Homburg v. Stichting Autoriteit Financiële Markten, 2016 NSCA 38

Nova Scotia Court of Appeal Citation: Homburg v. Stichting Autoriteit Financiële Markten , 2016 NSCA 38 Date: 20160518 Docket: CA 444317 Registry: Halifax Between: Richard Homburg, Homburg Bondclaim Limited and Homburg Shareclaim Limited Appellants v. Stichting Autoriteit Financiële Markten, de Nederlandsche Bank N.V., Belastingdienst, Theodor Kockelkoren, Marcus E. Wagemakers and The Government of the Kingdom of the Netherlands Respondents Judge: The Honourable Justice Jamie W.S. Saunders Appeal Heard: February 3, 2016, in Halifax, Nova Scotia Subject: Civil Procedure Rule 18. Discovery of Non-Party Witnesses.

State Immunity Act , R.S.C. 1985, c. S-18. Jurisdiction. Sovereign Immunity. Commercial Activity. Standard of Review.

Summary: A group of plaintiffs chose to sue in Nova Scotia for damages they say were brought about by conspiracy and misfeasance on the part of public officials in The Netherlands. Before filing a defence those defendants brought a motion in the Supreme Court of Nova Scotia seeking a declaration pursuant to the State Immunity Act that this country did not have jurisdiction to hear the case and that any judicial oversight of Dutch regulators and ministries must be left to the Dutch courts.

Before that jurisdictional issue could be heard, the plaintiffs brought two motions seeking orders compelling the discovery of two non-party witnesses pursuant to CPR 18.12. After a hearing, those preliminary motions were dismissed, and it is that decision which forms the basis of this appeal. The jurisdictional motion was adjourned pending our decision in this case.

The principal issue to be decided when that jurisdictional motion is heard is whether the plaintiffs will be able to establish that the defendants’ conduct constituted “commercial activity” as an exception under the State Immunity Act , with the result that the dispute could in fact be properly litigated in Nova Scotia.

Held: Appeal dismissed. Leave was granted to permit the Court to explain the correct application of CPR 18. The Rule provides a complete manual for the scope of discovery examination in this jurisdiction. Its provisions are designed to promote a sensible, sequential, timely, and inexpensive means to secure evidence by discovery, which will depend upon which of the three routes to discovery has been chosen and how the particular factual matrix underpins such a selection.

The overarching consideration (for parties, counsel and judges) must always be to recognize the explicit purpose of our Rules which is to provide: 1.01 …for the just, speedy and inexpensive determination of every proceeding. The

interpretation and application of the Rules, as a whole, and the interaction between its various parts should be informed by this preeminent goal. The judge’s reference to “commercial activity” was simply to provide context in explaining his decision. He properly recognized that whether the defendants’ actions and conduct constituted “commercial activity” under the Act was a matter to be dealt with when the jurisdictional motion is eventually heard. The judge was also right in finding that the motions were premature, and in recognizing that motions based on state-immunity are fundamentally distinct from motions for

summary judgment. The motions judge’s

interpretation and application of Rule 18 was consistent with the plain language, purpose and historical evolution of Nova Scotia’s Civil Procedure Rules relating to discovery in this jurisdiction. The judge applied the proper legal test. He did not err in principle. Neither will his decision produce a patent injustice. The appeal is dismissed with costs to the respondents. This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 24 pages. Nova Scotia Court of Appeal Citation: Homburg v.

Stichting Autoriteit Financiële Markten , 2016 NSCA 38 Date: 20160518 Docket: CA 444317 Registry: Halifax Between: Richard Homburg, Homburg Bondclaim Limited and Homburg Shareclaim Limited Appellants v. Stichting Autoriteit Financiële Markten, de Nederlandsche Bank N.V., Belastingdienst, Theodor Kockelkoren, Marcus E. Wagemakers and The Government of the Kingdom of the Netherlands Respondents Judges: Fichaud, Saunders and Beveridge, JJ.A. Appeal Heard: February 3, 2016, in Halifax, Nova Scotia Held: Leave to appeal granted; appeal dismissed per reasons for judgment of Saunders, J.A.

Fichaud and Beveridge, JJ.A. concurring.

Counsel: Ian A. Blue, Q.C. and Blair Mitchell, for the appellants Sheila Block and Ezra Siller for the respondents Daniela Bassan and Jennifer Taylor, for Homburg Invest Inc. (now 1810040 Alberta Ltd.) and James F. Miles Reasons for judgment: [ 1 ] A wealthy Canadian businessman, currently a resident of Switzerland, who owns substantial real estate and commercial enterprises in Nova Scotia as well as other parts of Canada, the United States and Europe, became embroiled in a dispute with regulatory authorities in the Netherlands.

He and his companies, as plaintiffs chose to sue in Nova Scotia for damages and other relief, alleging that he had fallen victim to a conspiracy and misfeasance on the part of public officials whose objective was to take over control of his commercial activities, cause economic loss to him and other corporate shareholders, and effectively drive him out of the Netherlands. [ 2 ] In these reasons the plaintiffs are the appellants and the defendants are the respondents. [ 3 ] Before filing a defence, the named defendants (being principally government agencies, branches of the Ministry of Finance, or officers of those bodies) brought a motion (which I will call the “jurisdictional motion”) in the Supreme Court of Nova Scotia seeking a declaration that the Court did not have jurisdiction to hear the case under the State Immunity Act , R.S.C. 1985, c.

S-18, and that in any event, Nova Scotia is not the forum conveniens where the matter should be heard.

In the defendants’ view, any judicial oversight of Dutch regulators and ministries must be carried out by the Dutch courts. [ 4 ] The principal issue to be decided when that jurisdictional motion is eventually heard is whether the plaintiffs will be able to establish that the defendants’ conduct constituted “commercial activity” and as such would fall within that exception in the State Immunity Act , with the result that the dispute could in fact be properly litigated in Nova Scotia. [ 5 ] Against the backdrop of that jurisdictional motion, the plaintiffs brought two motions seeking orders for the discovery of two non-parties pursuant to Civil Procedure Rule 18.12.

