Court File and Parties

COURT FILE NO.: CV-16-558059 MOTION HEARD: 20170419 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Elisabeth Hartmann, Applicant, Moving Party AND: 2504886 Ontario Inc., Royal Bank of Canada, 2450534 Ontario Limited and Payam Katebian, Respondents, Responding Parties

BEFORE: Master Jolley

COUNSEL: Marshall Reinhart, Counsel, for the Applicant, Moving Party David Brooker, Counsel, for the Defendants, Responding Parties

HEARD: 19 April 2017

Reasons for Decision

[1] The plaintiff brings an action for recovery of a shortfall of $232,505.61 in respect of a second mortgage she holds on certain commercial property. The plaintiff has a pending motion for partial summary judgment against the defendants who are variously the administrators of or investors in the first mortgage. She seeks leave to file additional materials pursuant to Rule 39.02(2) for use on that motion. For the reasons set out below, the plaintiff’s motion for leave to file these additional materials is dismissed.

Facts

[2] The plaintiff’s partial summary judgment motion is set to be heard 31 May 2017, adjourned from 1 March 2017 (which is relevant for the reasons outlined below). In that motion she seeks partial judgment of $180,052.08, representing $105,052.08 in overpayment to the first mortgagee and payment of a $75,000 holdback for protective disbursements held by the defendants.

[3] Pursuant to an order made 31 January 2017 for that partial summary judgment motion, the parties consented to the following timetable:

(a) moving party plaintiff’s motion record to be served and filed by 3 February 2017; (b) responding parties’ responding record to be served and filed by 13 February 2017; (c) cross examinations, if required, to be completed by 17 February 2017; (d) moving party’s factum to be served and filed by 22 February 2017; (e) responding party’s factum to be served and filed by 24 February 2017; and (f) motion to be heard for one hour on 1 March 2017.

[4] The parties each filed affidavits for the motion. The plaintiff served an affidavit of Klaus Hartmann sworn 28 December 2016. On Monday 13 February 2017 the defendants served an affidavit of Payam Katebian sworn that day. In that affidavit the defendants took issue with whether the amount the plaintiff paid for the assignment of the second mortgage was properly secured by the plaintiff’s second mortgage.

[5] As noted in the consent timetable, cross-examinations on the affidavits were to take place by Friday 17 February 2017. Absent leave of the court or the consent of the other party, the parties were required to serve any reply affidavits in those intervening four or five days before commencing cross examinations.

[6] The plaintiff did not file a reply affidavit to address the amount secured by her mortgage. Instead she cross-examined Mr. Katebian on his affidavit. Mr. Katebian confirmed on cross-examination that the amount secured by the mortgage was a live issue.

[7] The motion for partial summary judgment was set to be heard on 1 March 2017 on a record consisting of the Hartmann affidavit, the Katebian affidavit and the transcript of the cross-examination of Mr. Katebian. Both parties were prepared to proceed to argue the motion on those materials. The moving party did not seek an adjournment of the 1 March 2017 motion date to file the affidavit evidence she now seeks to file.

[8] Due to an administrative error, the motion was not on the court list when counsel attended 1 March 2017 and the motion has since been rescheduled to 31 May 2017. The plaintiff has taken that unexpected rescheduling to re-evaluate her need for further evidence. She has brought this motion to permit her to file an additional affidavit to address the amount secured by her mortgage.

The Law

[9] Rule 39.02(2) provides:

39.02(2) A party who has cross-examined on an affidavit delivered by an adverse party shall not subsequently deliver an affidavit for use at the hearing or conduct an examination under rule 39.03 without leave or consent, and the court shall grant leave, on such terms as are just, where it is satisfied that the party ought to be permitted to respond to any matter raised on the cross-examination with evidence in the form of an affidavit or a transcript of an examination conducted under rule 39.03.

[10] As the Divisional Court set out in First Capital Realty v Centreport Management Services, [2009] O.J. No. 4492, the criteria to consider in determining whether a party should be granted leave to respond to a matter raised on cross-examination is as follows:

(a) Is the evidence relevant? (b) Does the evidence respond to a matter raised on the cross-examination, not necessarily raised for the first time? (c) Would granting leave to file the evidence result in non-compensable prejudice that could not be addressed by imposing costs, terms or an adjournment? (d) Did the moving party provide a reasonable or adequate explanation for why the evidence was not included at the outset?

[11] Each criteria is to be weighed and no one criterion is determinative.

[12] I further note that the rule is not to be used as a mechanism for correcting deficiencies in the motion materials but is designed to fairly regulate and provide closure to the evidence gathering process for motions (Shah v. LG Chem Ltd., 2015 ONSC 776 at para 23).

Application of the Law to the Facts

A. Relevance

[13] Both parties agree the evidence is relevant. The respondent goes so far as to say the plaintiff’s failure to lead evidence that the funds she advanced for the assignment of the mortgage were secured by that second mortgage may disentitle the plaintiff to her partial judgment.

