Aon Reed Stenhouse Inc. v. Marsh Canada Limited, David J. Mew and Tom R. Parsons
COURT FILE NO. CV-10-414667
2012 ONSC 3852
MOTION HEARD: June 22, 2012
Daniel Z. Naymark for the plaintiff
Malcolm MacKillop and Hendrik Nieuwland for the defendants
ENDORSEMENT
Master R.A. Muir -
[1] The plaintiff brings this motion pursuant to Rule 34.15 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “Rules”) for an order requiring the defendant David J. Mew (“Mew”) to answer certain questions he refused to answer on his examination for discovery held April 20, 2012. A number of the issues on this motion were resolved on a consent basis prior to argument. However, the parties were unable to resolve their differences with respect to a few of the refused questions. The issues relating to those questions were argued before me on June 22, 2012.
BACKGROUND
[2] The plaintiff and the defendant Marsh Canada Limited (“Marsh”) are two of the world’s leading providers of risk management and insurance brokerage services. Needless to say, the plaintiff and Marsh are direct and robust competitors of one another in what appears to be a very competitive business.
[3] The defendants Mew and Tom R. Parsons (“Parsons”) were both long-time senior employees of the plaintiff. During the course of their employment with the plaintiff they were both involved in providing services to one of the plaintiff’s significant clients, Fairmont Hotels and Resorts Inc. (“Fairmont”).
[4] In December, 2009, Mew and Parsons left the plaintiff and joined Marsh. On January 21, 2010, Fairmont advised the plaintiff that it was moving its business to Marsh. For the plaintiff, this amounted to the loss of a very important customer and the associated revenue and profits.
[5] This action was commenced on November 18, 2010. The plaintiff alleges that Mew and Parsons, prior to their departure from their employment with the plaintiff, solicited Fairmont’s business on behalf of Marsh, contrary to their contractual and other legal obligations to the plaintiff. Moreover, the plaintiff alleges that Mew and Parsons did so by using confidential and proprietary information belonging to the plaintiff. Finally, the plaintiff alleges that Mew and Parsons continued to misuse such confidential and proprietary information after joining Marsh, in connection with providing ongoing insurance and risk management services to Fairmont.
[6] For their part, Mew and Parsons deny that they solicited Fairmont’s business prior to their departure from the plaintiff. Mew denies that he took any confidential information with him when he left the plaintiff and states that he had only peripheral involvement with Marsh’s efforts to secure the Fairmont account. He does admit, however, that after Fairmont went to Marsh in January, 2010, he began to work on the Fairmont account. Mew also concedes that while working for the plaintiff he had access to confidential information and that he now performs similar work for Marsh that would contravene the provisions of certain non-competition clauses in his employment contracts with the plaintiff. Mew takes the position, however, that those contracts, or at least portions thereof, are simply not enforceable.
THE REFUSALS
[7] The questions refused on Mew’s examination that remain in issue all relate to the plaintiff’s request that Mew provide certain information and documents relating to his involvement with Fairmont on behalf of Marsh between January 21, 2010 and December, 2010. The plaintiff argues that those questions and documents are relevant to its claim against Mew for breach of confidence. Specifically, the plaintiff alleges that during this time period, Mew provided services to Fairmont on behalf of Marsh by, in part, using confidential information belonging to the plaintiff. The plaintiff seeks, among other things, an accounting and disgorgement of profits received by Marsh as a result of Mew’s alleged misuse of this supposedly confidential information.
[8] Mew argues that there is simply no evidence that he took any confidential information with him when he left his employment with the plaintiff. Indeed, he has explicitly denied taking any such information with him. His evidence is that he neither possessed nor used such confidential information in order to provide services to Fairmont on behalf of Marsh. All of the information he would have used either belonged to Fairmont or was readily available to Marsh as Fairmont’s broker of record. He does admit, of course, that in providing services to Fairmont on behalf of Marsh he would have applied his skills and abilities derived from his 30 years of experience in the industry. However, Mew argues that there is nothing improper about that. Mew submits that the plaintiff’s questions and requests for documents are nothing more than the proverbial “fishing expedition” and are based on pure speculation. In Mew’s opinion, the plaintiff simply wants to riffle through Mew’s metaphorical filing cabinets to see if anything interesting turns up.
PRELIMINARY OBJECTION
[9] The plaintiff objects to the admission into evidence of an affidavit sworn and served by Mew on June 20, 2012, just two days before this motion was heard. Service of this affidavit was contrary to my timetable order of May 14, 2012, which required any responding evidence from the defendants to be served by June 13, 2012. However, it is my view that it is appropriate in the circumstances that the defendants be granted leave to file this affidavit despite their non-compliance with my order.
