COURT FILE NO.: CV-16-2039 DATE: 20190327 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ROBERT GLEGG, Plaintiff

AND:

2137691 ONTARIO LIMITED operating as GRAND ESTATE HOMES, LEONORA FALBO, a.k.a. ELEONOR FALBO a.k.a. LEONORA BREWDA a.k.a. ELEONOR BREWDA, TRON ELECTRIC, GIUSEPPE CERASUOLO and DINO and CHRIS ELECTRIC LTD., Defendants

BEFORE: Regional Senior Justice Peter A. Daley

COUNSEL: Michael A. Crystal, for the Plaintiff, Robert Glegg Alexander B Paul, for the Defendants, 2137691 Ontario Limited operating as Grand Estate Homes, Leonora Falbo, a.k.a. Eleonor Falbo a.k.a. Leonora Brewda a.k.a. Eleonor Brewda And Andrew Cottreau, for the Defendants, Tron Electric and Giuseppe Cerasuolo Danielle Marks, for Non-Party Co-Operators General Insurance Company.

HEARD: February 7, 2019

REASONS FOR DECISION

Daley J.

OVERVIEW

[1] The defendants 2137691 Ontario Limited operating as Grand Estate Homes and Leonora Falbo, a.k.a. Eleonora Falbo, a.k.a. Leonora Brewda, a.k.a. Eleonora Brewda (the “Moving Defendants”), move for an order compelling a non-party to this action, Co Operators General Insurance Company (“Co-Operators”), to provide a copy of the complete insurance policy and all insurance particulars for the defendant Dino & Chris Electric LTD (“DCE”), along with copies of all investigative materials, including reports, memoranda, letters from any experts, witness statements, photographs, videos and recorded information as to the state and condition of the damages claimed by the plaintiffs in the within action, in accordance with the Moving Defendants’ Amended Notice of Motion.

[2] For the reasons that follow, I have concluded that the motion must be dismissed as it relates to the production of Co-Operators’ insurance policy and declarations pages. However, the motion is granted on the terms outlined below with respect to the production of the documentation sought in accordance with r. 30.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

BACKGROUND

[3] The plaintiff retained the defendant Grand Estate Homes to carry out a home renovation project in March 2014. Grand Estate Homes subsequently subcontracted the electrical work on the home to the defendants Tron Electric, Giuseppe Cerasuolo and DCE.

[4] The plaintiff commenced the within action by issuing a Statement of Claim on July 7, 2016, claiming damages from all the defendants on the basis of allegedly deficient work in the construction and renovation of the plaintiff’s home. Several causes of action are asserted, including negligence, unjust enrichment, fraudulent misrepresentation and inducement of breach of contract.

[5] All of the defendants, including DCE, delivered Statements of Defence. However, DCE subsequently declared bankruptcy in May 2017 and, pursuant to the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, the action as against DCE was stayed. Kunjar Sharma of Kunjar Sharma and Associates Inc. was appointed as the trustee of DCE’s estate (the “Trustee”).

[6] The uncontradicted evidence is that DCE, at all material times, was insured by Co-Operators while the renovation work at the plaintiff’s home was underway, and, further, there is also evidence that Co-Operators retained a forensic engineering firm, Giffin Koerth, to attend the plaintiff’s property and investigate the allegedly deficient work completed by DCE. A report dated August 24, 2016, as to the outcome of that investigation was prepared by the engineering firm and disclosed to the parties in this action.

[7] Counsel for the Moving Defendants and counsel for the defendant Tron Electric Inc. and its related co-defendants have made requests of DCE’s Trustee relating to the production of the policy of insurance and all insurance particulars in place in the period of 2014 until 2016. The Trustee advised that he had no insurance policy in his possession related to DCE.

