Whitty v. Wells, 2016 ONSC 2266

CITATION: Whitty v. Wells, 2016 ONSC 2266

COURT FILE NO.: CV-11-442307, CV-13-488119, CV-14-488748, and CV-13-488659

DATE: 20160404

SUPERIOR COURT OF JUSTICE - ONTARIO

B E T W E E N:

Patrick Whitty, RPR Environmental Inc., 1049585 Ontario Inc., and 876947 Ontario Limited, Plaintiffs

-and-

Edward N. Wells, Edward G. Wells, Bradley May, Renzo Benocci, Brad Simpson, Mark Vanderlaan, Peter Kent, John Baird, Jim Prentice, Manon Bombardier, Gordon Owen, Sandra Antonioni, Diana Ball, Luke Cayley, Rob Fortin, Erin Gilmer, Jeffrey Green, Melanie Gregorich, Julie Horvath, Rebecca Huehn, Anna Lyn-King, Douglas Laing, Denise McGuire, John Miller, Amrick Shergill, Lorraine Young, and The Attorney General of Canada, Defendants

BEFORE: F. L. Myers, J.

COUNSEL: Vilko Zbogar, counsel for the plaintiffs Wendy Wright and Jacqueline Dais-Visca, counsel for all defendants other than Sandra Antoniani Scott Beattie, counsel for the defendant Sandra Antoniani

HEARD: April 1, 2016

Endorsement

[1] The defendants do not oppose the plaintiffs’ motion for a further extension of time to allow the plaintiffs to deliver their sworn affidavits of documents and an expert’s report on damages. However, the defendants (other than Ms. Antoniani) ask for terms to be added to the order requiring the plaintiffs to post security for costs and to pay costs thrown away. In my view, for the reasons that follow, the terms sought are appropriate and are granted.

The Facts

[2] The plaintiffs have brought four actions against the federal government and more than 20 individual government employees. The plaintiffs claim over $50 million in aggregate damages as a result of alleged illegal acts committed by the defendants. The plaintiffs claim that a form of search warrant executed against them and subsequent defamation by the government were acts committed in bad faith and in flagrant, intentional breach of the plaintiffs’ legal rights and the defendants’ duties. Ms. Antoniani is said to have ordered the illegal search with malice. The remaining individual defendants are the people who carried out the search in the main. There are no particulars of wrongdoing pleaded against the myriad of underlings who appear to have just been doing their jobs.

[3] The four actions became bogged down in pleadings motions and were further complicated by the plaintiffs’ commencement of a number of actions in the Small Claims Court purportedly independent of their counsel. After those matters were sorted out by others, I was appointed as Case Management Judge to try to help the parties move forward toward resolution of the action on the merits.

Case Management Endorsements

[4] In my first endorsement dated June 26, 2015, I questioned why the action was continuing against individuals whom the government was indemnifying. I also questioned the purpose and bona fides of the Small Claims Court actions. I continued:

As I told all counsel, it appears on reading the full history of the matter, that the plaintiffs’ claims have been treated as serious bona fide claims despite the difficulty proving the causes of action alleged. There is a readily understandable core of a cause of action visible on even a cursory review of the pleadings. The plaintiffs hurt their own cause by taking steps that risk delaying their own claims, that undermine the credibility of their claims by purporting to act independent of their counsel, or steps that might appear to be vexatious rather than substantively helpful.”

[5] I then set out a number of directions to get the parties started on document production efficiently. There were several thousand documents to be dealt with. I gave directions concerning the use of technology and suggested that parties consider retaining document handling services abroad. Tech-savvy document review, coding, and handling assistance is available abroad at very reasonable rates. As it turns out, the process was nowhere near as daunting as originally advertised. The bulk of the documents had already been produced by the government under various Access to Information requests. Many of those documents had been produced with some information redacted. The burden of comparing redacted documents to originals and producing one full set of complete documents fell to the government. The plaintiffs’ evidence is that they reviewed over 4,000 documents.

