COURT FILE NO.: CV-09-12829CM
MOTION HEARD: 20120615
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Strathan Corporation, Plaintiff
AND:
Chromeshield Co., Chromecraft Corporation and FNG Corporation, Defendants
BEFORE: Master Lou Ann M. Pope
COUNSEL: Anita Landry, for the Plaintiff
Celina S. Devuono, for the Defendants
HEARD: June 15, 2012
REASONS FOR ENDORSEMENT
[1] This refusals and undertakings motion, brought by the plaintiff, arises out of the cross-examinations of two deponents on the plaintiff’s pending partial summary judgment motion. The plaintiff seeks an order striking out the affidavits of Tony Pelle and Devin Norris or, in the alternative, orders to compel them to produce documents improperly refused, to answer questions improperly refused, to make inquiries, and to attend for further cross-examinations.
Background
[2] This action involves a commercial lease between the defendant, Chromeshield Co. (“Chromeshield”), as tenant, and the plaintiff respecting property in Windsor, Ontario where Chromeshield operated a chrome plating business.
[3] The lease was for a 10-year term commencing on or about July 29, 1998.
[4] The other defendants, Chromecraft Corporation (“Chromecraft”) and FNG Corporation (“FNG”), guaranteed all obligations of Chromeshield under the lease for the first 10-year term.
[5] The subject lease was assigned to the plaintiff in 2002 when the plaintiff purchased the premises from its predecessor in title (“first landlord”).
[6] In May 2008, Chromeshield exercised its option to renew the lease for a further 10-year term. Therefore, as of July 31, 2008, and pursuant to the terms of the lease, Chromecraft and FNG were released from their obligations under the lease. As such, the plaintiff contends that the only remaining security for the lease was the fixtures as evidenced by a term of the lease which provides that the “[t]enant may remove its fixtures so long as all rent and other sums due or to become due hereunder are fully paid . . . .”
[7] The plaintiff contends that in June 2008, on inspection, it discovered environmental, repair, maintenance, damage and encroachment issues on the premises, as well as equipment and fixtures having been removed from the premises.
[8] In December 2008, some seven months after Chromeshield exercised its option to renew the lease, it idled all business operations. Chromeshield contends that during the idling period, it undertook a complete restoration of the interior and exterior of the leased premises. Almost two years later, in November 2010, Chromeshield surrendered the premises to the plaintiff. The plaintiff contends that during the idling period, Chromeshield stripped the building of all of its fixtures and equipment under the guise of rehabilitation and cleanup to attract new business.
[9] The plaintiff commenced this action in 2009, following the idling of Chromeshield’s operations, but before Chromeshield surrendered the premises. The plaintiff also brought a motion for partial summary judgment prior to Chromeshield surrendering the premises. The plaintiff has not proceeded with that motion however it has not been withdrawn. After the premises were surrendered in November 2010, the plaintiff brought a second motion for partial summary judgment for rent and related arrears and thereafter amended its statement of claim to, inter alia, add relief based on breach of lease and damages for unpaid rent and other related expenses. In this second motion, cross-examinations on the affidavits were conducted which has given rise to this refusals motion.
[10] Examinations for discovery have not been held.
Plaintiff’s Motion for Partial Summary Judgment
[11] In the motion for partial summary judgment the plaintiff seeks judgment for rent and related arrears for the periods August 1, 2010 to August 3, 2011, and September 1, 2011 to February 2012. In support, the plaintiff relies on affidavits sworn by Christine Davison (“Davison”), sworn September 30, 2010 and August 3, 2011. Davison is the President of Strathan Corporation.
[12] In response, the defendants filed affidavits sworn by Tony Pelle (“Pelle”) and Devin Norris (“Norris”).
[13] Pelle was Chromeshield’s plant manager and eventually the general manager of the plant from 1998 to November 2008, in or about the time Chromeshield idled its operations. His affidavit contains statements that relate to such issues as the condition of the property both during the term of the lease and when the premises were surrendered, Chromeshield’s maintenance of the premises and restoration, Chromeshield’s response to the plaintiff’s environmental concerns, and the plaintiff’s lack of mitigation efforts to either sell or lease the subject property.
