SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 04-B7344
DATE: 20121101

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

VESPRA COUNTRY ESTATES LIMITED Plaintiff – and – 1522491 ONTARIO INC. o/a PINE HILL ESTATES, BRAVAKIS and ASSOCIATES LTD., PETER BRAVAKIS and 981772 ONTARIO INC. o/a HASSEY REALTY CORP. and MICHAEL HASSEY Defendants

Richard P. Quance, for the Plaintiff

Paul J. Daffern, for the Defendants

HEARD: October 30, 2012

RULING ON UNDERTAKINGS MOTION

BOSWELL J.

[ 1 ] Hassey Realty Corp. is a defendant in this action. Its principal is Michael Hassey. Mr. Hassey is also a named defendant. He has been subjected to some five days of discovery examinations during which he has given a number of undertakings. There is disagreement between the parties about whether the undertakings have been answered and whether Mr. Hassey should be compelled to attend for further examinations on questions arising from the answers provided. There are also two questions Mr. Hassey refused to answer that are in dispute.

[ 2 ] This is a case managed proceeding. As case management judge I have heard numerous motions and have conducted numerous case conferences. As part of a ruling on a motion for security for costs heard in the fall of 2011, I set out a brief overview of the action. I will repeat it here to put the undertakings motion into context.

Overview of the Action:

[ 3 ] The Plaintiff developed a parcel of land in the Township of Springwater, north of Barrie. The lands are located near the intersection of Horseshoe Valley Road and Fox Farm Road (the “Intersection”). The Plaintiff sold 27 lots to Pine Hill, but retained the bulk of the lands for itself. The retained lands were approved for an 800 unit subdivision.

[ 4 ] In the course of performing its due diligence in relation to the purchase of the 27 lots, Pine Hill learned that, as a condition of subdivision approval, the County of Simcoe required improvements to be made to the Intersection. The roadworks – and their associated costs – put the purchase of the lots in jeopardy. To save the deal, an amending agreement was entered into between the Plaintiff and Pine Hill which provided for a sharing of the estimated costs of the roadworks. The parties’ initial estimate was about $200,000. Pine Hill’s purchase of the 27 lots was financed, in part, by a vendor take-back mortgage (the “Mortgage”). The parties agreed that the Mortgage would be reduced by $100,000 if Pine Hill completed the required roadworks within 5 months of the date of closing.

[ 5 ] The focus of the litigation is really about what happened after the amending agreement was entered into. There was a significant difference between the roadwork required to accommodate a 27 lot subdivision and the roadwork required to support the 800 unit development. Pine Hill alleges that after the amending agreement was signed, the County of Simcoe imposed additional requirements that would have required Pine Hill to improve the Intersection to the standard required for the 800 unit development. They allege, further, that the County’s position was formed after they received a letter from the Plaintiff’s solicitors wrongly advising that Pine Hill had agreed with the Plaintiff to improve the Intersection to the 800 unit standard.

[ 6 ] Pine Hill commissioned a traffic study and appealed the County’s position to the Ontario Municipal Board. A settlement was reached whereby Pine Hill agreed to do about $400,000 in improvements at the Intersection. The traffic study and appeal delayed the completion of the roadworks and Pine Hill did not meet the 5 month deadline referred to in the Mortgage. The Plaintiff commenced this action, alleging that Pine Hill breached its obligations with respect to the improvement of the Intersection. The Plaintiff further alleged that Pine Hill jeopardized the Plaintiff’s sale of the remaining lands. The Plaintiff claimed a resulting trust in the 27 lots and registered a Certificate of Pending Litigation (“CPL”) on those lots. The Defendants counterclaimed for $2 million in damages they say were occasioned by the improper registration of the CPL and the misrepresentations allegedly made by the Plaintiff to the County regarding Pine Hill’s contractual obligations to improve the Intersection.

[ 7 ] Hassey Realty Corp. was the Plaintiff’s listing broker. The Plaintiff alleges that Mr. Hassey – a director and officer of Hassey Realty Corp. - acquired an undisclosed interest in the Defendant, Pine Hill Estates. The Plaintiff further alleges that Mr. Hassey failed to properly advise the Plaintiffs in the transaction and acted in his own self-interest. They seek damages from Hassey Realty Corp. and Mr. Hassey of $1.5 million for misrepresentation and breach of trust, plus an accounting of all profits made in respect of the subject transaction. They ask that any profits be disgorged.

