COURT FILE NO.: 11-CV-438283
Heard: May 14 and September 9, 2015
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: In-Store Products Limited v. Zuker, Torstar et al.
BEFORE: Master Joan Haberman
COUNSEL: Stein, A. for the moving party
Macdonald, R.B. for Zuker et al.
Patel, K. for Torstar et al.
REASONS
Master Haberman:
[1] In-Store seeks further production and responses to questions refused by both Zuker and Torstar. For the most part, the various forms of relief they request involve access to e-mails and to Zuker’s hard drive.
[2] The motion arises in the following context:
Michael Davidson, In-Store’s principal, alleges he had an oral agreement with Zuker to acquire 20% of Wagjag. In exchange, he would inject capital and provide services, which included making introductions for Zuker. Though he says he did provide some services, he concedes that funds were never provided;
Shortly after this alleged agreement was made, Zuker sold the business to Torstar, without In-Store’s approval and without accounting for their alleged interest; and
In-Store alleges Torstar was aware of his interest when they acquired the business and that they actually induced Zuker’s breach of contract;
Torstar emphatically denies that they were aware that In-Store, Davidson, or anyone else had an ownership position in Wagjag when they acquired it. No documents have been produced by any of the parties to cast doubt on their position.
THE PLAINTIFF’S EVIDENCE
[3] The evidence filed by In-Store is troubling in several respects. The associate, Mr. White, whose affidavit supports the motion, has made assumptions and, in at least in one instance, he has failed to accurately present Zuker’s evidence. This incorrect factual assertion then became the foundation for submissions made by counsel at the hearing of this motion.
[4] Another troubling feature of this motion involved In-Store’s vision of what they hoped to achieve through it. Their objective remained in a state of flux throughout the two hearing days, such that changes to the relief sought were only shared with counsel late in the day or during the hearing, which is also when these changes came to the court’s attention.
[5] As a result, though the issues were few, the shifting nature of the motion turned what ought to have been straightforward into a motion that required far more time than estimated. In the end, there were two attendances, one for 2 hours, one for 2.5 hours.
[6] White begins his affidavit by providing an abridged history of these events. Although his is the only evidence relied on by In-Store, it is curious that White does not set out in narrative form when the oral contract that In-Store relies on was formed or what its alleged terms were. Further, although counsel made much of what he referred to as the timeline of when Zuker was dealing with In-Store and when he sealed the deal with Torstar, no chronology of events is contained in In-Store’s evidence.
[7] Instead, White begins by discussing documentary disclosure made by the defendants, so at a point in time well beyond the events giving rise to the litigation. He points first to a letter of intent from Torstar to Zuker, Wagjag, and Gabriel Becher, dated April 28, 2010.
[8] There is no explanation in the affidavit before this point as to who Becher is, yet, by paragraph 6, White is already pointing out that there are no e-mails or letters among Zuker’s productions that relate to Becher’s interest in Wagjag. The inference is that this was an omission on Zuker’s part but there is nothing in evidence up to this point to explain why one should have expected Becher to feature.
[9] Much later in the evidence it is disclosed that Becher was a member of “Wagjag Personnel” and that, at least as of March 16, 2010, when the personnel list was prepared, he had a verbal agreement to become a minority shareholder (tab H. motion record). I was taken to no evidence to confirm whether this agreement “to become” a shareholder ever materialized into a tangible interest in the business.
[10] White then turns his attention to Zuker’s “negotiation” e-mails. He notes that while there were “numerous” emails that fell into this category that involved Davidson, there were no records of any kind in Zuker’s productions that related to the negotiations with Torstar, and none indicating whether or not there was mention of the of the Plaintiff or another party such as the Plaintiff involved in owning or purchasing an interest in Wagjag….
[11] In paragraph 10, White highlights the lack of documents in Torstar’s production that refer the Plaintiff’s involvement in Wagjag. In view of Torstar’s defence, to the effect that they were not aware of any involvement on the part of In-Store, this is not surprising. Instead of accepting that this supports both Torstar (“they were not aware there was a contract with In-Store”) and Zuker’s (“there was no contract with In-Store”) respective positions, White suggests there is something sinister about this absence, as the documents must exist and were withheld.
[12] White then discusses various motions his client has brought before the court. On May 17, 2013, Master McAfee made a consent order, allowing In-Store to amend their claim (which they have done again before me in May 2015) to add a number of parties. The motion was adjourned, however, with respect to the discovery plan and in particular, the scope of documentary disclosure. The Master adjourned that part of the motion back to her list of June 12, 2013.
