J.A.L. Developments v. Residences of Springhill Inc., 2020 ONSC 2222

Court File and Parties

COURT FILE NO.: CV-17-571518 MOTION HEARD: 20200130 REASONS RELEASED: 20200430 SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

J.A.L. DEVELOPMENTS INC.

Plaintiff

- and -

RESIDENCES OF SPRINGHILL INC., PAUL ROSSETTO, FAUSTO ROSSETTO, STEPHANIE ROSSETTO, ROSSBRO DEVELOPMENTS INC., ROSSBRO PROPERTIES INC., ROSSBRO PROPERTIES LIMITED, EMMA ROSSETTO, MATTHEW ROSSETTO, MPAR HOLDINGS INC. and SILVIA RICCIARDI

Defendants

BEFORE: MASTER D. E. SHORT

COUNSEL: Mitchell Wine fax: 416-777-2050 -for the Plaintiff (Moving Party) mwine@MSTWlaw.com

Daniel McConville fax: 416-599-7910 -for the defendants dmcconville@swlawyers.ca

REASONS RELEASED: April 30, 2020

Reasons for Decision

I. Pre-amble: COVID-19

Circumstances alter cases.

-Thomas Chandler Haliburton

1At some future time, these reasons may require clarification arising from the 2020 impact on Ontario of a global pandemic. On January 26, 2020, a man in his 50’s who arrived in Toronto from Wuhan, China, the epicentre of the outbreak, became the first “presumptive” case of the new coronavirus in Canada. The man called 911 as soon as he got sick with relatively minor symptoms and was placed in isolation in Toronto’s Sunnybrook Hospital. The next day, the National Microbiology Lab in Winnipeg confirmed that a man in quarantine was Canada’s first documented case of the new coronavirus.

2A tracing of the early Canadian tracing of history of this disease found at https://globalnews.ca/news/6627505/coronavirus-covid-canada-timeline/ noted that, on the January 28th 2020 Health officials in British Columbia reported that a man in his 40s was presumed to have the new coronavirus and was doing well.

3Shortly there-after, on January 30, 2020, it was reported that the Toronto man hospitalized with the novel coronavirus “is well enough to go home”.

4On the same day, the Plaintiff’s motion in the present case was argued before me. I have little doubt that neither side considered what might develop, while my decision was under reserve.

5The result has been developing a consideration of the guidance to be provided with regard to establishing appropriate future steps in this 2017 civil matter. The case has already been before many of my Toronto Master colleagues, and at least 5 Superior court judges. They have dealt with a number of attempts to advance this matter, where no examinations for discovery have been held, the normal need for a mediation has been waived and as well, additional parties have been added and then removed, by judicial orders.

II. Overview

6This is a motion by the Plaintiff/Defendants by Counterclaim in this 2017 action, for an Order permitting further discovery of the parties pursuant to Rule 48.04 of the Rules of Civil Procedure notwithstanding that the action has been set down for trial.

7The Plaintiff J.A.L. Developments Inc.("JAL") is an Ontario corporation that invests in various business ventures on behalf of Susan Gordin, a resident of the City of Toronto. The investment was managed by Susan's husband, Philip Gordin ("Gordin").

8Gordin is a real estate lawyer in Woodbridge, Ontario. Prior to this action, Gordin had acted on behalf of the principals of Springhill, the Defendants Paul Rossetto ("Paul") and Fausto Rossetto ("Fausto") for about 28 years. Perhaps more predictable than a global pandemic, problems developed when the clients’ project was not as profitable as expected, and as a consequence, the plaintiff obtained no repayment of its investment, whatsoever.

9Against that background the Gordins apparently elected to help finance a project identified as the Residences of Springhill Inc., (“Springhill”) in September 2009. As a result, JAL and Springhill entered into a Profit Sharing Agreement (the "Agreement") whereby JAL invested $200,000 in a real estate condominium project (the "Project") to be developed by Springhill.

10JAL's investment and profits were to be paid on September 1, 2014. However, the Project was not complete by that date. The plaintiff asserts that the parties “had a relationship of trust and JAL agreed to extend the Agreement's completion date”. The ultimate accounting addresses the financial position, both up to and after September of 2014.

