arising out of Ceridian’s alleged misrepresentation and is seeking leave to continue it pursuant to the Act, I will refrain from analyzing its merits except to say that it my view, Bluemoon will have difficulty in advancing such a claim given that it neither acquired nor disposed of its Ceridian shares between the date of the alleged misrepresentation and the subsequent public correction by Morneau Shepell on July 9, 2018 and more importantly, as there has been no decline in the value of its shares following the correction, it has suffered no damages. On the contrary, the shares have increased in value since the date of Bluemoon’s purchase.
38Bluemoon also initially based its misrepresentation claim upon its belief that Ceridian might have “undisclosed tax liabilities in the U.S., Canada or other jurisdictions”, arising from what Bluemoon says it fears is Ceridian’s under-reporting of the gain attributable to the distribution of its interests in LifeWorks
39There is no evidence that any such reassessment has occurred or that there is any reason to believe the taxing authorities have shown any interest in undertaking a reassessment. Such a possibility is entirely speculative. Nor has Bluemoon alleged that it has suffered any loss as a result of such misrepresentation.
40Further, and in response to Bluemoon’s allegation, Ceridian delivered the affidavit of Timothy Farley, Ceridian’s Vice-President – Tax. Mr. Farley deposes that there are no undisclosed tax liabilities in the U.S., Canada or elsewhere arising from the distribution of Ceridian’s interest in LifeWorks. In support of his statement, Mr. Farley provided detailed information on the tax filings of Ceridian and two related companies, Ceridian Canada Ltd. and Ceridian Global UK Holding Company Ltd. and attached as exhibits excerpts from the tax filings of Ceridian and Ceridian Canada.
41Mr. Farley’s evidence on the issue, which I accept, establishes that Bluemoon’s speculation that Ceridian may have undisclosed tax liabilities arising from the LifeWorks distribution is totally unfounded.
42In reply to Mr. Farley’s affidavit, Bluemoon’s tax expert witness, for the first time, asserted he was concerned that Ceridian’s public disclosure may not have accurately predicted the quantum of net operating losses that would ultimately be used to offset the tax associated with the LifeWorks distribution.
43As Bluemoon’s tax expert did not raise a concern regarding net operating losses in his first affidavit, Mr. Farley was not able to respond. Raising that issue for the first time in reply is neither appropriate nor fair. Further, as with the speculation concerning undisclosed tax liabilities, I consider the concern regarding the impact, if any, on net operating losses to also be speculation. Nor is there any evidence that Bluemoon or any other shareholder has suffered any loss as a result.
Derivative Action
44Bluemoon submits that it may be that a derivative action should be brought on Ceridian’s behalf against its executive officers and directors, past and present, because of both the potential tax consequences of the transaction and the potential distribution of the asset at less than fair market value.
45I have already addressed the issue of tax consequences. For the reasons stated, I am satisfied that Ceridian has suffered no tax consequences arising from the distribution nor is there any evidence that is likely to be the case. Accordingly, there is no basis for a derivative claim based on alleged tax consequences.
46With respect to the distribution of Ceridian’s interest in LifeWorks at less than fair value, Bluemoon submits that Ceridian’s officers and directors likely knew that Ceridian’s prospectus misrepresented the actual value of LifeWorks and personally benefited from Ceridian’s distribution of its interest in LifeWorks. It submits those actions constituted a breach of fiduciary duty by the executive officers and directors of Ceridian at the time of the distribution.
47While I can’t say, based on the record, that such a claim cannot succeed, as with its alleged statutory claim pursuant to the Act, I am of the view, based on the evidence, that Bluemoon also faces difficulties in advancing such a claim against the directors and officers. At the time of the distribution, Ceridian was a private company. The distribution was not just to Ceridian’s then directors and executive officers but to all shareholders, pro rata. It was not a sale. The valuation of Ceridian’s interest in LifeWorks was for tax purposes both for Ceridian and its shareholders who received an interest in LifeWorks. The transaction was fully disclosed in the IPO filings and it was made clear to all shareholders purchasing shares in Ceridian that its interest in LifeWorks would not be part of Ceridian going forward. Finally, Bluemoon bought its shares in the secondary market, after it was aware of the distribution and the subsequent purchase by Morneau Shepell. As a result, I consider Bluemoon’s proposed derivative claim against Ceridian’s officers and directors, past and present, to be very weak.
