SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-43736
DATE: 20151218

RE: 2287913 Ontario Inc. et al., Plaintiffs

and

Blue Falls Manufacturing Ltd. et al., Defendants

BEFORE: F.L. Myers J.

COUNSEL:
H. Richard Bennett and J. Figliomeni, for the plaintiffs

A. Fischer and C. O’Connor, for the defendants

HEARD: December 16, 2015

ENDORSEMENT

[1] This is the third appointment that I have heard involving the plaintiffs’ desire to move for summary judgment. The defendants urge me to refrain from scheduling the motion at this time.

[2] In Hryniak v. Mauldin, 2014 SCC 7, Justice Karakatsanis discussed pre-hearing directions as follows:

[72] I agree with the Court of Appeal (at paras. 58 and 258) that a motion for directions also provides the responding party with the opportunity to seek an order to stay or dismiss a premature or improper motion for summary judgment. This may be appropriate to challenge lengthy, complex motions, particularly on the basis that they would not sufficiently advance the litigation, or serve the principles of proportionality, timeliness and affordability.

[3] In this case, the plaintiffs allege that shortly after they paid over $1 million to buy out their partner’s share of their distributorship business, the defendants terminated the distributorship agreement and opened a competing business. The defendants argue that they terminated the applicable distributorship agreement for cause because the plaintiffs breached the agreement by selling competitors’ products.

[4] There are factual issues concerning the terms of the distributorship agreement as the parties did not sign a new agreement after the plaintiffs’ purchase. There is a ten year history of the distributorship relationship that may have to be considered to determine the terms of the agreement. Mr. Bennett accepts that a mini-trial with oral evidence is likely required just to determine the terms the contract. Moreover, the facts surrounding whether the agreement allowed the plaintiff to sell competing products, whether and to what extent it did so, and how it was positioned to enter into a new distributorship with a competing manufacturer just days after the termination of the distributorship, may be relevant if the distributorship agreement prohibited such competition.

[5] The defendants have raised concerns about their desire for further production. The plaintiffs point out that the defendants have not actually moved or even advanced a consistent claim for discovery of documents. Moreover, the plaintiffs say that they recently offered up their computers for searching by an independent party and the defendants then changed their request.

[6] When I heard the parties in Civil Practice Court earlier this month, I expressed concern that it had taken the plaintiffs six months from their first appearance to deliver their motion record. I noted at that time, the defendants’ concern for the complexity and number of causes of action asserted. If one or more causes of action survive summary judgment, it seems to me that the same facts that formed the basis of the motion will then have to go to trial. Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, suggests that a motion for summary judgment is not appropriate in that circumstance. Therefore, in my prior endorsement, I required the plaintiff to serve a revised Notice of Motion that expressly delineated the relief sought and the grounds advanced. I also tried to have the parties agree on the scope of E-discovery by December 15, 2015, failing which I indicated that the defendants could move before a Master for further and better production if so inclined.

[7] The plaintiffs have now delivered an amended Notice of Motion. They seek summary judgment for: breach of contract, fraudulent misrepresentation, conspiracy, breach of fiduciary duty, obtaining money by false pretenses, inducing breach of contract, breach of the duty of good faith and fair dealing under the Arthur Wishart Act, economic interests, intentional interference with contractual relations, wrongful appropriation of customers and business opportunity, loss of goodwill and future profits, erosion of equity, and unjust enrichment. There is also a separate cause of action for defamation alleged.

[8] Mr. Bennett argues that the sole issue is whether the plaintiffs were required to sell exclusively the defendants’ product. The plaintiffs admit that they sold a small amount of competing product. If they were entitled to do so, they say they win. The defendants say that the plaintiffs have produced no emails, purchase orders, dealership agreements, or other documents concerning the competitive products that they sold. The defendants want full E-discovery and hard documents concerning the plaintiffs’ sales of competitive product.

[9] As I said the last time, I cannot yet tell if the case is ripe for summary judgment. It may be that the defendants are stalling. However, the motion may also be a document dump by the plaintiffs.

[10] Summary judgment lies best when the moving party is able to identify a discrete, neat, gating issue that might be resolved on a motion to thereby save the parties the cost and delay associated with going to trial on a number of other issues. For example, In Rothwell v. Raes, 1988 4636 (ON SC), aff’d [1990] O.J. No. 2298 (C.A.), 1990 6610 (ON CA), Osler J. heard a 74 day trial concerning the plaintiff’s allegation that he contracted debilitating encephalitis from a DPT vaccination. Ultimately, Osler J. decided the case based on general causation. He found that, regardless of the plaintiff’s personal circumstances, the vaccine simply does not cause encephalitis. In concluding his reasons, the judge lamented that the plaintiff and his family had to endure the stress and strain of a 74 day trial and bear the inordinate expense of submitting to the full measure of the civil litigation process, only to be found to fail due to the lack of causal relationship between the vaccine and the disease from which he suffered. How could the plaintiffs or the defendants have been prejudiced if the case had been resolved on that single issue without a 74 day trial trudge through the plaintiff’s painful circumstances?

[11] By contrast, summary judgment faces more hurdles where a party delivers thick motion records advancing multiple, undifferentiated issues and essentially challenges the court to wade through complex facts and find an issue that might be soluble. Uploading a complex, multi-issue case with facts in dispute to a judge without the benefit of counsel’s trial narrative creates very challenging motions that are more likely to be found to be disproportional in the context of the “litigation as a whole” as discussed in Baywood.

