Court File and Parties

COURT FILE NO.: CV-17-583764 MOTION HEARD: 12 July 2018 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Superior Tray Systems Inc., Plaintiff AND: Deltro Energy Inc., Houndsmoor Investments Limited, David Del Mastro, Dean Del Mastro and Tory-Lynn Manchulenko, Defendants

BEFORE: Master Jolley

COUNSEL: Michael Mazzuca, Counsel for the Moving Party Defendants Deltro Energy Inc., David Del Mastro, Dean Del Mastro and Tory-Lynn Manchulenko Andrew Punzo, Counsel for the Responding Party Plaintiff

HEARD: 12 July 2018

Reasons for Decision

[1] The defendants other than Houndsmoor Investments Limited (hereinafter, “the defendants”) bring this motion for an order to compel the plaintiff to deliver a further and better affidavit of documents.

[2] The action has already required significant judicial intervention as a result of the defendants’ unwillingness to be examined themselves until this production issue was dealt with and as a result of the plaintiff’s intention to move for summary judgment before any examination for discovery.

[3] On the motion, the defendants take the position that the plaintiff’s affidavit of documents is incomplete and missing key documents. They have provided a lengthy list of documents they say are missing that range from emails and communications between them and the plaintiff pre-dating the contract date to drawings and documents regarding the materials that the plaintiff delivered to the defendants, from documents concerning the plaintiff’s manufacturing experience and processes to documents in support of claims made against the personal defendants and in support of various paragraphs of the statement of claim.

[4] The plaintiff does not deny that the documents exist. It takes the position that the documents are not relevant. Alternatively, it argues that many of the documents are admittedly already in the possession of the defendants, having been defined in paragraph 8(i) of this motion as documents given by the plaintiff to the defendants, and that it would not fulfil any purpose to require the plaintiff to list and re-deliver documents to the defendants that it has already given them.

[5] Relevance is determined by reference to the pleadings. A document is relevant if it is logically connected to and tends to prove or disprove a matter in issue. (Kuiack v. Panolam 2016 ONSC 4553).

[6] The plaintiff takes the position that this is a straightforward claim for unpaid invoices. It pleads that the defendants ordered material from it. It supplied the materials on terms set out in its quotes which terms the defendants incorporated into their purchase orders. It delivered the material to the defendants and the defendants have not paid for all the material they received. The plaintiff argues that, to succeed, it is required to prove the purchase terms, completion of the order and non-payment. It takes the position that the defendants have not challenged the quality of the product delivered. It argues that the defendants simply allege that they have been unable to test the goods that the plaintiff delivered because it has not delivered a complete system. The plaintiff admits that it withheld the last cables ordered because the defendants had failed to pay for the material it did have.

[7] The defendants argue that they have pleaded that the goods were not of a workmanlike quality and have challenged their functionality.

[8] Further, the defendants argue that the pre-contractual exchanges between the parties are relevant as there is disagreement pleaded over the terms of the contract.

Preliminary Issue

[9] This motion was peremptory on the both parties. As the motion proceeded, counsel for the defendants proposed to file a reply factum and a transcript of the examination for discovery of David Del Mastro that took place on 5 July 2018. The plaintiff objected. The defendants then requested an adjournment so that these materials could be put before the court and the plaintiff given an opportunity to respond should it wish. The plaintiff argued that no adjournment should be granted and no further material should be submitted in light of the peremptory nature of the motion.

[10] In the event the materials were admitted, the plaintiff preferred that the motion proceed today, as the matter has already been delayed. I agreed to admit the transcript and the factum without an adjournment. I noted the plaintiff’s argument about the weight to be given to the questions put to Mr. Del Mastro on his examination for discovery, given he had the benefit of the plaintiff’s position on this motion before he was examined.

The Claim

[11] The plaintiff makes the following allegations in its statement of claim:

7. On or about November 15, 2016 Superior Tray entered into an agreement with Deltro for the supply of cable trays and cable buses for a battery storage facility at 440 Commissioner Avenue in Toronto, Ontario (the “Project”).

8. Pursuant to the agreement, Deltro issued a number of purchaser orders to Superior Tray for the supply of cable trays and cable buses for installation at the Project.

9. Superior Tray delivered the material required pursuant to the purchase orders issued from time to time by Deltro in a good and workmanlike manner and in accordance with the obligations of Superior Tray under the purchase orders.

10. Superior Tray states that the total amount invoiced by Superior Tray, including taxes was $1,258,182.05 USD. To date, Deltro has only paid $459,527.67 USD, leaving a balance owing of $798,654.39 USD.

[12] On or about 2 November 2017 the defendants served a demand for particulars in which they sought, among other things, “full particulars of paragraph 9, including details on which the plaintiff relies to state that it ‘delivered the material required … in a good and workmanlike manner and in accordance with [its] obligations’”.