These preliminary motions were heard by Nova Scotia Supreme Court Justice Jamie Campbell in Chambers. Campbell J. dismissed the plaintiffs’ motions with costs. They now challenge that result which is the focus of this case on appeal. [ 6 ] The jurisdictional motion was scheduled to be heard, but was adjourned, pending our decision in this case. [ 7 ] For the reasons that follow, I would dismiss the appeal and affirm the decision and confirmatory order of Justice Campbell. Presumably our decision here will allow the jurisdictional motion to be rescheduled and heard. [ 8 ] I will begin my analysis with a brief

summary of the salient facts. Background [ 9 ] The plaintiff, Richard Homburg, is a Swiss resident and former director, CEO and Chairman of the Board of Homburg Invest Inc. (HII), a real estate investment company that was listed on the Toronto Stock Exchange (TSX) and the NYSE Euronext Amsterdam Exchange. It would appear that HII's corporate restructuring was approved in June 2013.

All of its shares were taken up by its legal successor, Geneba Properties NV, said to be subject to the Dutch regulatory authorities. [ 10 ] The plaintiffs Homburg Bond Claim Limited (HBL) and Homburg Share Claim Limited (HSL) are the assignees of rights of action of former HII bondholders and shareholders. [ 11 ] The defendants are a foreign state and agencies of a foreign state within the meaning of the State Immunity Act (the Act ). The defendant, AFM, is an agency of the Dutch government and falls under the authority of the Dutch Minister of Finance.

The AFM’s mandate is to supervise the conduct of business and the disclosure of information by financial market participants and regulated entities in the Netherlands. It serves a similar role as that of a securities commission in Canada. The defendant, DNB, is the Dutch central bank. It is also an agency of the Dutch government and falls partially under the authority of the Dutch Minister of Finance. The defendant, DTA, is a branch of the Dutch Ministry of Finance, and administers and enforces the Dutch tax regime. [ 12 ] The AFM granted HII a license to issue shares and bonds to Dutch investors.

Under the Dutch legal framework, HII was subject to the regulatory supervision of the Dutch state and its agencies, including the AFM, DNB, and DTA. [ 13 ] James F. Miles is the President of Homburg Invest Inc. (now 1810040 Alberta Limited) and Michael P. Arnold is the former Chairman of the HII Board of Directors. [ 14 ] With the principal actors now identified, I will turn to the decision of Justice Campbell (reported as 2015 NSSC 270 ) to pick up the narrative. His

summary explains the context quite nicely: [1] The two motions before the court are preliminary to a jurisdictional motion scheduled to be heard on November17 and 18, 2015. The Plaintiffs are seeking an order under Civil Procedure Rule 18.12 for discovery of two non-parties, Michael P. Arnold, C.A. and James F. Miles. Nature of the Motions

[2] The matter coming up in November is a motion by the Defendants for an order declaring that the Supreme Court of Nova Scotia does not have jurisdiction to hear the Plaintiffs’ case. That case is a series of claims against the Government of the Kingdom of the Netherlands, two agencies of the Dutch government, Stichting Autoriteit Financiel Markten and De Nederlandsche Bank N.V., and individual officers of those agencies (referred to collectively as the “Dutch authorities”). The Plaintiffs are Richard Homburg and the assignees of the rights of action of Homburg Invest Inc.

That company began doing business in the Netherlands and was subject to regulation by the Dutch authorities. The Dutch authorities engaged in supervision of Homburg Invest Inc. They required the provision of information. They required the removal of Richard Homburg as a policy maker. They required the appointment of two directors or officers who were residents of the Netherlands. They ordered Homburg Invest Inc. to submit a “plan of control” and indicated the potential appointment of a silent monitor. They levied a fine against Mr.

Homburg and eventually revoked the licence of Homburg Invest Inc. to sell securities in the Netherlands. [3] Very generally, the claim asserts that the Dutch authorities misused their powers by among other things, attempting to exert jurisdiction over a Canadian company. It says that they committed the torts of misfeasance in public office, unlawful means and conspiracy. [4] In the motion scheduled for November, the Defendants will argue that the courts in Nova Scotia do not have jurisdiction under the State Immunity Act , R.S.C. 1985, c.

S-18, and that in any event Nova Scotia is not the forum conveniens where the matter should be heard. They will say that any oversight of Dutch regulators and Dutch tax authorities is to be carried out by the Dutch courts. [5] The Plaintiffs will argue that the Defendants’ conduct was “commercial activity” and as such would come within that exception in the State Immunity Act.

They will assert that the Defendants attempted to impose requirements on a Canadian company that were inconsistent with Canadian law. [6] The Defendants say that there is nothing in the claim or any evidence to suggest that what they did could amount to carrying on “commercial activity” it was regulatory. [7] The Plaintiffs, in the motions now before the court, are asserting that Mr. Arnold and Mr. Miles have information that is required to enable them to respond to the jurisdictional motion in November.

They argue that through discovery and disclosure of documents they can obtain information to establish an evidentiary record to enable the court to determine whether the Defendants engaged in commercial activity. [ 15 ] After considering the evidence and counsels’ submissions, Justice Campbell denied the plaintiffs’ (appellants’) motions to compel the discovery of Messrs. Arnold and Myles. He concluded that CPR 18.12 did not apply, and if it did, the motions were premature.

The plaintiffs had failed to demonstrate that the discovery of these non-parties was necessary to the just determination of the jurisdictional matter. [ 16 ] The plaintiffs now seek leave to appeal, and appeal, saying the decision of Justice Campbell contains a number of errors in principle and has led to a patent injustice. Issues [ 17 ] As I see it, the host of issues and arguments canvassed in counsels’ very detailed written and oral submissions reduce to two simple questions: i. Should leave to appeal be granted? ii.

