SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-10-398634
DATE: 20121011

RE: A.G.C. Mechanical Structural Security Inc. v. Rizzo et al.

BEFORE: Master Glustein

COUNSEL:
Sean Dewart for the plaintiff
Jay Skukowski for the defendants

HEARD: October 4, 2012

REASONS FOR DECISION

Nature of motion and overview

[1] The plaintiff A.G.C. Mechanical Structural Security Inc. (“ AGC ”) brings this motion (the “Leave Motion”) under Rule 48.04(1) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “ Rules ”) for (i) an order that AGC’s litigation counsel [1] can file his affidavit on the Leave Motion and (ii) an order vacating the Solicitor’s Certificate of Trial Record dated April 27, 2012 (the “Trial Certificate”) [2] or for leave to continue a motion seeking “an order for directions with respect to matters regarding production and discovery” initially returnable March 28, 2012 (the “Production Motion”).

[2] Counsel for the defendants Aldo Rizzo (“Rizzo”), Appledale Property Management Inc. and Frank Giannone (collectively, the “defendants”) did not oppose an order that AGC’s litigation counsel could file his affidavit on the Leave Motion, as the affidavit was not being filed pursuant to Rule 39.02 as a supplemental affidavit for the Production Motion, but rather was filed as evidence for the Leave Motion. Consequently, the only issue before me on this Leave Motion is whether the court ought to vacate the Trial Certificate [3] or grant leave to AGC to continue the Production Motion.

[3] On March 28, 2012, I adjourned the Production Motion to June 26, 2012, to permit (i) cross-examinations on the affidavits by April 30, 2012 and (ii) a motion on refusals and undertakings from cross-examinations to be heard by me on May 16, 2012. On April 17, 2012, prior to the return of the Production Motion, AGC’s litigation counsel received a status notice dated March 26, 2012 (the “Status Notice”). The Status Notice advised that the action would be dismissed within 90 days of service of the Status Notice unless, inter alia , “the action is set down for trial” or “a judge or case management master orders otherwise”.

[4] AGC’s litigation counsel did not request a status hearing to obtain an order of the court for a timetable. Instead, AGC’s litigation counsel served and filed a trial record on May 3, 2012 and as such set the action down for trial pursuant to Rules 48.01 to 48.03. AGC’s litigation counsel also signed the Trial Certificate.

[5] In their factum delivered on June 20, 2012, prior to the scheduled June 26, 2012 return of the Production Motion, the defendants opposed the continuation of the Production Motion on the basis that AGC had not obtained (and should not be granted) leave under Rule 48.04(1) . I then adjourned the Production Motion to a date to be set by the court so that I could hear the Leave Motion on July 25, 2012 in which AGC sought (i) leave to file an affidavit from AGC’s litigation counsel under Rule 39.02 [4] and (ii) to vacate the Trial Certificate. On July 25, 2012, I adjourned the hearing of the Leave Motion to October 4, 2012 as AGC’s litigation counsel retained LawPRO counsel to act on the Leave Motion.

[6] For the reasons discussed below, I dismiss AGC’s motion to vacate the Trial Certificate [5] or for leave to continue the Production Motion. The filing of a trial record is a significant step in an action and signifies that a party is prepared to go to trial. Consistent recent case law establishes that a plaintiff can only initiate or continue discovery or bring discovery motions after a plaintiff sets the action down for trial [6] if there is a substantial or unexpected [7] change in circumstances such that it would be just to do so. That case law supports the conclusion that motions seeking documentary or oral discovery are “routine interlocutory matters” that do not affect substantive rights of the parties.

[7] At the hearing, AGC’s motion counsel acknowledged that there is no substantial or unexpected change in circumstances resulting in the need to bring the Production Motion. The evidence supports such an acknowledgment. In particular, at the time AGC’s litigation counsel set the action down for trial by filing the trial record on May 3, 2012, I had already adjourned the Production Motion [8] to a return date after the scheduled completion of cross-examinations and a motion on refusals and undertakings arising from the cross-examinations. Consequently, there could not have been any change in circumstances requiring a production motion, let alone a substantial or unexpected change in circumstances.

Evidence at the Leave Motion

[8] The evidence before the court at the Leave Motion consisted of (i) an affidavit sworn on July 13, 2012 by AGC’s litigation counsel and (ii) an affidavit sworn on July 19, 2012 by an associate lawyer with counsel for the defendants. There were no cross-examinations on the affidavits.

[9] Much of the evidence related to each party’s view of the history of the litigation and attributing blame for delay. Since I find that the Production Motion was an interlocutory proceeding governed by the “substantial or unexpected change in circumstances” test, the litigation history prior to the Production Motion is not relevant to these reasons.

