CCS Corporation v Secure Energy Services Inc, 2016 ABQB 94

Court of Queen ’ s Bench of Alberta Citation: CCS Corporation v Secure Energy Services Inc, 2016 ABQB 94 Date: 20160212 Docket: 0701 13328 Registry: Calgary Between: CCS Corporation Plaintiff - and - Secure Energy Services Inc., Rene Amirault, Daniel Steinke, Nick Wieler, Gordon Getzinger, Gary Perras, Myron Newman, David Engel, Stan Moodie, Corey Higham, Karen Myrheim, Enerland Consulting Services Ltd., David Baldock, Pembina Pipeline Corporation and Triumph EPCM Ltd. Defendants _ ________________________________________ ______________ Reasons for Judgment of Chief Justice Neil Wittmann _________________________________________ ______________

Introduction [ 1 ] When one of several Defendants settles with a Plaintiff during the currency of the litigation and prior to a trial, the non- settling Defendants bring forward concern about the fairness of the process going forward. In this case, one Defendant, Triumph EPCM Ltd. (“Triumph”) entered into a Partial Settlement Agreement (“PSA”) with the plaintiff CCS Corporation (“CCS”) on December 11 th , 2015.

The PSA was disclosed to all parties including the Defendants, Secure Energy Services Inc. (“Secure”) and Pembina Pipeline Corporation (“Pembina”), as well as the individual Defendants, described as Former Employees of CCS. On January 6 th , 2016, the Court was asked to approve the PSA. At that hearing, the Court expressed its discomfort in “approving” a settlement made between the parties, partial or otherwise and indicated it would hear an application with respect to procedural fairness issues arising from the making and performance of the PSA.

In the result, an application has been brought by Secure and the Former Employees, supported by Pembina. The Application [ 2 ] The remaining issues in the application are a request that the Court: f. Direct CCS to produce to the Secure Defendants any records provided to it by Triumph which were in existence before the date of the Partial Settlement Agreement but which have not yet been produced by Triumph in this Action, as referred to in paragraph 6(a)-(

e) of the Partial Settlement Agreement. g. Grant leave to the Secure Defendants to Question any Triumph Witness identified and defined as such in paragraph 7 of the Partial Settlement Agreement, as well Amparo Escrig and Robert Lipsett, whose Affidavits were filed by CCS, without prejudice to any party to later argue that it is or is not adverse in interest to Triumph for the purposes of the use of this evidence at trial. h.

Grant leave to any party to bring a motion for subsequent directions on issues arising from the Agreement at any point prior to trial, including, but not limited, to the parties’ respective rights of cross-examination at trial. The Pleadings [ 3 ] CCS brought an action in December 2007 against Secure, the Former Employees, Pembina and Triumph.

The essence of the claim involves allegations that the Former Employees of CCS unlawfully caused Secure to compete with CCS by using Confidential Information including drawings, specifications, and engineering designs relating to Treatment Recovery and Disposal Facilities (“TRDs”) and landfills, the core business of CCS. [ 4 ] The claim also alleges that Secure wrongfully appropriated a business opportunity with Pembina that arose previously in discussions between Pembina and CCS.

The allegations against Triumph are that Triumph is an Engineering Project Management and Construction Management Firm, that one of Triumph’s clients is Secure and that Triumph personnel had a prior involvement with CCS professionally and a personal relationship with a principal and former employee of Secure. The latest iteration of the Statement of Claim includes the following allegation: 59.

Triump has used CCS Confidential Information that it knew, or reasonably ought to have known, was the property of CCS and that has been unlawfully taken from CCS, to prepare documentation to assist Secure in its applications to regulatory authorities, and to design and build facilities for Secure. Specifically, Secure and Triumph copied and used CCS Confidential Information to assist Secure and Pembina in their spring 2007 application to Alberta Environment to build Secure’s landfill site in Grande Prairie.

Secure and Triumph copied and used CCS Confidential Information to assist Secure and Pembina in Secure’s application for a facility license to the Alberta Energy and Utilities Board to build a TRD facility at La Glace in which Pembina has a 50% working interest. Also, Triumph is alleged to have taken Confidential Information and used it as a springboard to launch the business of Secure in direct competition with CCS: para. 70.

