SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 10-49230
MOTION HEARD: 2012/07/17
RE: CANA INTERNATIONAL DISTRIBUTING INC., c.o.b. as SEXY LIVING
and
STANDARD INNOVATION CORPORATION
BEFORE: MASTER Pierre E. Roger
COUNSEL: Howard J. Wolch, for the Plaintiff
Peter Mantas, for the Defendant
REASONS FOR DECISION
[ 1 ] The Plaintiff, Cana International Distributing Inc. c.o.b. as Sexy Living, is a Vancouver company that sells and distributes adult products or sex toys. The Defendant, Standard Innovation Corporation, is an Ottawa company, which manufactures sex toys, including the We-Vibe adult toy.
[ 2 ] These parties are involved in a legal battle over the distribution of the We-Vibe. Sexy Living has brought this action alleging an exclusive right to distribute the We-Vibe (in food and drugstores) resulting from a November 2009 agreement. Whether or not that agreement or any renewal or lack thereof is binding on the parties is very much in dispute as is the effect or interpretation of any such agreement.
[ 3 ] The Defendant disputes the claim and has brought a counterclaim seeking the disgorgement of the Plaintiff’s profits with respect to the sale of other products at the expense of the We-Vibe, and an accounting of the Plaintiff’s sales of the We-Vibe and We-Vibe II. Damages sought by both parties, in their respective pleadings, are globally in excess 20 million dollars.
[ 4 ] To date there has been two injunctive motions and a prior motion before me dealing with the production of documents. The parties have not yet attended at examination for discovery.
[ 5 ] The parties could not agree about the scope of my prior order. In addition, the Defendant sought additional disclosure of documents it says are relevant.
[ 6 ] Standard Innovation brought a motion dated May 29, 2012, seeking: a further and better affidavit of documents from the Plaintiff requesting disclosure of what is outlined at paragraph 6 (a) to (j) in the grounds for motion section of its motion record; an order for directions regarding my order of January 17, 2012; leave to amend the Statement of Defence and Counterclaim as pleaded in the draft dated June 20, 2012, as found at Exhibit A of the affidavit of Finlayson dated June 28, 2012.
[ 7 ] Sexy Living brought a motion dated July 5, 2012, seeking: to strike the Statement of Defence for failing to comply with my order of January 17, 2012; in the alternative, an order requiring the Defendant to comply with my previous order; an order requiring Standard Innovation to provide all distributor agreements to which Standard Innovation was a party from August 2009 to date; an order requiring Standard Innovation to provide an authorization to contact its internal accountants/bookkeepers and external/public accountants, to request information and documentation as required, and to provide the contact information of said professionals; and summary judgment dismissing the counterclaim of Standard Innovation.
[ 8 ] Standard Innovation responded with a cross-motion seeking to stay the motion for summary judgment pending completion of both the document disclosure and examination for discovery or, in the alternative, adjourning the motion for summary judgment.
[ 9 ] I will deal with these many and varied requests in the order that they appear above. In its original motion record, Standard Innovation states that the additional information requested by it is relevant, that it would not be burdensome to the Plaintiff, and that, in any event, they are entitled to the same level of disclosure as per my previous order.
[ 10 ] In a subsequent affidavit, filed in response to the motion for summary judgment, Standard Innovation indicates, with respect to purchase orders, that these can be verbal or sent by email. Standard Innovation states that it does not retain records of phone calls. Further, it states that purchase requests are not purchase orders and that disentangling purchase requests emails from other emails would be a Herculean task that would not yield all purchase requests in any event, and that to fulfill that request would require time and resources that it cannot begin to fathom. It states that it would require someone to manually go through every email to determine whether a buyer requested a product which would involve hundreds of thousands of emails, some of which are archived. It states that the only accurate way to determine customer purchase is by studying the sales ledger which has been provided to Sexy Living.
[ 11 ] In an affidavit sworn July 9, 2012, the President of Sexy Living provides what is mostly her opinion about the merits of the proposed counterclaim. In an affidavit sworn July 12, 2012, an expert retained by the Plaintiff, provides contextual evidence about the parties disagreement. She does not understand why emails could not be identified directly by the order information that would give rise to a shipment and invoice and why someone would be required to manually go through the emails stating that much of the production issues now raised by the Defendant were never communicated to them when they dealt with these issues.
