1440195 ONTARIO INC. v. 1440194 ONTARIO INC., 2016 ONSC 2921
COURT FILE NO.: CV-15-124000-00
MOTION HEARD: APRIL 27, 2016
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1440195 Ontario Inc. v. 1440194 Ontario Inc. and Antonio Simas
BEFORE: MASTER R.A. MUIR
COUNSEL: Jonathan Frustaglio for the Moving Parties/Defendants Darren Smith for the Responding Party/Plaintiff
REASONS FOR DECISION
[1] This motion is brought by the defendants pursuant to Rule 25.10 of the Rules of Civil Procedure, RRO 1990, Reg. 194 (the “Rules”) for an order that the plaintiff provide particulars of certain allegations found in numerous paragraphs of the statement of claim.
[2] This litigation involves a dispute between two former business partners. Luis Amaro (“Amaro”) and Antonio Simas (“Simas”) operated a business known as Nova Services Group (“Nova Services”). The corporate parties to this action are holding companies for Amaro and Simas.
[3] All of the assets of Nova Services were sold in August 2012 for a purchase price of $20,750,000.00. At some point in the fall of 2012, Amaro received a copy of a document entitled “Sale of Assets”. This document was purportedly prepared by Simas or at least at his direction. Upon reviewing the Sale of Assets document, Amaro became concerned that the sale proceeds may have been improperly distributed in a manner inconsistent with the parties’ shareholdings in Nova Services.
[4] Amaro’s evidence is that Simas was always in control of the finances, accounting and all corporate aspects of Nova Services. Amaro also deposes that he had no information, insight or input into any of the financial aspects of Nova Services.
[5] After receiving the Sale of Assets document, Amaro consulted counsel and reviewed the financial and other corporate documents that were in his possession. He also requested and ultimately obtained copies of certain other documents from Nova Services’ accountant, Michael Cooper. The plaintiff then commenced this action alleging, among other things, an improper distribution of the sale proceeds and improper payments to the benefit of Simas and other related parties.
[6] The statement of claim was issued on September 11, 2015 and served shortly thereafter. In addition to a claim for damages, the statement of claim seeks the appointment of an inspector pursuant to the Business Corporations Act, RSO 1990, c B.16 and an order for the preservation and production of all corporate records.
[7] The defendants served a demand for particulars on November 5, 2015. A response to the demand for particulars was served on November 17, 2015. For the most part, the response to the demand for particulars simply states that the information sought is within the knowledge of the defendants. The defendants then served a pro forma statement of defence on November 20, 2015 in order to avoid any default proceedings.
[8] The defendants argued that the statement of claim and the particulars provided fail to meet the minimum level of material fact disclosure required by the Rules. In particular, they argued that the allegations made by the plaintiff are in the nature of fraud, misrepresentation and breach of trust. Such a pleading, they submitted, requires full particularity, in accordance with Rule 25.06(8).
[9] The plaintiff submitted that its claim is sufficiently particularized in the statement of claim and in the reply to the defendants’ demand for particulars. The plaintiff also argued that all of the requested particulars are within the knowledge of the defendants in any event. The plaintiff therefore argued that no further particulars are necessary in order to allow the defendants to plead to the statement of claim.
[10] In my decision in Areva NP GmbH v. Atomic Energy of Canada Ltd., [2009] OJ No. 4372 (SCJ – Master), I summarized the law applicable to particulars as follows:
39 Rule 25.10 has been interpreted to require particulars of a pleading only when the particulars sought are not within the knowledge of the party seeking them and when they are necessary to enable that party to plead. In Obonsawin v. Canada, [2001] G.S.T.C. 26 (ON S.C.), Epstein J. (as she then was) had occasion to comment on when particulars should be ordered. At p. 26-9 of that Report she stated as follows:
In terms of the general principles, the test for when particulars should be ordered is that set out in the decision in Physicians' Services. In that case the court applied the principles laid down in cases such as Fairbairn v. Sage, 56 O.L.R. 462, [1925] 2 D.L.R. 536 in which it was held that particulars for pleading will only be ordered when (1) they are not within the knowledge of the party demanding them, and (2) they are necessary to enable the other party to plead. While other cases such as Champagne v. Kapuskasing Plumbing & Heating Ltd. (1996), 48 C.P.C. (3d) 111 (Ont. Div. Ct.), help explain why particulars are ordered such as to define the issues, to prevent surprise at trial, to enable adequate preparation for trial, and to facilitate the hearing, I am of the view that the Physicians' Services case remains the authority as to when the court should order particulars.