11More than a year later, in November of 2016 the Agreement was amended whereby JAL asserts Springhill agreed to the registration of a second mortgage on the unsold units, contingent on certain conditions.

12Another applicable metaphor to evaluating parties’ positions, in cases such as this, is to “follow the money”. Here the total amount due JAL as of October 14, 2016 was agreed upon at $594,115.95.

13Some months later, on March 1, 2017, JAL attempted to register the second mortgage.

14The plaintiffs assert that:

“At this time Gordin discovered that Springhill had transferred the three remaining units a few days earlier on February 24, 2017 to the Defendant Matthew Rossetto ("Matthew"), Paul's son, the Defendant Emma Rossetto ("Emma"), Paul's and Fausto's mother, and a third party, Silvia Ricciardi (against whom this action was subsequently discontinued)”.

15With the sale, Springhill had no units left in the Project. JAL alleges the three transfers were fraudulent conveyances carried out at prices that were less than market value.

III. Following the Money: Initial Injunction

16JAL asserts that after closing of the three units, Springhill made the following payments immediately from its bank account:

a) $400,698.00 to the Defendant MPAR Holdings Inc. ("MPAR"), Matthew's company; b) $62,545.50 to the Defendant Rossbro Properties Inc. ("Rossbro Properties"), Paul's company; and c) $577,212.00 to the Defendant Rossbro Developments Inc. ("Rossbro Developments"), Fausto's company.

17The total of these three asserted “non-arms' length payments” was $1,040,455.50. After these payments, Springhill had no units left to sell and the cash in its bank account was only $6,454.15. I note in passing, that the net Sales income from the sale of 138 units was $63,836,927.

18JAL commenced this action and moved for and obtained an ex parte interim "Mareva'' injunction from the Honourable Justice Akbarali on March 21, 2017 freezing Springhill's bank accounts and issuing Certificates of Pending Litigation ("CPL") against Matthew's and Paul’s mother, Emma's condominium units.

19The Mareva injunction Order was served on the Defendants and Springhill's bank but, by then, only $6,454.15 remained in the Springhill bank account.

20On March 31, 2017 Justice McCarthy extended the original ex parte Mareva injunction, on the same terms. In passing, I note that a counterclaim was brought by Springhill in November 2017 against individual members of the Gordin family. Below I discuss various other intervening developments but note that over a year later, in December of 2018 Madam Justice Kimmel granted a motion which sought to dismiss the Counterclaim, as against the individual members of the Gordin family.

IV. Motion for Summary Judgment

21It appears that the main action was originally sought to be decided simply by way of a motion for summary judgment in July of 2018.

22Affidavits were filed by the parties and cross-examinations were conducted in April of 2018. However, no Affidavits of Documents were ever exchanged by the parties. Apparently, the only documents ever produced were those attached to the various affidavits in support of the motion for summary judgment. In addition, Springhill made its “accounting records” available to counsel for JAL, for review.

23To add to the unusual elements of this action, counsel appearing for both sides had similar portions of the respective names which lead to the following identifications for the purposes of these reasons. At the conclusion of cross-examinations, counsel for JAL, Mitchell Wine ("Wine"), was of the view that the action was not suitable for a motion for summary judgment. Then counsel for Springhill, David Winer ("David"), disagreed. A case conference was scheduled for July 4th, 2019 to determine the issue.

24On July 3rd, 2019, the day before the case conference, Wine prepared and distributed a document entitled “Proposal for Summary Trial” that included the following paragraphs “included at the request of David”:

3. If the Defendants do not believe that the full day of cross-examination of Phil Gordin was sufficient, Mr. Gordin will be produced for further examination for discovery limited to half a day.
4. The Plaintiffs will have the same rights with respect to the Defendants .[my emphasis]

25The case conference was held before Justice Akbarali on July 4, 2018. Her Honour agreed the motion for summary judgment should not proceed. The parties discussed possible summary trial procedures, including the procedure set out in a “Proposal for Summary Trial” document. In her endorsement, Justice Akbarali wrote:

“Plaintiffs SJM to be converted to a summary trial. Parties to cooperate to determine a procedure for the summary trial that will preserve as much work as possible. Parties to return to CPC to schedule a date.” (my emphasis)

V. Setting the Action Down for Trial

26Apparently, following that attendance on July 4, 2018 Wine asserts he had further discussions with David about the procedure for the summary trial which would include further discovery. It is my understanding that, at that time, counsel for all parties wanted the action to proceed to trial as quickly as possible, “with the minimum of cost possible while at the same time ensuring the parties could adequately prepare for trial.”

