Livent Inc. v. Deloitte & Touche, 2012 ONSC 7007

COURT FILE NUMBER: (02 CV 225823CM2) 04-CL-5321

MOTION HEARD: 20120604

ENDORSEMENT RELEASED: 20121208

SUPERIOR COURT OF JUSTICE – ONTARIO

RE:

Livent Inc., Through Its Special Receiver

and Manager, Roman Doroniuk

Plaintiff

Deloitte & Touche, and Deloitte & Touche LLP

Defendants

BEFORE: MASTER D. E. SHORT

COUNSEL: Counsel for the Defendant (Deloitte & Touche [Canada]

(Moving Party):

Brian Leonard & Jeremy Millard: fax 416-863-4592

Counsel for the Plaintiff (Responding Party):

Patrick O’Kelly & Jonathan Levy fax 416-947-0866

HEARD: June 4, 2012,

REasons for Decision

Sequel

[1] Litigation relating to the affairs of the theatrical production company Livent Inc. was first launched in 1998. In 2002 this action was commenced on behalf of Livent against its former auditors for damages.

[2] In reasons delivered in March of 2011 (2011 ONSC 648) I addressed the quantum to be posted as a consequence on an earlier decision on mine holding that security for costs could be ordered in the circumstances of this case. (2010 ONSC 2267).

[3] Those motions were brought seeking security for costs against the plaintiff, Livent Inc. (“Livent”) which brought the action through its Special Receiver and Manager, Roman Doroniuk (“Doroniuk” or “the Special Receiver”).

[4] The motions were, originally brought under Rule 56.01 of the Rules of Civil Procedure by the defendants, Deloitte & Touche LLP in Canada (“Deloitte Canada”), [incorrectly named in the title of proceedings as Deloitte & Touche] and the Defendant, Deloitte & Touche LLP, which is based in the United States (“Deloitte US”).

[5] The Deloitte Defendants asserted that they had “good reason to believe” that the Plaintiff, and its Special Receiver and Manager, (the “Special Receiver”), has insufficient assets in Ontario, or no ability to pay the costs of this proceeding if ordered to do so at the end of the trial in this action.

[6] At the argument of the second half of this motion, I was advised that during the intermission following the first portion of the argument, the claims against Deloitte US had been resolved by the parties. Thus, I was only required to address the request of Deloitte Canada (herein “Deloitte”) that security for its costs alone, be posted.

[7] Now each side has brought a further motion. The Special Receiver moves to vary the existing security for costs order and Deloitte moves on a variety of discovery issues.

[8] I will deal with the latter matter first.

I. Nature of Overall Livent Litigation

[9] This action was commenced in February 2002. The Special Receiver claims $450 million in damages against Deloitte for, among other things, negligence, breach of contract and breach of fiduciary duty in connection with the audits conducted by Deloitte of the financial statements of Livent Inc. ("Livent") during the relevant period. This action relates to, among other things, Deloitte's alleged negligence in its audits of Livent's financial statements for the years ended 1993 to 1997 (the "Negligence Action").

[10] The Amended Statement of Claim amended on May 24, 2002 consists of 117 pages and 419 paragraphs. The Amended Statement of Claim also refers to the Amended Statement of Claim that Livent issued in the fraud action it had commenced against Garth Drabinsky ("Drabinsky") and Myron Gottlieb ("Gottlieb") in November 1998 bearing the Court file number 98-CL-31S7 (the "Fraud Action"). The Amended Statement of Claim in the Fraud Action, in turn, consists of 51 pages and 118 paragraphs.

[11] By Order dated March 20, 2002, Justice Ground ordered that this action and the Fraud Action (collectively, the "Proceedings") and other related proceedings be tried together and be subject to common production of documents and discoveries.

[12] The documents that have been produced in the Proceedings have been extensive. They include, but are not limited to, the following:

(i) over 91,807 documents produced by the Special Receiver;

(ii) 11,476 documents produced by Deloitte; and

(iii) 2,968 documents obtained from the Crown disclosure provided to Drabinsky and Gottlieb in the criminal proceedings that were brought against them.

[13] Examinations for discovery covering approximately 69 days have been conducted of numerous witnesses in the Proceedings.

[14] In addition to the evidence in the Proceedings, extensive evidence was provided by numerous witnesses in the criminal proceedings that led to the conviction of each of Drabinsky and Gottlieb on two counts of fraud and one count of forgery.

[15] When the present motions were argued twelve weeks had been tentatively reserved for the evidence in this action. In the interim, the trial date has been delayed and there are still differences of opinion between the parties as to the likely length of the actual trial, which is scheduled to take place in 2013.

II. Current motions

[16] The Defendant, Deloitte & Touche LLP ("Deloitte"), seeks an order compelling the Plaintiff, Special Receiver, to answer questions that they allege were improperly refused in an examination of the Special Receiver by written questions served on November 2, 2009. In the alternative, Deloitte seeks an order requiring the Special Receiver to attend at an oral examination to answer the questions set out in the Refusals Chart.

[17] In addition, Deloitte seeks an order requiring the production of the files of three experts retained by the Special Receiver.

[18] The written interrogatories for the Special Receiver contained almost 350 subject areas and were some 45 pages in length. Counsel have narrowed the outstanding issues. Only five questions remain to be addressed. However the breadth of information sought in those questions presents the difficulties I have faced in considering this motion.

[19] The specific questions were as follows

▪ Produce any witness statements, will-say statements and/or summaries of evidence of anyone in the Special Receiver intends to call as a witness at trial or that the Special Receiver believes has knowledge of the matters in issue in these proceedings.

▪ Provide a list of the documents produced by Deloitte Canada that the special receiver will be relying on at trial.

▪ Provide a summary of the facts obtained from the Deloitte Canada witnesses produced an examination of discovery that the special receiver will be relying on at trial.

▪ Identify with a reasonable degree of specificity the evidence given by the partners of Deloitte Canada and Deloitte US during their respective examinations for discovery that the special receiver intends to rely on at trial to support the allegations made in the amended statement of claim against Deloitte Canada. Undertake to do the same for any evidence that will be given by the partners of Deloitte Canada and Deloitte US before trial.

▪ Specify the evidence given by the following witnesses during their respective examinations for discovery in this action and of the Fraud Action that the Special Receiver disputes:

Robert Webster;

Maria Messina;

Christopher Craib,

Grant Malcolm;

Diane Winkfein and

Tony Fiorino.

[20] In effect, the plaintiff is being asked to identify those portions of the evidence given by or on behalf of the defendant, which it disputes.

[21] To my mind, this appears to be an indirect notice to admit, where instead of serving a notice to admit specific evidence upon which the defendant intends to rely; they instead are asking the party opposite to flag what it regards as the weaknesses or problems with their opponent’s case.

[22] Is this an appropriate remedy at this stage in litigation that has been ongoing for 10 years and is expected to proceed to trial in the foreseeable future?

[23] The individuals listed are amongst at least 18 individuals who were examined for discovery at some point in this litigation

[24] To put their specific involvement in context. It is my understanding that the number of days and pages of discovery transcript for those particular individuals is as follows:

Robert Webster; three days 534 pages

Maria Messina; nine days, 1300 pages

Christopher Craib, four days, 722 pages

Grant Malcolm; one day, 139 pages

Diane Winkfein two days, 287 pages and

Tony Fiorino, one day at 137 pages.

[25] The Deloitte Canada and US witnesses alone had in excess of 30 days of discovery and well in excess of 5000 pages of examination for discovery transcripts.

III. Responses Made

[26] Counsel for the Special Receiver summaries his position that the five interrogatories were properly refused because the questions:

a) are redundant and seek information already available to Deloitte;

b) are overly broad and will have the effect of putting Livent to unjustified costs in preparing for trial; and

c) under the circumstances, are not questions that are properly the subject of discovery as established by applicable case law.

[27] The factum submitted by counsel for Deloitte summarizes their position:

“The questions at issue are intended to enable Deloitte to know the case it must meet at trial, to procure admissions, to narrow the scope of issues for trial and to avoid surprises at trial. The importance of these questions to Deloitte is amplified because of the following:

(a) the magnitude of the claim it faces (the Special Receiver seeks $450 million in damages);

(b) the complexity of the claims asserted by the Special Receiver (the Amended Statement of Claim is 117 pages long);

(d) the extensive examinations of numerous witnesses that have been conducted in the Proceedings and related proceedings; and

(e) the fact that the Special Receiver has no personal knowledge of any of the events underlying the claims he is pursuing against Deloitte.”

[28] These two positions both raise classic arguments as to limits of pre-trial discovery. I intend to address each of the five specific interrogatories, which are the subject matter of this motion. Bearing question numbers, 334, 335 336, 340 and 341. I intend to address each individually but much of my reasoning applies to all five.

[29] For convenience I will set out the question and answer presently provided, in each instance at the outset of my analysis.

Q. 334 Will-says

“Produce any witness statements, will say statements and/or summaries of evidence of anyone in the Special Receiver intends to call as a witness at trial or that the Special Receiver believes has knowledge of the matters in issue in these proceedings.”

Response:

Special Receiver will not produce will-say statements for the individuals it may call as witnesses at trial that have either been examined for discovery, have given witness statements or whose evidence is already contained in the record. The discovery transcripts and witness statements, all of which are in Deloitte's possession, set out with sufficient particularity what each potential witness's evidence will be and there is no reason that either party should be put to the task of creating duplicative will-say statements in advance of trial. While the Special Receiver reserves the right to call as witnesses whomever it deems necessary for trial, a list of potential witnesses likely to be called by the Special Receiver, together with a list of their available transcripts and witness statements, is set out in the attached Schedule "A".

