2017 ONSC 7085

COURT FILE NO.: CV-11-437362

MOTION HEARD: 20170929

REASONS RELEASED: 20171127

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

2287913 ONTARIO INC., TREBAR HOLDINGS INC., 2234406 ONTARIO INC. and ARCTIC SPAS OAKVILLE INC.

Plaintiffs/Defendants by Counterclaim

• and-

ERSP INTERNATIONAL ENTERPRISES LTD., BREAK THROUGH ENTERPRISES LTD., KELLNER CONSULTING LTD., LIQUID LOGIC LTD., ECHO SOLUTIONS INCOPORATED, PARADISE BAY SPA 7 TUB WAREHOUSE INC., SPA LOGIC INC., BLUE FALLS MANUFACTURING LTD., ARCTIC SPAS INC., JOHN KEIRSTEAD, JAMES KEIRSTEAD, DARCY AMENDT, DENNIS KELLNER and BRENT MACKLIN

Defendants/Plaintiffs by Counterclaim

BEFORE: MASTER M.P. McGRAW

COUNSEL: Ian R. Dick, A.M. Fischer and A.L. Sherrard Emails: allyson-fischer@hicksmorley.com and amy-sherrard@hicksmorley.com -for the Defendants/Plaintiffs by Counterclaim

H.R. Bennett and J. Figliomeni Emails: hrbennett@rickettsharris.com and jfigliomeni@rickettsharris.com -for the Plaintiffs/Defendants by Counterclaim

REASONS RELEASED: November 27, 2017

Reasons For Endorsement

I. Background

The Motion

[1] This is a motion by the defendants/plaintiffs by counterclaim (collectively, the “Defendants”) to compel the plaintiffs/defendants by counterclaim (collectively, the “Plaintiffs”) to answer approximately 58 refusals arising from the examination for discovery of Trevor Wasney held on April 18-21, 2017.

[2] I have been case managing this matter pursuant to the File Direction dated April 10, 2017 of Justice Myers who is case managing the Plaintiffs’ proposed summary judgment motion. I have held 8 telephone case conferences to schedule and timetable the Plaintiffs’ motion to compel answers to undertakings and refusals and this motion by the Defendants.

[3] The Plaintiffs’ motion proceeded before me on May 25 and 29, 2017. My Reasons for Endorsement dated June 6, 2017 (the “Reasons”) are available at 2017 ONSC 3499. My Costs Endorsement is available at 2017 ONSC 5621.

The Action

[4] The following is a brief overview of this action. A more detailed summary is set out in the Reasons.

[5] From 2001-2011, the plaintiff Arctic Spas Oakville Inc. (“ASOI”) sold and marketed Arctic Spa hot tubs and accessories manufactured by the defendant Blue Falls Manufacturing Ltd. (“Blue Falls”) at 7 retail locations throughout Southwestern Ontario. Pursuant to a dealership agreement (the “Dealership Agreement”), Blue Falls granted ASOI a license to use Arctic Spa trade-marks and artistic works and provided warranty support and training. ASOI was responsible for product servicing.

[6] The Dealership Agreement expired on December 31, 2010. The parties were unable to agree on the terms of a written renewal agreement. On or about September 26, 2011 (the “Termination Date”), Blue Falls terminated the continuing dealership agreement and/or arrangement with ASOI. On October 5, 2011, the defendant Brent Macklin incorporated the defendant Arctic Spas Inc. (“ASI”) as Blue Falls’ new Southwestern Ontario dealer and ASI opened its first retail location approximately 1 block from ASOI’s head office and warehouse in Burlington, Ontario. The Plaintiffs allege that the Defendants solicited ASOI’s employees, customers and technicians.

[7] Blue Falls alleges that it terminated the dealership arrangement as a result of: ASOI’s alleged breach of the exclusivity provisions of the Dealership Agreement; ASOI’s high volume of warranty claims raising suspicions of fraudulent or improper warranty claims; and acrimony created by ASOI amongst other Blue Falls dealers.