In addition, the Statement of Claim alleges that Triumph wrongfully induced an engineer employed by CCS’s consultants to take Confidential Information of CCS and wrongfully use it: paras. 82, 83. [ 5 ] The Defendants have vigorously defended the action. In so doing, no Third Party claims have been filed among or between any of the Defendants.

The Statement of Defence of Triumph expressly denies that it received, acquired, copied, adapted, plagiarized, borrowed, stole, or in any other way, used CCS Confidential Information as the term is expressed in the Statement of Claim and that Triumph independently had all of the necessary expertise, experience and technical ability to provide “superb” engineering services to Secure.

Triumph also denies it induced a former engineer employed by CCSs’ engineering consultant to take CCS Confidential Information from that engineering firm and utilize it for Triumph’s purpose in planning, designing, obtaining approvals for and constructing facilities for Secure and Pembina. Procedural Background [ 6 ] This Court has case managed this matter from inception and as such, has rendered a number of interlocutory application decisions. At the time of the making of the PSA, Pembina and Triumph each had

Summary Dismissal applications pending against CCS. The Pembina

Summary Dismissal application remains pending and is scheduled to be heard March 22 nd , 2016. The Pembina

Summary Dismissal application was scheduled to have been heard at the same time as an application for

Summary Dismissal by Triumph. Indeed, the brief filed by CCS in answer to each application is styled as “CCS’s Brief Responding to Pembina and Triumph Application for

Summary Judgment”. Those applications were scheduled to be heard December 14 th and 15 th , 2015 but did not proceed due to the making of the PSA between Triumph and CCS on December 11 th , 2015.

The Partial Settlement Agreement [ 7 ] The PSA made between Triumph and CCS is a five page document and includes four paragraphs of

preamble and 19 numbered paragraphs. One of the statements in the

preamble is that the agreement to a “partial settlement of certain aspects of the Action” is done “in the bona fide belief that in doing so, they will assist the Court in determining the issues in the action on their merits in a more efficient cost effective and fair manner.” [ 8 ] A payment from Triumph to CCS is to be made, but the amount is not disclosed in the PSA. It is reiterated that the document embodies an agreement for a partial settlement only. The claims by CCS for damages and costs against Triumph are settled, but the non- monetary claims for relief in the action are to survive.

The surviving claims against Triumph are claims for an interim and permanent injunction restraining the Defendants from making use or disclosing to any person or any party, the CCS Confidential Information; for interim and permanent Orders against all Defendants for the return of all CCS Confidential Information and an interim and permanent injunction restraining all Defendants from destroying or removing from their premises, including the Triumph premises, any evidence concerning CCS Confidential Information or from deleting or destroying any CCS Confidential Information. [ 9 ] The PSA indicates that the damages claim against Triumph will be struck out, which is a claim for damages against Triumph in the amount of $10,000,000.00 and that any claim for costs against Triumph or its insurer will be abandoned.

The PSA requires the delivery of affidavits by Triumph to CCS, which are from current and several former employees of Triumph “with respect to certain aspects of the matters in issue in the action” and that they will be filed with the Clerk of the Court and served on all Defendants.

There is also a covenant that CCS will be given “unfettered access to all Triumph records touching on the matters in issue in the action” and that “all such Triumph records shall be preserved by Triumph and kept at a venue conducive to their being reviewed by CCS, its counsel and its experts”. [ 10 ] Further, the PSA contains paragraphs entitled “ Access to Witnesses ” and “ Triumph Witnesses for Questioning ” which state as follows: 7.

Access to Witnesses: At all times, CCS and its counsel shall be entitled to have direct contact with the key witnesses from Triumph who had involvement in the matters in issue in the Action comprising Brad LeDrew, Greg Diduch, Derek Heaven, Tim Etcheverry, Jamie Ulicny, Natasha LeDrew, Steve Thompson, Brahm Singh, Grant Li, Duane Diduch, Herbert Huen, Fred Chen, Rod Lau, Tobi Wang and Eddy Yu (together called the “Triumph Witnesses”).

Triumph shall take all steps reasonably available to it on a bona fide basis, to encourage each of the Triumph Witnesses to cooperate with CCS and its counsel in reviewing the facts, records and documents touching on the matters in issue in the Action.

Triumph shall provide such access to its current employee, namely Brad LeDrew, and in recognition of the fact that all of the other Triumph Witnesses are no longer employed by Triumph, and therefore are no longer within the control of Triumph, Triumph shall use its reasonable best efforts to assist CCS and its counsel in making direct contact with, and obtaining the cooperation of, all such other Triumph Witnesses. 8.