[10] I note that the plaintiff did not serve its motion material until at least June 5, 2012 when my order required service by June 1, 2012 (although it appears that the defendants agreed to this short delay). Furthermore, the Brief of Documents filed by the plaintiff at the return of the motion indicates that there were significant and successful negotiations ongoing between counsel in the days prior to the hearing of the motion. The purpose of those negotiations was to narrow the issues to be argued. In my view, it made sense for the defendants to delay service of their responding material in order to ensure that it addressed only those issues which remained extant. Finally, I note that the defendants offered the plaintiff an opportunity to cross-examine Mew on the contents of the affidavit and would have consented to an adjournment of this motion, if necessary. The plaintiff declined to take up either of those offers. Given these factors, it is my view that the affidavit should be admitted into evidence and considered by the court on this motion.
ANALYSIS
[11] In determining the issues on this motion I have applied the relevance test set out in Rules 30.03 and 31.06. I am also mindful of the proportionality considerations set out in Rule 29.2.03 . The general principles regarding the scope of discovery are set out in Ontario v. Rothmans Inc. , 2011 ONSC 2504 , [2011] O.J. No. 1896 (S.C.J.) at paragraph 129 where Justice Perell stated as follows:
129 The case law has developed the following principles about the scope of the questioning on an examination for discovery:
The scope of the discovery is defined by the pleadings; discovery questions must be relevant to the issues as defined by the pleadings: Playfair v. Cormack (1913), 4 O.W.N. 817 (H.C.J.) .
The examining party may not go beyond the pleadings in an effort to find a claim or defence that has not been pleaded. Overbroad or speculative discovery is known colloquially as a "fishing expedition" and it is not permitted. See Cominco Ltd. v. Westinghouse Can. Ltd. (1979), 11 B.C.L.R. 142 (C.A.) ; Allarco Broadcasting Ltd. v. Duke (1981), 26 C.P.C. 13 (B.C.S.C.) .
Under the former case law, where the rules provided for questions "relating to any matter in issue," the scope of discovery was defined with wide latitude and a question would be proper if there is a semblance of relevancy: Kay v. Posluns (1989), 71 O.R. (2d) 238 (H.C.J.) ; Air Canada v. McConnell Douglas Corp. (1995), 22 O.R. (3d) 140 (Master) , aff'd (1995), 23 O.R. (3d) 156 (Gen. Div.) . The recently amended rule changes "relating to any matter in issue" to "relevant to any matter in issue," which suggests a modest narrowing of the scope of examinations for discovery.
The extent of discovery is not unlimited, and in controlling its process and to avoid discovery from being oppressive and uncontrollable, the court may keep discovery within reasonable and efficient bounds: Graydon v. Graydon (1921), 67 D.L.R. 116 (Ont. S.C.) at pp. 118 and 119 per Justice Middleton ("Discovery is intended to be an engine to be prudently used for the extraction of truth, but it must not be made an instrument of torture ..."); Kay v. Posluns (1989), 71 O.R. (2d) 238 (H.C.J.) at p. 246 ; Ontario (Attorney General) v. Ballard Estate (1995), 26 O.R. (3d) 39 (C.A.) at p. 48 ("The discovery process must also be kept within reasonable bounds."); 671122 Ontario Ltd. v. Canadian Tire Corp. , [1996] O.J. No. 2539 (Gen. Div.) at paras. 8-9 ; Caputo v. Imperial Tobacco Ltd. , [2003] O.J. No. 2269 (S.C.J.) . The court has the power to restrict an examination for discovery that is onerous or abusive: Andersen v. St. Jude Medical Inc. , [2007] O.J. No. 5383 (Master) .
The witness on an examination for discovery may be questioned for hearsay evidence because an examination for discovery requires the witness to give not only his or her knowledge but his or her information and belief about the matters in issue: Van Horn v. Verrall (1911), 3 O.W.N. 439 (H.C.J.) ; Rubinoff v. Newton , [1967] 1 O.R. 402 (H.C.J.) ; Kay v. Posluns (1989), 71 O.R. (2d) 238 (H.C.J.) .
The witness on an examination for discovery may be questioned about the party's position on questions of law: Six Nations of the Grand River Indian Band v. Canada (Attorney General) (2000), 48 O.R. (3d) 377 (S.C.J.) .
