Court File and Parties

COURT FILE NO.: 272/09

DATE: 20090618

SUPERIOR COURT OF JUSTICE – ONTARIO (DIVISIONAL COURT)

RE: first capital realty inc. (Plaintiff) v. centrecorp management services limted, john p. preston and robert s. green (Defendants)

AND RE: centrecorp management services limted, centrecorp management services PARTNERSHIP and STERLING REALTY SERVICE INC. (Plaintiffs by Counterclaim) v. FIRST CAPITAL REALTY INC. (Defendant to the Counterclaim)

BEFORE: Justice Low

COUNSEL: Arlen K. Sternberg, for the Plaintiff/Appellant Marguerite Ethier, for the Defendant/Respondent

HEARD AT TORONTO: June 17, 2009

E N D O R S E M E N T

[1] The plaintiff seeks leave to appeal the order of Roberts J. dated March 15, 2009 wherein she reversed the order of Master Hawkins dated October 7, 2008 which granted leave to the plaintiff to deliver a supplementary affidavit under rule 39.02(2) after plaintiff had completed cross-examination upon an affidavit filed by the defendant on a pending motion. The pending motion was for an order that Terrence Coughlin be made available to be examined for discovery on behalf of the defendant Centrecorp. Mr. Coughlin was said to be a director or an officer or an employee of Centrecorp.

[2] In response to the plaintiff's motion, the defendants filed the affidavit of Robert S. Green. Mr. Green was cross-examined and in the course of the examination he testified that Mr. Coughlin had ceased to be an employee of Centrecorp in 2000.

[3] On the eve of the argument of the motion, the plaintiff brought a motion before the master under rule 39.02(2) for leave to adduce in evidence two documents which, it would appear, indicate that in 2005 Mr. Coughlin was executive vice-president of Centrecorp. These documents emanated from Centrecorp and one of them was signed by Mr. Green.

[4] In support of the motion the plaintiff filed the affidavit of Sandra Perri, a solicitor, which was based in part on information and belief. Ms. Perri deposed, at paragraph 9 of the affidavit:

I am advised by Crawford Smith, partner at Torys LLP and lead counsel to First Capital in this matter, that in preparing for the hearing of the Main Motion, he reviewed correspondence between the parties relating to the Coughlin Claim and located two further documents that are responsive to Green's evidence, made known to First Capital for the first time on Green's cross-examination, that Coughlin ceased to be an employee of Centrecorp in August 2000. I am further advised by Mr. Smith that although the letters were available prior to Green's cross-examination, he had no recollection of them.

[5] The parties agreed in advance of the motion before the master that in the event that an order was granted allowing the additional evidence to be filed, terms were to be that Centrecorp would be granted leave to file responding material, that the parties may conduct cross-examinations on the further affidavit of Ms. Perri and any responding affidavits delivered by Centrecorp, that the plaintiff shall forthwith pay costs in an amount to be fixed, and that the plaintiff shall forthwith pay the costs to be fixed arising from the additional steps necessary as a result of the introduction of the additional evidence.

[6] That the evidence was highly relevant is not seriously disputed. The master held that the evidence responded to the issue of when Mr. Coughlin ceased to be an employee of Centrecorp, an issue that arose on Mr. Green's cross-examination, and that the interests of justice required that the additional evidence be received on the main motion. The master was satisfied as to the explanation for the failure to bring the documents forward at an earlier time.

[7] On appeal, the motions judge held, at paragraphs 30 – 32 the following:

[30] Plaintiff's lead counsel should have sworn an affidavit so that he could have been cross-examined. He should not have appeared as counsel. An adverse inference should have been drawn from the absence of lead counsel's affidavit. The explanation for the delay in submitting the exhibits contained in Ms. Perri's affidavit should not have been admitted.

[31] As a result, there was no explanation properly before the Court to explain the plaintiff's delay in submitting the exhibits sought to be introduced and the plaintiff's motion should have been dismissed.

[32] The acceptance of the plaintiff's explanation through inadmissible evidence constitutes an error in law.

[8] The plaintiff submits that the motions judge was clearly wrong in so holding and that both prongs of rule 62.02(4) are satisfied.

[9] With respect to rule 62.02(4)(b), it is unnecessary that I be of the view that the motions judge's order was clearly wrong. It is necessary that it appear that there is good reason to doubt the correctness of the order and that the proposed appeal involves matters of such importance, in the sense that the disposition is important to the general development of the law and the administration of justice, that leave should be granted.

[10] I am satisfied that there appears good reason to doubt the correctness of the order.

[11] The motions judge held that the evidence used on the motion before the master was not admissible, should not have been admitted and that in the absence of admissible evidence explaining the delay, the motion ought to have been dismissed.

