COURT FILE NO.: 272/09 DATE: 20091020
ONTARIO SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. WILSON, DAMBROT and MURRAY JJ.
BETWEEN:
FIRST CAPITAL REALTY INC.
Appellant
– and –
CENTRECORP MANAGEMENT SERVICES LIMITED
Respondent
Arlen K. Sternberg, for the Appellant
Marguerite Ethier, for the Respondent
HEARD AT TORONTO: October 15, 2009
J. Wilson J.:
The Appeal
[1] The appellant, First Capital Realty Inc. ("First Capital"), appeals with leave of Low J. from the order of Roberts J. dated March 16, 2009 ("the Order"). The Order reversed the interlocutory order of Master Hawkins dated November 12, 2008. The order of Master Hawkins permitted First Capital, pursuant to rule 39.02(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to deliver a brief affidavit after cross-examinations on a pending motion had been completed ("the Master's Order").
Background
[2] The parties disagreed on who should be the party presented for discovery on behalf of Centrecorp Management Services Inc. ("Centrecorp"). In May 2008, First Capital commenced a motion to compel the attendance of Terry Coughlin as the corporate discovery representative of Centrecorp ("the Attendance Motion"). The Attendance Motion was originally returnable September 30, 2008 before Master Hawkins. It has not yet been argued. The outstanding issues on the Attendance Motion are: (1) whether Coughlin is a director, officer, or employee of Centrecorp; and (2) if so, whether he is the appropriate discovery witness. The Attendance Motion will be heard by Master Hawkins regardless of the results of this appeal.
[3] The day before the Attendance Motion was scheduled to be heard, the parties became embroiled in an ancillary dispute that is the subject matter of this appeal. First Capital sought to file a further affidavit in support of the motion to compel the attendance of Coughlin, and Centrecorp opposed this request ("the Affidavit Motion").
The Affidavit Motion
[4] The master heard the Affidavit Motion on September 30, 2008. First Capital sought leave to file the supplementary affidavit pursuant to rule 39.02(2) of the Rules of Civil Procedure. That rule provides:
39.02(2) A party who has cross-examined on an affidavit delivered by an adverse party shall not subsequently deliver an affidavit for use at the hearing or conduct an examination under rule 39.03 without leave or consent, and the court shall grant leave, on such terms as are just , where it is satisfied that the party ought to be permitted to respond to any matter raised on the cross-examination with evidence in the form of an affidavit or a transcript of an examination conducted under rule 39.03.
[5] The two documents in dispute were attached to an affidavit of the associate lawyer who had filed the original affidavit in support of the Attendance Motion.
[6] The first document was a letter written by counsel for Centrecorp, dated January 26, 2005, in which counsel responded to questions from First Capital corporate counsel about the status of Coughlin and others within Centrecorp. The letter confirmed that Coughlin was Executive Vice President of Centrecorp. The second disputed document was attached to the letter. This document which was a Certificate of Incumbency dated January 26, 2005, signed by Robert Green, President of Centrecorp, in which Green certified at that time that Coughlin held the position of Executive Vice President.
[7] The master permitted First Capital to file the further affidavit attaching the two documents and explaining why they had not been included in the original affidavit material, notwithstanding the completion of cross-examinations in the pending motion.
[8] He concluded in a brief endorsement that the correspondence attached to the affidavit was very relevant to the issue of Coughlin's role with Centrecorp, and that in the interests of justice the further affidavit could be filed. He accepted the explanation that lead counsel was unaware of these documents, or had forgotten about them at the time the initial affidavit material was prepared.
[9] Centrecorp appealed the master's decision on the Affidavit Motion, and the matter was heard by Roberts J. In lengthy reasons, the motions judge reversed the decision of the master. First Capital sought leave to appeal the interlocutory decision of Roberts J. Leave to appeal was granted by Low J. pursuant to rule 62.02(4)(b) of the Rules of Civil Procedure.
Grounds of Appeal
[10] First Capital raises the following issues in this appeal:
Did the motions judge err in applying an incorrect standard of review to the Master's decision?
Did the motions judge err in applying the rule 39.02(2) criteria, especially the "reasonable explanation" criterion?
Did the motions judge err in determining that there would be non-compensable prejudice to Centrecorp?
Did the motions judge err in determining that the explanation of lead counsel, proffered through an associate's affidavit, was inadmissible hearsay?
Standard of Review
[11] There is no dispute that the standard of review that ought to have been applied by the motions judge in reviewing the Master 's Order, as outlined in Zeitoun v. Economical Insurance Group (2008), 91 0.R. (3d) 131 (Div. Ct.), is the test stipulated in Housen v. Nikolaisen (2002] 2002 SCC 33, 2 S.C.R. 235, and in Equity Waste Management of Canada v. Halton Hills (Town) (1997), 1997 2742 (ON CA), 35 O.R. (3d) 321 (C.A.).
[12] The same standard of review applies to this court reviewing the decision of the motions judge. Housen v. Nikolaisen at paras. 8, 10, 36 and 37, confirms that the standard of review on a question of law is correctness and on findings of fact is palpable and overriding error. A question of mixed fact and law generally engages the palpable overriding error standard, unless the question of law is extricable from the facts, in which case the standard of review on the question of law is correctness.
Analysis
[13] The case law under rule 39.02(2) confirms the criteria to consider in determining whether a party should be granted leave to respond to a matter raised on cross-examination:
Is the evidence relevant?
Does the evidence respond to a matter raised on the cross-examination , not necessarily raised for the first time?
Would granting leave to file the evidence result in non-compensable prejudice that could not be addressed by imposing costs, terms, or an adjournment?
Did the moving party provide a reasonable or adequate explanation for why the evidence was not included at the outset?
