Court File and Parties

COURT FILE NO.: CV-14-506668

DATE: 2017/06/05

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: D.L. DEEKS INSURANCE SERVICE INC. Plaintiff/Defendants by Counterclaim

AND:

ZACHARAKIS et. al, Defendants/Plaintiffs by Counterclaim

BEFORE: MASTER RONNA M. BROTT

COUNSEL: A. Hamilton, for the Plaintiff/Defendant by Counterclaim Fax: 416-640-3009

A. Jones and N. Fan, for the Defendants/Plaintiffs by Counterclaim Fax: 416-595-1163

HEARD: March 20, 2017

ENDORSEMENT

[1] The defendant Angelo Zacharakis (“Zacharakis”) is a former employee of the plaintiff, D.L.Deeks Insurance Services Inc. (“Deeks”). While still on Deeks’ payroll, Zacharakis signed a contract to work as an independent contractor with the defendant, Rai Grant Insurance Brokers Ltd. (“Rai Grant”), the plaintiff’s competitor. Pursuant to his contract with Deeks, Zacharakis had an option to purchase his book of business upon termination. He did not exercise the option and instead before leaving Deeks, he allegedly solicited Deeks’ customers in violation of his employment agreement with Deeks.

[2] This litigation has been proceeding in a less than expeditious fashion. Initially, the parties could not agree to a Discovery Plan. It took service of a motion for the defendants to agree to a plan. The plaintiff was then dissatisfied with the defendants’ affidavits of documents and productions and brought a motion for a further and better affidavit of documents and Request to Inspect. Master Hawkins ordered the defendants to submit to cross-examinations on their affidavits of documents and they were required to provide supplementary affidavits of documents.

[3] Cross-examinations proceeded in May 2016 and supplementary affidavits of documents were produced in June 2016. Despite their agreement to deliver emails, voice mails and text messages pursuant to the Request to Inspect, the defendants advised that they were ‘unable to access’ them, providing no explanation of why.

[4] Further, during the defendants’ cross-examinations a number of undertakings were given by the defendants. The defendants produced additional documentation in response. The defendants now want to proceed to examinations for discovery. The plaintiff has refused to schedule examinations for discovery, awaiting full documentary disclosure.

THE MOTION

[5] The defendants bring this motion to strike the Statement of Defence pursuant to Rule 30.08 or alternatively to obtain such order as may be just.

[6] Rule 30.08 of the Rules of Civil Procedure provides as follows:

Failure to Disclose or Produce Document

30.08(1) Where a party fails to disclose a document in an affidavit of documents or a supplementary affidavit, or fails to produce a document for inspection in compliance with these rules, an order of the court or an undertaking,

(a) if the document is favourable to the party’s case, the party may not use the document at the trial, except with leave of the trial judge; or

(b) if the document is not favourable to the party’s case, the court may make such order as is just.

Failure to Serve Affidavit or Produce Document

(2) Where a party fails to serve an affidavit of documents or produce a document for inspection in compliance with these rules or fails to comply with an order of the court under rules 30.02 to 30.11, the court may,

(a) revoke or suspend the party’s right, if any, to initiate or continue an examination for discovery;

(b) dismiss the action, if the party is a plaintiff or strike out the statement of defence, if the party is a defendant; and

(c) may such other order as is just.

[7] The plaintiff asserts that the defendants’ continued failure to produce documents pursuant to a Request to Admit and their failure to comply with Master Hawkins’ order of April 19, 2016 and their failure to deliver a proper further and better affidavit of documents should result in their Statement of Defence being struck.

[8] The Request to Inspect was served in January 2016. There were three core components;

(a) the employment agreement which was finally produced;

(b) The voicemail audio files; and

(c) The text messages.

[9] With respect to other voicemail messages, the defendants undertook, before Master Hawkins in April 2016, to produce the audio files. On cross-examinations ordered by Master Hawkins and conducted on May 16 and 17, 2016, the defendants reiterated their undertaking. On September 8, 2016, the defendants advised that they are “unable to access” and “unable to locate” the voicemail audio files.

