Court File and Parties

COURT FILE NO.: CV-14-507969 MOTION HEARD: 2017-04-28 REASONS RELEASED: 2017-05-09 SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

BDD SOLUTIONS INC., café MIRAGE GRILL & LOUNGE INC. AND MICHAEL BACHOUR Plaintiffs

- and-

DANNY HUYNH, ANDREW HUYNH, SKYWAY MANAGEMENT INC. AND RK (SHEPPARD CENTRE) INC. Defendants

BEFORE: MASTER M.P. McGRAW

COUNSEL: Gregory Govedaris Email: gg@govedaris.com -for the plaintiffs/defendants by counterclaim, BDD Solutions Inc., Café Mirage Grill & Lounge Inc., Michael Bachour and Pele Dagher

Chris Lee Email: clee@loonix.com -for the defendants/plaintiffs by counterclaim, Danny Huynh, Andrew Huynh and Skyway Management Inc.

REASONS RELEASED: May 9, 2017

Reasons for Endorsement

I. Overview

[1] This is a motion by the plaintiffs/defendants by counterclaim, BDD Solutions Inc., Café Mirage Grill & Lounge Inc., Michael Bachour and Pele Dagher (collectively, the “Plaintiffs”), seeking to compel the defendants/plaintiffs by counterclaim, Danny Huynh, Andrew Huynh and Skyway Management Inc. (collectively, the “Defendants”) to properly answer the Plaintiffs’ Request To Inspect Documents dated April 26, 2016 (the “Request”).

[2] The Request arises from unique circumstances, namely, a court order compelling the Defendants to provide particulars of allegations of fraud set out in their counterclaim for the purpose of trial, not pleadings. Over a year has passed since the service of the Request during which the parties have been embroiled in a dispute over the validity of the Request and the responsiveness of the Plaintiffs’ productions resulting in this motion, cross-examinations, numerous court attendances, endless correspondence between counsel and today’s attendance.

[3] Extensive discussions with counsel prior to and during the motion were required to narrow the issues in dispute, in particular, what documents the Plaintiffs say they requested but have not received, what more they want and what documents the Defendants say they have produced and what additional steps they are prepared to take in response to the Request.

[4] Ultimately, the Plaintiffs confirmed that they seek an order declaring that the Request is valid and compelling the Defendants to provide further and better responses to paragraphs 3, 4, 5 and 6 of the Request (which the Plaintiffs say are non-responsive) within 5 days of the order and if the Defendants have no additional documents in response to these paragraphs, to state in writing that they have no documents which are responsive to these paragraphs of the Request.

[5] These Reasons for Endorsement set out my decision with respect to this specific relief sought by the Plaintiffs.

II. Background

[6] This action arises from an Agreement of Purchase and Sale dated October 23, 2013 (the “APP”) pursuant to which Danny Huynh and Andrew Huynh agreed to purchase the restaurant business (the “Business”) owned by Café Mirage Grill & Lounge Inc. (“Café Mirage”) and the leasehold interest (the “Lease”) in the leased premises at the Sheppard Centre in Toronto (the “Leased Premises”) owned by BDD Solutions Inc. (“BDD”). Pursuant to the APP, the landlord, RK (Sheppard Centre) Inc. (the “Landlord”) was required to assign the Lease to Skyway Management Inc., a company controlled by the Huynhs (the “Assignment”).

[7] The transaction closed on December 11, 2013. An undertaking was provided on closing with respect to the Assignment. The Defendants subsequently refused to execute the Assignment but took possession of the Leased Premises and began operating the Business paying rent directly to the Landlord.

[8] The Defendants abandoned the Business and the Leased Premises on October 2, 2014. In the interim, on March 7, 2014, the Defendants commenced an action against their former solicitor for negligence with respect to the negotiation of the APS, alleging that she failed to do proper due diligence with respect to the Landlord’s intention to exercise a construction clause in the Lease.

[9] The Plaintiffs commenced this action on July 8, 2014 claiming, among other things, damages and a declaration that that consent to the Assignment was provided as of the closing date. In their Amended Statement of Defence, Counterclaim and Crossclaim dated October 27, 2014 (the “Counterclaim”) the Defendants allege fraud and misrepresentation and claim damages of $1,200,000 related to the Plaintiffs alleged non-disclosure of the fact that the Lease was being terminated and the provision of inaccurate and misleading books and records.

[10] On December 1, 2015, after pleadings had closed, the Plaintiffs served a Demand For Particulars with respect to the Counterclaim (the “Demand”). The Defendants refused to respond to the Demand. By Order of Master Hawkins dated January 15, 2016 (the “Original Order”), the Defendants were ordered to provide particulars on two issues related to their claims of fraud and misrepresentation pursuant to Rule 25.06(8) of the Rules of Civil Procedure. As set out in Master Hawkins’ Endorsement, the particulars ordered were for the purpose of trial, not for pleadings.

