Ontario Superior Court of Justice, Divisional Court
Court File Nos. 615/2000; 717/2000
Date: 2000-12-18
O'Driscoll J.
Counsel:
G.L.R. Ranking, for moving party, defendant, Menasco Aerospace Ltd.
H.F. Morton, Q.C., for responding party, plaintiffs.
[1] Master MacLeod:—This is a motion for leave to examine non-parties for discovery. On September 13th I released reasons in another motion in the same action. The facts are summarized in that endorsement as follows:
This is an action involving the supply of parts for Boeing aircraft. Menasco manufactures landing gear for Boeing. Apparently Menasco may not sell new landing gear to anyone but Boeing or perhaps in situations approved by Boeing. Despite this it appears the plaintiffs were able to purchase a number of "shipsets" from Menasco. The circumstances are in dispute. Menasco claims the plaintiffs knew or ought to have known the employees of Menasco involved in the sale (and subsequently terminated) were acting outside their authority. When Boeing learned of the sale, the landing gear were recalled. This was allegedly due to the fact they could not be certified by Boeing since they were manufactured outside of the process dictated by Boeing's production certificate.
The plaintiffs claim damages against Menasco for breach of contract and against Menasco and the other defendants for involvement in what they say was an unnecessary recall. In essence the plaintiffs contend they are the innocent victims of a dispute between Boeing and Menasco while the defendants contend the plaintiffs were involved in inducing Menasco employees to supply illicit parts in breach of their duty to their employer. The plaintiffs claim for damages include loss of their ability to establish a highly profitable business in landing gear.
[2] For purposes of this motion, I would only add that the two employees who were dismissed from Menasco, Stewart and Hogg, are the people whom Menasco now seeks to discover. Both Stewart and Hogg were interviewed extensively by Menasco and Boeing and, it appears, by Murrin or Hewson on behalf of the plaintiffs. They are no longer willing to co-operate with Menasco. Stewart indeed complains that he has been harassed by Menasco and by letter placed before the court asks that he not be involved further in this matter. Although Stewart was served with notice and Hogg was notified through his counsel, neither of the non-parties appeared on the motion.
[3] Rule 31.10 provides for examination of a non-party with leave. The rule also sets out certain tests which must be met. It reads as follows:
31.10(1) The court may grant leave, on such terms respecting costs and other matters as are just, to examine for discovery any person who there is reason to believe has information relevant to a material issue in the action, other than an expert engaged by or on behalf of a party in preparation for contemplated or pending litigation.
(2) An order under subrule (1) shall not be made unless the court is satisfied that,
(a) the moving party has been unable to obtain the information from other persons whom the moving party is entitled to examine for discovery, or from the person he or she seeks to examine;
(b) it would be unfair to require the moving party to proceed to trial without having the opportunity of examining the person; and
(c) the examination will not,
(i) unduly delay the commencement of the trial of the action,
(ii) entail unreasonable expense for other parties, or
(iii) result in unfairness to the person the moving party seeks to examine.
(3) A party who examines a person orally under this rule shall serve every party who attended or was represented on the examination with the transcript free of charge, unless the court orders otherwise.
(4) The examining party is not entitled to recover the costs of the examination from another party unless the court expressly orders otherwise.
[4] There is certainly reason to believe that Stewart and Hogg have information relevant to a material issue in this action. They were the two Menasco employees apparently most involved with the central facts in this case. Menasco alleges that they were induced by the plaintiffs to sell the landing gear in breach of various duties to Menasco; essentially that Stewart and Hogg acted without authority and this was known and encouraged by Lana and APM. The plaintiffs contend that Stewart and Hogg acted with full authority, a fact which Menasco has covered up to protect its relationship with Boeing. In the plaintiff's view, Stewart and Hogg were scapegoats.
[5] It is also clear that as matters stand, the moving party has been unable to obtain the information from the plaintiffs. Although there was some early contact between a representative of the plaintiffs and these witnesses, the plaintiff has not conducted a full interview and for reasons which will be discussed momentarily they are not able to do so now. Unless I make an extraordinary order releasing the witnesses from obligations to Menasco, they are unwilling to speak with the plaintiffs. They are also unwilling to speak with the defendants.
[6] Both Stewart and Hogg signed non-disclosure agreements with Menasco when their employment came to an end. It appears that Stewart was interviewed by the plaintiff's United States counsel in connection with proposed litigation in the U.S. Menasco has made it very clear to Stewart that they do not waive their rights under the non-disclosure agreement and has threatened legal consequences if he discusses Menasco's affairs with the plaintiffs or anyone else.
