Chesterman Farm Equipment Inc. v. CNH Canada Ltd., 2009 ONAFRAAT 24

Agriculture, Food and Rural Affairs Appeal Tribunal

1 Stone Road West Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: appeals.tribunal.omafra@ontario.ca

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West Guelph (Ontario) N1G 4Y2 Tél. : (519) 826-3433, Téléc. : (519) 826-4232 Courriel : appeals.tribunal.omafra@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL: Chesterman Farm Equipment Inc. v. CNH Canada Ltd. – Motion Decision CFEI v. CNH 2009 ONAFRAAT 24

STATUTE: Farm Implements Act

HEARING: July 16, 2009

DATE OF DECISION: August 18, 2009

2009-24

NEUTRAL CITATION: 2009 ONAFRAAT 24

IN THE MATTER OF THE FARM IMPLEMENTS ACT, AND THE MINISTRY OF AGRICULTURE, FOOD AND RURAL AFFAIRS ACT.

AND IN THE MATTER OF: an Application to the Agriculture, Food and Rural Affairs Appeal Tribunal (Tribunal) by Chesterman Farm Equipment Inc. (“CFEI”), of Tillsonburg, Ontario, about a decision of CNH Canada Ltd. (“CNH”);

AND IN THE MATTER OF: a Pre-hearing Conference pursuant to Rule 24 of the Tribunal's Rules of Procedure, held for the purposes of the hearing by the Tribunal of a motion by CFEI seeking disclosure of documents from the Association of Equipment Manufacturers.

Before: John O’Kane, Vice Chair

Appearances: Dave Chesterman, representative on behalf of the appellant, CFEI John May, counsel for the appellant, CFEI Eric Gillespie, co-counsel for the appellant, CFEI Stuart Mackay, counsel for the respondent, CNH Donald Good, counsel for the intervenor, Association of Equipment Manufacturers (“AEM”) Bev Leavitt, on behalf of the respondent, CFEI Shashu Clacken, counsel for the intervenor John Deere Limited (“JDL”) Gail McCombs, John Deer Limited (“JDL”)

DECISION OF THE TRIBUNAL

This Pre-hearing conference was heard in the Tribunal Boardroom, in Guelph, Ontario, on July 16, 2009.

Motion Overview

Chesterman Farm Equipment Inc. (CFEI) moves for production and discovery against the Association of Equipment Manufacturers (AEM) who, although an intervenor with limited status, is not a true party to the dispute between CFEI and CNH Canada Ltd. (CNH).

Appeal Background

In 2006, CNH, a farm equipment manufacturer ended a dealership relationship with CFEI. I use the word “ended” advisedly to ensure there is no misunderstanding that in these reasons I make any findings about the “end” of that relationship. Such determinations will ultimately be for the Tribunal panel assigned to the hearing.

CFEI applied to the Tribunal under section 5(5)[i] of the Farm Implements Act (Act) for a hearing into the dispute with CHN, following an unsuccessful mediation under section 5(3).

CFEI seeks over $1 million general damages and $1 million punitive and exemplary damages from CNH.

Intervenor’s Status

CFEI’s case asserts contract breaches and statutory breaches committed by CNH. One of the alleged statutory breaches is CNH’s refusal to pay CFEI’s cost of warranty repairs, which CFEI asserts farm implement distributors like CNH are required to pay under section 18[ii] of the Act. The Act defines distributors to include farm implement manufacturers.

On May 16th, 2008, the parties consented to a procedural Order granting AEM and John Deere Ltd. (JDL) limited intervenor status in this proceeding. Their role is limited to submissions about interpreting section 18 of the Act, as it arises in the context of the dispute between CFEI and CNH, and as it relates to the statutory liability of distributors under that section.

AEM is a trade association whose membership is equipment manufacturers in the agriculture, construction, forestry, mining and utility industries. AEM’s head office is in Milwaukee, Wisconsin. AEM does not have a physical presence in Canada. AEM does not have any employee’s in Canada. Since January 1st, 2005, AEM retains Howard Mains of Tactics Government Consulting, a government relations consulting firm in Ottawa as its Canadian representative.

JDL is a farm equipment manufacturer.