[6] Last June, I also discussed with the parties the need to focus efforts on the proof of the plaintiffs’ damages. I wrote:

The plaintiff should consider how it can quantify its damages for the purposes of settlement discussions. This should proceed now, in parallel with all other matters. The sooner settlement discussions can start, the more likely they are to succeed. General damages for defamation are at large and generally are quite modest in Canada. Special damages (i.e. actual money losses or business losses) must be proven specifically and supported by documents and experts. Tort damages require proof of specific losses and that the losses were caused by the acts alleged. The parties have spent substantial sums on all kinds of arcane process issues over the past four years. The practical issue in common to all of these cases though is “how much did the plaintiffs lose as a result of the allegedly unlawful acts of the government.” All of the other spending is just to allow this one big question to be answered. The plaintiffs should be focusing resources on the main damages issue so as to engage the government in discussions rather than wasting money on process points such as adding extra defendants who will not really be at the negotiating table with a serious chequebook. The court can assist the parties with settlement efforts including judicial mediation when the plaintiffs have put together a meaningful damages brief. [Emphasis added.]

[7] As the plaintiffs seek compensation in these lawsuits, their efforts should be and should always have been on quantifying their losses to try to engage the government in discussions while moving forward toward trial. The torts alleged occurred many years ago. As the plaintiffs say they lost business, contracts, and customers as a result of the governments’ unlawful acts, it is and has always been evident that they needed to assemble “before” and “after” lists of the business, contracts, and customers held and then lost, supported by contemporaneous correspondence, financial documents, financial statements, and expert analysis to derive a loss of profits figure. That will at least provide a number. The plaintiffs then will likely need to establish that the losses that they claim were caused by the governments’ unlawful acts rather than by other factors such as competition from other businesses, changes in the economy, and the like. None of this is simple. In fact, it is quite complex. The plaintiffs face serious challenges proving intentional torts of the type pleaded and then proving their damages. But they sue for $50 million. It is a serious case based on serious allegations which, as I noted above, do resonate on first reading.

[8] As matters have progressed however, I have been caused to pause and consider whether the plaintiffs are pursuing a different agenda. Perhaps they have realized that the task ahead is too daunting or that they cannot meet some of the legal hurdles they are required to surmount. I raised this concern due to the plaintiffs’ apparent reluctance to move forward with their own cases.

[9] In my endorsement dated October 30, 2015, I discussed the parallel paths of discovery and settlement discussions. I noted that while progress had been made by the parties, the plaintiffs thought that a further three or four months would be required for them to make disclosure. I reiterated the need to focus on substance and wrote:

It is well past time for the plaintiffs to be ready to show their hands and the defendants to be called upon to respond on the merits.

[10] With input of the parties I ordered a schedule as follows:

a. The plaintiffs to produce their historic financial records and their expert’s report by January 15, 2016; b. The parties will exchange sworn affidavits of documents by February 12, 2016; c. The parties will then take a short breath to evaluate each other’s case and proceed to mediation; d. If mediation fails and the plaintiffs have not agreed to let the individuals out of the action then the government may bring on its motions for summary judgment seeking to do so;

[11] All other steps in the plaintiffs’ 29 page proposed discovery plan were stayed so that the parties can move beyond process issues and “get down to discussing the merits.”

[12] On December 18, 2015, the plaintiffs requested an extension of time. I wrote:

The plaintiffs seek an extension of the time for delivery of their damages documents and expert’s report as set out at para 7(a) of my Endorsement dated October 30, 2015. These actions are five years old and are still at the production stage. I am hesitant to agree to any extension of time. However, Mr. Zbogar assures counsel opposite and the court that work is under way and is progressing well. He intends to deliver the documents required by para 7(a) on February 12, 2016 in his clients’ affidavits of documents that are due under para. 7(b) of the Endorsement. He asks for a deadline of February 29, 2016 for the delivery of the expert’s report. I am prepared to extend one indulgence to the plaintiffs and their expert. The documents shall be included in the plaintiffs’ affidavits of documents as offered. Justification of any further requests for an extension will require support by detailed evidence. Rather than committing resources to that task, the plaintiffs and their expert should focus on getting the report done on a timely basis so that these actions can move forward on their merits. [Emphasis added.]