See: Brock Home Improvement Products Inc. v. Corcoran (2002), 2002 49425 (ON SC), 58 O.R. (3d) 722 (S.C.) at paras. 8-9 and Nolan v. Canada (Attorney General) (1997), 1997 12213 (ON SC), 38 O.R. (3d) 722 at 727-8 (Gen. Div.).
[14] A flexible, contextual approach is to be taken in assessing the criteria relevant to rule 39.02(2), having regard to the overriding principle outlined in Rule 1.04 of the Rules of Civil Procedure that the rules are to be interpreted liberally to ensure a just, timely resolution of the dispute. An overly rigid interpretation can lead to unfairness by punishing a litigant for an oversight of counsel. See: A1fanis v. University of Ottawa (2004), 7 C.P.C. (6th) 371 (Ont. S.C.) at paras. 8 and 15; BFC Construction Group Inc. v. Ontario Realty Corp. (2001), 17 C.P.C. (5th) 288 (S.C.) at para. 24; Nolan v. Canada (Attorney General).
[15] The master correctly and succinctly considered the rule 39.02(2) criteria, excluding the issue of prejudice, as no allegation of prejudice was advanced.
[16] He concluded that the documents in question were highly relevant, and responded to issues raised during the cross-examinations. It was in the interests of justice to allow the further affidavit to be filed in these circumstances. Counsel provided an explanation that was accepted by the master for why these documents were not originally attached to the first affidavit, as counsel was unaware of their existence, or had forgotten about them. Any delay in bringing this material forward was adequately explained in the circumstances.
[17] The appellant alleges that, although the motions judge correctly identified the appropriate deferential test for a review of a discretionary interlocutory order of a master, she failed to apply the test.
[18] Instead of hearing the appeal, the motions judge in this instance essentially reheard the matter. She substituted her discretion for that of the master, including canvassing issues that were not raised before the master. Specifically, the issue of non-compensable prejudice was not raised before the master.
[19] We conclude that the motions judge erred in law in failing to apply the deferential standard of palpable and overriding error to review the discretionary, fact-driven decision of the master.
[20] In our view, the motions judge erred in her conclusions reached in several other respects.
[21] The motions judge concluded that to allow the production of the documents would cause non-compensable prejudice to Centrecorp. These documents were prepared and produced by counsel for Centrecorp in response to questions asked by the appellant's counsel. No issue of prejudice was raised before the master. There could be no non-compensable prejudice to Centrecorp producing its own document prepared by its counsel. As well, terms were agreed to by counsel if the supplementary affidavit was to be filed to overcome any potential prejudice.
[22] The parties agreed in written submissions provided to the master that if the order to file the supplementary affidavit was granted, the parties would be entitled to cross-examine on the associate's supplementary affidavit and any responding affidavit material filed by Centrecorp, and that First Capital would pay costs.
[23] Given this agreement, the conclusion by the motions judge that there was non-compensable prejudice as a result of the Master's Order is not supportable.
[24] The master accepted as reasonable the explanation for any delay in bringing forward the two documents based upon the evidence before him. The motions judge erred in both substituting her view with respect to delay, and in elevating the reasonable explanation for the delay to a near-dispositive requirement. All four criteria established by the case law should be weighed evenly in determining in light of the facts of each case whether it is appropriate to grant leave under rule 39.02(2).
[25] On the hearsay issue, the motions judge was incorrect. The associate attached two relevant documents to her affidavit to complete the record. The affidavit based upon information and belief identified the source of the information and stated her belief that it was true, and was properly admitted by the master as part of the record. Rule 39.01 permits affidavits to be filed on information and belief in these circumstances.
[26] Similarly, the motions judge 's reliance on the "best evidence" rule in determining that the explanation for the delay should have been set out in an affidavit by lead counsel is misplaced. The courts have long since rejected any strict application of this principle (see e.g. R. v. Papalia, 1979 38 (SCC), [1979] 2 S.C.R. 256). It was not necessary for lead counsel to prepare the affidavit, be cross-examined and recuse himself from arguing the Affidavit Motion in these circumstances. The conclusions of the motions judge on this issue were highly technical and, in our view incorrect.
[27] The Rules of Civil Procedure are meant to promote both fairness and the search for truth. They are not meant to encourage the adversarial game of cat and mouse, with technical but impractical arguments.
[28] The reasons of the motions judge in the application of the law to the facts of this case disclose several palpable and overriding errors with respect to the issues of mixed fact and law, and contain errors in the interpretation of the legal issues.
[29] We reiterate the importance of a deferential test for a motions judge to intervene in an interlocutory decision made by a master, as outlined in Zeitoun. The importance of the deferential test is further enhanced in this case, as the issue considered by the master was only a preliminary issue to an interlocutory order. The result of the motions judge granting the appeal has been a delay in the proceeding of over a year, with extensive legal costs incurred by both parties.
[30] For these reasons, the order of the motions judge is set aside, and the decision of the master is affirmed. The parties are agreed that the associate's affidavit may be filed, subject to the parties respecting the terms agreed to in their letter dated January 27, 2009.
[31] The parties have reached an agreement as to costs, for the appeal before the motions judge, the motion for leave to appeal and for this appeal.
_________________________ J. Wilson J.
_________________________ Dambrot J.
________________________ Murray J.
Released: October 20, 2009
COURT FILE NO.: 272/09 DATE: 20091020
ONTARIO SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. WILSON, DAMBROT and MURRAY JJ.
B E T W E E N:
FIRST CAPITAL REALTY INC.
Appellant
– and –
CENTRECORP MANAGEMENT SERVICES LIMITED
Respondent
REASONS FOR JUDGMENT
J. WILSON J.
Released: October 20, 2009