[7] Mr. Morton urges me to find that the non-disclosure agreement cannot apply to the subject matter of this litigation. If the Court relieves Stewart and Hogg from the agreement, he argues, the plaintiffs can interview both men and advise the defendants of what they say. In this way, the test in rule 31.10(2)(a) would prevent the Court from ordering discovery of the non-parties since the moving party could then obtain the information from the defendant on discovery. The Divisional Court has been clear that examination of non-parties is not to be allowed as a matter of course. Generally the party seeking the information must have exhausted all reasonable efforts to have the opposing party obtain it. See Famous Players Development Corp. v. Central Capital Corp. (1991), 3 C.P.C. (3d) 286 (Ont. Div. Ct.).
[8] I am urged not to order discovery of Stewart and Hogg but to proceed as outlined above on the basis that a discovery order deprives the plaintiffs of their right to interview a witness outside of the confines of the discovery process. It is true that there is "no property in a witness" and the plaintiffs are free to speak with Stewart and Hogg if they will speak to the plaintiffs. A witness is not required to speak to any party however, unless summonsed to do so pursuant to the Rules. Many witnesses are prevented from speaking absent a court order by a variety of legal impediments including contract obligations such as the one in question. Mr. Ranking concedes that the non-disclosure agreement can not be used to suppress relevant evidence in this law suit but he argues that the place for such disclosure is in an examination under oath where all parties can ask questions and all will know the answers. Discovery, moreover, has the advantage of taking place under court supervision and the answers will be transcribed by a court reporter. Mr. Ranking proposes that notwithstanding it is the defendant's motion, the plaintiffs also be allowed to examine Stewart and Hogg.
[9] In support of his argument, Mr. Morton referred me to a decision of the Alberta Court of Queen's Bench, Aetna Insurance Co. of Canada v. Mason and Co., [1998] A.J. No. 1374 (QL) (Q.B.) [reported 1998 ABQB 1082, 28 C.P.C. (4th) 25]. In that case, the Court ordered an exemption from a confidentiality provision in an agreement settling an Ontario court action. This was to permit the defendants to interview the representatives of certain pension funds which had previously sued the Alberta plaintiff in Ontario. Observing that "[o]ne litigant's entitlement to freedom of contract bumps up against the other litigant's ability to get at the truth", the court concluded "[t]ruth wins" and ordered that the Alberta defendants could interview the pension funds despite the confidentiality agreement [p. 26 C.P.C.]. Although that order was made in the inherent jurisdiction of the Court of Queen's Bench, Mr. Morton argues that a Master also has sufficient discretion under the rules and in particular under Rule 77.
[10] Assuming the Alberta decision to be good law in Ontario and assuming that a Master may exercise such power pursuant to those provisions of the Rules conferring broad discretion on the Court, I am not persuaded it is appropriate for me to become involved in this action at the witness interview level. This action is finally nearing trial. There have been days and days of discovery and follow-up discovery followed by days and days of motions. Disclosure of information has been a consistent problem. Since the evidence of Stewart and Hogg may be critical to a key element in this case, it seems to me the approach which is likely to most favour exposition of the truth is to have their evidence taken in the clear light of a formal transcribed neutral setting.
[11] I am not unmindful of Mr. Stewart's plea as set out in his letter. He advises the Court that he has "been debriefed by a number of different parties and have provided hours and hours of exhaustive testimony when the circumstances occurred, over ten years ago". He states that he views the request to examine him as a form of intimidation by Menasco and states that involvement in this matter has been an emotional strain "due to the intimidating tactics practiced by Coltec's counsel". This information was not set out in an affidavit and accordingly must be seen more as the expression of a point of view than as evidence. Mr. Morton provided me with the letter and the moving party did not object to my reviewing it.
[12] Mr. Stewart's letter engages the test in rule 31.10(2)(c)(iii) which is to the effect that the order granted must not result in unfairness to the person to be examined. Unfairness could take various forms such as expense, admissions against interest which might form a basis for action against the person being examined, or perhaps severe psychological strain. Without accepting that Coltec and Menasco have been guilty of any improper conduct, it appears to me the best way to minimize the emotional strain for Mr. Stewart would be to have all parties cease contacting Mr. Stewart to obtain information and to have him examined with his own counsel present. The examination will of course be subject to the deemed undertaking in rule 31.1.01(3) and may not be used for any purpose other than this proceeding without leave of the Court.