Did the motions judge err in refusing to grant an order for non-party discovery under CPR 18.12? Standard of Review [ 18 ] As to the first issue, the question of granting leave to appeal is one of first instance. Accordingly, there is no applicable standard of review. The test for leave to appeal is well-known. It requires an appellant to raise an “arguable issue”. An arguable issue must do more than simply identify a matter of pure academic interest. It must be an issue that actually arises on the facts and merits this Court’s attention. It must be “an issue that could result in the appeal being allowed”.

See for example, Nova Scotia v. Roué , 2013 NSCA 94 , and Burton Canada Co. v. Coady , 2013 NSCA 95 . [ 19 ] The second issue is whether Campbell J. erred in refusing to grant a discovery order under CPR 18.12. Justice Campbell’s decision was discretionary in nature. The standard of appellate review applied to a discretionary decision on an interlocutory appeal is settled law. Deference is owed. Our intervention is only warranted if we are satisfied that Justice Campbell erred in law, or if his decision to refuse non-party discovery has produced a patent injustice. See for example, Roué , supra and Innocente v.

Canada (Attorney General) , 2012 NSCA 36 . [ 20 ] As this Court made clear in Innocente , the standard of review on an interlocutory appeal no longer depends upon whether the order below had a “terminating effect”. [ 21 ] These are the principles I will apply to the issues before us in this case. Analysis Should leave to appeal be granted? [ 22 ] A strong case can be made here that leave to appeal ought to be denied. The appellants cite no authority to support their assertion (which I say is erroneous in any event) that CPR 18.12 grants “unrestricted authority” to order the discovery of non-parties.

In my view, Justice Campbell was right to hold that the test under Rule 18 is not whether discovery will provide the best or most complete

evidence, but rather whether the proceeding can be “determined justly” without the sought-after discovery. Applying that test, Campbell, J. found that the appellants had not met the burden necessary to obtain the discovery orders they requested. Further, the appellants’ request to obtain our leave to appeal is significantly premature. Justice Campbell left the door open for the appellants to later subpoena Messrs. Miles and Arnold, if the discovery of the respondents’ representatives established that Mr. Miles or Mr.

Arnold had evidence that related to or helped establish the commercial nature of the respondents’ activities. [ 23 ] Despite my reservations as to whether the appellants have satisfied the test for our granting leave, I am prepared to do so because this appeal gives the Court an opportunity to explain the correct application of CPR 18 in circumstances such as this.

Did the motions judge err in refusing to grant an order for non-party discovery under CPR 18.12? [ 24 ] In their attempt to have Justice Campbell’s decision and confirmatory order set aside, the appellants allege three principal errors in his reasoning. [ 25 ] First, they say that he erroneously applied CPR 18.12(3) when he ought to have considered Rule 18.12(1) and Rule 1.01. These latter provisions, they submit, were the actual sub-sections upon which they based their motions to compel the discovery of Messrs. Miles and Arnold. [ 26 ] Second, they say this is not a “regular” or “normal” proceeding.

Obliging them to fulfill their disclosure obligations and complete a discovery of the respondents’ representatives before they can apply to discover any external witnesses, will only add to delay and expense in this complex litigation. This argument is, in part, predicated on the appellants’ collateral argument that because the pleadings have not closed, they are somehow “precluded” from meeting their obligations under the Rules, preliminary to conducting a discovery examination of the respondents’ representatives. [ 27 ] Third, the appellants complain that Justice Campbell’s

interpretation of “commercial activity” under the Act was “… too narrow and … incorrect as a test for determining relevance”. They claim that the jurisprudence supports “… a wider

interpretation than the one given by Campbell, J., and that the scope of relevance in any discovery examination of Mr. Miles or Mr. Arnold should be based upon that possible wider

interpretation.” [ 28 ] Respectfully, I do not find any of the appellants’ arguments persuasive. [ 29 ] Before turning to a consideration of CPR 18 and its application in the circumstances of this case, I observe that while in his reasons Justice Campbell often employs the singular (for example, “an order”; “the motion would be premature”; and “the motion is dismissed …”), we recognize (as did he) that there were two motions before him. On July 27, 2015, the appellants filed a motion seeking documentary and oral discovery against James F.

Miles, C.A., a resident of Dartmouth, Nova Scotia, a non-party witness, pursuant to Rule 18.12(1). On August 21, 2015, the appellants filed a second motion seeking documentary discovery (but not oral discovery) against Michael P. Arnold, C.A., a resident of Cavendish, Prince Edward Island, another non-party witness, pursuant to Rule 18.12(1). While nothing turns on this occasional slip, it is important to recall that the appellants had in fact brought two separate motions before Justice Campbell, one relating to the discovery of Mr. Arnold, the other relating to the discovery of Mr. Miles.

Civil Procedure Rule 18 [ 30 ] Let me now turn to the appellants’ first complaint. They say Justice Campbell’s decision is flawed because he based his analysis upon CPR 18.12(3) when (they argue) he ought to have confined his analysis to 18.12(1). I disagree. [ 31 ] While it is true that the motion seeking an order compelling the discovery of Mr. Miles reads: … Jurisdiction to Make The Order 23. The Plaintiffs rely on the following legislation, Rules, or points of law: (

a) Civil Procedure Rules 18.12(1); 1.01; … and much the same reliance is repeated in the motion to obtain an order compelling the discovery of Mr. Arnold: Jurisdiction to Make The Order 21. The Plaintiffs rely on the following legislation, Rules, or points of law: (

a) Civil Procedure Rules 18.12(1); 1.01; … this is hardly determinative. The motions judge was not bound by the selection of legislative or juridical support chosen by counsel. [ 32 ] Justice Campbell was obliged to decide whether the appellants’ two motions fell within, and satisfied the requirements of Rule 18, in its entirety. That inquiry called for a consideration of Rule 18 as a whole to determine if the appellants were entitled to the relief –

by way of discovery – which they claimed. In other words, it was for Justice Campbell to decide which particular part or parts of the Rule applied to the matter before him, and which did not. He did precisely that. [ 33 ] The appellants rely, almost exclusively, on the words contained in Rule 18.12(1) which say: Discovery by Order 18.12

(1) A judge may order a witness or a custodian of a document, electronic information, or other thing to submit to discovery. In their factum the appellants say: 48. Rule 18.12(1) states that “A judge may order a witness or a custodian of a document, electronic information, or other thing to submit to discovery.” It provided Campbell, J. with unrestricted authority to grant the order requested for Mr. Miles who resides in Halifax and Michael Arnold who resides in Cavendish, P.E.I. … [Underlining mine] [ 34 ] The appellants have not provided any authority for such an assertion. It is a proposition I would reject.