27The plaintiff’s factum (with my emphasis added) asserts:

25. Wine set the action down for trial in July 2018 on consent of all parties with the knowledge that all parties agreed further discovery might be necessary and could be conducted. This was consistent with the case conference direction of Justice Akbarali that the parties were to return to “CPC to set a trial date”.
26. The Trial Record had to be filed for the parties to return to CPC. The Court office initially refused to set the action down for trial because the parties had not conducted a mediation.
27. Wine proposed writing to Justice Akbarali to ask her to order that the requirement for mediation be waived. A draft letter to Her Honour was circulated to counsel.

28By email dated August 17, 2018, David wrote to Wine as follows:

The parties, whom I represent, consent to an Order exempting the matter from Mediation. As to the draft letter to Justice Akbarali, I am ok with it except for one issue. In paragraph 4, you state that the parties wish to proceed "immediately" to trial. While my clients do wish to proceed to trial, they need to do so in an orderly fashion. As you recall, that may entail further examinations.

29It is asserted that counsel agreed to amend the letter in response to this comment.

VI. Further Motions Brought by the Parties

30Notwithstanding that the Trial Record had been filed in July 2018, by email of August 27, 2018, David wrote Wine threatening to bring a motion for security for costs. During the same period of time, counsel exchanged emails regarding a motion to strike the Statement of Defence and Counterclaim against the added Defendants by Counterclaim (Laura Gordin, Jessica Robin Tarr and Susan Gordin) under Rule 21 and motions by the Defendants by Counterclaim against JAL for security for costs.

31It appears that during this time David also scheduled a motion for his clients to amend the Statement of Defence and Counterclaim. In total, four motions were scheduled (although not ultimately argued) after the action was set down for trial. Two of those motions were scheduled by David on behalf of Springhill.

32Counsel for JAL observes that David never objected to JAL's two motions being scheduled, notwithstanding the filing of the Trial Record in July.

VII. Case Management

33A further case conference was held before Justice Firestone on October 30, 2018. Justice Firestone's endorsement stated:

“On the consent of the parties, the requirement for mandatory mediation is waived by me. Parties to attend TBSC to obtain a summary trial date. Summary trial procedure agreement to be filed by Nov 30, 2018. If parties can't agree further case conference to be scheduled.”

34Following the case conference, David and Wine exchanged e-mails discussing the summary trial ordered by Justice Firestone. In one of the emails, David made reference to the Proposal for Summary Trial that refers to further examination of the parties.

35The Rule 21 motion to strike the counterclaim against the Defendants by Counterclaim Laura Gordin, Jessica Robin Tarr and Susan Gordin was argued before the Honourable Justice Kimmel on December 11, 2018. Her Honour granted the requested relief in January of 2019.

36On February 1, 2019, counsel for Springhill advised that Springhill would be appealing Justice Kimmel's decision. Accordingly, on February 4, 2019, the To Be Spoken To Court attendance was adjourned to September 9, 2019. That TBST Court attendance was ultimately rescheduled for October 21, 2019. However, prior to that date, Springhill elected to abandon its appeal, on October 7, 2019.

37During that time period, on September 11, 2019, Wine wrote to David following up on Springhill's undertakings from the cross-examinations held in April of 2018 as well as the questions taken under advisement. Wine wrote to David on September 23, 2019 providing a draft Discovery Plan that dealt with further examinations for discovery and the exchange of documents. Wine also enclosed a list of outstanding undertakings, arising from earlier cross examinations.

VIII. Nature of Dispute, New Counsel and Previous Understanding

38It would seem some progress was finally being made. However, in mid-2019 David ceased being the Defendants’ counsel. They then retained new counsel, who sought to adjourn the October 21st To Be Spoken To Court attendance. This was agreed upon. On October 21st, Justice Sanderson adjourned the TBST court attendance to February 3, 2020.

39Plaintiff’s counsel asserts the “New counsel has refused to honour the agreements reached between Wine and David with respect to further discovery.”