[8] In their Amended Statement of Claim dated April 12, 2012, the Plaintiffs claim general damages of $10,000,000 and punitive damages of $1,000,000 for, among other things, breach of contract, fraudulent misrepresentation, conspiracy, breach of fiduciary duty and breach of duty of good faith and fair dealing. As set out below, the Plaintiffs have now reduced their damages claim to $2,400,000.

[9] In their Amended Statement of Defence and Counterclaim dated April 24, 2012 (the “Counterclaim”), the Defendants claim damages of $7,000,000 for breach of the Dealership Agreement and a related licensing agreement plus trade-mark and copyright infringement and punitive damages of $500,000.

[10] As set out in the Reasons, this action has been plagued by an overwhelming volume of documentary production and requests and court attendances related to these production disputes and the Plaintiff’s proposed summary judgment motion. After the productions ordered in the Reasons, over 2,000 documents have been produced with more sought. Documents numbering into the tens or hundreds of thousands documents may be relevant and/or available for production. In addition to the 8 telephone case conferences and 3 full days of court time for the motions before me, the parties have attended before other Judges and Masters approximately 18 times.

II. The Law and Analysis

Generally

[11] Rule 31.06 provides that:

(1)A person examined for discovery shall answer, to the best of his or her knowledge, information and belief, any proper question relevant to any matter in issue in the action….

[12] Rule 29.2.03 sets out the proportionality factors which apply to both oral and documentary discovery:

(1)In making a determination as to whether a party or other person must answer a question or produce a document, the court shall consider whether,

(a) the time required for the party or other person to answer the question or produce the document would be unreasonable;

(b) the expense associated with answering the question or producing the document would be unjustified;

(c) requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;

(d) requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and

(e) the information or the document is readily available to the party requesting it from another source.

(2) In addition to the considerations listed in subrule (1), in determining whether to order a party or other person to produce one or more documents, the court shall consider whether such an order would result in an excessive volume of documents required to be produced by the party or other person.

[13] Relevance, the scope of discovery and proportionality were canvassed comprehensively by Perell J. in Ontario v. Rothmans Inc., 2011 ONSC 2504 and Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2013 ONSC 917. In particular, discovery questions must be relevant to the issues as defined by the pleadings such that they must have probative value and adequately contribute to the determination of the truth or falsity of a material fact. Overbroad and speculative discovery and “fishing expeditions” are not permitted.

[14] I am also guided by Rule 1.04(1) which provides that the Rules of Civil Procedure shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits and Rule 1.04(1.1) which requires the court to make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. Given the volume of documents already produced, requested and available, the time and cost which has already been and will be expended, this case has hit the wall of proportionality such that, with due regard to the complexity of these proceedings and the amounts involved, the factors and the principles in Rule 1.04 are even more pronounced.

[15] Counsel initially advised that there were approximately 275 undertakings, under advisements and refusals which would be the subject of this motion. This was reduced by approximately 156 questions which the Plaintiffs answered under Rules 34.12(2) and (3) that are characterized as “without prejudice” such that the Plaintiffs object that these questions are relevant for the purposes of discovery but have answered in the interests of expediency. It was agreed that the issue of whether or not these answers may be used on a summary judgment motion or at trial will not be addressed on this motion. It is likely that direction on this issue will be required from Justice Myers or another Judge given the potential use on a summary judgment motion or at trial.

[16] The number of disputed undertakings and refusals was further reduced as a result of ongoing productions, exchange of positions and as set out below, as a result of productions ordered in the Reasons.

