CITATION: HAITAS v. HAITAS, 2017 ONSC 6592
COURT FILE NO.: CV-16-543801 (TORONTO)
MOTION HEARD: 2017 11 02
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Eleftherios Haitas
v.
Costantinos Haitas
BEFORE: MASTER R.A. MUIR
COUNSEL: Mark A. Russell for the plaintiff
Harman S. Toor for the defendant
REASONS FOR DECISION
[1] There are two motions before the court. The plaintiff and the defendant both bring motions seeking answers to questions refused or taken under advisement at the parties’ respective examinations for discovery. The defendant’s notice of motion also seeks answers to outstanding undertakings, however, the issues related to undertakings were resolved prior to the hearing of these motions.
[2] A number of the refusal issues were also resolved prior to the return date for these motions. However, a number of questions and issues remain in dispute and were the subject of argument on November 2, 2017.
[3] This is a dispute between two brothers. The plaintiff alleges that in early 2009 he entered into an agreement with the defendant to acquire 35% of the shares of a corporation known as 2197178 Ontario Limited, operating as Tire Storage Direct (“TSD”). TSD was in the business of providing storage services for seasonal automobile tires. The plaintiff alleges that the terms of the agreement required him to invest approximately $50,000.00 to $60,000.00 in TSD over a period of time. The plaintiff would be involved in the operation and management of the business but the defendant would hold the plaintiff’s shares in trust. The defendant would own 40% of the shares. A third party would hold 25% of the shares.
[4] The defendant tells a somewhat different story. He concedes that there was an agreement whereby the plaintiff could acquire 35% of the TSD shares. However, the defendant alleges that the plaintiff was required to make contributions of time and money to the business in an equal amount to the defendant’s contributions. The defendant alleges that the plaintiff failed to do this and is therefore not entitled to any compensation for the value of the shares.
[5] All of the outstanding shares of TSD were apparently sold in June 2015. The plaintiff seeks an accounting and tracing of funds in relation to the sale of the shares of TSD.
[6] The plaintiff alleges that he received a payment from the defendant in the amount of $250,000.00 for his shares but has never received an accounting or explanation as to how this amount was calculated. The defendant denies that the $250,000.00 was a payment on account of the shares but rather was a loan to his brother who was in financial difficulty at the time. The defendant has advanced a counterclaim for re-payment of the loan.
[7] In determining the issues on the refusals portion of this motion I have applied, in part, 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 examinations for discovery as summarized in Ontario v. Rothmans Inc., 2011 ONSC 2504 (SCJ) at paragraph 129; leave to appeal refused, 2011 ONSC 3685 (Div Ct).
[8] The defendant’s motion was argued first. The defendant seeks answers to five categories of refused questions.
[9] The first group of questions all relate to the plaintiff’s operation of an Active Green + Ross franchise. The defendant seeks production of the Active Green + Ross franchise agreement and wants to know whether it contained a non-competition clause and whether anything in the franchise agreement prevented the plaintiff from holding direct ownership of the TSD shares. The defendant argued that these requests are relevant to the issue of whether the plaintiff made the required financial and time contributions to TSD. I see no relevance to these questions. The matter in issue is whether or not the plaintiff made his financial and time commitments to TSD as allegedly required by the agreement with the defendant. The reasons for his alleged failure to comply with the terms of the agreement are not relevant. I also note that it appears from the transcript that the plaintiff answered these questions in part at questions 61 and 62, pages 12 and 13. No further answers are required for questions 55, 60, 165 and 168 on the plaintiff’s examination for discovery.
[10] The second category of refusals in issue involved only one question. The defendant seeks production of any documents in the possession, control or power of the plaintiff that make reference to the defendant holding shares in trust for the plaintiff. The plaintiff’s evidence is that he has produced all documents that touch upon his alleged shareholdings in TSD. If none of those documents reference a trust arrangement then that is the answer. Nothing further is required in connection with question 604.
[11] The third group of questions seek information with respect to the plaintiff’s financial circumstances at the time of the alleged loan from the defendant. The defendant has pleaded that the money advanced to his brother was done so as a loan because the plaintiff was in financial difficulty at the time. The plaintiff’s position is that the money was advanced as a payment toward his 35% interest in TSD. In my view, the reason for the defendant making this payment is clearly a matter in issue in this proceeding. The defendant has pleaded at paragraphs 24 and 25 of his statement of defence that this was a loan made to the plaintiff who was going through financial difficulties. One of the questions relates to $70,000.00 which the plaintiff allegedly owed to his father. This alleged debt is specifically pleaded at paragraph 25 of the statement of defence.
[12] The plaintiff argued that these are bald allegations inserted for colour and to cast the plaintiff in an unfavourable light. The plaintiff submitted that they are simply not relevant to the central matters in issue in this proceeding. However, the plaintiff did not bring a motion to strike these allegedly improper allegations. There is also no evidence that the plaintiff served a demand for particulars before delivering his reply and defence to counterclaim.
