BNL Entertainment Inc. et al. v. Ricketts et al.

[Indexed as: BNL Entertainment Inc. v. Ricketts]

Ontario Reports

Ontario Superior Court of Justice,

Master Muir

March 18, 2015

126 O.R. (3d) 154 | 2015 ONSC 1737

Case Summary

Civil procedure — Setting down for trial — Moving party not required to show substantial or unexpected change in circumstances in order to obtain leave to take further interlocutory step after setting action down [page155] for trial — Order granting plaintiffs leave to examine defendant for discovery being just in circumstances.

The plaintiffs sued their former accountants. After the plaintiffs' lawyer set the action down for trial, the plaintiffs brought a motion for an order granting them leave to conduct an examination for discovery of the individual defendant.

Held, the motion should be granted.

A moving party is not required to show a substantial or unexpected change in circumstances in order to obtain leave under rule 48.04(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to take a further interlocutory step after setting the action down for trial. The court should make the order that is just in the circumstances of each particular case. In this case, the plaintiffs did not instruct the lawyer acting for them at the time to set the action down for trial. There was no basis to conclude that they had expressly waived their discovery rights. The defendant was in default of his obligation to serve an affidavit of documents. It was difficult to see how the plaintiffs could have arrived at an informed decision to waive their discovery rights without being aware of the documentary evidence the defendant intended to rely upon in support of his defence. Granting the relief requested by the plaintiffs would not render rule 48.04(1) meaningless or interfere with the policy objectives of the rule. The action was not ready for trial, and an examination for discovery of the defendant would not result in any delay or wasted court time. There would be no prejudice or hardship to the defendant if the order sought was granted.

Cases referred to

AGC Mechanical Structural Security Inc. v. Rizzo, [2013] O.J. No. 933, 2013 ONSC 1316, 49 C.P.C. (7th) 174, 226 A.C.W.S. (3d) 996 (S.C.J.); Cromb v. Bouwmeester, [2014] O.J. No. 4298, 2014 ONSC 5318 (S.C.J.); Hill v. Ortho Pharmaceutical (Canada) Ltd., [1992] O.J. No. 1740, 11 C.P.C. (3d) 236, 35 A.C.W.S. (3d) 168 (Gen. Div.); Iannarella v. Corbett (2015), 124 O.R. (3d) 523, [2015] O.J. No. 726, 2015 ONCA 110, 65 C.P.C. (7th) 139, 75 M.V.R. (6th) 185, 249 A.C.W.S. (3d) 922; Jetport Inc. v. Global Aerospace Underwriting Managers (2013), 115 O.R. (3d) 772, [2013] O.J. No. 2375, 2013 ONSC 2740, 23 C.C.L.I. (5th) 52, 229 A.C.W.S. (3d) 367 (Master); Lugen Corp. v. Starbucks Coffee Canada Inc., [2014] O.J. No. 5951, 2014 ONSC 7141 (S.C.J.)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04(1), 26.02(c), 30.03(1) [as am.], 48.04 [as am.], (1) [as am.]

MOTION for leave to conduct an examination for discovery.

Alfred J. Esterbauer, for plaintiffs.

Megan Marrie, for defendant Thomas Yorke Ricketts.

[1] MASTER MUIR: — The plaintiffs bring this motion pursuant to rules 48.04(1) and 26.02(c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the "Rules"). The plaintiffs seek an order granting them leave to conduct an examination for discovery of the defendant Thomas Yorke Ricketts ("Ricketts") along with an order requiring Ricketts to serve an affidavit of documents. [page156] The plaintiffs also seek leave to make a significant number of amendments to their statement of claim.

[2] Ricketts is opposed to the relief with respect to the proposed examination for discovery and many of the proposed amendments to the statement of claim. Ricketts has agreed to serve an affidavit of documents. The defendant 1102854 Ontario Limited o/a Action Bookkeeping and Accounting has been noted in default.

Background

[3] This action is brought by the plaintiffs against their former accountants. The individual plaintiffs are all members of the musical rock band Barenaked Ladies. The corporate plaintiffs are the band's operating and touring companies. The plaintiffs allege that the defendants provided negligent accounting and tax-related advice to the plaintiffs between 1995 and 2005.

[4] This action was started on March 13, 2007. A copy of the statement of claim was provided to Ricketts and his insurer shortly thereafter but the claim was not formally served until 2010. The plaintiffs had obtained a number of orders extending the time for service with the consent of Ricketts while the plaintiffs attempted to mitigate and quantify their damages.

[5] A further extension of time was obtained on consent after the statement of claim was served. On September 19, 2012, Master McAfee made a timetable order requiring this action to be set down for trial by July 1, 2013. This timetable order also provided for dates by which the parties would conduct examinations for discovery and mediation.