[12] The admissibility of evidence is a question of law. Rule 39.01(4) is engaged. In those cases where hearsay is admissible only on non-contentious areas, the legislature has expressly so indicated in the Rules (as is the case on applications). Motions under rule 39.02 are not among those cases.

[13] In my view, there is good reason to doubt the correctness of the motions judge's holding with respect to admissibility.

[14] There is, in my view, also good reason to doubt the correctness of the motions judge's holding that the master's order created non-compensable prejudice. She states at paragraph 46:

Further, granting leave to file the affidavit of Ms. Perri, without also allowing the defendants the rights to file responding affidavit material and to conduct a cross-examination of Ms. Perri, and providing for the payment of the defendants' costs, created non-compensable prejudice to the defendants. This result from a failure to apply the correct principles and constituted an error in law.

[15] This does not appear capable of being reconciled with the parties' agreement as to terms or with the joint letter dated January 27, 2009 to the motions judge with respect to the agreed terms.

[16] In my view, although the issue of whether two documents ought to be permitted to be put before the master on a motion to require a particular individual to attend to be examined for discovery on behalf of a corporate party is a matter of importance only to the parties, the issue of whether or not rule 39.01(4) applies to make admissible an affidavit on information and belief on a motion for leave under rule 39.02 is one of general importance. The motions judge's decision appears to have put a gloss on rule 39.01(4) by excluding its application from a rule 39.02 motion. That exclusion does not appear in the text of the rule.

[17] A second issue of general importance is whether a reasonable explanation for delay in bringing forward the evidence is a sine qua non for the granting of leave. In argument, counsel for the respondent acknowledged that no one factor can be dispositive and that the court should weigh all of the relevant factors. The motions judge's decision appears, however, to treat the reasonable explanation criterion as dispositive.

[18] I would therefore grant leave on the foregoing basis.

[19] In my view, there are also conflicting decisions and it is desirable that leave to appeal be granted.

[20] There are conflicting decisions both with respect to the nature of the explanation required to be given in support of the motion for leave and with respect to the admissibility of hearsay evidence.

[21] In Nolan v. Canada (Attorney General) (1997), 38 O.R. (3d) 722 at 727-8 (Gen. Div.), Quinn J. articulated the factors relevant to the exercise of the court's discretion: is the evidence relevant; is it responsive to a matter raised on the cross-examination (and not necessarily for the first time); and if leave is granted, would non-compensable prejudice result that could not be addressed by the imposition of terms/costs/adjournment. In Nolan the court did not hold that there was a requirement to give a reasonable explanation for not having brought forward the evidence earlier.

[22] In Brock Home Improvement Products Inc. v. Corcoran, [2002] O.J. No. 931 (S.C.J.) Stinson J. wrote, at paragraph 9:

I believe that the words "ought to be permitted to respond" found in rule 39.02(2) impose a burden on a party who seeks leave to show more than an absence of non-compensable prejudice to the opposite party. In my view those words import a requirement for the party who seeks leave under rule 39.02(2) to provide, by way of evidence on the motion for leave, a satisfactory explanation for its failure to include the proposed additional evidence as part of its pre-cross-examination case. the court should scrutinize carefully the reasons for the omission and the evidence offered in support of that explanation. To approach the issue otherwise undermines the integrity of the evidentiary framework for motions and applications that is mandated by the rules. Absent some reasonable explanation for the original omission, leave should be refused.

[23] It is apparent that Roberts J. followed Brock.

[24] In Bell ExpressVu Limited Partnership v. Pellettier, [2009] O.J. No. 408 Wilton-Siegel J. held, at paragraph 14-15 that hearsay evidence is not inadmissible. With respect to the issue of reasonable explanation for the delay, he wrote, at paragraph 22"I do not think that inattention should be sufficient to exclude potentially relevant evidence when the evidence is adduced in support of statements made in an earlier affidavit rather than to raise novel issues. Furthermore, any costs of the defendants can be compensated for in a costs award."

[25] The Bell ExpressVu decision is in contrast with the adoption of a "due diligence" requirement at paragraph 41 of the decision of the motions judge. Clearly there is a difference in principle in the two approaches: if there is a threshold requirement that the evidence was not able to be brought forward earlier notwithstanding due diligence, that factor becomes dispositive and the additional evidence will not be admitted even if the evidence is highly probative, of significant assistance to the court in its search for the truth and there is no non-compensable prejudice. The approach taken by Wilton-Siegel J. in Bell ExpressVu, however, adopts a flexible, contextual and nuanced analysis in determining whether the discretion should be exercised.

[26] I am satisfied that there is a conflicting decision, and in my view it is desirable that leave be granted in order that an appellate court consider the criteria that ought to apply to the exercise of a discretion under rule 39.02.

[27] The motion is granted and costs are reserved to the panel hearing the appeal.

Low J.

DATE: June 18, 2009