In the May 16th, 2008 procedural Order the Tribunal created a schedule for production and discovery between CFEI and CNH. The Tribunal purposely excluded the intervenors from production and discovery rights and obligations given the limited nature of their involvement in this proceeding.

Genesis of this Motion

Production and discovery between CFEI and CNH is complete.

At the discovery of CNH’s representative, it confirmed that if it were not for CFEI’s breaches of the Dealership Agreement (the contract), in all likelihood the contract would have been renewed. One of the alleged breaches of the contract is CFEI’s failure to achieve a minimum market share. At discovery, CNH confirmed it obtains information about industry wide sales from AEM but it does not know AEM’s processes to gather market data. In response to CFEI’s request that CNH ask AEM about its data collection processes, CNH invited CFEI to make its own inquiries of AEM, and if unsuccessful, CNH would then consider the request.

On February 17th, 2009 CFEI corresponded with Howard Mains, AEM’s Canadian representative. In that letter, CFEI sought information from AEM in the context of tractors, forage and hay equipment in Haldimand-Norfolk, Oxford and Elgin Counties for 2001-2008. CFEI then listed 21 specific questions for AEM about its data collection and distribution processes and two questions about the data obtained.

On February 18th, 2009 a lawyer from Chicago, Illinois replied to CFEI on behalf of AEM. The substance of that letter was AEM would not answer CFEI’s questions.

On March 12th, 2009, CNH corresponded with CFEI advising that:

• CNH provides monthly sales information to AEM based on equipment categories defined by AEM
• CNH’s information was that all major and most minor manufacturers or distributors of tractors, hay and forage equipment provide similar sales information to AEM
• AEM uses the data to provide generic non-identifiable information to each contributing distributor outlining sales, by category, by county
• CNH then calculates its market share based on the information supplied by AEM

On March 19th, 2009 the parties and intervenors appeared at a pre-hearing conference. At that pre-hearing CFEI raised the issue of the importance to its case of the information sought in the February 17th letter to AEM. Since the Tribunal’s Rules do not provide for production and discovery from non-parties, the Tribunal issued a further procedural Order giving CFEI the opportunity to rely on Rules 30.10 and 31.10 of the Rules of Civil Procedural to bring a motion seeking production and discovery from the non-party AEM.

Production from Non-Parties

Rule 30.10(1) of the Rules of Civil Procedure provides (emphasis added):

The court may, on motion by a party, order production for inspection of a document that is in the possession, control or power of a person not a party and is not privileged where the court is satisfied that,

(a) The document is relevant to a material issue in the action; and

(b) It would be unfair to require the moving party to proceed to trial without having discovery of the document.

The parties on this motion agreed that Attorney General of Ontario et al. v. Stavro et al. 1995 CanLII 3509 (ON CA), [1995] O.J. No. 3136 (C.A.) provides the controlling authority on interpreting and applying Rule 30.10. Unlike the facts in the Stavro case, in this case there is an assertion by AEM of privilege with respect to at least some of the information sought by CFEI. That does not detract from the authority of the Stavro case; rather it adds another factor for consideration on this motion.

In exercising the discretion to order production from a non-party, the Rule 30.10 factors include:

• Privilege
• Relevance
• The importance of the documents in the litigation
• Is production necessary now rather than at trial to avoid unfairness to CFEI
• Is the discovery of CNH on the issue to which the documents are relevant adequate and if not, is CNH responsible for that inadequacy
• AEM’s position on production
• The availability of the documents or their equivalent from other sources
• AEM’s relationship to the litigation and the parties

Before considering those factors, I will address the issue of the Affidavit of Karen Dawson and the appended “Expert Witness Report of Harry Cummings”.

CFEI filed the affidavit of Karen Dawson, which appends the April 2009 report of Harry Cummings. I presume CFEI wants the Cumming Report read as support for the relief sought on this motion. During argument, CFEI’s counsel suggested I should consider the report, not for the proof of the contents, but as defining an issue over the accuracy of the market share data CNH relied on (AEM’s data).

A number of concerns arise from this approach:

The first concern is Ms. Dawson’s affidavit arriving after CFEI had cross-examined AEM’s representative. The Rules of Civil Procedure do not allow delivery of affidavits after cross-examination. This Tribunal should be reluctant to allow it to happen since if this practice takes hold it will turn motion procedures into endlessly leapfrogging affidavits.