[10] The relevant evidence on the Leave Motion can be summarized as follows [9] :

(a) AGC alleges that it carries on a mortgage recovery business. The action arises from events prior and subsequent to AGC terminating Rizzo. In particular, AGC alleges that “Rizzo had a fiduciary duty to [AGC] and breached that duty by disclosing confidential information to the co-defendants, which information has been used in the development of the business of the corporate Defendant”;

(b) In the notice of motion in support of the Production Motion, AGC sought “directions with respect to matters regarding documentary production and discovery”. In particular, the Production Motion was brought since “the parties are jointly seeking directions with respect to the matter of documentary production, disclosure and protection”;

(c) The Production Motion was returnable on March 28, 2012. At that time, the defendants sought and I granted an adjournment “in order to conduct cross examinations of the parties on their Affidavits”. I ordered that the Production Motion be adjourned to June 26, 2012 before me under a timetable providing (i) “Cross-examinations to be completed by April 30, 2012”; and (ii) “Motion on refusals and undertakings from cross-examinations to be heard by me on May 16, 2012”;

(d) Cross-examinations took place on April 16 and 18, 2012;

(e) On or about April 17, 2012, AGC’s litigation counsel received a Status Notice dated March 26, 2012 (previously defined as the “Status Notice”). The Status Notice provided that the action would be dismissed within 90 days of service of the Status Notice unless, inter alia , “the action is set down for trial” or “a judge or case management master orders otherwise”;

(f) AGC’s litigation counsel states that “I have received such Notices in the past. I cannot recall a single situation, before this case, where discoveries had not been completed at the time that a Status Notice was delivered”;

(g) AGC’s litigation counsel states that “When I received the Status Notice, my sole concern was to ensure that this action would not be dismissed for delay”, and that “I chose to set the matter down for Trial on this basis”;

(h) AGC’s counsel signed the Trial Certificate on April 27, 2012. AGC’s litigation counsel “prepared and served a Trial Record which was served and filed on or about May 3, 2012”;

(i) On June 20, 2012, the defendants served AGC with their factum for the Production Motion scheduled for June 26, 2012. In their factum, the defendants raised “an issue regarding the Plaintiff’s entitlement to continue with the production Motion and proceed with discoveries”;

(j) AGC’s litigation counsel states that it was upon receipt of the defendants’ factum that the issue of the effect of his setting down the action for trial “first arose”;

(k) AGC’s litigation counsel acknowledges that he failed to consider the consequences of setting the action down for trial. After receiving the defendants’ June 20, 2012 factum in which they raised the issue that the Production Motion could not continue because AGC’s litigation counsel filed the trial record, AGC’s litigation counsel wrote a letter to the defendants’ counsel on June 21, 2012 [10] in which he stated:

“The simple truth, which I admit with more than a little bit of embarrassment, is that I was inadvertent as to the consequences of setting the matter down at the time that I did. As I believe you are aware, I had received a Status Notice. My response to the Status Notice was to set the matter down. In hindsight, I clearly should have opted instead for a Status Review hearing”;

(l) In his June 21, 2012 letter, AGC’s litigation counsel asked the defendants to “seriously consider withdrawing your objection”;

(m) The defendants did not withdraw their objection. Consequently, on June 26, 2012, I adjourned the Production Motion so that the court could hear the Leave Motion on July 25, 2012 in which AGC sought (i) leave to file an affidavit from AGC’s litigation counsel under Rule 39.02 [11] and (ii) to vacate the Trial Certificate;

(n) On July 25, 2012, I adjourned the hearing of the Production Motion to October 4, 2012 as AGC’s litigation counsel retained LawPRO counsel to act on the Leave Motion;

(o) AGC’s litigation counsel states that “It has never been my intention or the intention of the Plaintiff to opt out of the discovery process”;

(p) AGC’s litigation counsel states that “I believe that the Plaintiff may suffer significant prejudice if the matter proceeds to Trial without there being full production and discovery. Many of the documents necessary to establish and evaluate the Plaintiff’s claims are in the exclusive possession of the Defendants. The pleadings disclose very divergent factual accounts which require assessment through oral discovery. There is no such prejudice to the Defendants since they have always intended to participate in the discovery process”;

(q) AGC’s counsel further states that “The Plaintiff is content to have the Certificate of Trial Record vacated” since (i) “it is not interested in [moving the action forward] without having the opportunity to put its best foot forward before a Trial Judge should the matter go that far”; (ii) “[putting the best foot forward] means obtaining relevant documents and having them reviewed by an expert in order to properly assess its case with respect to liability, causation and damages” and “also means having a further opportunity to examine Frank Giannone who gave very limited evidence at his cross examination and also the opportunity to examine Aldo Rizzo for the very first time”;

