ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-10-414667
DATE: 20121211
B E T W E E N:
Aon Reed Stenhouse Inc. Plaintiff/Respondent - and - Marsh Canada Limited, David J. Mew and Tom R. Parsons Defendants/Appellants
Matthew P. Gottlieb & Daniel Z. Naymark , for the Plaintiff/Respondent
Malcolm MacKillop & Hendrik Nieuwland , for the Defendants/Appellants
HEARD : November 13, 2012
GOLDSTEIN J.:
[ 1 ] Aon Reed Stenhouse Inc. (“ Aon ”) and Marsh Canada Limited (“ Marsh ”) are two of the world’s largest insurance brokerages. They are fierce competitors. David Mew and Tom Parsons were employees of Aon. They serviced the Fairmont Hotels (“ Fairmont ”) account, a large Aon customer. In December 2009 they quit Aon and went to work for Marsh. A short time after that Fairmont stopped doing business with Aon and started doing business with Marsh. Aon says that Mew and Parsons effectively stole Fairmont’s business away and sued them along with Marsh. At an examination for discovery, Aon’s lawyer asked Mew about his business activities relating to Fairmont after he went to work for Marsh. Mew’s counsel refused to answer or to produce documents. Aon brought a successful motion before Master Muir to compel answers and documentary production. Mew now appeals. In my view, the Master made no error and the appeal is dismissed for the reasons that follow.
BACKGROUND:
[ 2 ] Mew joined Aon in October 1979 and progressed to senior levels. In 2007 he was appointed Regional Manager, Client Services, a senior position which he held until he left Aon in December 2009. Mew provided insurance services to Fairmont.
[ 3 ] Parsons joined Aon in 2003 as Manager of Contract Risk Management Services. He provided risk management services to Fairmont.
[ 4 ] Although the parties dispute the exact degree of responsibility that Mew and Parsons had for the Fairmont account, there is no doubt that they had significant duties and possessed a great deal of knowledge about Aon’s business with Fairmont.
[ 5 ] In their employment agreements, Mew and Parsons agreed that they would not solicit any Aon client for 12 months after leaving the company. Both agreements stipulated:
You further agree not to divulge to any third party any confidential information in respect of the business of the Company or its subsidiaries or affiliates, including the identity of their clients or the terms of their contractual relations with their clients. (I refer to this clause as “ the non-solicitation agreement ”).
[ 6 ] In December 2009, Mew and Parsons resigned from Aon and began working at Marsh. In January 2010 Fairmont terminated its brokerage and risk management relationship with Aon and immediately began using the services of Marsh.
[ 7 ] In November 2010 Aon sued Mew, Parsons, and Marsh. The allegations contained in Aon’s statement of claim that are relevant to this appeal include the following:
• The Defendants solicited Fairmont’s business away from Aon while Marsh and Parsons were still employed by Aon and did so by using confidential Aon information;
• After joining Marsh, Mew and Parsons misused Aon’s confidential and proprietary information in servicing Fairmont.
The Defendants deny the key allegations.
[ 8 ] In April 2012 Mew was examined for discovery. He was asked seven questions regarding his involvement with the Fairmont account during his first year of work at Marsh. Mr. Mew admitted that he did work on the Fairmont account after January 2010 and that the work fell within the non-solicitation agreement. His counsel took the position that anything he did after January 2010 was not relevant and refused to answer the questions and produce documents.
[ 9 ] Aon brought a motion to compel answers and production, which the Master granted. Shortly prior to the hearing of the motion, the Defendants filed an affidavit sworn by Mew. Mew admitted to working on the Fairmont account for Marsh after January 21 2010 but denied that he took any confidential documents from Aon.
[ 10 ] In his detailed reasons, the Master concluded that the Aon was not on a fishing expedition, as the allegations of misuse of confidential information were clearly and specifically pleaded in the statement of defence. The Master concluded that the Plaintiff’s questions were relevant.
ANALYSIS:
[ 11 ] Mr. MacKillop, for Mew, argues that the Master made three legal errors in granting the order for production:
The production order was based on broad, unsubstantiated allegations in the statement of claim;
The production order was based on speculation that Mew took and misused Aon’s confidential information when he provided services to Fairmont on behalf of Marsh; and,
The production order was based on the discredited legal doctrine of “inevitable disclosure” of confidential information.