However, a bigger concern relates to the evidentiary value of the Cummings report as an attachment to the Dawson affidavit. Ms. Dawson’s affidavit evidence testifies to the fact that the report was delivered in the proceeding on April 19th, 2009 and nothing more directly about the report contents. In the penultimate affidavit paragraph, Ms. Dawson testifies CFEI seeks documentary production “in order to assess the reliability of AEM’s statistics”.

I considered the jurisprudence cited by the parties, including Dutton v. Hospitality Equity Corp. [1994] O.J. No. 1071 and Benge v. Toronto General Hospital [1996] O.J. 2584. Those cases dealt with summary judgment motions, and therefore, substantive rather than procedural determinations. However, I do not accept there should be any difference in how the Tribunal treats what is purported as an expert’s report simply because the motion deals with procedural matters.

The Statutory Powers Procedure Act affords the Tribunal discretion to receive hearsay evidence. However, when it does so it must temper admissibility of such evidence with the weight accorded to it. In this case, because Harry Cumming did not testify, AEM had no opportunity to test the contents of his report, including any concerns Cumming raises about AEM’s statistical processes, the Tribunal accords the Cumming Report almost no weight.

It is worthy of note that at page 3 in the Cumming Report three of the four main conclusions relate to the “reliability of AEM’s statistics” and those conclusions did not require production of the materials sought in this motion.

Privilege

During oral argument, counsel for CFEI confirmed the documentary production sought from AEM was confined to the twenty-three questions from the February 17th letter to AEM.

Questions #4 and #5 from that February 17th letter are:

4. What were the sales, in Canadian dollars for all Distributors, listed by Distributor by product category, in all product categories requested?

5. What were the sales, in units for all Distributors, listed by Distributor by product category, in all product categories requested?

The information about sales, in dollars and units, for all distributors of tractors, and hay and forage equipment in Haldimand-Norfolk, Oxford and Elgin counties between 2001 and 2008 is business information that is private and confidential to each distributor.

AEM publishes its Policy and Procedure Manual on its publicly accessible website. That manual creates processes to gather private and confidential business information from distributors based on three simple understandings:

1. The information gathered will remain confidential;

2. The information will be received, stored and managed by an independent data management firm, the information processing company or “IPC”;

3. No one other than the IPC, including AEM will have access to the raw business data.

It was only with the exchange of the materials for this motion and the associated cross-examination of AEM’s Canadian consultant that revealed that Hargrove & Associates Inc. (Hargrove) of Minneapolis, Minnesota was AEM’s independent data management firm or IPC.

These facts engage consideration of the right to privacy and confidentiality of many unidentified non-parties to this dispute as well as contractual obligations between AEM and its membership and AEM and Hargrove.

The law recognizes several species of privilege, one of which is the common law privilege of confidentiality.

The Supreme Court of Canada considered the common law privilege of confidentiality in Salvutych v. Baker 1975 CanLII 5 (SCC), [1975] S.C.J. No. 29. Applying the four considerations approved of by that Court to the present facts, the Tribunal finds:

1. The communication of farm equipment sales, in dollars and units between farm equipment distributors and AEM and Hargrove originated in confidence with a commitment by distributors, AEM and Hargrove that the information would remain confidential and not be disclosed.

2. Common sense as well as the provisions of AEM’s Policy and Procedure Manual dictates that confidentiality is essential for equipment distributor members of AEM to trust AEM and Hargrove with their private and confidential business information. Howard Mains’ evidence also confirms that fact.

3. The relation between the parties to the confidence is gleaned in part from AEM’s Mission Statement from its Policy and Procedure Manual. AEM provides its members with “timely, accurate, useful and consistent market statistics data”. AEM’s membership is derived from a wide spectrum of the economy. Surely it is in the interests of those AEM members to participate in this form of statistical gathering and reporting, without jeopardizing proprietary business intelligence.

4. All the elements noted above reinforce the desirability of preserving the confidential business information of AEM’s members. Disclosure of such information could lead to unfair competition within the participating industries.

The Tribunal concludes the sales data sought from AEM is privileged.

