SUPERIOR COURT OF JUSTICE - ONTARIO
Court File and Procedural Details
COURT FILE NO.: CV-10-41 0 198
MOTION HEARD: 20120210
REASONS RELEASED: 20120831
Parties
RE:
CA R O LI N E Y UE a nd S T E PHE N DO E Plaintiffs v. M I C H AEL VO N G a nd J A RDI NE H EN D E RSO N G R O U P I N C. Defendants
Before and Counsel
BEFORE: MASTER D.E. SHORT
COUNSEL: Conor Wyche
for the plaintiffs , (moving parties), Fax: 416-218-3184
Paul Dollak,
fo r J a rdine H e nd e r so n Realty I nc F a x : 41 6 - 6 4 2 - 35 78
Michael Vong, in person
HEARD: February 10, 2012
Reasons for Decision
Fresh Steps
“The "fresh step" rule is one that has been part of the rules of practice and procedure in Canada and the United Kingdom for many years. There is a great deal of jurisprudence on what constitutes a fresh step but the rule is based on the view that if a party pleads over to a pleading this implies a waiver of an irregularity that might otherwise have been attacked.”
Bowman, A.C.J.T.C.
I. Overview
[ 1 ] This action was commenced in September of 2010 as a simplified rules matter. Over the next year a number of procedural motions were scheduled before, and on some occasions heard by, at least nine different Masters of this court.
[ 2 ] One of those proceedings was a Rule 42 motion seeking a Certificate of Pending Litigation which was brought before Master Sproat in March of 2011. That motion was adjourned on terms which included a direction that “further affidavit material from the plaintiff shall be delivered by April 15, 2011.” The order also provided for any further responding materials for the proposed defendant to be filed a timely basis.
[ 3 ] Following delivery of those materials cross examinations were held. A motion dealing with refusals undertakings supported by a lengthy form 37 CD charts was scheduled and adjourned to permit a long motion date to be assigned. Ultimately that motion came on before me in December of 2011.
[ 4 ] At the outset of the hearing of that motion I raised an issue which had not previously been considered by either counsel. My question was whether, since the simplified rule provisions clearly do not permit any cross examinations, can refusals on such cross examinations properly be the subject matter of a motion at all?
[ 5 ] In order to permit the parties to consider their positions , I adjourned the matter to my list early in the new year so that the following preliminary issues could be addressed:
(i.) Are refusals and undertakings given on a cross examination on an affidavit, filed in a simplified rules matter, properly the subject matter of a motion brought within the action?
(ii.) Can the existing transcripts of such cross examinations be used by either party on the hearing of the main motion upon which the affidavits were filed?
(iii.) Is there a 30 minute limitation on such motions in any event?
[ 6 ] Prior to these issues being argued the Plaintiffs withdrew their undertakings motion. Their factum indicated that this was done, “as the court likely lacks jurisdiction to make an order for productions on a cross-examination under simplified rules.”
[ 7 ] That issue now being moot, the Motion then proceeded on the narrow issue of whether the transcripts and documentation obtained on to the cross-examinations are admissible for any purpose on the main motion, and if so, to what extent.
II. Nature of Action
[ 8 ] This is in essence a fraudul e nt con v e ya n c e action . Jud g m e n t for $ 9 2, 000 . 00 w a s previously o btained ag ainst the d e f e ndant s Mich ae l V on g and Jardin e Hend e r s on G r oup In c. by the plaintiffs
[ 9 ] They now are seeking to set aside the conveyance of a property from Jardine Henderson Group Inc. ("Group Inc.") to Jardine Henderson Realty Inc. ("Realty Inc."); made on April 8, 2008 (a point in time after the Plaintiffs provided funds to Group Inc.).
[ 10 ] The Plaintiffs ha v e brought a motion for l e a v e to obtain a Certificat e of Pending Liti g ation (the " CPL mo t ion ").
[ 11 ] The Plaintiffs brought a motion for und e rtakin gs and r ef usals m a d e at cro ss - ex aminations of Su s an Chiu and M i c hael V o n g (w h o sw o re af fid av it s reli e d upon b y R e alt y Inc. in the CP L Motion). While they no longer seek further answers, in the somewhat unique circumstances of this case, they do seek to utilize the existing transcript evidence on the argument of the CPL motion.
III. Rule 76 and applicable Time Limit on Argument
[ 12 ] The relevant opening portions of Rule 76 read:
76.01 (2) The rules that apply to an action apply to an action that is proceeding under this Rule, unless this Rule provides otherwise.