[17] This leaves approximately 58 disputed refusals which are divided into six (6) groups (corresponding with the chart attached as Schedule “A” to the Defendants’ Notice of Motion):

i.) Group 1 – 1 question related to the production of relevant emails from Mr. Wasney’s email account after the Termination Date;

ii.) Group 2 – 9 questions related to the parameters and productions related to the electronic keyword search of ASOI’s e-mails and computers by Duff & Phelps Canada Limited (“DPC”);

iii.) Group 3 – 18 questions related to the Defendants’ allegations that ASOI sold competitors’ products in breach of the Dealership Agreement;

iv.) Group 4 - 6 questions related to the Defendants’ allegations that ASOI submitted false warranty claims related to many of the same disputed issues and the productions ordered in the Reasons;

v.) Group 5 – 16 questions related to the Defendants’ trademark infringement allegations; and

vi.) Group 6 – 8 questions related to the Plaintiffs’ damages claim.

[18] Many of the disputed refusals were resolved by agreement and/or case management during the motion. This is noted below where applicable and where no further steps are currently required or were agreed to, I have made no order. As discussed with counsel, in the interests of efficiency, I will only refer to specific question numbers where necessary.

Group One

[19] Group 1 consists of 1 question related to the scope of the Plaintiffs’ searches of Mr. Wasney’s email account. The Defendants state that the Plaintiffs took the position during Mr. Wasney’s examination that emails with respect to the period after the Termination Date are not relevant. The Defendants submit that emails and other documents after the Termination Date are relevant to their trademark infringement claims and the Plaintiffs’ mitigation of damages.

[20] The Plaintiffs state that they have never taken this position and that all relevant emails from Mr. Wasney’s account after the Termination Date have been produced. Defendants’ counsel was satisfied with this response.

[21] No further steps or orders are required. Although it would appear that this issue is entirely resolved, consistent with efficiency and proportionality, any further questions regarding the scope of these searches shall be asked and answered in writing.

Group Two

[22] Group 2 is comprised of 9 questions arising from the keyword searches conducted by DPC and the Supplementary Affidavit of Documents and productions delivered by the Plaintiffs as a result of the DPC searches.

[23] In order to resolve a motion by the Defendants for a further and better Affidavit of Documents, the Plaintiffs agreed to have DPC conduct an electronic keyword search of the Plaintiffs’ personal and business computers. The terms of DPC’s engagement and the keyword searches are set out in a joint retainer letter agreement between the parties and DPC dated October 11, 2016 (the “Engagement Letter”).

[24] Pursuant to the terms of the Engagement Letter, DPC conducted the keyword searches and provided the results to Plaintiffs’ counsel who determined which documents were relevant and producible. The Engagement Letter provides that no information or results of the keyword searches may be provided to the Defendants.

[25] As a result of these keyword searches, the Plaintiffs produced approximately 1,048 documents. However, the Defendants submit that only 2 documents were produced from the time in and around the Termination Date while previous productions suggest that there should have been more. The Plaintiffs submit that this number is 95. The Defendants submit that the DFC searches should have resulted in the production of additional relevant documents.

[26] Specifically, the Defendants cite two examples: i.) the Plaintiffs previously produced an invoice from Premium Leisure, a competitor of Blue Falls, which pre-dates the Termination Date but did not produce the related purchase orders and correspondence which would typically accompany such an invoice; and ii.) the Plaintiffs previously produced a dealership agreement with Jacuzzi dated September 28, 2011, but no correspondence or other documents with Jacuzzi from before the Termination Date, which, unless there were pre-Termination Date discussions with Jacuzzi, would suggest that this new dealership agreement was negotiated, drafted and executed in 2 days, an unlikely scenario.

[27] Accordingly, the Defendants submit that they have a basis to conclude that the terms of the Engagement Letter were not carried out by DFC and are therefore entitled to know what parameters or guidelines Plaintiffs’ counsel used in determining which of the documents identified by DFC to produce to the Defendants. The Defendants also submit that it is not clear if Mr. Wasney provided DPC with his personal lap top although they acknowledge that in one of the Plaintiffs’ qualified answers they confirm that Mr. Wasney did not have a lap top.

