ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 07-CV-37522
DATE: 2012/07/20

BETWEEN:

ENVOY RELOCATION SERVICES INC., and NATIONAL RELOCATION SERVICES (RELONAT) INC. (as contractual joint venture called Envoy Relocation Services) Plaintiffs – and – THE ATTORNEY GENERAL OF CANADA Defendant

Ronald D. Lunau/Phuong T.V. Ngo/ Stephanie Pearce, for the Plaintiffs

Derek Rasmussen/Gregory S. Tzemenakis/ Elizabeth Kikuchi, for the Defendant

HEARD: July 10, 2012

Reasons for Decision to Vary the Production Order Dated
September 13, 2011

ANNIS J.

Overview

[ 1 ] The plaintiffs (“Envoy”) seek to vary my order of September 13, 2011 to require the disclosure of the Royal Lepage Relocation Services (“RLRS”) administration fees for the two 2004 relocation contracts for the Canadian Forces (“CF”) and the Government of Canada / Royal Canadian Mounted Police (“GOC/RCMP”) in issue in this case.

[ 2 ] On a preliminary basis, the plaintiffs request only that disclosure of the administration fees be made to their lead counsel and expert, in addition to providing this information to the court.

[ 3 ] The plaintiffs bring this motion at my invitation. On July 3, 2012, being the 75 th day of trial, after the plaintiffs had completed their evidence on damages, I advised the parties that I was prepared to reconsider my decision of September 13, 2011, refusing the disclosure of RLRS’ administration fees for the 2004 contracts.

[ 4 ] On July 4, 2012, plaintiffs indicated that they wished to move to vary my decision of September 13, 2011. A motion was scheduled for July 10, 2012.

[ 5 ] After consideration of the parties’ written and oral submissions, and after providing an oral explanation for my decision, I ordered the disclosure of RLRS’ 2004 administration fees.

[ 6 ] In addition, I ordered that the redacted parts of an undated “Reconciliation” chart enclosed with the defendant’s letter of May 23, 2012, be disclosed.

[ 7 ] I also indicated that, if necessary, the parties could call further witnesses to testify on matters related to the administration fees. I was advised the following day, after my order to disclose information had been complied with, that the plaintiffs would not be calling any witnesses.

[ 8 ] The defendant’s expert on damages was recalled on July 12, 2012 to testify on the further disclosed information. However, I do not rely on his evidence in this decision.

Background Facts

[ 9 ] On July 15, 2011, two months before trial was scheduled to begin and contrary to an order of Master McLeod, the defendant delivered a substantially revised report on Envoy’s damages from its expert Collins Barrow Ottawa LLP (“CBO”). The report used the actual staffing values and the number of hours purported to be required to perform the contract. This was new information provided by Brookfield Global Relocation Services (“Brookfield”), the corporate successor to RLRS.

[ 10 ] Envoy sought disclosure of further information from the defendant arising out of Brookfield’s new information and CBO’s revised expert report. Included amongst Envoy’s many demands was the request to be provided with RLRS’s administration fees for the 2004 contracts, which the defendant refused to divulge.

[ 11 ] This information was in the defendant’s possession as part of RLRS’s winning tender for the 2004 relocation contracts. The defendant argued that RLRS’ administration fees were not relevant and were not relied upon by CBO to calculate Envoy’s damages.

[ 12 ] The motion was originally returnable before McNamara J. on September 1, 2011. He quite appropriately adjourned the matter over to me as I had been assigned to conduct the trial of the action. I heard the motion on September 12, 2011.

[ 13 ] The motion was urgent in as much as, if allowed, there were commercial confidentiality concerns on which Brookfield had to be consulted. Thereafter, information had to be tracked down, including from Brookfield relating to events dating back to 2004. As well, the parties would have to conduct discoveries on the new information. All of this threatened to delay the trial which was slated to start a few days later.

