Court File and Parties

ONTARIO – SUPERIOR COURT OF JUSTICE

Court File No.: CV-15-524612 Motion Heard: June 23, 2017

Counsel: Fernando Souza for the defendants and the proposed defendants Felice Mete and Espedito Ariganello Andrew Kalamut for the plaintiffs Ahmad Mozaffari for the proposed defendant Arash Beheshti

Endorsement

Master R.A. Muir

[1] The defendants and proposed defendants represented by Mr. Souza (the “Moving Defendants”) bring this motion seeking answers to certain questions refused at the cross-examination of one of the plaintiffs’ witnesses and at an examination initiated by the Moving Defendants pursuant to Rule 39.03 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). The examinations took place in connection with a motion by the plaintiffs for leave to amend their statement of claim. I am seized of that motion.

[2] The Moving Defendants also seek an order for directions with respect to the examination of another of the plaintiffs’ witnesses, Mr. Terrence Hui, who is a resident of Vancouver.

[3] This is a dispute over construction related services provided by the defendants to the plaintiffs. The plaintiffs allege that the defendants improperly billed the plaintiffs for services in relation to deficiency, warranty and other work in connection with various condominium projects. The defendants have commenced a separate action seeking payment of outstanding invoices. The amounts claimed by each side exceed $10,000,000.00.

[4] In September 2016, the plaintiffs served a notice of motion seeking leave to amend their statement of claim to add three new defendants. Two of the new defendants are current or former officers and directors of the defendant corporations. The other new defendant is a former officer of one of the plaintiff corporations. The thrust of the new allegations is that the defendants and new defendants conspired, or otherwise agreed among themselves, to mislead the plaintiffs as to the nature of the contract between the plaintiffs and the defendants, resulting in damages to the plaintiffs. The main issue on the motion to amend appears to be the discoverability of these allegations and whether any applicable limitation periods may have expired in respect of the proposed new claims and defendants.

[5] The dispute regarding the examination of Mr. Hui was argued first. Mr. Hui lives in Vancouver. Therefore, if the parties are unable to agree on the manner and location of his examination, the court may determine those matters pursuant to Rule 34.07.

[6] Initially, the Moving Defendants were content to examine Mr. Hui by video conference as permitted by rule 1.08. It was later agreed that he would be examined in person in Toronto as he was scheduled to be in Toronto on other business on a date convenient to counsel. It later turned out that Mr. Hui had to change his plans. He was not in Toronto on the agreed upon date as he had to be in Vancouver as a witness and participant in an arbitration proceeding. Mr. Hui, however, did agree to make himself available to be examined by video conference but the Moving Defendants insisted he be examined in person in Toronto.

[7] In my view, a video conference examination is appropriate in the circumstances. This is not a situation where Mr. Hui is proposing to give video conference evidence at trial or even for discovery or on a summary judgment motion. This is a pleadings motion. The evidentiary threshold on a motion under Rule 5.04 is low when it comes to discoverability and due diligence. See Wakelin v. Gourley, [2005] OJ No. 2746 (SCJ – Master) at paragraph 14; affirmed [2006] OJ No. 1442 (Div Ct). If the defendants and the proposed defendants are unsuccessful in resisting the motion to amend they will be entitled to plead a limitation defence and have that issue determined on its merits.

[8] Rule 1.04(1) requires the court to interpret the Rules in a manner that secures the just, most expeditious and least expensive determination of civil disputes on their merits. Rule 1.04(1.1) requires the court to make orders and give directions that are proportionate to the importance and complexity of the issues and amounts involved. These principles also favour a video conference examination of Mr. Hui for the same reasons. The time and expense of having Mr. Hui fly to Toronto and attend what is now a four hour examination is not proportional when a workable alternative exists. Moreover, it is likely Mr. Hui’s examination can be scheduled sooner if it takes place remotely. As noted above, it could have taken place already had the Moving Defendants been agreeable to the video conference examination, as they were initially.

[9] I do not view Mr. Hui’s suggestion of a video conference examination as amounting to a breach of a promise to attend in Toronto to be examined. That agreement was made because he happened to plan to be in Toronto on a convenient date. His plans changed. His willingness to be examined in Toronto must be viewed in that context.