[11] The Defendants appealed the Original Order which was granted in part by the Honourable Madam Justice Matheson. Pursuant to her Endorsement dated March 26, 2016, Justice Matheson upheld one request for particulars by the Plaintiffs as set out in the Original Order (the “Appeal Order”):

1. THIS COURT ORDERS that the responding defendants are within 30 days to provide the following particulars to the plaintiffs:

b. How Michael Bachour overstated sales of Café Mirage (orally, in writing, or both) when Michael Bachour overstated such sales and to whom the overstatement was made.

[12] On April 22, 2016, the Defendants served their Reply to Demand For Particulars (the “Reply”). On April 26, 2016, the Plaintiffs served the Request demanding that the Defendants produce for inspection documents with respect to 6 references in the Reply. Counsel for the Defendants responded that day advising that while the Defendants took the position that they were not aware of any requirement for them to produce the documents for inspection at that time, they were prepared to produce any of these documents which were to be listed in the Defendants’ forthcoming Affidavit of Documents. The Defendants submit that the Demand was not valid given that it was served in response to a reply to demand for particulars for the purpose of trial, not pleadings.

[13] The parties continued to disagree on the validity of the Demand. The Plaintiffs brought this motion on May 19, 2016. On June 1, 2016, the Defendants served and filed the affidavit of Peter Carey, one of the counsel for the Defendants, in response to the Plaintiffs’ motion, continuing to take the position that the Plaintiffs were not entitled to the productions set out in the Request.

[14] On June 1, 2016, the Defendants advised that while they continued to take the position that the Request was invalid and improper, in the interests of settlement and moving these proceedings forward, they would provide a letter along with the Defendants’ Affidavit of Documents listing which documents in the Affidavit corresponded to the Request. On June 7, 2016, the parties obtained a consent order from Master Pope pursuant to which the Defendants were required to deliver their Affidavit of Documents and Schedule “A” productions by July 18, 2016.

[15] The Defendants served their Affidavit of Documents on July 15, 2016 and on July 18, 2016, counsel for the Defendants sent a letter specifying which documents on Schedule “A” corresponded with which paragraphs of the Request. The productions were provided by Defendants’ counsel on August 18, 2016. On September 20, 2016, Mr. Carey sent a letter to Plaintiffs’ counsel listing the documents in the Defendants’ Schedule “A” which corresponded to the 6 paragraphs of the Request (the “September 20 Letter”).

[16] In the eight-plus months leading up to the attendance on this motion, there was considerable correspondence between counsel as to the validity and sufficiency of the Defendants’ response to the Request (both in form and substance); numerous requests from counsel for the Defendants requesting that counsel for the Plaintiff clarify how the Defendants’ productions were unresponsive, what more counsel was seeking and how they could assist; an offer to inspect the documents in person; another affidavit from Mr. Carey; three attendances to cross-examine Mr. Carey on his affidavits (one was adjourned, one he did not attend, one which proceeded) and service by the Plaintiff of a three-volume Motion Record compelling Mr. Carey to attend on cross-examination.

[17] At Mr. Carey’s cross-examination on April 7, 2017, counsel for the Plaintiffs entered into evidence an Exhibit Book in which he had compiled the documents referred to in the September 20 Letter (the “Exhibit Book”). The Exhibit Book formed the basis for the Plaintiff’s motion.

[18] After significant discussion and towards the end of oral submissions, counsel for the Plaintiffs advised the court that the Plaintiffs seek an order declaring that the Request is valid and compelling the Defendants to provide further and better responses to paragraphs 3, 4, 5 and 6 of the Request which are as follows:

3. The “other correspondence” referred to in paragraph 1(a)(iii) of the Reply.
4. The “MLS Listing and other related advertisements and documents” referred to in paragraph 1(b)(i) of the Reply.
5. The “financial statements and tax returns” and “written statements” referred to in paragraph 1(b)(ii) of the Reply.
6. The “written statements” referred to in paragraph 1(b)(iii) of the Reply.

[19] The Plaintiffs further request that if the Defendants have no additional documents in response to these paragraphs, the Defendants be ordered to state in writing that they have no documents which are responsive to these paragraphs of the Request. While counsel for the Plaintiffs indicated that if they produce no further documents, the Defendants should strike out the corresponding paragraphs of the Counterclaim, that relief was not requested nor is it properly before me.

[20] The Defendants submit that the relief sought by the Plaintiffs is moot and that this motion is unnecessary. In particular, notwithstanding the Defendants’ position that the Request was invalid, the Defendants have responded, as reflected in the correspondence, including the September 20 Letter and the Exhibit Book and have fulfilled their obligations under the Request.