[ 14 ] By order the following day, I required the defendant to provide some of the additional information and documents requested. I also provided for a possible further hearing were Brookfield disinclined to provide some of the information requested.

[ 15 ] However, I refused the plaintiffs’ request for production of the 2004 RLRS administration fees. I did so, basically accepting the defendant’s submissions that the fees were not relevant and had not been relied upon by the defendant.

[ 16 ] Administration fees are the amounts that the parties to the 2004 procurement process agreed to be paid, on a per file basis, in accordance with their tender submissions to administer the geographical relocation of persons working for the CF, GOC or RCMP.

[ 17 ] The administration fees thus comprise the key multiplicand. When multiplied by the number of files administered by RLRS under the 2004 contracts, it calculates the amount of revenues that were paid to RLRS over the life of the contracts, subject to adjustments for cancelled and transferred files and revenues earned from change orders.

[ 18 ] Documents produced to the plaintiffs by the defendant, but not placed before the court on September 12, 2011, indicated that the administration fees of RLRS for both the 2002 and 2004 contracts were disclosed to CBO.

[ 19 ] Thus, although sought by and given to the defendant’s own expert, this information was never made available to the plaintiffs or to the plaintiffs’ experts, Navigant Consulting Inc. (“NCI”).

[ 20 ] In a letter addressed to plaintiffs’ counsel dated August 10, 2011, the defendant’s counsel declared that CBO had not relied on the RLRS administration fees in its analysis. Moreover, the letter stated incorrectly that CBO had never been made aware of the administration fees for the 2004 contract.

[ 21 ] On August 29, 2011, the defendant produced documents to the plaintiffs showing that CBO had requested and received both the 2002 and 2004 RLRS administration fees in e-mail correspondence with a representative of the CF.

[ 22 ] However, the administration fees had been redacted in copies of the documents provided to the plaintiffs. As well, no reference is found in the covering letter of August 29, 2011, advising the plaintiffs of the defendant’s counsel’s misstatement in the August 10, 2011 letter that the administration fees had not been provided to CBO.

[ 23 ] On May 23, 2012, in the middle of the damage portion of the trial, and eight months after my order refusing disclosure of the administration fees, the defendant provided the plaintiffs with a chart created by CBO entitled “Reconciliation of Revenue for Report”.

[ 24 ] The chart included comparisons of Envoy’s and RLRS’ incremental and total revenues. The information on RLRS’s revenues could only have been calculated using RLRS’ administration fees.

[ 25 ] The covering letter enclosing the reconciliation chart along with several other documents made no specific reference to the chart. However, the enclosed documents were described as having been “relied upon” by CBO in the preparation of its reports.

Analysis

[ 26 ] The plaintiffs move to vary my order pursuant to Rule 37.14 and Rule 59.06(2)(a) of the Rules of Civil Procedure . I find that only the latter Rule is applicable. It permits the varying of an order on the ground of “… facts arising or discovered after it was made”.

Administration Fees

[ 27 ] I took the initiative late in the trial to invite reconsideration of my order refusing disclosure of RLRS’ administration fees because I had learned a great deal about administration fees in the ensuing days of trial that followed my order.

[ 28 ] On September 12, 2011, my understanding of the issues and facts involved in the case was limited to the contents of the pleadings and the affidavit materials used to support or oppose the motion to obtain information for experts who would be providing opinions on Envoy’s damage loss.

[ 29 ] It was not possible prior to hearing the liability evidence to have a full appreciation of the significance of an administration fee. I certainly had no understanding of its relation to other financial elements of the contracts, which is an important consideration on the liability side of the case.

[ 30 ] In this regard, the most important other financial element in this litigation, considered at length during the liability portion of the trial, concerns fees for third-party property management services.

[ 31 ] These fees are central to this case because RLRS in its 2004 [and 2002] tender submissions indicated that it would charge transferees a zero per cent “ceiling” rate, i.e. apparently providing these services for free. Envoy quoted an eight per cent ceiling price for property management services. As a result RLRS’s financial bid on this item was in excess of $45 million less than that of Envoy’s.