Triumph Witnesses for Questioning: Triumph shall use its reasonable best efforts to endeavour to achieve the cooperation of all of the Triumph Witnesses who CCS yet needs to submit to questioning or whose questioning (including responses to undertakings) has not yet been completed. [ 11 ] There is also a paragraph in the PSA with the heading “ Trial of the Action ”. This paragraph states as follows: 11. Trial of the Action: Triumph shall appear at the trial of the Action as represented by Miller Thomson LLP.

It shall call as witnesses at the trial all of the Triumph Witnesses except those whose appearance is waived by CCS by notice to counsel for Triumph at any time prior to their appearance at the trial. In recognition of the fact that the majority of the Triumph Witnesses are no longer within its influence or control, Triumph shall take all steps reasonably available to it to compel the attendance of all of the Triumph Witnesses except those whose attendance is not required as aforesaid.

Such steps shall include, without restricting the foregoing, service on each of them of a Notice to Attend together with an allowance, all in compliance with Rules 8.8 and 8.9 of the Rules of Court and the taking of any further steps as may be necessary to seek and obtain the assistance of the Court to compel the attendance of the said Triumph Witnesses. All such Triumph Witnesses to be called to testify at the trial of the Action shall be made available by Triumph for cross- examination by counsel for CCS and Triumph shall not take any objection to CCS having the right to conduct such cross-examinations.

Triumph shall not cross-examine any witnesses called by CCS to testify at the trial. Issues [ 12 ] Secure had put forward two central issues arising from the contemplated performance of the PSA. They are: (

a) CCS and Triumph are no longer adverse in interest and Secure and Triumph are adverse in interest; (

b) Procedural Fairness (

i) Protection of Pre-Agreement Shared Information; (ii) Clarification of the Basis of Settlement; (iii) Questioning of Triumph Witnesses and Trial Procedures and the effect of the disposition of the Triumph

Summary Judgment motion.

[13] CCS has joined issue with Secure, in terms of who is adverse in interest and resists the Secure Defendants being allowed toquestion Triumph Witnesses. Authorities [14] CCS has referred to the following authorities: Steve Moore v Todd Dertuzzi, 2012 ONSC 5008; Briggs Bros StudentTransportation Ltd v Collacutt, 2009 ABCA 17; Collacutt v Briggs Bros Student Transportation Ltd,, 2008 ABQB 505; Sisters of StJoseph of Pembroke v Hilsden and Co.

(1963) Ltd. 1975 SKQB 797; Karsten v Young et al, 1999 BCSC 4804; Tynski v British ColumbiaTeachers Federation et al, 2007 BCSC 4; Trizec Equities Ltd v Ellis-Don Management Services Ltd, 1996 ABQB 10350; Spencer vLebastard, 1996 ABQB 945. [15] Secure has referred to the following authorities: Nadeau Poultry Farm v Desjardins & Desjardins, 2014 NBQB 81 ,2014 NBBR 81 (QB); Aviaco International Leasing Inc v Boeing Canada Inc, 2000 Carswell Ont 4279 (Ont SCJ); Edmonton (City) vLovat Tunnel Equipment Inc, 2000 ABQB 133; SE Johnson Management Ltd v Pigott Construction Ltd, 1988 CarswellAlta 32 (QB);Murphy Canada Exploration Co v Novagas Canada Ltd, 2009 ABQB 455; Guarantee Trust Company of Canada v Bailey et al, 1987CarswellAlta 115; Qureshi v Gooch 2005 BCSC 1584; Nalcor Energy v NunatuKavut Community Council Inc.

Positions of the Parties [16] Secure takes the position that the issues involve a determination of which parties are now adverse in interest and that CCS hascrafted a PSA in an effort to have Triumph only remain notionally in the action, as a party adverse in interest to it. Secure argues that thishas been done solely to maintain a procedural advantage that a party may have if it is adverse in interest.