[14] Norris was Chromeshield’s financial controller and the group controller with the Flex-N-Gate group of companies. He assisted Chromeshield in its idling efforts commencing in 2008. His affidavit contains statements that relate to payment of property taxes, property tax credit issues, rent payments, and the plaintiff’s lack of mitigation efforts to either sell or lease the subject property.
[15] The plaintiff cross-examined both Norris and Pelle.
This Refusals and Undertakings Motion
[16] The plaintiff contends that the documentary production requested and the questions asked of Pelle and Norris arose directly from their affidavits. Further, they are relevant to the issues to be determined by the court on the motion for partial summary judgment for rent and related arrears, including corporate liability, removal of equipment, breach of lease, the condition of the premises, damages and mitigation. It is further submitted that it would be unjust for the plaintiff to be forced to proceed to the hearing of the motion without the subject documents and answers.
[17] The defendants oppose the motion on the grounds that the documents requested and the questions asked did not arise from the affidavits of Pelle and Norris and were not relevant to the issues on the motion for partial summary judgment for rent arrears. Further, numerous answers were given by Pelle and Norris to the effect that they did not have knowledge, information and/or belief, which were accepted by plaintiff’s counsel; therefore, they should not be required to provide additional answers.
[18] The plaintiff grouped the issues on this motion, as set out in the Refusals and Undertakings Chart, as follows:
a) Firsthand knowledge;
b) Corporate liability;
c) Removal of fixtures and equipment.
Rules of Civil Procedure
[19] Rule 39.02(1) provides that:
A party to a motion or application who has served every affidavit on which the party intends to rely and has completed all examinations under rule 39.03 may cross-examine the deponent of any affidavit served by a party who is adverse in interest on the motion or application.
[20] Rule 39.01(4) states that:
An affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit.
[21] Rule 34.15(1) states as follows:
Where a person fails to attend at the time and place fixed for an examination in the notice of examination or summons to witness or at the time and placed agreed on by the parties, or refuses to take an oath or make an affirmation, to answer any proper question, to produce a document or thing that he or she is required to produce or to comply with an order under rule 34.14, the court may,
(a) where an objection to a question is held to be improper, order or permit the person being examined to reattend at his or her own expense and answer the question, in which case the person shall also answer any proper questions arising from the answer;
(b) where the person is a party or, on an examination for discovery, a person examined on behalf or in place of a party, dismiss the party’s proceeding or strike out the party’s defence;
(c) strike out all or part of the person’s evidence, including any affidavit made by the person; and
(d) make such other order as is just.
[22] The plaintiff relies on subrule 34.15(1)(c) and seeks an order that all or part of the affidavits of Pelle and Norris be struck on the grounds that they failed to answer proper questions and failed to produce relevant documents. In the alternative, they should be ordered to reattend and answer the improperly refused questions and to answer any proper questions arising from the answers. The plaintiff further requests that if the deponents are to be re-examined, and because of the lack of knowledge on the part of the deponents, the court should order Pelle and Norris to make themselves knowledgeable of the answers to the questions as well as the answers to the questions that might reasonably arise from their answers.
Case Law
[23] The recent ruling by Perell J. in Ontario v. Rothmans Inc., 2011 ONSC 2504, 2011 CarswellOnt 2916 (SCJ) (“Rothmans”), is the leading case relating to cross-examinations as developed by the case law.
[24] In determining the issue of proper questions for a cross-examination on an affidavit, Perell J. held as follows at para. 142:
Case law has determined what are proper questions for a cross-examination on an affidavit. Once again, relevancy is a key determinant of a proper question, and relevancy is determined by reference to the matters in issue in the motion in respect of which the affidavit has been filed and by the matters put in issue by the deponent’s statements in the affidavit.