40Determining whether or not there was a binding, previous agreement does not advance this matter. I have simply weighed the positions of both sides on the substance of the issues extant at this point in time.

41The plaintiff’s factum describes the moving party’s view of the disputed elements in the action and asserts (with my emphasis throughout):

45. Springhill defends this action on the basis that the Project earned no profits. Therefore, Springhill's position is that since the agreement with JAL was a profit-sharing agreement, no money is due to JAL.
46. In support of its position, Springhill relies upon a financial statement prepared by the accounting firm of Collins Barrow (Vaughan) LLP dated February 19, 2018.
47. The statement sets out that Springhill lost $2,645,034 in the project.
48. This contrasts significantly with information given by Springhill to JAL in an email of August 6, 2016 that the project would earn $1,926,000 in profits.

42The difference between the two amounts is $4,571,034. Wine asked Paul, appearing on behalf of Springhill, during cross-examination on April 25, 2018 to reconcile the difference between the two numbers and how circumstances in the project changed so markedly that a significant profit in August 2016 did not actually exist.

43An undertaking to provide this information was given. In answers to undertakings provided in November of 2019, Springhill produced a one page summary explaining the roughly $4.5 million difference. Not surprisingly the investors want to know how so large a loss could accrue in the then highly active, Toronto housing market. The factum before me asserts:

“ 51. The soundness of the numbers provided by Springhill is one of the central issues in this action. JAL is highly sceptical of this information. Wine would like to examine Paul further to ask follow-up questions. 52. Wine wrote to counsel for Springhill by email on December 19, 2019 requesting this further examination. No response has been received to this email.”

IX. Duty to Account

44Regardless of the propriety of the final 3 condo unit transfers and the agreed second mortgage, it appears to me that there were also contractual obligations that need to be addressed.

45The plaintiff apparently provided a document roughly in the form that follows which seems to show a swing from anticipated profits to stated losses of about 4.5 million dollars.

46What I find puzzling is that there is an element in the chart identified as “investor losses” shown as $2,620,000. I can understand deducting costs for various items of expense from the income received from sales to come to net profit or loss. I do not believe the inclusion of investor losses in that calculation was explained in the materials I reviewed.

47The material filed before me did include a brief document from Collins Barrow styled “Auditor’s Report on Compliance with Agreement”. In it the “Calculation of Net Profit” covers the period from December of 2010 to February 28, 2017.

48The Auditors Report, found page 83 of the record indicates that Collins Barrow attest:

“We have audited the Residences of Springhill – Joint Venture’s calculation of net profit from the commencement of the project on December 21, 2010 to September 1, 2014 and from September 2, 2014 to February 28, 2017 in accordance with criteria established by Section 5 of the Profit-Sharing Agreement (the “Agreement”) dated September 1, 2009 with J.A.L. Developments Inc.

49The Auditors Report indicates that they were to perform an audit “to obtain reasonable assurance” whether Residents of Springhill – Joint Venture, complied with the criteria established by section 5 of the Agreement. “Such an audit includes examining, on a test basis, evidence supporting compliance, evaluating the overall compliance with this criteria, and where applicable, assessing the accounting principles used and significant estimates made by the trustees.”

50It is interesting that the report concludes with paragraph reading:

“Without modifying our opinion, we draw attention to note 1 to the calculation of net profit, which describes the basis of accounting. The calculation of net profit is prepared to provide information to Residents of Springhill Joint Venture and the trustees to comply with the criteria established by section 5 of the agreement. As a result, the calculation of net profit may not be suitable for another purpose.”

51Note 1, headed “Basis of accounting”, includes two interesting provisions:

Revenue recognition

Revenue from the sale of condominium units is recorded that of all applicable taxes and rebates, when title transfers to the purchasers; they are entitled to occupancy; there is persuasive evidence of an arrangement for the sale of the unit; the proceeds are fixed and determinable; and collection of the sale proceeds is reasonably assured.

