Court File and Parties

COURT FILE NO.: CV-17-571626 DATE: 20190219 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Robert Allan Perry, Plaintiff (Appellant) – AND – Neil D’Souza and Mass Fidelity Inc., Defendants

BEFORE: E.M. Morgan J.

COUNSEL: Joseph Figliomeni, for the Appellant Alfred Schorr, for Eric Grossman (non-party Respondent)

HEARD: February 14, 2019

Appeal Re Implied Undertaking Rule

[1] This appeal from the judgment of Master Graham dated November 19, 2018 asks whether the so-called implied undertaking rule applies to answers given by a deponent who has voluntarily submitted to an examination under oath.

[2] Robert Allan Perry (“Appellant”) seeks to reverse a ruling in which the Master declined to enforce undertakings given by Eric Grossman (“Respondent”), a non-party in this proceeding. The Respondent is a bookkeeper who worked for the Defendant, Mass Fidelity Inc. (“Mass Fidelity”). He gave a number of undertakings when examined under oath by Appellant’s counsel in aid of execution against Mass Fidelity.

[3] Mass Fidelity is a judgment debtor that owes the Appellant $108,464.25 (USD) pursuant to a judgment granted by Cavanagh J. on November 27, 2017. The Defendant, Neil D’Souza, was also a judgment debtor of the Appellant, but the claim against him has apparently settled and he has been released from the action.

[4] The Respondent was never a director or officer of Mass Fidelity. Accordingly, although he was served with a Notice of Examination he was under no legal obligation to respond or to attend and submit to the examination. He did so voluntarily and was represented at the time by independent counsel (not by his counsel on this appeal).

[5] The Appellant contends that during the examination the Respondent provided information with respect to his own involvement in wrongfully transferring Mass Fidelity’s assets so that they would be out of reach of the Appellant. In the course of doing so, the Respondent gave a number of undertakings which he said he would answer subsequent to the examination. Before he could deliver those answers, on February 2, 2018, the Appellant commenced a new action alleging fraudulent conveyance against Mass Fidelity and a number of other parties, including the Respondent.

[6] The Respondent thereafter decided not to cooperate further with the Appellant or to proceed any further with the examination in aid of execution against Mass Fidelity (although the examination was completed with the exception of the answers to undertakings). He refused to answer the undertakings he had given during his examination. On November 13, 2018, the Master heard the Appellant’s motion to compel the Respondent to provide the answers he had undertaken to provide. In a judgment issued the following week, the Master dismissed the Appellant’s motion on the basis that in using the Respondent’s evidence to start a new action the Appellant had breached the implied undertaking rule.

[7] The Master acknowledged that the deemed undertaking rule contained in Rule 30.1 of the Rules of Civil Procedure does not apply here. That rule limits the use that can be made of evidence obtained in certain specified procedures, but not in an examination in aid of execution. The Master reasoned, however, that the implied undertaking rule at common law is broader in its application than the limited deemed undertaking rule in Rule 30.1. He concluded that the Appellant’s commencing of a subsequent action against the Respondent based on evidence obtained on the Respondent’s examination was a breach of the implied undertaking rule at common law.

[8] The Master further opined that the Appellant’s collateral use of the evidence without leave of the court was an abuse of process. In view of that finding, he concluded:

[The Respondent] should not be required to provide any more evidence arising from his examination until the plaintiff addresses the leave issue. Accordingly, the plaintiff’s motion to compel [the Respondent] to answer undertakings is dismissed.

Perry v D’Souza, 2018 ONSC 6890, at para 12.

[9] It is the Appellant’s position that in reaching this conclusion the Master made an error of law. Appellant’s counsel submits that the implied undertaking rule does not apply in the circumstances of the Respondent’s examination. He argues that the Respondent’s undertakings are enforceable like any other undertakings given during the course of an examination under oath and that they cannot be resiled from once given.

[10] It is the Respondent’s position that the Master was correct and that the implied undertaking rule does apply in the circumstances of the Respondent’s examination. He also argues that in any case since the Respondent had no obligation to submit to the examination he likewise had no obligation to answer any given question or to fulfill any given undertaking.