[25] Perell J., at para. 143, summarized the case law and set out the principles regarding the scope of cross-examination of a deponent for an application or motion:
• The scope of a cross-examination of a deponent for an application or motion is narrower than an examination for discovery;
• A cross-examination is not a substitute for examinations for discovery or for the production of documents available under the Rules of Civil Procedure;
• The examining party may not ask questions on issues that go beyond the scope of the cross-examination for the application or motion;
• The questions must be relevant to: (a) the issues on the particular application or motion; (b) the matters raised in the affidavit by the deponent, even if those issues are irrelevant to the application or motion; or (c) the credibility and reliability of the deponent’s evidence;
• If a matter is raised in, or put in issue by the deponent in his or her affidavit, the opposite party is entitled to cross-examine on the matter even if it is irrelevant and immaterial to the motion before the court;
• The proper scope of the cross-examination of a deponent for an application or motion will vary depending upon the nature of the application or motion;
• A question asked on a cross-examination for an application or motion must be a fair question;
• The test for relevancy is whether the question has a semblance of relevancy;[^1]
• The scope of cross-examination in respect of credibility does not extend to a cross-examination to impeach the character of the deponent;
• The deponent for an application or motion may be asked relevant questions that involve an undertaking to obtain information, and the court will compel the question to be answered if the information is readily available or it is not unduly onerous to obtain the information;
• The deponent for a motion or application who deposes on information and belief may be compelled to inform himself or herself about the matters deposed.
[26] I would also add to the above principles that the rule on proportionality is applicable to cross-examinations on an affidavit on a motion. As such, rule 29.2.03(1) requires that in making a determination as to whether a party or other person must answer a question or produce a document, the court shall consider the factors enumerated in that subrule.
(a) Firsthand Knowledge
[27] Pelle stated in paragraph 3 of his affidavit that in his capacity as Chromeshield’s plant manager and eventually its general manager, he had personal knowledge of the factual matters to which he swore in his affidavit and that where he obtained information from third parties, he identified those parties and that he verily believed such information to be true. He identified a third party source two times in his affidavit at paragraphs 20 and 26.
[28] Norris made similar statements in paragraph 3 of his affidavit regarding his personal knowledge of the facts set out in his affidavit in his capacity as Chromeshield’s controller.
[29] This group of questions was refused on the basis that the deponents gave their answers which were accepted by the plaintiff and no request was made in the form of undertakings for the deponents to make inquiries.
[30] The plaintiff’s position is that plaintiff’s counsel did not request undertakings where the deponents claimed a lack of knowledge because he considered Norris’ answers to be refusals given the number of times his answers were “I don’t know.” The plaintiff contends that defence counsel made a blanket refusal on the record to that effect. It is further contended that at questions 57 to 59 of Norris’ transcript, plaintiff’s counsel intended to have the refusals and answers put on the record for the purposes of this motion and that at no time during either examination did plaintiff’s counsel accept the lack of knowledge or refusals.
[31] Firstly, I do not accept that defence counsel made a blanket refusal on the record of Norris’ examination. I find no such statements by defence counsel. Questions 57 to 59, and question 22, relate solely to Timothy Graham’s position with Ventra and, in my view, the comments by defence counsel do not constitute a blanket refusal. Further, I have not found or been directed to any question or statement in the transcript of Norris’ examination that plaintiff’s counsel indicated on the record that he would consider Norris’ answers, where he claimed a lack of knowledge, as refusals and that he intended to bring a motion.
[32] In my view, the line of questioning regarding the relationship between the related companies was proper as it was raised by both deponents in their respective affidavits. Additionally, those questions were relevant in order for the plaintiff to ascertain the controlling mind of Chromeshield.
[33] It is noteworthy that neither deponent acted as legal counsel for any of those companies such that they would not likely have had knowledge of the legal relationships. It is conceivable that neither deponent in their respective positions would have personal knowledge of the answers to that line of questioning. Further, in my view, neither deponent’s answers were evasive or untruthful.
[34] The defendants were not required to produce a representative of the defendant corporations who had knowledge and information regarding all of the issues in dispute as would be required for examinations for discovery. The plaintiff elected not to conduct examinations for discovery prior to bringing its partial summary judgment motion. In response to that motion, the defendants filed the two subject affidavits. It is a guiding principle that the scope of a cross-examination of a deponent for an application or motion is narrower than on examination for discovery.