[8] Counsel for the defendants also made various requests to Co-Operators with regards to production of its policy of insurance in favour of DCE. A director of DCE executed a Direction and Authorization addressed to Co-Operators, authorizing it to release a copy of its insurance policy with respect to DCE; however, Co-Operators responded by indicating that it would not produce the contents of the insurance policy absent a court order. Co-Operators further indicated in October 2018 that if the Trustee for DCE wished to have a copy of the policy, he could request it and it would be provided; ultimately, Co-Operators took issue with accepting an authorization from the Trustee to provide copies of the insurance documents to a third-party, such as the Moving Defendants. Thus, when the Trustee provided the authorization to Co-Operators, the insurer maintained its objection to producing the policy of insurance to the defendants.

ISSUES ON THIS MOTION

[9] In accordance with its Amended Notice of Motion, the Moving Defendants seek production of Co-Operators’ policy of insurance in favour of DCE along with the documents and records in possession of the Co-Operators, as outlined above.

POSITION OF THE PARTIES

Moving Defendants’ Position

[10] The Moving Defendants rely on rr. 30.02 and 30.10 of the Rules of Civil Procedure and the inherent jurisdiction of the court to control its own process in support of their position that the policy of insurance and the documentation referenced should be produced by Co-Operators.

[11] The allegations raised by the plaintiff in the Statement of Claim make the deficiencies in the work carried out by DCE and its alleged negligence central issues at stake in the litigation. Were it not for DCE’s bankruptcy and the resulting stay of the action against it, DCE would have been required to produce for inspection any insurance policy under which an insurer may be liable for damages in this action pursuant to r. 30.02(3).

[12] Counsel for the Moving Defendants argue that the policy of insurance and the other records they seek are relevant, and that the failure to have those documents disclosed would result in unfairness by impacting the ability of the Moving Defendants to properly defend the pending action.

[13] Alternatively, the defendants rely upon rr. 1.04 and 2.03 in submitting that the interests of justice and fundamental fairness must be considered in this case, and that, as such, strict compliance with any rule in these circumstances would not be appropriate. Further, the court’s inherent jurisdiction to control its own process is also engaged.

Co-Operators’ Position

[14] Counsel for Co-Operators acknowledged the existence of a policy of insurance issued by the insurer in favour of DCE and confirmed that no privilege of any type was being asserted over that policy of insurance. Further, counsel acknowledged that no privacy interest was being asserted on behalf of the insurer.

[15] Simply put, it is Co-Operators’ counsel’s position that only a party to an action need disclose an insurance policy pursuant to r. 30.02(3). Counsel relies upon two decisions involving similar motions: Walker v. Doxtator et al., 2018 ONSC 2112; and Belmont (Village) v. Joe Snyders Construction Ltd. (1989), 4 C.P.C. (2d) 292 (Ont. S.C.), rev’d (1989), 36 O.A.C. 235 (Div. Ct.).

ANALYSIS

[16] The production of documents from non-parties is typically exceptional and reflects the understanding that non-parties are usually not subject to discovery: Mancinelli v. Royal Bank of Canada, 2017 ONSC 87, at para. 44.

[17] The onus is on the moving party to prove the two factors of relevance and unfairness: Walker, at para. 10.

[18] As to the factor of “relevance,” within the context of production from third parties a higher standard applies than would be the case in discovery ordered against a party in an action: Mancinelli, at para. 45. Relevance requires a reasonable possibility that the information sought is logically probative of a material issue in the action: Walker, at para. 12. The information, however, need not be “crucial” or “vital” to the moving party’s preparation for trial: Ontario (Attorney General) v. Ballard Estate (1995), 26 O.R. (3d) 39 (C.A.), at para. 6.

[19] As to the factor of unfairness, – this involves a balancing between the interests of the non-party – in terms of such elements as privacy, inconvenience and exposure to liability – and the concern that it would be unfair for the moving party to proceed to trial without the document at issue: Mancinelli, at para. 46; and Lowe v. Motolanez (1996), 30 O.R. (3d) 408 (C.A.), at para. 17.