40 See also: Caputo v. Imperial Tobacco Ltd. (1996), 48 C.P.C. (3d) 339 (Ont. Ct. G.D.) at 343; Physicians Services' Inc. v. Cass, [1971] 2 O.R. 626 (C.A.) at 627; and Mirshahi v. Suleman, above, at para. 17
41 The onus to satisfy the Court that particulars are necessary, and not within the knowledge of the party requesting them, rests with the party requesting the particulars. See Obonsawin, above, at p. 26-10. AECL, therefore, has the onus of demonstrating that it does not know the information requested in the list of particulars at paragraph 3 of the Notice of Motion. As stated in Master Sandler's decision in Copland, above, at 588:
In between the concept of "material facts" and the concept of "evidence", is the concept of "particulars". These are additional bits of information, or data, or detail, that flesh out the "material facts", but they are not so detailed as to amount to "evidence". These additional bits of information, known as "particulars", can be obtained by a party under new rule 25.10, if the party swears an affidavit showing that the particulars are necessary to enable him to plead to the attacked pleading, and that the "particulars" are not within the knowledge of the party asking for them. An affidavit is not necessary only where the pleading is so bald that the need for particulars is patently obvious from the pleading itself. New rule 25.10 is substantially the same as former Rule 140, and in my view, the law on this subject has not changed by reason of the change from the Rules of Practice to the Rules of Civil Procedure.
[11] For the purposes of this motion, it is also important to emphasize that an order for particulars is a discretionary one. The court must make the order that is just in the circumstances of each case. See Sears Canada Inc. v. Pi Media Ltd., 2011 ONSC 2625 (Master) at paragraph 23. Any determination of the required minimum level of material fact disclosure will vary depending on the type of action and pleading under review. See Areva at paragraph 35. Rule 25.06(1) requires that a pleading be a concise statement of the material facts, not all of the facts. See Areva at paragraph 31. Finally, pleadings should not be confused with discovery. The sufficiency of a pleading must be read in light of the discovery process. See Sears Canada at paragraph 49.
[12] These are the factors and principles I have considered and applied in determining the issues on this motion. In my view, the statement of claim as drafted is generally sufficient in the circumstances of this action. Only a few additional particulars need to be provided. It is clear from the evidence that Amaro does not have access to the complete books and records of the corporation. Those records appear to be under the control of Simas. A plaintiff in such circumstances is limited in terms of the detail it can include in its statement of claim. I view this as an important factor in determining the extent of the particulars that may be required on this motion.
[13] First, the pleading clearly and specifically sets out the details of the plaintiff’s claim with respect to the distribution of the sale proceeds. In my view, paragraphs 28 to 55 of the statement of claim provide more than sufficient material facts to explain the plaintiff’s claim that the larger distribution of the sale proceeds to Simas’ holding company was not in accordance with the parties’ respective shareholdings in Nova Services. The calculation of the damages being claimed for this aspect of the claim are based on a simple mathematical comparison of a distribution of the sale proceeds on the basis of the parties’ shareholdings as opposed to a distribution based on the Sale of Assets document. In my view, many of the particulars requested in respect of this portion of the statement of claim are properly questions for oral discovery and not required as part of the pleading, even assuming the claims being made are in the nature of fraud, misrepresentation or breach of trust. The particulars requested at numbers 5 to 8 on the defendants’ chart need not be provided.
[14] It is my view, however, that some further particulars are required in support of the plaintiffs’ claim dealing with allegedly improper payment of salaries and expenses. I accept Amaro’s evidence that Simas was at all material times in control of the finances of Nova Services. Simas has not disputed this statement in Amaro’s affidavit. The letters sent by Nova Services’ accountant, Mr. Cooper, also provide support for the suggestion that Simas was in control of the corporation’s affairs insofar as they suggest that Simas’ approval was necessary before any information could be released to Amaro.