Secure relies on NadeauPoultry for the proposition that a Mary Carter Agreement “shifts the landscape” between the parties in the litigation because the settlingparty has an interest in seeing the Plaintiffs succeed against the non-settling party or parties. [17] Secure also argues, relying on Aviaco, that whether parties are adverse in interest cannot be determined from the pleadingsalone. Secure takes the position that Triumph’s evidence, filed in June 2015 to be used against CCS in its

Summary DismissalApplication, was contradicted by the same deponent in a December 2015 affidavit, which is now apparently for use by CCS. Otherexamples were put forward by Secure. [18] Tim Etcheverry, a Triumph Witness described in paragraph 7 of the PSA, swore an Affidavit, June 12th, 2015 detailing hisexperience as a Junior Process Engineer with Triumph from 2006 to 2008. In the June affidavit, he indicated that from the beginning ofhis involvement on the project, he met with Myron Newman, a Defendant in the Action, and also a former CCS employee.

During thistime, Triumph was acting on behalf of their client Secure with respect to the design, including process and instrumentation drawings of afull service terminal.

Etcheverry swore in June 2015 that Newman would bring with him “hand drawn sketches of elements of the facilityto instruct and inform Etcheverry in the preparation of a process flow diagram and preliminary project specific Piping andInstrumentation Documents (P&ID’s).” [19] He also swears in June 2015, that he was shown P&ID drawings of another facility “apparently owned by the Plaintiff(CCS)”, but that he has no recollection of seeing those documents prior to “this litigation”. [20] Secure contrasts the June 2015 Etcheverry affidavit with the Etcheverry affidavit sworn December 11th, 2015, the same dateas the PSA.

In his December 2015 affidavit, Etcheverry swears that during the “one-on-one” design work he did with Newman in Mayand June 2007, Newman carried in his briefcase design drawings including process flow diagrams and piping and instrumentationdiagrams which appeared to him to be paper printouts or copies of electronically drafted designs which he understood, at the time, werenot prepared by Triumph and that Newman made physical reference to these drawings to make corrections to the process flow diagramwhich Etcheverry was preparing in front of Newman.

Secure takes the position that the evidence of Etcheverry is contradictory between June 2015 and the date of the PSA, December 11th, 2015 and shows that there has been a shift in the relationship between CCS andTriumph from adversity to ally. [21] Secure also argues that another Triumph employee at the relevant time, Greg Diduch, swore an affidavit December 11th, 2015 which contradicts his evidence on questioning, April 26th, 2011.

In his December 2015 affidavit, Diduch swears that in 2007, heunderstood Secure was desirous of having Triumph prepare a design for a facility used to mechanically separate oil from waste water andsoil and that his primary technical contact with Secure’s representative was with Myron Newman of Secure.

He deposes in December2015, that Newman would make reference to paper copies of technical drawings which he carried with him, which appeared to Diduch tobe fairly detailed process flow diagrams for a similar facility to that of the project and Newman made several references to thesedrawings during preliminary design meetings with Diduch. [22] At the Questioning of Diduch in April 2011, he stated the Process Flow Diagram (“PFD”) drawings were prepared byNewman by hand. Diduch was shown a drawing allegedly prepared for CCS and indicated that he did not recall seeing drawings thatlooked like that from Newman.

Secure argues that the PSA has changed the landscape and that the evidence of these two witnesses haschanged as a result. [23] Secure relies on Aviaco as authority for the proposition that the issue is not to be determined from the pleadings alone butfrom the state of the record as a whole. Secure says that it is adverse in interest to Triumph, as well as CCS, and that CCS is not adversein interest to Triumph.

[ 24 ] Relying on the foregoing, Secure submits that the 10 so-called Triumph Witnesses identified in the PSA in paragraph 7, not yet questioned in the action, ought to be subject to questioning by Secure. [ 25 ] In its application, Secure has indicated it also wishes to Question Amparo Escrig and Robert Lipsett, whose Affidavits were filed by CCS. The circumstances of the filing of those Affidavits are: that each Affidavit was filed August 7 th , 2015 “in opposition to Applications for

Summary Judgment made by some of the Defendants in this action”: para. 103, Escrig Affidavit; para. 38, Lipsett Affidavit. Escrig is a former Triumph employee and was a Project Manager at Triumph with responsibility for Secure projects: para. 1, Escrig Affidavit. Lipsett, is a Senior Engineer for Waste Processing at CCS. Counsel advised during the oral hearing of this matter, that Escrig had been cross-examined on her Affidavit extensively.