Rule 18.12(1) is not a stand-alone, catch-all provision designed to trump, replace or modify the other important provisions of the Rule. The logical extension of the appellants’ argument is that there would never be a need for any additional provisions governing discovery under the Rule. They would say that the judge’s authority to issue such an order, in any circumstance, is found in CPR 18.12(1) and that nothing else need be considered. I reject such a submission as being completely inconsistent with the clear wording, obvious intent, and spirit of the Rules. [ 35 ] In my respectful view, Justice Campbell’s

interpretation and application of Rule 18 is supported by the plain language of the Rules as well as the incremental approach described therein. [ 36 ] The motions judge began his analysis with a recognition that Rule 18.12 permits a judge to issue an order compelling a witness or custodian of documents to be discovered, provided certain requirements are met and the proceeding cannot be determined justly without the discovery. [ 37 ] Rule 18.12(1) establishes the general principle that a judge may order a witness or custodian of a document to submit to discovery.

Immediately following this authorization, we are guided by a detailed and comprehensive set of particulars describing when a judge may order discovery during the various stages of a proceeding. [ 38 ] When considering the proper

interpretation and application of rules to the procedures, rights, obligations and remedies embraced by our Civil Procedure Rules , it is not particularly helpful to “cherry pick” a provision or a sub-section, here and there. To understand how discovery works and the limits placed on its availability, one needs to consider CPR 18, as a whole. [ 39 ] The logical place to start is at the beginning of the Rule. It reads: Rule 18 - Discovery Scope of Rule 18 18.01

(1) This Rule allows a party to question a witness by discovery, unless the question was answered by the witness in response to interrogatories.

(2) Provisions about discovery in Rule 55 - Expert Opinion, and in Rule 57 - Action for Damages Under $100,000, prevail over this Rule.

(3) A party may discover a witness by agreement, under a discovery subpoena, or by order, in accordance with this Rule. [ 40 ] From this we know that there are three different ways to convene the discovery of a witness. The first is “by agreement”. The second is by service of a “discovery subpoena”. The third is by court order. As we work our way through the Rule, greater detail is provided as to the steps that need to be taken and the criteria that need to be satisfied, depending upon which of the three available avenues for discovery has been chosen, and how far along the matter has progressed.

From this natural progression, a logical process emerges. One starts with the least formal and least expensive route (a simple interview or discovery by agreement). If that is not possible, one moves “up” to service of a subpoena upon the witness (provided certain stipulated representations and undertakings are fulfilled). Should those two avenues not be available, a judge’s involvement may be requested so as to compel discovery by court order. [ 41 ] With this approach we see the symmetry of Rule 18 as a whole. It provides a complete manual for the scope of discovery examination in this jurisdiction.

While the applicability of certain parts of the Rule will depend upon which of the three routes to discovery has been chosen, and how the particular factual matrix underpins such a selection, the overarching consideration (for parties, counsel and judges) must always be to recognize the explicit purpose of these Rules which is to provide: 1.01 …for the just, speedy, and inexpensive determination of every proceeding. The

interpretation and application of the Rules as a whole, and the interaction between its various constituents should be informed by that preeminent goal. [ 42 ] Returning now to the contents of Rule 18, one can easily see the logic with which its parts have been arranged. Quickness and informality give way to judicial participation and added cost, should circumstances require it. The three choices are: by agreement; by subpoena; by order. It is only the third mechanism that requires the involvement of a judge. Whereas CPR 18.03 explains the factors

that might come into play when discovery is convened by agreement, and whereas 18.04 and 18.05 offer guidance relating to discovery by subpoena of a party, or a non-party respectively, and whereas none of 18.06 through 18.11 apply to this case, one is led to 18.12 for guidance in circumstances where the assistance of a judge is required. It is not surprising then, that it was this particular sub-section of Rule 18 to which Justice Campbell turned his mind when considering the appellants’ two motions. [ 43 ] Rule 18.12 provides: 18.12

(1) A judge may order a witness or a custodian of a document, electronic information, or other thing to submit to discovery.

(2) A judge may order discovery before a proceeding has started in one of the following circumstances: (

a) the party who moves for the discovery wishes to start a proceeding but is prevented from doing so immediately, and evidence needs to be preserved; (

b) a proceeding is likely to be started against the party who moves for the discovery, and evidence needs to be preserved; (

c) a court outside Nova Scotia requests assistance.

(3) A judge may order a discovery during a proceeding if both of the following apply: (

a) the person to be discovered is in a place outside Nova Scotia, and a discovery subpoena cannot be enforced, but an order would be enforced or obeyed; (

b) the proceeding cannot be determined justly without the discovery.

(4) Discovery may be held after a proceeding has concluded in accordance with Rule 79 - Enforcement by Execution Order. [ 44 ] The first thing he had to decide was where, in a temporal sense, this case fit. Justice Campbell properly concluded that 18.12(2) relates to circumstances where a judge can order discovery before a proceeding has started, and so had no application to this case. He reasoned: [9] Rule 18.12 allows a judge to grant an order requiring a witness or a custodian of documents to submit to discovery examination.