Relevance

In the context of the issues in this motion, CFEI’s claim, as articulated in the February 26th, 2008 letter from its counsel, which is CFEI’s pleading, raises:

CNH’s breach of Ontario Regulation 123/06

• CNH unreasonably invoking failure to achieve sales targets that
  • are unreasonable
  • are not calculated pursuant to the dealer agreement
  • include products CNH is not authorized to sell
  • regroup products lines to falsely portray CNH’s actual performance
  • exclude products CNH is authorized to sell
  • do not give rise to termination rights
  • have been set up as a bad faith excuse to terminate CFEI

CNH’s breach of the dealer agreement

• terminating the dealer agreement without cause
• terminating the dealer agreement for alleged breaches that do not invoke termination rights

The Dealership Agreement between CFEI and CNH requires CFEI to “obtain a reasonable share of the market” in CFEI’s contractually defined territory. In the contract CFEI and CNH agreed that a “reasonable market share” is 90% of CNH’s average market share. The contract definition of “market share” incorporates a formula utilizing total industry volume as reported by what is now AEM.

Section 35 of the Act, authorizes the Minister of Agriculture, Food and Rural Affairs to make regulations including;

(c) prescribing information to be included in a dealership agreement and setting out legal rights and obligations for parties to the agreement, subject to subsection 3(5);

Under that authority, the Minister promulgated Ontario Regulation 123/06 entitled “Dealership Agreements”. That regulation creates statutory terms that are incorporated into all dealership agreements. Section 2(1)(a)-(g) of the Regulation provides a distributor with statutory rights to terminate a dealership agreement. Section 3 of the Regulation provides for a series of “other terms” in dealership agreements.

At least part of the case may involve a consideration of whether the sales targets CNH set for CFEI are “fair and reasonable” (O.Reg 123/06, section 3(7)), and possibly, if CFEI failed to achieve sales targets, was the failure “not unreasonable” (O.Reg 123/06, section 3(1)(a)(i)).

The burden of demonstrating the relevance of the requested material rests with CFEI.

Mr. Chesterman of CFEI testified that the issue of market share is “clearly relevant” to the termination of the dealership agreement.

Mr. Mains testified that the sales of distributors other than CFEI is “not relevant” to the dispute.

It is difficult for the Tribunal to make a finding about relevance based only on bald assertions in CFEI’s and AEM’s motion evidence.

The contract created a performance standard (90% of average market share) that CNH relied on to end the business relationship with CFEI. The Act superimposes on the contractual performance standard a “fair and reasonable” requirement as well as a safety net that permits dealers who fail to achieve that fair and reasonable standard to demonstrate their failure was “not unreasonable”. Within this context, I must consider if the sales data sought and the data processing protocols are relevant.

I am unable to see the relevance of the information sought in this motion.

However, at this stage of the analysis the Tribunal reflects on the comments of both Justice Ground on the motion and later the Court of Appeal in the Stavro case. Those comments noted that:

• there will frequently be relevant documents in the hands of third parties
• the policy reflected in the Rules does not support routine production and discovery of non-parties
• the production question therefore usually turns on the “fairness” analysis

Therefore, despite uncertainty over the relevance of the requested material, I will assume its relevance and turn to the “fairness” analysis.

Importance of the Documents

There was little evidence filed by CFEI on the importance of the documents sought.

There was some limited evidence in Karen Dawson’s affidavit where she testifies CFEI seeks documentary production “in order to assess the reliability of AEM’s statistics”.

I already ruled the Cumming Report attracts little weight but repeat my observation that Cumming was able to make his conclusions about the reliability of AEM’s data and processes without the documents sought.

Therefore, the Tribunal finds that CFEI failed to discharge the onus of proving the importance of the documents sought.

Production Necessary Now, Rather than at Trial to Avoid Unfairness

Given AEM’s frank admission that it will not respond to a summons, in all probability CFEI will be unable to obtain the productions sought at trial.

However, apart from Mr. Chesterman’s affidavit assertion that the materials are “clearly relevant” and Ms. Dawson’s affidavit assertion the materials are required to assess the reliability of AEM’s statistics, there is no evidence that convinces me that CFEI cannot adequately prepare for the hearing without the requested materials.

Therefore, CFEI has not satisfied the Tribunal that it cannot adequately prepare its case for hearing without the requested materials.