[ 32 ] Without getting into all the details surrounding property management fees, it is sufficient to understand that RLRS’ bid on property management services likely had a significant ramification on the amount it bid for administration fees, and in turn, its profitability on these contracts.

[ 33 ] The relationship between the RLRS bid on property management services and its administration fee was not an issue even remotely related to the issues argued in the motion of September 12, 2011.

[ 34 ] The argument on the motion turned around the number and cost of staffing the contracts. Particularly at issue was whether RLRS’ actual staffing figure could be relied upon without having more information on how it was organized to deploy staff, including knowing the revenues generated on the contracts.

[ 35 ] Apart from damages issues argued on September 12, 2011, it is my view that the administration fees of RLRS are relevant to the general understanding of the effect of the 0 % bid by RLRS for third-party property management services.

[ 36 ] For that reason, the administration fees for both the 2002 and 2004 contracts should have been disclosed by the defendant in its affidavits of production. The information is relevant to the bidding process and provides an understanding of the true effect and significance of RLRS’ submission of a zero per cent property management services ceiling rate, which is central to this litigation.

[ 37 ] The defendant argued what seemed to be a form of estoppel, suggesting that, because Envoy failed to bring a motion to compel production of the administration fees after its production request was refused at discovery, this somehow meant that these documents should not be produced at trial.

[ 38 ] As I had indicated during argument of the September motion, a failure to follow up on a refusal to produce documents that otherwise should have been contained in the party’s productions and produced on discoveries has no limiting effect on the opposing party’s entitlement to seek to have them produced and introduced into evidence at trial. The only issue that might arise is whether prejudice occurs that cannot be compensated for by costs, which does not apply here.

[ 39 ] In respect of the relevance of these fees to issues of damages, it is apparent that the defendant’s expert thought them sufficiently useful to make a request for them. Thereafter, it used them to analyze the incremental and revenue difference in the bidders’ administration fees.

[ 40 ] A presumption arises that CBO’s use of the administration fees was to justify its opinion on the higher number of staff it imputed to Envoy to perform the contracts, or to otherwise support its original conclusions that Envoy would likely have suffered a loss had it been awarded the contracts.

[ 41 ] Conversely, the plaintiffs’ expert opined that there would likely be a correlation between the amount of revenues that could be generated on a contract and the staff and other costs that could be incurred to meet profit targets.

[ 42 ] If the revenues of RLRS are significantly greater than those that would have been earned by Envoy, then this may validate to some extent the higher staffing numbers deployed by RLRS that the defendant is arguing should be used as a benchmark to perform these contracts.

The Defendant’s Expert Made Use of RLRS’ Administration Fees

[ 43 ] At the time I made my order on September 13, 2011, I was not aware that CBO had obtained and used RLRS’ administration fees in its analysis.

[ 44 ] The motion materials filed with the court contained only the defendant’s letter of August 10, 2011. As mentioned, it represented that CBO was never made aware of the RLRS’ all-inclusive administration fee. I accept that defendant’s counsel was not aware, when he drafted the letter, that CBO had requested and obtained RLRS’ administration fees.

[ 45 ] Documents disclosing this information were provided to the plaintiffs’ counsel in correspondence described above on August 29, 2011. Despite the disclosure of these documents, the motion records and factums of the parties were not amended to reflect this change.

[ 46 ] This situation may have been compounded by the fact that lead trial counsel of both parties were not present at the motion on September 12, 2011. This was probably due to their being heavily involved in the preparations for trial which was scheduled to start two days later. Other counsel, who by their own admission were parachuted into the file, argued the motion. I doubt that they were aware of the documents evidencing CBO’s knowledge of RLRS administration fees.

