Ontario superior court judges, do, however, have inherent jurisdiction based upon the fusion of the courts of law and equity under s. 96(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43. Nevertheless, the extraordinary discretionary remedy, commonly known as a “Norwich order” has a long pedigree in Canada, following the seminal House of Lords decision in Norwich Pharmacal Co. v. Comrs. of Customs and Excise,  A.C. 133 (H.L.), [“Norwich Pharmacal”]. In Norwich Pharmacal, Lord Cross of Chelsea identified the following test to determine whether pre-action discovery of a third party should be allowed in the exercise of the court’s discretion:
(i) the strength of the applicant’s case against the unknown alleged wrongdoer;
(ii) the relationship between the alleged wrongdoer and the respondent (the person from whom discovery is sought);
(iii) whether the information could be obtained from another source; and
(iv) whether the provision of the information “would put the respondent to trouble which could not be compensated by the payment of all expenses by the applicant”. (Norwich Pharamacal, at 199).
In a judgment released today, in GEA Group AG v. Ventra Group Co., 2009 ONCA 619 [“GEA Group”], the Court of Appeal for Ontario concluded that the appropriate standard of review on appeal from a Norwich order is correctness. It also held while an applicant for a Norwich order is obliged to demonstrate that the requested pre-action discovery is “necessary”, this is not a ‘stand-alone’ prerequisite or that it is restricted to the necessity to plead a cause of action. Surprisingly, there is no analysis on whether a letter of request (letters rogatory) for extra-judicial assistance from a foreign court to obtain evidence relevant to proceedings pending in the foreign jurisdiction is required. (cf. Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52,  2 S.C.R. 612 (S.C.C.).
The appellant, Flex-N-Gate Corporation (“FNG”), a privately held Illinois automobile components producer and supplier and the appellant, Ventra Group Co. (“Ventra”), a Canadian automotive supplier, both controlled or beneficially owned by one, Shahid Khan (“Khan”) The appellant, Timothy Graham (“Graham”), an Ontario lawyer, was also a director, officer and employee of Ventra and acted as Ontario counsel to FNG, Ventra and Khan. The respondent, GEA Group AG (“GEA”), is a German public corporation operating as global technology group consisting of more than 250 companies in 50 countries.
In December of 2003, FNG made a preliminary, non-binding “Indicative Offer” to purchase a GEA subsidiary company. In both the Indicative Offer and a subsequent “Final Offer’ on March 17, 2004 by FNG to GEA, FNG made several statements suggesting that it held substantial assets. After the parties failed to conclude a share purchase transaction (SPA), the respondent, GEA commenced arbitration proceedings pursuant to the SPA and under the rules of the German Institute for Arbitration, claiming damages against FNG exceeding €210 million for alleged breach of contract. FNG, counterclaimed against GEA for damages for breach of the SPA.
The Arbitration proceedings were bifurcated into liability and damages phases. On September 15, 2006, the arbitral tribunal ruled in favour of GEA on the issue of liability, holding that FNG had breached the SPA, dismissing FNG’s counterclaim. The tribunal held that GEA was entitled to expectation damages to place it in the position had FNG fulfilled its contractual obligations. FNG’s application to vacate the tribunal’s liability decision to a German appellate court was denied on grounds of prematurity, since the damages phase of the Arbitration was not yet completed.
FNG alleged fraud arising from Khan’s testimony during the liability phase of the arbitration— regarding Ventra’s $1 Billion in sales and Ventra’s relationship with FNG (also stating that he owned FNG through a Nova Scotia LLC)— which conflicted with FNG’s representation, in both the Indicative and Final Offers, that Ventra was a wholly-owned FNG subsidiary. The parties also hotly contested the events and discussions during a settlement meeting which took place in Germany on March 8, 2007, among the parties’ principals and corporate and FNG’s German trial counsel, Thomas Weimann (“Weimann”) and GEA’s German trial counsel, Peter Heckel (“Heckel”).
According to Cronk, J.A.:
 The parties are also divided on what was said during a telephone conversation on January 30, 2008 between Heckel and Weimann. Heckel claims that he called Weimann on that date to inquire whether FNG was going to pay the outstanding €228,760 costs award made in favour of GEA by the German appellate court. Heckel maintains that Weimann replied that FNG was not going to pay the costs award and indicated in German that FNG was just “two sheds in the landscape”, suggesting that FNG had no substantial assets. Weimann denies having made these statements.”
Ultimately, GEA surmised that FNG had transferred all its assets to Khan or other unknown persons to make itself ‘judgment proof’ from any prospective damages award in the Arbitration from FNG. GEA then moved ex parte before Wilton-Siegel, J. for a Norwich order against Ventra and Graham. GEA’s application for a Norwich order was founded upon allegations of “wholesale fraudulent conveyances” by FNG, in particular, FNG’s alleged wrongful transfer of its interest in Ventra. On July 9, 2008, Wilton-Siegel J. granted the Norwich Order”; albeit narrower in scope than sought by GEA, restricted to “any and all conveyances, transfers or transactions whereby FNG’s interest in [Ventra] was transferred from FNG to other entities”.