To the extent that the attached proposed witness list includes individuals whose evidence is not contained in the record, these individuals are all Deloitte personnel. The Special Receiver cannot be compelled to provide will-say statements or summaries of evidence for individuals with whom Livent had no relationship, such as any witnesses who were employed through Deloitte during the relevant time period,

[30] Rule 31.06(1) &(2) provides:

31.06(1) A person examined for discovery shall answer, to the best of his or her knowledge, information and belief, any proper question relevant to any matter in issue in the action or to any matter made discoverable by subrules (2) to (4) and no question may be objected to on the ground that,

(a) the information sought is evidence;

(b) the question constitutes cross-examination, unless the question is directed solely to the credibility of the witness; or

(2) A party may on an examination for discovery obtain disclosure of the names and addresses of persons who might reasonably be expected to have knowledge of transactions or occurrences in issue in the action, unless the court orders otherwise.

[31] What is the extent of disclosure mandated by subrule (2)? More than twenty years ago, Justice Granger inDionisopoulos v. Provias, 1990 6642 (ON SC), 71 O.R. (2d) 547, provided this direction with respect to its interpretation:

To summarize, a party being examined for discovery is required under rule 31.06 to provide the names and addresses of persons who might reasonably be expected to have knowledge of the matters in issue, but are not required to provide a list of trial witnesses. A summary of the substance of the evidence of those persons who might reasonably be expected to have knowledge of the matters in issue, must be provided if requested. Rule 31.06(1) requires a person being examined to answer "any proper question relating to any matter in issue" or "any matter made discoverable by subrules (2) to (4)" and questions may not be objected to on the ground that "the information sought is evidence". If the "names and addresses of persons having knowledge'' is discoverable, then it would seem to me that a proper question relating to that is "what is the substance of their knowledge?" This is so even if the information to be disclosed is evidence.

[32] How substantive does that disclosure of substance need to be? More recently, in Davies v. Clarington (Municipality)2010 ONSC 6103P. Lauwers J., had occasion to consider the extent of appropriate disclosure required. After commenting on my decision on this point in Arunasalam v. Guglietti Estate, [2010] O.J. No. 3303, his Honour set out what he regarded as the extent of disclosure required under the rule:

I revert to Rule 31.06(2) and the case law to hold that the defendants must be provided with "the names and addresses of persons who might reasonably be expected to have knowledge of transactions or occurrences in issue in the action" known to the plaintiff and from whom the witnesses giving evidence at the trial on the plaintiff's behalf will be drawn, summaries of what the information that they possess, and copies of any relevant documents that they have in their possession. In the circumstances, this material must be provided well before the continuation of the examination for discovery. As to content, any such summary must contain a fair degree of detail addressing the normal journalistic questions related to the person and the relevant knowledge that he or she possesses, being: "who, what, where, when, why and how". If the level of detail is inadequate in the opinion of the defendants, I may be spoken to. A summary need not be sworn or signed.

[33] Relying upon this case law, Deloitte asserts that it is permitted to obtain disclosure of witness statements or summaries of evidence of any witnesses that the Special Receiver intends to call at trial and that the fact that such witnesses may have been examined by another party or may have been in Deloitte's employ during the relevant time does not diminish this obligation.

[34] I disagree. I think that the extent of information provided to date and the nature of the case is such that there is not likely to be any significant degree of surprise as to the case each side has to meet

[35] The affidavit evidence before me satisfies me that Deloitte's interrogatories canvassed, in great detail, the facts and evidence that would be relied upon by the Special Receiver in advancing the allegations contained in the Amended Statement of Claim in the Negligence Action. Notably, the portions of the interrogatories that relate to Livent's pleadings are structured to mirror the headings used by the Special Receiver in the Amended Statement of Claim.

[36] On March 8, 2010, the Special Receiver delivered to counsel for Deloitte its written answers to interrogatories, which were contained in a 177 page volume (the "Written Answers").

[37] In his factum the Special Receiver asserts:

“The Written Answers are highly detailed and describe the facts on which the Special Receiver will rely in support of its allegations in the Proceedings, including: the negligence claim against Deloitte; matters relating to the frauds that occurred at Livent (including who participated in the frauds and the role they played); the stakeholders that stand to benefit from the Proceedings; damages; the administrative and criminal proceedings related to Livent; witnesses; experts; and various other matters. Wherever possible, the Written Answers make reference to specific documents (including their respective Summation database identification numbers) and describe the information contained in the document on which the Special Receiver intends to rely.”

[38] For example, in addressing an interrogatory concerning disclosure of the frauds to Deloitte prior to August 1998, the Special Receiver provided the following response:

[In] August 18, 1995 Livent entered into an agreement with Pace to tour Show Boat in certain U.S. cities. A copy of this agreement was contained in Deloitte's 1995 year end audit work papers at DT11265 to DT11266 and a second copy was in Deloitte's 1996 year end audit work papers at DT21470 to DT21471. Deloitte failed to assess the implication of this 1995 agreement on the accounting for the June 15, 1996 Show Boat touring rights agreement and its inconsistencies and contradictions with management's representations to Deloitte as documented in the various versions of the Peter Chant memo to file “re: 1996 year-end issues”.

[39] In my view this type of response more than satisfies the need to provide a summary that contains “a fair degree of detail addressing the normal journalistic questions related to "who, what, where, when, why and how".

Q. 335 Documents relied upon

“Provide a list of the documents produced by Deloitte Canada that the special receiver will be relying on at trial.”

Response

The Special Receiver is not currently in a position to provide Deloitte with a list of all documents upon which the Special Receiver will be relying at trial. In any event, and as set out in Mr. Howard's letter of November 23, 2011, we believe it would benefit both parties to come to some agreement on a Joint Book of Documents, certainly to avoid issues of authenticity, sent or received and the fact of their existence. Equally, we can discuss truth of the contents of documents on a case by case basis to attempt to narrow and shorten matters....

[40] This response seems reasonable to me.

[41] I expect that while this matter was under reserve the parties have moved forward on a protocol for a joint book of documents. But is a party obliged to provide its opponent, in advance of trial, with a list of all documents it will be relying upon at trial?

[42] Clearly the Special Receiver alleges that Deloitte conducted its audit of Livent's financial statements in a manner that was negligent and in breach of contract and fiduciary duty during the relevant period.

[43] As noted above, Deloitte has produced over 11,476 documents, many of which consist of its working papers for the audits in question.

[44] Counsel for Deloitte submits:

In complex cases involving extensive productions and examinations for discovery of numerous witnesses, the party being examined is required to identify, with a reasonable degree of specificity, the documents it is relying upon in support of its allegations. It is not enough for the Special Receiver to "point to a stack of documents and say that the documents relied upon are within the voluminous productions".

[45] Amongst the cases cited in support of this argument are:

Loewen, Ondaatje, McCutcheon & Co. v. Snelling, [1985) 2 C.P.C.(2d) 93; at paras. 9, 14 and 16 (H.C.J.)

Noranda Metal Industries Ltd. v. Employers Liability Assurance Corp., 2000 50967 (ON SC), 49 C.P.C. (4^th) 336 at para. 30 (S.C.J.),

Brock-Tecb Inc. v. XYcorp Inc., 1999 CarswellOnt 3678 at para. 59 (S.C.J.) (Master),

Andersen v. St. Jude Medical Inc.., 2007 CarswellOnt 9601 at para. 23 (S.C.J) (Master),

[46] In Loewen, Ondaatje, supra Justice Steele refers to the decision of Justice Osler approving on appeal the decision of Justice Keith in a case (on which, coincidently, I was counsel) Leliever v. Lindson, (1977) 3 C.P.C 245:

While there are few, if any, decided cases upon the point, it has in my view been customary to determine questions of this sort by having regard to the importance and the complexity of documents, with respect to which it is sought to question parties. There is no universal test that can be applied to situations of this sort as obviously there will be cases in which the whole of a document can be easily seen and comprehended and it may appear quite obvious that a party intends to rely upon it all. There will be others in which the documents are so voluminous and so complex that the opposing party is quite obviously entitled to obtain some definition from the plaintiffs of those parts upon which he intends to rely. In the present instance, each of the documents is approximately 18 pages in length and is of some complexity, even though both refer to the same entity.... Each covers a wide range and in my view there is no reason to doubt the correctness of the decision of my brother Keith that the plaintiff should indicate within reasonable bounds the specific part of each statement upon which he intends to rely.

[47] Later in his reasons Justice Steele observes:

For these reasons, I am of the opinion that the Master was correct in his ruling with respect to the answers to the various questions relating to the conspiracy and asking upon what facts the plaintiff relied, rather than leaving it to the respondents to speculate amongst the mammoth amount of transcripts and productions....[my emphasis throughout]

[48] I agree that some definition of the facts relied upon is required. That is a long way in my opinion from entitling the defendant to information in the quantity contemplated by the subject interrogatory.

[49] More recently on a refusals motion, Master MacLeod in Andersen v. St. Jude, supra , provided this helpful clarification:

23 ....The plaintiffs were asked to identify the evidence or documents on which they will rely in support of a specific proposition. "Please see the productions" is not helpful and is not a proper response. It is also unreasonable to expect the answer to be so precise that the plaintiffs paint themselves into a corner. Again, I suggest a timetable for exchange of such information may be the practical response but in the meantime the plaintiff is obliged to answer the question to the best of her knowledge at this time. This requires a reasonable degree of specificity but not absolute precision. See Loewen, Ondaatje, McCutcheon & Co. v. Snelling (1985), 2 C.P.C. (2d) 93 (Ont. H.C.)