Position of CCS [ 26 ] CCS’s counsel advised Secure and the Court that there is no mechanism by which the amount of the settlement payment by Triumph to CCS would vary with the ultimate liability of Secure. It is a fixed, undisclosed sum now. Secure acknowledged it is content with this statement as answering its query as to the basis of the settlement payment. CCS argues that it remains adverse in interest to Triumph after the PSA because it has not amended its pleadings against Triumph, except for the relief sought, by deleting any claim for damages and costs.

CCS further points out that Triumph hasn’t changed its defence. It points to Moore v Bertuzzi to suggest that the absence of a change in pleadings is a factor for the Court to consider. CCS also indicates that the injunctive relief it seeks against Triumph is broader than the Confidentiality Order in place in the action. [ 27 ] In a review of the cases referred to in Collacutt ABQB, CCS distinguishes the present case and makes the point that Questioning is now limited to relevant and material questions relating to the issues defined in the pleadings: Collacutt ABCA. Analysis

A) Background [ 28 ] As the result of oral argument and some suggestions by the Court, the parties have agreed that the performance of the PSA may go forward in terms of paragraph 6 entitled “ CCS Access to Triumph Records ”. That part of Secure’s application, which is in essence paragraph (

f) set forth above, is now moot. There are two reasons for this. First, Triumph is still a party to the action. It has now, and has had, a positive obligation to disclose all relevant and material records to all of the parties in the action. No challenge was made by any counsel to this proposition. Secondly, counsel for Secure made it clear that she was not asking that any records created by Triumph and CCS as the result of the Settlement Agreement, be disclosed by CCS, such as memoranda or chronologies.

She simply says she is entitled to relevant and material records of Triumph, in existence either before or after the making of the PSA, if not previously disclosed by Triumph.

To the extent that those records are provided by Triumph to CCS pursuant to the PSA, counsel for CCS quite properly has undertaken to provide them to Secure and Pembina if they have not previously been provided by Triumph. [ 29 ] The next paragraph, in terms of relief asked for, (g), asks the Court to grant leave to Secure to question any Triumph Witness identified and defined in paragraph 7 of the PSA, as well as Amparo Escrig and Robert Lipsett. As stated earlier, the latter two have sworn affidavits filed by CCS.

The prayer for relief in this context continues that any such Order would be without prejudice to any party to later argue that it is or is not adverse in interest to Triumph for the purposes of the use of the Questioning evidence at the trial.

B) The Nature of the PSA [ 30 ] Categorizing settlement agreements made after the commencement of litigation is often useful for determining the kind of procedural order that a Court may make as a consequence. There are two well-known kinds of settlement agreements, namely a Pierringer Agreement and Mary Carter Agreement. A Pierringer Agreement is well described in Amoco. It is named after a Wisconsin case, Pierringer v. Hoger et al , 124 NW (2 nd ) 106 (Wis SC) 1963.

In a case involving multiple Defendants in tort, the typical Pierringer Agreement permits a settling Defendant to withdraw from the litigation, leaving the remaining Defendant or Defendants liable only for the loss they actually caused, with no joint liability. The latter prospect, at least in Alberta, ensures that Third Party proceedings for contribution cannot survive against the non-settling Defendants. In Amoco , Fruman JA characterized a Pierringer Agreement as a “proportionate share settlement agreement”: para. 3.

The issue in Amoco and in a later case decided by Graesser J of this Court, Murphy Canada, was whether or not the non-settling Defendant had any rights of disclosure or discovery from a settling Defendant or Defendants. [ 31 ] A Mary Carter Agreement, on the other hand, arose in the Florida case of Booth v Mary Carter Paint Co (1967), 202 So. 2d 8 (Fla. Dist. C.A.) .

In a Mary Carter Agreement , one of two or more Defendants typically settles the action with the Plaintiff but remains as a party to the action, either because of continuing claims of non-settling parties including claims for a contribution and indemnity, or by the Plaintiff. In the case of a Mary Carter Agreement , the Plaintiff is guaranteed a minimum recovery from the settling Defendant, but the exposure of the settling Defendant is capped to an agreed amount with the settling Defendant’s liability decreased in direct proportion to any increase in the non-settling Defendants liability determined by a Court.