[12] Here, it may be that there is a discrete factual issue as to whether the agreement between the parties included an exclusivity clause. If it did and the plaintiffs admit that they breached that clause then the facts concerning the extent of the breach and the discovery sought by the defendants may not be necessary to resolve the case on that one issue.

[13] But I am dubious. I have not yet heard the plaintiffs admit that their sales of competing product were sufficient to justify termination of their agreement and dismissal of the action if an exclusivity clause is found to have existed. So, there may well be factual issues even if an exclusivity clause is found. Moreover, despite giving the plaintiffs the opportunity to simplify their motion, they came back with a dozen causes of action claimed and multiple heads of damages sought. Mr. Bennett says that they all essentially flow from the one finding of whether the plaintiffs breached an exclusivity clause. If that is so, then why are all of the torts pleaded? On the face of the causes of action asserted, while some overlap, there is no perfect confluence. Fraudulent misrepresentation looks at the pre-contractual discussions. It turns as well on the knowledge and intention of the representor. Whether a fiduciary duty applies turns on whether the distributor undertook to sacrifice its own self-interest in favour of the plaintiffs’ interests and then exercised a discretionary power that hurt the plaintiffs or to benefit itself at the plaintiffs’ expense. Conspiracy requires proof of an antecedent agreement and either an illegal act or a deliberate intent to hurt the plaintiffs. The torts of inducing breach and intentional interference have well-defined factual inquiries that extend well beyond proof of a mere breach of contract. Were the court to find a breach of contract but rule that there is a triable issue against non-contracting defendants on any of the tort allegations, then won’t the same facts that underpinned the motion still have to go to trial? How will the motion have proven a saving in that case? Won’t there also be a risk of inconsistent findings?

[14] Complexity alone is not a basis to reject a motion of summary judgment. As noted by Corbett J. in Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200 at para. 32

Summary judgment motions come in all shapes and sizes, and this is recognized in the Supreme Court of Canada’s emphasis on “proportionality” as a controlling principle for summary judgment motions. This principle does not mean that large, complicated cases must go to trial, while small, single-issue cases should not. Nor does it mean that the “best foot forward” principle has been displaced; quite the reverse. If anything, this principle is even more important after Hryniak, because on an unsuccessful motion for summary judgment, the court will now rely on the record before it to decide what further steps will be necessary to bring the matter to a conclusion. To do this properly, the court will need to have the parties’ cases before it.

[15] I am not so much concerned with the complexity as I am with the lack of a discrete issue for which discovery ought to be replaced with cross-examinations in order to promote the goals of efficiency, affordability, and proportionality. The plaintiffs ask that I combine discovery and cross-examination. While similar in physical appearance, each process has very different rules and strategies. As discovery evidence cannot be used at trial or on motions by the party being examined, the party opposite is encouraged to ask all manner of relevant questions on discovery so as to learn the case which it has to meet. To do that, the examiner is encouraged to ask questions to elicit damaging information and is protected by the Rules from having that evidence used against his or her client. A cross-examination transcript, by contrast, can be used by all parties at the hearing of the motion. That means that counsel needs be careful to ask questions that cannot hurt his or her client and to control the witness through techniques of cross-examination that do not necessarily allow for the goals of discovery to be met.

[16] There are certainly cases where courts order cross-examination transcripts to stand in place of discovery. Often this occurs on consent where examining counsel is satisfied that he or she has asked the questions that he or she wanted to ask even though the process was cross-examination rather than discovery. The decision is usually made after the cross-examination has occurred when one can gauge the thoroughness of the transcript. Before taking away the prima facie right to discovery in advance, it seems to me that the court should have some assurance at least that the motion process proposed will result in a fair hearing that resolves all or part of the case.

[17] Where a party advances a small number of discrete issues that may resolve the entire case, it is much easier to conclude that a thorough investigation of those issues may be the most proportional process even though the issues may be complex or have some facts in dispute. At para. 59 of Hryniak, Justice Karakatsanis wrote that, “[w]hat is fair and just turns on the nature of the issues, the nature and strength of the evidence and what is the proportional procedure.” I am not yet hearing the motion and cannot yet make an assessment of the nature and strength of the evidence. However, considering the nature of the issues advanced and being keenly motivated to try to find the most efficient, proportionate process overall, I am not prepared to allow this summary judgment mini-trial to be scheduled as yet. Given the number of issues and the nature of the dispute, I do not see how a focused cross-examination could fairly replace a far-reaching examination for discovery in this case. Moreover, I do not yet see how even a successful result for the plaintiffs on the issue of whether the parties’ contract included an exclusivity provision avoids a trial on the same facts concerning the torts alleged. Furthermore, if the agreement is found to have prohibited competition, a trial is then required on whether the plaintiff’s sales of others’ products amounted to a material breach that justified termination of their distributorship and allowed competition by the defendants. Either way, I do not see the motion saving time or money.

[18] The plaintiffs will therefore have one month to consider re-fashioning their motion to bring it on a discrete issue or two. If they continue to assert other causes of action that will require a trial even if they succeed on their proposed motion, then there is no point in bringing the motion. If through admissions or strategic decision-making, they can find issues that truly resolve all or a significant part of the case so that the same facts do not go to trial even if the plaintiffs win the motion, then I would consider the matter further. If the plaintiffs are unable or unwilling to proceed in this manner, then the defendants will have a further 30 days to bring a motion for a further and better affidavit of documents if so advised. Thereafter discoveries will proceed and the action will be set down for trial in 2016.

[19] The parties are to schedule a telephone Case Conference with my office to be held on or before January 22, 2016. Costs reserved to the Case Conference.

F.L. Myers J.

Date: December 18, 2015