[10] The Moving Defendants argued that Mr. Hui’s cross-examination will be complex and will make reference to hundreds of documents covering many years which would make a video conference examination difficult and less efficient. I disagree. The plaintiffs have offered to arrange for appropriate video conference facilities. Technology is readily available to assist with the logistics of the examination and the plaintiffs have committed to providing such assistance.

[11] I agree with the observations of Justice Newbould. Video examinations of witnesses should be encouraged rather than discouraged. Use of such technology can help address the high cost of modern litigation and will further the objectives of Rule 1.04. See Midland Resources Holding Ltd. v. Shtaif, [2009] OJ No. 5216 (SCJ) at paragraph 22. I note that Justice Newbould made those observations in 2009, a lifetime ago when it comes to technology. See also the decision of Master Roger (as he then was) in Code Inc. v. Independent High Electoral Commission, 2012 ONSC 2208 (Master) at paragraph 21.

[12] For these reasons, it is my view that the balance of convenience favours a video conference examination.

[13] Mr. Hui shall attend at a cross-examination on his affidavit. The examination shall take place by video conference on a date and time to be arranged by counsel. His examination shall take place prior to the cross-examination of the Moving Defendants’ witness. Given what may be additional logistical issues related to the remote examination, I am extending the time for his examination to seven hours.

[14] The refusals were argued next.

[15] In determining the issues on the refusals portion of this motion, I have applied the relevance test set out in Rules 30.03 and 31.06. I have also considered the proportionality requirements of Rule 29.2.03. I am also mindful of the principles relating to the scope of cross-examination and Rule 39.03 examinations as summarized in Ontario v. Rothmans Inc., 2011 ONSC 2504 (SCJ) at paragraphs 142 to 148. In short, questions must be relevant to matters in issue on the pending motion or raised by the witness in his or her affidavit.

[16] The first refusals argued arise from the Rule 39.03 examination of Wendy Shum. Ms. Shum is the controller for the plaintiff group of companies and had some involvement with the plaintiffs’ contracts with the defendants.

[17] The first refusal is a request to provide complete copies of certain contracts placed in evidence by the plaintiffs on their motion to amend. The plaintiffs argued that the contracts were included in order to provide the court with background and context only. They are otherwise irrelevant to the matters in issue on the motion to amend. That may be so. However, the plaintiffs chose to make reference to and include portions of those documents as part of their evidence. In my view, the complete contracts should be provided and not versions redacted to meet the requirements of the plaintiffs. The production of the full contracts would not be a significant burden or offend the principle of proportionality. Questions 409 and 417 shall be answered, subject to redactions for confidential information which may be challenged by way of a case conference before me.

[18] Questions 881, 1153, 1272 and 1140 seek information and documents relating to the plaintiffs’ contracts with their general contractors on the various subject projects. The information requested is in relation to potential recovery of back charges from contractors for the value of work performed by the defendants. I see no relevance to this information in relation to the issues on the motion to amend. The proposed amendments are relatively narrow in scope and relate to the plaintiffs allegedly being misled by the defendants and proposed new defendants about the nature of the parties’ contractual relationships. The plaintiffs’ efforts or lack of efforts to collect from their contractors is not relevant to when the plaintiffs discovered the alleged true nature of the work carried out by the defendants and the alleged misrepresentations in that respect. While there is some general background references in the plaintiffs’ evidence to their contractual arrangements with their general contractors, the wholesale production of the documents requested by the Moving Defendants is simply out of proportion to the importance and nature of the matters in issue on the motion to amend. In this respect, I rely on my observations regarding the nature of this pleadings motion as set out above concerning the examination of Mr. Hui. These questions need not be answered.

[19] The next refusal argued was a request for a file from the plaintiffs’ consultants, KPMG. The plaintiffs retained KPMG to review third party vendor costs including contracts involving the defendants. The plaintiffs have produced the KPMG reports and all communications between KPMG and the plaintiffs. The Moving Defendants seek production of KPMG’s complete file, presumably including all working papers and documents KPMG reviewed. In my view, this request offends the principle of proportionality applicable to this pleadings motion for the same reasons I have outlined above. The plaintiffs have produced the reports and their communications with KPMG. This is sufficient for the purposes of the narrow issues on the motion to amend. Question 1042 need not be answered.

