COURT FILE AND PARTIES

COURT FILE NO.: 11-CV-00438877
MOTION HEARD: 2012-03-22
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Penaflor

And

Commerx Computer Services Inc. et al.

BEFORE: Master Joan Haberman

COUNSEL: Callahan, P., for the moving party

Bond, J. for the responding party

REASONS

Master Haberman:

[ 1 ] In November 2011, Mr. Penaflor issued a statement of claim against this defendant (“Services”) and others, in which he seeks damages and disgorgement of profits, as well as compensation for oppressive and unfair conduct under the Business Corporations Act (Ontario) .

[ 2 ] The defendants served a notice of intent to defend on November 14, 2011 but waited until December 9, 2011 to seek particulars of paragraphs 19, 20 and 21 of the claim. In each case, the particulars sought were effectively “which ones?” In each case, the response provided on December 9, 2011 was “all” of them.

[ 3 ] The defendants are not happy with the response. They claim that they should not have to produce documents or information going back more than 2-years before the claim was issued, in view of the expiry of the applicable limitations period. They claim that by answering the demand for particulars as it did, Penaflor has opened the disclosure box back to 1994.

[ 4 ] The defendants seem to be of the view that I must resolve the limitations issue before deciding whether the particulars sought are adequate. I disagree. There is only one motion before me - a motion by them for particulars. Those particulars have now been provided and they are adequate.

[ 5 ] If the defendants are not content with the responses provided, they can challenge them by way of cross-examination during the oral discovery process. If they want to restrict their documentary disclosure to the 2-year time frame they say applies, they can bring a further motion to deal with the limitation issue, but as they have received appropriate responses to their demand, they are not entitled to further particulars at this time.

[ 6 ] This order was made in court at the time the matter was heard and while the above should end the inquiry, in view of how this motion was argued and the impact of the expanded time used on costs, I am compelled to comment on the larger picture. I therefore advised my Reasons would follow.

Chronology

[ 7 ] This action involves allegations to the effect that Services artificially reduced its profits by inflating amounts it paid to the other two corporate defendants with whom their dealings have not been at arm’s length. These allegations are contained in the three impugned paragraphs.

[ 8 ] According to Penaflor, the impact of these transactions was to reduce what he has been paid during his affiliation with Services and what he is entitled to by way of this law suit. It is these allegations that have led to Services’ pursuit of particulars. Services now wants to know which transactions Penaflor questions.

[ 9 ] At paragraph 20 of the statement of claim, Penaflor asserts that payment by Services to these other companies was never fully disclosed to him. He therefore sought to inspect various corporate records back to 1994. Discussions broke down around the time frame sought. As Services has taken the position that a 2-year limitation period applies, they are only prepared to allow Penaflor to go back two years in terms of what he asks to see. Notwithstanding Mr. Callahan’s urgings, this, of course, is not an issue for this court to determine at this time in the context of a motion for particulars. There is no motion brought by Penaflor before me regarding defence productions.

[ 10 ] Before the motion was brought, the parties had a brief exchange about the adequacy of the response that was provided on December 9, 2011. On the same day, defence counsel sent a one-line e-mail to plaintiff’s counsel, stating that the response to the demand “is severely lacking.” It is somewhat ironic, in the context of the defendants’ current complaint, that he failed to advice as to the nature of the alleged inadequacies with any particularity.

[ 11 ] This was noted by plaintiff’s counsel who pointed out that the gravamen of Penaflor’s complaint was the defendants’ lack of timely disclosure.

[ 12 ] On December 13, 2011, defence counsel wrote to say he would be bringing a motion under Rule 25. Although he failed to specify under which subrule he was moving, I can only assume he meant Rule 25.11 – a master’s motion to strike a pleading – though it is not clear on the face of the pleading how or why that Rule would apply..

[ 13 ] A further exchange occurred, with plaintiff’s counsel again pointing out that he could not help unless he knew the nature of the problem, adding that the defendants’ failure to make the level of disclosure requested continued to impede Penafore’s ability to be more particular in his allegations.

