2013 ONSC 4635

Berkel v. Park Mews, et al. v. Bank of Montreal

Court File No.: CV-12-452225

(Two) Motions Heard: May 2/13

In attendance:
K. Toyne, for the applicant 416-362-8410, f.
A. Mahdavian/P. Copeland, for the respondents 416-863-1515, f.

______________________________________________________________________________By the Court:

[1] The respondent’s motion: On September 1/11, the applicant and the respondent, Sam Berkel (“Mr. Berkel”), separated. Fearing that Mr. Berkel would dissipate funds from the sale of a family business, the applicant took steps to preserve the funds and prevent their dissipation. The applicant attended at the Bank of Montreal on September 22/11 and changed the signing authority on the account held in the name of the corporate respondent, Park Mews Investments LN Inc., a company for which she was a director, officer, signing authority and shareholder and which was set up to receive monies from the sale of the family business. The applicant did so by deleting the signing authority for the stipulated signing officers and retaining sole signing authority—she says on the recommendation and instruction of Bank employee Dorothy Karagiannis. When the respondents learned of what the applicant had done, they raised objections with the Bank and challenged the applicant’s authority and ability to unilaterally change the signing authority. As a result, the Bank froze the company’s bank account.

[2] The applicant’s motion: A directors’ meeting of Park Mews Investments LN Inc. was called for April 30/12. The purpose of the meeting was to consider and, if thought appropriate, pass a special resolution to remove the applicant as an officer and director of the company (by reason of the applicant having modified the signing authority for the Bank of Montreal account). The applicant says that the notice of the April 30/12 meeting was invalid in that no Requisition, pursuant to s. 105(1) of the OBCA, was made and sent. And, yet, among Mr. Berkel’s documents appended to an affidavit sworn in June/12 is what purports to be a March 10/12 Requisition, the authenticity and validity of which is in question (with the applicant indicating that she never saw it before then).

[3] What is not in question is that Mr. Berkel says that it was his former lawyer, Mr. Kinnaird, who was the author of the Requisition. Whether the document is genuine and was validly delivered impact the applicant’s arguments as to the validity of the Notice of Meeting for the April 30/12 meeting, as well as to her entitlement to relief.

[4] My decision: The respondents’ motion: R. 39.02(2) of the Rules provides that the court shall grant leave to a party to conduct an examination under R. 39.03, after having cross-examined an opposing party, where it is satisfied that the party seeking leave “ought to be permitted to respond to any matter” raised on cross-examination. Further, the court has discretion to grant leave where the evidence to be elicited would be of assistance to the court and ought to be before the court and there is no compelling evidence of non-compensable prejudice to the party opposite (see: BFC Construction Group Inc. v. Ontario Realty Corp., [2001] O.J. No. 5692 (S.C.J.) at paras. 16 and 31). Where a party fails to introduce evidence (this as a result of counsel’s inadvertence or strategic error), the court is entitled to factor these considerations into its deliberations—taking with a contextual approach (see: Yung v. Lam, [2012] O.J. No. 3583 (S.C.J.), at paras. 10-11).

[5] The applicant’s visit to the Bank and the events that unfolded there are at the heart of the application. At present, all that is before the court as to what led to the freezing of the Park Mews account is the applicant’s sworn evidence that Ms. Karagiannis of the Bank instructed her to certify false documents, which the applicant admits she now knows was the wrong thing to have done. The applicant says that she did not know the procedure for changing signing authorities; that she relied entirely on the expertise of Ms. Karagiannis; that she was not informed of the significance or consequences of signing the Certificate and Authorization; and, relying on Ms. Karagiannis, she did not read the Certificate.

[6] The specific details of the applicant’s dealings with Ms. Karagiannis are unknown. What Ms. Karagiannis did or did not say and what she did and did not do in her interactions with the applicant, Ms. Mahdavian says, are important considerations in the determination of whether and/or to what extent the parties may be liable in respect of the issues at play in the litigation. I agree.

[7] At paragraph 56 of her factum, the applicant admits that Ms. Karagiannis’ evidence is relevant. She also admits that there is no prejudice attendant on Ms. Karagiannis being examined. Then too, and in any event, Ms. Karagiannis/the Bank of Montreal are not opposed to Ms. Karagiannis being examined.

[8] The applicant is opposed to my permitting Ms. Karagiannis to be examined in that, she says, the respondents have not provided “a reasonable or adequate explanation for why the evidence was not [sought] at the outset”. Further, she says, the evidence they seek to elicit from Ms. Karagiannis does not “…respond to a matter raised on [the applicant’s] cross-examination” (see Sure Track Courier Ltd. v. Kaisersingh, 2011 CarswellOnt 15139 (S.C.J.)), at paras. 28-30 and 43-44).

[9] I don’t agree. While the explanation proffered for the delay in seeking Ms. Karigiannis’ evidence is less than perfect, it is reasonable. I accept, as has been posited by Ms. Mahdavian and supported by the evidence of Mr. Berkel (paras. 35-37 of Mr. Berkel’s April 17/13 affidavit), that the reason Ms. Karagiannis was not examined in a timely fashion is because of an error on the part of the respondents’ former lawyer, for which error the respondents ought not to be penalized. On September 24/12, Mr. Berkel’s former counsel served a summons to witness on Ms. Karagiannis at her place of work that was not in compliance with the Canada Evidence Act and was made returnable on Thanksgiving Monday of 2012—a statutory holiday. The respondents say that they were unaware of the defect and that it was only after retaining new (present) counsel that they learned that Ms. Karagiannis’ examination ought to have taken place before the applicant and respondents were cross-examined.

