Court File and Parties

Citation: Tucker v. Seaquest Capital Corporation, 2016 ONSC 462 Court File No.: CV-11-9430-00CL Date: 2016-01-25 Superior Court of Justice - Ontario

Re: Brian Joseph Tucker et al., Plaintiffs And: Seaquest Capital Corporation et al., Defendants

Before: Penny J.

Counsel: John Pirie and Michael Nowina for the Plaintiffs Gregory Roberts for the Defendant Magaly Bianchini Terry Corsianos for the Defendant Northstar Bancorp Limited

Heard: January 14, 2016

Endorsement

The Motions

[1] There are two motions. The plaintiffs seek an order:

(i) requiring Ms. Bianchini and Northstar Bancorp Limited to provide a further and better affidavit of documents;

(ii) appointing the firm of Duff & Phelps to preserve, collect and deliver to the plaintiffs all e-mail correspondence between David Holden and Ms. Bianchini;

(iii) for leave to cross-examine Ms. Bianchini on her affidavit of documents and conduct further discovery of Ms. Bianchini and NBL; and

(iv) awarding costs thrown away due to the adjournment of the trial.

[2] The defendant, NBL, seeks an order granting leave to amend its statement of defence. Ms. Bianchini and NBL seek an order for production of settlement agreements between the plaintiffs and certain other defendants.

[3] This action, commenced in 2011, was scheduled for a three-week trial to commence January 11, 2016. Between Christmas and New Year’s of 2015, a box containing some 332 documents was served on the plaintiffs’ counsel by counsel for Ms. Bianchini, purportedly in answer to an NBL undertaking. It was at first perceived by the plaintiffs that these were “new” documents, although it has subsequently been revealed that virtually all the documents were already in the plaintiffs’ possession, many as a result of undertaking answers from a prior cross examination which had been delivered in December 2014.

[4] In any event, on January 8, 2016, the parties appeared before me at 9:30 scheduling appointment. The plaintiffs sought an adjournment of the trial on two grounds:

(1) the last minute production of these “new” documents; and

(2) a serious health concern which had befallen lead counsel for the plaintiffs.

[5] Given the health concerns, all other counsel consented to an adjournment during the 9:30 appointment. I was satisfied that the health issue was both serious and bona fide and on this basis adjourned the trial. The defendants did not, however, concede that the document production issue would have warranted any adjournment. I indicated to counsel during the 9:30 appointment that, in the absence of the health issue, I would have insisted that the document-related motion for an adjournment be argued on January 11, 2016 at the outset of trial.

[6] Given the adjournment, however, I ordered that the motions described above would be argued before me on Thursday, January 14, 2016.

[7] As part of the material filed before the motions were argued, Ms. Bianchini swore a further and better affidavit of documents, listing all documents produced by her at any time, and for any purpose, during this litigation.

Background

[8] This is an action for fraud, breach of fiduciary duty and knowing assistance in a breach of trust. Mr. Holden is said to be the principal initiator of the fraud. Mr. and Mrs. Holden consented to judgment in 2011. The two Seaquest companies were noted in default and judgment was issued against them in 2011 as well.

[9] In simple terms, the allegations against Ms. Bianchini and NBL are that they were participants in the fraud or that they knew about it and did nothing. A central aspect of Ms. Bianchini’s defence is her allegation that she knew nothing of Mr. Holden’s criminal and regulatory past or what he was saying to or doing with the investing public during the commission of the fraud. Ms. Bianchini says she too was a victim of Mr. Holden’s fraud, not a participant in it.

Document Production

[10] As a result of issue being joined on this question, the plaintiffs take the position that all communications between Ms. Bianchini and Mr. Holden during the period 2006 to 2012 are relevant, as they would go to the nature of Ms. Bianchini’s knowledge of and relationship with Mr. Holden and what she knew or did not know about what Mr. Holden was doing with or saying to potential investors.

[11] Some of the documents included with the 332 documents delivered on the eve of trial were e-mails between Ms. Bianchini and Mr. Holden. The plaintiffs now express a concern that a proper search of Ms. Bianchini’s e-mail account has not been undertaken. They say Ms. Bianchini is selectively producing e-mails which assist her defence while potentially ignoring others.

[12] The plaintiffs further say that Ms. Bianchini’s prior affidavits of documents in this case have been, until this motion was brought, woefully inadequate. For example, Ms. Bianchini has never listed any e-mails in her affidavits of documents until the one sworn on January 11, 2016. Her original affidavit of documents listed only five documents.

[13] Because the plaintiffs have lost all faith in Ms. Bianchini or her counsel concerning the rigor and candor of Ms. Bianchini’s document production, they seek the appointment of an independent agent to conduct an “Anton Pillar”-like search of Ms. Bianchini’s e-mail account for relevant communications with Mr. Holden. The plaintiffs concede provision would have to be made for the adjudication of relevance and any claims of solicitor client privilege.