[ 14 ] On December 21, 2011, defence counsel wrote to advise that they had booked one hour before the master “on either February 13 or 14 for our motion under Rule 25.” However, though a motion under Rule 25 was threatened and eventually booked, that is not what was delivered or argued before me.

[ 15 ] Instead, the defendants brought a motion for particulars, dealing with only three paragraphs of the claim.

[ 16 ] The motion was scheduled for February 14, 2011. Pursuant to their notice of motion, the defendants seek “proper and further particulars” with respect to the three paragraphs of the claim noted above. They take no issue with any other aspect of the claim as drafted and Rule 25 is not even mentioned.

[ 17 ] The motion record was served on January 16, 2012 and a responding record was served by courier on February 8. The responding party also delivered a factum and brief of authorities.

[ 18 ] When the matter came before Master Glustein on February 14, the defendants sought to have it adjourned in view of their having been short served with the responding materials. The reason an adjournment was sought was to provide the defendants with time to address the issues raised by the new materials. There was no mention of the fact that another motion or a different type of motion was also being considered at that time.

[ 19 ] Master Glustein accepted the defendants’ position on its face and agreed to adjourn the motion to March 22, 2012 on the following terms, to accommodate the defendants’ stated needs:

1. Defendants to file reply affidavit material by February 29, 2012;

2. Cross-examinations to take place by March 9, 2012;

3. Transcripts to be expedited.

[ 20 ] On February 24, defence counsel wrote to say he was prepared make his client available to be examined on March 6. He said nothing about a further motion being prepared.

[ 21 ] Although Master Glustein’s order required the defendants to file their reply materials by February 29, 2012, they failed to do so. Instead they served a new motion record, also returnable on March 22, 2012, by courier on February 27. The materials, however, were not filed with the court until March 2, 2012, thus beyond the stipulated deadline in the order. Therefore, to the extent that the defendants claim that the supporting affidavit for the new motion constitutes “reply” evidence, it was filed late, in breach of the Glustein order.

[ 22 ] Mr. Callahan maintains that he met the deadline and did indeed file his reply materials as ordered as Ms. Ortiz’s affidavit, though contained in a new motion record, was also intended to reply to the motion for particulars.

[ 23 ] Mr. Callahan clearly did not meet the court-imposed deadline for filing. There is also considerable doubt as to whether what he filed can be viewed as “reply materials” for a motion for particulars. The affidavit simply refers to an exchange of correspondence between counsel that took place in 2004. For the most part, it deals with the scope of disclosure.

[ 24 ] As there is no evidence regarding the contents of any of these letters, the Ortiz affidavit can only address the fact that the letters were sent and received. It cannot speak to whether the content of any of them are true. The fact that Ortiz herself states in the affidavit that she is filing it for the dual purpose of supporting the new motion and replying to the motion for particulars is not determinative of the issue of what the affidavit accomplishes.

The New Motion

[ 25 ] The new motion record was served by courier on February 27, so is deemed to have been served on the 28 th . It contains a notice of motion for determination of a question of law under “Rule 21(1)(a)” or an order staying or dismissing the action under “Rules 21(3)(a) and (d)”or, in the further alternative, for an order under Rule 25.11.

[ 26 ] The new motion was not booked with the court, and though it was made returnable on the same date as the master’s motion for particulars, it is a motion that only a judge can hear. The motion record was not served with a cover letter explaining why it was being served before the motion for particulars was disposed of or how counsel planned to be in two courts at the same time.

[ 27 ] To further complicate matters, there is no Rule 21(1)(a). Presumably, the intention was to rely on Rule 21.01(1)(a). Neither a party nor the court should not have to guess at what counsel intends – the purpose of a notice of motion is to provide notice of what that party seeks to bring before the court.

[ 28 ] Similarly, there is no Rule 21(3)(a) or (d) . The correct reference would be Rules 21.01(3) (a) and (d). There is no evidence at all in this record that deals with the issue of whether the court has jurisdiction over the subject matter (as per (a)) and no evidence to demonstrate that the action is frivolous or vexatious (as per (d)). Further, no evidence is admissible on a Rule 21.01(1)(a) motion except with leave of the judge.

