Court File and Parties

CITATION: Robert Teti v. Mueller Water Products Inc., 2017 ONSC 7348

COURT FILE NO.: CV-13-489853

MOTION HEARD: 20171121

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Robert Teti and ITET Corporation, Plaintiffs

AND:

Mueller Water Products Inc., Mueller Co., Mueller Canada Ltd., Mueller International, LLC and Mueller Systems, LLC, Defendants

BEFORE: Master Jolley

COUNSEL: Paul Lomic and Sabrina Salituro, Counsel for the Plaintiffs, the Responding Parties on Motion 1 and the Moving Parties on Motions 2 and 3

Ken Hanna and Christopher Langan, Counsel for the Defendants, the Moving Parties on Motion 1 and the Responding Parties on Motions 2 and 3

HEARD: 21 November 2017

REASONS FOR DECISION

[1] There are three motions before the court. The first is a motion by the defendants to compel the plaintiffs to answer questions undertaken and refused. The second is a motion by the plaintiffs to strike the reply of the defendants to a request to admit and to require the defendants to serve another reply. The third is a motion by the plaintiffs to compel the defendants to update the answer they gave to an undertaking.

Motion 1 – Defendants’ Motion to Compel Answers to Undertakings and Refusals

[2] The defendants bring this motion to compel the plaintiffs to answer what they say are two outstanding undertakings and to answer five categories of questions refused.

A. Undertakings

** (1) Undertakings relating to the production of notes of certain meetings – Questions 248 and 386**

[3] In the undertakings chart, the plaintiffs advised that Mr. Teti was still looking for these notes. At the motion, his counsel advised that Mr. Teti has not located any such notes. As such, the answer is that he does not have any notes to produce in response to these two questions. He has an ongoing obligation to correct this answer, if required.

** (2) Undertakings relating to the development timeline for the plaintiffs’ final prototype – Questions 682, 774, 812 and 817**

[4] The defendants argue that the timeline for development of the final prototype of the plaintiffs’ product is relevant because it will also establish a timeline for any alleged disclosure or misuse of alleged confidential information. They also argue that it is relevant in light of the plaintiffs’ allegation that the defendants delayed implementation of the parties’ agreement to develop the plaintiffs’ product. Whether there was delay, as alleged, is impacted by what the intended timeline was.

[5] The plaintiffs’ position is that they did not give this undertaking at Question 682 in part because it is vague. They argue that it is unclear what a development timeline means.

[6] The issue arose as plaintiffs’ counsel wanted his client to look at the documents rather than answer questions about prototype development dates from his memory. Starting at Question 680 the following exchange took place:

Q 680: When would they have completed their work with respect to the actuator that is comprised with Exhibit 16?

A: I would have to check my notes. When would be that last version?

Q 681: Right.

A: I don’t know off the top of my head.

Q 682: We’ll go back and try and check your records but would it have been about the time that these prototypes were sent to Mueller Co. for testing?

A: We - Mr. Hanna, I’m sorry to interject again. I mean, we don’t know. It goes to the same issue of his recollection. If [it] will help, because I appreciate you want to establish a timeline, you know not today, but, you know, after we have the transcript and we’ll look at the documents and I understand what your question is. You want to know what the timeline is for the components that are comprised within that Exhibit 16.”

[7] While the use of the term “timeline” may be vague, it was a term introduced by plaintiffs’ counsel in response to the defendants’ questions about when work on various components was completed.

[8] If it was an undertaking, I find that it is not answered by the delivery of a USB key with 270 documents on it that apparently range from manuals to emails to third party product specifications.

[9] If it was a refused question, I find the refusal improper. This is a $100,000,000 claim against the defendants. They are entitled to know what the timeline was for the development of the components of the prototype in light of the plaintiffs’ allegation that the defendants delayed development of the plaintiffs’ product.

[10] Question 774 was an undertaking so it is too late to argue on a motion for its enforcement that the question is vague. The plaintiffs indicated that they would have to check their records to determine how long Ienso, a circuit board designer, took to finalize a bullet-proof design. The question has not been answered. Providing a USB key of documents does not answer that question either.

[11] Similarly, the plaintiffs undertook at Question 812 to make inquiries as to when the PCV board was finalized and to advise. At Question 817 the plaintiffs undertook to make reasonable inquiries of Ienso to determine when the PCV board in Exhibit 16 was finalized. The plaintiffs have not made these inquiries. The questions have not been answered and are not answered by providing a bundle of documents.