[ 12 ] I commence with a review of the standard of review for a master’s decision. The standard was summarized by Strathy J. in Paul v. Pizale , 2011 ONSC 3490 :
19 The standard of review on appeal from the Master was set out by the Divisional Court in Zeitoun v. Economical Insurance Group (2008), 91 O.R. (3d) 131 (Ont. Div. Ct.), aff'd, (2009), 2009 ONCA 415 , 96 O.R. (3d) 639 (Ont. C.A.): the decision should not be interfered with unless the Master made an error of law, exercised his or her discretion on the wrong principles or misapprehended the evidence such that there was a palpable or overriding error. Where there is an error of law, the standard of review is correctness, whether the order is final or interlocutory. Where there is an error in the exercise of discretion, it must be established that the discretion was based on a wrong principle or that there was a palpable or overriding error in the assessment. See also Housen v. Nikolaisen , 2002 SCC 33 , [2002] 2 S.C.R. 235 (S.C.C.).
20 A Master's decision concerning relevance is a question of law: Republic National Bank of New York (Canada) v. Normart Management Ltd. (1996), 31 O.R. (3d) 14 (Ont. Gen. Div.).
[ 13 ] In Ipex Inc. v. AT Plastics Inc. , [2011] O.J No. 3636, 2011 ONSC 4734 , 337 D.L.R. (4 th ) 63, Strathy J. also made the following comments regarding master’s decisions on the production of documents:
19 I accept the general proposition, put forward by counsel on behalf of ATP, that a Case Management Master's decision on documentary production is one that falls squarely within the Master's area of experience and expertise. Masters have been aptly described as being on the "front line" of production and discovery motions and their decisions on those issues are entitled to deference on appeal: Noranda Metal Industries Ltd. v. Employers Liability Assurance Corp . (2000), 49 C.P.C. (4th) 336 , [2000] O.J. No. 3846 (S.C.J.); Temelini v. Wright, [2009] O.J. No. 4447 (S.C.J.) at para. 16 , aff'd. 2010 ONCA 354 , [2010] O.J. No. 5994 . This is particularly so where the decision involves an element of discretion.
[ 14 ] With those principles in mind, I turn to the alleged errors in the Master’s decision.
- Was the production order was based on broad, unsubstantiated allegations
in the statement of claim?
[ 15 ] Mr. MacKillop, for Mew, argues that Aon was on a fishing expedition. He says that the Master’s error can be found in paragraph 14 of his reasons for judgment (reproduced here with emphasis added):
I do not see the plaintiff’s requests as constituting a fishing expedition. First, the allegations of misuse of confidential information are clearly and specifically pleaded in paragraph 25 of the statement of claim. Moreover, there does exist certain circumstantial evidence that lends at least some support to these allegations. Mew was a long-term and senior employee of the plaintiff who admits that he had access to confidential information concerning Fairmont when he was employed by the plaintiff. It was only one month after Mew and Parsons left the plaintiff and joined Marsh that Fairmont announced that it was taking its business from the plaintiff to Marsh. Mew then began immediately working on the Fairmont account, in apparent breach of the terms of the non-competition provisions of his employment agreements with the plaintiff (assuming they are enforceable).
[ 16 ] Mr. MacKillop argues that, contrary to the Master’s comments, the allegation of misuse of confidential information is not clearly and specifically pleaded. Paragraph 25 of the Statement of Claim simply makes a bare allegation.
[ 17 ] Mr. Gottlieb, for Aon, argues that the basic question before the Master – whether the questions were relevant – went to the heart of the pleadings. The actions of the Defendants in relation to the Fairmont account are a critical issue in the lawsuit. Since the pleadings determine relevance, the Master was right to order that the questions be answered and the documents be produced.
[ 18 ] Notwithstanding Mr. MacKillop’s able argument, I do not agree with him. Relevance is determined by the pleadings: Ontario v. Rothmans Inc., [2011] O.J No. 1896, 2011 ONSC 2504 . In that case (to which the Master also referred) Perell J. very helpfully summarized the principles about the scope of questioning on an examination for discovery (I excerpt the key points):
The scope of the discovery is defined by the pleadings; discovery questions must be relevant to the issues as defined by the pleadings: Playfair v. Cormack (1913), 4 O.W.N. 817 (H.C.J.).