[13] The extension was granted on those terms.

The Deadline Passed

[14] The date for delivery of the parties’ affidavits and lists of documents has passed. The government produced its list as required. It had to retain overtime help to meet the deadline and it did so. The plaintiffs’ let the deadline go by without comment. They did not ask for an extension of time until after they had fallen into default of the due date that had already been extended at their request.

[15] The plaintiffs have now disclosed that they did not retain their damages expert until January of this year. The expert’s report was initially due on January 15. Mr. Zbogar says that there was no point in retaining an expert before the plaintiffs had their documents ready. Mr. Zbogar also advises that the plaintiffs have only prepared client lists, employee lists, and other information for the expert to start reviewing in the past two weeks. I would have expected those types of lists to have been prepared at or before the commencement of the action. How did the plaintiffs realize that they suffered losses at the time without looking at their performance numbers and making those types of lists for comparison?

[16] Mr. Zbogar now says he hopes that the expert will have a report by mid-June but he cautions that, if the expert requires further information, the date may be pushed back.

[17] Mr. Zbogar says that his clients are proceeding in good faith to produce their documents. They have now delivered a draft affidavit of documents and they need only another two weeks to have it sworn. The evidence of his law clerk, which is principally on information and belief from Mr. Zbogar himself, shows that the plaintiffs’ dedicated part of one employee to the document disclosure task. That person invested a number of hours to production issues over a number of months. Reviewing documents also tasked to capacity Mr. Zbogar’s practice. Mr. Zbogar was also hampered by two illnesses in his family in January. In all, far too few people were engaged in the plaintiffs’ document review task to have any hope of fulfilling the timelines discussed among counsel and ordered by the court.

[18] At best, the plaintiffs’ argument resolves to them having underestimated the time required given the resources that they were willing to commit to their lawsuits. Put another way, they have declined to commit resources required to fulfill their obligations in the lawsuits that they have brought.

[19] The 4,000 or so documents reviewed by the plaintiffs is objectively a very manageable number and one that ought not to have taken nine months to assemble had the plaintiffs committed sufficient resources to a project befitting a $50 million lawsuit. As I wrote in February, “[t]his is a civil case. It is about money. Every step of the way is bounded by cost-benefit analysis and proportionality.” Parties in a $50 million case managed action ought to expect to invest the time, resources, and effort required to have the case move forward efficiently. There is no urgency. There is no need for short or false deadlines. But meeting a schedule based on agreed, reasonable deadlines to keep matters moving apace is a minimum step toward efficiency.

[20] The government urges me to find that Mr. Zbogar misrepresented the state of his clients’ preparedness (or lack of preparedness) in December when he assured counsel opposite and the court that the process was proceeding well and he committed to produce an expert’s report when an expert had not even been retained. Recall that Mr. Zbogar now says that there was no use in retaining the expert until the documents were ready to be produced and under the schedule as amended in December, that would not occur until mid-February. Was Mr. Zbogar providing assurances to his colleagues and to the court that the expert would have a report prepared just two weeks after being retained and seeing the documents for the first time? Or, would reasonable counsel and court have concluded that the expert was retained and was well along the road reviewing historic documents, asking for other documents that he or she might need, in parallel with the ongoing production process so as to be ready with a report two-and-one-half months hence?

[21] I decline to make a finding on this point because the issue of Mr. Zbogar’s conduct is not the important issue in my view. The issue is whether the plaintiffs have committed to advancing these cases appropriately.

