COURT FILE NO.: FC-02-81-3
DATE: February 12, 2014
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Lynne Lafontaine, Applicant
AND
James Maxwell, Max Auto Supply Limited and Gormax Holdings Limited, Respondents
BEFORE: The Honourable Mr. Justice Martin James
COUNSEL: Stephen Appotive/Meghan O’Halloran, Counsel for the Applicant
A. Sean Jones, Counsel for the Respondent James Maxwell
Martin Black, Counsel for the Respondents Max Auto Supply Limited and Gormax Holdings Limited
HEARD: November 28, 2013
ENDORSEMENT
[1] The applicant brings an application to seek the court’s assistance in obtaining disclosure from business entities associated with the respondent James Maxwell. This application is made in the context of an existing private arbitration dealing with family law issues between the applicant and Mr. Maxwell.
[2] This matter was heard as a motion in the application. By the time the motion was heard, the issues were reduced to the following:
a. Whether the applicant was entitled to production of the information/documentation set out on a summary marked as Exhibit A;
b. Whether the totality of the productions provided by the respondents would be subject to a confidentiality covenant given by the applicant; and,
c. Whether the applicant should pay some or all the cost of compiling and producing the required disclosure, including copying charges.
[3] The issue of financial disclosure by James Maxwell and the non-party business entities with which he is associated was addressed by the arbitrator on two occasions prior to the commencement of this proceeding.
[4] The first arbitral award respecting disclosure was made on March 30, 3012. In addition to requiring Mr. Maxwell to provide extensive financial disclosure, the arbitrator directed Mr. Maxwell to prepare a corporate organization chart tracking his business interests between 2004 and 2011. In addition, the arbitrator ordered production of the constating documents and corporate registers for certain corporations, corporate financial statements, corporate tax returns and legal and closing documents respecting conveyances of some of Mr. Maxwell’s business interests during this timeframe.
[5] The second arbitral award dealing with disclosure issues was made about 10 months later, in February 2013. This decision is 53 pages in length. The arbitrator concluded that Mr. Maxwell had not met his obligations to provide full, complete and accurate information. The arbitrator determined that Mr. Maxwell and/or the other respondents should bear the costs associated with compiling the documentation that was ordered to be produced and that the applicant should pay for photocopy charges at the legal aid rate. The arbitrator agreed with Mr. Maxwell’s submission that she did not have jurisdiction to order production from non-parties but the arbitrator observed that in her view Mr. Maxwell was taking advantage of his corporate re-structuring to diminish his own capacity to make full financial disclosure.
[6] This application was launched promptly following the release of the arbitrator’s second decision respecting the disclosure obligations of Mr. Maxwell.
[7] Counsel for the respondent Max Auto Supply Limited and Gormax Holdings Limited submits that:
a. Counsel for the applicant has been overbearing in his demands for more and more documents;
b. The respondents have made a good faith effort to provide adequate disclosure;
c. The applicant, her counsel and/or her accountants have made it difficult for the respondents to understand what information remains outstanding;
d. The applicants have been slow to respond to requests for information.
[8] My understanding is that Exhibit A represents the culmination of a disclosure process that has been underway for some time. Mr. Black did not appear to dispute the applicant’s request for the information set out in Exhibit A. Even if he had, I would be inclined to grant the relief sought by the applicant.
[9] I agree with the respondents’ request that the confidentiality agreement should apply to all documents that have been produced. Mr. Appotive’s argument that documents previously produced should be exempt was not persuasive nor do I accept that a blanket confidentiality obligation will be more difficult to manage. In my view, private companies and other private entities, especially non-parties, are generally entitled to expect that information provided during the course of litigation will be treated and handled as confidential.
[10] On the issue of who should bear the cost of locating, reviewing and compiling the information to be disclosed, there are no hard and fast rules. The practice varies from case to case. Here the arbitrator said that Mr. Maxwell should bear this cost and I see no reason to alter or interfere with that decision.
[11] On the issue of legal costs, it is very difficult on this type of motion to determine where the equities lie at this stage of the disclosure process. Maybe the applicant is justified in her on-going requests. Maybe the non-party business entities have gone above and beyond what can reasonably be expected of them.