[28] The Plaintiffs submit that there is no evidence that they have failed to produce relevant documents from the DPC keyword searches and that the Defendants are embarking on an intrusive “fishing expedition” all based on their position that “there must be more”. DPC has confirmed through Plaintiffs’ counsel that they fully implemented the terms of the Engagement Letter, temporally and with respect to the search terms, and in fact conducted wider searches than required. Plaintiffs’ counsel has executed all lawyers’ certificates with respect to their 5 Affidavits of Documents which list over 2,000 documents.

[29] There are numerous difficulties with the Defendants’ position that they are entitled to more information about how DFC implemented the Engagement Letter and how Plaintiffs’ counsel determined which documents were relevant and producible:

(i) the Defendants, sophisticated parties with counsel negotiating on their behalf, agreed to the terms of the Engagement Letter which prohibits them from receiving any information or results with respect to the searches conducted by DFC;

(ii) DFC has confirmed that it fulfilled its obligations under the Engagement Letter including with respect to search terms, scope and timing, all of which the Defendants agreed to;

(iii) the Defendants have not provided any authority to support their position that they are entitled to the parameters or guidelines applied by Plaintiffs’ counsel in determining relevance or what these parameters might potentially even include or demonstrate;

(iv) Plaintiffs’ counsel has advised that there are no additional relevant documents to produce, they have executed lawyer’s certificates for all 5 Supplementary Affidavits of Documents and the Plaintiffs are aware of their ongoing production obligations.

[30] In order to grant an order for production of additional records, particularly from computers and electronic devices, there must be some compelling evidence pointing to a genuine basis for concern that documents have been destroyed or hidden (Abou-Elmatt v. Canada (AG), 2013 ONSC 3176; In-Store Products Limited v. Zuker, 2015 ONSC 6215). In my view, no such compelling evidence exists to suggest that documents were excluded from the DPC keyword searches. The Defendants contention that “there must be more” is not sufficient to meet this threshold.

[31] Rather, this appears to be a situation where it is not clear that the documents which the Defendants are seeking even exist in which case the appropriate and proportionate next step is for further productions to be made only if identified on re-attendance on examination for discovery (Arenza Global Technologies Corp v. Cue Network Ltd., [2000] O.J. No. 1524 (S.C.J.)).

[32] Based on the above considerations and circumstances, I am not satisfied that the Plaintiffs are obligated to conduct any further searches or make any further inquiries with respect to the DPC keyword searches and the Engagement Letter, save and except for any reasonable, additional clarification questions regarding the process which shall be asked and answered in writing.

Group Three

[33] Group 3 consists of approximately 18 questions related to the Defendants’ allegations that ASOI sold competitors’ products in breach of the Dealership Agreement. The Defendants submit that these questions are relevant to Blue Falls’ grounds for terminating the dealership agreement and arrangement and the Plaintiffs’ mitigation of damages. I agree with the Defendants that the questions are relevant, however, the issue is one of proportionality, efficiency and what additional steps can or should be taken given all of the inquiries and productions to date.

[34] Questions 1664 – 1672 – These questions relate to the Plaintiffs’ refusal to answer questions regarding the opinion of James Kierstead, one of ASOI’s principals, with respect to whether he agreed with and approved of bringing in competitive product for sale by ASOI specifically, plug and play hot tubs manufactured by Premium Leisure. The Defendants also seek all documentation with respect to Premium Leisure. The Plaintiffs submit that Mr. Wasney has provided all information with respect to Mr. Kierstead’s opinion, specifically Questions 1595, 1599 and 1601-1605 where Mr. Wasney deposed that Mr. Kierstead’s opinion was that he did not like the idea of a private label like Premium Leisure in this category. Similarly, the Plaintiffs state that they have produced all relevant documentation including all correspondence and invoices. Accordingly, these questions are answered and no further efforts or inquiries are required.