(r) Consequently, in his affidavit AGC’s litigation counsel asks the court to (i) “make an Order vacating the Certificate of Trial Record and, instead, either order a timetable or direct this matter to a Status Hearing” or (ii) “Should this Honourable Court not be so inclined, the Plaintiff asks that leave be granted so that the production Motion can be heard (as both parties have always intended) and so that the matter can then proceed to discovery as it would have, but for my having set the matter down for Trial in response to receiving the Status Notice”; and

(s) With respect to the issue of prejudice to the defendants, the defendants’ associate counsel states that (i) “I do verily believe that the Plaintiffs’ delay in moving the matter to discoveries has unfairly compromised the ability of the Defendants to defend this action”; (ii) “I do further verily believe that the Defendants will suffer prejudice should the trial record be vacated, given the Defendants believe this is a claim without merit and should be decided at a trial immediately, and the Plaintiff deliberately, and not inadvertently, set the matter down for trial to avoid dismissal of the action”; and (iii) “I do further verily believe that the Defendant [sic] has [sic] been prejudiced through the unnecessary incursion of costs while attempting to secure dates to discovery”.

Analysis

(a) The applicable law

[11] Rule 48.04(1) mandates that any party who sets an action down for trial or consents to the action being placed on a trial list shall not initiate or continue any motion or form of discovery without leave of the court, subject to specific exceptions under Rule 48.04(2) or (3) which do not apply in the present motion. Rule 48.04(1) provides:

Subject to subrule (3), any party who has set an action down for trial and any party who has consented to the action being placed on a trial list shall not initiate or continue any motion or form of discovery without leave of the court.

[12] AGC submits that the overarching principle the court should apply on a motion for leave under Rule 48.04(1) [12] is that a party ought not to be “punished” for mistakes in the conduct of litigation. AGC relies on the decision of Borins J. (as he then was) in Gloucester Organization Inc. v. Canadian Newsletter Managers Inc. , 1995 CarswellOnt 142 (Gen. Div.) (“ Gloucester ”) , in which Borins J. granted leave to the plaintiff to amend the statement of claim after the plaintiff set the action down for trial.

[13] In Gloucester , Borins J. adopted the following passage set out in Cropper v. Smith (1884), 26 Ch. D. 700 (C.A.) at 710-11 ( Gloucester , at para. 8):

Now I think it is a well-established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. . . . I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace. . . . It seems to be that as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it corrected, if it can be done without injustice, as anything else in the case is a matter of right.

[14] Borins J. considered Rule 26 permitting an amendment “at any stage of an action” and the well-established case law that permitted pleading amendments even on the eve of trial (see King’s Gate Developments Inc. v. Colangelo (1994), 1994 416 (ON CA) , 17 O.R. (3d) 841 (C.A.) at 844-45 as cited by Borins J. at Gloucester , at paras. 6-7).

[15] Consequently, Borins J. held that “the liberal amendment policy reflected in r. 26.01, when read with r. 1.04(1) and 2.01(1), compels a consideration of different principles in the exercise of judicial discretion when leave is sought under r. 48.04(1) to bring a motion for leave to amend a pleading, than when leave is sought to proceed with a motion for other relief” ( Gloucester , at para. 13).

[16] In Gloucester , Borins J. commented that he was not deciding the approach to be taken on Rule 48.04(1) leave motions which did not involve leave to amend pleadings. He stated ( Gloucester , at para. 9):

Whether the principles discussed in the Kovary [ Kovary v. Heinrich (1974), 1974 784 (ON SC) , 5 O.R. (2d) 365 (H.C.) ] case still apply to the exercise of the discretion contained in rule 48.04(1) in respect to cases other than those concerned with the amendment of pleadings is not before the court on this appeal. All that I believe that it is necessary to say on this subject at this time is that the principles to be considered in respect to the exercise of the discretion contained in rule 48.04(1) will vary and will depend on the nature of the leave requested and the circumstances of the case. However, in my view, as I will explain, different principles than those relied on by the master should be considered on a rule 48.04(1) motion for leave to amend a pleading.

[17] The flexible approach taken by Justice Borins in Gloucester with respect to motions for leave to amend pleadings after an action was set down for trial was adopted by Wilson J. in Tanner v. Clark , [1999] O.J. No. 581 (Gen. Div.) (“ Tanner ”) .

[18] Wilson J. held that each case would depend on its own facts, “depending upon the nature of the leave requested, and the circumstances of the case” ( Tanner , at para. 25).

