Court File and Parties
CITATION: Shoults v. Sputnik Travel Services Limited, 2017 ONSC 5036
COURT FILE NO.: CV-13-00493218
MOTION HEARD: 20170503, 20170802
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Elena Shoults, Plaintiff
AND: Sputnik Travel Services Limited and Valentina Kirova and Fred Buzhaker, Defendants
BEFORE: Master B. McAfee
COUNSEL: N. Chsherbinin, Counsel for the Plaintiff V. Luchko, Counsel for the Defendants
HEARD: May 3, 2017 and August 2, 2017
REASONS FOR DECISION
The Motions
[1] There are two motions before me. The plaintiff Elena Shoults (the plaintiff) brings a motion for leave to amend the statement of claim, for a further and better affidavits of documents from the defendants Sputnik Travel Services Limited (Sputnik), Valentina Kirova (Kirova) and Fred Buzhaker (Buzhaker) (collectively the defendants), answers to undertakings given on the examination for discovery of Buzhaker and costs. The defendants bring a motion for a further and better affidavit of documents from the plaintiff and costs.
The Action
[2] The plaintiff was a commissioned travel agent with Sputnik from September 2007 to September 7, 2013. The nature of the plaintiff’s relationship with Sputnik is at issue in this action. The plaintiff alleges that on September 7, 2013, her contractual relationship with Sputnik was unilaterally terminated by Kirova and Buzhaker. The plaintiff claims inter alia damages in lieu of notice, damages for civil conspiracy and damages for unpaid commissions.
[3] The defendants deny that any relationship was unilaterally terminated and allege that the plaintiff voluntarily resigned or abandoned the relationship. The defendants counterclaim seeking damages for inter alia fraud, conversion and/or unjust enrichment.
Plaintiff’s Motion
Leave to Amend the Statement of Claim
[4] The proposed amendments are found at paragraph 1(a) and paragraph 7 of the proposed amended statement of claim. The defendants consent to the proposed amendments at paragraph 7, save for the last sentence. The defendants oppose the proposed amendments at paragraph 1(a) and at the last sentence of paragraph 7 of the proposed amended statement of claim.
[5] The proposed contested amendments are as follows:
1(a) … In addition, a declaration that she was an undisclosed shareholder and/or that she operated with the corporate defendant as a partnership;
and
- … Consequently, Elena states she was Sputnik’s undisclosed shareholder and/or operated with it as a partnership.
[6] Rule 26.01 of the Rules of Civil Procedure provides as follows:
On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[7] There is no evidence of non-compensable prejudice.
[8] The defendants argue that leave should not be granted because the proposed amendments are vexatious and have no merit, lack particulars, would be struck if leave was granted and an increase in litigation costs will result. I disagree.
[9] As stated by Justice Molloy in Coriale (Litigation Guardian of) v. Sisters of St. Joseph of Sault Ste Marie, 1998 CarswellOnt 3624 (Ont.Gen.Div.) at para. 15, “…the factual merits of a proposed amendment are a completely irrelevant consideration under Rule 26.” See also Atlantic Steel Industries Inc. v. Cigna Insurance Co. of Canada, 1997 CanLII 12125 (ON SC), [1997] O.J. No. 1278 (Ont.Gen.Div.) at para. 7.
[10] With respect to particulars, the proposed amendments consented to at paragraph 7 plead an arrangement between the parties that resulted in the plaintiff’s remuneration being calculated as a percentage of revenues after deducting a portion of Sputnik’s operating expenses. A profit sharing relationship is an element of a partnership (see Partnerships Act, R.S.O. 1990, c. P.5, s. 3 and Continental Bank Leasing Corp. v. Canada, 1998 CanLII 794 (SCC), [1998] 2 S.C.R. 298, at para. 24).
[11] An increase in litigation costs is not prejudice that cannot be compensated for by costs.
[12] Reading the proposed amended statement of claim generously, with allowance for drafting deficiencies, and there being no evidence of non-compensable prejudice, leave is granted with respect to the contested proposed amendments.