[12] I am also mindful of the comments of Justice Chapnik in Bridge v. Dominion of Canada General Insurance Co. , [2000] O.J. No. 5349 (S.C.J.) where she stated at paragraph 6:
Broad, unsubstantiated allegations in pleadings cannot be used by parties to embark on a fishing expedition.
[13] These are the principles I have considered and applied in determining the issues on this motion. Having done so, it is my view that the plaintiff’s questions and requests are proper and should be answered.
[14] I do not see the plaintiff’s requests as constituting a fishing expedition. First, the allegations of misuse of confidential information are clearly and specifically pleaded in paragraph 25 of the statement of claim. Moreover, there does exist certain circumstantial evidence that lends at least some support to these allegations. Mew was a long-term and senior employee of the plaintiff who admits that he had access to confidential information concerning Fairmont when he was employed by the plaintiff. It was only one month after Mew and Parsons left the plaintiff and joined Marsh that Fairmont announced that it was taking its business from the plaintiff to Marsh. Mew then began immediately working on the Fairmont account, in apparent breach of the terms of the non-competition provisions of his employment agreements with the plaintiff (assuming they are enforceable).
[15] Of course, none of this means that Mew actually misused, or even possessed, confidential information belonging to the plaintiff. I acknowledge his firm denials in this regard. That, however, is a matter for the trial judge to decide on the evidence before him or her. What this evidence does mean to me, however, is that the plaintiff’s line of inquiry is not overly broad or speculative. In the circumstances before me, I do not view the plaintiff’s allegations of misuse of confidential information to be “unsubstantiated”, to use the word commonly found in the authorities. In other words, they rise to the level of relevance.
[16] Mew argued that the plaintiff is relying on the doctrines of “springboarding” and “inevitable disclosure” in order to support its request for the information and documents it is seeking. Mew points out that these doctrines have been rejected in Canada and cannot form the basis for the plaintiff’s requests. In my view, these doctrines are not being relied upon by the plaintiff. The plaintiff’s position is based on the usual and accepted principles applicable to discovery, as referenced above. This is a discovery motion. At this stage of the proceeding, the plaintiff is not asking the court to make a finding of fact based on a presumption that Mew, in providing services to Fairmont, must have misused confidential information or the proprietary work product of the plaintiff. In my view, the plaintiff is simply seeking information and documents relevant to its claim for breach of confidence and that there exists at least some evidence to support those allegations.
[17] Finally, I do not see the plaintiff’s requests as overly broad or lacking proportionality. The plaintiff only seeks information and documents covering a limited period of time (less than one year) and in connection with only one of Marsh’s customers. Mew estimates that his response to the plaintiff’s requests would result in the production of “hundreds and possibly thousands of pages of documents”. In my view, such additional production does not seem disproportionate or excessive given the sophistication of the parties and the amounts in issue in this litigation. As I noted above, both the plaintiff and Marsh are large multi-national businesses. I cannot see how an organization such as Marsh would be prejudiced by the additional limited production that may be necessitated in order to respond to the plaintiff’s requests. I also note that the plaintiff is agreeable to an order permitting the defendants to redact any irrelevant commercially sensitive or confidential information from any documents produced.
CONCLUSION
[18] I therefore order that Mew answer the questions set out in the plaintiff’s Revised Refusals and Under Advisements Chart found at tab 2 of the plaintiff’s motion record. Those answers shall be provided within 90 days. To the extent that documents are produced as part of those answers, the defendants shall be at liberty to redact any irrelevant commercially sensitive or confidential information from those documents.
COSTS
[19] At the conclusion of the argument of this motion, the parties agreed that the party that succeeded on the issue argued should receive its partial indemnity costs, payable within 30 days. The plaintiff has been entirely successful on this issue and is therefore entitled to its costs. I have reviewed the costs outlines submitted by both sides. The plaintiff’s costs outline seeks partial indemnity costs of $3,062.72, inclusive of HST and disbursements. The defendants’ costs outline identifies partial indemnity costs of $8,150.13. In my view, having regard to the factors and principles set out in Rule 57.01(1), and the submissions of the parties, it is fair and reasonable that the plaintiff receive its partial indemnity costs, as requested. The defendants shall pay the plaintiff’s costs of this motion fixed in the amount of $3,062.72, inclusive of HST and disbursements, payable within 30 days.
[20] Finally, I wish to compliment all counsel for the efficient, cooperative and civil manner in which this motion was scheduled and argued. Mew’s discovery took place on April 20, 2012 and within two months of that date, most of the questions refused had been resolved and the parties were ready to argue those that had not. Their conduct of this matter is to be commended and is very much appreciated by the court.
June 28, 2012
Master R.A. Muir