Is the discovery of CNH on the issue to which the documents are relevant adequate and if not, is CNH responsible for that inadequacy

It was clear on the motion that CFEI tried, during its examination of CNH, to get information about CNH’s market share. However, as already addressed, due to the confidentiality provisions of CNH’s membership in AEM, it cannot access any raw sales data. It knows its own sales and it learns from AEM where it stands, measured against other participating but unidentified distributors. From that, it knows its market share but nothing specifically about its competitors.

CFEI discovered CNH. Presumably, CFEI had the opportunity to ask questions about:

• the sales targets set by CNH;
• how CNH set those sales targets;
• the fairness and reasonability of those sales targets;
• how CNH determined CFEI failed to achieve those sales targets;
• why CNH considered CFEI’s failure to reach the sales targets unreasonable.

CNH’s inability to produce the documents sought is due to the confidentiality protections erected by AEM. Although CNH is a member of AEM that does not make it responsible for AEM’s policies in the absence of evidence that CNH controls AEM’s confidentiality protections. There was no such evidence on this motion.

Therefore, I cannot conclude that any inadequacy to reveal the documents sought in the discovery process is CNH’s responsibility.

AEM’s Position on Production

AEM resists production to CFEI. The reasons for AEM’s refusal include the confidential nature of the materials.

In addition, AEM cites the estimated expense ($50,000.00) and the estimated time (12 months) to comply with the requested production.

AEM’s witness testified about the destruction of raw sales data after six months and therefore to re-create the raw data requires engaging AEM’s membership to re-submit sales data back as far as 2001.

Presumably, the participating distributors received their consolidated reports from AEM back to 2001. Given that and recognizing that participation in submitting sales data is voluntary, it is questionable that any distributors would now provide AEM and Hargrove with the data needed.

Given AEM’s resistance, coupled with the probable cost in dollars and time, weighed against the speculative likelihood the data could not be re-created militates against production from AEM.

The Availability of the Documents or Their Equivalent From Other Sources

All parties to the motion and the evidence confirm it is unlikely the requested productions, at least as they relate to sales data, are available for other sources.

AEM’s Policy and Procedure Manual describes in very general terms its data gathering processes. That document is publicly available on its website. That document was produced to CFEI in the proceeding.

AEM’s Relationship to these Proceedings and the Parties

AEM is not a party to the dispute between CFEI and CNH.

AEM has no stake in the outcome of the dispute between CFEI and CNH.

AEM has a general interest in interpreting s. 18 of the Act, derived from its membership of farm implement distributors, which includes CNH.

CFEI argued AEM has, by taking certain positions on this motion, aligned itself with CNH in the dispute with CFEI and is therefore closer to a party than a non-party.

However, I am not persuaded by that since it was only in response to CFEI’s motion for production and discovery that AEM made arguments about how its statistical processes and the market sales data it collects were not connected to the contractual performance standards between CFEI and CNH.

Therefore, I do not agree with CFEI about the close alignment between CNH and AEM on the substantive dispute before the Tribunal. I am not prepared on this motion to treat AEM as a true party to that dispute.

Conclusion on Production

In considering the Rule 30.10 factors outlined above, I conclude that in these circumstances, the Tribunal will not order AEM to produce the requested sales data.

Several practical considerations, together with the above considerations, militate against ordering production from AEM.

The first consideration is that Hargrove, which is the actual repository of the raw sales data, is not a party to these proceedings, nor was it served with these motion materials.

The second consideration is the scope of the Tribunal’s jurisdiction. The Tribunal has no jurisdiction outside Ontario. Counsel for AEM candidly advised the Tribunal that a summons issued by the Tribunal would probably go unanswered by any AEM employees from the U.S.A. The only evidence the Tribunal has about Hargrove is that its offices are outside Ontario. Therefore, any order made for production from either AEM or Hargrove would be limited geographically.

The third practical consideration is the likely costs of assembling the requested material ($50,000) and the associated delay (12 months). It will not be in anyone’s interests to have this proceeding delayed by as much as another 12 months while the requested productions are re-created.

Had the Tribunal been inclined to order production, it would have ordered CFEI to pay AEM’s costs to do so, in accordance with Rule 30.10(5) of the Rules of Civil Procedure. That would have required developing a process to bring AEM’s costs regularly to the Tribunal for approval.

