Friday, 30 November 2018

Discovery of Non-resident non-parties – Divisional Court Ruling

     North American cross border litigators know that under s. 1782 of the U.S. Code, U.S. federal courts have power to issue a subpoena against a U.S. resident in aid of a foreign proceeding.    Can this be used to discover non-parties in the United States?  

     In Mancinelli v Royal Bank of Canada [2018] O.J. No. 2015, a class action, the Ontario Divisional Court* recently upheld an order by Perell J. requiring the plaintiffs, who had obtained from a U.S. Court a subpoena to examine a U.S. company non-party for discovery, not to pursue that discovery without first obtaining leave of the Ontario court.     

     The Court gave several reasons for this ruling.   One was that under Rule 31.10 of Ontario’s Rules of Civil Procedure, a party must obtain the court’s leave to examine a non-party for discovery.  Second, under Ontario law discovery in a class action is not permitted until the action has been certified (except for discovery on issues specific to certification).  This class action had not yet been certified, so no discovery on the merits is permitted yet.   Third, in their ex parte motion before the U.S. Court the plaintiffs had failed to disclose the foregoing.  In Re Application of Microsoft Corp., 428 F. Supp 2d 188 at 194 (SDNY 2006) the court stated that no U.S. court has ever granted an order under s. 1782 where the foreign court objected to such order.    

     The Court did not state or suggest that the fact the non-party is a non-resident would preclude discovery.  Had that been a barrier to discovery, one would expect Perell J’s’ one hundred and six paragraph long reasons, or the Divisional Court, to have mentioned it.

     The Divisional Court distinguished formal, compelled examinations for discovery from obtaining evidence in the form of voluntary disclosure.  One is free to do the latter without leave. 

      This case illustrates the tendency of courts to be protective of their own procedural powers in cross border cases.    The plaintiff had argued that the order the defendants sought – to bar the plaintiffs from using their subpoena without leave – was an injunction and thus the test for an injunction applies.  The Divisional Court upheld Perell J’s answer, that “the remedy for non-compliance was compliance, not an injunction” (para. 37).     This is consistent with the fact that choice of law is only for substantive law;  a court will always apply its own procedural rules.

*S.N. Lederman, F. P. Kiteley and A Doyle JJ.