[12] The following questions are to be answered:

(a) Question 682 – advise what the timeline is for the components that are comprised within Exhibit 16;

(b) Question 774 – advise roughly how long it took Ienso to finalize the bullet-proof design;

(c) Question 812 – make inquiries and advise when the PCV board in Exhibit 16 was finalized; and

(d) Question 817 – make reasonable inquiries of Ienso to determine when the PCV board in Exhibit 16 was finalized.

B. Refusals

Grouping 1 – Refusals of questions concerning particulars and material facts underlying the allegations in the statement of claim – Questions 980, 981 and 982

[13] The plaintiffs were asked for:

(a) Any other facts they rely on for the allegations that there was a further breach of the 2002 agreement – Question 980;

(b) Whether the plaintiffs are alleging any other breach of contract other than the 2002 agreement and the 2009 agreement – Question 981;

(c) If the answer to (b) is yes, then advise what alleged contract(s) it is that was breached, who the parties are to the contract(s) and what material facts the plaintiffs allege in respect of those alleged breaches of contract – Question 981;

(d) What is being alleged against each defendant in respect of each cause of action pleaded; for example, is each defendant alleged to be guilty of breach of confidence, deceit, etc. What material facts are relied upon by the plaintiffs against each defendant in respect of the alleged breaches – Question 981;

(e) Which allegations in the claim relate to the alleged breach of the 2002 agreement and which relate to the alleged breach of the 2009 agreement – Question 981; and

(f) If there are breaches of confidence and breaches of trust independent of the 2002 and 2009 agreements alleged against the defendants, advise against which defendants those causes of action are alleged and provide the material facts relied on in support of the allegations against each defendant – Question 982.

[14] There are a number of defendants and they seek to know what is being alleged against each of them and on what material facts the plaintiffs rely.

[15] The plaintiffs take the position that the defendants, by these questions, are attempting to re-litigate the partial summary judgment motion that was heard by Belobaba, J. The court found that the group enterprise theory does exist in Canada and also that there was compelling evidence of a factual nexus among the four defendants and a factual basis for the group enterprise claim in this action. As such summary judgement was not appropriate. The plaintiffs argue here that, as the motions judge did not take issue with the pleadings and, in fact found that there was a genuine issue for trial concerning the “group of defendants”, it is inappropriate to revisit that issue here. However, it is because these claims were allowed to proceed by the motions judge that these questions are appropriate.

[16] The court’s ruling was on a legal issue – did the group enterprise theory exist in Canada and was there a basis for it alleged in the claim? As those claims have cleared the genuine issue for trial hurdle and are proceeding to trial, the defendants are entitled to ask what material facts the plaintiffs rely on in support of these claims. This motion seeks just that - to discover the material facts that the plaintiffs will lead against each defendant at trial and what breaches will be alleged against each defendant at trial. Having found that there was a legal and factual basis for the plaintiffs’ group enterprise claim against the defendants does not answer what material facts the plaintiffs rely on against each defendant for the specific causes of action alleged against each.

[17] It may be that the plaintiffs are pursuing each defendant for breach of each contract and for equitable breach of confidence. It may be that the basis for that pursuit is the group enterprise claim. But the defendants are entitled to know whether that is the basis for the claims alleged against each defendant and, more importantly, what material facts are alleged against each defendant to support each cause of action. If the material facts alleged against Mueller Water Products Inc., Mueller Co. and Mueller International LLC are only the facts that support the “group enterprise” and not an action specific or individual to each of those defendants vis a vis the plaintiffs, then the plaintiffs can advise.

[18] Questions 980, 981 and 982 are to be answered.

Grouping 2 – Refusals for production of documents from parties related to the plaintiffs – Questions 41 and 43

[19] In their notice of examination, the defendants requested that the plaintiffs bring relevant documents in the possession, control or power of Galaga Inc., a company wholly owned by Mr. Teti as well as relevant documents of any other subsidiary or affiliated corporation of ITET or any corporation controlled directly or indirectly by either of the plaintiffs.

[20] The plaintiffs took three positions: (a) the documents requested were not relevant; (b) they have produced all such documents; and (c) they will comply with the Rules.

[21] The defendants have pleaded in the amended statement of defence that the alleged information of Teti is not confidential as “Robert Teti used various corporate vehicles, including Home Corp. Services Inc. and Galaga Inc. to develop or have developed, the ITET System and used various corporate entities to pay for the development of the ITET System” and that “the ITET System and prototypes were all developed, publicly installed and tested, as well as used and promoted by or through separate legal entities which are not plaintiffs to the within action.”