Discovery of Non-Parties

In addition to seeking the right to conduct a discovery of AEM, CFEI wants leave to read-in the discovery evidence at the hearing, without any further proof of that evidence.

During argument, CFEI indicated they would like to conduct the discovery by written interrogatory but with the right to conduct an oral examination as well.

CFEI indicated they wanted to examine Darrin Drollinger, AEM’s Vice President of Statistics. However, CFEI would accept anyone from AEM with the appropriate knowledge about the statistical processes and the market data.

Rule 31.10 of the Rules of Civil Procedure provides:

(1) The court may grant leave, on such terms respecting costs and other matters as are just, to examine for discovery any person who there is reason to believe has information relevant to a material issue in the action, . . .

(2) An order under subrule (1) shall not be made unless the court is satisfied that,

a. The moving party has been unable to obtain the information from other persons whom the moving party is entitled to examine for discovery, or from the person the party seeks to examine;

b. It would be unfair to require the moving party to proceed to trial without having the opportunity of examining the person; and

c. The examination will not,

i. unduly delay the commencement of the trial of the action.

ii. entail unreasonable expense for other parties, or

iii. result in unfairness to the person the moving party seeks to examine.

(5) The evidence of a person examined under this rule may not be read into evidence at trial under subrule 31.11(1).

Both the CFEI and AEM motion materials referred to the Divisional Court’s decision in Famous Players Development Corp. v. Central Capital Corp. 1991 CanLII 7202 (ON CTGD), [1991] O.J. No. 2127 (Div. Ct). It appears that case is the controlling authority under Rule 31.10.

At this point of my reasons I will deal first with the use at trial or hearing of a non-party’s discovery, before returning to the Rule 31.10(1)(2) test.

Rule 31.10(5) of the Rules of Civil Procedure clearly precludes reading the discovery of a non-party into evidence at trial.

I note Justice Sutherland’s comment from Famous Players about Rule 31.10(5) that “obtaining discovery of the case to be met is the sole reason for an examination under the rule.” (My emphasis added.)

Rule 31.10(5) as interpreted by the Divisional Court forbids reading from the transcript into evidence. I do not think it matters if the product of the non-party discovery is a transcript or written interrogatories, the same principle applies.

The Tribunal’s own Rule 26.07 precludes reading into evidence at a hearing from the discovery transcript of an opposite party. At a Tribunal hearing, the use of discovery transcripts is limited to impeaching a witness about prior inconsistent evidence. In my view, the same principle should apply in Tribunal practice for non-party discovery.

Therefore, based on the clear wording of Rule 31.10(5) of the Rules of Civil Procedure and the direction from the Famous Players case and the intent of the Tribunal’s Rule 26.07, I would not make an order permitting CFEI to read into evidence at the hearing from a non-party’s discovery.

In addition, I am concerned that such an Order is inappropriate as it could fetter the Tribunal hearing panel’s discretion to control its hearing process.

The Rule 31.10(1) test engages a consideration of relevance of the information sought by discovery. In my view, CFEI’s case for the relevance analysis at this stage suffers the same as the relevance analysis for production. However, as in that circumstance, and despite my uncertainty about relevance of AEM’s information, I will assume relevance and consider the balance of the test.

Turning to the Rule 31.10(2) test, the Divisional Court in Famous Players confirmed that the moving party must satisfy all the criteria of subrule 31.10(2) in order to engage the Court’s discretion. (My emphasis added.)

I am satisfied on the evidence that CFEI has been unable to get the information it wants from its discovery of CNH or directly from AEM. Therefore CFEI satisfies Rule 31.10(2)(a).

The balance of the test in subrule 31.10(2)(b) and (c) is essentially a “fairness” analysis.

I will not repeat the fairness analysis from the production portion of these reasons. I do not find CFEI’s evidence persuasive that it is unfair to require it to proceed to a hearing without the non-party discovery.

In addition, I am convinced an examination will unduly delay the October 26th, 2009 start of the hearing.

The person CFEI seeks to discover is from the United States. This Tribunal’s Orders and Summonses are effective in Ontario, but not beyond. There is no enforcement mechanism to ensure a discovery, if ordered, could be arranged and completed before the scheduled hearing start.