B. Evidence responds to a matter raised on the cross examination

[14] The evidence responds to a matter raised on the cross-examination of Mr. Katebian, namely whether the amount the plaintiff paid for the assignment of the second mortgage is properly secured by that mortgage. This issue was also raised in the Katebian affidavit served on the plaintiff 13 February 2017.

C. Prejudice

[15] The respondent will not suffer non-compensable prejudice if leave is granted as the plaintiff has confirmed that she is not seeking to adjourn the May 31 motion and also confirmed that the proposed supplementary affidavit will only address the issue of the security under the second mortgage.

D. Reasonable or Adequate Explanation for Why the Evidence was not included at the Outset

[16] In order to be permitted to respond with new evidence after cross-examinations, the party who seeks leave must satisfactorily explain why the evidence was not included as part of its pre-cross-examination evidence. (Brock Home Improvement Products v. Corcoran (2002), 58 O.R. (3d) 722). The Rules oblige a party to put his or her best case forward before embarking on cross-examination of the opposite party’s witnesses and this approach is designed to achieve the just, most expeditious and least expensive determination of motions.

[17] As an explanation for not serving a reply affidavit before conducting cross-examinations, the plaintiff takes the position that there was insufficient time between Monday 13 February 2017 when she received the respondent’s affidavit and Friday 17 February 2017 when the respondent was scheduled to be cross-examined to put an affidavit together to reply to the issue of the scope of the security provided by the second mortgage. There is no explanation as to why that was the case. Such a statement that there was insufficient time without explanation or support cannot meet the “careful scrutiny” required before leave is granted.

[18] The plaintiff’s affiant further deposes that the 15 days between 13 February 2017 and 1 March 2017, the date of the motion, was also not enough time to put a reply affidavit together. If the plaintiff needed some more time to finalize a reply affidavit, there is no evidence in the record that she advised the respondent that that was her intention, or that she sought an indulgence to do so. In fact, at the courthouse door on 1 March 2017 she was prepared to proceed to argue her motion without that evidence.

[19] It seems that after the cross-examination and with the benefit of an unexpected adjournment, the plaintiff reviewed her materials and noted that she may not have addressed that point. The absence of that evidence may have been highlighted by the responding party’s affidavit and on his cross-examination but it is not the affidavit that required the plaintiff to lead the evidence – it is the test she faces on her upcoming motion where she will likely need to demonstrate to the court that the funds she paid in relation to the assignment of the second mortgage are in fact secured by that mortgage.

[20] In First Capital Realty, the moving party led credible evidence explaining why the new materials had not been included in the original affidavit. Here the plaintiff has not provided a satisfactory explanation for her failure to include the proposed additional evidence as part of her pre-cross-examination case. At best the plaintiff states that she was not aware that the responding parties were challenging how much of her claim is secured by the second mortgage. However, because the plaintiff has always been required to prove that point to succeed, this cannot credibly be said to be an issue that came to light as a result of the respondent’s affidavit or as a result of cross-examination.

Is the court satisfied that the moving party ought to be permitted to respond with an additional affidavit

[21] As noted by the court in paragraph 8 of the Brock Home Improvement decision, the parties are obliged to consider the issues and to put all relevant evidence forward before embarking on cross-examination of the opposite party’s witnesses. This is required in order to achieve the “just, most expeditious and least expensive determination” of motions. A party cannot see how it makes out on cross-examination and then determine whether it needs to bolster its case by reply evidence (Shell Canada Products v. Northmore, [1997] O.J. No. 523 at para 8).

[22] Like the case of McLelland v. Metropolitan Toronto Condominium Corp. No. 757, [1996] O.J. No. 2494, here, by virtue of the cross-examination conducted of Mr. Katebian, it became apparent to the plaintiff that their material may be deficient and that something should be done to bolster it. As stated by Somers, J. in McLelland, “this was not the intention of Rule 39.02(2)”.

Conclusion

[23] A flexible, contextual approach is to be taken in assessing the criteria relevant to Rule 39.02(2) having regard to the overriding principle outlined in Rule 1.04 of the Rules of Civil Procedure that the rules are to be interpreted liberally to ensure a just, timely resolution of the dispute. While the Rules are to be interpreted liberally, they are not to be ignored.

[24] The plaintiff made a strategic decision to proceed with her motion on 1 March 2017 without the additional evidence. Only now that the motion has been adjourned does she wish to use that opportunity to supplement the record.

[25] It is not in the interests of justice in these circumstances to allow the plaintiff, because of an unintended adjournment, to revisit the strength of her case and file further affidavit evidence.

[26] The plaintiff’s motion is dismissed. If the parties are unable to agree on the issue of the costs of this motion, they shall provide the court with submissions no more than 3 pages in length by 28 April 2017.

Master Jolley Date: 21 April 2017