[13] The other branch of the test is whether or not it would be unfair to the party requesting the order to require them to proceed to trial without the opportunity to examine the non-party. It seems obvious that one or other party will require the evidence of these people at trial. It would be unfair for the defendants not to have the opportunity to know and explore that evidence in advance. This is particularly so in light of the evident hostility to the defendant apparent in Mr. Stewart's letter. It is clear from that letter that he will assert that he was terminated by Menasco only to appease Boeing. There would be nothing fair about freeing a witness from a legal obligation of confidentiality for the sole purpose of allowing the plaintiffs to interview these witnesses and not allowing the defendants access to the information except by summary. In Ontario (Attorney General) v. Ballard Estate (1995), 44 C.P.C. (3d) 98 (Ont. Ct. (Gen. Div.)), Ground J. ordered examination of a former premier of Ontario who had knowledge of certain factors pertinent to valuation of the shares of Maple Leaf Gardens Limited. His conclusion on the issue of fairness at p. 101 was as follows:
I conclude, therefore, that it would be most difficult for the defendants to adequately prepare for trial or to determine what evidence or witnesses they must call without having this information. This is particularly so in the circumstances of this case where obviously the plaintiffs have had an opportunity to question Mr. Peterson on all these issues in preparing his affidavit filed by the plaintiff in the injunction motion. On any test of fairness, it seems to me that the defendants should have a similar opportunity to obtain information from Mr. Peterson prior to trial.
[14] Were I to grant Mr. Morton's request, I would be creating exactly the situation of unfairness envisioned by Ground J. Provided the tests in the rule are met, there is no unfairness in allowing both parties to examine these witnesses. They will thus have the same information and be on the same footing with respect to that information as they prepare for trial. Equally importantly, they will each be able to more accurately assess their positions on this key point and this will put them in a far better position to use the Settlement Conference productively.
[15] I should observe that this fact situation in this case is not the one which usually engages this rule. Frequently it happens that the person most involved with a particular aspect of the litigation is not the person produced by a party for discovery. Sometimes the person with the most intimate knowledge is another employee or a subcontractor, banker, associate or, as here, a former employee. In the usual situation, the person with knowledge, here the departed employee is still to some degree in the control of the party being discovered. Under those circumstances, the other party frustrated with lack of knowledge of the person being discovered seeks to discover the subcontractor, former employee, etc. In those cases the party seeking the information must often be content with an undertaking by the person being examined to speak to the person with knowledge and obtain the information. This is the case in all of the authorities presented by Mr. Morton. None of those cases involve an employer seeking to examine its own former employees who are now under the control of neither party.
[16] In summary, I am satisfied that the tests set out in the Rule are satisfied and the request of the defendants to examine Hogg and Stewart should be granted subject to terms. The terms are as follows:
The moving party defendants have leave to examine Alexander Hogg and Brad Stewart pursuant to rule 31.10 of the Rules of Civil Procedure. The plaintiffs also have leave to conduct an examination.
The examinations shall take place within the next 60 days at a time and place agreeable to the parties and to the persons to be examined. Counsel shall agree upon the dates within two weeks of release of these reasons. In the event a date can not be agreed upon the Court shall fix a date.
The moving party and the responding party may conduct oral examinations. All other parties shall have the right to attend the examination but not to ask questions.
Hogg and Stewart shall each be entitled to have counsel present during their own examination. Stewart shall be entitled to retain and instruct counsel for this sole purpose at the expense of the defendant not to exceed $5,000.00.
The moving party defendant shall pay the costs of the examination and pursuant to rule 31.10(3) the transcript costs for the questions asked by counsel for the defendants. The plaintiff shall pay the costs of the transcript for the questions asked by counsel for the plaintiff.
The transcripts of the examination and any documents produced on the examination may not be used for any purpose other than this litigation without leave of the Court.
Having regard to rule 31.10(4) the costs of the examination itself but not the costs described in paragraphs 3 and 4 shall be costs of the action and shall be in the ultimate discretion of the trial judge.
[17] I am advised that Stewart resides in Ontario while Hogg resides in California. Hogg is also represented by counsel although he did not appear on the motion. I invite the parties to consider whether Hogg's evidence may be taken by video conference or teleconference or some other means satisfactory to all. In that event, I may be spoken to with respect to any necessary order. Failing such agreement, commission evidence will be required and letters of request may have to be directed to the California courts. I may of course be spoken to in that regard as well.
It has been the practice in this action to fix the costs of the various motions and to make them payable forthwith. Menasco is entitled to its costs of this motion. The parties may make written submissions if they are unable to agree upon the appropriate quantum of costs.
Brad Stewart, appellant, on his own behalf.
H. Morton, Q.C., and M.A. MacDonald, for appellants.
C. Thomson, Q.C., and Ian C. Whan Tong, for respondents, Menasco Aerospace Ltd./Coltec Aerospace Canada Inc.
[18] O'Driscoll J. (orally):—On September 19, 2000, counsel for Menasco applied under rule 31.10(1) to the Case Management Master C. MacLeod, for an order granting Menasco leave to examine for discovery Brad Stewart and Alexander Hogg, each being a non-party to the litigation [supra].