[ 29 ] No factum or brief of authorities have been filed with respect to this Rule 21.01 motion so it is not at all clear where the defendants were heading with it.

[ 30 ] On March 2, 2012, Penaflor’s counsel wrote to say she had received the new record rather than reply materials as anticipated. Her view was that the motion for particulars appeared to have been abandoned. In view of the nature of the relief sought by the new motions, this was a reasonable assumption.

[ 31 ] On that basis, Penaflor’s counsel indicated there was no longer any basis for his cross-examination to proceed. Finally, Penaflor’s counsel alerted defence counsel to the prohibition against evidence with respect to a Rule 21 motion of this kind.

[ 32 ] The defendants caused considerable confusion by the way in which they handled these events. First, they threatened and booked a Rule 25 motion. Instead, they delivered a motion for particulars. They then asked to adjourn their own motion in order to address late served responding materials.

[ 33 ] Before the new return date, the defendants changed tact again and filed an entirely new and different type of motion without explanation and simply expected everyone to understand and accept what they were doing. The new motion was made returnable before a judge on the same date as the master’s motion.

[ 34 ] Despite all of the above, Mr; Callahan wrote to Penaflor’s counsel in a most disparaging tone, claiming that her suggestion that the defendants had abandoned their motion for particulars was “both absurd and incorrect.” Mr. Callahan then made it clear he still wished to proceed with Penaflor’s cross-examination.

[ 35 ] Penaflor’s counsel wrote to again explain her position and Mr. Callahan again responded in a manner which can only be described as rude.

[ 36 ] Despite all of the foregoing, Mr. Callahan confirmed with the court that the adjourned motion for particulars would be proceeding as scheduled on March 22. However, though he had only booked one hour for the motion, he confirmed that it would be proceeding for 2 hours. Under the section listing the materials to be used, he said nothing about the new motion record so it appears that he always intended to argue the particulars motion, only.

[ 37 ] When all of this came before me for review, it was a very confusing bundle. While it was clear from the confirmation that the defendants were planning to come to court on March 22 to argue their motion for particulars, it was not clear why they had filed a Rule 21 motion returnable on the same day or why it was among the materials for the matter I was scheduled to hear.

[ 38 ] I therefore asked staff to contact Mr. Callahan to find out how he planned to argue a judge’s motion and a master’s motion at the same time on the same day. All that was sought was clarification. Instead, I received a 2 ½ page letter, containing submissions from the defendants as to why they would be seeking to adjourn their own motion for particulars yet again, this time, because they had not been permitted to cross-examine Mr. Penaflor. This is something they were certainly aware of when they confirmed the motion would be proceeding, yet they failed to indicate at that time that an adjournment would be sought..

[ 39 ] In his letter, Mr. Callahan also indicated that he wished the have the Rule 21 motion adjourned to a judge and that he wished to have it heard in advance of the motion for particulars.

[ 40 ] The Rule 21 motion was never scheduled with the court, so it could not be adjourned. I note as well that, but for my request for clarification, both Penaflor’s counsel and the court would have been unaware that the defendants were planning to come to court to seek to adjourn their motion for particulars.

[ 41 ] Of course, if the Rule 21 motion did go first and if the defendants were successful, that could well render the motion for particulars moot, so that all of the time and costs associated with it would have been wasted.

The Hearing

[ 42 ] Mr. Callahan was told immediately about the concerns I had regarding how he had proceeded and he was put to his election: if he decided to proceed with his Rule 21 motion first, I would mark this motion for particulars as having been withdrawn without prejudice. I was not prepared to adjourn it a second time in view of how the defendants had conducted themselves, particularly as it had been confirmed as proceeding only 3 days earlier. But for my staff having sought clarification, it is unlikely that either the court or Penaflor’s counsel would have even been aware that an adjournment of the particulars motion was going to be sought in court. I also indicated that I would give the plaintiff his costs of the motion thrown away.