Originally, a Mary Carter Agreement was kept secret from the non-settling parties. Since the evolution of the practice in Canada, that has never been the case. Indeed, the Code of Professional Conduct of the Law Society of Alberta in the commentary to

Chapter 4.01 “The Lawyer as Advocate” contains a provision that a lawyer representing a party who has made or is party to an agreement made before or during the trial, by which a Plaintiff is guaranteed recovery by one or more parties, notwithstanding the judgment of the Court, should immediately reveal the existence and particulars of the agreement to the Court and to all parties to the proceedings. That is what was done in this case. [ 32 ] In my view, it does not matter that the PSA here is a hybrid. It is neither a true Mary Carter Agreement nor is it a

Proportionate Share Agreement or Pierringer Agreement. The settlement amount has been fixed but not disclosed. An application to thetrial judge may be made for disclosure of the amount, as suggested by one of the parties in oral argument. In this case, Triumph remainsa party to the action which renders the fairness issues to the non-settling Defendants easier to determine because the Court is not beingasked, as it was in Amoco and Murphy, to allow further discovery or questioning of non-settling parties who had been excised from thelitigation according to the settlement agreement.

C) The Alberta Rules of Court [33] The Alberta Rules of Court (“ARC”) 5.17 states in part as follows: 5.17(1) A party is entitled to ask the following persons questions under oath about relevant and material records and relevant andmaterial information: (

a) each of the other parties who is adverse in interest; (

b) if the party adverse in interest is a corporation, (

i) one or more officers or former officers of the corporation who have or appear to have relevant and material information that wasacquired because they are or were officers of the corporation, and (ii) the corporate representative; ... (

d) one or more other persons who are or were employees of the party adverse in interest who have or appear to have relevant andmaterial information that was acquired because of the employment [34] On the plain meaning of the Rule, questioning can only occur if a party is adverse in interest. Much of the argument in thebriefs submitted by the parties, and made orally, surrounded the issue of who was adverse in interest to whom.

In oral argument and inthe briefs, Secure submitted that the result of the PSA was that CCS and Triumph are no longer adverse in interest and that leavingTriumph in the action, purportedly for the purpose of injunctive relief and disgorgement of Confidential Information, was illusory.Secure cited two cases, Qureshi and NunatuKavut, both involving permanent injunctions, for the proposition that if the future conduct isnot likely to continue, a permanent injunction will not likely be granted and that there is no realistic likelihood of continued conduct inthis case. [35] The Court makes no ruling on this issue.

It is not necessary. If and when the case is tried, injunctive relief may or may notremain as a live issue. To the extent it remains, Triumph has indicated that it is contesting the same. The Court notes the last sentence inparagraph 11 of the PSA relating to Trial of the Action which says “Triumph shall not cross-examine any witnesses called by CCS totestify at the trial”. This covenant is the antithesis of the truth seeking concept embedded in the historical and venerable right of cross-examination. Triumph’s covenant does suggest a notional contest.

However, it is not necessary for this Court to rule on the issue of thestrength or degree of alignment between CCS and Triumph as the result of the PSA as it affects Secure’s prayer for relief in thisapplication. What is relevant is whether Secure is adverse in interest to Triumph.

D) Adverse in Interest – The Law [36] It is now well established that whether parties to litigation are adverse in interest is determined by reference not only to thepleadings, but also to the record as a whole. [37] In this regard, if there is nothing before a court but the pleadings, the pleadings will usually suffice. But it is not necessary thatthere be pleadings inter se between parties in order that they be adverse in interest. The correct distinction is between an opposite partyand a party adverse in interest. It is to be noted that ARC 5.17 does not reference an opposite party.

It references a party adverse ininterest. [38] The classic definition is contained in Rose & Laflamme Ltd v Campbell, Wilson and Strathdee Ltd, (SK CA),[1923] 2 WWR 1067 (Sask CA) where Lamont JA said at page 1070: ... ‘opposite party’ does not mean the same thing as ‘a party adverse in interest’. To my mind, ‘a party adverse in interest’ is notnecessarily limited to a party with whom an issue is to be adjudicated upon by the Court in the action. There are cases ... where, althoughno issue is stated between defendants, their interests are as adverse as if they were upon opposite sides of the record.

In my opinion,therefore, under our Rules a party to a cause or matter may be said to be adverse in interest to another party if he has a direct pecuniary orother substantial legal interest adverse to the legal interest of the other party, even although they may be upon the same side of the recordand there is no issue on the record that the Court will be called upon to adjudicate between them. [39] Similarly, in Aviaco, the Plaintiff objected to Defendants examining each other because no cross-claims were filed betweenthem. Nordheimer J. said at paragraph 6-7: 6.