[19] On September 19, 2000, the Master released a typewritten endorsement in which he granted the application and summarized his findings and his conclusions as follows, in paras. 16-17 of his reasons:
In summary, I am satisfied that the tests set out under the Rule are satisfied and the request that the defendants to examine Hogg and Stewart should be granted subject to terms. The terms are as follows:
The moving party defendants have leave to examine Alexander Hogg and Brad Stewart pursuant to rule 31.10 of the Rules of Civil Procedure. The plaintiffs also have leave to conduct an examination,
The examinations shall take place within the next 60 days at a time and place agreeable to the parties and to the persons to be examined. Counsel shall agree upon the dates within two weeks of release of these reasons. In the event a date can not be agreed upon the Court shall fix a date.
The moving party and the responding party may conduct oral examinations. All other parties shall have the right to attend the examination but not to ask questions.
Hogg and Stewart shall each be entitled to have counsel present during their own examination. Stewart shall be entitled to retain and instruct counsel for this sole purpose at the expense of the defendant not to exceed $5,000.00.
The moving party defendant shall pay the costs of the examination and pursuant to rule 31.10(3) the transcript costs for the questions asked by counsel for the defendants. The plaintiff shall pay the costs of the transcript for the questions asked by counsel for the plaintiff.
The transcripts of the examination and any documents produced on the examination may not be used for any purpose other than this litigation without leave of the Court.
Having regard to rule 31.10(4) and the costs of the examination itself but not the costs described in paragraphs 3 and 4 shall be costs of the action and shall be in the ultimate discretion of the trial judge.
I am advised that Stewart resides in Ontario while Hogg resides in California. Hogg is also represented by counsel although he did not appear on the motion. I invite the parties to consider whether Hogg's evidence may be taken by video conference or teleconference or some other means satisfactory to all. In that event, I may be spoken to with respect to any necessary order. Failing such an agreement, commission evidence will be required and letters of request may have to be directed to the California courts. I may of course be spoken to in that regard as well.
[20] The order of the Master is the subject of two appeals before me, one by the plaintiffs, and one by Mr. Stewart, each under s. 19(1)(c) of the Courts of Justice Act, R.S.O. 1990, c. C.43. Several grounds were urged by Mr. Morton and those submissions were adopted by Mr. Stewart.
[21] It was also submitted that if the appeal fails, para. 9 of the formal order should be struck out. It states:
This Court Orders that, subject to the terms of this order, all parties and their counsel are prohibited from contacting Brad Stewart to discuss his evidence in advance of his discovery.
[22] In my view, the learned Master granted Menasco and the plaintiffs leave to examine the two non-parties, Messrs. Stewart and Hogg, because the Master came to the conclusion that these two individuals were in his words [para. 4, supra]:
They were the two Menasco employees apparently most involved with the central facts in this case.
[23] Indeed, it would appear that these two gentlemen were the only two individuals responsible for processing the sales of the landing gear at issue. Menasco fired both individuals as a result of the sales in 1990. Despite attempts by Menasco, it has not been able to speak with either individual since 1990.
[24] Master MacLeod fashioned a remedy to protect the witnesses from any abuses. He also ordered Menasco to pay for Mr. Stewart's counsel. Menasco is content to pay such costs.
[25] In my view, the Master did not commit any error in granting the order under review. With respect, the Master who was the Case Management Master, was thoroughly familiar with the case, its issues, the parties, the idiosyncrasies of the parties, and the nuances of the case.
[26] In my view, the order under review was legal and thoughtful and arose out of a commonsense solution to the problem that the Master faced.
[27] Both appeals are dismissed. There will be no variation in the September 19, 2000 order of the Master with regard to paragraph 9.
[28] I have endorsed the back of the Appeal Book, Volume 1, as follows:
For the oral reasons given and recorded, the within appeal of the Plaintiff, 717/2000, and that of the Appellant, Mr. Brad Stewart, 615/2000, are dismissed, save that the time limit in the formal order regarding Mr. Stewart and Mr. Hogg, each being paragraph 3, is amended: that for Mr. Stewart to read "60 days from this date," and for Mr. Hogg to be "90 days from this date."
Submissions as to costs were requested and heard. Counsel for Menasco submits that the costs of this appeal were driven up because of the allegations which Mr. Thomson branded "as disgraceful" about Mr. Ranking who has had carriage of this file.
As a result of these last minute aspersions, Mr. Ranking had to withdraw. Mr. Thomson, who had no previous knowledge of the case, had to be briefed — double preparation.
Mr. Thomson asked for $20,000.00 costs. Mr. Morton opts for the figure of $10,000.00.
Where it becomes known that unsubstantiated aspersions are cast, whether by a litigant or by counsel, there is a price to be paid, and rightly so.
Costs of this appeal are fixed at $17,000.00 and are payable by the Plaintiffs, forthwith, to Menasco. No costs of the appeal initiated by Mr. Stewart.
[29] Appeals dismissed.