Necessity
48Bluemoon submits that its objective in seeking pre-action discovery of the respondents is to obtain additional information before it can make a reasonable decision as to whether to commence a claim or claims.
49In response, both Ceridian and Morneau Shepell submit that the information sought by Bluemoon is neither necessary for it to commence its alleged claims nor does it have a legitimate objective in seeking the order. In that regard, they submit, based on the evidence, that Bluemoon’s objective in bringing this application has nothing to do with any damages it has suffered as a shareholder or to vindicate any alleged wrong done to Ceridian. Rather its objective is to obtain information for its shareholder, Mr. Chliaifchtein, concerning Mr. True’s financial and business affairs surrounding the sale of WorkAngel’s 50% interest in LifeWorks to Morneau Shepell. The transaction occurred during the timeframe that intersects with Mr. True’s separation, divorce, and related legal proceedings in the UK with his former spouse, Karina True. Ms. True is Mr. Chliaifchtein’s daughter.
50With respect to whether the information sought is required or necessary to pursue its claims, in my view, the evidence establishes Bluemoon has more than enough information to bring its alleged claims against Ceridian concerning the distribution of its interest in LifeWorks. This is not a case where the applicant does not know who the alleged wrongdoers are or if it has a cause of action. Unlike previous Norwich applications where the order is sought against third parties and not the wrongdoer, Bluemoon seeks the order against Ceridian which it alleges committed the misrepresentation.
51Bluemoon asserts that various executive officers and directors of Bluemoon, in breach of their fiduciary duty, “knowingly” undervalued LifeWorks and distributed it to shareholders, including themselves. It has sufficient information to seek leave to bring a derivative action. It knows who the officers and directors of Ceridian were at the time and which ones owned shares in Ceridian and therefore would have received an interest in LifeWorks at the time of the distribution. It also knows the extent of the alleged gain by the shareholders arising from the sale to Morneau Shepell.
52Notwithstanding that Bluemoon submits it has issued the Statement of Claim in respect of its claim under the Act in order to avoid the expiry of a limitation period, the fact of the claim is further confirmation, in my view, that it has sufficient information to commence such a claim against the respondents without the pre-action discovery it seeks. To the extent it requires further information, it can obtain it from the discovery process in the action.
53In support of the submission that Bluemoon’s objective in obtaining the Norwich order is not legitimate, the respondents point to several factors in evidence, including:
Mr. Chliaifchtein caused Bluemoon to purchase the shares of Ceridian on July 11, 2018, two days after Morneau Shepell announced its purchase of LifeWorks. Further, it only purchased 2,100 shares which is a small number having regard to the issued and outstanding shares;
Since the IPO, Ceridian’s shares have increased in value almost four fold;
When the demand letters for information concerning the transactions were sent to the respondents some two years after the events complained of, Mr. True was the focus of the information requested notwithstanding that he had never been an officer, director or shareholder of Ceridian. At the time of the events in issue, Mr. True was the CEO of LifeWorks and WorkAngel which owned 50% of LifeWorks;
The weaknesses of Bluemoon’s alleged claims against Ceridian and its former/present directors and officers;
The application specifically seeks information and documents related to Mr. True who is the only individual named in the Notice of Application. In the list of information sought attached as Appendix “A” to Bluemoon’s factum, Mr. True is the only individual named. It seeks: “Any and all agreements with Jamie True relating to the distribution or acquisition.” Further, Bluemoon’s factum makes reference to Mr. True, wrongly, as a shareholder of Ceridian and indicates a derivative claim lies against him;
Bluemoon’s opposition to Ceridian’s request for a sealing order of Ceridian’s confidential financial information. As Mr. Chliaifchtein is neither a director nor officer of Bluemoon, under the terms of the proposed draft order sought, the information to be sealed could not be shared with Mr. Chliaifchtein;
Mr. True was separated from his former spouse in 2017 and they are now divorced. In the years 2017, 2018, 2019 and 2020, the couple was involved in various family law proceedings in the UK.