Direct and Indirect construction costs

Direct and Indirect costs as defined in the Agreement are accumulated and deferred until condominium unit that the relate to is sold; at which point these costs are expensed and included in the determination of net profit. Incidental revenue specifically relating to the condominium units earned during the holding, development and construction phases as is treated as a reduction of construction costs

52The one page “Calculation of Net Profit” indicates that the net sales totaled almost $64 million. The project costs including land and direct construction costs totaled about 45.5 million dollars. However, the indirect construction costs including such items as architect and consulting fees, “interest on construction financing”, marketing, Municipal fees etc. totaled almost an additional $21 million. There appears to be no mention of the treatment of the three transferred units referred to in paragraph 16, above.

53A column in the chart in the one page chart, in particular reflects that as at September 1, 2014, the gross profit was $15,319,220. However, that was before the indirect construction costs were considered. Those are reported at $17,297,575. As a consequence, the net loss as at September 1, 2014 was reported as already being $1,978,355.

54Comparing the foregoing with the chart below raises many questions. Particularly I have emphasized the item of “investor losses” stated at $2,620,000, as a component of the project costs:

Gordin Collins Barrow Difference Revenue Remaining units $2,891,000 Parking and storage $50,000 Tarion Bonds $615,000 Insurance claim & L/C $350,000 TOTAL $3,906,000 Payables Morrison loan $1,380,000 Forecast payables $350,000 HST (payable remaining units) $250,000 TOTAL $1,980,000 Net profit $1,926,000 Reduction in sale prices $347,000 Increased interest costs $36,205 Taxes/condo fees misc. condo exp $15,245 Misc. payables $100,000 additional payables $1,100,000 insurance not recovered $350,000 investor losses $2,620,000 TOTAL INCREASED COSTS $4,568,450 DIFFERENCE -$2,642,450

55Plaintiff’s counsel wrote to counsel for Springhill by email on December 19, 2019 requesting this further examination to attempt to clarify the contents of the foregoing chart. Counsel for the plaintiff asserted that no meaningful response had been received regarding this issue prior to the argument of this motion.

X. When all else fails…

56To put the nature of this dispute in a more comprehendible focus, I reproduce below the what I regard as one of the longest sentences I have ever read. This text is included in Paragraph 5 to the “Profit Sharing Agreement” which was the genesis of the Collins Barrow Report. To give a clearer understanding of the dispute, I now set out the entire paragraph upon which the outcome of this action would appear to turn.

(c) “Indirect Construction Costs” shall mean the following:

All additional costs incurred by Rossborough, associated with the Project, including, without limiting the generality of the foregoing, all "soft" costs associated with the purchase of the Lands, the marketing, sale, financing and construction upon the Lands of dwelling units and all improvements constructed or installed in or on or about the Lands, the costs incurred for soil tests, architects' and consultants' fees, and mortgage standby and commitment fees, mortgage interest paydown fees, mortgage penalties, advertising and promotion, real estate commisslons, model home facilities, legal fees, accounting end bookkeeping fees. mortgage costs including appraisal fees, brokerage fees, mortgage legal fees, mortgage insurance, and carrying costs costs with respect to the Project, including without limitation, such charges as land transfer tax. goods and services taxes, sales taxes, value-added taxes, multi-stage, taxes and any other taxes payable by Rossborough in connection with the Project (save and except for any income or corporate taxes payable on the profits from the Project), mortgage interest, realty taxes, interest on funds borrowed for acquisition of tho Lands construction and associated purposes, bank charges, insurance and all other mortgage interest, realty taxes, interest on funds borrowed for construction and associated purposes, bank charges, insurance, and all other costs which can be specifically allocated to the Project, and further including interest and any other costs of general financing specifically related to the Project. Indirect construction costs shall not include any expense for head office cost of Rossborough, including head office staff.

57The foregoing comprises part of paragraph 5 of the Agreement. It is preceded by two somewhat terser terms:

2. Rossborough agrees to pay J.A.L., upon repayment in full of the Investment Account, a share of the Net Profits of the Project, as hereinafter defined, in the amount of (i) Two Hundred Thousand Dollars ($200,000) plus (ii) an amount calculated by multiplying the Investment Amount by Nine Per Cent (9% )per annum for the term of the investment (collectively, the “Profit share”).
3. It is understood and agreed that J.A.L.’s Investment and Profit Share shall have first priority over any and all equity, loans or net profits payable to Rossborough or any other entity, other than the payment of the land and construction loan to the lending construction lender(s) for the project. It is further understood and agreed that, in the event that there are insufficient funds available from the Project to pay J.A.L. some or all of its Investment and/or its Profit Share, then J.A.L.’s Investment and/or Profit Share will be reduced or eliminated accordingly without recourse to Rossborough or the Guarantors.