[13] The plaintiff responded that “the Defendants have never taken issue with the materials delivered by Superior Tray and have verbally confirmed that there are no deficiencies with the materials supplied by Superior.”

The Defence and Counterclaim

[14] The defendants make the following allegations in their statement of defence:

6. In response to paragraphs 9 and 12 of the Plaintiff’s Claim, Deltro denies that the Plaintiff has ‘ delivered [or supplied] the material required … in a good and workmanlike manner and in accordance with [its] obligations’ . Deltro states and the fact is that the Plaintiff has not delivered such materials as alleged. The Plaintiff has not delivered any or all of the materials required under the terms of the contract, but has instead failed to supply some or all of the materials, and as such, the Plaintiff is not entitled to payment as alleged.

7. Deltro states and the fact is that the Plaintiff agreed to provide the materials, namely electrical wiring, cable trays and cable buses, for the Project in full, which materials would then be tested upon installation including for quality and functionality. Once tested, approved and/or commissioned, the Plaintiff would receive payment. The materials are an integral part of the Project; it would not make commercial sense for Deltro to have otherwise agreed to pay the Plaintiff in full for essential materials that had not been tested, approved, commissioned, or which were not functional or did not suit the desired or purported purpose for which they were installed.

8. Deltro states that the functionality of the Project and thus the Plaintiff’s materials cannot be properly tested, approved and/or commissioned without the full supply of materials as agreed to be provided by the Plaintiff. The Project must be tested in order for payment to flow to Deltro, and thus to the Plaintiff, therefore, the Plaintiff is causing unnecessary delays by failing to provide the materials.

9. If the Plaintiff has delivered any materials to the Project, which is not admitted but specifically denied, Deltro denies that those materials were delivered in a good and workmanlike manner as alleged.

10. In response to paragraph 11 of the Plaintiff’s Claim, the Defendants deny having agreed to pay any amount for interest as alleged, and put the Plaintiff to the strict proof thereof. The Defendants state and the fact is that an interest rate was never agreed to, but was unilaterally imposed by the Plaintiff on its invoices. The Defendants have never agreed to pay interest to the Plaintiff.

11. If Deltro agreed to pay interest, which is not admitted but specifically denied, Deltro denies agreeing to pay the percentage alleged by the Plaintiff or that the Plaintiff is entitled to the amount as alleged, and Deltro puts the Plaintiff to the strict proof thereof.

[15] The defendants make the following further allegations in their counterclaim:

30. Superior Tray has caused and continues to cause delays on the Project by failing to supply the materials, and completion of the Project is delayed as a result. The costs associated with said delays are currently unknown, but will be determined in full prior to or as of the date of trial.

31. Since Superior Tray has not provided the materials for the Project as it originally agreed to, Deltro has or will be forced to look elsewhere and engage a new supplier for the materials. The costs associated with the same are currently unknown, but will be determined in full prior to or as of the date of trial.

Correspondence from the plaintiff to the defendants from March or April 2016 to present

[16] The defendants argue that these documents are relevant to pre-contractual agreements, purchase orders, payments, statements of account and/or the manufacture, production and installation of the system and materials. They say the background to and discussions about the contract before it was negotiated are needed to shed light on the interpretation of the contract itself.

[17] The statement of defence takes issue with the interest payable under the contract. It also alleges that the plaintiff was due no funds until all materials were provided, tested and approved.

[18] Each party submitted affidavits on this motion. Martin Cox, the plaintiff’s president deposed that prior to Deltro issuing a purchase order, the plaintiff would provide a quote to Deltro for the particular supply of materials requested. Each quote that the plaintiff provided contained Terms and Conditions relating to payment and delivery. After receiving the quote, Deltro then issued a purchase order, which referenced the corresponding quote from the plaintiff and appended that quote with its Terms and Conditions to the purchase order. The appended and accepted Terms and Conditions provided: 30% deposit required with Purchase Order to secure project financing; balance will be billed at the time of each delivery for the shipped product, less part of the initial 30% deposit proportional to the value of the shipment; all payments would be Net 30 days.”

[19] Both parties argued that the emails between them should be reviewed on this motion to place the contract in its factual matrix. To the extent I have reviewed those emails, they do not support any interpretation that payment was not due until entire delivery was complete. In fact, as is evident from Mr. Cox’s affidavit and from the emails, Deltro paid the plaintiff’s first six invoices and made a partial payment against the seventh invoice for the product provided. Deltro’s later emails apologized for any late payment and promised payment as soon as financing permitted. I was not directed to any correspondence where Deltro took the position that it was not required to pay upon delivery or that payment was contingent on all materials being delivered, tested as part of a complete system and approved. To the contrary, Deltro advised the plaintiff that it would provide its wire transfer confirmation as soon as possible so that the plaintiff could order the remaining material. In a further email, it promised payment within two weeks.