[13] On June 12, 2013, the master dismissed the plaintiff’s motion for productions without prejudice following examinations for discovery. The master made no order regarding the discovery plan that Zuker sought to impose and costs of $2000 were ordered against In-Store as it was clearly the master’s view that this motion was premature. This order was appealed, without success.
[14] Discoveries of Zuker took place in June 2014 and of Torstar’s representative in July 2014. At paragraph 24 of his affidavit, White discusses Zuker’s discovery evidence, stating:
At his examination for discovery, the Defendant Zuker under sworn oath testified that e-mails or documents once in his possession, power or control could have been destroyed.
[15] In fact, this is a distortion of the evidence. This issue arose while Zuker was being cross-examined about schedule “C” of his affidavit of documents, which appears to have been created using boiler-plate language. On page 76 of the transcript, when asked if he knew if any of his e-mails were destroyed, Zuker’s unequivocal response was Not by me, no. On page 79, he again states, that no, I did not delete e-mails.
[16] The context for this evidence was Zuker having stayed on with Wagjag for a period of time after Torstar’s acquisition. By June 2013, however, he had already left. He assumed that, as a result, he could no longer access his emails created on his Wagjag account after that date. He did not delete or destroy anything – he made that clear. He also made it clear that he did not believe he had access to these materials as he was no longer affiliated with Wagjag.
[17] As it turned out, he was not correct. He was ultimately able to log in and he had access to everything he needed. Further productions were made at that time as a result.
[18] This line of questioning went on for 7 pages, but it was all reduced by White to something quite unlike what Zuker actually said. In-Store counsel then relied on White’s evidence as a jump-off point for their submissions, repeating several times that Zuker swore an oath that his documents could have been destroyed or deleted.
DEFENDANTS’ EVIDENCE
On behalf of Zuker
[19] Counsel’s law clerk, Ms. Garbig, swore the responding affidavit for Zuker, beginning with the June 12, 2013 motion before Master McAfee. It seems there was an endorsement that accompanied the order, which was not included in In-Store’s materials.
[20] The master wrote as follows:
There is insufficient evidence before me to establish the relevancy and existence of the categories of documents in issue.
In my view, in all of the circumstances of this particular case, it is more appropriate to move following examinations for discovery on a proper evidentiary basis for appropriate relief with respect to productions remaining in issue.
[21] Garbig also points out that all of the salient details of Torstar’s acquisition of Wagjag were disclosed, including the price of the share purchase agreement.
On behalf of Torstar
[22] Torstar filed part of the transcript of their examination of Michael Davidson. When asked to explain the basis of the claim against Torstar, and what evidence In-Store relied on to support the claim that Torstar knew about their alleged contract with Zuker, In-Store counsel stated as follows:
We’re not going to answer that until, counsel, you produce all correspondence between Zuker, Wagjag, Inc., between these entities and Mr. Zuker and Wagjag Inc. which has not been produced to date.
…I am not answering it until you produce what appears to be blatantly relevant as far as the documents leading up to… correspondence leading up to the letter of intent which you’ve produced…Torstar produced ….
[23] This response was repeated with respect to each of the Torstar defendants. Effectively, In-Store took the position that all correspondence between these entities and Zuker or entities affiliated with him that preceded the letter of intent were somehow relevant – whether or not it made any reference to Davidson, to In-Store or, in even a generic way, to any another unnamed shareholder, contingent owner or potentially interested party.
[24] In-Store was equally unhelpful when Zuker was being examined. Having asked for all e-mails leading up to their letter of intent with Torstar, In-Store’s counsel was asked to explain why that would be relevant.
[25] While counsel are not expected to engage in a heated debate during this exercise, it is generally worthwhile to take few moments, on or off the record, for counsel to set out the rationale for the question. If he believes he has a winning position for the master, why not save the costs of a motion and try to make the point directly with counsel?
[26] Instead, In-Store counsel stated as follows:
I am not going to explain it. You can refuse it. You can refuse it, you can undertake to give me some, none….
[27] This approach to discoveries is difficult to reconcile with Master McAfee’s order indicating that, in her view, In-Store should use the discovery process to establish a basis for the existence and relevance of the materials and information they sought.
[28] It is particularly troubling that, having failed to elicit what they hoped to get from the defendants, which may or may not exist, In-Store then refused to tip their own hand. These responses, coupled with the absence of evidence from In-Store to support their claims that the documents they seek actually exist, lead me to conclude that In-Store has not yet overcome the problem pointed out by Master McAfee in her earlier order. In short, they have failed to demonstrate that all of the documents sought exist.