58Understandably in such circumstances the Plaintiff seeks confirmation of the appropriateness of the previously presented accounting regarding this project. Clearly reading and interpreting the contract are crucial to the outcome of this case.

XI. Law and Authorities

59Because the action was previously set down for trial in order to obtain an early hearing date for a summary trial, Rule 48.04 of the Rules of Civil Procedure requires the leave of the Court for the discovery the Plaintiffs now wish to carry out:

48.04 (1) Subject to subrule (3), any party who has set an action down for trial and any party who has consented to the action being placed on a trial list shall not initiate or continue any motion or form of discovery without leave of the court. (my emphasis)

60The interpretation of the test for leave has evolved over the years. From the 1970's through to the 1990's the Court adhered to the principles laid down by Justice J. MacDonald, in 1992, in Hill v. Ortho Pharmaceutical (Canada) Ltd: [1992] O.J. No. 1740, 11 C.P.C.(3d) 236:

“…The authorities make it clear that setting a matter down for trial is not a mere technicality of procedure. Before it can be vacated to permit any further discovery or other interlocutory proceedings, there must be a substantial or unexpected change in circumstances such that a refusal to make an order under Section 48.04(1) would be manitestly unjust. …”

61Starting in the 1990's, the Courts began to loosen the requirement that a party show a "substantial or unexpected change in circumstances" holding that the test was too rigid. Borins, J. in Gloucester Organization Inc. v. Canadian Newsletter Managers Inc. (, 21 O.R.(3d)753; 37 C.P.C.(3d) 111) considered whether the test had changed with the replacement of the Rules of Practice by the Rules of Civil Procedure in the late 1980's and held at para.9:

All that I believe that it is necessary to say on this subject at this time is that the principles to be considered in respect to the exercise of the discretion contained in rule 48.04(1) will vary and will depend on the nature of the leave and the circumstances of the case.

62Similarly, in 1999, in Tanner v. Clark, 30 C.P.C. (4th) 358, Wilson, J. wrote:

10 The case-law with respect to when leave should be granted to proceed with the motion once a case has been set down for trial is divergent. This divergence appears to reflect different but important competing principles: the benefit of predictability and certainty on one hand, weighed against the principles of justice and fairness affecting individual cases.

25 and In my view, the authorities cited above establish that a single test for leave pursuant to 48.04(1) for all motions requiring substantial and unexpected change in circumstances is overly rigid and simplistic. I adopt the approach of Borins, J. in Gloucester Organization Inc. ( supra ). The relevant principles to be considered and the weight to be given to leave motions will vary depending upon the nature of the leave requested, and the circumstances of the case.

26 An interlocutory matter that can be raised before the trial judge, is to be distinguished from serious matters affecting substantive rights. In the case of the former, a higher threshold is appropriate before leave is granted to bring closure to claims in the interests of certainty and predictability. Once a trial date has been set, the test of substantial and unexpected change in circumstances makes sense for routine interlocutory matters. However, where substantive rights are affected, the merits of the requested relief become a fundamental consideration to ensure the case is fully canvassed at trial. At the same time, full consideration shall be given to any prejudice to the party opposing the motion that cannot be compensated for by costs.”(my emphasis throughout)

63Eleven years later, and now ten years ago, Justice Perell confirmed this was the correct approach in Van Ginkel v. East Asia Minerals Corp. (2010 ONSC 905; 2010 CarswellOnt 717). His Honour canvassed the previous case law to extract the appropriate guiding principles. With respect to Rule 48.04(1) he held at para 17 of his reasons:

“* Once a party has set an action down for trial, it is a matter of discretion in the particular circumstances of the case whether the court will grant leave to initiate or continue a motion or form of discovery. However, the setting down for trial is not a mere technicality and the test for granting leave to permit further discovery or other interlocutory proceedings, is that there must be a substantial or unexpected change in circumstances such that a refusal to grant leave would be manifestly unjust or the interlocutory step must be necessary in the interests of justice. …”

64Implementing Rule 48.04 focusing upon the "interests of justice" has been the predominant view of the Courts in recent years. I believe that approach was inspired, at least in part, by Rule 1.04 of the Rules of Civil Procedure that states the Rules "shall be construed liberally to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits".