The CFEI Factum confirms the information sought by discovery relates to market share (paragraph 29, April 6th, 2009 Factum). To my understanding that involves the same information sought in CFEI’s questions # 4 and #5 reproduced in “Production” section above. AEM’s uncontradicted evidence on this motion is the re-creation of that data will take an estimated twelve months and $50,000.00. Therefore, I conclude there would be undue delay and unreasonable expense.

In the circumstances, CFEI has not satisfied all the criteria of Rule 31.10(2). Therefore, as informed by the Divisional Court in Famous Players, I have no discretion to make the requested discovery order since the rule is clear that I “shall not” make such an order unless all the criteria are met. (My emphasis added.)

Costs of the Motion

At the Tribunal’s direction, AEM and CFEI filed brief written costs submissions. That direction was not limited to just the costs of production and discovery, but included costs of the motion.

AEM seeks costs of $25,775.54 associated with responding to CFEI’s motion. CNH’s position is AEM should not receive any costs of this motion.

The Farm Implements Act is silent about the Tribunal awarding costs.

Section 17.1 of the Statutory Powers Procedure Act restricts tribunals from ordering costs unless the conduct of a party has been unreasonable, frivolous and vexatious or in bad faith and the tribunal has created its own rules with respect to costs. Pursuant to section 25.1 of the SPPA, this Tribunal has made rules with respect to ordering costs.

The Tribunal’s Rule 28 deals with costs. The commentary associated with Rule 28 notes that participants, witnesses or others without official party standing can request or receive costs, but only in the most unusual circumstances.

The Tribunal’s rules also provide in Rule 1.09 that where a matter of procedure is not provided for in the Rule, the Rules of Civil Procedure may be followed where the Tribunal determines they are appropriate. As noted previously in these reasons I have relied on the Rules of Civil Procedure to deal with the test for production and discovery. In the context of the question of costs of the motion I also conclude it is appropriate to rely on the Rules of Civil Procedure.

Therefore, relying on the SPPA, the Tribunal’s Rules and the Rules of Civil Procedure, in the circumstances of this motion I have discretion to award costs.

As noted in the commentary to Rule 28, cost awards at the Tribunal are rare.

The circumstances of this motion are most unusual. CFEI, a party in a dispute with CNH, seeks to bring a non-party into the production and discovery process of this private dispute. Despite AEM’s limited intervenor status, they remain a non-party to the “lis” between CFEI and CNH. Although the Tribunal’s Rule 28.01 refers to a “party” asking for costs, I do not interpret the word “party” in that rule to be limited to CFEI and CNH as the parties to the “lis”. The Tribunal’s Rules do not define the word “party”. Defining the word “party” to exclude “participants, witnesses or others without official party standing” would be contrary to the commentary accompanying Rule 28. That commentary confirms the Tribunal’s intention in Rule 28 is to allow participants, witnesses or others without official party status to seek costs in the appropriate case.

In these most unusual circumstances, I do find it is unreasonable of CFEI to seek to involve a non-party in the production and discovery phase of this private dispute. I understand why CFEI brought the motion. They believe they had good reason to pursue production and discovery. However, a reason, even a good reason for pursuing this motion strategy, does not insulate the conduct from a determination it is unreasonable in the circumstances. In my view, a cost award is the only fair and reasonable way to deal with the unreasonableness of CFEI’s motion.

In response to CFEI’s motion, AEM retained Canadian counsel and prepared and filed responding materials, participated in a cross-examination of its affiant, prepared for and attended a full day motion hearing. AEM would not have incurred the expenses for those steps were it not for CFEI’s motion.

A cost award in these circumstances is not a sanction or punishment but, rather, recognition that when a party to a private dispute seeks to involve a non-party in the interlocutory proceedings, they will force that non-party to incur expenses. In such circumstances, whether the motion is successful or not, the moving party should compensate the non-party for those expenses.

AEM’s counsel filed as part of the costs submissions a Bill of Costs in a Form 57B “Costs Outline” (Rules of Civil Procedure) as evidence supporting the costs claimed.