[ 47 ] However, it is not fair to the plaintiffs to place their oversight of the new documents on the same plane as that of the defendant. In my view, the defendant was duty bound to file an amended factum, or at least to ensure that the mistake in its materials was clearly drawn to the court’s attention.

[ 48 ] Because this new information would have weighed heavily in favour of disclosing RLRS’s administration fees, I place a high onus on the defendant to have corrected the record by bringing this information to the attention of the court.

[ 49 ] But most troubling in terms of a motion over productions is the late production of the “Reconciliation” document. It was only provided by the defendant under cover of a letter dated May 23, 2012.

[ 50 ] As noted, I accepted the defendant counsel’s explanation that he had been caught unaware when he found out that his letter of August 10, 2011, was incorrect. But on that basis, I would have thought that the importance of full and timely disclosure of relevant documents would have been emphasized, such that the Reconciliation chart should have been produced prior to September 12, 2011, and not more than eight months later.

[ 51 ] The reconciliation document is significant because it is evidence that the defendant’s expert made use of the RLRS’ administration fee to calculate the incremental and revenue differences between Envoy and RLRS’ tender proposals.

[ 52 ] In earlier testimony, the defendant’s expert indicated that he attempted to find various means to validate the conclusions in his reports. I can only assume that this analysis would have been carried out for that purpose, but did not produce the desired results.

[ 53 ] By the fact that the defendant’s expert requested, obtained and analyzed the administration fees of RLRS, I can only assume that it considered this information to be relevant for the purposes of providing an opinion on the plaintiffs’ loss of profits.

[ 54 ] Had this document been provided on the motion of September 12, 2011, I most assuredly would have required RLRS’ 2004 administration fees to be disclosed.

Defendant’s Submissions

[ 55 ] Despite not having disclosed significant documentation in a timely fashion, the defendant nevertheless opposed the disclosure of RLRS’ 2004 administration fees. It argued that disclosure is not necessary because CBO did not rely upon the administration fees in any of its reports. It also argued that I was foreclosed from varying my previous order because plaintiffs had closed their case, and I was functus officio , having rendered a final decision on September 13, 2011.

[ 56 ] I reject these arguments. The fact that one party does not rely upon information in its expert’s report does not obviate a duty to disclose the information if the evidence is relevant to the issues in the case. In this regard, I am in agreement with Ferguson J. who concluded that production be restricted to documents which formed the basis of an expert’s opinion for the reasons that he explains in Browne v. Lavery , (2002) 2002 49411 (ON SC) , 58 O.R. (3d) 49 (S.J.C.) at paragraph 53 et seq.

[ 57 ] It would also be highly unfair to have allowed CBO to carry out its analysis of RLRS’s administration fees, presumably for the purpose of attempting to use it to support its conclusions, and thereafter to deny providing the same information to the plaintiffs because the expert did not rely on the information in the final analysis. Indeed, CBO’s decision not to rely on the evidence suggests that it may be useful to Envoy’s case. I point out that we are not discussing privileged information in these circumstances.

[ 58 ] Again, I adopt the principles enunciated by Ferguson J. in Browne starting at paragraph 22 regarding the “fairness test” as discussed by Wigmore, (Wigmore on Evidence, vol. 8 (McNaughton rev., 1961)) note 28, at para. 2327, at pp. 635-36 and cited in Hunter v. Rogers (1981), 1981 710 (BC SC) , 34 B.C.L.R. 206, [1982] 2 W.W.R. 189 (S.C.) and the cases that follow.

[ 59 ] With respect to the plaintiffs having closed their case, or my being functus officio , I do not believe that either submission can be sustained on matters of evidence when the evidence at trial has not been completed and no final judgment has issued.

[ 60 ] In any event, it is my understanding that motions to vary are generally intended to provide exceptions to the finality rules. It makes sense that an order should be modified if new information comes to light that, had it been known, would have affected the outcome. This is particularly the case where the failure to bring the information forward was not the fault of the moving party; see Lamond v. Smith (2004), 2004 5855 (ON SC) , 72 O.R. (3d) 119 (S.C.J.) where the court on its own motion set aside an order on the basis that it had materially incomplete material before it.

