SUPERIOR COURT OF JUSTICE – ONTARIO
(COMMERCIAL LIST)
COURT FILE NO.: 04-CL-5321
(02-CV-225823 CM2)
DATE: 20130125
RE: LIVENT INC., THROUGH ITS SPECIAL RECEIVER AND MANAGER ROMAN DORONIUK, Moving Party/Plaintiff
AND:
DELOITTE & TOUCHE and DELOITTE & TOUCHE LLP, Responding Party/Defendant
BEFORE: Justice Gans
COUNSEL: Patrick O’Kelly and Jonathan Levy, for Livent Inc.
J.L. McDougall, Q.C. and Brian Leonard, for Deloitte & Touche LLP
HEARD: January 22, 2013
ENDORSEMENT
[1] Livent Inc. (“Livent”) brings this motion to obtain an order permitting it to cross-examine certain witnesses at the trial of this action in accordance with Rule 53.07(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. All of the proposed witnesses identified on this motion are current or retired partners of the remaining defendant Deloitte & Touche LLP (Canada) (“Deloitte”), and all were partners at the time of the events on which the causes of action are based.
[2] It is Livent’s position that these partners are necessarily adverse in interest to Livent within the meaning of Rule 53.07(1) because each partner in the final analysis may be individually liable for any judgment that might be obtained by Livent.
[3] Rule 53.07 sets out the circumstances under which a party may call an adverse party as a witness at trial:
Subrules (2) to (7) apply in respect of the following persons:
An adverse party.
An officer, director, employee or sole proprietor of an adverse party.
A partner of a partnership that is an adverse party.
[4] I do not find it necessary to conclude that the use of the term “partner” in paragraph 3 is broad enough to catch all former partners of Livent. However, I am satisfied, and it is not with much debate, that the Rule is clearly intended to permit the calling and cross-examination of current partners of the “named” adverse party, Deloitte. Hence, an order will go as asked in respect of Claudio Russo and John Cressati.
[5] I am also of the view that retired partners should come within the “adverse party” designation in Rule 53.07(1) for the following reasons:
The Partnerships Act, R.S.O. 1990, c. P.5, ss. 10 and 18, makes it clear that a retired partner is liable for partnership debts and obligations incurred before that partner’s retirement. While in the circumstances of this case, the partner has but a contingent or potential liability, it is a liability that, but for amount, is indistinguishable from that of Deloitte. In my view, this exposure makes the instant case distinguishable from the “corporate” debtor and shareholder examples put forward by Mr. McDougall in argument.
Rule 8 sets out the procedural code for the commencement of suits by and against a partnership. It provides that a proceeding by or against two or more persons as partners may be commenced in the name of the partnership. Deloitte’s counsel acknowledged that the issue would be removed from debate had the retired partners in fact been named defendants. While the Rule appears to be permissive, the case law holds that it would have been improper to name the partnership and the individual partners unless the latter were joined in the action as a result of an independent cause of action (see CIBC v. Deloitte & Touche (2003), 2003 38170 (ON SCDC), 33 C.P.C. (5th) 127 (Div. Ct.) at para. 30).
Had it been necessary, I would have given effect to the overarching interpretive provision found in Rule 1.04, and permitted cross-examination of the retired partners, if only to ensure that the trial is conducted in a most expeditious, if not cost effective fashion. That said, only time will tell how much savings will be realized in circumstances where each of these proposed witnesses has been examined for discovery over countless days.
[6] I am advised by counsel that they will come to an agreement as to which of the current and retired partners Deloitte will make available as witnesses called in the course of the Defendant’s case. Hence, it will not be necessary for me to make an order describing the scope of re-examination, it being understood that if a witness is called by Livent as part of its case in chief, re-examination will be limited to those matters arising out of cross only.
GANS J.
Date: January 25, 2013