[ 13 ] In particular for some time, the rule had specifically provided that there is to be no discovery, cross-examination on an affidavit or examination of a witness. The present rule reads:
76.04 (1) The following are not permitted in an action under this Rule:
Examination for discovery by written questions and answers under Rule 35.
Cross-examination of a deponent on an affidavit under rule 39.02.
Examination of a witness on a motion under rule 39.03.
[ 14 ] However as of January of 2010 the rule was amended to permit a degree of Oral Discovery:
76.04 (2) Despite rule 31.05.1 (time limit on discovery), no party shall, in conducting oral examinations for discovery in relation to an action proceeding under this Rule, exceed a total of two hours of examination, regardless of the number of parties or other persons to be examined.
[ 15 ] A practice direction for civil applications, motions and other matters in the Toronto region was issued on January 1, 2010 and amended as of January 30, 2012. That Practice Direction dealt specifically with simplified procedure discovery motions. In particular, the applicable section of the Practice Direction reads in part:
[21] Motions concerning issues arising from examinations in Simplified Procedure actions will be scheduled for a maximum of 30 minutes in total. All parties are expected to complete oral argument of the motion within the time scheduled, subject to leave from the presiding master in exceptional cases.
[ 16 ] As this was a novel issue and the Practice Direction allowed for granting of leave by me, I determined that there would be no 30 minute limitation on this motion. However, I make no determination as to whether the time for the main CPL motion ought to be extended, leaving that determination to the discretion of the Master hearing the CPL motion.
[ 17 ] Thus only the question of the ability to make use of the transcripts remains to be resolved.
IV. First Principles
[ 18 ] Before turning to the cases I have considered I look to the guidance set out in the early items in the Rules (my emphasis throughout ).
[ 19 ] The “General Principle” is found in Rule1.04:
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.
(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them.
[ 20 ] Guidance as to the appropriate response to non-compliance with the Rules is found in Rule 2:
Effect of Non-compliance
2.01 (1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step , document or order in a proceeding a nullity , and the court,
(a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute ; or
(b) only where and as necessary in the interest of justice, may set aside the proceeding or a step , document or order in the proceeding in whole or in part.
[ 21 ] Rule2.03 gives the broadest power to dispense with compliance:
2.03 The court may, only where and as necessary in the interest of justice, dispense with compliance with any rule at any time.
[ 22 ] Is this such a time?
V. Attacking Irregularity
[ 23 ] Rule 2.02 addresses this matter:
A motion to attack a proceeding or a step, document or order in a proceeding for irregularity shall not be made , except with leave of the court,
(a) after the expiry of a reasonable time after the moving party knows or ought reasonably to have known of the irregularity ; or
(b) if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity.
[ 24 ] Here the rule is clear and both counsel might well be held in a normal case to reasonably ought to have known of the prohibition on cross examinations.
[ 25 ] Practically however the case does not have all the hallmarks of a typical simplified rules case. The relief sought in my mind skews the approach and requires a further analysis of the facts in this case.
VI. Factual background
[ 26 ] The defendant Michael Vong is the current and sole director and officer of the defendant Jardine Henderson Group Inc. On February 5, 2007, Jardine Henderson Group Inc. ("Group Inc.) entered into an agreement of purchase and sale for the properties listed in the Amended Statement of Claim and municipally known as suites 703 and 704 Duncan Mill Road, Toronto, Ontario (the "properties"). The buyer was listed as Jardine Henderson Realty Inc. in trust for a company to be incorporated.
[ 27 ] The plaintiffs allege that On April 26, 2007, The Plaintiffs provided $87,700.00 to Group Inc. and Vong by depositing this amount in a Group Inc. bank account. These funds were not returned.
[ 28 ] On May 22, 2007, the purchase of the properties by Group Inc. closed. However it appears that on April 8, 2008, Group Inc. transferred its interests in the properties to Jardine Henderson Realty Inc. ("Realty Inc.")
[ 29 ] On January 8 , 2009, Default jud g ment w as obtain e d against Group Inc . and Vong, in the amount of $92,794.16.
VII. Rule 2.02This CPL Motion and the undertakings Motion
[ 30 ] On September 9, 2010, the Plaintiffs brought the within action seeking to set aside the April 8, 2008 transfer as a fraudulent conveyance Vong and Group Inc. have not defended this action, and have been noted in default. However, apparently Due to inadvertence, Realty Inc. was not named at the outset as a defendant in this Action .
[ 31 ] The plaintiffs are bringing a motion to amend their Claim to add Realty Inc. as a named defendant.
[ 32 ] Realty Inc. takes the position that there was no fraudulent conveyance , as the properties were purchased by Group Inc. in trust for Realty Inc .