[13] On consent, leave is granted to amend the statement of claim with respect to the proposed amendments at paragraph 7, save for the last sentence. Leave is granted to amend the statement of claim with respect to the amendments at paragraph 1(a) and the last sentence of paragraph 7.
Undertakings
[14] The undertaking at issue was given at question 81, page 348 on the examination for discovery of Buzhaker held on November 5, 2015. On August 2, 2017, during argument, the parties agreed to resolve this undertaking on the following basis:
(a) the defendants agree that the question needs to be answered;
(b) at the outset of the hearing of the motion on May 2, 2017, additional information in response to this undertaking was provided by the defendants; and
(c) if certain information is deficient or incomplete, the defendants will provide the missing documents to the extent possible.
Further and Better Affidavits of Documents from the Defendants
[15] The documents that the plaintiffs submit have been omitted from the defendants’ affidavits of documents are set out at paragraph 56 of the factum of the plaintiff. The defendant opposes the relief with respect to the documents listed at (b) – (f) below on the basis of relevance.
(a) Sputnik’s monthly sales reports in relation to sales the plaintiff generated for 2007-2010
[16] Certain documents were provided to the plaintiff at the outset of the motion on May 2, 2017. The defendants advise that they have now produced the documents in their possession. It is conceded that monthly sales reports for September to December 2007 are missing. The defendants agree that if any documents are missing and if such documents are available, they will be produced.
(b) Sputnik’s annual financial reports in relation to sales the plaintiff generated
[17] The defendants object to producing this documentation save for expenses. The redacted documents are found starting at page 206 of defendants’ motion record. I am satisfied that this documentation in an unredacted form is relevant based on the pleadings and in particular based on the amendments for which leave has been granted at paragraphs 1(a) and 7 of the amended statement of claim. The documents exist. The documents shall be produced in unredacted form.
(c) Sputnik’s monthly sales reports in relation to sales generated by agent Svetlana from July 2012 to June 2013, generated by agent Eleonara for 2009 and 2010, and agent Gulnara for 2012, together with copies of paid cheques
[18] The parties agree that these employees were paid commissions on the basis of 60 per cent of their gross sales without deduction for expenses. I was not referred to any pleading that satisfies me that the sales reports in relation to sales generated by these employees are relevant. The documents need not be produced.
(d) Cheques Sputnik issued to Buzhaker and Kirova from 2007-2013
[19] I am satisfied that the cheques are relevant based on the pleadings and in particular based on the amendments for which leave has now been granted at paragraphs 1(a) and 7 of the amended statement of claim. The documents shall be produced.
(e) Sputnik’s general and trust accounts and office expenses ledgers from 2007-2013
[20] I am satisfied that these documents are relevant for the reasons given at (d) above. The documents shall be produced.
(f) Sputnik’s form T4As for agents Svetlana, Eleonora and Gulnara from 2010
[21] I am not satisfied of the relevance of these documents for the reasons given at (c) above. The documents need not be produced.
[22] The defendants shall serve a further and better affidavit of documents disclosing the documents at (a) on consent, that were produced on May 3, 2007, and any other documents in this category that are available, at (b) in unredacted form, at (d) and at (e).
Defendants’ Motion
Further and Better Affidavit of Documents from the Plaintiff
The documents that the defendants submit have been omitted from the plaintiff’s affidavit of documents are set out at paragraphs 36 and 37 of the Buzhaker affidavit sworn January 18, 2017.
Documents listed at paragraphs 36 of the Buzhaker affidavit
(a) Full disclosure of all bank account statements for bank accounts held personally by the plaintiff from September 2007 to the end of April 2014
[23] The defendants previously moved for production of the personal bank account statements. At that time the defendants agreed to restrict the period to September 2011 to November 2013, and agreed to permit redaction of all entries unrelated to the travel business (see order and endorsement of Master Dash dated April 17, 2015). As the relief was previously dealt with by Master Dash, I decline to revisit the relief granted. The material before me contains no compelling reason to do so.
