ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-06-079846-00

DATE: 20130703

BETWEEN:

The Atlas Corporation

Plaintiff

– and –

Andy Ingriselli, Groundwater Environmental Management Services and Jill Atwood

Defendants

Salvatore Mannella, for the Plaintiff

Sarit E. Batner, for the Defendants and Aquatech Dewatering Company Inc.

HEARD: June 20, 2013

REASONS FOR DECISION

EDWARDS J.:

Overview

[1] The plaintiff seeks production from a non-party, Aquatech Dewatering Company Inc. (“Aquatech”) of Aquatech’s financial statements for the years 2006 through 2009, inclusive; a copy of the shareholder agreement between the shareholders of Aquatech; and production of the books and records of Aquatech, used by the accountants in the preparation of Aquatech’s financial statements. Aquatech opposes this motion.

Procedural History

[2] The action as it is presently constituted arises out of an alleged breach of an oral employment agreement and fiduciary duties that the plaintiff claims the defendant, Andy Ingriselli (“Ingriselli”) owed because he and his company Groundwater Environmental Management Services (“GEMS”) have been soliciting former customers of the plaintiff.

[3] On August 4, 2009, O’Connell J. heard a motion brought by the plaintiff which, amongst other things, sought to add Aquatech and Romeo DeGasperis as party defendants to the action. The motion was dismissed with reasons released on April 1, 2010. The plaintiff was unsuccessful in adding Aquatech as a party defendant, as a result of the expiry of a limitation period.

[4] The plaintiff then brought a further motion before this court on June 23, 2010 which, in part, sought relief directing Ingriselli to deliver a further and better affidavit of documents and to include copies of all invoices issued by Aquatech for the time period February 2006 through to the time of the arguing of the motion in June 2010. The motion was successful and in part the order of Lauwers J. provided:

This court orders that the defendant Andy Ingriselli, serve a further and better affidavit of documents to include copies of all invoices issued by Aquatech Dewatering Company Inc. for the period from February 10, 2006 to the present date.

[5] The defendants sought leave to appeal the decision of Lauwers J. which came before O’Connell J. on March 4, 2011. At that time, counsel for Aquatech appeared in connection with that part of the order requiring Ingriselli to produce copies of all invoices issued by Aquatech. Counsel for Aquatech took the position that the motion heard by Lauwers J. had not been served on Aquatech and as the order of Lauwers J. impacted on Aquatech, it should have been served with the motion as it had an interest in the production of its financial records.

[6] In making the order that he did, Lauwers J. likely contemplated that Ingriselli had the authority to obtain the invoices from Aquatech, given the allegation in the amendment to the statement of claim suggesting that Ingriselli had resigned his position with the plaintiff and become a direct competitor of The Atlas Corporation (“Atlas”) by starting up his own competing business through GEMS and Aquatech.

[7] When the motion came before O’Connell J., by way of the leave to appeal application, it became clear that Ingriselli was only a fourteen per cent shareholder in Aquatech and while he was the president of Aquatech, his role was limited to day-to-day management and he did not have possession, power or control over Aquatech’s business invoices. With this in mind and the fact that Aquatech had not been served with the motion that was argued before Lauwers J., O’Connell J. on July 15, 2011 set aside that portion of the order of Lauwers J. relating to the production of Aquatech’s invoices. In doing so, however, O’Connell J. indicated that it was without prejudice to the plaintiff moving to seek production of Aquatech financial records on proper notice to Aquatech. That motion is now effectively before this court.

Position of the Plaintiff

[8] As part of its claim, the plaintiff if successful in establishing liability as against the defendants, has elected to claim damages on the basis of the profits gained by both Ingriselli and Jill Atwood (“Atwood”). This election flows from an order made by Boyko J. on May 1, 2007. The election in relation to the profits gained by the defendants relates to the profits gained by defendants Ingriselli, GEMS, and Atwood. The order did not, nor could it, relate to profits made by Aquatech.

[9] Fundamentally, the position of the plaintiff is that without the financial records of Aquatech, it will not be in a position to prove its damages. Furthermore, it is argued that Aquatech is not a stranger to these proceedings and that any concern that the court might have with respect to the confidentiality of the financial records is more than adequately protected by the deemed undertaking rule.

Position of Aquatech

[10] Counsel for Aquatech takes two positions with respect to this motion. First of all, it is argued that the plaintiff is effectively now attempting to do what it was unsuccessful in doing when O’Connell J. dismissed the plaintiff’s motion seeking to add Aquatech as a party defendant. That motion, it will be recalled, was unsuccessful given the expiry of the limitation period. Had Aquatech been added as a party, the plaintiff would have been in a much stronger position to obtain production of Aquatech’s financial records, given that Aquatech would then be a party to the action. It is also argued by counsel for Aquatech that the plaintiff has not met the requirements of Rule 30.10 of the Rules of Civil Procedure (the “Rules”). Specifically, it is argued that the plaintiff has not established relevance, given that there is no evidence that customers of the plaintiff were diverted by Ingriselli to Aquatech. There is no evidence it is argued that Ingriselli solicited clients of the plaintiff on behalf of Aquatech.