[14] Ms. Bianchini and NBL say that all but two of the documents served in late December 2015 were previously produced. They say a search was conducted of Ms. Bianchini’s e-mail account and that all relevant documents have now been produced. They say the plaintiffs’ motion is a fishing expedition calculated to swamp Ms. Bianchini with costs which she can ill afford. They also submit that the plaintiffs’ proposed actions, as well as actions to date, regarding document production have lost all sense of proportion.

[15] I find myself unable to agree with the arguments of either side in this particular debate. In my view, the issue turns on the appropriate balance between two potentially conflicting principles:

(1) the need for disclosure of all relevant documents during the discovery process; and

(2) the commitment a party makes when it represents it is ready for trial, as embodied, for example, in Rule 48.04(1).

[16] On this record, it does appear Ms. Bianchini has been, at the very least, casual about her document production obligations. In other circumstances, I might well have considered the imposition by court order of additional document review obligations upon her and her counsel. I am not, however, prepared to do so at this juncture. That is because the plaintiffs were well aware of the alleged shortcomings in Ms. Bianchini’s document production from the beginning. The recent delivery of 332 documents did not involve the production of any material number of new documents. The plaintiffs were justifiably alarmed by this turn of events but, on examination, the documents had almost all been given to them a year earlier.

[17] The plaintiffs received production from Mr. Holden’s trustee in bankruptcy of all Mr. Holden’s documents, electronic and otherwise, in the trustee’s possession. I was advised during oral argument that there were voluminous numbers of e-mails in the material received from Mr. Holden’s trustee. The plaintiffs must have known that Mr. Holden communicated by e-mail with Ms. Bianchini and certainly did know, from the first affidavit of documents received from Ms. Bianchini, that she had produced none of them. Most of the e-mails reflecting communications between Ms. Bianchini and Mr. Holden delivered in December 2015 had already been provided to the plaintiffs a year earlier (albeit it in a somewhat haphazard manner).

[18] All of the concerns now raised by the plaintiffs about the quality of Ms. Bianchini’s production of e-mail communications with Mr. Holden were certainly known, or could have been known, by December 2014 and in many cases much earlier. Notwithstanding this knowledge, the plaintiffs chose to represent to the court and the defendants that they were ready for trial and agreed to the scheduling of the trial for three weeks commencing January 11, 2016. There is simply nothing materially new arising out of the recent delivery of emails.

[19] Had the delivery of the 332 documents been the only issue on the adjournment request I can say with certainty, having now heard the discovery motion, that I would not have granted the adjournment of the trial. The fact that the trial had to be adjourned for an entirely different reason does not, in my view, provide a platform upon which parties can now engage in new and additional interlocutory skirmishing. The time for discovery is over. There remain, in any event, other means at trial for dealing with alleged failings in the quality of a parties’ document production.

[20] It is for these reasons that the plaintiffs’ motion for additional discovery and the appointment of an independent investigator is dismissed.

[21] Because the adjournment resulted from a health issue involving plaintiffs’ counsel, there is no basis for ordering costs thrown away against these defendants.

[22] On the question of costs of the motion, I intend to fix the costs of the motion payable in the cause. I do so because, in my view, Ms. Bianchini contributed to the need for the motion by the episodic and haphazard manner in which the production of her documents was conducted. I therefore fix the costs of the motion, inclusive of fees, disbursements and all applicable taxes, at $14,000 in the cause.

[23] To avoid any repetition of similar disruptions, there will be no further documents served, or motions brought, without leave.

Leave to Amend

[24] The NBL motion for leave to amend was not opposed. Leave is granted to amend NBL’s statement of defence in accordance with para. 3 of the January 13, 2016 Bianchini and NBL notice of motion.

[25] No order as to costs.

Disclosure of Settlements with Other Defendants

[26] The plaintiffs have settled with four defendants, Tony Cosentino, Ed So, Vince Bulbrook and Ali Hemani. The first three have provided witness statements to the plaintiffs. Ms. Bianchini and NBL seek to have the settlement agreements produced. At the hearing of the motion, the plaintiffs agreed to produce the settlement agreements with the individual settlement amounts redacted but agreed to provide the global amount of settlement funds received from all settling defendants.

[27] A brief argument proceeded, therefore, on the narrow question of whether the moving defendants were entitled to know the specific amount of the monetary settlement with each settling defendant.

[28] At the present time, I order the plaintiffs to produce the settlement agreements with the individual settlement amounts redacted and order that the plaintiffs provide the global amount of settlement funds received from all settling defendants.

[29] If, during the trial, the moving defendants feel the need to revisit the question of the individual settlement amounts, they may do so when the proper evidentiary context has been established.

[30] As the time devoted to this issue was de minimis, I make no order as to costs.

[31] Parties shall book a 9:30 appointment before the Commercial List Team Leader, Justice Newbould, to obtain a new trial date.

Penny J.

Date: January 25, 2016