Rule 18.12(2) provides that an order can be made before the proceeding has started if certain conditions are met. Here, the proceeding has been started. That Rule just does not apply. [ 45 ] I agree. At the other end of the spectrum, Rule 18.12(4) provides for discovery by order after a proceeding has been concluded. This provision is also inapplicable. [ 46 ] Since this was not a case where the proceeding had not even started, nor a case where the proceeding had been concluded, sub- section (2) and sub-section(4) were easily jettisoned.

This then left only 18.12(3) to be considered. [ 47 ] Based on the facts before him, Campbell, J. was satisfied that the sought-after orders for discovery came before him during the proceeding and that, therefore, the requirements of 18.12(3) had to be satisfied. [ 48 ] For convenience it will be recalled that 18.12(3) sets out two threshold requirements to be satisfied by the moving applicant: 18.12

(3) A judge may order a discovery during a proceeding if both of the following apply: (

a) the person to be discovered is in a place outside Nova Scotia, and a discovery subpoena cannot be enforced, but an order would be enforced or obeyed; (

b) the proceeding cannot be determined justly without the discovery. [ 49 ] As is now apparent, the particulars described in sub-section (2), (3) and (4) (exerpted in ¶43 above) serve as guideposts for permitting the exercise of discovery, depending upon the circumstances therein described. These sub-sections are not interchangeable. Their provisions are distinct and are intended to cover different scenarios. [ 50 ] This is evident by comparing sub-section (2) to sub-section (3).

Under 18.12(2) only one of the three listed circumstances need obtain, whereas under sub-section 18.12(3) the motions judge must be satisfied that both of the two listed criteria have been met before issuing the sought-after order. [ 51 ] Having isolated 18.12(3) as being the only scenario relevant to the circumstances before him, Justice Campbell went on to find: [10] Under Rule 18.12(3) an order for discovery can be made during the proceeding if the person to be discovered is outside the Province and a subpoena cannot be enforced and the proceeding cannot be determined justly without the discovery.

Both of those conditions have to be present. Mr. Miles lives in Dartmouth, Nova Scotia. A subpoena could be enforced. Mr. Arnold lives in Prince Edward Island. There is nothing to indicate that a Nova Scotia subpoena would not be enforceable in that province. On that basis alone the motion requesting an order under Rule 18.12 could be dismissed.

[ 52 ] Once again, I agree with Justice Campbell. The appellants’ failure to satisfy him that a subpoena could not be enforced in the case of Mr. Arnold living in Cavendish, P.E.I. was enough in itself to dismiss the motion seeking an order compelling his attendance, since the Rule obliged the applicant to satisfy both criteria. [ 53 ] In any event, Campbell, J. went on to address the second criteria under Rule 18.12(3)(

b) which requires an applicant to demonstrate that: (

b) the proceeding cannot be determined justly without the discovery. [ 54 ] Clearly, such a determination is heavily discretion-based. Justice Campbell explained how he viewed the interplay between the various provisions of the Rule relating to the discovery of witnesses and how that

interpretation would guide his exercise of discretion to the circumstances before him. He reasoned: [11] The Rule cited by the Plaintiffs, Rule 18.12, does not deal specifically with non-party discovery. It does make clear though that an order should be made only if the proceeding “cannot be determined justly” without discovery. The parties have agreed, that is the test to be applied. [12] Rule 18.12(3) should be interpreted in light of the Rules that apply more generally to the discovery of witnesses. Parties are encouraged to carry on litigation in a way that is fair, expedient and cost effective.

Before non-parties are dragged unwillingly into the process, the parties themselves should complete disclosure and have discovery examination of their internal representatives. When that has been done the parties and the court should have a much better understanding of kind and scope of information that might be required from non-parties and who those non-parties might be. Non-parties are not the place to start. [13] Rule 18.04 sets out the requirements for a party seeking to obtain a discovery subpoena to discover representatives of the other party.

Rule 18.05 sets out the requirements for the issuance of a subpoena to a non-party after the close of the pleadings. In both situations the moving party has to establish that the discovery subpoena would promote the just, speedy and inexpensive resolution of the proceeding. The party has to show that it is in compliance with its own disclosure obligations and has to provide a concise statement of the grounds for its belief that a discovery subpoena is required instead of, or in addition to, an interview or discovery by agreement.

For discovery of non-parties there is an additional requirement regarding undertakings to pay expenses. [14] The Rules provide for an orderly process. If discovery is required to preserve evidence even before the proceeding has started an order for discovery can be made. Once the proceeding has started, parties are obliged to complete disclosure before undertaking discovery examinations. That encourages a more expeditious process in which discovery is undertaken with some sense of the evidentiary context.

Non-parties can be compelled to become involved to complete the evidence. [15] That approach should inform the

interpretation of Rule 18.12. The discovery rules as a whole establish an approach to the process that should be followed in their

interpretation. Part of that approach is to encourage parties to deal with litigation internally before involving strangers to the dispute. It is a fair, expedient and cost effective approach. The

interpretation of Rule 18.12, and the issue of whether a proceeding can or cannot be determined justly without discovery of a third party, should be informed and guided by that approach as well. [ 55 ] I endorse Justice Campbell’s comments as to how Rule 18 is intended to provide for an orderly process of discovery.

Its provisions are designed to promote a sensible, sequential, timely, and inexpensive means to secure evidence by discovery; primarily (or at least initially) through the discovery of parties and their representatives before dragging third party strangers into the dispute. [ 56 ] That is precisely what Justice Campbell’s decision and confirmatory order require. He was not persuaded that the dispute between the parties could not be determined justly without the discovery of Messrs. Miles and Arnold. He reasoned: [22] The kinds of information that the Plaintiffs have indicated they are seeking from both Mr.