[ 43 ] Mr. Callahan was clear that he wished to deal with the Rule 21 motion first, so that the motion for particulars would not proceed at this time. This left the issue of costs thrown away to determine. We took the morning break before addressing costs, but when I returned 15 minutes later, Mr. Callahan was nowhere to be seen. My registrar found him in the hall, on his cell phone and he had to be asked several times to cut his call short to return to court.

[ 44 ] When he finally did, there was yet again a complete turn around. At this point, Mr. Callahan advised that notwithstanding what he had advise the court before the break, he had sought instructions after having made his election and he now wished to have the motion for particulars heard first. However, as he had not been permitted to cross-examine Penaflor, he again sought to have motion adjourned.

[ 45 ] I had already ruled before the break that I was not prepared to adjourn the particulars motion a second time. The matter had initially been adjourned to facilitate the defendants’ wish to conduct cross-examination. Though the cross-examination was requested, their new and unexplained Rule 21 motion completely confused the landscape. As a result of the new motion, Penaflor refused to allow cross-examination in the face of what was now a motion for which it had not been ordered and for which evidence is largely inadmissible absent leave. This, in my view, was reasonable. The fact that the defendants explained their tact after the fact in no way changes matters.

[ 46 ] The defendants had also confirmed that the motion for particulars would be proceeding on March 22. This is an important point that should not be overlooked. The purpose of confirmation forms is to alert the court to what we can anticipate when a matter comes before us. This is a party’s opportunity to let us know if things have changed since the motion was filed, for example, that a matter will take less time because it has been fully or partially resolved. It also allows counsel to tell us if an adjournment is being sought and whether or not the request will be opposed. The confirmation form is an important document which far too few treat seriously. What counsel write on the form governs how much of and in what depth we should read their materials.

[ 47 ] I received a file with two motion records – one for particulars and one dealing with a Rule 21 issue. Only the former had been scheduled and fell within my jurisdiction and there was no suggestion that it would not be proceeding.

[ 48 ] Before arriving at my decision to proceed with the motion for particulars, I also considered the nature of the motion and the evidence filed by both sides.

[ 49 ] The evidence filed by the defendants, the moving parties, was in the form of an affidavit from a law clerk. For the most part, it chronicles the exchange of correspondence between counsel. The only evidence as to why the particulars are needed appears at paragraph 10, where the clerk states that she was advised by counsel that the defendants require “the necessary information sought...in order to proceed with their defence to the within action.”

[ 50 ] At best, this constitutes hearsay. It is also preferable to have the evidence directly from the party indicating that they are unable to plead in view of the lack of particularity. It is also unclear why the defendants cannot plead when they have been told that the allegations pertain to all transactions. This suggests that they are not in a position to dispute that this is the case regarding everything.

[ 51 ] It is rare for a party seeking particulars to cross-examine the responding party. The responding affidavit is from Penaflor, himself. He, too, outlines the chronology of dealings between counsel. In the end he states that the details of the transactions are not within his knowledge. I assume that is the basis of the request to cross-examine, though that was not made clear.

[ 52 ] Penaflor’s position regarding the state of his own knowledge has not factored into my decision in a manner helpful to him as, in my view, the answers he did provide were adequate. As a result, there was no need to cross-examine on the issue of his knowledge in the context of this motion. This issue will have to be explored another day, as it will have a bearing on the parties’ disclosure obligations. That is not what I am dealing with here. Accordingly, there was no need to adjourn this motion yet again to permit cross-examination of Penaflor.

[ 53 ] On the basis of all of the foregoing, I refused the further adjournment request and dealt with this motion.

Costs

[ 54 ] If the parties have been unable to agree as to costs, the plaintiff shall deliver brief written submissions by April 3, 2012 . The defendants shall respond by April 13, 2012 and the plaintiffs shall reply by April 20, 2012.

Master Joan M. Haberman

Released: March 29, 2012