24 Q. 193 was said to be an example of an improper cross examination technique. It is fair to put to a witness evidence that apparently contradicts a proposition in the pleadings and ask how the witness can continue to assert his or her position in the face of that evidence. It is not reasonable to put a negative proposition to the witness and then to ask the witness to review the productions and to identify documents that might support the negative proposition. If the defendants believe there are such documents, it is their responsibility to challenge the witness with the documents and seek a specific admission. In the case of an expert, the expert may be challenged with scientific literature though the expert ought first to be asked if he or she recognizes the authority of a text or author. A discovery witness cannot be asked to go and survey the literature and identify anything that might contradict his or her expert. This kind of question and this kind of objection has appeared repeatedly in this proceeding.

[50] In Noranda, a defendant insurer had been ordered to pinpoint the specific facts in the plaintiffs' evidence on which the insurer intended to rely in support of its defence that the plaintiffs acted recklessly. Given that the plaintiffs had no basis upon which to test the insurer's case, other than through an understanding of its view that the plaintiffs acted recklessly, on appeal, Justice Nordheimer held that:

30....In my view the law is clear that if a party says that it relies only on the evidence of another party in support of an allegation, that party is required to identify with some measure of specificity what parts of the evidence of the other party it is relying on.... [my emphasis]

[51] In my view, that description does not apply to the facts of this case. The ground has been ploughed numerous times and neither side is going to trial guessing what the other side’s case is about.

Q. 336 Provide summary of facts from discovery of other side to be relied upon at trial

Provide a summary of the facts obtained from the Deloitte Canada witnesses produced on examination of discovery that the special receiver will be relying on at trial.

Response

See response to Q. 334 above. The Special Receiver intends to rely on the entirety of the transcripts from the examinations for discovery of Deloitte's witnesses in conducting the trial. It is impossible, in advance of trial, to exclude any portion of the transcripts as the oral evidence of the Deloitte witnesses at trial may require use of all or part of the transcripts during cross-examinations.

Q. 340 Discovery evidence of Deloitte partners that is going to be used to support allegations in amended statement of claim

Identify with a reasonable degree of specificity. The evidence given by the partners of Deloitte Canada and Deloitte US during their respective examinations for discovery that the special receiver intends to rely on at trial to support the allegations made in the amended statement of claim against Deloitte Canada. Undertake to do the same for any evidence that will be given by the partners of Deloitte Canada and Deloitte US before trial.

Response

See response to Q. 334 above.

[52] Deloitte asserts that the Special Receiver is required to identify with a reasonable degree of specificity the evidence given by the partners of Deloitte that he intends to rely upon at trial and submits:

Stating that he will be relying upon the “entirety of the transcripts from the examinations for discovery of Deloitte witnesses” is improper, especially since 9 partners of Deloitte and Deloitte US were examined in the Proceedings over a period of 32 days, resulting in almost 6,000 pages of transcripts.

[53] However the answer refers to such use of the entirety of such evidence as being “in conducting the trial”. Is there an obligation to identify any and evidence obtained from the other side on oral examination, upon which a party intends to rely? In view there is not. Counsel are well aware of the issues as defined by the pleadings. They have had and used ample opportunities to obtain the knowledge of various witnesses. It is beyond the scope of pre-trial discovery to have the other side “show you all their cards”.

[54] As noted above, I do not interpret the decision of Justice Nordheimer in Noranda, supra, as applying in this case where the specifics of the alleged breaches of professional responsibility and negligence have been identified with what I regard as sufficient detail.

Q.441 Specific Witness testimony

Specify the evidence given by the following witnesses during their respective examinations for discovery in this action and of the Fraud Action that the Special Receiver disputes:

Robert Webster;

Maria Messina;

Christopher Craib,

Grant Malcolm;

Diane Winkfein and

Tony Fiorino.

Response:

The Special Receiver is not required to identify the evidence given by Robert Webster, Maria Messina, Christopher Craib, Grant Malcolm, Diane Winkfein and Tony Fiorino at their respective examination for discoveries that the Special Receiver disputes. There is no basis under the Rules for Deloitte to make such a request, In the event that the Special Receiver calls these individuals as witnesses at trial, Deloitte will have an opportunity to cross-examine them and test their evidence with use of their respective discovery transcripts.

[55] In effect, the plaintiff is being asked to identify those portions of the evidence given by not in the employ of the defendant, which it disputes, regardless of whether it is relevant to the issues at the trial.

[56] To my mind, this appears to be an attempt at a reverse Request to Admit. This is not the document contemplated by the Rules identifying specific evidence of these witnesses upon which Deloitte intends to rely. They could specify any such evidence of these witnesses (with reasonable specificity) to establish whether the evidence is admitted or that it will be necessary to prove that evidence at trial.

[57] Instead, they are asking the party opposite to flag what that party regards as the weaknesses or problems with the evidence of these third party witnesses.

[58] Is this an appropriate remedy at this stage in litigation that has been ongoing for 10 years and is expected to proceed to trial in the foreseeable future?

[59] Here the individuals listed are amongst at least 18 individuals who were examined for discovery at some point in this litigation. As noted earlier the discoveries of the subject witnesses are voluminous:

Robert Webster; three days, 534 pages

Maria Messina; nine days, 1300 pages

Christopher Craib, four days, 722 pages

Grant Malcolm; one day, 139 pages

Diane Winkfein, two days, 287 pages and

Tony Fiorino, one day , 137 pages.

[60] In addition, the Deloitte Canada and US witnesses alone had in excess of 30 days of discovery and well in excess of 5000 pages of examination for discovery transcripts.

[61] Rule 51 dealing with such notices to admit, in part, provides a procedure to be followed:

51.02(1) A party may at any time, by serving a request to admit (Form 51A), request any other party to admit, for the purposes of the proceeding only, the truth of a fact or the authenticity of a document.

[62] I observe the rule does not contemplate a denial of the truth of evidence given. It then deals with the time frames for admission of “facts” identified:

51.03(1) A party on whom a request to admit is served shall respond to it within twenty days after it is served by serving on the requesting party a response to request to admit (Form 51B).

Deemed Admission Where No Response

(2) Where the party on whom the request is served fails to serve a response as required by subrule (1), the party shall be deemed, for the purposes of the proceeding only, to admit the truth of the facts or the authenticity of the documents mentioned in the request to admit.

[63] The rule addresses the consequences of a failure to admit (as opposed to a failure to respond:

(3) A party shall also be deemed, for the purposes of the proceeding only, to admit the truth of the facts or the authenticity of the documents mentioned in the request, unless the party’s response,

(a) specifically denies the truth of a fact or the authenticity of a document mentioned in the request; or

(b) refuses to admit the truth of a fact or the authenticity of a document and sets out the reason for the refusal.

[64] In DeMarco v. Mascitelli, 14 C.P.C. (5th) 384, Justice LaForme, held that ,in the words of the headnote:

There was nothing improper about a flat denial, regardless of the allegedly contingent or tentative language used. Although the plaintiffs might have vacillated in moving the action along, they did not do so in a fashion that showed a contempt for the action, the process, or the defendants. Furthermore, the delay did not give rise to a presumed or actual substantial prejudice to a fair trial.

[65] In his reasons re refers to two helpful previous decisions:

11 The essence of the position of the Defendants is that a response that merely states that: "we deny the facts for the time being" is one that is pro forma and tentative, and is improper. That is, pro forma responses intended to circumvent Rule 51 are improper.

12 With respect, I believe the complete answer to this submission is found in the Ontario Divisional Court decision of Docouto v. Ontario (Attorney General), [(2000) 44 C.P.C. (4^th)182]

13 In Docouto the strategy in connection with a Request to Admit was to deny the truth of all the statements within it. O'Leary J. in a unanimous decision stated that there is no rule, either in Rule 52.03(1) or elsewhere, that requires a party to admit the truth of any fact. After making that observation, he went on to say:

“... it cannot be found that a party that decides to deny all facts in a Request to Admit, be they true or false ... is guilty in abusing the processes of the court.^”

14 He concluded this point by saying that, the rules provide that any failure to admit the truth of facts known to be true could result in costs against them.

15 Master Clark in De Naray v. Gainers Inc., [(1997),17 C.P.C.(4^th) 396] was of the same view in respect of a flat denial of all facts. In an opinion that I share, he held that Form 51B (Response to Request to Admit) found in the Rules of Civil Procedure allows for six (6) answers, three (3) deal with facts and three (3) with documents and require a party to admit, deny, or refuse in respect of either. Further, Rule 51.03(3) provides that where the response is a denial, no reason need be given, but where there is a refusal, a reason must be given. Pursuant to this scheme, a flat denial constitutes full and complete compliance with Rule 51.03(3). [my emphasis]

[66] The only consequence for a failure to admit a fact subsequently proven at trial is a potential costs consequence:

51.04 Where a party denies or refuses to admit the truth of a fact or the authenticity of a document after receiving a request to admit, and the fact or document is subsequently proved at the hearing, the court may take the denial or refusal into account in exercising its discretion respecting costs.

[67] Here the moving party seeks an order requiring a fixed position to be taken prior to trial with respect to about 3000 pages of transcript with an implicit consequence of tying counsel’s hands at trial with respect to the evidence of these individuals. This is not my understanding of the practice and tradition of civil trial courts in Ontario.

[68] This refusal is upheld

IV. Proportionality in Discovery

[69] I find further justification for my holdings on these matters in the relatively new rule 29.2 relating to Proportionality in Discovery. The need for proportionality in interpreting the Rules flows from new rule 1.04:

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding

[70] Notwithstanding the costs incurred to date, it still is incumbent upon this court to avoid directing further activities where the cost and delay that would be incurred as a consequence are not proportional to the value added.