[13] The plaintiff relies on the decision of Justice Strathy in Paul v. Pizale, 2011 ONSC 3490 where it was held that certain questions were not relevant even though the subject matter of the questions was pleaded and no motion to strike was brought. Justice Strathy appears to suggest that no motion to strike the obviously irrelevant allegations was necessary. See Paul at paragraph 16. However, in Paul, the allegations in question were found to be unrelated to the subject matter of the proceeding. The master below had found that there was “no connection in the pleadings between the vague references to other properties and the allegedly fraudulent nature of the impugned mortgages”. See Paul at paragraph 18.
[14] This is not the case on the motion before me. The allegations relating to the plaintiff’s financial circumstances are directly connected to the issue of whether the advance in 2015 was a loan or payment on account of the value of the plaintiff’s shares in TSD. In my view, Paul is distinguishable on this basis.
[15] I would also point out that questions 891 and 893 appear to be basic inquiries about a Schedule A document produced by the plaintiff. The defendant is entitled to ask questions about the plaintiff’s productions. Questions 667, 749, 790, 891 and 893 shall be answered insofar as they relate to the plaintiff’s financial circumstances in 2015 (although I note that question 891 appears to have been answered at the top of page 186 of the transcript, despite the objection of counsel).
[16] The fourth group of refused questions seek information about other investments made by the plaintiff. The defendant argued that these questions were relevant to the issue of whether the plaintiff made the financial investment in TSD allegedly required by the agreement. I see no relevance to these questions. The matter in issue is whether or not the plaintiff met the required financial requirements of the agreement. Any alleged reasons for not doing so are not relevant. Questions 730, 732, 734, 736 and 737 need not be answered.
[17] The fifth and final group of questions seek financial information with respect to the Active Green + Ross franchise. Again, the defendant argued that these questions were relevant to the issue of whether the plaintiff made the financial investment in TSD allegedly required by the agreement. I see no relevance to these questions for the same reasons set out in paragraph 16, above. Questions 103, 110, 112 and 115 need not be answered.
[18] The plaintiff’s motion was argued next. All of the questions in issue on the plaintiff’s motion seek information regarding the sale of the TSD shares in 2015. The plaintiff seeks production of documents and information in relation to the negotiations leading up to the sale, particulars of the sale price and related information, who received the proceeds of sale and the ultimate disposition of the proceeds of sale. The defendant accepts that these questions may eventually be relevant to matters in issue in the event the plaintiff succeeds in establishing a claim to a 35% interest in TSD. However, the defendant argued that these questions should only be answered if and when the plaintiff has obtained a declaration of trust with respect to the shares.
[19] I do not accept the defendant’s argument. First, there is no motion before the court pursuant to Rules 30.04(8) and 31.06(6) seeking an order for divided production and discovery. The only request for such relief is found in the defendant’s factum. In my view, the decision relied upon by the defendant in 1376273 Ontario Inc. v. Maylon O. Simpson Estates Ltd., 2003 CarswellOnt 2836 (SCJ – Master) does not assist the defendant. In that case Master Kelly concluded that a formal motion for divided discovery was not necessary because the other party did not object to the informal procedure. See 1376273 Ontario Inc. at paragraph 11. That is not the case on this motion. The plaintiff clearly objects to the lack of a formal motion.
[20] Second, Rules 30.04(8) and 31.06(6) require that there be a finding that the disclosure of the information would seriously prejudice the defendant. The defendant has provided the court with no evidence of prejudice. The defendant relies entirely on a bald statement in his factum that disclosure would “cause a disruption of business relationships and affect the competitive position in the marketplace of the defendant”. This is not sufficient to support an order under Rules 30.04(8) and 31.06(6).
[21] Third, I see no basis for a claim of privilege over the documents requested. The documents requested appear to be straightforward commercial documents between arms’ length parties. The plaintiff has not requested any documents that might be subject to lawyer client privilege or any other recognized category of privilege. The defendant has not provided any evidence that might support a claim of privilege on a case by case basis applying the so-called Wigmore factors.
[22] Finally, the questions asked by the plaintiff appear to be narrowly focused and limited in scope. They do not offend the principle of proportionality in the circumstances of this action. Questions 1173, 1179, 1181, 1224, 1229, 1230, 1231, 1232, 1233 to 1235, 1236, 1238 and 1239 on the defendant’s examination for discovery shall be answered.
[23] To the extent that I have ordered questions to be answered, they shall be answered within 60 days.
[24] If the parties are unable to agree on the issue of the costs of these motions, they shall provide the court with brief submissions in writing by November 17, 2017. The parties may deliver reply costs submissions by November 24, 2017. These costs submissions may be sent directly to me by email.
Master R.A. Muir
DATE: 2017 11 03