Canada (Transport) v. Marineserve.mg Inc.

Canada (Transport) v. Marineserve.mg Inc. Court Supreme Court Date 2004-06-08 Citation 2004 NSSC 115 Docket SH 173182 Judge/Registrar/Adjudicator MacLellan, Douglas L. (Honourable Justice) Document Type Decision Relations Library Sheet - Canada (Transport) v. Marineserve.mg Inc. - 2004 NSSC 115 - 2004-06-08 - Library Sheet Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: Canada (Transport) v. Marineserve.mg Inc. , 2004 NSSC 115 Date: 20040608 Docket: S.H. No. 173182 Registry: Halifax Between: Attorney General of Canada, in Right of the Minister of Transport Plaintiff v. Marineserve.mg Inc., a body corporate and Maritime Harbours Society, an incorporated society Defendants Judge: The Honourable Justice Douglas L. MacLellan Heard: May 26, 2004, in Halifax, Nova Scotia Counsel: John P. Merrick, Q.C, for the plaintiff, Attorney General of Canada Harvey L. Morrison, Q.C., for the Marineserve.mg Inc. William L. Ryan, Q.C., for Maritime Harbours Society By the Court: [1] This is an application by the plaintiff, Attorney General of Canada, in Right of the Minister of Transport (Transport Canada) in which it asks for an order that it be allowed to use financial records it obtained from the defendant, Marineserve.mg Inc., (Marineserve) in an arbitration hearing with Maritime Harbours Society (MHS) and therefore avoid the implied undertaking rule. [2] This action by the plaintiff was started against the defendant here and also MHS. The action alleged breaches of contract by MHS and also in tort against both MHS and Marineserve. The action arose as a result of funding provided by the plaintiff to MHS for work related to the Port of Digby. MHS entered into a separate contract with Marineserve under which it provided various services to the Port in exchange for funding obtained by MHS from the Government of Canada. [3] In September 2000, the plaintiff initiated an audit of the records of MHS to ensure that it was complying with the contract obligations. As a result of this audit, the plaintiff started the action against the two defendants. [4] Following the commencement of the action against the two defendants, this Court in May 2002, ordered that the action against MHS be stayed and that the parties use the arbitration procedure set out in their contract. That arbitration is now scheduled for June 15, 2004. [5] In June 2001, the plaintiff obtained a Court order requiring Marineserve provide to it financial records and documents in relation to its contract with MHS dealing with the Port of Digby. The plaintiff now wishes to use these records in the arbitration hearing with MHS. [6] In addition to hearing from counsel for the parties I have also heard from counsel for MHS and he has filed a brief in opposition to the application. [7] Counsel have identified the issue as being whether it is appropriate to permit the plaintiff to violate the normal implied undertaking rule and to make use of the financial records it obtained from the defendant at the time of the arbitration hearing. Counsel for the plaintiff has referred me to the leading cases on the issue. [8] In Sezerman v. Youle [1996] N.S.J. No. 172, our Court of Appeal dealt with the issue, and in Campbell v. Jones [2002] N.S.J. No. 450 it once again dealt with the issue and there Saunders, J.A. said: The court’s most comprehensive discussion of the implied undertaking rule and granting relief therefrom is Sezerman v. Youle (1996), 150 N.S.R. (2nd) 161. There Chipman, J.A. writing for the court, adopted as an accurate statement of the effect of the rule, the formulation proposed by John Laskin (as he then was) in his article entitled “The Implied Undertaking In Ontario” (1989-90), 11 The Advocates’ Quarterly 298: There is an implied undertaking by a party conducting an oral examination for discovery that the information so obtained will not be used for collateral or ulterior purposes; any such use is a contempt of court. The mischief which the rule seeks to prevent is the use of discovery evidence in a manner which is unfair to the party who gave it. In situations where a litigant comes into possession of otherwise confidential information under the auspices of pre-trial discovery or disclosure procedures, the courts have held the litigant to an implied undertaking not to use that information for an improper purpose. Thus the rule operates to protect the privacy of a litigant when that privacy has been breached by court sanctioned procedures. As this court noted in Sezerman, application of the rule is not absolute. There are circumstances where relief will be granted. At para 25 of Sezerman, Chipman, J.A. endorsed Laskin’s analysis as a correct explanation of the primary exception to the rule: Laskin addresses relief from the undertaking at p. 313, noting that it is only with leave of the court that a party obtaining the disclosure is free to use it in a manner not contemplated by the implied undertaking... Laskin says at p. 314: Where leave is sought to use the material in other proceedings, an important factor is the extent to which those proceedings are connected with the proceedings in which disclosure is made. Where the two sets of proceedings involve the same or similar parties and the same or similar issues, leave will most readily be granted.... Also important is the use to which the party seeking leave wishes to put the material. Use for the purpose of related proceedings is regarded as a proper use consistent with the purposes for which discovery was made available and with the public interest in the administration of justice. [9] The defendant here objects to the use of its financial records mainly based on the fact that it is not a party to the arbitration hearing and also that when the plaintiff requested the confidential financial records counsel for the plaintiff allegedly argued that the records should be disclosed and that they would be protected by the implied undertaking rule. [10] Counsel for MHS has filed a brief in this application as a party which might be affected by the Court’s decision. In that brief and in his oral submissions before me, Mr. Ryan raised