[71] As well, in addressing discovery issues, present day courts must consider the provisions of new rule 29.2 that deals specifically with proportionality in Discovery. That rule provides in part:

29.2.02 This Rule applies to any determination by the court under any of the following Rules as to whether a party or other person must answer a question or produce a document:

Rule 30 (Discovery of Documents).
Rule 31 (Examination for Discovery).
Rule 34 (Procedure on Oral Examinations).
Rule 35 (Examination for Discovery by Written Questions).

29.2.03(1) In making a determination as to whether a party or other person must answer a question or produce a document, the court shall consider whether,

(a) the time required for the party or other person to answer the question or produce the document would be unreasonable;

(b) the expense associated with answering the question or producing the document would be unjustified;

(c) requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;

(d) requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and

(e) the information or the document is readily available to the party requesting it from another source.

(2) In addition to the considerations listed in subrule (1), in determining whether to order a party or other person to produce one or more documents, the court shall consider whether such an order would result in an excessive volume of documents required to be produced by the party or other person.

V. Conclusion

[72] Ultimately, this is not a case where the Special Receiver has simply pointed to a stack of documents or materials and left Deloitte to play a guessing game as to what will be relied upon at trial. To the contrary, it seems to me that the Special Receiver has gone to great efforts to provide the details of its position with a reasonable degree of specificity that is commensurate with the number of matters at issue in this action and the volume of material contained in the record.

[73] In my judgment, having regard to the entire history of productions and examinations in various fora in this case, to require further and better answers to any of the matters refused would not accord with the dictates of the proportionality principle. The parties ought to be permitted to spend their available time preparing their own cases for trial. In my view the all the factors in rule 29.2.03 support my view that the defendant’s motion with regard to these undertakings ought to be dismissed.

VI. Expert Files

[74] Deloitte moves as well for additional materials relating to the expert reports being relied upon by the Special Receiver at trial. In their factum the following assertion is made:

The Special Receiver is obliged to produce more than the “documents and materials given” to his experts “for use in forming their respective opinions”. Deloitte is entitled to production of all foundational information underlying the findings, opinions and conclusions made by the Special Receiver's experts in the reports they have produced, including:

(a) documents that show the instructions upon which the experts proceeded and the assumptions they were asked to make;

(b) documents that show that the instructions given to the experts changed over time;

(d) all articles or legal principles that the experts have relied upon;

(e) all prior drafts of the experts' reports; and

(f) correspondence between the experts and their instructing counsel that contain foundational information.

[75] Deloitte’s counsel further submit:

“The Special Receiver's refusal to produce the requested information will impede Deloitte from meeting the case put before it and from responding in a meaningful fashion to the experts' opinions that the Special Receiver relies on.”

[76] In support of his position the Special Receiver asserts:

On March 9, 2010, the Special Receiver served its liability experts' reports on counsel for Deloitte. The report of D. Paul Regan, dated March 8, 2010, consists of 261 pages, is organized chronologically and then sub-divided by the accounting items with which the Special Receiver's liability experts take issue in each audit year from 1989 to 1997. On May 7, 2012, the Special Receiver served further liability experts' reports on counsel for Deloitte. The report of D. Paul Regan, dated May 7, 2012, is organized to mirror the two liability reports relied upon by Deloitte.

[77] The reports of the two experts obtained by the Special Receiver made available for inspection by me at the hearing of these motions.

The documents relied upon by the experts in forming their opinions are set out \in detail and include descriptions of each document (as well as its Summation database number for ease of reference). The Special Receiver's liability experts have also identified specific discovery transcript references where they are relied upon in support of a particular point.
In the Written Answers, the Special Receiver clearly advised counsel for Deloitte that the expert reports would be relied upon in response to many of the interrogatories. While Deloitte initially sought to have the Special Receiver provide further answers to interrogatories for which it had relied upon the experts' reports, Deloitte has subsequently determined not to pursue those requests for further answers.
The Special Receiver has not refused to produce experts' files. On April 12, 2012, counsel for the Special Receiver advised that it would agree to exchange lists of all documents and materials provided to its experts, provided that was done on a reciprocal basis. Deloitte commenced this motion rather than respond to that proposal.

[78] The factum of Special Receiver argues:

Deloitte brings this motion to compel production of the expert files despite the Special Receiver's offer for the parties to make the appropriate disclosure concerning their respective experts. The Special Receiver has offered to produce to Deloitte "the documents and materials given to each of [its experts]," and has requested that Deloitte do the same. This encompasses much of what Deloitte seeks to have produced.
To the extent that Deloitte seeks production of experts' notes, it is only entitled to those notes that reflect the information the experts obtained that formed part of the foundation of their opinions. This is not a blanket entitlement, and all other notes remain subject to litigation privilege.
As is the case with experts' notes, the right to disclosure of correspondence between experts and instructing counsel is not unlimited. Correspondence between counsel and an expert which is not relied upon for the purposes of preparing an experts' report remains subject to litigation privilege and is not disclosable.

VII. Rule 31.06 entitlements

[79] The rule is brief and seems to be quite limited in the required production at first blush:

31.06(3) A party may on an examination for discovery obtain disclosure of the findings, opinions and conclusions of an expert engaged by or on behalf of the party being examined that are relevant to a matter in issue in the action and of the expert’s name and address, but the party being examined need not disclose the information or the name and address of the expert where,

(a) the findings, opinions and conclusions of the expert relevant to any matter in issue in the action were made or formed in preparation for contemplated or pending litigation and for no other purpose; and

(b) the party being examined undertakes not to call the expert as a witness at the trial.

[80] The law regarding the extent of disclosure under rule 31.06(3) is not settled. In my 2011 decision in Aherne v. Chang, 2011 ONSC 2067, 106 O.R. (3d) 297 (affirmed 2011 ONSC 3846, 337 D.L.R. (4th) 593) I examined many of these issues and I will not repeat the bulk of that analysis here.

[81] Much of the tension and uncertainty in this area flows from the decision in Browne (Litigation guardian of) v. Lavery, 2002 49411 (ON SC), [2002] O.J. No. 564; 58 O.R. (3d) 49; [2002] O.T.C. 109; 37 C.C.L.I. (3d) 86; 18 C.P.C. (5th) 241. There, Mr. Justice Ferguson dealt with a situation not involving a defence medical. In that case, a second expert retained by a party was provided with a copy of the report delivered by a previous expert. Justice Ferguson determined that the previous expert’s report (the “first report”) formed part of the "findings" relied upon by the second expert and, therefore, had to be produced, even though it would have, otherwise, remained privileged.

[82] In arriving at his conclusion, Justice Ferguson considered whether or not the first report could be a "finding" since it was supposedly not relied upon by the second expert. In that regard, he reasoned:

“In my view, that is no longer a proper restriction. The fundamental' difficulty with that principle is that there is no practical and fair way to determine what documents (either in whole or in part) have been influential or relied upon.

It seems logical that if counsel sends the expert information counsel does so because he or she believes this information is relevant to the expert's task. If it is relevant to the task then it seems to me it should be available to counsel who must test the opinion.” [my emphasis]

[83] The Court of Appeal examined what may be considered a "finding" in such circumstances in Conceicao Farms Inc. v. Zeneca Corp., [[2006] 31976]; 2006 31976 (ON CA), 83 O.R. (3d) 792; 272 D.L.R. (4th) 545; 215 O.A.C. 233. The concept of waiver of privilege, however, was not considered. Conceicao involved a motion by counsel, in preparation for an appeal of the trial decision, for production of a privileged memorandum that the opposing party's lawyer had made following a telephone conversation with an expert witness who testified at trial.

[84] The Court ruled in Conceicao that rule 31.06(3) “clearly encompasses not only the expert's opinion but the facts on which the opinion is based”. Justice Goudge writing for the Court of Appeal in 2006, observed that the rule entitles a party to obtain, on discovery, the foundational information of the expert's final opinion:

“[13] In Holmested and Watson at p. 31-106, the learned authors clearly and concisely summarize these aspects of the rule:

Rule 31.06(3) is concerned with fact disclosure, not with documentary production. If prepared in contemplation of litigation an expert’s report is privileged and the report itself (i.e., the document) remains technically privileged, notwithstanding rule 31.06(3). However, in practice the parties often waive this privilege and deliver or exchange expert’s reports in lieu of, or in fulfillment of their obligations under rule 31.06(3).

[14] There is an area of debate concerning the scope of information that may be obtained pursuant to this rule. It clearly encompasses not only the expert’s opinion but the facts on which the opinion is based, the instructions upon which the expert proceeded, and the expert’s name and address. How far beyond this the right to obtain foundational information (as our colleague called it) extends, need not be determined here. Suffice it to say that we are of the view that it does not yet extend as far as is tentatively suggested in Browne (Litigation Guardian of) v. Lavery 2002 49411 (ON SC), (2002), 58 O.R. (3d) 49. We simply proceed on the basis that the rule entitles the appellant to obtain on discovery the foundational information for Dr. Grafius’ final opinion. As will become clear, we need not decide in this case the precise extent of the information that is discoverable. [my emphasis]

[85] Again in the present case I must weigh what I believe was the view "tentatively suggested" in Browne that the Court of Appeal rejects in Concaicao is the obiter view set out by Justice Ferguson,:

“It is my tentative view that our system of civil litigation would function more fairly and effectively if parties were required to produce all communications which take place between counsel and an expert before the completion of a report of an expert whose opinion is going to be used at trial.”