Ventra and Graham then moved to set aside the Norwich Order, relying upon Graham’s sworn affidavit whereby he denied ever having been an FNG director, but confirming that he was a director, employee, officer and occasional legal counsel of Ventra et al. In the latter capacity, Graham said, “nothing in this affidavit is intended to waive solicitor-client, litigation work product, or other legal privileges of those entities”. (at ¶25). Graham also denied that FNG owned Ventra shares even indirectly”; “No representation (guarantee) was made in the SPA concerning FNG’s ownership of Ventra shares”; and “FNG held no ownership interest in Ventra at the time of or at any time following the SPA.” (at ¶26). In a preliminary motion, Ventra and Graham further sought to vary the confidentiality provision of the order to allow disclosure of the Norwich proceeding and the Norwich Order to FNG to obtain necessary information only obtainable from Graham.
The parties then brought a motion before C. Campbell J., who granted the requested variation of the Norwich Order, permitting disclosure to FNG of the Norwich application, the underlying orders, and the related proceedings and evidence, without prejudice to FNG’s right to move before the court to vary or set aside the conditions (the “September Order”), subject to certain conditions, namely:
“b) [GEA, Ventra, Graham] and FNG are free to use the information provided, and the documents and transcripts generated in these proceedings in other proceedings that [GEA] may initiate either in Ontario or elsewhere and whether it be in court or in a private dispute resolution proceeding; and
c) notwithstanding paragraph (b) above, no cause of action will be commenced or maintained by any of [Ventra, Graham], FNG and/or any of their shareholders, directors, officers, employees, agents or counsel (including, without limitation, Shahid Khan) with respect to the publication or disclosure of the materials generated, or information disclosed, in this proceeding by [GEA] or any of its directors, officers, employees, agents or counsel, including without limitation that any statements made are, under the law of defamation, accorded absolute privilege.”
After receiving notice of both Orders, FNG then moved to set aside the conditions in the September Order and the Norwich Order itself. GEA also moved for various relief, including an order continuing and varying the Norwich Order to permit the discovery of Graham on the issue of the failed 2004 SPA transaction between GEA and FNG. In this variation motion, GEA relied on the same grounds in support of the Norwich, but for the first time alleged that it “had been induced to deal with FNG in respect of the SPA based on fraudulent misrepresentations by FNG regarding its assets.”(at ¶31) GEA argued that the interests of justice favoured allowing it to pursue pre-action discovery with respect to this “different, but equally blameworthy conduct by FNG”.
Cumming J. subsequently dismissed the motions brought by Ventra, Graham and FNG and granted GEA’s motion to vary the Norwich Order (the “December Order”). In separate appeals, FNG and Ventra and Graham (collectively, the “appellants”) appealed the December Order, seeking to set aside the Norwich Order in its entirety, as well as conditions 1(b) and (c) of the September Order, above. In the alternative, they sought to narrow the scope of the pre-action discovery permitted by the Norwich Order. A prior sealing order by the Court of Appeal was vacated on the application of GEA, without cavil.
The Court of Appeal’s Analysis
Justice Cronk cited with approval Justice Mason’s formulation of the factors for Norwich relief in Alberta (Treasury Branches) v. Leahy (2000), 270 A.R. 1 (Q.B.), aff’d (2002), 303 A.R. 63 (C.A.), leave to appeal refused  S.C.C.A. No. 235 (“Leahy”) as follows:
The court will consider the following factors on an application for Norwich relief:
(i) Whether the applicant has provided evidence sufficient to raise a valid, bona fide or reasonable claim;
(ii) Whether the applicant has established a relationship with the third party from whom the information is sought such that it establishes that the third party is somehow involved in the acts complained of;
(iii) Whether the third party is the only practicable source of the information available;
(iv) Whether the third party can be indemnified for costs to which the third party may be exposed because of the disclosure, some [authorities] refer to the associated expenses of complying with the orders, while others speak of damages; and
(v) Whether the interests of justice favour the obtaining of the disclosure.
Cronk, J.A. concluded that the motions judge erred by misapprehending and misapplying the test for a Norwich order:
“…in the context of the application as presented to him, the motions judge failed to consider properly whether the disclosure sought was a necessary measure in all the circumstances to permit GEA to pursue its rights against FNG. This was an error in principle, reviewable on the correctness standard.” (at ¶ 70).
The learned justice goes on to observe that:
 …the precise placement of the necessity requirement in the inventory of factors to be considered on a Norwich application is of little moment. The important point is that a Norwich order is an equitable, discretionary and flexible remedy. It is also an intrusive and extraordinary remedy that must be exercised with caution. It is therefore incumbent on the applicant for a Norwich order to demonstrate that the discovery sought is required to permit a prospective action to proceed, although the firm commitment to commence proceedings is not itself a condition precedent to this form of equitable relief.