The examining party may not go beyond the pleadings in an effort to find a claim or defence that has not been pleaded. Overbroad or speculative discovery is known colloquially as a "fishing expedition" and it is not permitted. See Cominco Ltd. v. Westinghouse Can. Ltd. (1979), 11 B.C.L.R. 142 (C.A.); Allarco Broadcasting Ltd. v. Duke (1981), 26 C.P.C. 13 (B.C.S.C.).
Under the former case law, where the rules provided for questions "relating to any matter in issue," the scope of discovery was defined with wide latitude and a question would be proper if there is a semblance of relevancy: Kay v. Posluns (1989), 71 O.R. (2d) 238 (H.C.J.); Air Canada v. McConnell Douglas Corp. (1995), 22 O.R. (3d) 140 (Master), aff'd (1995), 23 O.R. (3d) 156 (Gen. Div.). The recently amended rule changes "relating to any matter in issue" to "relevant to any matter in issue," which suggests a modest narrowing of the scope of examinations for discovery.
The extent of discovery is not unlimited, and in controlling its process and to avoid discovery from being oppressive and uncontrollable, the court may keep discovery within reasonable and efficient bounds: Graydon v. Graydon (1921), 67 D.L.R. 116 (Ont. S.C.) at pp. 118 and 119 per Justice Middleton ("Discovery is intended to be an engine to be prudently used for the extraction of truth, but it must not be made an instrument of torture ..."); Kay v. Posluns (1989), 71 O.R. (2d) 238 (H.C.J.) at p. 246; Ontario (Attorney General) v. Ballard Estate (1995), 26 O.R. (3d) 39 (C.A.) at p. 48 ("The discovery process must also be kept within reasonable bounds."); 671122 Ontario Ltd. v. Canadian Tire Corp. , [1996] O.J. No. 2539 (Gen. Div.) at paras. 8-9 ; Caputo v. Imperial Tobacco Ltd. , [2003] O.J. No. 2269 (S.C.J.) . The court has the power to restrict an examination for discovery that is onerous or abusive: Andersen v. St. Jude Medical Inc. , [2007] O.J. No. 5383 (Master) .
[ 19 ] Although the Master only referred to Paragraph 25 of the statement of claim, when read in context it can be seen that Paragraph 25 summarizes very detailed facts regarding the allegedly tortious behaviour of the Defendants. It is not necessary for me to conduct a detailed review of the statement of claim; suffice it to say that the statement of claim alleges particular facts in relation to the wrongful use of Aon information by Mew and Parsons in several different paragraphs.
[ 20 ] In my view the Master was correct that the questions were relevant and did not constitute a fishing expedition: Mew and Parsons are alleged to have dealt with Fairmont while employees of Aon. Fairmont moved its business to Marsh shortly after Mew and Parsons moved to Marsh. Aon alleges in the statement of claim that Mew was in possession of confidential information and used it after moving to Marsh. Mew admits in both his defence and in his affidavit that he was possession of confidential information. Relevance is a question of law inviting a standard of correctness and the Master was correct.
[ 21 ] Furthermore, I see nothing about the order that converts production from a tool for discovery into an instrument of torture. The Master was very much alive to the issue of proportionality. He took into account Mew’s objections that the requests would result in hundreds and possibly thousands of additional pages of disclosure. The Master stated:
In my view, such additional production does not seem disproportionate or excessive given the sophistication of the parties and the amounts in issue in this litigation. As I noted above, both the plaintiff and Marsh are large multi-national businesses. I cannot see how an organization such as Marsh would be prejudiced by the additional limited production that may be necessitated in order to respond to the plaintiff’s requests. I also note that the plaintiff is agreeable to an order permitting the defendants to redact any irrelevant commercially sensitive or confidential information from any documents produced.
[ 22 ] This aspect of the Master’s decision carefully balanced the competing interests at stake and is unassailable. He made no error in the exercise of his discretion.
DISPOSITION:
[ 36 ] The appeal is dismissed. Pursuant to an agreement between Mr. MacKillop and Mr. Gottlieb costs of $6000.00 are payable to Aon. I am grateful to all counsel for their highly professional approach to this matter.
GOLDSTEIN, J.
DATE: December 11, 2012
COURT FILE NO: CV-10-414667
DATE: 20121211
ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N:
Aon Reed Stenhouse Inc. Plaintiff - and - Marsh Canada Limited, David J. Mew and Tom R. Parsons Defendants
JUDGMENT
GOLDSTEIN J.
Released: December 11, 2012