54Bluemoon submits that the suggestions of an improper motive on the part of the applicant are inaccurate, unsubstantiated, and irrelevant to the issues on this application. I disagree.
55The above factors cause me great concern as to Bluemoon’s motives in pursuing the application. I am satisfied based on all the circumstances that Bluemoon’s real objective in seeking the Norwich order is to obtain information about Mr. True’s involvement in and financial benefits from the sale of LifeWorks to Morneau Shepell.
56Mr. True was never an officer, director, employee or shareholder of Ceridian. There is no evidence he was involved in Bluemoon’s alleged complaints, the distribution of Ceridian’s interest in LifeWorks to its shareholders and the establishing of the value of its interest in respect of the distribution. In my view, Bluemoon’s fixation from the outset in obtaining information concerning Mr. True’s involvement in the transactions only makes sense in the context of his prior relationship with the Chliaifchtein family. Everything else is irrelevant.
57If that motive is inaccurate or unsubstantiated, Bluemoon has failed to address it although it has had ample opportunity to do so. Rather than produce Mr. Chliaifchtein, Bluemoon has produced a Swiss lawyer (an officer and director) and an independent tax expert who were not able to speak to the decision behind the purchase of the Ceridian shares. Nor do I consider the respondents’ submission to be irrelevant, given the extraordinary equitable nature of the relief requested.
58As a result, I am not satisfied Bluemoon’s objective in bringing the application is for a legitimate purpose but rather is brought for the purpose identified by the respondents, to obtain information about Mr. True, which is neither a recognized nor an appropriate basis to order pre-action discovery.
59The issue of whether granting the Norwich order is sought for a legitimate objective is tied to the question of whether the granting of the Norwich order is in the interests of justice. In my view, and given my findings, I am satisfied that it would not be in the interests of justice to issue the order requested.
60For the above reasons, therefore, Bluemoon’s application is dismissed.
Sealing Order
61As noted, Ceridian has brought a motion for a sealing order pursuant to s. 137(2) of the Courts of Justice Act. Ceridian seeks to seal by redaction, various portions of Mr. Farley’s affidavit as well as the financial information in both exhibits to his affidavit on the basis that the information concerning its tax filings is highly confidential.
62In response, Bluemoon submits that Ceridian has failed to lead convincing evidence of a serious risk to an identified public interest to overcome the strong presumption in favour of open courts.
63I am satisfied that Ceridian’s tax information is confidential and highly sensitive. Further, it was filed solely in response to Bluemoon’s speculative allegation in respect alleged tax liabilities.
64The recent Supreme Court of Canada decision in Sherman Estate v. Donovan, 2021 SCC 25 affirmed the test in Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, [2002] 2 S.C.R. 522 concerning the exercise of discretion to limit the open court principal. The Court held that the test rests on three core prerequisites: the applicant must demonstrate that openness presents a serious risk to an important public interest; the order sought is necessary to prevent the serious risk that alternative measures won’t prevent; and the benefits of granting such an order outweigh its negative effects.
65In Sierra Club, at para. 55, Iacobucci J. recognized that a general commercial interest of preserving confidential information was an important public interest. Further, the fact that the information in question is highly sensitive establishes, in my view, that public exposure via the court process poses a serious risk to such confidential information.