[35] Questions 2376-2387, 2431, 2672 – These questions relate to the Plaintiffs’ initial contacts and communications with Jacuzzi which led to the execution of the Jacuzzi dealership agreement; the process for ordering product from Jacuzzi; Jacuzzi signage; and related documents. As set out above, the Defendants submit that since the Plaintiffs entered into a Jacuzzi dealership agreement two days after the Termination Date and already had Jacuzzi product in their stores, it follows that the Plaintiffs must have been engaged in discussions with Jacuzzi prior to the Termination Date.

[36] The Plaintiffs submit that paragraphs 58-62 of Mr. Wasney’s affidavit sworn September 15, 2017 is a full response to all of the Defendants’ questions regarding Jacuzzi. Specifically, Mr. Wasney previously advised the Defendants that he and 3 ASOI employees travelled to Los Angeles from August 31-September 2, 2011 to meet with Jacuzzi representatives. Mr. Wasney states that that this was a networking opportunity during which Mr. he and his colleagues toured Jacuzzi’s facility in Mexico; that there were no discussions regarding ASOI selling Jacuzzi products within 1 month or so of the visit; that the Plaintiffs did not order or sell any Jacuzzi products or display any Jacuzzi signage prior to the Termination Date; and that the initial Jacuzzi product was obtained from another Ontario dealer. The Plaintiffs further state that they have produced all relevant documents with respect to Jacuzzi, including all of the flight documents related to the trip to Los Angeles.

[37] The Plaintiffs further submit that documents produced by the Defendants reveal that the Defendants obtained ASOI’s confidential log-in credentials and passwords in November 2011 which allowed them to gain unauthorized access to ASOI’s online account for almost 6 years. This access would have provided Blue Falls with all details of ASOI’s dealings with Jacuzzi including orders.

[38] Considering all of the circumstances, it appears that the Defendants’ requests with respect to Jacuzzi largely fall into the category of additional requests for documents where the Plaintiffs have advised that they have no further documents and where none may exist. The exception is the trip to Los Angeles which, given the timing, raises legitimate questions which are relevant to both the termination of the dealership agreement and mitigation. While I accept that networking trips are common in many industries, this involved 4 ASOI representatives and lasted 3 days, suggesting that it took some degree of advance planning and likely would have involved some preliminary discussions with respect to a future dealership relationship.

[39] Therefore, in my view, it is reasonable, proportionate and appropriate for the Plaintiffs to make further inquiries of Mr. Wasney and the 3 employees who accompanied him on the trip to Los Angeles, Cameron Pittock, Melanie Fogolin and Joel Bowers to determine if they have any documents, correspondence or notes, to the extent not already produced, and to ask them regarding their recollections of the trip and the meetings, specifically if the possibility of ASOI becoming a dealer or distributor of Jacuzzi products within the coming month was discussed. Any questions arising from any new documents or information produced can be asked on re-attendance on discovery.

Group Four

[40] Group 4 consists of approximately 6 questions related to the Defendants’ allegations that the Plaintiffs submitted false warranty claims, which is relevant to the termination of the dealership agreement/arrangement and the damages claimed by the Defendants. This issue of false warranty claims consumed the majority of the time and submissions during the Plaintiffs’ motion and is again the case on this motion. This issue has also resulted in the largest number of productions with the potential for tens if not hundreds of thousands more. The challenge with these questions and requests is proportionality, not relevance.

[41] The Defendants allege that the fact that ASOI’s warranty claims were 125% higher than the global average raised suspicions that ASOI was filing false warranty claims. Blue Falls alleges that ASOI replaced faulty Onzen water sanitization systems (the original Blue Falls system installed in their hot tubs) with the cheaper Genesis system purchased from a third party. The Defendants submit since that the cost of the Onzen system was approximately $475 and the cost of the Genesis system approximately $200, ASOI made a profit of $275 every time it replaced an Onzen system with a Genesis system and filed a claim for an Onzen system replacement.