The Reluctant Plaintiffs

[22] At para. 10 of my endorsement dated February 19, 2016, reported at 2016 ONSC 1278, I raised specifically the question of the plaintiffs’ bona fides in these actions as follows:

It is logical to expect that if the plaintiffs believed that they could establish significant, provable loss, they would have committed and prioritized the resources required to engage the government ASAP. This does not appear to have happened. They have declined to have counsel communicate with the defendants’ counsel to move forward efficiently. They have delayed even to the point of violating a court ordered schedule. As a result of the persistent lack of communication in these matters, I instituted monthly case conferences which have been necessary to make even grudging headway in the plaintiffs’ cases. Why would the plaintiffs be repeatedly delaying their own cases? The plaintiffs do not seem to want to move forward on the merits - at least not with any alacrity or efficiency. Might their conduct throughout be more consistent with a belief that their claim has little provable value and that the plaintiffs are just trying to use the court processes to punish government employees i.e. the individuals whom they blame for the wrongdoing alleged?

[23] The plaintiffs are not moving proactively in any sense. For example, I am told that the plaintiffs still need two weeks just to swear the existing draft affidavit of documents that was due six weeks ago. I would have expected a plaintiff whose bona fides was questioned at least to make the effort to swear the existing draft affidavit prior to the return of the motion if not to comply with the outstanding court order, then for pure symbolism of demonstrating their engagement.

How to Move Forward Justly

[24] I do not accept Mr. Zbogar’s submission that it’s just a scheduling order so no sanction is required. Courts are very reluctant to resolve cases based on procedural grounds rather than on their merits. This is especially true where the question involves breach of procedural orders. But I agree with Nordheimer J. in Bottan v. Vroom, 2001 CarswellOnt 2382 that if the merits always need be determined before remedies for breach of procedural rules can be imposed, there would be little room for the effective application of the rules that provide such remedies (such as Rules 57.03(2) and 60.12).

[25] In UHA Research Society v. Canada (Attorney General), 2014 FCA 134 Stratas J.A. made reference to the importance of scheduling orders of the court as follows:

[8] I reiterate and underscore the fact that the end result is an order of the Court scheduling the appeal hearing. A scheduling order is no different from any other order of the Court – it is an instrument of law, on its terms mandatory and effective…

[10] Scheduling Orders of this Court are not trivial matters that can be set aside whenever something comes up for counsel.

[26] I agree. Rule 60.12 provides:

FAILURE TO COMPLY WITH INTERLOCUTORY ORDER

60.12 Where a party fails to comply with an interlocutory order, the court may, in addition to any other sanction provided by these rules,

(a) stay the party’s proceeding;

(b) dismiss the party’s proceeding or strike out the party’s defence; or

(c) make such other order as is just.

[27] It seems to me that I should be considering orders required to ensure that the case is prosecuted efficiently, affordably, and proportionately in the circumstances. Affordability must be considered in light of proportionality. Civil litigation requires investment of time, effort, and money. Proportionality in a big case may well require significant expenditures on significant steps. The plaintiffs claim to have suffered over $50 million in business losses. That suggests that they carry on very substantial businesses and have suffered massive, demonstrable losses of revenue and/or increased expenses due to the defendants’ wrongdoing. Proving those assertions is a very substantial task involving complicated accounting and a large number of documents and computer media no doubt. If the plaintiffs cannot or will not make the investment required to prove their case five years in, then the defendants are entitled to know and to be done with it. In my view, the appropriate order is one that ensures that the plaintiffs are committed to advancing the case appropriately and that protects the defendants in the event that the plaintiffs are not committed to doing so.

Security for Costs as a Condition of an Order Extending Time

[28] The government asks for an order for security for costs under Rule 60.12(c) to sanction or penalize the plaintiffs for their failure to comply with the timetable in the circumstances discussed above. There is no doubt that security for costs is a remedy that is available under Rule 60.12(c) in appropriate cases. In fact, Rule 56.09 makes security for costs a remedy that is available as a term of an order on any motion.