A classic statement of the meaning of the expression "adverse in interest" is contained in Menzies v. McLeod (1915), (ON SC), 34 O.L.R. 572 in which Chancellor Boyd said, at p. 575: An actual issue in tangible form spread upon the record is not essential, so long as there is manifest adverse interest in one defendant asagainst another defendant. 'Adverse interest' is a flexible term, meaning pecuniary interest, or any other substantial interest in the subject-matter of litigation.

7. It is apparent from the above quotation that the issue of adversity in interest is not to be determined from the state of the pleadings alone but upon the state of the record as a whole. Inherent in that observation, in my view, is that an adversity of interest may arise at any point in the proceeding as the record and evidence develop. Of particular importance in this regard, is the practical reality that any of the witnesses to be examined for discovery may well give evidence that is inconsistent with their pleading.

Therefore, while the defendants might not appear to be adverse in interest on the face of their pleadings, it does not follow that an adversity of interest will not become apparent as the discoveries take place.

Further, in a case such as this one which is based primarily on an alleged conspiracy among the defendants, and on the existence and characterization of payments that may have flowed among some or all of the defendants, it seems to me there is every possibility that some element of adversity of interest may well appear among the defendants as the discovery process proceeds. [ 40 ] Aviaco was a case where Nordheimer J. was called upon to determine whether co-Defendants could examine each other prior to trial.

In deciding to allow it, he also stated at paragraph 16: “I am satisfied that there is currently both a measure of adversity of interest shown on the pleadings, and the very real possibility that a more apparent adversity of interest may appear during the course of the discoveries, that I would be in error to make what is essentially a declaration at this stage that the defendants are not adverse in interest.”

E) Adverse in Interest – The Pleadings [ 41 ] As pointed out earlier in these Reasons, CCS has claimed that Triumph, Secure and Pembina have unlawfully appropriated or misused the CCS Confidential Information. During oral argument, the Court referred to the Contributory Negligence Act , RSA 2000, c C-27,

section 2 of that Act, which states as follows: 2

(1) When damage or loss has been caused by the fault of 2 or more persons, the court shall determine the degree in which each person was at fault.

(2) When 2 or more persons are found at fault, they are jointly and severally liable to the person suffering the damage or loss, but as between themselves, in the absence of a contract express or implied, they are liable to make contribution to and indemnify each other in the degree in which they are respectively found to have been at fault. [ 42 ] Scrutiny of the above

section and its plain meaning puts an imperative on a trial court to determine the degree each person was at fault. Counsel for CCS has countered that it has made no claim for joint and several responsibility as against Triumph; that the remedy against Triumph was a separate claim for $10,000,000 which is now struck by the PSA and that the only claims for joint and several damages are against Secure and Pembina for $80,000,000 and against the Former Employees for $10,000,000.

But the allegations in the Statement of Claim referred to above clearly are that Triumph was involved in acting illegally to provide the CCS Confidential Information to Secure. It is in the interests of Secure, and perhaps Pembina, to prove that Triumph either did no such thing, or if it did, it was done without the knowledge, consent or involvement of either Secure or Pembina. The determination under s.2 of the Contributory Negligence Act “shall” be made by the trial judge whether Triumph is a party or not.

It was also suggested by the Court during the hearing, that whether Secure was adverse in interest to Triumph would be the same on the pleadings, before or after the PSA. [ 43 ] The Court finds that Secure and Pembina are adverse in interest to Triumph for the purpose of questioning pursuant to ARC 5.17.

F) The Affidavits of Escrig and Lipsett [ 44 ] The Court is informed that extensive cross-examination has occurred on the Escrig affidavit. During oral argument, the Court suggested that if it were to order the ability of Secure and Pembina to Question Lipsett and Escrig in addition to the Triumph Witnesses identified in paragraph 7 of the PSA, the parties should agree that any cross-examination on affidavits be deemed Questioning, so as not to repeat the process. Unless this is done, form over substance would prevail.

The Court acknowledges that there is a difference in the nature and extent of the Questioning allowed, pursuant to ARC 5.17 and Questioning on an affidavit under ARC 6.7. That distinction is not raised in the context of this matter.