[42] As set out in the Reasons, based on a proposal by the Plaintiffs, the Defendants were ordered to provide the Plaintiffs with the identity of the 18 alleged false warranty claims which they initially identified. The Plaintiffs then produced all service call documentation from Evosus which is relevant to these 18 warranty claims and the Defendants in turn produced all of their relevant documentation with respect to these 18 warranty claims to the Plaintiffs. The Defendants submit that the production of ASOI’s Customer Note History information from Evosus as a result of the Reasons and service records from a former service technician further support these allegations. The Defendants have also identified an additional 96 alleged false warranty claims.

[43] The Defendants further allege that former ASOI service technicians have advised that ASOI instructed them to file the following improper warranty claims: falsely claiming a pressure switch adjustment or leak to obtain reimbursement from Blue Falls; and replacing original jets and Gecko motherboards with cheaper ones not manufactured by Blue Falls and claiming for the cost of more expensive Blue Falls’ parts. In an email produced by the Plaintiffs, an ASOI employee instructed a service technician to “do a claim for a leak on this spa…its within 30 days and we cannot bill the customer”, to which another ASOI employee responded: “it’s not risky to put in a claim for a leak as this spa already had a leak in line once so just put in for a jet body leak as it is not my job to do so. I have had Jim do it many a time and have all been approved”.

[44] The Defendants allege that the only way to determine the validity of ASOI’s warranty claims is to review ASOI’s service records all of which are only available on ASOI’s Evosus database. The Defendants submit that their production request is proportionate as they are no longer seeking all supporting documentation for every warranty claim since 2006. Rather, the Defendants seek production of the following from September 2006 until the Termination Date:

i.) a report summarizing all daily tasks/instructions given to ASOI’s technicians from its dispatchers (including Customer Note History, Service Order and Daily Schedules;

ii.) technicians’ notes following completion of work; and

iii.) reports summarizing jets, motherboards and Onzen/Genesis systems purchased from Blue Falls and other suppliers respectively.

[45] The Plaintiffs submit that they should not be required to produce anything more with respect to the warranty claim allegations. Typical of these proceedings, in my view, one side has unreasonably over-reached and the other side has unreasonably offered nothing in return.

[46] Among other things, the Plaintiffs submit that since Blue Falls had the authority to approve or deny warranty claims, the Defendants should know whether or not they were misled and should be able to access full particulars of the alleged improper conduct. The Plaintiffs insist and that they have no further documents that will assist the Defendants and that the Defendants will require the evidence of numerous former ASOI service staff who are now Blue Falls staff. In my view, this submission misses the point.

[47] Just because Blue Falls exercised its authority and discretion to approve ASOI’s warranty claims, it does not necessarily follow that they did so with the benefit of all available information and/or that they have access to all relevant information. In fact, at the heart of these allegations is that ASOI purposely provided false and misleading information in order to profit from warranty claims. Like many litigants alleging improper conduct, Blue Falls does not have access to all of the relevant information and documentation, namely, ASOI’s service records from Evosus. The withholding of information and/or the provision of misleading information is typical where improper conduct and fraud is alleged. As such, it is inaccurate to conclude that that the Defendants already have access to all relevant documents, particularly when it is not clear to what extent, if any, documents on Evosus have been reviewed.

[48] The Plaintiffs further submit that because the Defendants are claiming improper conduct or fraud, they are required to possess all particulars regarding the alleged conduct given that fraud must be pleaded with sufficient particularity. In this respect, they submit the Defendants’ pleading is “weak” because the math proposed by the Defendants regarding the alleged improper claims does not work given that Blue Falls returned a credit to ASOI such that ASOI would have made no money on false warranty claims. The Plaintiffs further argue that Blue Falls actually promoted, sold and provided service training for Genesis and that a Blue Falls partner sourced jets for ASOI directly from Blue Falls’ supplier. This again misses the point.

