CITATION: Linamar Transportation Ltd. v. Johnson, 2014 ONSC 4415
HAMILTON COURT FILE NO.: 08-01329
DATE: 2014/07/23
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
Linamar Transportation Ltd.
Plaintiff
– and –
Mark Johnson and Edward Johnson
Defendants
F. Pignoli, for the Plaintiff
S. Gill, for the Defendant/Moving Party Edward Johnson
No one appearing for Mark Johnson
HEARD: June 12, 2014
THE HONOURABLE MR. JUSTICE H. S. ARRELL
JUDGMENT
Introduction:
[1] The Defendant, Edward Johnson, moves for leave to appeal to the Divisional Court from the ruling of Taliano J., dated March 4, 2014, ordering that he answer all outstanding undertakings and refusals given on his examination for discoveries on July 25, 2012 on or before March 31, 2014 and pay costs of $3,000.00. Upon default of either provision the registrar was to strike the defence. It is conceded that the provisions were not met and his defence has been struck.
[2] Rule 62.02 of the Rules of Civil Procedure provides,
"(4) Leave to appeal shall not be granted unless,
(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or
(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted."
Facts:
[3] This action involves a claim commenced on February 29, 2008 against the Defendants for $183,890.05 for misappropriation and statutory breach of trust under the Highway Traffic Act, R.S.O., c.H.8. The Defendants were former officers and directors of LaSalle, which operated as a transportation brokerage business. It made a voluntary assignment in bankruptcy on November 29, 2007. The Plaintiff alleges it entered into a series of agreements with LaSalle to transport freight for LaSalle's customers and that the funds received by LaSalle in payment from its customers for the Plaintiff's services were to be held in trust for it under the H.T.A.
[4] LaSalle was acquired by the Defendant's family run transportation business called Mobile Cartage in early 2006. It went bankrupt on November 27, 2007, two days prior to LaSalle's bankruptcy. LaSalle was discharged from bankruptcy on October 9, 2012 and Mobile on May 10, 2011.
[5] Discoveries were completed on August 21, 2012. The parties consented to an Order setting out a timetable which indicated all answers to undertakings would be completed by January 30, 2013. That was varied on consent to allow for answers to undertakings to be completed by August 30, 2013. The Plaintiff and the Defendant Mark Johnson have satisfied their respective undertakings and refusals and are ready for trial at the September sittings.
[6] The motion to enforce answers to undertakings from the Defendant Edward Johnson was originally returnable December 12, 2013. It was adjourned on consent a number of times until finally heard on March 4. 2014. The Plaintiff swears, and there is no evidence to the contrary, that it consented to the adjournments in good faith assuming the Defendant was fulfilling his undertakings.
[7] The undertakings consist mainly of obtaining company records and records from the trustee in bankruptcy. They were given on the basis of "best efforts". There was a refusal to produce the records of Mobile as not relevant.
[8] The evidence of best efforts consisted of:
a) A letter dated December 17, 2013 from the Defendant's counsel to the trustee in bankruptcy requesting the books and records of LaSalle;
b) A short email dated March 25, 2013 and March 26, 2013 between Edward Johnson's lawyer and Mark Johnson's lawyer requesting records;
c) A follow-up letter of January 13, 2014 to the trustee in bankruptcy from the Defendant's lawyer:
d) A similar letter on the same date to Mark Johnson's lawyer in follow-up requesting documents.
[9] There was no further evidence before Taliano J. of any other efforts to fulfill the undertakings. He concluded that the efforts made were not sufficient and gave the Defendant another four weeks to answer the undertakings and refusals, which he found to be relevant. The Defendant has not abided by the order to date.
Analysis:
[10] The rule for leave to appeal makes it clear that leave should not be granted unless the criteria in the rule are met. As stated in Bell Express Vu Limited Partnership v. Morgan, [2008] O.J. No. 4758"...the test is an onerous one". Clearly the onus is on the Defendant to persuade me that the criteria in the rule for granting leave have been met.
[11] The rule is conjunctive. Both aspects of Rule 62.02(4) either (a) or (b) must be met. Matters of general importance relate to matters of public importance and matters relevant to the development of the law and the administration of justice, not matters that may be of particular importance relevant only to the litigants.
Greslik v. Ontario Legal Aid Plan, [1988] O.J. No. 525 at page 3
Rankin v McLeod, Young, Weir Ltd. (1986), 57 O.R. (2nd) 569
[12] The Defendant seeks leave under both (a) and (b) of the rule. He states that there are conflicting decisions on the issue of "best efforts" when attempting to obtain answers to undertakings and it is an issue of importance to the bar that the issue be clarified. He further argues there is reason to doubt the correctness of the decision issued by Taliano J. I disagree.