Miles and Mr. Arnold goes to the merits of the main action. The Plaintiffs are seeking evidence about the communications and discussions between the Dutch regulatory authorities and Homburg Invest Inc. which is now 1810040 Alberta Limited and a non-party to the proceedings. The information does not address the issue of whether the action of the Defendants was “commercial activity”. It relates to the regulatory relationship between the Dutch authorities and Homburg Invest Inc. It relates to internal issues between Homburg Invest Inc. executives and the Board of the company.

There has been nothing provided to this point to indicate that it would be reasonable to believe that either person has evidence that would suggest that the Dutch authorities were undertaking commercial activity. It is, however, possible that examination of representatives of the Defendants will point toward how either Mr. Arnold or Mr.

Miles might have evidence that relates to or helps to establish the commercial nature of the activities. [ 57 ] Obviously Campbell, J. did not foreclose the appellants’ chance to re-apply and seek the discovery examination of these two non-party witnesses at a later date, signalling the possibility: …that examination of representatives of the Defendants will point toward how either Mr. Arnold or Mr.

Miles might have evidence that relates to or helps to establish the commercial nature of the activities … [t]hat may be possible when party disclosure and discoveries have been completed, specific gaps in the information as it pertains to the jurisdictional issue are identified and some reasonable grounds are put forward to indicate that either Mr. Arnold or Mr. Miles might be able to fill in those gaps. [ 58 ] It is to be remembered that in this case the appellants sought discovery of two non-party witnesses, before they had completed disclosure or even cross-examined the respondents’ affiants.

This is hardly a case where the appellants are left in the dark with respect to what the respondents’ position will be in defending the litigation commenced by Mr. Homburg and his associates. The respondents have filed a 19-page, 82 paragraph affidavit of Ms. Kristel van der Sanden, a senior supervisor at the AFM, to which she has attached 20 separate exhibits comprising almost 400 additional pages said to: 9. … provide factual evidence regarding the Defendants and their conduct in respect of the allegations made in the Statement of Claim.

[ 59 ] Ms. van der Sanden concludes her affidavit this way: Conclusion 80. At all times relevant to the allegations made by the Plaintiffs, the Defendants were agencies or administrative bodies of the State of the Netherlands engaged in regulatory supervision of an entity licensed to offer investment schemes to the Dutch public. By participating in the Dutch securities markets, HII consented to be regulated and supervised by the AFM and DNB. 81. As described above, the actions of the Defendants were lawful under the law of the Netherlands.

The courts of the Netherlands are an appropriate forum to adjudicate any disputes arising out of the Defendant’s conduct or alleged conduct. The Netherlands has a sophisticated legal system premised on the rule of law; her courts are experienced with adjudicating challenges to regulatory action. 82. Mr.

Homburg has brought, in the Netherlands, administrative and judicial appeals of the Defendants’ regulatory decisions; he is therefore aware of the administrative and judicial means available to him, and he is capable of pursuing those means, and has, in fact pursued remedies within the Dutch judicial system in respect of the regulation by the Defendants. [ 60 ] Based on this record it was certainly reasonable for Justice Campbell to conclude, as he did, that the appellants’ discovery of Ms. van der Sanden as the respondents’ representative, could well reveal how Mr. Arnold or Mr.

Miles might have evidence which relates to or helps establish the commercial nature of the respondents’ activities and whether – should there be gaps in that information – either Mr. Arnold or Mr.

Miles might be able to fill in those gaps, should they have relevant evidence to give that could only be obtained from them. [ 61 ] Before leaving this first issue, it seems to me that the appellants’ complaint that the judge’s consideration of 18.12(3) was wrong because (so they argued) he failed to appreciate that the pleadings had not closed and that as a result they were unable to fulfill the representations or undertakings required by 18.02, 18.04 or 18.05, is refuted by the plain meaning of 18.12. The operation and application of 18.12 does not depend upon the pleadings being closed.

As we have seen, 18.12(2) provides: A judge may order discovery before a proceeding has started … Similarly, 18.12(3) says: A judge may order a discovery during a proceeding … Further, 18.12(4) provides: A Discovery may be held after a proceeding has concluded … (Underlining mine) [ 62 ] The operation of these subsections is not dependent upon whether the pleadings have “closed”. Of course pleadings would not be closed if the proceeding had not yet been commenced.

And the pleadings would not be closed if a motion for an order for discovery were made “during a proceeding” but before a defence had been filed, as was the case here. [ 63 ] Had it been intended that judge-ordered discovery pursuant to 18.12 would be limited to circumstances where the pleadings were formally closed, it would have been a very simple matter to add those words, as we see, for example, in 18.02(1) which explicitly states: 18.02

(1) After pleadings close in a defended action, a party must do all of the following: … [ 64 ] Had the Justices of the Nova Scotia Supreme Court intended the Rule to have such a narrow, restricted application, they could have easily said so. There is nothing in this record which would support such a limited

interpretation. [ 65 ] Before concluding this part of my analysis a brief historical footnote comparing the approach taken in the new Civil Procedure Rules which came into effect on January 1, 2009, to the 1972 Rules would be helpful.

While the stated object under the Rules is the same (“…to secure the just, speedy and inexpensive determination of every proceeding”), this single, over-arching purpose is now enshrined in a stand-alone Rule 1, whereas in the 1972 iteration of the Rules it was one of several provisions included in the same rule, which also described the manner in which those Rules were to be cited, interpreted and applied. [ 66 ] Thus, while the object remains the same, it is reasonable to conclude that the 1972 Rules were seen to be deficient in achieving that objective.

Otherwise there would not have been any need to embark upon such an extensive revision of the Rules. Members of the judiciary and the Bar recognized that changes to the Rules were necessary to reduce cost and delay and to better provide access to timely and affordable justice.

Based on the bountiful record of published commentary by the judges and lawyers who worked so diligently, first in the revision of the Rules and later in their introduction across the province, one can easily take judicial notice of the fact that the scope of discovery, in all of its variations, became a primary focus in the perceived need for change. [ 67 ] Those in practice when the 1972 Rules were introduced will remember that the scope given to discovery examination was far- ranging, with the procedures introduced in Nova Scotia seen to be perhaps the most “wide open” in the country.