[49] This is a refusals motion, not a pleadings motion. The Defendants have pleaded improper conduct, identified a documentary basis for these claims and are now pursuing their right to discover if there are further relevant documents. The Evosus service record documents are relevant to these allegations as they set out what repairs were requested and completed, by whom, with what parts and what information was provided to Blue Falls, all of which are relevant to whether or not the warranty claims were improper. The Plaintiffs may very well have legitimate substantive defences and responses to all of these allegations, however, the Defendants are entitled to discover them at this stage in the proceedings.

[50] The Plaintiffs also submit that the Defendants are not entitled to the Evosus service records given that they did not request them earlier, including as part of the DFC keyword search or sooner after Mr. Wasney’s examination for discovery. The Plaintiffs also submit that their pending summary judgment motion will be delayed if the Plaintiffs are required to produce any Evosus service records. Again, I reject these arguments.

[51] The Plaintiffs rely on Horsefield v. Economical Mutual Insurance Company, 2017 ONSC 1589 in which Master Short found that it was too late for an insurer who decided to be “totally uninvolved” for almost 10 years after the date of a fire to seek further documents in litigation where there was uncertainty as to the value of the documents requested. This is distinguishable from the present case where the Defendants have been directly and actively involved in the ongoing piecemeal production of substantial documents where, in many cases, specific productions have given rise to more productions, such as the service records which here have raised further legitimate inquiries. Further, there is not the level of uncertainty as in Horsefield, given the information and documentation which has already been identified.

[52] Further, the Plaintiffs’ summary judgment motion has not been scheduled and was specifically delayed so that examinations for discovery and these motions arising could be completed. Much of the delay can be attributed to the ongoing piecemeal productions arising from discoveries, motions by both parties and the nature of the documents at issue in these proceedings. It would not be fair or proportionate to declare productions on this relevant issue at an end simply because the Plaintiffs’ summary judgment motion has been delayed by voluminous productions attributable to both parties and the circumstances.

[53] While I agree with the Plaintiffs that it would be disproportionate to order production of everything that the Defendants are seeking, I disagree that the appropriate relief is to grant nothing. The Defendants are entitled to a more reasonable, proportionate and efficient production than the one they have requested.

[54] In my view, a reasonable, relevant and proportionate production order in the circumstances is for the Plaintiffs to produce the following for the period September 2006 until the Termination Date:

i.) a report summarizing tasks/instructions given to ASOI’s technicians from its dispatchers (including Customer Note History, Service Order and Daily Schedules) only for the replacement of the Onzen system, jets and motherboards and technicians’ notes following completion of work;

ii.) reports summarizing jets, motherboards and Genesis systems all purchased from suppliers other than Blue Falls (Blue Falls should have in its possession or control documentation with respect to jets, motherboards and Onzen and Genesis systems which it sold to ASOI).

[55] This more limited production order requires reports only, not all underlying documents, is based on information solely in the possession of the Plaintiffs and relates only to those kinds of warranty claims that have been identified as allegedly and/or potentially improper which should be reasonably searchable on Evosus based on this limited and targeted scope. In my view, this strikes the appropriate balance between the Defendants’ rights to discover these issues, the Plaintiffs rights to be free of onerous and disproportionate discovery and the principles enunciated in Rule 1.04.

Group Five

[56] Group 5 consists of approximately 16 questions related to the Defendants’ allegations of trademark infringement by ASOI. The Defendants submit that they require the information and documents sought in order to assess the Plaintiffs’ use of their trademarks. The Plaintiffs previously admitted that they used these trademarks in marketing and advertising efforts after the Termination Date to sell inventory which Blue Falls refused to re-purchase in order to mitigate their damages. The Plaintiffs submit that they have produced all relevant documents with respect to the use of these trademarks.

[57] During submissions, the Defendants acknowledged that some of these questions may be more appropriate for re-attendance on examination; that they did not recognize that they had received certain documents and/or that certain documents including a distribution list for advertising and marketing materials and inventory lists are the same as documents already produced. By the close of submissions, it was apparent that counsel had resolved substantially all outstanding questions with respect to these documents. Accordingly, I conclude that it is reasonable and proportionate that, to the extent to which any questions remain, they can be asked in writing, or if necessary, re-attendance on examination for discovery.