[ 12 ] First, considering the Defendant’s requests for additional disclosure from the Plaintiff, in the order in which they appear at paragraph 6 (a) to (j) in the grounds for motion section of its motion record, I order the following to be disclosed by the Plaintiff, to the extent that any of this has not already been produced, which disclosure is to be made subject to a confidentiality agreement to be agreed upon between the parties:
6 (a) - is relevant to the pleadings and is ordered to be disclosed.
6 (b) – sales ledgers for the indicated years are relevant to the pleadings and ordered to be disclosed. If this information is available by month, then that information shall be disclosed for the requested period.
6 (c) - is relevant to the pleadings and is ordered to be disclosed.
6 (d) - is relevant to the pleadings and is ordered to be disclosed.
6 (e) - is relevant to the pleadings and is ordered to be disclosed.
6 (f) - is relevant to the pleadings and is ordered to be disclosed.
6 (g) - is relevant and is ordered to be disclosed, but, for clarity, this is limited to such documents for any product if the agreement includes as well any We-Vibe product of Standard Innovation for the period of time during which they sold the We-Vibe products.
6 (h) - is relevant to the pleadings and is ordered to be disclosed but is limited to such correspondence if it includes the We-Vibe products of Standard Innovation for the period of time during which they sold the We-Vibe products.
6 (i) - is relevant to the pleadings and is ordered to be disclosed but is limited to invoices to retailers who purchased the We-Vibe products from the Plaintiff for the period of time during which they sold the We-Vibe products.
6 (j) - is relevant to the pleadings and is ordered to be disclosed but is limited to accounts receivable relating to an invoice to a retailer who purchased the We-Vibe products from the Plaintiff for the period of time during which they sold the We-Vibe products.
[ 13 ] I have considered proportionality when ordering the above. While it would have been helpful for the Defendant to explain specifically in their materials why the above is relevant and required, this was done on this motion and I find that this information is relevant on the face of the pleadings. Some of the above has apparently already been produced by the Plaintiff, or the Plaintiff agreed to produce some of the above, as is apparent from tab 2 (e) of their original motion record – letter of March 8, 2012. Anything currently outstanding from what is ordered above is to be produced. Similarly, and although some of these requests could have been dealt with at discovery, the most expeditious way to deal with them today, considering that we are presently focused on these issues is to deal with this now in order to allow this action to proceed expeditiously to discovery and maybe thereafter to a motion for summary judgment should that then be an effective way to deal with some of the claims made by either party. The parties are to agree to a confidentiality agreement prior to the above disclosure and this shall be done quickly to ensure that the timeline is respected.
[ 14 ] Paragraph 3 of the Order of January 17, 2012, is an accurate description of my disposition of this earlier motion. I was convinced by the Plaintiff when this was originally argued that all of these products were relevant and that the requested information should be produced for all of these products, as is ordered at paragraph 3. Having reviewed the evidence and the arguments of counsel on what is alleged to be outstanding for these three products (Salsa, Tango and Touch – for sales journal, purchase orders and investigation documents), I am convinced that the Defendant has sufficiently complied with this part of the order. Proportionality comes into play and is a significant factor in this part of my disposition.
[ 15 ] Paragraph 1 (f) of the Order of January 17, 2012, does include “and other contracts”, which would include telephone and email orders. However, proportionality needs to be considered. The Defendant argues that this would be extremely demanding and might, in any event, not be informative considering what has already been ordered to be produced. Considering the evidence before me, even if this would otherwise have been included in the language of my previous order, telephone requests and emails ordering the products at issue are not to be disclosed as this would be a disproportionate exercise considering what has been produced to date.