[35] As such, plaintiff’s counsel was at liberty to ask Norris for undertakings to advise of the answers; however, he did not do so. As a result, Norris is not required to answer those questions and the plaintiff’s motion is dismissed regarding those questions as set out in the Refusals and Undertakings Chart in the column entitled “Disposition by the Court.”
[36] For the above reasons, Norris is not required to reattend to answer the following questions and the motion is dismissed with respect thereto. To be clear, these questions do not have to be answered by Norris because he gave a proper answer and he was not asked for an undertaking to advise of the answer.
Norris’ Refusal Chart: Q. 5, 10, 11, 19, 20, 21, 22, 23, 24, 25-26, 30, 160 (improperly numbered as 35), 51, 56-57, 58-59, 66, 68, 70-71, 79, 80, 81-82, 89-90, 91, 92, 105, 113, 132-133, 140, 141, 151, 154, 157, 158, 161 and 163.
[37] On the other hand, in the transcript of Pelle’s examination, defence counsel made numerous blanket refusals to questions and plaintiff’s counsel did in fact put on the record numerous times that he intended on bringing a motion to determine whether the refusals were proper. Therefore, I must consider whether the questions were proper, whether the refusals given were proper and whether the questions must be answered.
[38] Pelle is not required to answer the following questions:
Pelle’s Refusal Chart: Q. 79, 80-81, 82, 84, 86, 88, 97-99, 100, 102, 106, 107, 125 (see reasons below), 145, 147, 148, 149, 156-157, 185, 256, 257 and 336.
[39] To be clear, although the plaintiff categorized the above questions as ones where the deponent is supposed to have firsthand knowledge of the matter, many of them are not required to be answered as the questions are not relevant. This is indicated on the Refusals and Undertakings Chart. For example, regarding the line of questioning about how the deponent’s affidavit was prepared, in my view these questions are not relevant to the issues on the motion. The deponent swore to the truth of the facts as set out in the affidavit and that he had knowledge of the facts as set out. I am not aware, nor have I been directed to any requirement, that a deponent must swear to who actually wrote the words or who drafted the affidavit.
Questions 108 to 111:
[40] Pelle shall answer questions 108 to 111. Firstly, Pelle raised this issue in his affidavit. He specifically stated the following in paragraph 18: “Under the lease, I knew that . . .” He did not say that it was “his understanding” that the lease required the tenant to do certain work. He was specific in his statement. Further, at question 107, Pelle stated: “I didn’t read the whole lease, but I’ve read the lease.”
Question 125:
[41] Pelle is not required to answer this question because it is not a fair question. It was not fair to ask Pelle whether he believed Mr. Egan’s statement in paragraph b of the Estoppel Certificate was accurate given that Pelle was unfamiliar with the document. Secondly, in attempting to answer, he would have to interpret the legal meaning of paragraph b, in particular, “improvements and space required to be furnished according to the lease have been completed in all respects.” Further, he is not required to answer questions regarding representations made by another person that were made in a document to which he was not a party.
(b) Corporate Liability
[42] The plaintiff argues that the questions under this category relate to the “group of companies” referred to in both affidavits and who is in charge.
[43] This group of questions was refused, in the most part, because they were not relevant.
[44] As stated earlier, it is my view that the line of questioning regarding the relationship between the companies was proper because, firstly, it was raised by both deponents in their respective affidavits. Secondly, the questions regarding the relationship between those companies are relevant in order for the plaintiff to ascertain the controlling mind of Chromeshield.
[45] The following questions, as identified by the plaintiff, relate to the issue of corporate liability.
Norris’ Refusal Chart: Q. 5, 10, 11, 19, 20, 21, 22, 23, 24, 25-26, 30, 37, 38, 51, 56-57, 58-59, 66, 35, 151, 160, 163
[46] Except for questions 37 and 38, the above questions are the same questions as listed under the subheading “Firsthand Knowledge.” For reasons set out above under the subheading “Firsthand Knowledge,” I ruled that Norris was not required to answer any of those questions. Therefore, I will deal only with the remaining questions numbers 37 and 38.