Group Six

[58] Group 6 relates to 8 questions arising from both parties’ damage claims including the Defendants’ counterclaim for trademark infringement and the Plaintiffs’ claims for general damages and special damages for unpaid warranty claims and lost sales arising from deposits taken from potential ASOI customers. In this regard, the Defendants seek detailed financial records from the Plaintiffs from 2006 to the date of trial, including general ledgers, internal budgets and forecasts.

[59] The Plaintiffs submit that it is sufficient for the Defendants’ purposes and a full response that they have already produced ASOI’s financial statements for the 4 years following the Termination Date. Further, the Plaintiffs have provided a detailed explanation of the reduction of their damage claim to $2,400,000 which cites the documents relied upon for this amended amount.

[60] It appears that any further details and support with respect the Plaintiffs’ damage claim will be provided when the Plaintiffs deliver their expert report on damages and/or affidavit in support of their summary judgment motion. In this regard, the Defendants’ advised that they are content to wait for the Plaintiffs’ expert report or affidavit as they will still have the opportunity to cross-examine on the Plaintiffs’ damage claim. Accordingly no further inquiries or steps are required by the Plaintiffs at this time.

Other Issues

[61] The Defendants also raise certain issues with respect to their proposed Amended Amended Statement of Defence and Counterclaim and seek directions regarding re-attendance on discovery.

[62] The Plaintiffs have consented to the Defendants’ request for leave to issue the Amended Amended Statement of Defence and Counterclaim, however, the parties have not resolved the terms upon which leave would be granted. The proposed amendments are with respect to the breach of the Dealership Agreement and the alleged false warranty claims, already pleaded. After hearing submissions, it appears as if the parties should be able to resolve the terms for granting leave, particularly, with respect to any additional discoveries arising from the amended pleading. Therefore, no order or directions are required at this time.

[63] The Defendants request directions with respect to re-attendance on discovery, complaining that Plaintiffs’ counsel have, among other things, interrupted their examinations including two counsel stating positions and answers on the record.

[64] Plaintiffs’ counsel submits that the involvement of two counsel has been necessary during examinations given the large number of documents and issues being discovered. After hearing submissions, I conclude that the alleged conduct of counsel does not rise to the level which requires the court’s intervention or directions at this time. Counsel are encouraged to resolve these issues and, if necessary, either party may bring a motion for directions under Rule 34.14.

III. Disposition

[65] Order to go as follows:

i.) the Plaintiffs shall make further inquiries of Mr. Wasney and the 3 ASOI employees who accompanied him on the trip to Los Angeles to meet Jacuzzi representatives on August 31-September 2, 2011, Cameron Pittock, Melanie Fogolin and Joel Bowers to determine if they have any documents, correspondence or notes regarding the trip, to the extent not already produced, and to ask them regarding their recollections of the trip and the meetings and specifically if the possibility of ASOI becoming a dealer or distributor of Jacuzzi products including within the coming month was discussed, within 45 days

ii.) the Plaintiffs shall produce, within 60 days, the following for the period September 2006 until the Termination Date:

a.) a report summarizing tasks/instructions given to ASOI’s technicians from its dispatchers (including Customer Note History, Service Order and Daily Schedules) only for the replacement of the Onzen system, jets and motherboards and technicians’ notes following completion of work; and

b.) reports summarizing jets, motherboards and Genesis systems purchased from suppliers other than Blue Falls (Blue Falls should have in its possession or control documentation with respect to jets, motherboards and Onzen and Genesis systems which it sold to ASOI).

[66] If the parties cannot agree on the costs of this motion, a timetable for written costs submissions can be spoken to on a telephone case conference which the parties may schedule through the Masters Administration Office.

Released: November 27, 2017

Master M.P. McGraw