65Although most of the cases in the last 10 years have adopted the more flexible approach, a few decisions have applied the "substantial or unexpected change in circumstances" test.

66In BNL Entertainment Inc. v. Ricketts, 2015 ONSC 1737, 126 O.R.(3d) 154, my colleague, Master Muir discussed the two lines of authority. The case involved the failure of the Defendant to serve an Affidavit of Documents before the action was set down for trial (as the parties in the case before me have failed to do). In 2015 Master Muir wrote:

12. In recent years a debate has developed in the case law regarding the test to be applied for granting leave under Rule 48.04(1). The more established test requires a moving party to show a substantial or unexpected change in circumstances. …. This is to be contrasted with a broader approach taken by at least two judges of this court who have held that a finding of substantial or unexpected change in circumstances is not necessary and that the court may grant leave where the interlocutory step is necessary in the interest of justice.

67In particular he referred to the decision of D.L. Chappel J. in AGC Mechanical Structural Security Inc. v. Rizzo, 2013 ONSC 1316; 49 CPC (7th) 174; at paragraphs 21 and 22 and the reasons of E. Frank J in Cromb v. Bouwmeester, 2014 ONSC 5318 at paragraph 35.

68Having reviewed and considered the various conflicting authorities cited to me by the parties. I prefer to follow the line of cases that have adopted the broader approach. In my view, it is desirable for the court to apply a flexible test when exercising its discretion to grant leave under Rule 48.04(1). The court should consider all of the circumstances of the matter before it and make the order that is just in the circumstances of each particular case. This approach is consistent with the overall interpretive provision found in Rule 1.04(1) which requires that the Rules be "liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits".

69In light of the present status of Ontario’s Superior Court operations, at this stage in the current pandemic response, I am even more convinced that a liberal approach needs to be taken in all pending civil litigation matters. I regard this as desirable in order to enable pending cases to move forward to a resolution in the foreseeable future, “on the merits”.

70Here further discovery will facilitate a more time efficient hearing on the merits. This approach is also consistent with the principle of full pre-trial disclosure when discovery rights are in issue. This principle promotes the early resolution of disputes and leads to efficiencies at trial.

71In my view, this interpretation is supported by the clear language of the Court of Appeal in its decision in Iannarella v. Corbett, 2015 ONCA. There the court places great emphasis on the importance of pre-trial production and discovery for reasons of efficiency and basic fairness. For the purposes of this motion, it is important to note that the Court of Appeal stated quite clearly that a waiver of discovery rights must be express and not simply implied solely from the fact that an action was set down for trial.

72I view the decision in Iannarella as affirming (in the litigation environment of 2015) the significant importance of pre-trial discovery and the view that discovery rights are at least partly substantive and not merely procedural in nature. The present environment militates for every element in civil litigation that will facilitate as practical and prompt resolution as reasonably practicable in the realities of the world of 2020.

73The provincial government and this court are committed to returning to full operations as quickly as they can. Those operations will of necessity differ from the environment of 2019. The current internet environment is facilitating “virtual” hearings without the parties and their counsel being in the same physical location.

74Our court has acknowledged that it is incumbent on all involved in the future world of civil litigation to seek to be prepared for changing processes together wit technological improvements “to ensure we can continue to deliver effective justice”.

XII. “Circumstances Alter Cases”

75One of the unintended consequences of mandated home quarantine is that there is time to probe deeper into other elements, conceivably, having a bearing on the ultimate result. I was curious who was the author of the above phrase.

76Thomas Chandler Haliburton (1796-1865) was a Nova Scotian politician, judge, and author. He made an important political contribution to the state of Nova Scotia before its entry into the Confederation of Canada. He was the first international best-selling author of fiction from what is now Canada. In 1856, he emigrated to England, where he served as a Conservative Member of Parliament. He was the father of the British civil servant Lord Haliburton and of the anthropologist Robert Grant Haliburton.

77Haliburton was eager to promote immigration to the colonies of British North America. The community of Haliburton, Nova Scotia was named after him. In Ontario, Haliburton County is named after Haliburton in recognition of his work as the first chair of the Canadian Land and Emigration Company.