…The developed Norwich jurisprudence does not confine pre-action discovery to only those cases where it is established that the information sought is necessary to plead, or even to those situations where the applicant is determined to sue.”
 The purpose of an action for discovery “is to enable justice to be done”: [Straka v. Humber River Regional Hospital (2000), 51 O.R. (3d) 1,] at para. 36. It would defeat the object of an action for discovery if, other prerequisites to obtaining such relief having been satisfied, a Norwich order is automatically precluded because the applicant seeks to justify the order on grounds other than necessity to plead.
 On the contrary, in my opinion, the limits of the necessity criterion for a Norwich order must be established in the context and on the facts of each particular case. 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), to evaluate whether a cause of action exists (as in [P. v. T.,  4 All E.R. 200 (Ch D)]), to plead a known cause of action, to trace assets (as in [Bankers Trust Co. v. Shapira,  3 All E.R. 353 (C.A.)] and Leahy), or to preserve evidence or 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.”
The Court of Appeal held that the motions judge committed the following reversible errors:
2) Neither in GEA’s original notice of application for the Norwich Order nor in its November 2008 variation motion, did it identify a possible cause of action against Ventra as a ground for the equitable relief sought, nor did it seek the information to permit the investigation of whether it had a potential actionable claim against Ventra or other prospective defendants apart from FNG and its principals or agents.
3) While GEA’s allegations of fraud were targeted exclusively at FNG, but not Ventra or Graham, the motions judge failed to consider whether a Norwich order was required to permit GEA to pursue its rights against FNG, including to permit GEA to plead its case against the alleged wrongdoer, namely, FNG, (at ¶98) and
4) a Norwich order was unnecessary for GEA to pursue its rights against FNG. The existing evidentiary record was sufficient for FNG to advance its claims of fraudulent conveyances and fraudulent misrepresentations against FNG and/or Khan, “while full particulars of the mechanics of the potential fraud or frauds were unknown to GEA, the nature, timing and apparent purpose of the frauds were known, as was the identity of the suspected wrongdoer or wrongdoers. “ (at ¶99)
The Court of Appeal also granted leave to the appellants to file fresh evidence regarding the civil proceedings commenced by GEA in Illinois, which Justice Cronk held:
“…strongly undercuts GEA’s suggestion that pre-action discovery in Ontario from Ventra and Graham is required in order for GEA to determine and address its legal remedies against FNG and/or Khan. The fresh evidence, which I regard as relevant and admissible under the principles outlined in R. v. Palmer,  1 S.C.R. 759 and Sengmueller v. Sengmueller (1994), 17 O.R. (3d) 208 (C.A.), supports the claim that GEA was positioned at the time of the motions before the motions judge to commence proceedings against FNG and/or Khan if so advised. It also suggests that GEA now has access to wide-ranging discovery rights against FNG and Khan in the State of Illinois.” (at ¶102)
The Court of Appeal characterized GEA’s efforts to obtain the Norwich order to gather evidence of additional fraud as “an overt ‘fishing expedition’”. Further, the Norwich order was neither necessary to identify the principal alleged wrongdoer (already known to be FNG) nor was a Norwich order necessary to preserve evidence. No tracing was required, as GEA has no existing proprietary or personal claim or other beneficial entitlement to assets formerly or at present in the possession of any of the appellants. Finally, Cronk, J.A. rejected the request to set aside or vary the September Order, which was either not directly appealed from, or consented to by GEA.
At paragraph 85, Justice Cronk emphasizes that “a Norwich order is an equitable, discretionary and flexible remedy. It is also an intrusive and extraordinary remedy that must be exercised with caution. It is therefore incumbent on the applicant for a Norwich order to demonstrate that the discovery sought is required to permit a prospective action to proceed, although the firm commitment to commence proceedings is not itself a condition precedent to this form of equitable relief.”
An unanswered question is the issue of jurisdiction and arbitrability. Recall that the arbitral seat was in Germany and the underlying dispute was arbitrated under the rules of the German Institute for Arbitration; in fact, an attempt to vacate the arbitration award on liability was rejected by a German appeal court as premature. Why then is an Ontario court determining the issue of interim measures, such as a Norwich order? (see, Alan Redfern and Martin Hunter (with Nigel Blackaby and Constantine Partasides), Law and Practice of International Commercial Arbitration (4th Ed.) (London: UK, Thomson, Sweet & Maxwell, 2004) Chap. 7, The Role of National Courts During Proceedings and see also, GreCon Dimter Inc. v. J.R. Normand Inc. et al., 2005 SCC 46, (2005) 255 D.L.R. (4th) 257, (2005) 336 N.R. 347, (2005) J.E. 2005-1369 (S.C.C.))
Antonin I. Pribetic