(b) Full disclosure of all bank account statements for bank accounts held by Elvics from December 2012 to the end of April 2014, including bank statements for Elvics’ RBC and BMO accounts
[24] I am satisfied that the documents are relevant based on the pleadings and in particular based on the issues of the plaintiff’s dependence on Sputnik pleaded at paragraph 6(e) of the statement of claim, the issue of mitigation pleaded at paragraph 27 of the statement of defence and counterclaim, the allegations of fraud pleaded at paragraph 31 of the statement of defence and counterclaim and unjust enrichment pleaded at paragraph 34 of the statement of defence and counterclaim. The documents shall be produced.
(c) Documentation indicating the source of the deposit funds for all deposits above $1,000 into all of the plaintiff’s personal bank accounts from September 2007 to April 2014 and Elvics’ bank accounts from December 2012 to April 2014
[25] With respect to the plaintiff’s personal bank accounts, as stated at (a) above, the defendants previously agreed to restrict the production of the plaintiff’s personal accounts to the period September 2011 to November 2013 and to permit redaction of all entries unrelated to the travel business (see endorsement and order of Master Dash dated April 17, 2015). Having previously agreed to restrict the production of the plaintiff’s personal bank accounts by time period and limited to the travel business, the material before me does not satisfy me of a reason why the previous restrictions should now be revisited.
[26] Accordingly, with respect to the plaintiff’s personal accounts, the source documentation shall be provided on a best efforts basis for the time period September 2011 to November 2013, for all deposits above $1,000 related to travel business. I am satisfied that the documents are relevant based on the pleadings referred to at (b) above. Best efforts shall be made to produce the documentation.
[27] With respect to Elvics’ bank accounts, I am satisfied that the documents are relevant based on the pleadings referred to at (b) above. Best efforts shall be made to produce the documentation.
(d) Elvics’ entire general ledger for year end of November 30, 2014
[28] I am satisfied that this document is relevant based on the pleadings and in particular based on the issue of mitigation as pleaded at paragraph 14 of the statement of defence and counterclaim. The document shall be produced.
(e) Elvics’ financial statement for year end of November 30, 2014
[29] I am satisfied that this document is relevant for the reasons given at (d) above. The document shall be produced.
(f) Elvics’ T2 Corporate Income Tax Return and notice of Assessment for year end of November 30, 2014
[30] I am satisfied that these documents are relevant for the reasons given at (d) above. The documents shall be produced.
(g) A copy of Elvics’ TICO business registration application, and any other documents that would show when the plaintiff and/or Elvics first applied for a TICO business registration
[31] Although the plaintiff argues that this document is not within her power, possession or control, I disagree. The plaintiff is the principal of Elvics. Her affidavit evidence does not satisfy me that the document could not be obtained upon her request. The plaintiff would have prepared the document or had the document prepared on Elvics’ behalf. At some point the document would have been in her possession, control or power.
[32] To the extent that the plaintiff argues that the discovery plan only requires her to produce documents in her possession, I am not satisfied that that is a sufficient basis not to compel compliance with Rule 30.03(1). Relevant documents that are or have been in the party’s possession, control or power shall be disclosed.
[33] The document is relevant based on the pleadings and in particular based on paragraph 6(b) of the statement of claim and relevant to the issue of whether the plaintiff voluntarily resigned or abandoned the relationship or was terminated as pleaded at paragraph 12 of the statement of claim and paragraph 15 of the statement of defence and counterclaim. The document shall be produced.
Documents listed at paragraph 37 of the Buzhaker affidavit - Peerless Travel documents
[34] At paragraph 37 of the Buzhaker affidavit, the defendants seek Peerless Travel documents and seek an order that the defendants be permitted to deal directly with Peerless Travel for production of the documents. There is no motion before me pursuant to Rule 30.10. To the extent that any Peerless Travel documents are ordered produced by the plaintiff, they are to be requested by the plaintiff in the normal course. If the documents are not produced, a 30.10 motion may then be brought by the defendants, on notice to Peerless. The documents listed at paragraph 37 of the Buzhaker affidavit are dealt with below at (a) to (e).
(a) All written contracts between Peerless Travel and the plaintiff and or Elvics or any of Elvics’ name variations
[35] The plaintiff’s evidence on examination for discovery was that there is no written contract (Q. 490). I am not satisfied that the written contracts requested exist. I decline to make an order that such documents be produced.