[86] My present analysis is guided by three factors: the subsequent jurisprudence, the requirements of proportionality and the new Rules provisions dealing with the role of experts.

[87] For example, new Rule 4.1 outlines the duty of an expert to assist court. An expert is to be fair, objective and non-partisan. The expert is to provide opinion evidence that is related only to matters that are within the expert's area of expertise. As well the expert is to provide such additional assistance as the court may reasonably require to determine a matter in issue.

[88] Under subrule 4.1(2) the expert's duty prevails over any obligation owed by the expert to the party by whom he or she is engaged. Arguably this obligation may ultimately mean that the expert’s entire file should be available to the court at an early stage. My analysis of the present state of Ontario jurisprudence does not support such an expansion at this time. I therefore turn to the previous case law.

[89] Three years after the decision in Concaicao, Justice Mesbur in Bookman v. Loeb, 2009 33528 (ON SC), 72 R.F.L. (6th) 388; 2009 CarswellOnt 3796; dealt with these issues on a motion heard prior to the hearing of that dispute.

[90] I adopt her analysis at paragraphs 23 through 39 of her reasons in Bookman. Although that case was a family law matter I find the principals and approach she adopted useful in this case. In Bookman counsel resisting broad production took the position that much of what is requested was being sought for either for the purpose of impeachment of the expert rather than for pretrial disclosure or was protected by litigation privilege.

[91] Justice Mesbur addresses the fundamental concepts requiring consideration in such cases:

26 The respondents also need to be able to respond in a meaningful fashion to the expert reports the plaintiff has delivered. To do so, they must know, among other things, what the expert was retained to provide an opinion on, whether those instructions changed over time, whether the experts' opinions themselves have changed over time, and what instructions or assumptions the expert was told to make in formulating his opinion. If the expert has relied on any documents from the court proceedings, or other documents, the respondents need to know what the expert has relied on, in order that their experts can respond in a meaningful fashion. If the expert has relied on particular articles or legal principles, again, the respondents are entitled to know this, for the same reason. In fact, the parties do not really disagree with this broad description of what should be provided....

[92] They differ, however, in relation to the respondents' specific requests for some broad categories of information. These categories reflect areas where there appears to be continuing uncertainty as to the extent of present disclosure requirements in Ontario civil cases. The specific areas remaining in this case are:

(a) prior drafts of the expert’s report with all attachments;

(b) both counsel's and the expert’s notes of any meetings they had prior to the expert’s preparation of his final report. If there are no notes, a summary of what was discussed;

(d) if not entitled to full file, copies of any letters of instruction given to the expert by any of the party's lawyers, including all email, letter and other correspondence passing between prior counsel and the expert;

(e) copies of all accounts the expert has rendered to the party and bills paid from the outset of his retainer, together with disclosure of the terms of the expert's engagement together with all correspondence and payment records in relation to fees;

(f) production of the files of any other experts, including letters of instruction, letters of retainer, correspondence with counsel and/or the client directly, earlier drafts of reports, note of meetings with counsel etc.

[93] Resisting counsel generally take the position that the experts' files are protected by litigation privilege. While, privilege is asserted as well with respect to counsel’s notes of conversations with the expert, counsel are generally prepared to advise as to the instructions given to the experts if not already contained in their expert reports. This can be provided either by way of memorandum, or by providing actual letters where they exist. Any letters referred to specifically in the expert’s report are to be produced.

[94] In reviewing the Court of appeal’s decision in Conceicao Justice Mesbur addressed the scope of information that could be obtained pursuant to the rule.

“28. ...Simply put, the court held that the requesting party was entitled to the "foundational information" for the expert's final opinion. The court said that the rule clearly encompasses not only the expert's opinion but the facts on which the opinion was based and the instructions upon which the expert proceeded. The court, however, declined to comment on how far beyond this foundational information discovery extends....”

[95] Based upon that Court’s comments she went on to infer that the scope of what must be produced “lies somewhere between the foundational information for the expert's opinion, and everything that has passed between the expert and the instructing solicitor, including the expert's entire file.” She went on to echo the reasoning of Pierce J in Fyffe v. Ontrac Equipment Services Inc. 2008 CarswellOnt 5669 (S.C.J.):

...where she noted that while an opposing party is entitled to foundational information, this is not a "limitless entitlement".

[96] She then endeavoured to delineate the "zone of privacy" of litigation privilege, while recognizing “the tension between widening discovery while retaining the area of privacy necessary for the advocate to perform his or her role in the adversarial context.”

[97] Justice Mesbur’s analysis of the role of litigation privilege is instructive:

31 Lederer J faced the same interpretive challenge in Babakar v. Brown, [2009 13622 (ON SC), 71 C.C.L.I. (4th) 258] that is to say, how far the right to obtain foundational information extends. He noted that it has been established that it is improper to allow questions that set out to contradict, or confirm, the findings of experts. Such questions enter the realm of cross-examination.

32 Another question is whether litigation privilege is lost once the expert report itself has been produced, or whether privilege is maintained in the expert's file until trial. The Supreme Court of Canada [in Blank v. Canada (Department of Justice), 2006 SCC 39] stated that litigation privilege is based on the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate. Litigation privilege aims to facilitate that process. As the court said, “Litigation privilege ... is not directed at, still less, restricted to communications between solicitor and client. It contemplates, as well, communications between a solicitor and third parties ...” The court went on to quote with approval the comments of R.J. Sharpe (now Sharpe J.A.) when he said [in [1984] Special Lectures LSUC 163.]: “Litigation privilege is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate.” Both Blank and Conceicao suggest that the proper approach is to maintain privilege in the expert's file until trial.

[98] Against the context of this brief overview of the law, I will address the disclosure requests the respondents have made. I will deal with each in turn.

(a) documents that show the instructions upon which the experts proceeded and the assumptions they were asked to make

[99] I understand that his information has been provided by both sides already. If there were any other instructions given, upon which the experts proceeded, both sides have a duty to produce such further instructions.

(b) documents that show that the instructions given to the experts changed over time;

[100] I do not believe there is a stand alone obligation to provide this information prior to trial. What must be provided is the foundational information for the report as delivered. The respondents are clearly entitled to receive the letters of instruction to each of the experts,. If no such letters exists, the experts or counsel must provide the particulars of the instructions that were provided. This includes any changes to these instructions, if such changes were made. Beyond the foregoing, to the extent this might be construed as a request for emails, letters or other correspondence passing between counsel and any expert, that material is in my view subject to litigation privilege that has not yet been waived.

[101] In a case such as this, such a request is, in my view, impractical and not in accord with the dictates of proportionality, generally and of rule 29.2.03(1), in particular. This refusal is upheld.

(d) all articles or legal principles that the experts have relied upon;

[102] To my mind this item seeks a similar degree of time and cost to produce little of assistance to the trier of fact. The experts have delivered their reports. If they have missed an important principle of law or economics that can be tested on cross examination. To require the experts to delineate all articles or legal principles upon which they have relied is not justified having regard to the degree of disclosure already made and the lack of proportional value of undertaking the exercise requested at this stage.

[103] Based on the affidavit evidence filed, I accept that the Special Receiver has endeavoured to state its position clearly to the other side. The extent of its attempt to clarify its position is summarized in this portion of the responding factum which, in part, describes the electronic information available:

Throughout the Written Answers, the Special Receiver set out his position on the matters at issue in the Proceedings, the facts that will be relied upon in support, and the documents supporting those facts (including references to examination transcripts). To the extent possible, referenced documents have been identified with their Summation database document number, which makes them easily accessible to Deloitte.
In response to certain interrogatories, the Special Receiver cross-referenced the reports delivered by its experts. In turn, the expert reports delivered by the Special Receiver also identify the documents upon which the experts relied to form their opinions, using Summation reference numbers that allow Deloitte to locate them among the productions. The Special Receiver has advised Deloitte that he will be relying on those documents at trial.
Short of creating a master list of all of the documents already identified in the Written Answers and expert reports, taken out of context, and therefore made less useful, there is nothing further that the Special Receiver can do to better particularize the documents to be relied upon on at trial.

[104] In my view this is more than sufficient to comply with the requirements of the Rules and the applicable caselaw....It would seem this request for even more precision, is aimed largely at the impeachment of the expert at trial, and is impermissible at this stage. In my view, this additional information does not go to the foundation of the experts' opinions, but rather to the potential impeachment of the expert's expertise and evidence.

[105] That type of challenge is best reserved for a hearing before the trial judge who is the person best suited to determine if the expert is not objective nor independent. (see May 9, 2012 decision of the Court of Appeal in Carmen Alfano Family Trust (Trustee of) v. Piersanti, 2012 ONCA 297; 291 O.A.C. 62.)

(e) all prior drafts of the experts' reports

[106] In his factum the Special Receiver asserts that he understands that his experts do not have a practice of retaining prior drafts of their reports.

[107] This is not a helpful statement. Are there no copies on any hard drives, email servers or clouds? Did no one receive a copy of the draft for comment? Is no preliminary draft or portion of such a draft extant anywhere? Perhaps.

[108] I am ordering that any existent previous drafts in the care or control of the expert, the Special Receiver or its counsel be produced on the basis that this is a reciprocal obligation upon both sides in this litigation. If Deloitte does not wish to produce any drafts on this basis, with regard to its expert, then this order will apply to neither party.

(f) correspondence between the experts and their instructing counsel that contain foundational information.

[109] The portions of any correspondence containing foundational information clearly must be produced to the extent that has not already occurred. The experts' files otherwise remain privileged until trial. They need not be produced now.