These changes were a deliberate attempt to avoid “trial by ambush”, a technique which had, up to that point, prevailed. Revisionists of the day saw early and comprehensive disclosure, by way of viva voce discovery and production of documents, as a way to promote early settlement, reduce litigation costs, and improve the rate at which cases could be tried and resolved. [ 68 ] As was made clear in the early jurisprudence that developed in the years following the introduction of the 1972 Rules, the notion of “relevance” was very broadly defined so as to give effect to those goals.

Full and frank disclosure was seen as a way to expose

the strengths and weaknesses of any given case, thus improving the chances for timely settlement. Those revisions were combined with various experiments in case (flow) management designed to speed up the pace of litigation. After almost 40 years of use many of those approaches had fallen out of favour. [ 69 ] Advocates for change now viewed liberal and far-ranging discovery as part of the problem, rather than part of the solution. In many cases the frequency of discovery – especially involving experts – was seen to be a waste of time and resources.

The money spent on discovery, and the months taken to complete it, did not measure up on any cost-benefit analysis. While such sentiments were not universally held, the idea that the time had come for a substantial revision in the rules relating to discovery ultimately prevailed. Eventually, after a lengthy process of consultation, significant reform was achieved.

Instead of permitting discovery of “any person” with potentially relevant evidence to give (however remote), new Rules were written which were clearly intended to limit, or foreclose, the availability of discovery, except as specifically authorized under the 2009 Rules. The

interpretation and application of the present Rule 18 should be seen in the context of this important historical and procedural shift. [ 70 ] Rules evolve to keep pace with changes in the practice of law and procedures intended to improve the ways in which litigants may access timely and affordable justice. The “orderly process of discovery” encompassed by Rule 18 is not a “one size fits all” system.

The choice of stream will depend upon where any given case fits within the factual scenarios included within the Rule. [ 71 ] The purpose of 18.12(1) is simply to introduce the route to discovery which that part of the Rule is written to cover. It is preambulary. It identifies “the judge” as being the official who “may order” a person or thing to be made available for discovery. It follows the same pattern as, for example, 18.11(1) which introduces “the Prothonotary” as being the official who can issue a subpoena, in the circumstances described in that part of the Rule.

So too with 18.01(1), 18.04(1) or 18.05(1) introducing what “a party” may do, within the circumstances therein described. Thus, the opening sub-section serves as an introduction to the format or path to discovery that follows it. [ 72 ] I am satisfied that Justice Campbell’s

interpretation and application of Rule 18 to the circumstances before him, was consistent with the plain language, purpose and historical evolution of Nova Scotia Civil Procedure Rules relating to discovery in this jurisdiction. He applied the proper legal test in deciding the motions brought by the appellants. He did not err in principle. Neither will any injustice occur as a result of his decision. Commercial Activity [ 73 ] I turn now to the appellants’ second principal argument. They say Justice Campbell misinterpreted the legal test of what constitutes “commercial activity” under s. 5 of the Act . In their submission, he was wrong to adopt “a narrow

interpretation that would require the foreign party to be actually engaged in a commercial enterprise before it could be considered to be engaging in “commercial activity”, and that his error led him to apply an “incorrect … test for determining relevance”. [ 74 ] In my view, this is not a ground upon which the merits of this appeal ought to be decided. As I read Justice Campbell’s reasons he only considered the phrase “commercial activity” in the context of determining whether the motions brought to compel the discovery of Messrs.

Miles and Arnold were relevant to the issue at the yet-to-be-scheduled jurisdictional motion. In other words, he was not applying the Act to the merits of the allegations brought by the appellants, nor could he. He was simply providing context to explain his ruling. That was the limited extent to which Justice Campbell related the phrase “commercial activity”. He recognized that whether the respondents’ actions and conduct amounted to “commercial activity” under the Act, was a matter that would be fully briefed and argued by counsel when the jurisdictional motion was heard.

He observed: [19] … The Plaintiffs will have to show an evidentiary record to support the assertion that the Defendants have engaged in commercial activities and that the action relates to those activities. [ 75 ] That of course will be a determination to be made by the judge who ultimately hears the jurisdictional motion. Nothing contained in Justice Campbell’s reasons, or this decision on appeal, will have any bearing on whatever that judge might ultimately decide. Premature Motions, or Effectively a

Summary Judgment [ 76 ] The third and final argument advanced by the appellants is that Justice Campbell was wrong to find that their motions were premature and that he failed to appreciate the effect of his ruling was to operate as a kind of

summary judgment. Again, I do not find this submission to be persuasive. [ 77 ] I fail to see why first obliging the appellants to complete their discovery of the respondents’ representative will add to the delay or cost of this litigation, and if it does, how that responsibility lies at the feet of the respondents. As I have already explained, and as Justice Campbell made clear, he left the door open for the appellants to re-apply for discovery of Messrs. Arnold and Miles, should that prove necessary.

Justice Campbell recognized that before ordering the discovery of these two gentlemen, he had to be satisfied that this proceeding could not be determined justly without their evidence. The analysis of what required a “just determination” under Rule 18.12 led him, quite properly, to consider the rest of Rule 18 and particularly the Rules relating to discovery of non-party witnesses. He said: [12] Rule 18.12(3) should be interpreted in light of the Rules that apply more generally to the discovery of witnesses. Parties are encouraged to carry on litigation in a way that is fair, expedient and cost effective.