III. The Law and Analysis

[21] Rule 30.04 of the Rules of Civil Procedure provides as follows:

(1) A party who serves on another party a request to inspect documents (Form 30C) is entitled to inspect any document that is not privileged and that is referred to in the other party’s affidavit of documents as being in that party’s possession, control or power.

(2) A request to inspect documents may also be used to obtain the inspection of any document in another party’s possession, control or power that is referred to in the originating process, pleadings or an affidavit served by the other party.

(3) A party on whom a request to inspect documents is served shall forthwith inform the party making the request of a date within five days after the service of the request to inspect documents and of a time between 9:30 a.m. and 4:30 p.m. when the documents may be inspected at the office of the lawyer of the party served, or at some other convenient place, and shall at the time and place named make the documents available for inspection.

[22] Compliance with a request to inspect documents under Rule 30.04 is immediate and mandatory (see Timminco Ltd. v. Asensio, 2009 ONSC 9431, 95 O.R. (3d) 547 (S.C.J.)). One of the purposes of a request to inspect documents is to aid the requesting party in determining if the other’s pleading discloses a reasonable cause of action or defence (see Montreal Trust Co. of Canada v. Toronto-Dominion Bank, [1992] O.J. No. 1274 (Gen. Div.)).

[23] While Rule 30.04 requires that the party receiving the request make the documents available for inspection, as here, the practice has evolved such that the documents are now typically produced physically or electronically.

[24] In the present case, the Request arose out of the Demand and the corresponding Original Order and Appeal Order all of which are grounded in the requirements under Rule 25.06(8) that fraud and misrepresentation must be pleaded with particulars. The Plaintiffs submit that they still have not received these particulars and are entitled to receive them at this stage of the proceedings.

[25] Specifically, the Plaintiffs submit that the Defendants have not complied with the Request because the documents produced, as set out in the Exhibit Book, are not responsive to paragraphs 3, 4, 5 and 6 of the Request:

i.) Para. 3 - the Request and the Reply refer to “other correspondence” from Mr. Bachour in which he allegedly overstated the sales of Café Mirage while the documents produced by the Defendants are 3 e-mails dated October 23 and 28, 2013 from Max Hameed to Danny Hyunh attaching financials and the Lease, which were also produced in response to para. 2.

ii.) Para. 4 –the Request and the Reply refer to “the MLS Listings and other related advertisements and documents” while the documents produced by the Defendants are 3 different versions of the MLS listing.

iii.) Para. 5 – the Request and the Reply refer to “financial statements” and “written statements” while the documents produced by the Defendants are the same 3 e-mails produced in response to paras. 2 and 3.

iv.) Para. 6 – the Request and the Reply refer to “written statements” made by Mr. Bachour while the documents produced by the Defendants are the same 3 e-mails produced in response to paras. 2, 3 and 5.

[26] The Plaintiffs submit that since the documents produced by the Defendants do not respond to or correspond with the Request and the Reply, they are entitled to an order compelling the Defendants to provide further and better productions. The Plaintiffs further submit that this is important here given that the particulars of fraud and misrepresentation which were ordered and provided pursuant to the Appeal Order are now part of the pleadings. The Plaintiffs further state that if the Defendants have no further documents to produce at this time, then they should be ordered confirm in writing that they have no documents which are responsive to the Request.

[27] The Defendants argue that the relief sought by the Plaintiffs is moot. Citing Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342, the Defendants submit that because they have complied with the Request by producing the documents in the Exhibit Book, any decision of this court will not resolve some controversy which affects or may affect the rights of the parties and will have no practical effect on these rights. In response, the Plaintiffs submit that in order for the issue to be moot, the Defendants must agree that the Request is valid, and the Defendants’ response is vague and indeterminate which creates a live controversy between the parties.

[28] The Defendants also submit that there is no legal basis to compel them to take any further steps with respect to the Request. The Defendants say that they complied with the Request through the September 20 Letter, as reflected in the Exhibit Book, by producing documents in response to each of the 6 paragraphs of the Request. The documents have been produced, they have no further documents to produce therefore, there is nothing further for them to do. The Defendants say that the Plaintiffs are now requesting additional particulars upon the previous particulars and are attempting to obtain advance discovery and that the Plaintiffs should simply ask any relevant questions regarding the documents produced through Schedule “A” and the Request on examinations for discovery, which are tentatively scheduled for Fall 2017.

[29] Counsel could not direct me to any case law considering requests to inspect documents for the purpose of trial rather than pleadings. This is consistent with Justice Matheson’s comment in her Endorsement that particulars for trial should be rare. I was also not directed to any cases dealing with motions compelling further and better responses to requests to inspect generally.

