ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-12-109480-00

DATE: 20130214

BETWEEN:

Gus Kalsatos and Koen York Enterprises Ltd.

Plaintiffs

– and –

Center City Sports Inc. and Center City Machinery Inc.

Defendants

Adam J. Ezer, for the Plaintiffs

Gregory W. Roberts, for the Defendants

HEARD: December 31, 2012

REASONS FOR DECISION

EDWARDS j.:

Background

[1] Gus Kalsatos (“Gus”) and Alex Kalsatos (“Alex”) are brothers who became embroiled in litigation that commenced on October 11, 2002 when Gus and Center City Auto Sales Inc. (“Auto”) issued a statement of claim against Alex, Center City Quality Cars Inc. (“Quality”), Axela Finance Inc. (“Axela”) and Evelyn Watling (“Watling”). I will refer to this action as the “first action”.

[2] In the first action, it would appear that Gus and Alex had entered into a financial arrangement in connection with a used car business, which was located at 2376 Dundas Street West, in the City of Toronto. Ultimately, the first action came before Lederman J. in May 2011, who ordered Alex and Quality to pay Gus the sum of $113,020.35.

[3] The decision of Lederman J. was appealed by Gus and Auto. A notice of cross-appeal has also been filed by Alex and Quality.

[4] The action which is presently before this court was commenced by a notice of action on May 17, 2012. On the same date, Mullins J. made an order in the nature of a Mareva injunction against the defendants and also granted, what may be described as, a production order against individuals who are not party to the action but, who were for the most part, parties to the first action.

[5] On June 8, 2012, Corkery J. refused to extend the order of Mullins J. With respect to those paragraphs granting production against the non-parties, Corkery J. ordered as follows:

The issue of whether paragraph 6 and 7 of the order of Madam Justice Mullins dated May 17, 2012 should continue shall be addressed in a separate motion on July 5, 2012…

[6] As a result of the order of Corkery J., the non-parties were under no obligation to make any documentary production of those documents referenced in paragraph 6 and 7 of the order of Mullins J. Rather, the whole issue as to whether or not there should be a non-production order was left to another day for determination. Ultimately, it is that issue that is now before this court.

[7] The plaintiffs in this action are also plaintiffs in an action against the estate of Edward Conway and his professional corporation. This action is a solicitor’s negligence action which, amongst other things, pleads that Mr. Conway:

…failed to conduct examinations for discovery of Alex Kalsatos, Quality, Axela, or Watling…

[8] Mr. Conway was the plaintiff’s solicitor in the first action before Lederman J.

[9] In part, the plaintiff’s claim against Mr. Conway includes the following allegations:

Mr. Conway:

(i) Failed to conduct examinations for discovery of Alex Kalsatos, Quality, Axela, or Watling;

(ii) Failed to take proper steps to prove the value of various vehicles wrongfully converted from ownership by the plaintiffs, or to take the necessary steps to trace the ownership and to demand proper recovery from all relevant third parties;

(iii) Failed to advance a claim at trial for loss of net profits as a result of the improper transfer of the vehicles; and

(iv) Failed to pursue an accounting of all proceeds from the sales or disposition of the plaintiff’s assets, or an interim injunction restraining Quality, Axela, Watling, and Alex from any further disposition of the plaintiff’s assets.

[10] As to the defendants in the action before this court (which I will refer to as the “second action”), Center City Sports Inc. (“City”) was incorporated on November 25, 2003. The certificate of incorporation for City was cancelled on August 4, 2008 (i.e., even before the commencement of the plaintiff’s second action on May 17, 2012).

[11] The defendant, Center City Machinery Inc. (“Machinery”) was incorporated on March 12, 2007. Anthony Kalsatos, who is the son of Alex, is shown as the sole director of Machinery.

[12] Since the hearing of the Mareva injunction before Mullins J. and the subsequent refusal of Corkery J. to continue the order of Mullins J., the plaintiffs in the second action have taken no steps to issue and serve a statement of claim. The second action, therefore, is a long way from being ready for trial as pleadings have not closed and discoveries have not even commenced.

[13] As to the purpose for which the production order now sought against the non-parties is concerned, Mr. Ezer, counsel for the plaintiffs, candidly acknowledged that the documents sought will be used in support of a motion in the Court of Appeal in the first action, seeking leave to introduce fresh evidence on that appeal. This becomes readily apparent by reference to an affidavit of Christopher Kerr, which was filed in the Court of Appeal in support of the plaintiffs’ motion in the first action, seeking leave to introduce fresh evidence. Mr. Kerr deposes:

I am advised by Mr. Ezer, and verily believe it to be true, that he specifically advised Madam Justice Mullins at the hearing on May 17, 2012, that part of the intent of the appellants in seeking production was to adduce evidence on this appeal. Mr. Ezer referred to there being authority as an exception to the normal rule regarding the admission of fresh evidence, if the evidence was not adduced previously due to solicitor’s negligence.