[15] Nevertheless, it is clear from the pleading, and from Amaro’s own evidence, that he is in possession of some corporate documents either provided to him historically or obtained from Mr. Cooper. Moreover, the claims made in respect of the allegedly improper payments are very specific. The plaintiff alleges that improper salary was paid to Simas and his spouse. It is also alleged that improper expenses were paid between 2003 and 2012. Improper loans and consulting fees are also alleged. Precise numbers are assigned to some of the plaintiff’s claims. It is obvious to me that the plaintiff has identified specific items in the corporation’s financial documents and made calculations based on an examination of specific documents. However, these allegedly improper payments are only identified using generalities. Further particulars are obviously available and need to be provided. The particulars requested at numbers 9 to 15 on the defendants’ chart shall be answered by the plaintiff providing the following information:
(a) specifics of the dates, amounts and beneficiaries of the personal expenses in the amount of $94,836.62 as identified in paragraph 60(iii) of the statement of claim;
(b) specifics of the dates, amounts and beneficiaries of the payments for loans and liabilities referred to in paragraph 60(iv) of the statement of claim; and,
(c) specifics of the dates, amounts and recipients of the consulting fees referred to in paragraph 60(v) of the statement of claim.
[16] The balance of the particulars requested at numbers 9-15 of the defendants’ chart need not be provided. In my view, these further particulars are in the nature of evidence and are properly questions for oral discovery. The information is not necessary in order for the defendants to plead to the statement of claim.
[17] In my view, no further particulars are required. The allegations made with respect to oppressive conduct, non est factum and unjust enrichment in paragraphs 68 to 75 are sufficiently pleaded and meet the minimum level of material fact disclosure required by the Rules. These allegations are based, in part, on the events surrounding the execution by Amaro of certain agreements in 2002 and 2009. Those agreements purported to amend the parties’ original shareholders’ agreement. The material facts in support of those claims are set out in detail at paragraphs 39 to 55 of the statement of claim. The allegation and claims in paragraphs 68 to 75 of the statement of claim are also based on allegedly improper payments and distribution of the sale proceeds. As I have ruled above, these claims have been properly pleaded, subject to the particulars I have identified in paragraph 15, above. The particulars requested at numbers 16 to 22 of the defendants’ chart need not be provided.
[18] Similarly, the particulars requested at numbers 1 to 4 of the defendants’ chart are not required. To some extent, paragraphs 9, 10, 11 and 25 of the statement of claim are introductory in nature. They summarize the claims made in subsequent paragraphs in the statement of claim. These paragraphs refer to the defendants improperly disbursing the sale proceeds and making preferential payments and providing benefits to related parties. These claims and allegations are either sufficiently pleaded elsewhere in the statement of claim, as I have noted above, or particulars will be provided in accordance with my ruling in paragraph 15, above. The information requested at number 4 of the defendants’ chart is properly a question for oral discovery. The particulars requested at numbers 1 to 4 of the defendants’ chart need not be provided.
[19] Finally, I should note that the defendants have not served a request to inspect documents. Rule 30.04(2) allows a party to serve a request to inspect documents in order to obtain the inspection of any document in a plaintiff’s possession, control or power and referred to in the statement of claim. The statement of claim in this action makes many references to documents. In my view, the inspection of those documents by the defendants would have been of great assistance to the defendants in understanding the basis of the plaintiff’s claim and in defending this action. Such an approach would appear to have been far more preferable than the service of a lengthy demand for particulars.
[20] I therefore order as follows:
(a) the plaintiff shall serve a supplementary response to the defendants’ demand for particulars in accordance with paragraph 15 of these reasons by May 31, 2016;
(b) the balance of the relief sought on the defendants’ motion is dismissed; and,
(c) if the parties are unable to agree on the issue of the costs of this motion, they shall provide the court with written submissions by May 31, 2016.
Master R. A. Muir
DATE: April 29, 2016