[29] The plaintiffs argue that for security for costs to be granted either under Rule 60.12(c) or 56.09, the defendants must first establish the existence of one of the regular grounds for ordering security for costs under Rule 56.01 (i.e. a foreign plaintiff or a plaintiff without assets, for example). Mr. Zbogar was not able to point to any authority for that proposition. In my view, the interpretation proposed by Mr. Zbogar would render Rule 56.09 redundant. One would never need to resort to Rule 56.09 to add security for costs as a condition or term of another order if the grounds for making an order for security for costs already existed under Rule 56.01. The order could be made under Rule 56.01 without resort to Rule 56.09. In my view, Rule 56.09 supplements Rule 1.05 to remind and clearly provide that security for costs is a term that is within the court’s remedial quiver whenever terms or directions are added to an order to provide for a just outcome.

[30] The government submits that security for costs should be ordered as a penalty for breach of the schedule. The plaintiffs say that security for costs is too severe a penalty for a little breach of a minor order. I do not think that security for costs is a penalty at all. Nor do I order it as a sanction or penalty. I leave that to costs discussed below.

[31] An order for security for costs is not punitive in intent or application. Security for costs is, as the name suggests, security. An order for security for costs requires a party to post cash or cash equivalents to create a readily accessible fund that can be used later to pay a costs order that may be made against the party. The grounds for ordering security for costs provided in Rule 56.01 are generally examples of cases where it appears either that the plaintiff will likely be required to pay costs (such as where the case is frivolous) or where it appears likely that the defendant will not be able to enforce a costs order if one is made (where the plaintiff has no assets or is not in Ontario or a reciprocating province for example). Security for costs requires the plaintiff to post collateral not as a penalty but where it is fair and just to do so to ensure compliance with a potential future costs order.

[32] Rule 56.01 lists the most common situations where security for costs is appropriate; but they are not the only situations. In this case, I originally designed a two-track process to see the parties move forward with production and mediation on the merits while holding off the governments’ proposed motions for summary judgment. Now, as a result of the plaintiffs’ failure to comply with the schedule, there will likely be a significant hiatus for several months while the parties await the plaintiffs’ expert report. The motions for judgment could have been long since heard to end the distress on a number of individuals who have been sued personally with no particulars of wrongdoing in their personal capacities. I am confronted with plaintiffs who do not feel compelled to obey what they perceive to be minor procedural orders, who five years into the case have resisted focusing on the “one big question” of their damages, and who have not seen fit to respond to my expression of concern that the litigation may be being carried in bad faith.

[33] In these circumstances, it seems to me that an order for security for costs is very much a fitting term of a further extension of time. If the plaintiffs persist in disobeying court orders or if they fail to deliver a proper expert report on a timely basis, which I fear is a real likelihood, then a dismissal of the actions and a substantial award of costs of the action against the plaintiffs is indeed quite likely. I am very dubious that the plaintiffs will produce a credible, complete expert report by mid-June if at all. I have heard no evidence indicating that the plaintiffs have approached the task of proving their damages with anything approaching the investment of time and resources required to do a credible job in a substantial case. The evidence is more consistent with the plaintiffs doing the minimum necessary to keep the litigation alive. Their reluctance is palpable and continues despite my making clear in October that the time for them to tip their hands was nigh.

[34] The action involves serious claims of intentional wrongdoing. A punitive costs award is quite possible if those claims are not proven. Ordering the plaintiffs to post security to protect against a costs award if they do not proceed appropriately with their claims will provide an economic incentive to focus the plaintiffs on the need to invest in the proceeding appropriately to fulfill their obligations on a timely, credible, and ongoing basis. It will also test their engagement. If the plaintiffs do not wish to proceed on that basis they can decline to post the security and have the actions dismissed now. If the plaintiffs think that their provable damages do not justify the investment required to proceed, they are always free to open settlement discussions. If posted, security will protect the defendants against the risk of collecting on a subsequent costs order that could well be made if the plaintiffs subsist in dilatory or improper conduct.