The Outstanding Undertakings:

[ 8 ] A case conference was held, at counsel’s request, on April 25, 2012 to address timetabling issues. At that time, Mr. Hassey had undertakings outstanding from his original examination for discovery. On consent, I ordered Mr. Hassey to answer his outstanding undertakings by June 1, 2012. No issue was taken about compliance with that Order. A further discovery on any questions arising from the undertakings was to be completed by the end of August, 2012. It was held on August 9, 2012 and during the course of it, additional undertakings were given. In other words, what is before the Court today is an issue about undertakings arising on top of undertakings.

[ 9 ] Counsel for the Plaintiff/moving party provided a helpful schedule of outstanding undertakings and questions taken under advisement. A copy of that schedule is attached hereto as Schedule “A”. The schedule contains a total of 20 undertakings and 3 questions taken under advisement. In due course, counsel for the Defendants advised the Plaintiff’s counsel that the under advisements could be treated as refusals.

[ 10 ] Of the 20 undertakings given on August 9, 2012, 8 are said to be outstanding. With reference to the schedule, the Plaintiff asserts that numbers 2, 8, 9, 10, 11, 12, 16 and 18 remain unanswered. The Defendants reply that all undertakings have been answered in full. Following argument, it was conceded that indeed question 18 had been satisfactorily answered.

[ 11 ] It is unusual for the Court to have to adjudicate on whether or not an undertaking has been answered. It is even more unusual to have two very experienced counsel arguing over undertakings. With all due respect to counsel, this motion was, in my view, taking unfair advantage of the fact that this is a case-managed file. An assigned case management judge should not be a proxy for co-operation and negotiation. Having said that, I have little choice but to review the undertakings one by one and comment on the productions made in answer. I will review them in chronological order, with reference to Schedule “A”.

Number 2

[ 12 ] Mr. Hassey was asked about an invoice from Lafarge to the County of Simcoe that was paid by Pine Hill. The invoice references a summary being attached, but the summary was not there. Mr. Hassey undertook to provide it if it was available. His counsel indicated to the Court that the summary was located and provided during the examination. In any event it appears to have been an invoice from JB Enterprises, rather than Lafarge, and it was provided to the Plaintiff’s counsel in a letter dated September 6, 2012. I am satisfied that this undertaking was answered.

Number 8

[ 13 ] Mr. Hassey was asked to provide a breakdown of the increased costs external to the subdivision in the amount of $337,204.18. In answer to this undertaking, Mr. Hassey has provided a document, under cover letter of October 26, 2012, that provides the following calculation:

External County Road 22 $414,157.18

Paid to County for additional work 29,941.00

Engineering 40,000.00

Fox Farm Road 43,106.00

Paid to township in lieu of tar and chip 10,000.00

Total 537,204.18

Less original contract (200,000.00)

Balance $337,204.18

[ 14 ] The question is whether the breakdown is sufficient to answer the undertaking. The question at discovery was quite general:

Q. 5203: Subparagraph (b) of paragraph three in the answer to the undertaking talks of costs external to the subdivision being increased in the amount of $337,204.18. Do you know where that number comes from?

A. I’ll undertake to give you the breakdown of that.

[ 15 ] In my view, the question was general and the answer was general, but satisfactory.

Number 9

[ 16 ] This undertaking required Mr. Hassey to provide the amended contracts and change orders relating to the increased costs for County Road 22 and Fox Farm Road in the amounts of $414,157.18 and $43,106.00 respectively, as referenced in the breakdown referred to above.

[ 17 ] Mr. Daffern referred the Court to a series of documents that he says answer this undertaking. He might be right. But I do not know enough about the action, nor the nature or particulars of the works done to be able to satisfy myself on the review of a bundle of documents, whether they satisfy this undertaking. While the documents may indeed have been provided in answer to the undertaking, I am going to order Mr. Hassey to reproduce them, but in an organized form and with a cover letter that allows a party reviewing the documents to understand what they are meant to be.