VIII. Refusals upheld

[110] It perhaps goes without saying that all the foregoing findings are in no way intended to limit the discretion of the trial judge to require more extensive production either at a pre-trial stage or once the trial begins. What I have addressed is simply whether further pre-trial disclosure is required at this stage. (viz. Carmen Alfano Family Trust v. Piersanti, 2009 CarswellOnt 1199).

[111] In the circumstances I am awarding the Special Receiver his costs of the refusal motion on a partial indemnity basis in any event of the cause. In light of the unusual costs environment in this case, I have determined such costs are to be paid following trial. If the parties cannot agree on a quantum I will establish an ad hoc procedure to receive their submissions.

Security for Costs Redux

[112] As well as dealing with the matters addressed above, I heard a second motion relating to a variation of a previous order I made relating to the requiring that the plaintiff post security for costs.

[113] This motion was brought by the defendant, Deloitte & Touche LLP ("Deloitte"), to vary the quantum of security for costs to be posted by the plaintiff. That quantum was originally set by me by order dated March 10, 2011.

[114] That order was appealed by both sides and upheld on appeal.

IX. Plot Synopsis

[115] In order to assist in appreciating the basis for the present motion, a brief summary of the factual history, set out at length in my earlier reasons, is required. As well, developments occurring subsequent to the release of my reasons in March of 2011 are quite germane.

[116] The Amended Statement of Claim asserts claims not only on behalf of Livent for Livent's own purported losses, but also on behalf of, and for damages allegedly suffered by, Livent's "Stakeholders", which the Statement of Claim defines as Livent's creditors, shareholders, and other stakeholders.

[117] The Stakeholders include Cerberus Capital Management LP ("Cerberus") and Tri-links Investment Trust ("Tri-links"), who, following discovery of the Frauds, purchased Livent notes with a face value of over US $37 million for a discounted amount of approximately US $18 million.

[118] Discovery of the Frauds resulted in Livent seeking bankruptcy protection in Canada and the United States. Livent was eventually made subject to a Plan of Arrangement (the "Plan").

[119] The Plan established a "D&T Litigation Fund," defined as:

the fund in the amount of [U.S.] $3,171,000 to be established by the Liquidation Trustee and deposited in trust with Stikeman Elliott, counsel to Livent (Canada) in the D&T Litigation, on the Effective Date for the payment of the Estates' costs and expenses of prosecuting the Canadian Action, including the D&T Litigation [emphasis added]

[120] In the Plan, "Canadian Action" is defined as any action, including this action and an action brought against Livent's former management, asserted or to be asserted by Livent to recover monies against non-debtor third parties.

[121] Pursuant to the Plan, a creditor's committee was empowered to raise funds from the creditors to be deposited into the D&T Litigation Fund.

X. The Existing Security for Costs Order

[122] On the original motion the plaintiff argued that it was inappropriate to make an order for security for costs against a court appointed special receiver. In the alternative, it was submitted that the most that should be awarded as security for costs of preparation and trial was $559,000.

[123] In determining the quantum to be ordered, I considered a number of factors based on the information available at that time. One of those factors was my assumption, based on the submissions of counsel, that the trial would last 8 weeks.

[124] As detailed in my reasons, I determined that an allowance of $1,225,000 was appropriated .this was calculated applying a reduction of roughly 10% to a gross total of $1,363,006. Which amount was based upon this calculation:

Pre-trial matters $168,000

Trial Preparation matters $197,000

Trial period $434,400

Experts $280,000

Disbursements $126,800

Sub-total $1,206,200

HST $ 156,806

TOTAL $1,363,006

[125] That amount was premised on an 8 week trial commencing in September of this year. That prediction proved to be overly optimistic in two respects. The trial is now scheduled for 2013 and is expected to last 12 weeks. As well additional expert testimony is anticipated.

[126] The factum filed by Deloitte identifies indications in my reasons as to the inability, at that stage, to predict with certainty a number of elements:

Master Short appreciated the possibility that changed circumstances in the future would make a variation of his order appropriate. For example, he noted that:

(a) "I have determined to use a roughly 2 month estimate for the duration of the trial... [i]f the actual situation differs, there would seem to be good reason to seek a variation of my ultimate decision on this motion";

(b) the 2 month estimate for the duration of the trial was taken from the "probably over optimistic estimate of the plaintiff'; and

(c) "obviously matters of alteration of this timing and of any potential further security to be posted during the trial or otherwise, remain in the discretion of the trial judge."

[127] Both parties appealed aspects of my security for costs order to Justice Colin Campbell. Those appeals were dismissed in reasons released September 13, 2011, [2011 ONSC 5353].

[128] Justice Campbell heard a further motion having a bearing on the present motion on the same day the appeals were heard. That motion dealt with the application by the Special Receiver for approval of the terms of a Litigation Financing Arrangement. In many respects the decision on that application, [2011 ONSC 5352] gives rise to the present motion.

[129] As there was no dispute filed before me with respect to the Deloitte interpretation of the Financing Arrangement, I base my decision on the following understanding of the arrangement approved by Justice Campbell.

XI. The Plaintiff's Litigation Financing Arrangement

[130] The plaintiff’s motion sought approval of a new Litigation Financing Arrangement. That motion was required because, as Livent's Special Receiver deposed in support of the motion:

“(a) the D&T Litigation Fund had been fully utilized to fund the litigation to that date;

(b) the Special Receiver did not have the funds to pay Master Short's security for costs award directly. The D&T Litigation Fund had been consumed, and there was no further opportunity to replenish the D&T Litigation Fund as available funds under the Plan had been distributed; and

(c) as such it was necessary for the plaintiff to seek out alternative sources of financing for the security for costs owing to Deloitte, as well as the estimated costs of pursuing the Canadian Actions. Without such additional financing, the Canadian Actions would not continue.” [my emphasis]

[131] Under the Litigation Financing Arrangement, the plaintiff would turn to some of Livent's creditors to bear the financial burden of posting security for costs and continuing the action.

[132] In particular the Litigation Financing Arrangement would vary the financing provided for in the Plan and would alter the priorities between creditors from those anticipated when the original Plan was sanctioned under the Litigation Financing Arrangement, if the plaintiff won a judgment in the litigation, there would be a different allocation of success amongst creditors, with first recovery going to those who would now be bearing the financial burden.

XII. Deloitte Objection to Arrangement

[133] Deloitte objected to the Litigation Financing Arrangement, submitting in part:

(a) under the Litigation Financing Arrangement, Daedalean Financial Corporation ("Daedalean") and Cerberus, who are alleged to hold approximately $80 million of unpaid claims on Livent's estate, have agreed to subscribe to the litigation financing. In return for their advancing up to $5 million they will receive super-priority, not only in respect of that $5 million but also in respect of the entirety of their $80 million claim. The same super-priority will be awarded to other participants in the Litigation Financing. Daedalean and Cerberus will be paid interest on any advances they make at the rate of 18% per annum and Daedalean will also be paid $10,000 per month as an administration fee;

(b) Daedalean and Cerberus appear to have acquired their claims through the purchase of Livent's debt following its insolvency. Whatever their rights to advance claims on Livent estate, they were not victims of the fraud at Livent and have no claims against Deloitte; and

(c) as a consequence of the Litigation Financing Arrangement, this litigation will be changed from an action brought by a court-appointed receiver to one controlled by and for the benefit of a subset of Livent's creditors, Daedalean and Cerberus, who will receive preferential treatment for their claims and who will not be at risk for Deloitte's costs should the claims made in the litigation be unsuccessful. [my emphasis]

[134] Justice Campbell dismissed Deloitte's objections. He approved the Litigation Financing Arrangement but went on to hold that:

“[i]n my view it is appropriate ... to alleviate any prejudice to [Deloitte] by permitting a further motion for security for costs to be brought after the action is set down for trial.

XIII. Extent of Financing Available and- Changed Circumstances

[135] It now appears clear that, pursuant to the Litigation Financing Arrangement, the plaintiff now has access to up to a further $10 million to prosecute this litigation.

[136] Before me, Deloitte’s counsel asserted that Deloitte has no knowledge of the extent to which the plaintiff has obtained funds under the Litigation Financing Arrangement or the current balance of the D&T Litigation Fund. As a consequence it is submitted absent the assistance of this Court, Deloitte would still be unable to reach those funds to satisfy a costs order in Deloitte's favour.

[137] They further argue that circumstances have now developed such that the quantum of security for costs previously determined by me is no longer just or proportionate. The circumstances they rely upon include that:

(a) Master Short's original ruling was based on an eight-week trial, but this the trial has now been scheduled for at least twelve weeks;

(b) Further expert reports, which were not anticipated in the proceedings before Master Short, have now become necessary;

(d) The plaintiff now .has access to significant funds to prosecute this litigation, raising issues of proportionality under Rule 1.04(1.1).

XIV. Historical perspective

[138] In recent decades the attitude to the funding of plaintiff’s cases by third parties has being the subject of a major sea change. Most of the change has been prompted by the development of class actions and the permitting of contingent fee arrangements

[139] Little has been decided with regard to the interaction between those changes in attitude and the appropriate approach to security for costs in cases not falling within the class action legislation.

[140] In one such case, McIntyre Estate v. Ontario (Attorney General), 2001 7972 (ON CA), Osborne A.C.J.O. described historical concepts relating to the funding of litigation by third parties.

[141] This was a motion by Imperial Tobacco Canada Limited (ITCL) for leave to intervene in an appeal by the Attorney General for Ontario from the order which concluded that the proposed contingent fee arrangement between the plaintiff and her counsel in an action against ITCL did not violate the provisions of An Act Respecting Champerty, R.S.O. 1897, c. 327 (the Champerty Act).