the issue of the jurisdiction of this Court to deal with the application. He submits that since the application is brought only under Rule 37.10, the Court should dismiss it. He offers the case of Empire Excavators Limited -and- T.A.G. Developments Limited [1998], 168 N.S.R. (2d) 309 as support for his position. In that case, Hood, J. of this Court dismissed an application under Rule 37.10 and she concluded: I conclude that an application cannot be brought under rule 37.10. An application must be brought under another rule and when it is, the court has the additional powers set out in rule 37.10. This application is not properly before the court and it is therefore dismissed. [11] That case dealt with an application dealing with a Mechanic’s Lien action. [12] I reject the submission that the Court cannot deal with this application. As pointed out by counsel for the applicant, the implied undertaking rule is not a rule of the Court but a rule established by our Court decisions, therefore, there is no specific rule applying to it. I would note, however, that Civil Procedure Rule 5.14 provides: No proceeding shall be open to objection on the ground that only a declaratory judgment or order is sought thereby, and the court may make binding declarations of right whether or not any consequential relief is or could be claimed. [13] I also note that Section 41(g) of the Judicature Act provides: In every proceeding commenced in the Court, law and equity shall be administered therein according to the following provisions: (g) the Court, in the exercise of the jurisdiction vested in it in every proceeding pending before it, shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as to the Court seems just, all such remedies whatsoever as any of the parties thereto appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them respectively in the proceeding so that as far as possible all matters so in controversy between the parties may be completely and finally determined and all multiplicity of legal proceedings concerning any of such matters avoided. [14] This Interlocutory Notice (Application Inter Partes) requested “an order granting leave to the applicant, Attorney General of Canada, to use any documents and information disclosed in this proceeding at the arbitration hearing between the Applicant and Maritime Harbours Society scheduled to commence June 15, 2004.” It was clear from the application what was being sought and I conclude that MHS was not taken by surprise by the application and would not need an adjournment to respond if the applicant amended his application and made it under Rule 5.14. [15] I would dismiss the objection based on jurisdiction. [16] Counsel from MHS also opposes the application on the basis that the applicant has not filed an affidavit setting out the financial records it intends to use and therefore the Court cannot decide if it would be proper to permit their use in the arbitration hearing. Counsel also suggests that by permitting this application the Court would be interfering in the arbitrator’s right to decide whether the records should be introduced into evidence for him. [17] I reject both arguments. I conclude that the application covers all the financial records obtained by the applicant and it will be up to the arbitrator to decide if the applicant is entitled to use these records at the arbitration proceeding. Part of that process could well involve a requirement of notice being given to MHS. [18] The applicant has made it very clear that any order I make should not bind the arbitrator, but simply avoid a possible objection to the use of the records based on the implied undertaking rule when the issue comes before him. I therefore reject the argument based on the suggestion that my order will interfere with the right of the arbitrator to control that proceeding. [19] I am also satisfied here that the plaintiff has shown that the arbitration procedure is closely connected to this action and the two proceedings involve the same issues and that the use of the records in the arbitration procedure is a proper use consistent with the public interest. [20] The plaintiff started its action against both defendants alleging breaches of contract and in tort. In the decision in which the Court allowed the plaintiff access to the defendant’s records, Tidman, J. of this Court commented on the relationship between the two defendants. He said: In my view the issue of the defendant’s liability is not a simple one and is inextricably interwoven with the issue of how the respondent used funds provided to it by MHS. The Plaintiff alleges that the respondent participated with MHS in breaking the contract between the plaintiff and MHS. The specific breach alleged is that MHS used the funds advanced by the plaintiff in a manner and for a purpose contrary to the provisions of the contract. Nearly two-thirds of the total funds advanced by the plaintiff to MHS were in turn advanced by MHS to the respondent. How those funds were used by the respondent will directly bear on the breach of contract issue. In my view, and as expressed by Mr. Merrick, the issues are so interwoven that it would indeed be very difficult and potentially confusing to deal with them separately. [21] I also note, as indicated by plaintiff’s counsel, that this financial information could possibly be obtained at the arbitration hearing by use of a subpoena to the defendant. [22] I also conclude that the release of this information to the arbitrator and to MHS would not cause any prejudice to the defendant as the plaintiff has already obtained the records following a contested chambers application and the documents relate only to the defendant’s dealing with MHS. [23] I would allow the application. The plaintiff will be entitled to use at the arbitration the information and documents it obtained from the defendant in this proceeding and will not be restricted by the implied undertaking rule. [24] The parties have not addressed the issue of costs and I would be prepared to hear counsel on that matter, however, I would hope that there can be agreement as normally costs would be in the cause. J.