[22] During the motion the plaintiffs advised that Galaga Inc. paid one invoice, which was marked Exhibit or Production 17 and that it has no other documents. Also during the motion counsel for the plaintiffs argued that the further question and answer at Question 201 made it clear that the only involvement of Galaga Inc. or any other company controlled by Mr. Teti was the payment of an invoice when Mr. Teti did not have funds. Counsel advised during the motion that there was no other company involved in research and development of the plaintiffs’ product. Question 201 asked whether any other companies were involved with the design or development of the ITET digital water box. If the answer is no, as advised during the motion, that answer should be provided to the defendants in writing and that should be noted as the reason there are no relevant documents. If any other company was involved to the extent it paid any invoice on behalf of Mr. Teti, as was the plaintiffs’ reading of the question, that should be answered and any relevant document evidencing or related to that payment provided.

Grouping 3 – Refusals of questions related to the marketing of the plaintiffs’ ITET digital water system in the United States – Questions 1041 to 1043

[23] The plaintiffs were asked to review the documents in their productions or any of the productions that relate specifically to communications or discussions in relation to marketing the product to the southern United States. The plaintiffs objected to the question on the basis that (a) they relied on the pleadings and the discovery record; (b) the question was vague and overly broad; (c) particulars had been provided. The plaintiffs also objected on the basis that they are precluded from reviewing all of the defendants’ productions by virtue of the protective order in place.

[24] The defendants pleaded that their product “is not made, constructed, used or sold in Canada nor is it imported into or from Canada. Any alleged ‘marketing plan’ or ‘financial plan’ for the ITET System would be irrelevant or useless for the 420 RDM [the defendants’ product].”

[25] The plaintiffs allege that the defendants misused the plaintiffs’ confidential marketing plan. The defendants take the position that the products are marketed in different regions so that the plaintiffs’ marketing plan could only be relevant if it involved marketing to the southern United States where the defendants’ product is sold.

[26] To the extent the first part of the question asks the plaintiffs to review their own productions and identify any document that discusses marketing the plaintiffs’ product to the southern United States, the question is relevant and should be within the plaintiffs’ knowledge. If they did not have a plan to market to the southern United States at that stage, they can advise.

Grouping 4 – Refusals of questions about the ability of the plaintiffs to manufacture and sell their ITET digital water system – Questions 1017 and 984

[27] The plaintiffs plead that the defendants have deprived them “of the benefit of the ownership of the ‘intellectual property’, including improvements and improvement patents, provided for in the Agreement; and arising from the duty of confidence and trust.”

[28] The plaintiffs were asked at Question 1017 whether the defendants have asserted ownership over any of the technology that is part of the plaintiffs’ ITET digital water system. The plaintiffs replied that the defendants “helped themselves to the development and manufacture, marketing and sale of the very thing which was disclosed to them and which they undertook to develop on behalf of the plaintiffs.” This answers Question 1017 by stating that the defendants have asserted ownership by “helping themselves” to the very product.

[29] At Question 984 the plaintiffs were asked whether Mr. Teti had attempted to have the product manufactured and been denied the ability to have that done and whether there was anything precluding him from being able to try to sell the product in the market. In response, the plaintiffs advised at page 235 that “for competitive reasons”, it was “virtually impossible for him to enter the market”. That answer implies that the plaintiffs have not attempted to manufacture their product and suggests why that is the case, but the defendants are entitled to a clear yes or no answer as to whether the plaintiffs have attempted to manufacture and sell their water system.

Grouping 5 – Question relating to public disclosure and availability of competitor water meters – Question 956

[30] The defendants take the position that the availability of competitor water meters with disconnect values rebuts the allegation of misuse of confidential information. They asked the plaintiffs whether they had any information or documents to suggest that either the Evo valve or the RSV are not water meters.

[31] When Mr. Teti was asked this question, he indicated at Questions 954-955 that he had never heard of the Evo or RSV products. That may have been the end of the debate except the question was then taken under advisement and is now being treated as a refusal. If the plaintiffs’ answer is that they do not have any information at all about either product, then that is an answer to this question and needs to be provided. If they have information that the two products are not water meters, then this is the opportunity to provide it. Question 956 is to be answered in one of these fashions.

Motion 2 – The plaintiffs’ motion to strike the defendants’ response to their request to admit and for an order requiring a proper response

[32] On the motion before Belobaba, J. the plaintiffs included in their materials an affidavit of Thomas Cullinan with a number of exhibits (“the Cullinan affidavit”) that had been sworn 11 December 2014 on behalf of the defendants. They also included the transcript of Mr. Cullinan’s cross examination taken 18 January 2015. The Cullinan affidavit and transcript had been originally filed on a motion before Master Dash.