[ 61 ] Nor do I think that plaintiffs’ failure to seek a variance of my order upon disclosure of the reconciliation report obtained on May 26, 2012 can be used against them. The plaintiffs may well have thought at this late stage of the trial that, in the face of my order, it would serve no purpose to attempt to re-open this issue.

[ 62 ] It is my view, trial judges have discretion to reopen issues if necessary in the interests of justice and where their previous orders or rulings can be varied without causing prejudice to the parties. I would think that this discretion applies particularly to the conduct of civil non‑jury trials, where trial judges are readily able to discount evidence in rendering their decisions to minimize prejudice.

[ 63 ] In support of this point, I note that the defendant provided no case where a trial judge was prevented from modifying an order or ruling made earlier in a trial. In addition, the defendant advanced no argument that it would be prejudiced by the late disclosure of RLRS’ administration fees.

[ 64 ] In order to attenuate any possible prejudice from my decision to vary my previous order, I indicated to the parties during argument that they would be at liberty to recall witnesses to deal with the new evidence. This new evidence, should be noted, consists of two numbers and the mathematical revenue calculations that can be made using those numbers. The additional costs and time involved in recalling witnesses would be minimal in comparison with the significant monetary claims that are disputed in this litigation.

[ 65 ] In summary, I conclude that the requirements of Rule 59.06(2)(a) have been made out requiring me to vary my order of September 13, 2011 to provide for the limited disclosure of RLRS’ 2004 administration fees requested by the plaintiffs. The order is warranted on the basis of “facts arising or discovered after it was made”.

[ 66 ] The costs of this motion will be addressed in conjunction with those to be decided at the conclusion of trial.

Order

[ 67 ] The terms of my formal order are as follows:

1. The plaintiffs are granted their motion and the defendant shall disclose the administrative fee per file charged by Royal Lepage Relocation Services (“RLRS”) under the 2004 IRP contracts.

2. The disclosure of the administrative fee per file charged by RLRS shall be made to Justice Annis, Ron Lunau (counsel for the plaintiffs) and Michel Hebert (Navigant Consulting Inc.).

3. The defendant shall produce forthwith to Justice Annis, Mr. Lunau and Mr. Hebert a complete and un-redacted copy of the document entitled “Reconciliation of Revenue for Report”, identified as Exhibit I to the Affidavit of J. Katsuno, plaintiffs’ Motion Record, Tab 2-I.

4. At a future date to be determined the parties will be entitled to further examinations of Mr. Bruce Brooks with respect to the information produced pursuant to this Order. If they are unable to reach an agreement, the parties will appear before me to determine the schedule.

5. Costs of this motion shall be determined at the conclusion of trial.

[ 68 ] In addition, now having cognizance of RLRS’ 2004 administration fees, I conclude that they ought to be divulged in my trial reasons, as may be necessary. Should the defendant or Brookfield wish to bring a motion seeking to maintain the confidentiality of this information, they should proceed by way of motion filed within 30 days of the date of these reasons.

[ 69 ] If a motion is necessary, the parties should communicate with the trial coordinator to fix a date that will accommodate the parties and the court.

Mr. Justice Peter Annis

Released: July 20, 2012

ONSC 4262
COURT FILE NO.: 07-CV-37522
DATE: 2012/07/20

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ENVOY RELOCATION SERVICES INC., and NATIONAL RELOCATION SERVICES (RELONAT) INC. (as contractual joint venture called Envoy Relocation Services) Plaintiffs – and – THE ATTORNEY GENERAL OF CANADA Defendant REASONS FOR DECISION TO VARY THE PRODUCTION ORDER DATED SEPTEMBER 13, 2011 Annis J.

Released: July 20, 2012