THE LAW, ANALYSIS and CONCLUSIONS
[29] When a party seeks a further and better affidavit of documents, however, they must always demonstrate that there is some basis to believe that the documents they seek actually exist. Evidence is therefore required. It is not enough to say “I know there must be letters” so I want them all.
[30] Further, the information they seek must be relevant to the matters in issue. Some letters may be, and some may not be. Those letters that are not, on their face, relevant to a matter in issue, need not be disclosed or produced. Contrary to what In-Store submits, a responding party need not produce every single document he has within a category of documents to prove that he has nothing relevant.
[31] Thus, though relevance is generally based on the pleadings, in this case, it is not clear that the pleadings go far enough to support these very broad requests. Further, when access to a party’s computer hardware and all other electronic devices is sought for the purpose of inspection, the evidence must point to a genuine basis for concern that documents have been obliterated or are being hidden and that evidence must be compelling
[32] The plaintiff’s starting thesis is as follows: The defendants have failed to disclose and produce documents relevant to the litigation.
[33] This simply presumes that documents that fit this bill exist and that they are, indeed, relevant. However, this ignores the threshold requirement. A party must first show that there is reason to believe that the documents sought actually exist. It was as a result of these principles that Master McAfee dismissed the motion when it was before her, but on a without prejudice basis – she gave the plaintiff an opportunity to further develop their case before the matter was reconsidered so that they could try to meet that threshold.
[34] One way for a party to demonstrate that their adversary is hiding materials is to disclose their end of a correspondence exchange. If their adversary has not produced their copy of the document evidencing the “conversation”, it could lead to a strong inference that their disclosure is wanting.
[35] While In-Store’s motion record contains Zuker and Torstar’s affidavits of documents, it does not contain their own, so it is not possible for the court to confirm that In-Store disclosed as much as Zuker did about their dealings inter se.
[36] Master Sandler’s approach to this issue in Bow Helicopter v. Textron Canada Ltd., 1981 CarswellOnt 389, is trite law. There, he stated:
…many applications for a further and better affidavit on production…are brought on the most inadequate material, and on the erroneous assumption that speculation, intuition and guesswork that other documents exist, can be proper ground for ordering a supplementary affidavit on production. This case before me is no exception.
[37] The law is therefore clear that the moving party must demonstrate some basis for concluding that documents exist and that they are being withheld. In Abou-Elmaati c. Canada (AG), 2013 ONSC 3176, Perell J. stated:
..there must be some evidence that there has been an omission such that production and/or inspection ought to be ordered, and there is no right to in effect “rummage through an opponent’s filing cabinets” or computers.
[38] With respect to a request for access to another party’s computer hard drive, Master Dash noted, in Nicolardi v. Daley, [2002] OJ No. 595, that investigating a party’s computer is a very intrusive exercise exposing all of the party’s stored data, whether or not related to the action in issue. In his view, a motion based only on belief that there is more there is nothing more than a fishing expedition. I share that view.
[39] While In-Store filed a case brief containing some 11 cases, they referred to only 4 of them in oral argument. First, they relied on the decision of Goldstein J. in Aon Reed Stenhouse v. Marsh Canada Ltd. 2012 CarswellOnt 15598.
[40] The issue before the court there was whether a motion for refusals amounted to a fishing expedition. His Honour returned to general principles, emphasizing that relevance is determined by reference to the pleadings. There, the witness had sworn an affidavit denying that what was alleged was true, and on that basis his counsel asserted that what was being sought was not relevant, notwithstanding what was pleaded.
[41] The court found that the affidavit was not determinative of the inquiry of relevance, which must rest on the pleadings.
[42] The facts in that case were quite unlike those here. In this case, when one goes back to the pleadings, the relevance of what has been sought is largely elusive. Further, with respect to documentary disclosure, the party seeking documents must first show there is reason to believe they exist. Whether what is sought bears any relevance to the matters in issue is the second stage of the inquiry.
[43] Each party to an action is required to provide documentary disclosure by way of an affidavit of documents. In all cases, each party gets the first cut and, in their affidavit, they effectively swear they have disclosed all documents within their power, possession and control that are relevant to any matter in issue.
[44] The fact that our rules provide parties with the ability to test that affidavit, by way of an order to cross examine on it and to then seek a further and better affidavit of documents supports what was said in Aon. Where there is reason to believe there is more than what has been disclosed – reason that can be demonstrated to the court, as distinct from suspicion – the motion will be viewed as the pursuit of tangible relevant evidence rather than simply a fishing expedition.
[45] On the other hand, when no evidence is tendered to support the request, it is simply abusive to force a responding party to deal with a hunch or conjecture. Motions are very costly side-trips to the main event – the trial – and should only be brought if warranted. A “gut feeling” does not justify 4.5 hours of hearing time.