[13] I have no doubt about the correctness of the decision of Taliano J. The Defendant Mark Johnson, the brother of Edward Johnson, was able to answer his undertakings. The Defendants were in business together. There is no evidence before me that they did not have access to the same information. Clearly, better efforts are required when counsel gives a promise to obtain answers to undertakings, even on a best efforts basis. Especially given the facts of this case and the relationship of the Defendants. There is no evidence of follow-up telephone calls to the recipients of the letters; there is no evidence as to why the material has not been produced, other than it is in the hands of third parties such as the accountant for the LaSalle and the trustee. There is no evidence from the third parties as to why the material has not been produced. In fact, since the trustees in bankruptcy have been discharged, there is no evidence as to why the Defendant simply did not go and pick up his files. The undertakings were given 1 ½ years prior to the order of Taliano J. and the effort by the Defendant over that lengthy time period to obtain answers was clearly well below the standard expected on a best efforts basis given the facts of this case.
[14] As was stated by Powers J. in Gheslaghi v. Kassis (2003), CanLll 7532 at para.6 and 7 the meaning of "best efforts" is as follows:
"With respect to some of the matters in dispute, counsel undertook to use his/her best efforts to seek out and furnish information and/or documents. During the course of the argument before me, it became apparent that counsel were not ad idem on the meaning of "best efforts".
A promise to use one's best efforts is, in my opinion, an undertaking – an undertaking that must be complied with. On the one hand, it is not a guarantee that the relevant information/documents will be produced. The promise, or undertaking, cannot be ignored. A promise to use one's best efforts, as aforesaid, is an undertaking which a court will enforce and, in appropriate cases, apply sanctions for non-performance where serious efforts have not been undertaken. "Best efforts" mean just what one would expect the words to mean. The words mean that counsel and his/her client will make a genuine and substantial search for the requested information and/or documentation. The undertaking is not to be taken lightly – a cursory inquiry is not good enough. The word "best" is, of course, the superlative of the adjective "good" (good-better-best) and must be interpreted in that light. If a party and/or counsel is/are not able to discover the subject of the undertaking, he/she/it must be able to satisfy a court that a real and substantial effort has been made to seek out what is being requested by the other party. Like any undertaking made during an examination for discovery, a promise to use one's best efforts may be enforced under Rules 31 and 34 and through the court's inherent jurisdiction to prevent abuses."
[15] Black's Law Dictionary (9th ed. 2004) defines best efforts as "...Diligent attempts to carry out an obligation...Best efforts are measured by the measures that a reasonable person in the same circumstances and of the same nature as the acting party would take."
[16] The Defendant cites Chitti v. Transamerica (2001), CarswellOnt 3828 and Schultz v. Galvin (1998), CarswellOnt 411 as cases in conflict with Gheslaghi. I disagree. The facts in those cases are different, as would be expected, but the enunciation of the law is consistent. The cases all indicate that what is a best effort is what a reasonable person would conclude was a best effort to obtain the answers to undertakings based upon the specific facts of any given case and the nature of the undertakings.
[17] There is no merit to the argument that the Defendant was justified in refusing to produce the books and financial records of Mobile as not relevant. The statement of defence indicates both Mobile and LaSalle were owned and controlled by the Defendants; that Mobile acquired the shares of LaSalle in 2006; that both entities went into bankruptcy within two days of each other; that pursuant to lending agreements there were daily cash sweeps by the primary lender of all funds received by LaSalle and Mobile. Clearly both entities were intertwined and controlled by the Defendants. There is no reason to doubt the correctness of Taliano J.'s decision that the records of Mobile were relevant and should be produced.
[18] I conclude there is no reason to doubt the correctness of Taliano J.'s decisions and there are no conflicting decisions in law that have been brought to my attention. I further conclude that the applicant has not persuaded me that it is desirable that leave be granted, nor that the issue is of such importance to the bar that leave should be granted. Indeed, the issue is important to the parties but that is not the test.
[19] The Application is therefore dismissed.
[20] The parties made submissions to me on costs and asked that I fix them depending on my decision.
[21] The Plaintiff is entitled to costs as it has been totally successful on this leave application. Costs were fixed by Taliano J. on the motion to strike the Defendant's defence. Costs on the leave application before me are to the Plaintiff payable forthwith by the Defendant Edward Johnson fixed in the amount of $4,500.00 inclusive of disbursements and taxes.
Arrell J.
Released: July 23, 2014
CITATION: Linamar Transportation Ltd. v. Johnson, 2014 ONSC 4415
HAMILTON COURT FILE NO.: 08-01329
DATE: 2014/07/23
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Linamar Transportation Ltd.
Plaintiff
- and -
Mark Johnson and Edward Johnson
Defendants
REASONS FOR JUDGMENT
Arrell J.
Released: July 23, 2014