[ 33 ] The Plaintiffs have brought a motion for leave to register a Certificate of Pending Litigation against title to the properties (the "CPL Motion")
[ 34 ] Realty Inc. resists this motion, and relies on statutory declarations of Vong and Chiu ostensibly sworn May 22, 2008, which are included in its motion materials responding to the CPL Motion.
[ 35 ] Ultimately, on May 24, 2011, Vong and Chiu were cross-examined on their statutory declarations. Chiu was cross examined on an affidavit sworn November 4, 2010, in response to the CPL motion. Undertakings and refusals were given by both affiants.
[ 36 ] No objection was taken when cross-examinations of the affiants were requested. The affiants Susan Chiu and Michael Vong, (who swore affidavits/statutory declarations being relied upon by Realty Inc.), and Stephen Doe (a Plaintiff), were cross-examined, and transcripts of their cross-examinations prepared and served. Undertakings were given and documents were produced by them further to those undertakings.
[ 37 ] The resulting transcripts are the subject matter of the present motion.
VIII. Respondent’s position
[ 38 ] Watson and McGowan, Ontario Civil Practice 2012 correctly notes that the policy and purpose of this rule is to reduce the cost of litigation. By reducing the number of pre-trial procedures available in cases that claim modest amounts of money, the litigants are able to save legal costs, thereby making litigation more economical for the public.
[ 39 ] The Respondent asserts that the transcripts ought not to be referred to on the main CPL motion. Relying upon my decision in Homebrook v. Seprotech Systems Inc. , [2011] O.J. No. 2404 ( infra ) it is submitted that this court has been strict about enforcing this ban. Counsel asserts, “If cross-examinations are not permitted, they are not permitted.”
[ 40 ] Prior to 2010 the Rules did not permit conducting of any examinations for discovery in such matters . The Court was been strict in enforcing that portion of the rule even where both sides have agreed to conduct examinations for discovery in spite of the rule. [See Alcox v. Woolley , [1997] 0.J. No. 2821; Mills v. MacFarlane , [2000] 0.J. No. 2874; Leo v. Hamilton-Wentworth Roman Catholic Separate School Board , [2000] O.J. No. 1803 ; Transit Trailer Leasing Ltd. v. Robinson 2004 19514 (ON SC) , [2004] O.J. No. 1821 .]
[ 41 ] In Alcox and in Transit Trailer the court held that if, despite the rule, examinations are conducted, evidence from those examinations was not admissible. However in both those cases the matters were being “downsized”.
[ 42 ] In Alcox Quinn J. on a motion to transfer an action into a Rule 76 proceeding, addressed a situation where an unrepresented litigant had been examined for discovery but the other side had not:
“11 Unfortunately, the matter does not end there. A wrinkle remains. ... I am of the view that an examination for discovery is, potentially, an immensely valuable tool in a piece of litigation 7 (and that value, although perhaps discounted, may exist even where the examination is conducted by a lay person). To now move this action under the umbrella of rule 76 would create the risk of prejudice to the defendant. ... [counsel] proposed, quite fairly, that perhaps the discoveries might be completed and then rule 76 invoked. The problem with such an approach is that one of the consequences of the simplified procedure is that examinations for discovery are prohibited. 9 As I see it, they may not be held even on consent. To knowingly hold them as a precursor to the use of rule 76 is an abuse of that rule. Fairness to the defendant, and, of equal importance, the appearance of fairness, require that something be done to offset the potential for prejudice associated with the half-completed discoveries. Rule 76 is unhelpful in this regard. It appears not to fully recognize that prejudice might be occasioned by opting into its provisions. It does provide for remedying prejudice as to costs, but that is all. In the circumstances of this case, where the defendant is unrepresented by counsel, something more is required. To accomplish the "something more" I am obliged to resort to the inherent jurisdiction of the court to control its own process. I must turn back the clock, to the extent that is possible. Therefore, as remedially clumsy as it might appear, the examination for discovery of the defendant is rescinded for the purposes of this proceeding and any civil proceeding between the parties which involves the subject matter now being litigated. The transcript of the discovery which was filed with the court shall be sealed. The parties shall file any additional copies of the transcript in their possession and they similarly shall be sealed.
12 In making this order I am attempting (in addition to offsetting potential prejudice to the defendant) to discourage the abuse of rule 76. The simplified procedure will not achieve its purpose (of reducing the crippling costs of civil litigation) unless plaintiffs' lawyers meticulously analyze their case before issuance of the statement of claim and do so again immediately upon receipt of the statement of defence. To avoid this task until after examinations for discovery have been held largely defeats the purpose of the rule since such examinations comprise a substantial portion of the costs associated with getting a case to trial under the ordinary procedure. Unless the examination for discovery reveals to plaintiffs' counsel something which he or she could not reasonably have been expected to know or learn at the pleadings stage, then a price must be paid for amending down....”