[20] In Ballard Estate, the Court of Appeal delineated the following factors as being relevant to the fairness analysis under r. 30.10, which were reframed somewhat in Mancinelli, at para. 47:

(1) the importance of the document to the issues in the litigation;

(2) whether production at the discovery stage as opposed to production at trial is necessary to avoid unfairness to the moving party;

(3) whether the examination of the opposing party with respect to the issues to which the documents are relevant would be adequate to obtain the information in the document;

(4) the availability of a document or its information from another source that is accessible to the moving party;

(5) the relationship of the non-party from whom production is sought to the litigation and the parties to the litigation; and

(6) the position of the non-party with respect to production.

[21] The decision of Belmont (Village) involved a factual situation that is very similar to the case at hand. The plaintiff had hired the defendant to construct a roof and the defendant in turn obtained materials from another company. The roof collapsed and the plaintiff sued both the defendant and the supplier. The supplier went into receivership, and the defendant contractor unsuccessfully sought production of the insurance policy allegedly covering the supplier. The court concluded that the insurance policy was not relevant to a material issue in the action and unfairness to the moving party was not demonstrated.

[22] In the Court of Appeal decision in Pye Bros Fuels Ltd. v. Imperial Oil Ltd., 2012 ONCA 153, 20 C.P.C. (7th) 1, the moving party cross-claimed against an insurer for contribution and indemnity. The moving party was not specifically asserting that the insurance policy was relevant to the main litigation, but rather asserted that the insurer had a duty to defend, despite not having made any claims against the insurer concerning that duty. The Court of Appeal noted that the purpose of r. 30.02(3) is not to provide a means to obtain discovery of documents in advance of commencing a separate action relating to coverage or contractual obligations. As such, the court concluded that the insurance policy was not relevant and production was not ordered.

[23] With respect to the disclosure of insurance policies under r. 30.02, I have concluded that this rule is not engaged in the circumstances of this case, as Co-Operators is not a party to this action.

[24] As to the test of relevance in these circumstances, I have concluded that the test has not been met.

[25] At stake in this action are various causes of action relating to alleged deficiencies in the construction of the plaintiff’s property. The Moving Defendants have claimed contribution and indemnity from DCE, arguing that DCE was required to complete the work properly and to comply with the relevant regulations. In its Statement of Defence, DCE disputes that there are deficiencies or, in the alternative, if there are deficiencies, the existing electrical work already in place prior to its involvement was deficient.

[26] Furthermore, the insurance policy issued by Co-Operators to DCE is also not relevant to the material issues at stake in the action regarding the deficiencies in the construction at the plaintiff’s home or with respect to DCE’s potential liability for those deficiencies. The policy will not inform the question as to whether or not DCE is liable to the plaintiff or the co-defendants for contribution and indemnity.

[27] Turning to the factor of “unfairness”, the Moving Defendants must show that it would be unfair for them to proceed to trial without the policy of insurance having been produced. While it is true that if the plaintiff succeeds in this action and the action remains stayed against DCE, the Moving Defendants may be required to pay a judgment obtained against them, in spite of unenforceable findings of negligence against DCE as a joint tortfeasor, that alone does not give rise to unfairness favouring the granting of the Moving Defendants’ motion for production of the insurance policy.

[28] The Moving Defendants have not argued nor have they provided any evidence that they seek production of Co-Operators’ policy of insurance in order to inform their litigation decisions or to assist in the introduction of evidence at trial.

[29] Factors favouring the Moving Parties on the question of fairness include:

(1) r. 30.02(3) suggests that it is not unduly unfair for insurers to produce policies of insurance generally to parties within an action;

(2) the privacy interests of DCE are not in issue, given that the Trustee and a representative of DCE have authorized the release of the insurance policy to the Moving Defendants;

(3) the Moving Defendants have exhausted all other means to obtain the policy; and

(4) the non-party has a close relationship to a “party” in the action, namely DCE, and should DCE be found liable and the bankruptcy stay lifted, the insurer may be liable for DCE’s negligence or breaches.