[30] In arriving at my conclusions below, as required, I have considered the proportionality principle in Rule 1.04(1.1) of the Rules of Civil Procedure, which states:

In applying these Rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

[31] As D.M. Brown J. (as he then was) stated in GE Canada Real Estate Financing Business Property Co. v. 1262354 Ontario Inc., 2014 ONSC 1173 at para. 48, the principle of procedural proportionality,

“requires taking account of the appropriateness of the procedure as a whole, as well as its individual component parts, their cost, timeliness and impact on the litigation given the nature and complexity of the litigation.”

[32] With respect to the Plaintiffs’ request for a declaration that the Request is valid, while I do not agree with the Defendants that the issue of validity is moot, in my view, there is no need for me to decide it, and I decline to do so. While the Defendants have continued to take the position that the Request is not valid, since on or about June 1, 2016 they have treated it as valid. As reflected in the September 22 Letter and the Exhibit Book (and even earlier correspondence) they have either produced documents or advised which Schedule “A” productions correspond with which paragraphs of the Request.

[33] Any issues with respect to any effect which the Defendants’ refusal to admit that the Request is valid such as any delays or additional steps arising from this refusal may be relevant to costs. In this respect, this issue is not moot.

[34] The more important, material issue before me is the Plaintiffs’ request for further and better productions in response to the Request, the issue which has stalled this litigation for over a year. I do not agree with the Defendants that this issue is moot. There is a live issue in dispute between the parties, namely, whether the Plaintiffs are entitled to the additional relief they seek.

[35] The Plaintiffs submit that the documents produced by the Defendants are not responsive and that the Defendants should produce further documents or be compelled to confirm in writing that they have no responsive documents. The Plaintiffs further submit that this should be done now, before examinations for discovery, because they are entitled to know the particulars of the fraud and misrepresentation allegations against them in the Counterclaim. The Defendants submit that they have produced all relevant documents which are currently in their control, cannot produce documents which they do not have and that the Plaintiffs can ask any relevant questions based on these documents at oral discovery.

[36] The circumstances here are somewhat analogous to Arenza Global Technologies Corp v. Cue Network Ltd., [2000] O.J. No. 1524 (S.C.J.). In that case, Master Haberman (as she then was) ordered the defendants to re-attend at examinations for discovery rather than deliver a further and better affidavit of documents where it was not clear that the documents which the plaintiffs were seeking even existed. In Master Haberman’s view, it was not appropriate to order the delivery of a further and better affidavit of documents at that time, rather, the appropriate time for further productions would be if further documents were identified on oral discovery.

[37] In the present case, the Plaintiffs seek the production of documents which may or may not exist. The Defendants state that they have no further documents and cannot produce what they do not have. Examinations for discovery have not taken place. In my view, similar to Arenza, rather than grant the relief requested by the Plaintiffs, it would be more appropriate at this stage in the proceedings to proceed to oral discoveries where the Plaintiffs can ask any relevant questions based on the documents produced and seek the production of any additional documents identified.

[38] More importantly, it would be contrary to the principles of proportionality to grant the relief sought by the Plaintiffs. This litigation has been stalled for more than a year over a dispute with respect to one component part: the Request. As counsel for the Plaintiffs concedes, it is open to the Plaintiffs to proceed to oral discoveries and ask any relevant questions based on the documents which have been produced by the Defendants. This will achieve some or all of what the Plaintiffs are seeking on this motion by identifying additional documents for production or confirming that the Defendants have no further productions with the added benefit of moving this litigation to the next stage. Conversely, granting the relief sought by the Plaintiffs would further delay these proceedings and require the parties to incur additional, unnecessary costs without moving the litigation forward.

[39] It is also open to the Plaintiffs, as their counsel concedes, to bring a motion to strike the Counterclaim or for summary judgment, either based on the current pleadings and productions or after oral discovery. As reflected by the Plaintiffs’ suggestion that the Defendants should strike portions of the Counterclaim, this may be their goal. Unlike the relief the Plaintiffs are seeking, however, this would also move the litigation forward.

[40] While I am mindful of the Appeal Order and the Plaintiffs’ entitlement to know the particulars of the allegations of fraud and misrepresentation made against them, they have received the Reply and the Defendants’ productions. Any further productions and particulars can be addressed in the context of oral and additional documentary discovery and/or future motions arising from discoveries or any motions to strike or for summary judgment. It is time to move this litigation forward.

[41] Having considered all of the circumstances and the factors set out above, I conclude that it is not appropriate to grant the relief sought by the Plaintiffs. The Plaintiffs’ motion is dismissed.

IV. Disposition

[42] Order to go dismissing the Plaintiffs’ motion.

[43] Counsel advised that they have already engaged in discussions with respect to the costs of this motion. If counsel are unable to agree on costs, then they may contact me through the Masters Administration Office to schedule a case conference call or attendance in person to establish a timetable and process for costs submissions.

Released: May 9, 2017 Master M.P. McGraw