Questions 37 and 38:
[47] Norris gave a proper answer to question 37. Question 38 is not relevant to any of the issues on the motion for partial summary judgment for rent and related arrears. This is the same line of questioning the plaintiff posed to Pelle and for the same reasons, the motion is dismissed.
Pelle’s Refusal Chart: Q. 75, 76, 77, 248, 318, 384, 385, 386, 390
Questions 75, 76, 77:
[48] Pelle shall answer these questions. The questions are relevant in order for the plaintiff to understand the corporate structure, as deposed to by both Pelle and Norris in the initial paragraphs of their affidavits. Further, Pelle stated in paragraph 20 of his affidavit that in October 2008 “his boss” was Nick Sleiman, “who is Flex-N-Gate group’s Vice-President of Manufacturing – Metals.” However, in answer to question 73, he stated that sometime between 2005 and December 2008 when the facility closed, Chromeshield brought in a director. Given the statements made in his affidavit and the answers to earlier questions, these questions are relevant.
Question 248:
[49] Pelle is not required to answer this question as it is not a fair question. Pelle’s answer to question 247 was that he was not sure if the alarm system had been deactivated. He states that it might have been as the company had a contract with a monitoring service and he assumed that the service was no longer there. Given those answers, it was not a fair question to ask as to whose decision it was to deactivate it.
Questions 383 to 386 and 390:
[50] These questions are not relevant. What is relevant is what the plan was and what was done.
(c) Removal of Equipment and Fixtures
[51] Most of the remaining questions relate to the equipment and fixtures, in particular, those that were removed, where they went, and who ordered the removal. The plaintiff submits that this information is relevant to the issues. Chromeshield refused to answer these questions based on lack of relevancy.
[52] In determining this issue, I considered the pleadings. Additionally, I considered clause 10.02 of the lease which provides that the tenant “may remove its fixtures so long as all rents are fully paid . . . “ (Article X – Additions, Alterations, Fixtures, Clause 10.02 Fixtures), and the Asset Purchase Agreement dated July 22, 2998 between the first landlord and Chromeshield, in particular, Schedule 3 – Fixed Assets and Equipment.
[53] The plaintiff contends that Chromeshield is in arrears of rent and related expenses, presumably, property taxes, and that certain assets, which were situated on the subject premises when Chromeshield vacated the property, were removed by Chromeshield. (Article X – Additions, Alterations, Fixtures, Clause 10.02 Fixtures) On the other hand, Chromeshield’s position is that it owned all equipment in the leased premises, including heating and cooling equipment attached to the exterior of the building, and it denies being in breach of any of the provisions of the lease, including rent. However, Chromeshield admits to removing various equipment and fixtures between the fall of 2009 and late summer of 2010 and that the plaintiff was aware of that activity. (Amended Statement of Defence, paragraph 53.)
[54] It is my view that the issue of ownership of equipment and fixtures that were located on the premises prior to Chromeshield vacating the premises, and whether any of those items form security for any rent or related arrears are relevant issues on the partial summary judgment motion. Further, Pelle raised the issue of removal of trade fixtures and equipment in his affidavit, at paragraphs 35 and 56; therefore, the plaintiff is entitled to question him on those statements. For the reasons above, it is my view that questions relating to specific equipment and fixtures that were removed from the premises by Chromeshield are relevant and are required to be answered.
[55] On the other hand, questions about where the items went after they were removed and who ordered the removal are not relevant to the issues on the motion and do not have to be answered. Answers to those questions will not assist the motions judge in making findings regarding what was owing, if anything, for rent arrears and other related arrears and the issue of security for the rent.
Norris’ Refusal Chart: I made previous rulings on all questions on Norris’ chart relating to the issue of equipment except question 137.
Question 137:
[56] Plaintiff’s counsel requested production of all documents that Norris has relating to “anything that was transferred out of the plant from the point of time that it was idled in December of 2008 to the time the lease . . . was surrendered,” including sale documents, invoices, bills of lading, “that evidences what was removed from the plant and where it went to.” This question is somewhat broad. The rules of civil procedure regarding proportionality must be considered in the context of this request.
