SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: Petro-Diamond Incorporated, Biourja Trading, LLC and Kolmar Americas Inc., Plaintiffs
AND:
Verdeo Inc., Bioversel Trading Inc., Great Lakes Biodiesel Inc. (formerly Bioversel Sarnia Inc.), Einer Canada Inc (formerly Bioversel Inc.), Arie Mazur and Sergey Ptushkin, Defendants
BEFORE: D. M. Brown J.
COUNSEL:
L. Brzezinski and C. MacInnis, for the Plaintiffs
D. Lederman, for the defendants, Bioversel Trading Inc., Great Lakes Biodiesel Inc. (formerly Bioversel Sarnia Inc.), Einer Canada Inc (formerly Bioversel Inc.) and Arie Mazur
HEARD: December 20, 2013
REASONS FOR DECISION
I. Motion for a Rule 32 order to inspect the operations of a biofuel plant
[1] The plaintiffs have commenced three lawsuits in the United States against some of the defendants involving disputes over biofuel contracts. This Ontario action by the plaintiffs seeks to set aside three impugned transactions which, in very general terms, the plaintiffs allege were designed to defeat their ability to collect on any judgments they might obtain in the United States.
[2] On October 10, 2013, Morawetz J. granted an interim order, on consent, which adjourned the plaintiffs’ motion for a Mareva injunction on the undertaking of the defendants, Bioversel Trading Inc., Great Lakes Biodiesel Inc. (“GLB”), Einer Canada Inc. and Arie Mazur, not to dispose of or encumber a biofuel production plant in Welland, Ontario owned by Great Lakes Biodiesel Inc. (the “Plant”) or to dispose of or encumber any equipment and machinery located in the Plant, or on its property, except in the ordinary course of business.
[3] This Court will hear the Mareva injunction at the end of January, 2014. Cross-examinations for that motion are underway.
[4] Against that background the plaintiffs have moved for an order, under Rule 32.01 of the Rules of Civil Procedure, authorizing an inspection of the Plant by their “expert witnesses, lawyers, agents or employees” to inspect, survey, measure, make observations of and/or conduct non-destructive tests on all equipment and machinery in the Plant before January 10, 2014. At the hearing plaintiffs’ counsel clarified that his clients were seeking the right to conduct a two-hour inspection of the Plant, prepare a list of the Plant’s inventory and read any DCS data on the equipment which will indicate whether the equipment recently has operated. The defendants resisted the motion, contending that the order sought went beyond the scope of inspections authorized by Rule 32.01.
II. Governing legal principles
[5] Rule 32.01(1) provides that the court “may make an order for the inspection of real or personal property where it appears to be necessary for the proper determination of an issue in a proceeding”. Although courts should give the rule a liberal interpretation,[^1] the need for the inspection must relate to the ability to determine an issue in dispute.Inspections are ordered to ensure that cases are decided on their merits by permitting the assessment of physical conditions.[^2]
[6] An inspection enables one party to obtain information about a thing without having to rely entirely on information provided by the opposite party on discovery.[^3] An inspection can level the forensic playing field, for example, by enabling the experts of an opposite party to reach conclusions which permit them to present reliable evidence to the court.[^4] In Ontario District School Board 19 v. 553518 Ontario Ltd. the court described the test of necessity as follows:
"Necessity" has been held to mean "useful" or "probative of an issue" [citations excluded]. Therefore, in my view, to establish "necessity" the moving party must show that there is a reasonable possibility the proposed test will reveal something useful for the trier of fact (that is, something which will assist the trier of fact in determining an Issue in the proceeding).[^5]
[7] Typical examples of circumstances in which courts have ordered inspections of property have included: (i) a view of real property to prepare an appraisal where the value of the property was relevant to the issue of damages;[^6] (ii) examining a mobile boom to ascertain its method of operation and the degree to which it could be extended where liability turned on whether a cable, struck by the boom, had been suspended at the requisite height;[^7] and, (iii) inspecting the valves of tires which had blown out where it was alleged that the valves had not been installed by the tire manufacturer, but by the plaintiff.
III. Analysis
[8] What, then, is the issue for which an inspection is necessary for its proper determination? In their statement of claim the plaintiffs seek a certificate of pending litigation against the Plant. The plaintiffs alleged that GLB has assets in Ontario capable of satisfying a portion of the plaintiffs’ claims, including the claims asserted in the U.S. proceedings (para. 68), and that the Plant was acquired with funds from impugned transactions in respect of which the plaintiffs assert a trust claim:
- The plaintiffs state that the Trust Property was employed to purchase the land and the Plant, thereby entitling the plaintiff to trace the Trust Property into the Plant so as to acquire a valid equitable interest in the land and premises purportedly owned by GLB.
[9] For the plaintiffs to establish that claim, they will have to demonstrate that certain funds were used to acquire the Plant. I do not see how an inspection of the Plant would assist in the determination of that issue.
[10] The plaintiffs submitted that on their motion for a Mareva injunction conflicting evidence has been filed about whether the Plant is operational. The CEO and the plant manager of GLB both deposed that the Plant is operational; an associate from the law firm representing the plaintiffs filed an affidavit which suggested that based on his observations there was little activity taking place at the Plant.
[11] At this stage of the proceeding I fail to see how the level of operations at the Plant relates to an issue in dispute in this action. The Plant is already subject to the interim non-dissipation/encumbrance order made by Morawetz J. and there is no evidence that any activity at, or in respect of, the Plant has run afoul of those restrictions. Accordingly, I dismiss this part of the plaintiffs’ motion.
IV. Motion to produce documents referred to in an affidavit
[12] On November 8, 2013, the plaintiffs served a Request to Inspect Documents seeking to inspect two sets of documents referred to in the following portions of the affidavit of Barry Kramble sworn November 1, 2013:
GLB has entered into contracts for sale of biodiesel with Amerigreen and Suncor.
The GLB plant has received approvals by Natural Resources Canada ecoENERGY for the Biofuels Program relating to a production subsidy from the Government of Canada to encourage the growth of biodiesel production in Canada.
[13] Rule 30.04(2) provides that a request to inspect documents may be used “to obtain the inspection of any document in another party’s possession, control or power that is referred to in …an affidavit served by the other party.” If the “contracts for sale of biodiesel” and “approvals by Natural Resources Canada” referred to in paragraphs 12 and 13 of Mr. Kramble’s affidavit are written documents, then the defendants must produce them for inspection to the plaintiffs no later than Friday, January 3, 2014.
[14] The costs of this motion are reserved to the judge who hears the motion for a Mareva injunction.
D. M. Brown J.
Date: December 20, 2013
[^1]: Farhi v. Wright (1987) C.P.C. (2d) 88 (Ont. H.C.J.)
[^2]: Morier v. Michelin North America (Canada) Inc. (2010), 88 C.P.C. (6th) 115, para. 17.
[^3]: Healy, supra., para. 5.
[^4]: Donnelly v. Fraleigh (2001), 9 C.P.C. (5th) 271 (Ont. S.C.J.)
[^5]: (2000), 49 C.P.C. (4th) 384 (Ont. S.C.J.)
[^6]: Farhi, supra.
[^7]: Healy v. Runnymede Iron and Steel Co., [1942] O.W.N. 17 (Master)