[20] Del Mastro suggested in his examination for discovery that the payment terms set out above were contradicted. Other than that bald statement given after he had seen the plaintiff’s position on this motion, the defendants have not delivered any emails other than ones apologizing for late payment and acknowledging that payment was needed for the plaintiff to order materials.

[21] The defendants have not shown that there are emails relating to purchase orders, payments or statements of account or that they are relevant. This request is dismissed.

Drawings, reports and documents regarding the system and materials provided by the plaintiff to the defendants

[22] The defendants then seek communications from the plaintiff to the defendants about the manufacture, production and installation of the system and materials (notice of motion, paragraph 8(i)(e) and various drawings, reports, photographs and other documents in the plaintiff’s possession regarding the system and materials (paragraph 8(ii)). These requested documents range from quality control checklists, certification and warranty documents, analysis documents, installation manuals, handwritten notes, documents concerning the plaintiff’s experience in manufacturing and installing similar systems to documents about the plaintiff’s manufacturing and production processes.

[23] The gist of the defence is that the plaintiff has not delivered all the materials it was required to. Because of this incomplete delivery, the materials and system cannot be tested. Because it cannot be tested, no payment is due. This seems also to be the position of Del Mastro on his examination for discovery where he stated that goods were not delivered in a good and workmanlike manner as they were not complete or delivered.

[24] In their pleading the defendants do leave open the argument that, once the materials arrive and are tested, they will be found to be deficient. There is no evidence of this to date, given the defendants have done no testing. This is so even though the defendants have apparently admitted that only a visual test is required.

[25] Given the alternative pleading that any materials that were delivered were not in a good or workmanlike state, the issue of their condition has been raised. However, this does not mean that every document listed in the defendants’ list is relevant. The defendants have not put in issue the plaintiff’s entire manufacturing process or its experience in manufacturing similar systems. They have also not put in issue the installation of the system.

[26] As for the communication in paragraph 8(i)(e), I do understand the plaintiff’s argument that it is not the best use of judicial resources for a party to seek an order for documents that it has already received from the other side, which is what this paragraph does. It gives this motion the appearance of being brought to slow down the plaintiff’s ability to get on with its summary judgment motion. The defendants could have examined the plaintiff for discovery on these documents, which all parties had, and, if necessary, sought an undertaking that the plaintiff provide a further and better affidavit of documents during the discovery process. Having chosen this route, the documents in paragraph 8(i)(e) are admittedly relevant and it will not cause the plaintiff undue hardship to list those documents in a further and better affidavit of documents.

[27] As for the documents listed in paragraph 8(ii), in light of paragraph 9 of the defence, the plaintiff shall produce the items listed in (a), (b), (c), (f), (g), (h) and the brochure materials referenced in (i). The defendants have not put quality control in issue and a request at this stage for those checklists is akin to a fishing expedition. The items in (d) need not be provided. There is insufficient information before me about the existence or scope of the documents requested in (e) and that relief is dismissed. As for (f), the plaintiff need only produce the certification and warranty documents in its possession. It need not search for documents demonstrating compliance with regulations, legislation, etc. unless it already has those materials.

Further Requests

[28] There must be evidence that documents have been omitted from a party’s affidavit of documents before the court should make an order for a further and better affidavit of documents (Abou-Elmaati v. Canada (Attorney General) 2013 ONSC 3176 at paragraph 59). Here, there is no evidence that the plaintiff has handwritten or electronic notes from meetings or calls or that those notes are relevant. If there are such documents, that can be explored during the plaintiff’s examination for discovery. The request in paragraph 8(iii) is denied.

[29] As noted above, the statement of defence does not put the plaintiff’s manufacturing experience in issue and they were not the installer. As such the request set out in paragraph 8(iv) is denied.

[30] In addition to the above reason, paragraph 8(v) requesting all documents “about [the plaintiff’s] manufacturing and production processes” is too broad. There is no evidence linking this to the cable trays or delineating the request in any way. The request in paragraph 8(v) is denied.

[31] The request in paragraph 8(vi) is also overly broad. Aside from what I have ordered listed above, there is no evidence of any other document that has not been included. The request in paragraph 8(vi) is denied.

Documents in support of the plaintiff’s claim against the personal defendants

[32] The plaintiff has already advised that it has nothing further in relation to its breach of trust and unjust enrichment claims against the personal defendants and that the documents that support that claim are with the defendants and will be explored at discovery.

[33] The balance of this request is more appropriate for examinations for discovery and undertakings, if necessary. These requests in paragraph 8(vii), (viii) and (ix) are dismissed.

Timetable

[34] The defendants had requested a timetable as part of their motion. Both parties agreed that they would address the timetable at their next attendance before Dow, J. on 21 August 2018.

[35] At the request of the parties, costs were reserved to be addressed after release of this decision. If the parties are unable to settle costs by 24 August 2018, they may each submit a costs submissions of no more than three pages in length and a costs outline by 31 August 2018.

Master Jolley Date: 26 July 2018