[46] All a responding party can do on a motion of this kind, when they truly have nothing more, is to say that that is the case. They are not required to open their filing cabinets, books and records and hard drive to prove they are being honest and accurate and there is, indeed, nothing more that is relevant. The burden of proof is on the moving party to show a basis for the motion, not on the responding party to show that there is none.
[47] The main thrust of In-Store’s submissions, vis a vis Zuker, was that, since the agreement they say they had with him was oral, they are entitled to see any documents relating to any discussions he had with anyone else about possibly giving or selling them a share of the business. They say this will demonstrate that this is how Zuker did business – by way of oral agreements. This will therefore bolster their claim that, though their agreement with him was only an oral one, this is consistent with Zuker’s usual practice. It is In-Store’s position that this will lend credibility to their case.
[48] However, going back to the pleadings, this allegation appears nowhere, though the claim has been amended three times.
[49] Further, In-Store’s motion record contains some of the e-mails exchanged by Davidson, his counsel, Steve Cohen and Zuker. They all date from February 2010. These emails reflect an ongoing discussion between the parties to come to an arrangement. A detailed draft agreement, in writing, was prepared by Cohen, circulated and commented on. Cohen was In-Store’s counsel and he made it clear that Zuker should get independent legal advice.
[50] It therefore appears that the parties clearly contemplated that whatever agreement they may reach would be in written form, arrived at after discussion and careful legal drafting, with input from both sides. Contrary to what In-Store states, Zuker does not appear to have contemplated that any agreement he might reach would them would remain an oral one, so how he conducted business with others is not relevant.
[51] The last e-mail in this series is dated February 23, 2010 and it is from Cohen to both Davidson and Zuker. In it, he advises Davidson that you may wire the $50K cash subscription to my firm in trust ….
[52] In-Store concedes that they transferred no funds to Zuker. Although there is no explanation in their evidence or in their pleading as to why that was the case, their counsel submitted that it was because Davidson was waiting to hear back from Zuker regarding the capital structure. This e-mail suggests otherwise as does the fact that the parties already had the essence of a draft agreement. As of February 23, 2010, Davidson knew how much was expected from him and his counsel, Cohen, had suggested the money flow through his trust account.
[53] In the absence of In-Store’s affidavit of documents, it is not possible to determine what took place after these discussions. All we do know is that no written agreement was ever executed and that the agreement with Torstar was apparently reached in June 2010, about three months later.
[54] Zuker’s affidavit of documents indicates that he and Davidson continued to correspond for some time. It appears that e-mails were exchanged on a regular basis between them up to June 11, 2010, around the time that Zuker’s deal was concluded with Torstar. Yet, in all that time, no agreement was ever signed, though it was clearly the intention of the parties that a written agreement is what they were working towards.
[55] It is curious that the only documents In-Store provided with their motion materials were the earlier February e-mails, presumably to show that the parties had agreed to essential terms. They did not provide the documents that continue the story, nor do they discuss it in their supporting affidavit. The trail runs cold, picking up again in mid-November 2010.
[56] At the end of the day, there is nothing in the pleadings to support In-Store’s theory of the case, nor have they produced documents to demonstrate a real factual basis for it.
[57] In terms of In-Store’s case against Torstar, they rely on Homelife Realty Services v. Homelife Performance Realty Inc., 2007 CarswellOnt 8011¸ where the court discussed that in certain cases, it will be obvious that a party had notice and knowledge could be assumed. But this principle, on its own, does nothing to assist In-Store unless they can present a set of facts that leads in that direction, and this they have failed to do. There is nothing in the evidence to show or lead to the obvious inference that, prior to acquiring this business, Torstar was aware that there was another player and that that player was In-Store. No “smoking gun” was revealed that makes this point and provides a basis for following up with further disclosure.
[58] Turning to the relief sought, the numbering that follows is based on the amended notice of motion. My decision regarding each of the matters in issue is based on the legal framework set out above.
ITEM 1 of the Amended Notice of Motion - Zuker’s under advisements and refusals
[59] Ques. 110-111: was adjourned nut counsel has since advised me they are withdrawing it.
[60] Ques. 297 on p. 72: is dismissed as there is no longer any issue of Zuker’s access to his Wagjag e-mails.
[61] Ques. 297 on pp. 73-74: to be answered but only in so far as e-mails that mention Davidson; In-Store; or the possibility/ likelihood/existence of a 3rd party with an interest in Wagjag, aside from Becher.
Item 2 of the Amended Notice of Michael - Torstar’s Undertakings and refusals
[62] Ques. 368-370: It was only after Mr. Patel made his submissions that Mr. Stein withdrew this item.
