COURT FILE NO.: CV-10-400338

DATE: 2012/03/13

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1001411 ONTARIO LIMITED carrying on business CINESPACE STUDIOS MANAGEMENT Applicant

AND:

CITY OF TORONTO ECONOMIC DEVELOPMENT CORPORATION, THE CORPORATION OF THE CITY OF TORONTO,TORONTO WATERFRONT STUDIOS INC., PT STUDIOS INC., CASTLEPOINT STUDIO PARTNERS LIMITED, CASTLEPOINT STUDIO PARTNERS 2 LIMITED, EDITH MYERS, COMWEB CORPORATION, COMWEB STUDIO HOLDINGS INC., RETURN ON INNOVATION CAPITAL LTD., THE ROSE CORPORATION, ROSE FILM STUDIOS INC., ROSE FILM STUDIOS II INC., 2104910 ONTARIO INC., KENNETH FERGUSON and GE CANADA EQUIPMENT FINANCING G.P. Respondents

BEFORE: PENNY J.

COUNSEL:
Michael Shell for the Applicant

Barnet Kussner for City Of Toronto Economic Development Corporation

Darrel Smith for City of Toronto

Carlton Thorne for Toronto Waterfront Studios Inc., PT Studios Inc., The Rose Corporation, Rose Film Studios Inc., Rose Film Studios Ii Inc., 2104910 Ontario Inc. and Kenneth Ferguson

HEARD: March 8, 2012

ENDORSEMENT

1## Introduction

This is a motion to strike out certain portions of the affidavit of Dimitrios Mirkopoulos sworn December 1, 2011 which has been filed in this application. The application itself seeks to quash City of Toronto By-law 411-2009, passed on April 16, 2009.

2The City previously brought a motion to strike out certain portions of an earlier, December 22, 2010, affidavit sworn by Mirkopoulos. In my endorsement of August 11, 2011, I granted the City's motion and struck out portions of the original Mirkopoulos affidavit with leave to amend, in accordance with certain principles set out in that endorsement, recognizing that legitimate context and background are entirely permissible.

3The City argues that significant portions of the new affidavit do not comply with my August 11, 2011 order.

Background

4## Background

In its application, Cinepspace seeks, together with related or collateral relief, a declaration that Bylaw 411-2009 is:

(1) ultra vires the City Of Toronto Act 2006, S.O. 2006, c. 11, Sch. A and exceeded the scope of the City's statutory authority;

(2) illegal and/or null and void ab initio ;

(3) constitutes unreasonable and/or procedurally unfair conduct, an exercise of bad faith, unfairness, partiality and/or the conferring of an improper bonus, benefit and/or advantage; and/or

(4) extends to the recipients and beneficiaries, contrary to public interest, or otherwise, improper and/or illegal loans, advances, grants, payments, investments, equity financing, deferments, favourable lease terms, guarantees, bonuses and/or benefits.

5In my prior endorsement, I recognized the strong principal that admissibility of evidence should generally be left to the judge hearing the application. However, I also recognized a number of circumstances in which courts have struck out affidavit evidence in advance of the hearing, including the following:

(1) courts are willing to strike out portions of affidavits that are irrelevant, particularly where the offending paragraphs have been inserted to prejudice or embarrass the opposing party or for purposes of "atmosphere" or "colour" of a negative or adverse nature;

(2) a scandalous affidavit is one containing allegations made for the purpose of prejudice to the opposite party;

(3) affidavits full of innuendo who's only purposes to cast another party in a bad light should be struck;

(4) where paragraphs are irrelevant and responding to them would create unnecessary expense and lengthen the proceedings, they ought to be struck. The time of the parties and Court should not be wasted dealing with matters that can have no impact on the outcome.

6Applying these principles, it was my conclusion that the impugned paragraphs were irrelevant to the legal issues before the Court and were only added for atmosphere or colour, for the purpose of putting the respondents in a bad light, and that the respondents should not be forced to defend themselves against 16 years of allegations concerning City conduct that was never challenged at the time. I thought it better to deal with the propriety of these allegations on motion now, before the parties are required to spend hours, days or weeks searching for documents, drafting affidavits and cross examining on events and transactions, motivations and justifications for events that happened long ago, involved differently constituted City councils, different mayors, different parties and different bylaws. It was my view that the applicant’s challenge to the 2009 by-law cannot be used as a platform to launch policy grievances held by Cinespace regarding municipal involvement in the film industry for the last 16 years.