[ 43 ] Justice Cusinato in Transit Trailer addressed a similar transfer to Rule 76 and made these observations:
51 Such return to the simplified procedure or election at the pre-trial conference does not however of itself exempt the parties concerning compliance with the provisions of Rule 76 for an action, which falls within the simplified procedure. In fact it was recently appointed defence counsel at the opening of trial who objected to plaintiff counsel's request for leave to read into testimony the examination of the representative defendant, because this action fell within Rule 76.04. The court ruled on this objection in defence counsel's favour. As the court confirmed any examination conducted whether on consent while the defendants were un-represented or with counsel of record are excluded by this Rule.
[ 44 ] In Homebrook v. Seprotech Systems Inc. [2011] O.J. No. 2404 , I was required to address the interaction of Rule 20 and Rule 76 in the new situation where a two hour discovery was available to each party. The plaintiff moved for summary judgment in a wrongful dismissal action. The defendant wished to examine the plaintiff prior to the summary judgment motion being heard. The pertinent portion of my reasons reads:
[5] On a motion under Rule 20.04 the court must “weigh the evidence” and in the normal case parties can cross examine on materials filed which undoubtedly could assist in “evaluating the credibility of the deponent”. Here Rule 76.04(1)2 prevents any cross examinations.
[6] In Trans-Canada Medical Management v. Varenbut, ( 5 C.P.C. (6 th ) 344 ) Rouleau, J, as he then was, held that in a non-simplified rules situation a discovery could still proceed in the face of a motion for Summary Judgment.
[7] Here, in my view, the “equality of arms” consideration of the concept of proportionality directs me to apply Rule 1.04(2) to establish, by analogy in this particular situation, a procedure whereby both parties are entitled to conduct an examination in the form of a discovery of up to two hours each, pursuant to Rule 76.04(2). Such examinations shall be held in accord with the Rules applicable to discoveries rather than cross-examinations (should they conflict) with the transcripts being available on the return of the judgment motion.
[ 45 ] In Homebrook , I felt the summary judgment “trumped” the cross examination ban. In the matter before me now I turned to an examination of the ultimate interim remedy sought, the Certificate of Pending Litigation.
IX. Certificate of Pending Litigation
[ 46 ] The Courts of Justice Act legislates the formalities required for the issuance and maintenance of a Certificate of Pending Litigation
- (1) The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).
Liability where no reasonable claim
(4) A party who registers a certificate under subsection (2) without a reasonable claim to an interest in the land is liable for any damages sustained by any person as a result of its registration.
Recovery of damages
(5) The liability for damages under subsection (4) and the amount thereof may be determined in the proceeding in respect of which the certificate was registered or in a separate proceeding.
Order discharging certificate
(6) The court may make an order discharging a certificate,
(a) where the party at whose instance it was issued,
(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,
(ii) does not have a reasonable claim to the interest in the land claimed, or
(iii) does not prosecute the proceeding with reasonable diligence;
(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or
(c) on any other ground that is considered just,
and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just. [ my emphasis ]
[ 47 ] In furtherance of those requirements Rule 42 provides in part as follows:
Claim for Certificate to be in Originating Process
(2) A party who seeks a certificate of pending litigation shall include a claim for it in the originating process or pleading that commences the proceeding, together with a description of the land in question sufficient for registration.
Motion Without Notice
(3) A motion for an order under subrule (1) may be made without notice.
Order to be Served Forthwith
(4) A party who obtains an order under subrule (1) shall forthwith serve it, together with a copy of the notice of motion and all affidavits and other documents used at the hearing of the motion, on all parties against whom an interest in land is claimed in the proceeding.
42.02 (1) An order discharging a certificate of pending litigation under subsection 103 (6) of the Courts of Justice Act may be obtained on motion to the court.
Factum
(2) Each party to a motion under subrule (1) shall, unless the motion is made on consent, serve on every other party to the motion a factum consisting of a concise argument stating the facts and law relied on by the party.
(3) The moving party's factum shall be served and filed with proof of service in the court office where the motion is to be heard at least seven days before the hearing.
(4) The responding party's factum shall be served and filed with proof of service in the court office where the motion is to be heard at least four days before the hearing.