Number 10

[ 18 ] This undertaking required Mr. Hassey to advise what additional work was done with respect to internal costs. I have the same concerns with this undertaking as I did with Number 9. In other words, though the documents may have been provided that satisfactorily answer the undertaking, they are not in a format that allows me to confidently say the undertaking has been answered. They should be reproduced.

Number 11

[ 19 ] Mr. Hassey undertook to advise what additional work was done with respect to a figure of $537,000. The answers to questions 9, 10 and 11 were all included in a bundle of documents provided to the Plaintiff’s counsel under cover letter of October 19, 2012. The letter provides no guidance as to what the documents are or how they relate to the particular undertakings. Again, I have the same problem referenced above in relation to Numbers 9 and 10. These documents must be reproduced in a format that a reader might understand.

Number 12

[ 20 ] In my view, this undertaking is the same as Number 8 and has been answered.

Number 16

[ 21 ] This undertaking required Mr. Hassey to provide particulars of increased carrying costs incurred by Pine Hill Estates. Mr. Hassey has provided some limited material in response to this undertaking. I am not going to parse his material. He is stuck with his answer. The Plaintiff may rely on the evidence he has provided. If it fails to substantiate the claim, then that is the Defendants’ risk heading into trial.

The Under-Advisements:

[ 22 ] There are two under advisements which are being treated as refusals. They essentially ask that Mr. Hassey produce financial documents that would substantiate any profits earned by Pine Hill Estates. Recall that the Plaintiff sues for an accounting and disgorging of such profits.

[ 23 ] The question is clearly relevant. It is not a disproportionate request in my view. The basis on which it was refused is the argument that it is not a question that properly arises from an undertaking previously given. The Plaintiff agrees that it is not a question that arises from a prior undertaking, but says that it was an area expressly reserved at the first examination to be covered at the continuing examination. I do not have a copy of the transcript from the first examination. While it is open to me to find that the Plaintiff failed to satisfy me on this point, on an evidentiary basis, I am prepared to accept counsel at his word that this was a reserved topic. I am doing so because, as will be apparent below, I am not prepared to compel Mr. Hassey to attend for any further examinations and I want these parties to be able to complete the discovery process and move on. As a matter of fairness and completeness, these are relevant documents and ought to be disclosed.

Further Examination:

[ 24 ] The Plaintiff asks that I compel Mr. Hassey to attend for further questioning on the answers arising from the most recent slate of undertakings. I decline to do so.

[ 25 ] Mr. Hassey has attended for five days of discovery examinations. He has been asked 5,664 questions. He has provided answers to his original undertakings. He has been questioned on those undertakings. The “questions arising” amounted to more than 600 questions. A party has an obligation to attend for discovery and to answer proper questions put to him or her. Mr. Hassey has, in my view, fulfilled that obligation.

[ 26 ] The Rules of Civil Procedure do not provide for exhaustive discoveries. They provide for proportionate discoveries. Having considered those factors set out in Rule 31.05.1, I find that the discoveries have already been disproportionate. The amount of money at stake in the proceedings is significant, but realistically not in the ranges claimed. The facts are somewhat complex and document heavy, justifying more than the presumptive 7 hours of discovery. But Mr. Hassey is at 5 days. That is an amount of time that should have been more than sufficient to address all relevant and material issues.

Conclusion:

[ 27 ] Mr. Hassey should provide answers to undertakings numbered 9, 10 and 11 on Schedule “A” in a format that will enable the Plaintiff to appreciate and understand how the documents produced relate to the questions asked. Mr. Hassey should also answer the two outstanding refusals/under advisements. All answers should be provided within 30 days. I decline to order any further examinations.

[ 28 ] The parties may address the issue of costs of these motions in writing. The Plaintiff shall serve and file its submissions by November 15, 2012. The Defendants shall make their submissions within 14 days thereafter. Submissions are not to exceed 2 pages in length, not including any Costs Outlines, and may be filed with the judicial secretaries at Newmarket.

Boswell J.

Released: November 1, 2012