Case Report – Ont. C.A. articulates soft necessity requirement for pre-action discovery

On August 21st, the Ontario Court of Appeal clarified the requirements for pre-action discovery and affirmed that an applicant for pre-action discovery must establish that the discovery sought is “necessary” to the process of obtaining justice for some wrongdoing.

Norwich Pharmacal orders, also called “equitable bills of discovery,” enable a person to conduct pre-action discovery against a third-party who is likely to have important information about a bona fide wrongdoing. The development of the Canadian standard for these and similar third-party orders is of high relevance today because they are a potential means of investigating and pursuing claims based on anonymous internet use.

The dispute in this case arose because the applicant had substantial evidence supporting actions for fraud against two known potential parties, all of which was submitted in support of its successful action for pre-action discovery of other persons. On appeal, the strongest position against the order taken by one of the respondents was that it ought not to have been granted because the information sought was not necessary to plead.

In allowing the appeal and setting aside the order, The Court of Appeal held that necessity is a requirement for Norwich order but rejected a necessity to plead requirement as being too strict. It said:

On my reading of the authorities in Canada and England, it is unclear whether the requirement of a showing of necessity for pre-action discovery properly forms part of the court’s inquiry as to whether the third party from whom discovery is sought is the only practicable source of the information available (as held in Mitsui at para. 24) or as to whether the interests of justice favour disclosure or non-disclosure (as argued by FNG before this court). However, there is no suggestion in the established jurisprudence that it is a stand-alone requirement for the granting of a Norwich order. Nor do I regard it as such.

In my opinion, 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…

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.), to plead a known cause of action, to trace assets (as in Bankers Trust 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 applicant had asserted that pre-action discovery would allow it to determine the circumstances of wrongdoing and assess its legal remedies. Though the Court of Appeal implicitly accepted these purposes as legitimate, it held that the applicant did not need pre-action discovery given it knew “the nature, timing and apparent purposes of the frauds” as well as the identify of the suspected wrongdoers.

I’ve recently been enjoying Antonin Pribetic’s excellent Trial Warrior Blog. Antonin has two posts on this case, one a detailed case summary and another that discusses how Norwich orders may be used to advance defamation claims against anonymous internet users.

GEA Group AG v. Ventra Group Co., 2009 ONCA 619.