[ 48 ] In 1984, in Toronto Board of Education Staff Credit Union Ltd. v. Skinner , 1984 2111 (ON SC) , 47 O.R. (2d) 70, 1984 CarswellOnt 419, 45 C.P.C. 55; Justice Potts dealt with an appeal in a situation where the plaintiff obtained a l is pendens by an ex parte motion supported by an affidavit. Certain of the defendants moved before a Judge of the High Court to vacate the lis pendens pursuant to s. 39 of the Judicature Act and also brought a motion before the Master for leave to cross-examine on the affidavit filed in support of the motion for a lis pendens. The Master granted leave to cross-examine and the plaintiff appealed.
[ 49 ] Justice Potts carried out a detailed analysis of then current rules and the previous jurisprudence and concluded his reasons upholding the Master’s decision in these terms:
- In my view, it would hardly make sense to endorse the right of cross-examination when an ex parte motion comes before a Master for review under R. 219, but deny such a right where the nature of the subject-matter is of such importance that it is requisite to seek review from a High Court Judge. The better view is surely that a right of cross-examination exists in the latter case as well. I adopt the reasoning of Master Peppiat at p. 5 of his decision:
... the proceeding under section 39 of the Judicature Act is analogous to the procedure under Rule 219 but with wider grounds for relief. I have no doubt that the court in hearing a motion under Section 39, will apply the same principles as in hearing a motion under Rule 219 and may set aside an order and vacate a certificate of lis pendens if it finds that there has not been proper disclosure upon the ex parte application. The distinction is that it may also proceed upon other grounds which would not be available under Rule 219. It is therefore necessary in the interests of justice that an applicant be permitted to attempt to show that there has been no disclosure and cross-examination upon the affidavit is a most useful tool in this respect.
- I am, therefore, of the opinion that the Master had jurisdiction to order the cross-examination. In any event, I would allow the cross-examination of the deponent to the affidavit in the exercise of my inherent jurisdiction to do so.
[ 50 ] I agree that a lis pendens, or now a Certificate of Pending Litigation is a statutory right, where the nature of the subject-matter establishes an importance beyond that of a normal simplified procedure matter.
X. Fresh Steps
[ 51 ] Associate Chief Justice Bowman in Imperial Oil Ltd. v. Canada, 2003 TCC 46 addressed a provision of the Tax Court of Canada Rules which parallels the current Ontario Rule 2.02. There replies to notices of appeal were filed The replies also raised objections to the right of the appellants to object and to appeal in the manner in which they did. It was argued that those objections had been waived by virtue of taking a “fresh step”. The learned Justice commented as follows:
19 Before I deal with the other matters raised in the motions, this is a convenient time to mention the matter of section 8 of the Tax Court of Canada Rules (General Procedure) which reads:
A motion to attack a proceeding or a step, document or direction in a proceeding for irregularity shall not be made,
(a) after the expiry of a reasonable time after the moving party knows or ought reasonably to have known of the irregularity, or
(b) if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity, except with leave of the Court.
20 The "fresh step" rule is one that has been part of the rules of practice and procedure in Canada and the United Kingdom for many years. There is a great deal of jurisprudence on what constitutes a fresh step but the rule is based on the view that if a party pleads over to a pleading this implies a waiver of an irregularity that might otherwise have been attacked. For two reasons I do not think that the fresh step rule precludes the respondent from bringing the motions . First, it is clear that by filing the replies to the notices of appeal the respondent is not waiving her objections to the filing of the notices of objection and appeal. The replies clearly state the Crown's objection. Second, a rather wide ranging attack on the appellants' right to appeal, including allegations that that this court has no jurisdiction, that the appeals are frivolous, vexatious and an abuse of process is hardly an attack on an irregularity.
XI. Disposition
[ 52 ] Given the nature of the relief sought, in and of itself, I would be inclined to allow the use of the subject transcripts on the main CPL motion.
[ 53 ] I am further encouraged of the correctness of this position based on my understanding of the rules and statutory provisions discussed above. Lastly the fact that both parties proceeded as if the right existed in any event, these fresh steps are such as to make it contrary to the goals of a resolution proportionate to the importance and complexity of the issues, and to the amount involved . I believe to permit the use of the transcripts assists in achieving the most expeditious and least expensive determination of this civil proceeding on its merits.
[ 54 ] Upon reflection and given that both sides contributed to the tying of this Gordian knot, I think the best disposition is for the costs of both the now withdrawn refusals motion and this subsidiary motion, to be reserved to the judicial officer ultimately determining whether or not a Certificate of Pending Litigation ought to be issued in this case.
Master D. E. Short
DATE: August 31, 2012
DS/ E47