7I granted the motion on the basis that:

While context and background are legitimate evidentiary objectives, such material must relate to the matters in issue. In this case, I fear, there is no discernible basis for the allegations of [recovery,] the innuendo, the alleged questionable practices and "unfairness" regarding transactions (some of which never proceeded), events and by-laws which were never challenged at the time and which can bear no legitimate connection to the 2009 by-law, which is the subject of this application. I accept the detailed analysis of the challenged paragraphs set out at paras. 35 to 91 of the City's factum.

8I also went on to say that:

In the circumstances, given the extent of the expunged portion of the affidavit, and recognizing that legitimate context and background are entirely permissible, I believe some latitude should be afforded to Cinespace if it wishes, to recast its evidence if any of the events expunged can be legitimately engaged, without the colour, the innuendo, the casting of aspersions, etc., as background or context. If this is done at all, however, it must be done having regard to the principles I have articulated above and relied on as the basis for striking out the portions of the affidavit I have ordered be struck out.

9The City’s argument is that Cinespace has once more put in a history going back to 2000, concerning the same transactions that were never attacked. These incidents are set out with only minor drafting changes. In some cases paragraphs that were struck have been reproduced almost verbatim. Although some "editorializing" words have been taken out of some paragraphs, these past events are completely irrelevant. In order to understand whether a 2009 by-law constitutes bonusing, there is no need to recount prior City initiatives concerning the film industry, dating back 12 years. These past events have been left in the affidavit, not because they form necessary context, but to establish an “odour.” Cinespace wishes to put those matters before the Court to argue that they show some sort of history of bad faith or unfair dealing. The prior order has already rejected the applicant's efforts to do this. The amended affidavit is not in the spirit of the order and is in many cases directly contradictory to it.

10## Analysis

At the heart of my prior ruling there were two core principles:

(1) innuendo inserted for colour and for no purpose except to cast the other party in a bad light should not be permitted; and

(2) the respondents ought not to have to defend against a decade or more of allegations involving City conduct that was never challenged at the time and which involved differently constituted councils, different mayors and different by-laws.

I viewed the allegations of impropriety inherent in many of the assertions made in the original affidavit as a form of collateral attack on prior City by-laws, well outside the statutory limitation period for such challenges.

11The arguments of the City and TEDCO are somewhat different now. As counsel for TEDCO submitted, the innuendo is largely gone and the affidavit has been “sanitized” but the basic facts alleged still include reference to prior by-laws, agreements and policies of the City and TEDCO. The argument is now almost exclusively based on relevance. A prior by-law, for example, cannot be attacked in this application and its existence is, therefore, completely irrelevant; all mention of it should be completely and finally excised from the evidence.

12I do not think my prior ruling, or the law with respect to striking out paragraphs of affidavits in advance of the hearing, goes that far. In my view, the objectionable aspects of the original affidavit have largely been eliminated. The innuendo is gone. What remains is the pleading of certain facts, without colour, which the applicant seeks to rely upon as laying some kind of foundation for the 2009 By-law now in issue.

13One exception is paragraph 41 which addresses the deponent’s “concerns” about the use of public funds in 2000 for film development purposes. This is virtually identical to a portion of a paragraph I ordered struck out after the first motion. The deponent’s concerns about the use of public funds in 2000 are entirely irrelevant to the issues raised in the application and this paragraph should be struck.

14The other freestanding issue has to do with paragraphs 95 through 113 of the new affidavit. These paragraphs deal with alleged “damage” to Cinespace. They are said to relate to the question of whether the By-law granted “bonuses” contrary to section 82 of the City of Toronto Act .

15The City argues that old paragraphs 178-196 went on at length about alleged advantages given and predatory pricing by the mega-studio after the 2009 By-law in issue and how this had caused damage to others in the industry, including Cinespace. Damages are not in issue and these paragraphs were struck. The issue is whether the transactions authorized by the By-law constitute a bonus. New paragraphs 98-112, the City argues, repeat the same allegations.

16Paragraphs 1 (e) to (i) of the application seek relief in the nature of an accounting and the disgorgement of any benefits resulting from the impugned By-law. There was no motion to attack or strike out these paragraphs. The claimed “damages” could relate to these claims. Further, I am not satisfied that the obtaining of certain monetary benefits could in no circumstances be relevant to whether the By-law conferred an advantage in the nature of a bonus on the mega-studio. The ability to out-bid the applicant could be relevant to the issue of bonusing. These are issues that should be heard and resolved by the judge hearing the application/trial, with the benefit of a broader evidentiary record. Accordingly, I decline to strike out these paragraphs on these grounds.

17With the exception outlined above, the motion is dismissed.

18## Costs

I encourage the parties to attempt to resolve the issue of costs, failing which brief submissions (not to exceed 2 typed pages together with a bill of costs) may be submitted within two weeks of the release of these reasons.