[142] In her statement of claim in that action the plaintiff alleged that her late husband died of lung cancer as a direct result of smoking ITCL products to which he had become addicted. The plaintiff’s income and assets are not sufficient to fund what she contended would be relatively costly litigation. Accordingly, plaintiff’s counsel took the position that they would only act for her on a contingent fee basis.

[143] Rather than simply proceeding with the action on a contingent fee basis, the plaintiff applied for a declaration that the particular contingent fee arrangement with her counsel did not violate the Champerty Act, the Solicitors Act, R.S.O. 1990, c. S.15, or the common law.

[144] One of the arguments raised by ITCL involved invoking the common law tort of “barratry” to justify its interest in the appeal.

[145] In his reasons the Associate Chief Justice noted:

[22] I include myself among those who had never heard of the tort of barratry until I read the material on this motion. Nonetheless, this submission requires some comment because of the position ITCL takes with respect to it. ITCL claims that the tort of barratry permits a defendant who is exposed to costs as a result of a champertous proceeding to sue the lawyer through whose “efficacious intermeddling” or improper motive the champertous action was brought in the first place.

[146] Justice Osborne then provides a brief history of this area of the law:

[23] Barratry is related to, but clearly different from, champerty and maintenance. Barratry is defined in Black’s Law Dictionary, 7th ed. (St. Paul: West Publishing, 1999) as “[t]he offence of frequently exciting and stirring up quarrels and suits, either at law or otherwise”. According to Black’s, barratry is also “a crime in most jurisdictions”.

[24] By contrast, champerty refers to a bargain between a stranger and a party to a lawsuit by which the stranger pursues the party’s claim in consideration of receiving part of any judgment proceeds. The difference between champerty and barratry appears to be that while champerty is purely self-interested, barratry requires the additional intent to harm the third person: “… if the design was not to recover his own right, but only to ruin and oppress his neighbour, that is barratry”. See Words and Phrases Judicially Defined, Vol. I (London: Butterworth & Co., 1943).

[25] Maintenance is further distinguished from barratry and champerty on the basis that it appears to be motivated by altruism. That is, it requires a person to “lay out money on behalf of another in suits at law to recover a just right, and this may be done in respect of the poverty of the party; but if he lends money to promote and stir up suits, then he is a barrator”. Words and Phrases, supra.

[26] In Canada, the common law criminal offences of champerty, maintenance and barratry (as well as refusing to serve in office and being a “common scold”) were abolished after the 1950 Report of the Royal Commission on the Revision of the Criminal Code. There is no reference to a tort of barratry in torts texts such as Canadian Tort Law, Lewis Klar, (Toronto: Butterworths, 1999), Remedies in Tort, Lewis Klar et al., (Toronto: Carswell, Looseleaf ed.) or The Law of Torts, 9^th ed., John Fleming (N.S.W.: The Law Book Company, 1998). Nonetheless, for the purpose of this motion I will assume, but not decide, that there is such a thing as the tort of barratry.

[147] More recently Justice Penny in Maureen Boldt v. Law Society of Upper Canada, 2010 ONSC 3568 was required to consider these concepts where a plaintiff’s pleading alleged that the defendants engaged in champerty, maintenance and barratry.

[148] His Honour provided this summary of the law at that point in time:

[48] In McIntyre Estates v. Ontario (Attorney General), 2002 CarswellOnt 2880 (Ont.C.A.) at paragraphs 26 and 34, the Court of Appeal summarized the general principles of the torts of champerty and maintenance, as follows:

(i) champerty is a subspecies of maintenance. Without maintenance, there can be no champerty.

(ii) for there to be maintenance the person allegedly maintaining an action or proceeding must have an improper motive which motive may include, but is not limited to, officious intermeddling or stirring up strife. There can be no maintenance if the alleged maintainer has a justifying motive or excuse.

(iii) for there to be champerty there must be maintenance with the added element that the maintainer shares in the profits of the litigation.

(iv) the type of conduct that has been found to constitute champerty and maintenance has evolved over time so as to keep in step with the fundamental aim of protecting the administration of justice from abuse.

(v) when the courts have had regard to statutes such as the Champerty Act and the Statute Concerning Conspirators, they have not interpreted those statutes as cutting down or restricting the elements that were otherwise considered necessary to establish champerty and maintenance at common law.” [my emphasis]

[149] Following the release of that decision, David Cheifetz wrote on this topic in a September 20th, 2011 posting in Slaw, Canada’s online legal magazine. In part, his comment read:

“Barratry is implicit in much of the class action process south of the border, and not much less up here. It is most obvious in the class actions where few, if any, of the plaintiff class have suffered any injury of any type – let alone a compensable injury – so that the relief sought is disgorgement of revenue (profits) through the "waiver of tort" remedy.

Another way to put it is the class action process had almost made barratry, in its traditional meaning, mostly legal. Lawyers still can't create the facts that amount to the civil wrong – for example, if you know that some place is not properly maintained, suggest that somebody would do well to have a slip and fall there – but, if they see some problem likely to have injured unknown people, they can now advertise the fact that the wrong exists and troll for clients to make it worthwhile for the lawyers to sue.

I expect that many most lawyers who represent plaintiff classes would publicly disagree with me, if the barratry proposition was put to them. They will describe this as a necessary aspect of the regulatory function – the conduct modification purpose of class actions. After all, if we lawyers don't lead the charge (from the front, of course, with suitable pay for the danger of leading the charge from the front) then who will? ”

[150] Perhaps in the future the answer to that rhetorical question, for cases that are not brought under the class action legislation, will be third party investors.

[151] In my view such financing approaches, while permitting potentially meritorious claims to proceed, nevertheless need to be subject to a re-thought approach to potential liability for costs in the event the action is unsuccessful. What type of order is just in such circumstances?

XV. An Order "That Is Just" in the Circumstances

[152] Clearly the new subrule 1.1, added to Rule 1.04 in 2010 may have a bearing on this matter as well:

1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

[153] Master Haberman in Shuter v. Toronto Dominion Bank, 2007 37475 (ON SC), [2007] O.J. No. 3435; 2007 37475, provided helpful guidance on establishing a just order once it has been determined that security ought to be provided.

64 It is important, at the second stage of the inquiry, to bear in mind what Rule 56.01 is intended to address. An order for security for costs is consistent with the overall philosophy of our Rules, which emphasises a number of objectives, including streamlining proceedings so that matters move through our courts within a reasonable timeframe; encouraging early and reasonable settlements; and discouraging litigation or steps in litigation that are doomed to fail. As a result, in this jurisdiction, costs generally follow the event - the party whose position fails is generally required to pay a significant portion of the costs of the party who has prevailed. This approach is intended to deter parties from launching frivolous actions, from dragging their heels to court and from initiating unnecessary or unmeritorious steps along the way.

65 In keeping with this general set of goals, our Rules recognize that this approach to costs provides no such deterrent if a party is unable to pay costs at the end of the day. Hence, in certain cases where the court agrees that there is genuine cause for concern about a plaintiff's ability to do so, it will entertain a motion requiring that party, either a plaintiff or plaintiff by counterclaim, to post security during course of the litigation so that funds are available to pay a cost order if and when required. In this way, a defendant is partially protected from having to bear the costs of an action that ought not to have been started.

[154] In Cigar500.com Inc. v. Ashton Distributors Inc. 2009 46451 (ON SC), 99 O.R. (3d) 55. Justice Code delivered a judgment reversing the master and following the decision of the Divisional Court in, Zeitoun v. Economical Insurance Group, (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131, [2008] O.J. No. 1771, 292 D.L.R. (4th) 313, 53 C.P.C. (6th) 308, 165 A.C.W.S. (3d) 770, 236 O.A.C. 76, 64 C.C.L.I. (4th) 52 .

[155] The Divisional Court decision in that case was subsequently affirmed by a unanimous five Justice panel of the Court of Appeal in Zeitoun v. Economical Insurance Group, 2009 ONCA 415;73 C.P.C. (6th) 8; 307 D.L.R. (4th) 218; 73 C.C.L.I. (4th) 255;2009 CarswellOnt 2665; 96 O.R. (3d) 639.

[156] In his reasons in Cigars500.com Justice Code observed:

“[68] In any event, the court's decision in Zeitoun is simply the culmination of a clear trend or evolution in the modern rule 56.01 case law towards flexible consideration of the merits at the second stage of analysis. A number of the pre-Zeitoun decisions, cited above to this effect, involved corporate plaintiffs on rule 56.01(1) (d) motions…..:

[69] For all these reasons, I am satisfied that Zeitoun is a binding decision to the effect that the merits of a plaintiff's claim remain a relevant factor at the second stage of rule 56.01 analysis, even when the plaintiff is not "impecunious". Furthermore, this principle applies generally to rule 56.01 motions, including to corporate plaintiffs under rule 56.01(1) (d). This is not to say that the courts will not take a stricter approach to corporate plaintiffs who lack assets in Ontario but who have wealthy shareholders. Indeed, the courts are likely to give considerable weight to this factor for the policy reasons set out by Nordheimer J. in Aviaco [International Leasing Inc. v. Boeing Canada Inc.; 48 C.P.C. (4th) 366; 99 A.C.W.S. (3d) 391]. In this regard, it is to be remembered that the burden in Zeitoun for a plaintiff who is not "impecunious" is a high one. It must establish that its claim "has a good chance of success". Furthermore, this remains only one factor to be balanced with other relevant factors, such as the existence of "wealthy shareholders [who] have decided to carry on business and litigation through a shell corporation", as Sutherland J. put it in Smith Bus Lines Ltd., [1987 4190 (ON SC), 61 O.R. (2d) 688 at 705]. All of these factors should be considered at the second-stage inquiry under rule 56.01.” [my emphasis]

[157] I agree with Justice Code’s conclusion that the ultimate decisions in Zeitoun are simply the culmination of a clear trend or evolution in the modern, rule 56.01 case law, towards flexible consideration of applications for security for costs. In my view this includes not only a consideration of the merits at the second stage of analysis but also a consideration of all relevant factors.