[6] Discoveries did not take place in accordance with the timetable, or at all. An unsuccessful mediation session was held on October 16, 2013. The plaintiffs had previously delivered their trial record on June 26, 2013.

[7] The plaintiffs' affidavit of documents was not served until January 2015. As of the date of this motion, Ricketts had not served his affidavit of documents but has now agreed to do so.

[8] The plaintiffs' motion record was served in January 2015, and this motion was heard by me on February 20, 2015. I reserved my decision on the discovery issue and adjourned the relief regarding the amendments to the statement of claim to April 21, 2015. Following the argument of this motion, the decision of the Court of Appeal in Iannarella v. Corbett (2015), 124 O.R. (3d) 523, [2015] O.J. No. 726, 2015 ONCA 110 came to my attention. The Iannarella decision was released just three days before the argument of this motion and it was my view that the decision may have some application to the issues before me [page157] on this motion. As a result, I requested that the parties provide the court with written submissions in relation to that decision. I have now received and considered those submissions.

Preliminary Issue

[9] At the outset of the argument of this motion, the plaintiffs sought leave to file a supplementary affidavit. The affidavit was served on short notice. Mr. Esterbauer advised the court that there had been some difficulty reaching the plaintiff Steven Page and he was not able to obtain this evidence any earlier. I advised counsel that I was prepared to accept the affidavit for filing and offered to adjourn this motion if Ricketts wished to respond or cross-examine. Counsel for Ricketts elected to proceed with the argument of the motion.

Analysis -- Leave Under Rule 48.04

[10] The filing of the trial record has resulted in the plaintiffs being bound by the provisions of rule 48.04(1). For the purposes of this motion, the important part of the Rule states as follows: "48.04(1) . . . any party who has set an action down for trial . . . shall not initiate or continue any motion or form of discovery without leave of the court."

[11] The objective of rule 48.04(1) is to ensure that matters are not set down until they are ready for trial. This practice avoids delays and the loss of valuable trial time. See Cromb v. Bouwmeester, [2014] O.J. No. 4298, 2014 ONSC 5318 (S.C.J.), at para. 21.

[12] In recent years a debate has developed in the case law regarding the test to be applied for granting leave under rule 48.04(1). The more established test requires a moving party to show a substantial or unexpected change in circumstances. See Hill v. Ortho Pharmaceutical (Canada) Ltd., [1992] O.J. No. 1740, 11 C.P.C. (3d) 236 (Gen. Div.), at p. 4 (QL); Jetport Inc. v. Global Aerospace Underwriting Managers (2013), 115 O.R. (3d) 772, [2013] O.J. No. 2375, 2013 ONSC 2740 (Master), at para. 61; and Lugen Corp. v. Starbucks Coffee Canada Inc., [2014] O.J. No. 5951, 2014 ONSC 7141 (Master), at para. 12. This is to be contrasted with a broader approach taken by at least two judges of this court who have held that a finding of substantial or unexpected change in circumstances is not necessary and that the court may grant leave where the interlocutory step is necessary in the interest of justice. See AGC Mechanical Structural Security Inc. v. Rizzo, [2013] O.J. No. 933, 2013 ONSC 1316 (S.C.J.), at paras. 21 and 22; and Cromb, at para. 35. [page158]

[13] It should also be noted that there exists a long-established exception to the substantial or unexpected change in circumstances test when dealing with inadvertence or where serious matters affecting substantive rights are in issue. See AGC Mechanical, at para. 12.

[14] I have reviewed and considered the various conflicting authorities cited above and relied upon by the parties. I prefer to follow the line of cases that have adopted the broader approach. In my view, it is desirable for the court to apply a flexible test when exercising its discretion to grant leave under rule 48.04(1). The court should consider all of the circumstances of the matter before it and make the order that is just in the circumstances of each particular case. This approach is consistent with the overall interpretive provision found in rule 1.04(1), which requires that the Rules be "liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits".

[15] This approach is also consistent with the principle of full pre-trial disclosure when discovery rights are in issue. This principle promotes the early resolution of disputes and leads to efficiencies at trial. In my view, this interpretation is supported by the clear language of the Court of Appeal in its recent decision in Iannarella. The court places great emphasis on the importance of pre-trial production and discovery for reasons of efficiency and basic fairness. See Iannarella, at paras. 26-70. For the purposes of this motion, it is important to note that the Court of Appeal stated quite clearly that a waiver of discovery rights must be express and not simply implied solely from the fact that an action was set down for trial. See Iannarella, at para. 53. I view the decision in Iannarella as affirming the significant importance of pre-trial discovery and the view that discovery rights are at least partly substantive and not merely procedural in nature.