The Law

[11] It is quite clear that the moving party on a motion to obtain production from a non-party must show that the documents sought to be produced are relevant to a material issue in the action and that it would be unfair to require the moving party to proceed to trial without the documents. The burden of satisfying this test rests with the moving party.

[12] An order for production of documents from a non-party is the exception and not the rule. An order made pursuant to Rule 30.10 of the Rules should not be made as a matter of course and should only be made in exceptional circumstances. See Tetefsky v. General Motors Corp., 2010 ONSC 1675, [2010] O.J. No. 1117 at para. 41, aff’d [2011] O.J. No. 1390 (C.A.).

[13] The plaintiff seeks to prove its damage claim through, presumably in part, the production of Aquatech’s financial statements. Aquatech, however, is not a party to this action and the plaintiff fundamentally therefore cannot recover any profits made by Aquatech given its non-party status. The order of Boyko J. of May 1, 2007 required the plaintiff to elect to seek damages on the basis of: (a) the profits that the plaintiff had lost; or (b) the profits that the defendants had gained. As previously noted, the defendants for whom the plaintiff has elected to seek damages against are Ingriselli, GEMS, and Atwood - not Aquatech. It is difficult to understand therefore how the plaintiff can establish relevance in its damage claim where its election relates to a non-party.

[14] This court has no evidence with respect to any customers of the plaintiff having been wrongfully diverted by Ingriselli to Aquatech. In the absence of such evidence and given that Aquatech is not a party to this litigation, the plaintiff cannot meet the requirements of the first part of Rule 30.10. As it relates to the issue of fairness, this issue can, in my view, be best dealt with in part by reference to the alternative argument advanced by counsel for Aquatech, which effectively boils down to the suggestion that the plaintiff is now attempting to do something that was effectively barred as a result of the order made by O’Connell J. denying the plaintiff’s motion to add Aquatech as a defendant. In the vernacular, the plaintiff is trying to come through the back door where the front door has been firmly bolted. I agree.

[15] There is an element now of unfairness to Aquatech in having to respond to this motion where the plaintiff’s immediate discovery rights as against Aquatech have been barred, given Aquatech’s status as a non-party. While the order of O’Connell J. on the leave to appeal motion, striking out the order of Lauwers J. referred to in paragraph [4] above was done on a without prejudice basis, nonetheless, what the plaintiff seeks to do borders on an abuse of process. The existence of Aquatech and Ingriselli’s role in Aquatech has been known to the plaintiff for some considerable period of time and a conscious decision was apparently made not to add Aquatech as a party to this litigation within the relevant limitation period. This is made clear from the reasons of O’Connell J., dated April 1, 2010, where he stated:

Within six months of the commencement of the litigation, Famiglietti and Tony DeGasperis had a lunch where Aquatech was discussed. Famiglietti learned at that meeting that Ingriselli was not only involved with Aquatech but was a partner as well. Famiglietti was well aware that Aquatech was now a competitor in the same specialized work that Atlas was involved in. It is not only curious but I find telling that the Statement of Claim issued by Atlas in May 2006, pleads that Ingriselli entered into a similar business in competition with Atlas, which it is plead was forbidden by oral agreement between Atlas and Ingriselli. When the pleadings are juxtaposed with what the evidentiary record reveals I have no hesitation in finding that the similar business so referenced was a clear reference to Aquatech.

Famiglietti was fully aware of the context of Ingriselli/DeGasperis relationship well within the two year limitation period, but he did not pursue the addition of Aquatech and DeGasperis within that time period. It was clearly a conscious choice, one wrought no doubt by the desire to deal with the matter amicably and short of litigation. It was a desire that proved unattainable.

[16] No appeal was taken with respect to the order of O’Connell J. The plaintiff has chosen to make its damage claim in accordance with the order of Boyko J. as against the profits made by the defendants. Those defendants do not include Aquatech. The plaintiff cannot succeed in its motion under Rule 30.10 of the Rules as it has not established relevance for the production of the financial records of Aquatech, nor in my view is it unfair, given the procedural history in this matter to deny the plaintiff’s request for production of the financial records from the non-party. The plaintiff’s motion is dismissed. As to the question of costs, both counsel have provided me with their submissions on costs and with those submissions in mind, the plaintiff shall pay the costs of Aquatech fixed in the amount of $6,500.00, plus HST.

Justice M.L. Edwards

Released: July 3, 2013