[20] The last question in issue on Ms. Shum’s examination is a request for particulars of similar services provided to the plaintiffs by a different contractor. The Moving Defendants seek information about how this other contractor billed the plaintiffs. In my view, this question may be relevant to the merits of the proposed amendments but not to the issues on the motion to amend. The merits of proposed amendments are not to be considered on a motion under Rule 5.04. See Ontario v. Rothmans at paragraph 148. I do not see how the plaintiffs’ contractual arrangements with a third party can be relevant to the question of when they discovered the alleged conspiracy claims they now seek to advance against the defendants and the proposed defendants. Question 75 need not be answered.

[21] For the reasons set out above, the outstanding refusals on the cross-examination of Dennis Au-Yeung need not be answered.

[22] The plaintiffs seek their costs of this motion. The Moving Defendants suggest no order for costs or that costs be reserved to the hearing of the motion to amend.

[23] The plaintiffs’ costs outline identifies partial indemnity fees and disbursements in the total amount of $28,010.84. The Moving Defendants’ costs outline sets out partial indemnity fees and disbursements of $3,852.79.

[24] When dealing with costs, the overall objective for the court is to fix an amount that is fair and reasonable for the unsuccessful party who generally must pay the costs of the successful party. See Zesta Engineering Ltd. v. Cloutier, [2002] OJ No. 4495 (CA) at paragraph 4 and Boucher v. Public Accountants Council for the Province of Ontario, [2004] OJ No. 2634 (CA) at paragraph 26. In Davies v. Clarington (Municipality), 2009 ONCA 722 the Court of Appeal stated as follows at paragraph 52:

Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.

[25] In my view, the plaintiffs have been more successful than the Moving Defendants and are entitled to a portion of the costs requested. Approximately 94 questions were refused or taken under advisement on the two examinations. The plaintiffs ultimately agreed to answer 40 of those questions. The Moving Defendants initially sought an order that the remaining 54 questions be answered but reduced that number to 20 prior to today. In terms of the refusals argued today, the plaintiffs have been mostly successful.

[26] The plaintiffs have also been successful today with respect to the issues relating to Mr. Hui’s examination.

[27] However, it is my view that some reductions must be made to the costs requested by the plaintiffs. First, I view the amounts claimed as excessive for a motion of this nature. This is a procedural motion within a procedural motion. Parties must remain mindful of exactly what is at stake when bringing or responding to interlocutory motions. As I noted above, neither this motion, nor the motion to amend, involve a full determination on the merits of any of the proposed claims or defences. I also note that the plaintiffs’ costs are much higher than the Moving Defendants’ costs.

[28] Second, the plaintiffs have not been completely successful in term of the refusals portion of this motion. They subsequently answered many questions initially refused and were unsuccessful on one of the refusals argued today. I also commend Mr. Souza for not arguing the refusals from Mr. Au-Yeung’s examination when the court’s view of the matters in issue became clear. This resulted in a savings of time and money for all involved. This is an appropriate factor to consider as part of the court’s costs order.

[29] Third, I understand the Moving Defendants’ frustration with the cancellation of the in-person examination of Mr. Hui on short notice. The witness agreed to be examined in Toronto but then cancelled when his plans changed.

[30] For these reasons, I have concluded that it is fair and reasonable for the Moving Defendants to pay the plaintiffs’ costs of this motion fixed in the amount of $4,000.00, inclusive of HST and disbursements. These costs shall be paid thirty days after the determination of the plaintiffs’ motion to amend.

[31] The motion to amend will be heard by me on September 11, 2017 commencing at 10:00 a.m. for a period of one full day. The following timetable will apply:

(a) The redacted copies of the complete contracts ordered to be produced at paragraph 17, above, shall be provided July 7, 2017; (b) The Moving Defendants shall respond to the plaintiffs’ document request found in the plaintiffs’ notice of examination by July 7, 2017; (c) The Moving Defendants shall use best efforts to provide the plaintiffs with copies of relevant documents at least three business days prior to the cross-examination of the Moving Defendants’ witness; (d) The remaining cross-examinations shall be completed by August 11, 2017; (e) The moving parties’ factum shall be served by August 18, 2017; (f) The responding parties’ factums shall be served by August 29, 2017; (g) Reply factum, if any, shall be served by September 5, 2017; (h) All material for use on the motion to amend shall be filed by September 5, 2017; (i) The moving parties shall serve and file their motion confirmation form by 2:00 p.m. on September 6, 2017.

[32] Finally, I wish to thank counsel for their very helpful submissions and for the professional manner in which this motion was argued.

Master R.A. Muir DATE: June 23, 2017