[63] Ques. 454-460: This item is dismissed. Torstar has already searched their documents again after the last hearing date and remain steadfast in their position that as they did not know about In-Store or Davidson’s discussions or alleged agreement with Zuker/Wagjag they have no documents that suggest otherwise. They maintain that they have no documents flowing between the people and entities mentioned here that suggest that Davidson, In-Store or anyone else does/may have an interest or contingent interest in Wagjag in the period leading up to the Torstar acquisition. A party cannot produce what does not exist and they are not required to produce everything else they have to make that point.
Item 4 of the Amended Notice of Motion
Vis a vis Zuker
[64] 4a) Once again, In-Store is trying to raid the pantry in order to make Zuker prove a negative, by seeking considerably more than could be relevant on the current pleadings. This is dismissed.
[65] 4(b) The agreement with Becher is not relevant to any agreement In-Store may have had with them. In-Store’s “course of dealing” theory, suggesting that Zuker tended to use oral agreements, does not stand up to scrutiny in view of the evidence about how efforts were clearly underway to paper the deal with In-Store. This was not intended to be an oral agreement. I am therefore not persuaded that anything about how Zuker came to terms with Becher can be relevant to the case at bar.
Vis a vis Torstar
[66] In view of my decisions above, In-Store chose not to make submissions with respect to either 4a) or 4b). They are both dismissed on the same basis as above.
Item 5 of Notice of Motion produce hard drive for inspection
[67] While In-Store’s suspicions may have been justifiably raised by the delay in getting access to Zuker’s e-mails (in view of his mistaken belief that he had been shut out of his Wagjag account after having left their employ) , that is not sufficient to justify such a significant level of intrusion.
[68] What is being sought here amounts to yet another attempt at a fishing expedition. Suspicion is not an adequate basis for such a request. This is also dismissed.
COSTS
[69] In-Store initially asked for costs, then indicated they would not be seeking costs, but they maintained Torstar should get minimal costs ($2000) and Zuker should get none.
[70] This motion took far longer than the time booked for it and well beyond what should have been required in view of the small number of issues on the table. This was largely the result of how In-Store approached the matter, changing position repeatedly, even during their cost submissions. The fact that the responding party addressed what he believed In-Store considered an outstanding undertaking before In-Store indicated the question was withdrawn is a good example of how the hearing proceeded.
[71] There was also no meat on the bones of In-Store’s thesis that the documents they sought must exist. They:
• produced nothing at all to demonstrate this;
• cut off their discussion of documentary disclosure at a point where they believed their position was supported (though that was not the case);
• failed to include their own affidavit of documents in the material to assist with the analysis of the allegedly missing documents;
• refused to provide their own evidence at discoveries, leading to an inference that they had none; and
• insisted that they should have access to everything Zuker had to show that it was his practice to make oral agreements that dealt with his parting with portions of his business, when their own evidence showed that this was not what appeared to be the direction they had been heading in.
[72] It was also troubling that In-Store distorted Zuker’s evidence about whether or not he destroyed or could have destroyed documents and then relied on that distortion throughout their submissions.
[73] In addition to the length of the hearing, there were cross-examinations conducted of Zuker’s witness, so In-Store had an opportunity to build their case for the existence of the documents they say must exist. In the end, they came away from this exercise with nothing more than they had going into it.
[74] Finally, the second hearing was the last of several seeking the very same thing. There were two appearances before Master McAfee and an appeal from her last order to a judge.
[75] Zuker seeks costs of $11,675.40 (substantial) or $7691.09 (partial). Torstar seeks $9523.35 for substantial indemnity costs, $6379.08 on a partial scale. In-Store’s own cost outline indicates that had they sought costs, they would have been looking for $7545.52, on a partial indemnity scale so the numbers advanced by the defendants are not out of range.
[76] In-Stores’ response to these numbers is that the motion was necessary but it is not clear what, if anything, they got as a result of it – and the motions that preceded it.
[77] In my view, far too much time was spent by moving counsel on suspicion and conjecture, far too little time on putting forward an evidentiary basis for what was sought and crafting a legal argument that was sound. The same result could have been achieved far more quickly but for the padding that added nothing to the merits of the motion.
[78] In my view, both responding parties have justified their claim for partial indemnity costs. The quantum for each that I have arrived at falls within what ought to have been within the reasonable contemplation of the plaintiff.
[79] I therefore order In-Store to pay costs fixed at $7000 to Zuker et al. and $6000 to Torstar within 30 days.
Master Joan M. Haberman
Released: October 7, 2015