66Ceridian seeks an order redacting the financial information in the two exhibits to Mr. Farley’s affidavit as well as the portions in his affidavit referring to the tax information and those portions of the factums that refer specifically to the tax information. Mr. Farley’s statement that Ceridian has no undisclosed tax liabilities from its distribution of its interest in LifeWorks remains. It is the backup information to that statement that is being sealed. In my view, those measures are appropriate and proportionate given the information sought to be protected. Further, the benefits of granting such an order outweigh its negative effects.
67Accordingly, an order shall issue redacting the following portions of the Farley affidavit: the last three and a half lines of para. 11, after “Ceridian Canada”; para. 14 from “shares” to the end; the first two and a half lines of para. 15 to “there”, as well as the financial information in both Exhibit “A” which is an excerpt from its 2018 U.S. tax return and Exhibit “B” which is Schedule 6, Summary of Disposition of Capital Property in Ceridian Canada’s 2018 tax return.
68In addition, paragraph 16, and all but the first sentence of foot note 1, the third sentence of para. 37 and the last three and a quarter lines of para. 59 from “that” in Ceridian’s factum shall be redacted, together with foot note 25 after reference to the Farley affidavit and para. 30 from the third sentence to the end and para. 34 in Bluemoon’s factum and the second line of para. 10 to the end of the sentence and the following sentence and para. 14 from “higher” to the end of the paragraph in Bluemoon’s Responding and Reply Factum.
69With the above changes, the draft order attached as Schedule “A” to Ceridian’s notice of motion shall issue. In my view, in the circumstances, the limitations on who can review the confidential information as set out therein are appropriate.
Motion to Quash
70As noted in the introduction, I dismissed Morneau Shepell’s motion to quash Bluemoon’s rule 39.03 Notice of Examination to examine Mr. Stephen Liptrap, the President and Chief Executive Officer of Morneau Shepell Inc. at the beginning of the hearing, with reasons to follow. These are my reasons.
71The Notice of Examination was served on Wednesday June 16, 2021, following delivery of materials by all parties. It stated that Mr. Liptrap was “required” to produce at the examination “all original documents … which are relevant to any matters in issue in this proceeding” – and a list of “all documents over which you claim privilege.”
72On July 9, 2021, pursuant to my direction, Bluemoon’s counsel delivered a letter to Morneau Shepell’s counsel setting out nine different categories of issues they intended to examine Mr. Liptrap on concerning the “existence and nature” of documents in Morneau Shepell’s possession.
73Morneau Shepell submits that to permit the Notice of Examination to stand would permit Bluemoon to obtain the vary documents it seeks to obtain in its application in advance of a determination of the merits. It concedes the existence of the documents but submits that providing the documents and/or their details goes to the very substance of the application.
74In response, Bluemoon submits it has prima facie right to examine Mr. Liptrap especially given the parties do not dispute that Mr. Liptrap has evidence relevant to the application which Morneau Shepell’s chosen affiant does not. It seeks only an understanding of what documents exist.
75As I stated at the time when I allowed the motion, in an application for pre-action discovery, service of a Rule 39 notice of examination on an officer of one of the parties seeking the very information at issue in the application in advance of a determination on the merits is not appropriate. It don’t accept, based on the outline of the questions proposed, that just the existence of the documents was at issue. In my view, Bluemoon was also after the substance. As noted, Morneau Shepell conceded the existence but Bluemoon persisted in pursuing the examination.
76A Norwich order is recognized as an intrusive remedy. To further that intrusion by seeking to examine the President and CEO of the respondent seeking information which is the subject of the application is not only improper in my view, it amounts to an abuse of process.
77In addition, as I have now dismissed Bluemoon’s application, the Notice of Examination is moot and should be struck on that basis as well.
78The motion is therefore allowed, and the Notice of Examination quashed.
Conclusion
79For the above reasons,
Bluemoon’s application is dismissed;
An order shall issue redacting Ceridian’s financial information as directed; and
The Notice of Examination served on Mr. Liptrap is quashed.
80Costs are reserved. If the parties cannot agree, I may be spoken to.
L.A. Pattillo J.
Released: January 19, 2022