[11] Both counsel agree that the question of whether the implied undertaking rule applies to evidence given voluntarily by a non-party witness is a question of law. On the other hand, the Rules of Civil Procedure make clear that the question of whether a deponent should be compelled to answer undertakings given at the examination under oath is an exercise of discretion. Where a Master is alleged to have made an error of law the standard of review is correctness, whereas an exercise of discretion by a Master is reviewable on the basis of palpable and overriding error: Zeitoun v Economical Insurance Group (2008), , 91 OR (3d) 131, at paras 38, 40-41 (Div Ct).

[12] It would come as a surprise to most people familiar with the Rules to hear that a witness who is examined under oath in aid of a court proceeding, albeit voluntarily rather than by court order or subpoena, cannot be compelled to answer undertakings. Answers by way of undertaking are routinely given and enforced in all kinds of pre and post-trial examinations, generally without inquiry into the way in which the attendance of the deponent was initially arranged. I note that Rule 60.18, which governs this type of examination in aid of execution, gives the court wide latitude in fashioning the parameters of an examination and in adjudicating questions arising therefrom.

[13] Specifically, Rule 60.18(6) provides that the court may make “such order for the examination of any other person as is just.” It is certainly the case that a master or judge can order even a voluntary witness to answer a given question or to answer an outstanding undertaking if he or she determines that the cause of justice requires the answer. For a witness to testify in a court proceeding and to unilaterally pick which questions to answer and which to ignore, without providing any opportunity for the court to rule on the validity of the questions and refusals, would take the conduct of the proceeding out of the court’s hands.

[14] Rule 60.18(6) is a specific instance and restatement of the court’s inherent jurisdiction to govern its own processes: see Re Stelco (Bankruptcy) (2005), , 75 OR (3d) 5, at para 34 (Ont CA). Just because a witness appears voluntarily does not mean that the witness, rather than the court itself, is the ultimate arbiter of a just legal process. I am satisfied that if the Master had wanted to compel the Respondent to answer the undertakings he gave at his examination under oath, the Master had authority to do so.

[15] I am equally satisfied that if the Master determined that it would not serve the course of justice to compel the Respondent to answer his undertakings, the Master had authority not to order them answered. The governing Rule gave the Master the discretion to weigh the factors of the case before him and to determine whether the undertakings should be answered given the needs of the case and the needs of justice more generally.

[16] Having said that, Appellant’s counsel’s primary point of argument is that the Master erred in using the undertakings motion as a means of enforcing the implied undertaking rule in a situation where it does not apply. As indicated above, the Master opined that in bringing a subsequent action against the Respondent, the Appellant breached the “implied undertaking by a party to whom documents are produced that he will not use them for a collateral or ulterior purpose”: Perry v D’Souza, at para 8, citing Goodman v Rossi, , [1995] OJ No. 1906 (Ont CA), quoting Williston and Rolls, The Law of Civil Procedure (1970), at 941. According to Appellant’s counsel, that implied undertaking applies to compelled examinations but not to voluntary ones; accordingly, since the Respondent’s submission to the examination was voluntary, the Master’s invoking of the rule amounted to legal error.

[17] In support of this argument, counsel for the Appellant cites Juman v Doucette, 2008 SCC 8, [2008] 1 SCR 157, the Supreme Court of Canada’s leading case on the implied undertaking rule. In Juman, at para 20, Binnie J. described the principle underlying the rule: “The root of the implied undertaking is the statutory compulsion to participate fully in pre-trial oral and documentary discovery. If the opposing party seeks information that is relevant and is not protected by privilege, it must be disclosed even if it tends to self-incrimination.”

[18] Appellant’s counsel submits that in putting the matter this way the Supreme Court has limited the application of the rule to examinations submitted to by the examinee as a matter of legal compulsion. Absent legal compulsion, the argument would presumably go, there is no principled basis on which the implied undertaking rule can take “root” and grow.

[19] In the Juman case, the evidence in issue was acquired by the opposing side at a mandatory examination for discovery. This, of course, is the typical scenario; the deponent whose evidence is used by the opposing side will likely have been compelled to be examined either by virtue of being the representative of a party to the action or by having sworn an affidavit in the action. Persons voluntarily submitting to an examination in litigation in which they are not otherwise involved are likely to have no objection to the documents and information that they disgorge being used by the other side. They are naturally assumed to have volunteered it.