Before non-parties are dragged unwillingly into the process, the parties themselves should complete disclosure and have discovery examination of their internal representatives. When that has been done the parties and the court should have a much better understanding of kind and scope of information that might be required from non-parties and who those non-parties might be. Non-parties are not the place to start . [Underlining mine]

[ 78 ] Rule 18.05 allows a party to obtain a subpoena to discover a non-party. The requesting party must make certain representations and provide undertakings. Rule 18.05 embodies the exceptional nature of non-party discovery in Nova Scotia, a principle that was well- recognized by Justice Campbell and is properly reflected in his analysis of the

interpretation and application of Rule 18.12. I think Justice Campbell was right to conclude that the appellants’ sought-after discovery of Messrs. Miles and Arnold was at this point both premature and not shown to be relevant. [ 79 ] Finally, the appellants complain that Campbell, J. failed to give appropriate weight to their assertion that for them, the jurisdictional motion is essentially a motion for

summary judgment. Let me say first that in my view this is not a proper ground of appeal, as it is simply a complaint about the judge’s rejection of an analogy and not a submission alleging an error in principle or a patent injustice. [ 80 ] But I go further. The appellants chose to bring their action against the respondents in Nova Scotia. From the detailed allegations in their Statement of Claim they certainly anticipated a jurisdictional challenge to their choice of forum. For example, the Statement of Claim says in part: AFM and DNB’s Actions Were Extraterritorial 33.

The Plaintiffs refer to both paragraphs 23 and 32, above, and plead the doctrine of the sovereign equality of states. This doctrine prohibits the extraterritorial application of the Netherlands’ domestic law because such application would constitute an interference under international law with the exclusive territorial jurisdiction of Canada . The demands described in paragraphs 23 and 32, above, were a dubious attempt to apply AFM and DNB powers beyond the territorial limits of the Netherlands.

This attempt to apply those powers to a Canadian company in Canada was beyond the jurisdiction of the Netherlands and therefore beyond the jurisdiction of AFM and DNB, if they were not a misuse of those powers to begin with. The AFM and DNB therefore acted in excess of their jurisdiction and because they did so, they acted unlawfully in Canada . 34. As a result of this unlawful activity, the Plaintiffs have suffered the damages described above in an amount that will be provided prior to and proven at trial. AFM and DNB Therefore Engaged in Commercial Activity 35.

The Plaintiffs refer again to the allegations in paragraph 14 to 33 above. The Plaintiffs plead the provisions of s. 5 of the State Immunity Act , RSC, 1985, c. A-18. AFM and DNB acted without jurisdiction and unlawfully in interfering with the control and management of HII in Canada . The legal status in Canada of AFM’s and DNB’s several moves was no higher than those of any other stakeholder in HII seeking to change the management and control of the company. Therefore, in: (

a) seeking to direct and control the course and activities of HII’s business in Canada, the U.S. and Europe; (

b) seeking to oust Mr. Homburg from his control-position in HII; (

c) publishing Mr. Homburg’s private tax disputes with the DTA in an effort to discredit him and persuade him to give up his control position in HII; (

d) using an extreme and absurd

interpretation of BGfo in an attempt to persuade the HII Board of Directors in Halifax to force Mr. Homburg out of HII; and (

e) positioning themselves in discussions with Monitor Laporte, Mr. Schӧingh and Mr. Miles in a manner that would ensure that HII would have to seek CCAA protection in order to remove Mr. Homburg’s control position; AFM and DNS were engaging in commercial activity in Canada. 36.

As a result of this unlawful commercial activity, the Plaintiffs have suffered the damages described above in an amount that will be provided prior to and proven at trial. (Underlining mine) The appellants cannot now cast themselves as some kind of accidental tourist, who fell victim to an unknown and surprising procedural challenge, of their own making. [ 81 ] More broadly, motions based on state immunity and motions for

summary judgment are fundamentally distinct. Justice Campbell recognized the differences. On a

summary judgment motion under Rule 13, a defendant is required to show that the pleadings are clearly unsustainable and that the evidence demonstrates there is no genuine issue for trial. Nothing of that nature is required when a party is faced with a Rule 4.07 motion to dismiss the action for want of jurisdiction. In this case, the appellants need not provide evidence supporting their entire case. They cannot, however, simply plead facts alleging a cause of action and then say those facts constitute commercial activity.

They must establish an evidentiary record that enables a court to determine whether the foreign entity has engaged in commercial or sovereign activity and whether the proceedings relate to commercial activity. [ 82 ] Jurisdictional limitations are of seminal importance in a case like this one which directly invokes the principle of sovereign immunity. It is a key element of international order that has been recognized for centuries to protect the autonomy and equality of international bodies. See for example Schreiber v. Canada (Attorney General) , 2002 SCC 62 .

These principles apply reciprocally to protect Canadian regulatory bodies from actions against them in foreign courts. [ 83 ] Both the State Immunity Act and the Rules of Civil Procedure establish clear jurisdictional limitations outside of which courts are not empowered to adjudicate disputes. It is true that there will be times when a motion to dismiss an action for want of jurisdiction will have a terminating effect on the proceedings. However, this result is contemplated by the Legislatures which have enacted

mechanisms permitting defendants to challenge the jurisdiction of the court. From what is before us on this record it cannot be assumed that should the appellants not succeed in resisting the respondents’ jurisdictional motion, they are somehow barred from seeking redress before the Dutch courts. [ 84 ] Whether the respondents’ conduct in this case will bring them within the “commercial activity” exception under the Act , is a matter for another court, on another day.

Conclusion [ 85 ] The overarching purpose of our Civil Procedure Rules is to ensure the “just, speedy and inexpensive determination of every proceeding”. That object is reflected in the high bar set by this Court when interlocutory discretionary orders are challenged on appeal. A party seeking to overturn such an order bears a heavy burden. We will only intervene if we are satisfied that the decision under appeal is wrong in law or would lead to a patent injustice.

I see nothing here which would warrant our intervention. [ 86 ] While I would grant leave, I would dismiss the appeal with costs to the respondents in the amount of $1,500.00 inclusive of disbursements, as agreed by counsel at the hearing. Saunders, J.A. Concurred in: Fichaud, J.A. Beveridge, J.A.