The fees claimed are $12,905.80, inclusive of GST for the work of AEM’s counsel up to the motion attendance plus $2,500.00 for that attendance. Given Mr. Good’s experience, the rates claimed are reasonable. Given the relative complexity of the issues on the motion, the hours spent and the distribution of those hours between Mr. Good and lower cost fee billers is reasonable. When I examine the description of the division of labour, there is no evidence of duplication of effort. Although the disbursement entry for photocopies of $716.70 seems high, Mr. Good’s certificate satisfies me they incurred those disbursements as claimed.

AEM also seeks $5,000.00 for Howard Mains’ involvement and $4,380.00 for the involvement of AEM’s U.S. counsel. Although AEM did not file the invoices or accounts supporting those two amounts, I have no doubt AEM incurred those amounts. However, when I consider the reasonable expectation of CFEI as the unsuccessful party on this motion, I do not find it reasonable to award recovery for those amounts. Although I do consider it reasonable that CFEI should expect to pay AEM’s costs on this motion, I do not consider it reasonable that CFEI would have expected those costs to include external consultants such as Mr. Mains and U.S. counsel as well as Canadian counsel.

Therefore, in the circumstances of this most unusual motion, I find it is fair and reasonable that CFEI pay AEM’s costs of the motion fixed at $16,395.54 inclusive of fees, disbursements and GST.

ORDER OF THE TRIBUNAL

The Tribunal Orders that:

1. CFEI’s motion for production and discovery of AEM is dismissed.

2. CFEI shall pay to AEM costs of the motion fixed at $16,395.54, which in accordance with Rule 28.05 will bear interest in the same manner as a cost award made under section 129 of the Courts of Justice Act

Dated at Brampton, Ontario this 18th day of August, 2009

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1Dispute resolution

5. (1) On the request of a purchaser, dealer, distributor or manufacturer, the Director may inquire into and attempt to resolve a dispute with respect to any matter arising from the application of this Act or the regulations.

Mediator

(3) If a person makes a request to the Director for an inquiry under subsection (1) or an investigation under subsection (2), the Director may appoint a mediator to assist the parties to resolve the dispute.

Hearing

(5) If the parties to a dispute are unable to resolve it with the assistance of a mediator, any of the parties to the mediation may apply to the Tribunal for a hearing.

Decision

(6) The Tribunal shall decide the issue that is before it for a hearing and shall serve notice of the decision, together with written reasons, on the parties to the hearing in accordance with its rules of practice.

1Liability for warranties

18. (1) The distributor of a new farm implement is liable to the purchaser to honour the warranties under sections 12 (power) and 13 (quality).

Idem

(2) The dealer and distributor of a new farm implement are jointly and severally liable to the purchaser to honour the warranty under section 15 (parts supply).

Idem

(3) The distributor who supplies a new repair part is liable to the purchaser to honour the warranty under section 16 (quality of parts).

Idem

(4) If a farm implement is damaged as a result of a breach of the warranty under section 16 (quality of parts), the distributor of the repair part is liable for the cost of repairing the farm implement.

Repairs under warranty

(5) A dealer or distributor making repairs to a farm implement under a warranty provided by this Act shall use new repair parts that are of the standard and size specified by the manufacturer for that farm implement, unless the purchaser and the distributor authorize in writing the use of different parts.

Recall of defective farm implements

(6) If a distributor is or should be aware that a significant percentage of farm implements sold by the distributor exhibit a common defect, the distributor shall notify purchasers of the defect and of the distributor’s obligation to repair the defective farm implements.

Repair

(7) The distributor shall have the defective farm implements repaired at the distributor’s expense or shall reimburse the dealer for the cost of repairing the defective farm implements.

Reimbursement

(8) If the distributor reimburses the dealer for the cost of repairing the defective farm implements, the distributor shall do so in accordance with the terms to which the parties agree.

Cost of repair

(9) If the parties do not agree on terms for the reimbursement of the cost of repair, the cost shall include,

(a) if necessary for doing the repair, the cost of transporting the implements within the dealer’s market area as assigned in the dealership agreement;

(b) the cost of travel incurred by the dealer in having the repair done;

(c) the cost of labour for doing the repair, based on the dealer’s posted shop rate for labour; and

(d) the cost of parts used in the repair.

Reimbursement by manufacturer