[57] Based on my ruling above, Norris is not required to answer questions regarding where items went. However, he shall produce documents relating to assets and fixtures that were transferred out of the plant. It is reasonable to assume that Pelle has access to the documents requested given his former position as controller. Notwithstanding that order, the plaintiff’s request is too broad and must be narrowed to only the relevant equipment and fixtures. It seems reasonable that, and my order is that Norris produce all documents that evidence what assets, equipment and fixtures were transferred out of the plant that, at a minimum, relate to the items listed in Schedule 3 – Fixed Assets and Equipment of the Asset Purchase Agreement, and Chromeshield’s trade fixtures and equipment, as referenced in paragraph 35 of Pelle’s affidavit.[^2]
[58] I am prepared to hear further argument on what items Chromeshield is required to produce arising out of question 137, in addition to the documents ordered above, given that counsel on this refusals motion did not specifically address this issue not knowing what my order would be. If the parties are unable to resolve this issue, counsel may arrange a date for the continuation of this motion to make submissions on this issue.
Pelle’s Refusal Chart: I made previous rulings on the following questions on Pelle’s chart under this heading: 125, 145, 147, 148, 248, 256, 257, 318, 384, 385, 386, 390.
Question 333:
[59] Chromeshield claims litigation privilege over the Environ report. It claims that the report was obtained in response to this action being commenced on April 21, 2009. The Environ invoice is dated November 30, 2010. However, Pelle attached the invoice from Environ as one of several documents marked as Exhibit “F” to his affidavit. He attached it as evidence of daily activities he directed of Chromeshield’s contractors in performing restoration work, including environmental work in the summer of 2010.
[60] The evidence is that Chromeshield “suffered a catastrophic loss of business due to the general downturn in the automotive industry,” (Affidavit of Pelle, para. 20) and as a result Chromeshield suspended operations and used that time to do restoration work. (Affidavit of Pelle, paras. 21-22.)
[61] Chromeshield relied on no authority in law in support of its position on litigation privilege. Other than the fact that the Environ report post-dated the commencement of this litigation, Chromeshield has not met its onus to satisfy this court that the Environ report was prepared in contemplation of this litigation.
[62] Therefore, the Environ report shall be produced by Pelle.
Question 374:
[63] Pelle answered question 367 that there was no written plan. As such, the refusal to question 374 was proper.
Whether to strike the affidavits?
[64] The plaintiff relied on no case law in support of its position that the affidavits be struck.
[65] In my view, the evidence of both Norris and Pelle were appropriate in responding to the plaintiff’s motion. As stated earlier, the defendants are not required to produce a representative of the defendant corporation who had knowledge and information regarding all of the issues in dispute as would be required for examinations for discovery. I conclude that there are insufficient grounds to strike the affidavits of Norris and Pelle.
Conclusion
[66] The completed Refusals and Undertakings Charts are attached hereto.
[67] Norris and Pelle shall reattend for cross-examinations at their own expense and answer the questions as set out in the above Charts and any proper questions arising from the answers.
Costs
[68] Given the divided result, there shall be no order as to costs.
“Original signed by “Master Lou Ann M. Pope”
Master Lou Ann M. Pope
Case Management Master
Date: September 14, 2012
[^1]: In view of the recent amendments to the Rules, it is accepted that the test for relevancy is no longer “semblance of relevance” but rather relevance. I concur with the approach taken by Master Haberman in Romspen Investment Corporation v. Woods et al., 2010 CarswellOnt 4008, 2010 ONSC 30005, at para. 16, where she states: “At the end of the day, regardless of whether the test is relevance or semblance thereof, the approach comes down to this: subject to privilege, if the questions asked could elicit a response that the trial judge could rely on to resolve a matter in issue before him, the test has been met – the question asked is relevant.”
[^2]: Although I have referenced Pelle’s affidavit here, I make this order as against Norris because these are issues relevant on the motion for partial summary judgment.