[19] Wilson J. held that the threshold would depend on whether the issue before the court was (i) a “routine interlocutory matter” or (ii) “serious matters affecting substantive rights”.

[20] The decision in Tanner did not address whether a discovery motion was (i) a “routine interlocutory matter” or (ii) a “serious matter affecting substantive rights”.

[21] After Tanner , a series of recent cases have held that discovery is a procedural matter which requires the “higher threshold” of “substantial or unexpected change in circumstances”.

[22] Master Dash adopted the conclusion of E.M. Macdonald in Hill v. Ortho Pharmaceutical (Canada) Ltd. that the substantial or unexpected change in circumstances test applied to issues of “discovery or other interlocutory proceedings”.

[23] In Van Ginkel v. East Asia Minerals Corp. , 2010 ONSC 905 () , Perell J. refused to grant a plaintiff leave under Rule 48.04(1) to bring a motion to compel answers to undertakings, refusals, and follow-up questions after the plaintiff set the action down for trial.

[24] The decision of Perell J. in Van Ginkel was followed by J.M. Fragomeni J. in Jens Nielsen Custom Contracting Ltd. v. Litwin.

[25] The effect of the above decisions is to characterize discovery as a procedural matter that does not affect substantive rights.

[26] I adopt the following submissions from the defendants’ factum on this issue:

[D]iscovey is a creation of the procedural Rules . It is not an inalienable right, and can be circumscribed, varied, refused or outright denied in an array of circumstances.

[27] Consequently, while examination for discovery may in many cases be an important tool to prepare for trial, a denial of discovery rights either in part or in full does not affect the right to a fair trial and as such does not affect “substantive” rights.

[28] Further, discovery motions are amongst the most routine of interlocutory matters.

[29] Finally, an approach which requires a substantial or unexpected change in circumstances for leave to conduct discovery is consistent with the settled case law that setting an action down for trial is not a mere triviality.

[30] By way of example, courts have said the following:

(a) “The profession must be forcefully reminded that a certificate of readiness means what it says!”

(b) “Time and again the court has reiterated the view that the setting of an action down for trial is a serious step...”

(c) “The case law interpreting rule 48.04(1) establishes that setting a matter down for trial is not a mere technicality...”

[31] AGC relies on earlier decisions in Vallender v. Marbella Boutique Imports Ltd. and York Condominium Corp. No. 202 v. Kuhl.

[32] However, Vallender and Kuhl were decided well before Tanner , White , and Van Ginkel.

[33] AGC’s submission that those decisions mandate that a client not suffer a loss of discovery rights because counsel set the action down for trial is not consistent with the mandatory nature of Rule 48.04(1).

[34] Further, I note that the two recent cases relied upon by AGC that refer to Kuhl can be distinguished on their facts.

[35] In Boivin (Litigation Guardian of) v. Slack the issue was a change of venue.

[36] In any event, in Boivin there is no discussion of the more recent cases.

[37] In MacNeil v. Humber River Regional Hospital the primary issue was whether the plaintiff could amend the statement of claim.

[38] Again there is no discussion of the more recent cases.

[39] Any broader extension of the principle would appear inconsistent with the mandatory nature of Rule 48.04(1).

[40] Consequently, I follow the case law in White , Van Ginkel , and Jens Nielsen , and adopt the test that there must be a substantial or unexpected change in circumstances before a party can seek discovery after setting the action down for trial.

(b) Application of the law to the present motion

[41] AGC’s motion counsel properly acknowledged that there is no substantial or unexpected change in circumstances.

[42] I accept the uncontested evidence that AGC’s litigation counsel did not consider the consequences under Rule 48.04(1) when he set the action down for trial in response to the Status Notice. However, that does not create a substantial or unexpected change in circumstances.

[43] I accept AGC’s uncontested evidence that examinations for discovery would significantly assist AGC’s litigation counsel in preparing for trial.

[44] Similarly, if the defendants produce an expert report, AGC will be able to respond to the report and can seek any documents relevant for its responding expert at that time.

[45] Consequently, I dismiss AGC’s motion to vacate the trial record (and the Trial Certificate) and for leave to bring the Production Motion.

Costs

[46] Both counsel presented costs outlines which were reasonable and consistent.

[47] Given the full success of the defendants, I order AGC to pay costs to the defendants in the amount of $10,246.50, payable within 30 days of the order.

[48] I thank counsel for their thorough submissions which were of great assistance to the court. I also note that their civility to each other and to the court were a model to be followed by those who appear before our courts.

Master Benjamin Glustein

DATE: October 11, 2012