[10] And while Ms. Karagiannis’ evidence does not respond only to a matter raised on the cross-examination of the applicant, it does respond to matters raised by her on cross-examination (see, for instance, qq. 476, 495 and 532 of the September 26/12 cross-examination).

[11] Given the nature and import, to the application and the impending motion, of the evidence sought to be elicited from Ms. Karagiannis, given the failed (flawed) effort on the part of the respondents’ former counsel to examine Ms. Karagiannis (her examination having been intended and discussed, before the cross-examinations on the affidavits), given that there is no evidence before me of prejudice to any party if Ms. Karagiannis is to be examined and given that it is uncontroverted that the respondent’s new counsel moved without delay in seeking an Order permitting her to examine Ms. Karagiannis, I am granting the respondents leave to examined Ms. Karagiannis.

[12] I agree with Ms. Mahdavian when she says that the respondents ought to be permitted to test the veracity of the applicant’s statements by examining the person on whose shoulders she places full responsibility for the actions taken/not taken by her. The court ought to have a full evidentiary tableau before it to permit a proper determination of the issues now in dispute.

[13] Mr. Toyne asks that his client be permitted to deliver a further affidavit following Ms. Karagiannis’ examination, if she determines it necessary to do so. I am neither permitting nor refusing her that relief, at this time. I say, without deciding the issue, that (failing agreement) she may renew her request (in the context of a motion) after the conclusion of Ms. Karagiannis’ examination.

[14] My decision: The applicant’s motion: As for the applicant’s motion for leave to examine the respondents’ former lawyer (Mr. Kinnaird) as a witness on a pending motion, the respondents say that such an examination would violate solicitor-client privilege, in circumstances where the respondents have not waived privilege--implicitly or explicitly. I note that on Sam Berkel’s cross-examination, Mr. Berkel was examined on the very issue which the applicant wishes to raise with Mr. Berkel’s former lawyer: the document purporting to be a Requisition to call a special meeting of the shareholders of Park Mews for the purposes of having the applicant removed as a director.

[15] During his cross-examination, Mr. Berkel was asked a number of questions in respect of the Requisition that he could not answer. As pointed out by counsel for the respondents, undertakings were given by Mr. Berkel in respect of those questions. Given that “…calling counsel for the opposing side to testify…is the exception and should be avoided whenever possible” (Maesbury Homes Inc. v. 1539006 Ontario Inc., 2011 ONSC 2829 (S.C.J.)), I am inclined to agree with Ms. Mahdavian when she says that, at best, the applicant’s motion is premature.

[16] Mr. Toyne submits that Mr. Kinnaird is “…the only person that can provide the information required to determine when the Requisition was created”, with Mr. Berkel having disavowed any involvement in the preparation of the Requisition or its delivery (if, indeed, it was delivered). That may or may not be so (I do not know) but, on the evidence before me (particularly in circumstances where issues of privilege may or may not be invoked), I am inclined to agree with Ms. Mahdavian when she says that, at least at first instance, any questions for Mr. Kinnaird ought to be put to him by his former client (i.e. in the context of fulfillment of undertakings).

[17] Ms. Mahdavian says that Mr. Toyne can pose questions arising out of the undertakings fulfilled, to the extent that they have not been fulfilled or fulfilled in a fulsome and responsive manner. Thereafter, the applicant can renew her motion to have Mr. Kinnaird attend to be examined if the questions posed are not answered satisfactorily.

[18] Because I am not prepared to make a blanket ruling, at this stage and on the evidence before me, that the information sought from Mr. Kinnaird is necessarily and in all respects protected by privilege, because I accept that the authenticity of the Requisition is a key issue in this proceeding and because, at least at the time that the applicant’s motion was heard, it was not entirely clear that Mr. Berkel would be able to obtain the information that the applicant seeks from his former lawyer, I am not summarily dismissing the applicant’s motion. I am saying that the applicant must permit Mr. Berkel to try to obtain the information sought from Mr. Kinnaird; and, if his efforts fail, the applicant can renew her motion with the filing of supplementary materials (this, before me, by way of special appointment).

[19] As for the outstanding undertakings and/or incomplete/non-responsive answers to undertakings (not all of which relate to Mr. Kinnaird), Ms. Mahdavian agrees to permit Mr. Toyne to require of Mr. Berkel that he reattend to answer the applicant’s questions. There are a number of undertakings that the applicant may wish to explore further and she is specifically permitted to do so. Ms. Mahdavian says that, until this motion was brought, she did not know that the applicant was dissatisfied with some of the answers provided in fulfillment of undertakings. The deficiencies are to be highlighted for Ms. Mahdavian in writing and if, and to the extent that, they are not addressed to the applicant’s satisfaction within a reasonable period of time (failing agreement, a reasonable time will be deemed to be 10 days), a follow-up examination of Mr. Berkel will be in order.

[20] Failing agreement as to the issue of costs, I may be spoken to.

July 8/13 __________________________