78Haliburton attained distinction as a local businessman and as a judge, but his greatest fame came from his published writings. He wrote a number of books on history, politics, and farm improvement. He first rose to international fame with his Clockmaker serial, which published as a book throughout the British Empire, as popular light reading.

79In 1841 Haliburton was appointed as a justice to the Supreme Court of Nova Scotia. I doubt he ever anticipated being quoted almost 180 years later, in a decision rendered in the Supreme Court in what was then Upper Canada.

80The frontispiece to these reasons is the phrase “circumstances alter cases”. My research at sites such as https://en.wikipedia.org/wiki/Thomas_Chandler_Haliburton lead me to clear evidence that the phrase was found in Justice Haliburton’s 1849 publication “The Old Judge, Or Life in a Colony", which I understand is included in the Fisher Library’s rare book collection at the University of Toronto.

XIII. Determination

81These reasons were written during an unprecedented world health challenge, where to all intents and purposes the civil side of the Superior Court was shut down due to public health concerns flowing from the 2020 COVID-19 pandemic.

82Initially efforts are being made to accommodate urgent matters primarily in the criminal and family law areas. This action has already taken several years to get to this point. To further delay the matter is not likely to alter, in any meaningful way, the point in time when the matter is ultimately going to be heard by a judge of this court.

83At present the Court offices are closed. The motion record with my endorsement will eventually make its way to the Superior Court office in Toronto for filing. In the interim, I am transmitting a PDF version of this decision, electronically signed by me, to both counsel by e-mail.

84In coming to my conclusion, I have been guided by and have sought to apply the guidance of Rule 1.04 in an environment that was unlikely to have been imagined by the drafters of the present Rules:

General Principle

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits

Proportionality

(1.1) 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. O. Reg. 438/08, s. 2.

Matters Not Provided For

(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them.

85I have considered these principles in the context of the facts before me on this motion. In my view, it is just in the circumstances of this action that the plaintiffs be granted leave to conduct an examination for discovery as requested.

86In part, my decision was based on the principle that trials should be decided on their merits and should not involve “surprise and trial by ambush”. Moreover, in a case focusing on a sea of financial data, the more numerical surplusage that can be identified and eliminated, before the summary trial begins, the more likely the parties can focus on the crucial data points.

87Before me the Plaintiff submitted that it was in the interests of justice to allow both parties to conduct further discovery. I am granting that Order.

88Neither party has served an Affidavit of Documents. In the present circumstances I am requiring production of lists of documents being relied upon by each side, to the party opposite by May 20, 2020.

89Those lists are to be supplemented if new documents are to be relied upon 20 days after the holing of each Examination. Parties to agree on video discovery dates within 15 days to be held by the end of June 2020 unless they agree otherwise.

90Once the foregoing events have been scheduled, the parties are granted leave to undertake steps necessary to schedule a hearing in the manner established for the equivalent of To Be Spoken To Court.

91I am further directing that the cross-examinations of Paul and Fausto in April of 2018 will serve as their examinations for discovery. Paul will be re-examined with respect to follow-up questions arising from the answers to undertakings provided by Springhill. He will also be examined on behalf of the Defendant Emma Rossetto.

92To the extent financial information in response to undertakings given by Matthew are still outstanding. Counsel for JAL reserves the right to re-examine this Defendant to follow up on these answers to undertakings once they are provided.

93The cross-examination of Gordin in April of 2018 will serve as his examination for discovery. Gordin can be re-examined with respect to follow-up questions arising from the answers to undertakings provided by JAL.

94In addition to questions arising from the answers to undertakings, Paul (on behalf of Springhill), Matthew and Gordin may be asked further questions relevant to the litigation. Such further questioning is to be exercised on a reasonable basis.

95I am satisfied that this motion should not have to have been brought before this court. The Plaintiff Company is entitled to their costs of this motion on a substantial indemnity basis. If the parties cannot agree on a quantum within 30 days, I may be contacted to convene an in-person video conference to resolve that issue, utilizing the system created by Zoom Video Communications, Inc. or such other internet system as may be available.

96I am obliged to counsel for their assistance and patience in these extraordinary times.

Master D. E. Short