[20] In other words, the Supreme Court did indeed say that the principle underlying the rule is that persons who are legally compelled to be examined should be encouraged to do so fully and honestly by being protected from collateral use of the evidence that they produce. The Court did not, however, go on to say that persons who are not compelled to submit to an examination but who do so anyway should not likewise be encouraged to do so fully and honestly. I can think of no reason for making such a distinction. Indeed, at the hearing I asked Appellant’s counsel what, in his view, would be the rationale for limiting the rule to witnesses who are examined by compulsion, and he could provide me with no answer other than to stress that the Supreme Court mentioned only those who were so compelled.

[21] In the House of Lords’ leading case on the implied undertaking, Lord Diplock indicated that the policy goal of the rule reflects “the desirability of encouraging full and unreserved discovery of documents before trial that were given in the courts”: Home Office v Harman, [1983] AC 280, 306. There is nothing to suggest that this reasoning should not apply to a witness in the Respondent’s position just as it does to a party to the case. If it would be unfair and an abuse of process to surprise a party by making collateral use of the documents and information produced on an examination for discovery or on an affidavit, it would logically produce the same unfairness to surprise a non-party with that kind of collateral use.

[22] In any case, I need not decide whether the implied undertaking rule does indeed extend beyond the bounds of where the Supreme Court of Canada suggested it extends – i.e. beyond a legally compelled examination. I will leave the propriety of starting a subsequent action based on evidence obtained at an examination in a prior and different action to a court considering the matter in the subsequent action.

[23] For now, suffice it to say that while the Respondent may have voluntarily submitted to the examination, that is not the end of the story. The Respondent is a voluntary deponent in the sense that he did not require the Appellant to obtain a court order to compel his appearance at the examination. The Respondent did, however, require the Appellant to obtain a court order to compel him to answer his undertakings. That is precisely what was before the Master and is under appeal here – the Respondent’s undertakings, and therefore the questions to which they were given in response, were not being answered voluntarily.

[24] As Appellant’s counsel said in argument, it is generally understood that an unfulfilled undertaking effectively becomes a refusal: see Rule 31.07(1)(b). The answers can be subject to a compulsory court order, which is why examining parties bring motions like the one heard by the Master below. Had the Appellant been successful below in compelling the Respondent to produce what he had undertaken to produce, that documentation or information would have been court-ordered evidence. It would therefore have been subject to the implied undertaking rule in accordance with the Supreme Court’s explanation of the “root” of that rule in Juman.

[25] It was open to the Master under Rule 60.18(6) to determine that it was not in the interests of justice to draw what appears like an unprincipled line – i.e. between undertakings answered voluntarily and undertakings answered by court order. That would have made some of the Respondent’s answers available to the Appellant to use for collateral purposes which jeopardized the Respondent in ways he did not foresee, and made other of the Respondent’s answers unavailable to the Appellant for such collateral use due to the operation of the implied undertaking rule.

[26] In linking the two in the way that he did, the Master must have perceived that the interests of justice require fairness all around in dealing with the Respondent’s examination. He was particularly concerned to avoid a ruling in which the Respondent’s answers were simultaneously compelled and voluntary. The Master considered it to be an abuse of the examination process for the Appellant to seek a court order to compel answers withheld by the Respondent, when at the same time the Appellant sought to use the Respondent’s answers collaterally on the basis that they are purely voluntary.

[27] Generally, a party answering undertakings is obliged to re-attend at discoveries and answer those undertakings under oath. Like so many other aspects of the Rules, “[t]he right to a follow up discovery is not, however, an absolute right”: Senechal v Muskoka (Municipality), , [2005] OJ No 1406, at para 6. It is always subject to the court’s overriding discretion to make such order as it deems just. Courts have long been authorized to deny or limit examinations under oath where an element of abuse is found: Kay v Posluns (1989), , 71 OR (2d) 238 (HCJ).

[28] I see no error in the Master’s decision to decline the Appellant’s request to compel the Respondent to provide answers to undertakings.

[29] The appeal is therefore dismissed.

[30] The parties may make written submissions on costs. I would ask counsel for the Respondent to provide me with a Costs Outline and written submissions of no more than 2 pages within two weeks of today, and for counsel for the Appellant to provide me with equally brief written submissions within two weeks thereafter.

Morgan J. Date: February 19, 2019