[10] With respect to the iPhone text messages, the defendants on September 8, 2016 produced limited, redacted text messages.

[11] The defendants now submit, based on issues of relevance and proportionality, that the plaintiff’s requests are far too voluminous. Relying on Rule 29.2.03, the defendants request that the court considers additional factors including:

(a) The time required for the party to produce the documents

(b) The expense associated with producing the document

(c) Whether the order would result in an excessive volume of documents.

[12] Relying on the evidence of a solicitor, and not the client, the defendants assert that the digital voicemail messages do not exist on their server. In regards to the iPhone voicemail messages, the affidavit of the solicitor alleges that the data extracted from the cellphones consists of four thousand files. With respect to the text messages, counsel asserts that all of the information has been removed from the cellphone and the undertaking has been answered.

[13] In August 2015 each of the defendants served their original Affidavit of Documents – both of which listed emails where original audio files were ‘attached’. The defendants produced printouts of blank emails containing the relevant messages and those also contained handwritten explanations by the defendant Zacharakis. The production of these emails would appear to be evidence that the original audio files existed. (Now the defendants appear to be taking the position that these files have been destroyed.)

[14] The unsworn supplementary affidavits of documents were served on February 9, 2016 and list a date range of files available at that time – from September 17, 2014 onwards. One explanation for their refusal to provide documents and for why these files have been destroyed, is that they are allegedly kept for only thirty days. Given that the defendants produced, in February 2016, documentation from September 17, 2014 onwards, it would seem to indicate that at least some documents are kept for more than thirty days.

[15] With respect to text messages, the defendants initially served partial screenshots but realizing their relevance the solicitors for the defendants undertook, at the April 16, 2016 motion, to produce the complete iPhone text messages. They recently produced KPMG’s “attempt at recovery of deleted text messages”, and have now listed them in Schedule “C” of their affidavits of documents, without explanation. When the screenshots were first produced, Zacharakis’ handwritten notes were included on the screenshots. Clearly then, at that time, he had sufficient access to the information. That information should have been properly produced at that time – when the affidavits of documents were initially delivered.

[16] When an undertaking to produce documentation has been made, it is completely inappropriate to come back almost a year later, and allege proportionality, lack of accessibility and/or relevance of the documents to be disclosed. An undertaking is an undertaking and it shall be complied with. Further, at this time, this is not a proportionality issue as the defendants at one point had this information and agreed to produce it. It makes little sense that now, after the fact, the request is now not proportional. Where a right to disclosure is breached, prejudice to the other party builds, and full disclosure is key to our litigation process.

[17] There is no question that the defendants have not been forthcoming with their productions. They have failed to comply with the Request to Admit, they have failed to comply with Master Hawkins’ Order and they have failed to comply with their undertakings. They are significantly delaying this action. I am not prepared however, to strike the Statement of Defence, choosing instead to send a very clear message that this is the defendants’ last chance.

[18] It is ordered that the defendants shall comply with the court’s previous order, their disclosure obligations under the Rules and their own undertakings. Only once there has been compliance with these, will the parties be ready to proceed to examinations for discovery. In the event documents are not available or accessible, the defendants shall provide detailed explanations. The defendants shall bear the costs associated with their disclosure obligations. If within ninety days the information is not forthcoming, the plaintiff is at liberty to move, on notice, to strike the Statement of Defence.

[19] On the issue of costs of the motion, the parties agreed following the hearing that they would attempt to agree on the issue of costs. If they are unable to do so within thirty days, they shall write to me to either request a one half hour telephone case conference or to advise that they have agreed to deliver brief (1 – 2 pages) written submissions within thirty days. No reply submissions on costs may be filed without leave.

MASTER RONNA M. BROTT

Date: June 5, 2017