[14] As to the viability of the plaintiffs obtaining leave in the Court of Appeal to file fresh evidence in the form of documents that might arise as a result of the non-party production now sought, this issue was indirectly addressed by Sharpe J.A. on a motion before the Court of Appeal to extend the time for perfection of the appeal. In that regard, Sharpe J.A. noted:

In my view, the appellants will face an uphill battle in persuading a panel of this court that they should now be permitted to effectively reverse their tactical decision at trial to claim only reimbursement of monies advanced and assert the fraudulent conversion claim. However it is not for me on this motion to decide the fresh evidence issue and indeed, the appellants have not yet collected all the hoped-for fresh evidence that will support the conversion claim.

In the pending Superior Court action from which the appellants hope to secure the evidence they need, the appellants obtained an ex parte Mareva order. That order was not renewed but the judge who declined to renew it left open the possibility that the appellants’ might be able to enforce provisions in the order requiring disclosure and production of information relating to the allegedly converted cars. While some affidavits have been filed and some cross-examinations have occurred that the appellants say supports their claim, the Superior Court has yet to determine whether further disclosure and production under the terms of the Mareva the order should be required. The appellants ask for an indefinite postponement of the perfection date for this appeal to allow them to take all necessary steps in the Superior Court with regard to that order.

The Issue

[15] The sole issue before this court is whether or not a non-party production order should be made at a stage in a proceeding where the pleadings themselves have not even been regularized and affidavits of documents exchanged. In essence, this court is urged by the plaintiffs to grant the order so as to avoid a potential injustice where the plaintiffs submit the documents if produced may meet the test in the Court of Appeal for the filing of fresh evidence. The defendants on the other hand, including the non-parties themselves, argue that the process by which the plaintiffs seek the production order is a complete abuse of process and that the Rules of Civil Procedure (the “Rules”) do not allow for the production from non-parties where the statement of claim hasn’t even been issued and served.

[16] Mr. Ezer, on behalf of the plaintiffs, acknowledges that the sole basis under the Rules for the granting of an order now sought is found in Rule 30.10 and Rule 31.10. He also relies upon Rule 2.01(1). The operative part of Rule 30.10 and Rule 31.10, as it relates to the motion before this court, is a requirement that the moving party show that it would be “unfair to require the moving party to proceed to trial without having discovery of the document” and “it would be unfair to require the moving party to proceed to trial without having the opportunity of examining the person.” (emphasis added)

[17] As it relates to both Rule 30.10 and Rule 31.10, the second action is a long way from being ready for trial. The statement of claim has not yet even been issued. Productions have not been exchanged between the parties to the action. Generally speaking, the purpose of both Rule 30.10 and Rule 31.10 is to assist the moving party in obtaining documents and evidence from a non-party to assist in proving that party’s case at trial.

[18] The sole purpose for which the plaintiffs now seek production from the non-parties is to potentially assist the plaintiffs in their appeal in the Court of Appeal by obtaining evidence from the non-parties that could be then used in a motion to introduce fresh evidence on the appeal. There are two competing interests at play with respect to this motion. The first is whether or not the plaintiffs are abusing the Rules in a manner that was never intended. In my view, a clear reading of both Rule 30.10 and Rule 31.10 makes clear that these Rules are almost exclusively reserved for the production of, and taking of evidence, from non-parties where the evidence has not been obtained through the normal discovery process and where it would be unfair to require the moving party to proceed to trial without this evidence.

[19] What the plaintiffs are now seeking to do in the second action is an abuse of this court’s process and an abuse of the Rules. This abuse can only be saved if the competing interest of ensuring that all of the relevant evidence the Court of Appeal needs to have before it, is before it when the appeal is heard. This court is not the appropriate forum for the determination of that issue. If the plaintiffs are of a mind that the evidence which the plaintiffs believe is within the possession of the non-parties, is fundamental to the hearing of their appeal, the proper forum for the granting of such an order that is sought from the non-parties should have been on motion to the Court of Appeal and not this court. This court does not have jurisdiction at this stage of a proceeding where a statement of claim has not even been issued to grant the type of order now sought.

[20] Mr. Ezer, on behalf of the plaintiffs, also submitted that this court has an inherent jurisdiction to make the type of order sought so as to prevent an injustice occurring in the Court of Appeal. Section 146 of the Courts of Justice Act (the “Act”) provides:

Jurisdiction conferred on a court, a judge or a justice of the peace shall, in the absence of express provision for procedures for its exercise in any Act, regulation or rule, be exercised in any manner consistent with the due administration of justice.

[21] Section 146 of the Act cannot be applied to confer a power on this court that is not contained in the rule. Both Rule 30.10 and Rule 31.10 makes specific provision that requires the moving party to show that it would be unfair to require the moving party to proceed to trial without the benefit of the documents requested or the evidence sought. Where the avowed intention of the moving party is not for the production of documents and evidence at trial but, rather in support of a fresh evidence application on appeal, neither of these Rules provide this court with the inherent jurisdiction to make the order sought.

[22] The plaintiffs’ motion is dismissed with costs. If the parties cannot agree upon costs of this motion, written submissions can be made by the parties, limited to three pages in length to be filed with the trial co-ordinator’s office within ten days from the date of receipt of these reasons.

Justice M.L. Edwards

Released: February 14, 2013