[158] Furthermore, this principle applies generally to rule 56.01 motions, including to corporate plaintiffs under rule 56.01(1) (d). This is not to say that the courts will not take a stricter approach to corporate plaintiffs who lack assets in Ontario but who have wealthy shareholders. I agree that the courts should give considerable weight to this factor for the policy reasons set out by Nordheimer J. in Aviaco, supra.

[159] In the earlier portion of my reasons I referred to the lead article in the 2009 edition of the Annual Review of Civil Litigation (edited by Justices Archibald and Echlin of this court) which was entitled "The End of the Action at Its Beginning: The Relationship between Security for Costs Motions and the Insolvent Corporate Plaintiff ". In that article, the authors considered the difficulty of addressing the competing interests in cases such as this:

“In our current global economic climate, there would appear to be increased likelihood that lawsuits will be brought by insolvent corporate plaintiffs, or that corporate plaintiffs with lawsuits already in progress may become insolvent during the course of litigation. In the next decade, this issue will of great significance for both plaintiffs and defendants. Defendants' counsel will have an interest in seeking and obtaining security from corporate plaintiff with questionable finances. Plaintiffs' counsel will have an interest in resisting orders for security; or in assessing whether to bring suits on behalf of corporations with minimal assets....”

[160] The authors address a major concern I have had in coming to my ultimate conclusion:

“In a great many cases, a successful motion for security for costs effectively spells the end of the litigation. This is especially true where the plaintiff is insolvent. ...if the plaintiff corporation is a shell company that is being directed to pursue a course of litigation by a risk-averse shareholder, the order for-security for costs effectively upends the shareholder's litigation strategy, and in most cases will also mean the end of the litigation. The difficulty for motions judges in these situations is to carefully balance the interests of the defendant in not being put to a costly defence by a plaintiff with nothing on the line, while also recognizing that an order for security could derail a prima facie meritorious claim.”

[161] In his factum counsel for the Special Receiver addresses the issue of the extent to which this court ought to consider the financial position of those presently supporting the plaintiff’s action:

From these principles, Deloitte takes the preposterous leap to argue that the financial status of a corporate plaintiff's creditors is somehow relevant in determining the quantum to be fixed in an order for security for costs. The Ontario Court of Appeal has stated that costs ought to be fixed based on the "amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding ..." [Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), 2004 CarswellOnt 2521 (CA.) at para 26]

Applied to the security for costs context, this requires determining an amount, which, objectively, would be fair and reasonable for a plaintiff to pay in the event that it is unsuccessful at trial. That this amount might somehow fluctuate based on the funds available to a creditor would be an unwelcomed change in the law: "from each according to his ability" is not a recognized legal principle in determining the quantum for security for costs, and nor should it be.

[162] In this case “investors” in the plaintiff’s position negotiated and were allowed super priorities with regard to any ultimate recoveries, such that if they are successful at trial, they potentially will be in a position to reap profits in the tens of millions of dollars. Obviously their position is not without risk. Nevertheless, in my view investors in this type of claim should expect to undertake a reasonable exposure to additional losses resulting from a cost award ,if they are unsuccessful at trial

[163] This is not David and Goliath. This is not an unfortunate investor who has lost his life savings and has already “bet the farm”.

[164] If parties wish to participate in high stake games, they my need to be given strong incentives to do so, but having received those incentives they should be prepared to “ante up” so that there is an equality of both arms and exposure.

[165] I have little doubt that if the plaintiff’s position is upheld at the conclusion of the various court processes, not only is it probable that the full amounts posted as security will be returned, but also those advocating the plaintiff’s cause will seek a very a substantial costs award in addition to the damages that may be awarded. My view of the requirement of proportionality for “equality of arms” includes an element of equality of “risk and reward” exposure.

[166] I therefore feel it is appropriate to order additional security for costs at this time. Subject to the trial judge’s discretion, I am directing that security in the amount set out below be paid into court and posted at least sixty days prior to the scheduled date for the opening of the trial.

[167] Having considered the caselaw and the requirements of the existing Rules, I am exercising my discretion in making this order which I regard as “just in the circumstances”.

XVI. Quantum

[168] In my previous reasons I noted that there was little, if any, incentive for Messrs Drabinsky and Gottlieb to proceed with their defence of the Drabinsky Litigation, and in all likelihood trial of that matter will not proceed. I accepted this as a reasonable probability and accordingly, held that the time required for trial in Deloitte's original costs estimate needed to be be significantly reduced to reflect the probability that trial will more likely only proceed for 2 months as opposed to the six originally contemplated.

[169] Schedule “H” of the Special Receiver’s factum sets out the calculation of Deloitte’s proposed upwardly adjusted total security amount of $2,100,000. I calculate a lesser sum as being appropriate

[170] In my view in light of the changes in circumstances, the number of witnesses now identified and the addition anticipated expert evidence, an extra month of trial is probable.

[171] I originally used eight weeks for two months of trial in my calculations. Eight weeks resulted in an allowance of $434,400 or $54,300.00. In my view an additional five weeks need to be contemplated now. Those five extra weeks mean an additional allowance of $271,500 is appropriate.

[172] As well, preparation for a longer trial will mean additional preparation costs. Here, since we are dealing with three months rather than two and I allowed $197,000 I have taken a rough approximation of a 33.3 % increase and allowed an additional $100,000 for increased required trial preparation.

[173] With respect to expert evidence Deloitte originally sought $700,000. I was not satisfied that anywhere near this amount has been adequately proven at that stage. Clearly expert evidence was going to be required. In my view 40% of the amount sought is a more reasonable allowance for the obtaining and presenting such evidence for the purposes of my establishing a total sum to be posted. Thus, I included $280,000 in my calculation. Clearly there will now be additional expert costs and I am allowing a further 20% of the original claim, being $140,000.

[174] To reflect the roughness of these approximations I am not increasing the previous Disbursement Allowance nor directing any sum for pre-trial matters. An amount to reflect applicable HST on the additional sums will need to be posted as well.

[175] In my earlier reasons I incorporated a 10% reduction due, amongst other reasons, to the delay in bringing the application. Given the present fact situation I see no reason for such a reduction to delay here.

[176] In light of the changed circumstances, I am not adding the complexity of a weekly payment option but rather requiring the additional amount established to be paid by way of a lump sum. However, I would commend as a pay as you go element to be considered by the trial judge if it becomes apparent that the trial will continue below the present twelve week estimate.

[177] I therefore have come to an additional amount to be paid as security for costs in this case in the total of $577,995.00 based upon this calculation of allowances for added costs:

Trial Preparation matters $100,000

Trial period costs $271,500

Experts $140,000

Sub-total $511,500

HST $66,495

TOTAL $577,995

[178] Taken together with my previous award of $1,363,006, this brings the total security to be posted pursuant to my judgements to $1,941,001.

XVII. Conclusion

[179] Obviously matters of alteration of this timing and of any potential further security to be posted during the trial or otherwise, remains in the discretion of the trial judge.

[180] In particular, there are two factors upon which I place particular reliance in determining to exercise my discretion in this way. Firstly, the overall claim against this defendant being in the hundreds of millions of dollars and the concept of proportionality places this amount within the range of reasonableness.

XVIII. Costs of Motions

[181] Firstly I commend all counsel for their advocacy in this matter. Once again their courtesy and assistance to me in addressing these important issues is greatly appreciated.

[182] If the allegations which appear to sound in fraud are not proven at trial, the trial judge will have to weigh that fact in establishing the costs payable. Obviously such a determination could have impact on costs awards made throughout in this action.

[183] As a consequence of that possibility, in my earlier award I elected to reserve the costs of this motion, throughout, to the trial judge who will be in a much better position ultimately to address the fairest disposition of the costs of this element of the overall litigation. That ruling was upheld on appeal.

[184] In all the circumstances, I feel that the costs of this increased security for costs motion should be to Deloitte on a partial indemnity basis, but again subject to the discretion of the trial judge at the completion of the trial.

Master D. E. Short

DATE: December 8, 2012

DS/ R55

Livent Inc. v. Deloitte & Touche, 2012 ONSC 7007

Case Summary

I. Nature of Overall Livent Litigation

II. Current motions

III. Responses Made

Q. 334 Will-says

Q. 335 Documents relied upon

Q. 336 Provide summary of facts from discovery of other side to be relied upon at trial

Q. 340 Discovery evidence of Deloitte partners that is going to be used to support allegations in amended statement of claim

Q.441 Specific Witness testimony

IV. Proportionality in Discovery

V. Conclusion

VI. Expert Files

VII. Rule 31.06 entitlements

VIII. Refusals upheld

IX. Plot Synopsis

X. The Existing Security for Costs Order

XI. The Plaintiff's Litigation Financing Arrangement

XII. Deloitte Objection to Arrangement

XIII. Extent of Financing Available and- Changed Circumstances

XIV. Historical perspective

XV. An Order "That Is Just" in the Circumstances

XVI. Quantum

XVII. Conclusion

XVIII. Costs of Motions

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Financial Outcomes

Issues

Statutory Provisions 4

Legal Tests 2

Legislation 1