[33] The plaintiffs served a request to admit on 19 October 2017 requesting the defendants to admit the Cullinan affidavit without the exhibits. The defendants refused to admit the authenticity of the affidavit, taking the position that it was not an authentic or true copy without the exhibits.

[34] They did admit the authenticity of the Cullinan affidavit as it appeared in the earlier motion before Master Dash. (They also admitted the transcript as it appeared before Master Dash and before Belobaba, J.) Unfortunately when the plaintiffs filed the Cullinan affidavit in their responding record before Belobaba, J. on the motion for partial summary judgment, there was a photocopying error and the Cullinan affidavit in that record is not exactly as it appeared before Master Dash. So the admission of the Cullinan affidavit that was before Master Dash is not an admission of the Cullinan affidavit that was before Belobaba, J.

[35] The plaintiffs are concerned that the defendants (a) will object when they attempt to use the Cullinan affidavit and demonstrate that it was before Belobaba, J. as that precise affidavit is not covered by the admission; (b) will argue that the Cullinan affidavit before Master Dash is not relevant as its purpose (in support of a Protective Order) has been spent.

[36] This is not the case of Foundation for Equal Families v. Canada (Attorney General) 1999 CarswellOnt 2081 where what was in issue was the defendants’ refusal to admit what it described as propositions of law. The court was asked to rule on the scope of a request, i.e. whether it could be used to request the admission of matters that involved mixed fact and law, as was proposed, when a strict reading of the Rules might limit requests to the admission of the truth of facts or the admission of the authenticity of documents.

[37] While there are some circumstances where the court may exercise its authority to strike a response to a request to admit, I find this is not one of them. If I were to have found that it was appropriate for the plaintiffs to use the request to admit to have the defendants admit the authenticity of a partial document (here, an affidavit without exhibits), the answer from the defendants would not change. They have stated that they will not admit the authenticity of an incomplete version of the Cullinan affidavit and their reason for doing so is that, without the exhibits, it is not an authentic copy and it lacks a factual matrix.

[38] It seems what the plaintiffs are really requesting is an admission of fact as to the contents of the record that was before Belobaba, J. It may be that a request to admit that fact is more appropriate to achieve those ends but the court cannot compel an answer to a request to admit that the defendants are not prepared to give.

[39] As noted in RSC Management Ltd. v. Cadillac Fairview Corp. (1985) 1985 CanLII 2119 (ON SC), 51 O.R. (2d) 107, if the defendants do not admit a document they should have admitted, the trial judge may take the denial into account in exercising his or her discretion respecting costs under Rule 51.04.

[40] For the record, however, the defendants have stated that they explicitly admit the authenticity of the Cullinan affidavit in its entirety and will not argue at trial that it can only be used for the purpose for which is was originally tendered. This admission does not waive the plaintiffs’ compliance with the rules of evidence.

[41] The plaintiffs’ motion is accordingly dismissed.

Motion 3 - The plaintiffs’ motion to compel the defendants to provide a current and updated answer to a question answered on their examination for discovery

[42] On examination for discovery in January 2017, the defendants were asked whether they had engaged any experts on the issue of damages. The answer was no. Secondly, they were asked at page 125, akin to Rule 31.06(3), “If you have no report, I would like to know what oral or written findings - and that would include any documents, raw data, that could be relied upon or is relied upon by an expert’s opinions, conclusions or report of an expert. If any of that exist, I would like to know about it.” The answer was they did not exist.

[43] The defendants confirmed in a letter dated 24 July 2017 that they had not retained any experts and that they will comply with their obligations under the Rules of Civil Procedure. They have not resiled from that position.

[44] The questions were answered – there is neither an outstanding undertaking nor a refusal. It is not appropriate to come back to court and seek updates to answers given on examination for discovery as that exercise could be repeated at whim by a moving party until an answer that was given becomes no longer complete. The defendants are obliged under Rule 31.09(1)(b) to forthwith correct answers given on discovery that are no longer correct and complete. That will apply to both of the questions above that the defendants have already answered, which they acknowledge.

[45] The plaintiffs’ motion is accordingly dismissed.

Costs

[46] The parties have each submitted bills of costs for each of the three motions and wish to make further written submissions upon release of this decision. If the parties cannot agree on costs, each moving party will have ten days from release of this decision to provide the other with supplementary costs submissions. Then the responding party on the motion will have five days to provide the other with a written response. The party that brought the motion shall file each side’s costs submissions on their motion with the motions office to my attention.

Master Jolley

Date: 7 December 2017