[ 16 ] The Plaintiff is requesting all distribution agreements of the Defendant from August 2009 to date. The Defendant on this motion stated that all such agreements for Canada and the US have been produced on consent by the Defendant despite my earlier endorsement which did not specifically grant this request and further, in any event, the Defendant undertook that if any such agreement for Canada and the US has not been produced, the Defendant would, on consent and despite what I may order today, produce same for Canada and the US. This request was before me last time and was not granted. It is alleged by the Plaintiff that they need this now as a result of the information produced to date hence their renewed request. This part of the request is dismissed. This information is not required as the Plaintiff already has all the relevant source documents required. In any event, further to the Defendant’s undertaking outlined above these will in any event be produced on consent for Canada and the US.
[ 17 ] The Plaintiff requests an opportunity to communicate with the Defendant’s internal and external accountants to better understand their accounting system. This request is dismissed. Such a request is premature. The parties should attend first at examinations for discovery as this might satisfactorily address this request either directly at discovery or by undertakings to enquire and advise. This request, if granted, would add a level of discovery that is not contemplated by the rules that would open up a number of procedural and substantive issues. If, after discovery and after the exchange of expert reports, the parties’ experts need to communicate with one another to address any inconsistencies or attempt to clarify issues that are the subject of disagreement, then this can be addressed at that time or subsequently under either rule 20.05 (2) (k) or rule 50.07 (1) (c), as might be applicable. Again, I note that this was before me at the last hearing and was dismissed.
[ 18 ] The Defendant requests to amend their counterclaim in order to seek damages for defamation against the Plaintiff and against a new party, Ms. Micheline Ciolli. It was confirmed by the Defendant at the hearing of this motion that this is the extent of their proposed claim against Ms. Ciolli. This request is allowed and leave is granted to the Defendant to amend their Statement of Defence and Counterclaim as pleaded in the draft dated June 20, 2012 as found at Exhibit A of the affidavit of Finlayson dated June 28, 2012. Rule 26.01 is applicable. I have considered the cases brought to my attention by the Plaintiff and believe that in the circumstances of this case they support my conclusion to allow the amendments.
[ 19 ] This brings us to the last item argued today, the Plaintiff’s motion for summary judgment on the original and proposed counterclaim. These requests are dismissed, on a without prejudice basis to the rights of the Plaintiff to bring such a motion following both the disclosure ordered above and following the examinations for discovery of all parties. While I appreciate the Plaintiff’s effort at trying to avoid production of the above, I am convinced by the Defendant’s arguments that the motion for summary judgment should not be dealt with by this court, in the circumstances of this case, until after the above disclosure and discovery. I believe that these steps are required steps for the court to consider whether it can apply the full appreciation test. I have reviewed the cases on point cited by the parties, and find that they support my disposition.
[ 20 ] Regarding timeline, the following is ordered:
The Amended Statement of Defence and Counterclaim shall be served and filed by July 27, 2012.
Any Amended Reply and Defence to Counterclaim shall be delivered by August 31, 2012.
All information ordered above to be disclosed, shall be disclosed by October 19, 2012.
Examinations for discovery of both parties shall be conducted by January 31, 2013.
Time to set this action down for trial is hereby extended to September 30, 2013.
The parties are to exchange expert reports prior to the pre-trial, which will be scheduled in the usual course when this action is set down for trial. If a timeline for this other than what is provided by the rules is required then a case conference can be scheduled to deal with this.
In any event, as requested by the parties at this motion, a case conference is hereby scheduled before me on February 1, 2013 at 12:00 for one hour, by telephone conference to address any issues, including any following discovery.
[ 21 ] Finally, costs are allowed for all motions returnable today on a partial indemnity scale payable by the Plaintiff to the Defendant within 30 days in the all inclusive amount for fees, disbursements and HST of $15,000.00. Both parties have delivered costs outlines generally comparable for fees. The Defendant was primarily successful and I believe that for these motions costs should follow the general rule outlined at rule 57.03. Considering the costs outlines, the factors relevant to costs outlined by the parties in their respective costs outlines and the factors at rule 57.01, I believe that a reasonable amount for costs payable to the Defendant for all motions returnable today is $15,000.00.
[ 22 ] I believe that the above addresses all relief sought by the parties in the many motions heard today however if any has been omitted then the parties shall schedule a case conference.
Master Pierre Roger
DATE: July 19, 2012