[12] Accepting that Mr. Maxwell and the business entities with which he has an on-going relationship expended considerable effort to answer information requests emanating from the applicant and her advisors, it seems clear that their patience came to an end well before the commencement of this application. See for example Dave Maxell’s email of February 11/13 wherein he advised that a court order would be required for any future document requests and Mr. Taudien’s email of March 18/13 to Mr. Appotive with the re: line, “Here- you can stop your whining now.”
[13] I find the following considerations persuasive:
a. It was Mr. Maxwell’s decision to intermingle personal with corporate expenses;
b. It is easy to criticize time spent tracking a particular item that goes nowhere.
Ultimately it is the aggregate result that counts and the information-gathering process is not yet complete;
c. To date the applicant has achieved some success in reviewing various records to re-construct Mr. Maxwell’s true income for support purposes.
d. The arbitrator concluded that the disclosure to date was inadequate.
[14] By letter dated July 19, 2013 Mr. Black, on behalf of Max Auto Supply Limited and Gormax Holdings Limited, wrote to counsel for the applicant wherein he noted that the corporate non-parties had voluntarily produced numerous documents at no charge and without any legal obligation to do so. He made it clear that any further requests would require a court order and Mr. Black outlined the criteria set out in the applicable cases respecting what an applicant must establish in order to secure production from non-parties. Mr. Black’s letter may have been taken as a “shot across the bow” and it provides justification for the applicant’s belief that she could expect to encounter resistance going forward.
[15] The evidence before me is that the respondents made it clear that they would contest additional disclosure demands and would seek compensation. Counsel for the applicant concluded, justifiably, that complete disclosure would only be obtained by applying to court. Mr. Appotive has done what the respondents demanded; that they disagree with how he went about it or that they think he engaged in overkill doesn’t amount to more than collateral damage.
[16] I note that the applicant has engaged chartered accountants to investigate Mr. Maxwell’s income. The requests for additional information and documentation appeared to have been generated by the accountants in the course of their duties. The respondents’ complaints do not have a similar profession backstop. There has been no responding material submitted from a similarly-qualified, independent accounting professional indicating that the applicant’s requests are unreasonable, excessive or unfair.
[17] Mr. Appotive has delivered a bill of costs for $24,679.06. This represents his full costs of the application from its inception including his time of 36.6 hours at $400 per hour and 34.6 hours for Ms. O’Halloran at $185 per hour. By way of comparison, Mr. Black’s outline claims 17.1 hours plus 2.8 hours for a clerk. Usually counsel for the respondents has less work to perform than counsel for the moving party.
[18] The hearing before me was a motion, not a trial. The applicant’s submissions do not address how and why the costs of the entire proceeding should be dealt with by a motion judge. I do not know whether there will be other steps taken in the application or not. The case conference endorsement of July 19, 2013 does not refer to costs or reserve costs to the motion judge.
[19] The applicant served an offer to settle on November 12, 2013 and attached a draft confidentiality agreement. The offer proposes that the respondents pay $12,000 for both the application and the motion. It is not clear to me whether the respondents have agreed to accept the draft confidentiality agreement in its current form. I am not prepared to embark on an inquiry as to its suitability in the context of an offer to settle.
[20] The applicant has been substantially successful on the motion.
Disposition
[21] An order providing for the following shall issue:
a. The respondents shall provide the information and documentation necessary to provide answers to the questions contained in Exhibit A filed at the hearing.
b. The applicant shall execute a confidentiality agreement in a mutually-acceptable form. If the parties cannot agree on the terms, each side may submit their preferred version to me with brief reasons within 14 days and I will select one of them for the parties to sign;
c. The costs of providing the requested disclosure shall be borne by Mr. Maxwell;
d. The applicant shall pay for copies at the Legal Aid rate; and,
e. The respondents shall pay the applicant’s costs of this motion fixed in the sum of $10,000 plus HST forthwith.
The Honourable Mr. Justice James
Date: February 12, 2014
COURT FILE NO.: FC-02-81-3
DATE: February 12, 2014
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Lynne Lafontaine, Applicant
AND
James Maxwell, Max Auto Supply Limited and Gormax Holdings Limited, Respondents
BEFORE: The Honourable Mr. Justice Martin James
COUNSEL: Stephen Appotive/Meghan O’Halloran, Counsel for the Applicant
A. Sean Jones, Counsel for the Respondent James Maxwell
Martin Black, Counsel for the Respondents Max Auto Supply Limited and Gormax Holdings Limited
ENDORSEMENT
James, J.
Released: February 12, 2014