G) Fairness and Prejudice to CCS [ 45 ] Counsel for CCS was repeatedly asked what unfairness or prejudice would arise by permitting Secure or Pembina to question the Triumph Witnesses described in paragraph 7 of the PSA, or Escrig and Lipsett. No satisfactory answer was given. CCS expressed a concern as to the use of this questioning at the trial, either in the form of read-ins or otherwise. That issue is not before me. What is before me is the request for a procedural Order to ensure that this matter goes forward on a fair basis.

Fairness must be applied to all parties, not simply to Secure or Pembina, but also to CCS and Triumph. It is also noteworthy that at no time during the oral hearing did Triumph’s counsel object to the Questioning of the Triumph Witnesses, nor to the record production requested. [ 46 ] The Court is persuaded the best practice it should follow in this case, is evident in Aviaco . As stated, I find that there is currently a measure of adversity of interest between Secure / Pembina and Triumph shown on the pleadings and on the record developing as the result of the realigned interests evidenced by the PSA.

The adversity in interest is between Secure / Pembina and Triumph. It has always been there. It has simply been made more prominent by the PSA. It should not go unnoticed that counsel for CCS and Triumph were right to disclose the PSA to the Court and to all parties to this litigation, in accordance with their obligations under the Code of Professional Conduct of the Law Society of Alberta and indeed, the prevailing law. Conclusion [ 47 ] There will be an order including all of the terms agreed to arising out of this application by the parties including paragraphs (a) - (

e) of the application. With regard to the disclosure and production of Triumph records, any Triumph record existing before or after

the PSA that is relevant and material to the issues in the litigation shall be produced to all parties, either through the covenant in the PSA to disclose the same to CCS, or directly to Secure and Pembina. [ 48 ] At the oral hearing, counsel for Secure indicated that of the Triumph Witnesses described in paragraph 7 of the PSA, they did not wish to Question the first four named Triumph Witnesses, Brad LeDrew, Greg Diduch, Derek Heaven or Tim Etcheverry.

Therefore, with regard to paragraph (g), Secure and Pembina will be entitled to Question the following Triumph Witnesses named in paragraph 7 of the PSA: Jamie Ulicny, Natasha LeDrew, Steve Thompson, Brahm Singh, Grant Li, Duane Diduch, Herbert Huen, Fred Chen, Rod Lau, Tobi Wang and Eddy Yu. In addition, the cross-examination transcripts of Escrig and Lipsett shall be deemed to be Questioning transcripts for purposes going forward.

If Secure or Pembina wish to ask additional questions, they may do so by compelling the appearance of Escrig and Lipsett in accordance with the relevant provisions of the ARC . [ 49 ] During oral argument, the Court asked counsel if during Questioning, it was made clear that the answers given to questions by any witness could be used by any party adverse in interest as if the question had been posed by the party attempting to use the answer. This of course is a standard agreement in multi-party litigation.

All counsel indicated that this agreement had been made. [ 50 ] In view of a concern about time, all of the Questioning shall be done, with the exception of undertaking information arising, no later than the close of business May 31 st , 2016. [ 51 ] Finally, it is not necessary for the Court to adjudicate the relief asked for in (

h) of the application. Any party can apply for directions prior to trial. But as indicated during oral argument, the parties’ respective rights of cross-examination and the use of the Questioning at the trial are best left for determination by the trial judge. [ 52 ] In light of the substantial success of Secure, Secure will have costs of this application to be assessed under double Column 5 of

Schedule C of the ARC . Although Pembina and Triumph attended the application and spoke briefly, they filed no briefs and they will bear their own costs. The costs of Secure will be paid forthwith by CCS upon assessment or agreement, in any event of the cause. Heard on the 3 rd day of February, 2016. Dated at the City of Calgary, Alberta this 12 th day of February, 2016. Neil Wittmann C.J.C.Q.B.A. Appearances: S. Carscallen, QC L.Y. Pan, QC for CSS Corporation

M.H. Hollins, QC J.L. Wilkins for Secure Energy Services Inc., Rene Amirault, Daniel Steinke, Nick Wieler, Gordon Getzinger, Gary Perras, Myron Newman, David Engel, Stan Moodie, Corey Higham, Karen Myrheim, Enerland Consulting Services Ltd. L.R. Duncan, QC R. Bell L. Dunnigan for Pembina Pipeline Corporation P. Ryzuk for Triumph