[16] I have considered these principles in the context of the facts before me on this motion. In my view, it is just in the circumstances of this action that the plaintiffs be granted leave to conduct an examination for discovery of Ricketts as requested.

[17] I have arrived at this conclusion for several reasons. First, the unchallenged evidence of the plaintiffs is clear. They did not instruct the lawyer acting for them at the time to set this action down for trial. They did not know it had been set down for trial. They were unaware of the potential consequences of the action being set down for trial. It appears that the decision to deliver a trial record was made by their former lawyer without instructions from his clients. I agree with counsel for Ricketts [page159] that it would have been helpful to have the direct evidence of the plaintiffs' former lawyer but I do not regard such evidence as essential given the clear evidence of the plaintiffs and the absence of any documentary evidence to the contrary.

[18] Counsel for Ricketts suggested that I draw an inference that the plaintiffs made a deliberate decision to waive their discovery rights and set this action down for trial. This submission is based on a vague reference to "instructions" in an e-mail message sent by the plaintiffs' former lawyer on June 4, 2013, just prior to setting this action down for trial. I am not prepared to accept this submission. It is simply not clear what "instructions" are being referenced in this e-mail message. In my view, a much clearer statement is necessary in order for the court to draw such an inference, especially in view of the clear evidence to the contrary from the plaintiffs themselves.

[19] In my view, there is no basis in the circumstances of this action for the court to conclude that the plaintiffs have expressly waived their discovery rights. As the Court of Appeal has stated, such a waiver should not be implied solely from the delivery of the trial record.

[20] Second, it is important to note that Ricketts is in default of his obligations under the Rules. Rule 30.03(1) requires every party to an action to serve an affidavit of documents. The obligation to serve an affidavit of documents is mandatory. See Iannarella,at para. 52. It is difficult to see how the plaintiffs could have arrived at an informed decision to waive their discovery rights without even being aware of the documentary evidence Ricketts intends to rely upon in support of his defence.

[21] Of course, it is obvious that the plaintiffs and their counsel are not without fault. This action has been delayed for many years. The plaintiffs failed to serve their affidavit of documents until January 2015. They could have taken steps to compel Ricketts to serve his affidavit of documents but chose not to. However, it is clear from the evidence that both sides were content to hold this matter in abeyance for many years while the issues involving the plaintiffs' alleged damages were sorted out. Neither side seemed particularly concerned about following the timetable order established by Master McAfee's order. The plaintiffs' lack of diligence does not relieve Ricketts of his obligations under the Rules.

[22] Third, in my view the granting of the relief requested by the plaintiffs would not render rule 48.04(1) meaningless or interfere with the policy objectives of the Rule. No pre-trial or trial dates have been set. At least some of the proposed amendments to the statement of claim are not opposed by Ricketts and [page160] will almost certainly be allowed. The amendments may give rise to an amended statement of defence and perhaps oral discovery. Issues may arise with respect to Ricketts' production once he serves his affidavit of documents. In short, this action is not ready for trial. An examination for discovery of Ricketts will not result in any delay or wasted court time. There is no suggestion that the delivery of the trial record was done for tactical reasons or in an attempt to jump the queue and obtain an early trial date. In my view, the rigid application of the substantial or unexpected change in circumstances test in these circumstances would serve no useful purpose consistent with the policy justification for rule 48.04(1). Indeed, it is my view that the opposite result would obtain. A denial of discovery rights to the plaintiffs would undoubtedly lengthen and complicate the trial process. Valuable trial time would be wasted.

[23] Finally, there will be no prejudice or hardship to Ricketts if the relief requested is granted. This is not a situation where a witness will be subjected to multiple and lengthy examinations. There is no evidence that Ricketts is unable to attend to be examined. Ricketts has been represented by counsel throughout and has readily agreed to several extensions of time in the past. He appears to be in no hurry to get to trial. There is no evidence of any urgency that would require an early trial date.

[24] For these reasons, I have concluded that it is just in the circumstances of this action that the plaintiffs be granted leave to conduct an examination for discovery of Ricketts as requested at paragraph (a) of their fresh as amended notice of motion.

Order

[25] I therefore order as follows:

(a) the plaintiffs are hereby granted leave to bring this motion pursuant to rule 48.04(1);

(b) Ricketts shall attend at an examination for discovery on a date to be agreed to by counsel, such examination not to exceed seven hours in length; and

(c) the remaining issues on this motion are adjourned to be heard by me as a special appointment motion on April 21, 2015, commencing at 2:00 p.m.

Motion granted.

End of Document