(b) Commission/compensation statements with respect to any payments made by Peerless Travel to the plaintiff and/or Elvics, or any of Elvics’ name variations
[36] I am satisfied that these documents are relevant based on the pleadings and in particular based on paragraphs 6(e) and 12 of the statement of claim, paragraph 15 of the statement of defence and counterclaim and the issue of mitigation pleaded at paragraph 27 of the statement of defence and counterclaim.
[37] The plaintiff argues that the discovery plan only requires her to produce documents in her possession and that the Peerless Travel documents are not within her possession. As noted above, Rule 30.03(1) requires the disclosure of relevant documents that are or have been in the party’s possession, control or power. The Peerless Travel documents are within the plaintiff’s control or power, the plaintiff having previously worked with Peerless Travel. The documents shall be produced.
(c) Copies of cheques issued by Peerless Travel to the plaintiff and/or Elvics, or any of Elvics’ name variations
[38] The documents shall be produced for the reasons given at (b) above.
(d) Sales reports of the plaintiff and/or Elvics, or any of Elvics’ name variations
[39] The documents shall be produced for the reasons given at (b) above limited to the period ending April 2014, being the end of the notice period claimed by the plaintiff.
(e) Any other documents in connection with the commencement of contractual relations and compensation paid between Peerless Travel and the plaintiff and/or Elvics, or any of Elvics’ name variations
[40] This is not a request for a specific document or specific documents. I cannot be satisfied that any such documents exist. I decline to make an order that a further and better affidavit of documents be produced that discloses the documents in this category.
Timing
[41] Each notice of motion requests production of further and better affidavits of documents within 30 days and I so order.
Costs
[42] If successful, the plaintiffs seeks costs for both motions in the total all-inclusive sum of $6,000. If successful, the defendants seek costs of the plaintiff’s motion in the all-inclusive sum of $6,000 and costs of the defendants’ motion in the all-inclusive sum of $10,000. The defendants also seek costs thrown away with respect to the amendments to the statement of claim in the amount of $1,000. The defendants submit that the costs thrown away represent the costs of preparing an amended statement of defence.
[43] With respect to costs thrown away of the amendments to the statement of claim, in my view the amount of $1,000 for costs thrown away representing the costs to deliver an amended statement of defence is too high. I award $750 which represents approximately two and a half hours of counsel’s time on a partial indemnity basis.
[44] There was divided success on the motions. The parties shall bear their own costs of the motions.
Summary of Order Granted
[45] Order to go as follows:
Plaintiff’s Motion
On consent, leave is granted to amend the statement of claim with respect to the proposed amendments at paragraph 7, save for the last sentence.
Leave is granted to amend the statement of claim with respect to the proposed amendments at paragraph 1(a) and the last sentence of paragraph 7.
On consent, with respect to the undertaking given at Q. 81, P. 348 on the examination for discovery of Buzhaker, if certain information is deficient or incomplete, the defendants shall provide the missing documentation to the extent possible.
The defendants shall serve a further and better affidavit of documents disclosing the documents referred to above under the heading “plaintiff’s motion” at (a) on consent, to the extent that the documents are missing and are available, at (b) in unredacted form, at (d), and at (e), within 30 days of today’s date.
Costs thrown away of the amendments to the statement of claim are fixed in the all-inclusive sum of $750 payable by the plaintiff to the defendants within 30 days.
There shall be no costs of the motion.
Defendants’ Motion
The plaintiff shall serve a further and better affidavit of documents disclosing the documents referred to above under the heading “defendants’ motion” with respect to the documents listed at paragraph 36 of the Buzhaker affidavit at (b), at (c) on a best efforts basis and with respect to the plaintiff’s personal bank accounts limited to September 2011 to November 2013, and related to travel business, at (d), at (e), at (f) and at (g) and with respect to the documents listed at paragraph 37 of the Buzhaker affidavit at (b), at (c), and at (d) limited to the period ending April 2014, within 30 days of today’s date.
There shall be no costs of the motion.
Master B. McAfee
Date: September 11, 2017