[35] I have reviewed the government’s draft bill of costs. It is reasonable and not at all aggressive. Accordingly, the plaintiffs shall post with the accountant of the court $100,000 in cash or by unconditional letter of credit issued by a Schedule 1 bank as security for costs of the defendants other than Ms. Antoniani within 60 days. Rules 56.04 to 56.08 apply. The plaintiffs shall post a further $130,000 in cash or by unconditional letter of credit issued by a Schedule 1 bank as security for costs for steps leading up to the commencement of trial preparation within 30 days of the earlier of the unsuccessful end of a future mediation or the date of a Case Conference at which the hearing of the defendants’ motions for summary judgment is scheduled. The defendants may move to seek a change in the amount of security required prior to trial.

Costs Thrown Away

[36] In addition, the government incurred $30,000 in overtime expenses for document review to meet the court ordered deadline in February. If they had known that they could have had an extra six weeks to comply because the plaintiffs needed that time, they would not have had to incur overtime charges. The plaintiffs say that they should not have to pay for overtime as the government would have had to incur that cost in any event to comply with the court’s order. But that is not the case. If, instead of just ignoring the deadline, the plaintiffs’ counsel had picked up the telephone and engaged with the defendants’ counsel, timing could have been discussed and mutually agreed. I have previously criticized the plaintiffs for their failure to communicate with the defendants on matters of process where cooperation is required for efficiency. For example, the plaintiffs previously raised as an excuse for their failure to meet a deadline the fact that they were having trouble dealing with the volume of the governments’ documents in their possession as a result of Access to Information requests. When that matter was first raised at a Case Conference, the government readily agreed that the plaintiffs did not need to list the government’s own documents. Had the parties spoken before court, much time could have been saved by them all. Moreover, it is also better advocacy. It would have been much more persuasive for the plaintiffs to have said that they had an issue but resolved it with the defendants on consent rather than coming forward with an excuse for non-performance after the fact. I stressed the need to communicate expressly in my endorsement dated February 19, 2016. I completely adopt the discussion of communication and cooperation penned by Master MacLeod in L’Abbé v. Allen-Vanguard, 2011 ONSC 4000 at para. 33 and following.

[37] Here, by failing to communicate their inability and their lack of intention to comply with the deadline, the plaintiffs unnecessarily left the government believing that it needed overtime to meet the deadline. In my view it is appropriate for the plaintiffs to pay forthwith $20,000 of the government’s added expenditure caused both by the plaintiffs’ failure to comply with the timeline as ordered and their failure to communicate with the opposite parties as required. This is without prejudice to the government’s right to seek the rest of its overtime costs at a later date if so advised.

Costs of the Motion

[38] Finally, the government seeks its costs of this motion at the very reasonable sum of $1,500. In light of the motion being required to deal with the plaintiffs’ breaches, this is wholly appropriate in my view.

Order

[39] Therefore, the time for delivery of the plaintiffs’ sworn affidavit of documents is extended to April 15, 2016. The time for delivery of the plaintiffs’ expert report on damages is extended to June 17, 2016. These orders are made on the following terms:

a. The plaintiffs jointly and severally shall post $100,000 in cash or by unconditional letter of credit issued by a Schedule 1 bank as security for costs of the defendants other than Ms. Antoniani on or before May 31, 2016. b. The plaintiffs jointly and severally shall post a further $130,000 as security for costs for steps leading up to the commencement of trial preparation within 30 days of the earlier of: (a) the unsuccessful end of a future mediation; or (b) the date of a Case Conference at which the hearing of the defendants’ motions for summary judgment is booked. c. Rules 56.04 to 56.08 apply to the security required by this order. d. The plaintiffs jointly and severally shall pay forthwith costs thrown away of $20,000 to the defendants other than Ms. Antoniani without prejudice to the right of those defendants to move later for recovery of the rest of their overtime expense.

[40] The plaintiffs jointly and severally shall pay forthwith the costs of this motion to the defendants other than Ms. Antoniani fixed at the all-inclusive sum of $1,500 and of Ms. Antoniani fixed in the amount of $500 all-in.

F.L. Myers J.

Date: April 4, 2016