[30] The following factors would demonstrate that fairness weighs in favour of the Co-operators:

(1) The insurance policy is not important to material issues at stake in the litigation;

(2) the insurer will likely be exposed to liability if the policy of insurance is produced;

(3) the non-party (Co-Operators) has refused production; and

(4) if the policy of insurance and particulars are not produced at this stage, the insurer may still be liable post-judgment for the plaintiff’s claim or claims of co-defendants for contribution and indemnity in accordance with s. 132 of the Insurance Act, R.S.O. 1990, c. I.8.

[31] Weighing the fairness considerations, I have concluded that they favour the non-party such that the insurance policy should not be disclosed.

[32] As to the application of rr. 1.04 and 2.03, the discretion afforded by these rules cannot be used to override the express and clear requirements of r. 30.10 and the established factors of relevance and fairness.

[33] In the result, I have concluded that the Moving Parties’ motion seeking production of Co-Operators’ policy of insurance with respect to the defendant DCE must be dismissed.

[34] With respect to that part of the Moving Defendants’ motion seeking production of the documents and records referred to above, which are not particularized, as it is undisputed that Co-Operators insured DCE at all material times and that it retained the services of an engineering firm to conduct an investigation with respect to the plaintiff’s claims and DCE’s actions, and given that no evidence at all was offered on behalf of the insurer on this motion and no privilege or privacy rights have been asserted by it, I have concluded that production of the documents in the insurer’s possession related to the investigation of the plaintiff’s claim shall be made for the purposes of inspection by this court in accordance with r. 30.10(3). The Moving Defendants’ Amended Notice of Motion expressly requests that the insurer provide a list of documents “with respect to all investigative materials, including any reports, memoranda, and/or letters from any expert(s), any witness statements, photographs, videos and recorded information of the state and condition of the claimed damages.” The information sought by the Moving Defendants from this non-party in that respect solely relates to the issue of damages relative to the plaintiff’s home.

[35] Pending a determination of relevance and fairness of the documents under r. 30.10(3) after they have been produced to the court, I have concluded on a preliminary basis that relevance and fairness favours the Moving Defendants’ request. It is undisputed that the insurer investigated the plaintiff’s claim, including having retained an engineer to examine the plaintiff’s property and, as such, any documentation relative to that investigation specifically having regard to the damages sustained or alleged to have been sustained by the plaintiff is relevant. Furthermore, given the fair acknowledgment by the insurer that it is making no claim of privilege or privacy with respect to the disclosure of any material within its files, including the insurance policy, fairness again favours an order being granted. This disclosure would also provide the court with an opportunity to inspect the documents within the insurer’s possession in order to determine if they are material and relevant to the issues at stake in the action.

[36] Therefore, the non-party Co-Operators through its counsel shall provide to me a list of all documents (other than the policy of insurance and related endorsements) within its possession relating to its insured DCE and its investigation of the claims being asserted against it by the plaintiff. Copies of the documents listed shall be produced to me with that list.

[37] The list and the documents shall be delivered to me within a sealed envelope marked only to be opened by me, for my sole examination and review, so as to determine whether or not they are properly producible to the Moving Defendants on the basis of relevance to material issues in the action and unfairness in requiring the Moving Defendants to proceed to trial without having discovery of the documents.

[38] The list and the documents shall be delivered to me within 30 days from the date of release of these reasons.

[39] As to the issue of costs, counsel shall serve and file costs submissions along with Costs Outlines within 30 days. No reply submissions shall be filed.

Daley RSJ.

Date: March 27, 2019

COURT FILE NO.: CV-16-2039 DATE: 20190327 SUPERIOR COURT OF JUSTICE - ONTARIO RE: ROBERT GLEGG, Plaintiff AND: 2137691 ONTARIO LIMITED operating as GRAND ESTATE HOMES, LEONORA FALBO, a.k.a. ELEONOR FALBO a.k.a. LEONORA BREWDA a.k.a. ELEONOR BREWDA, TRON ELECTRIC, GIUSEPPE CERASUOLO and DINO and CHRIS ELECTRIC LTD., Defendants BEFORE: Regional Senior Justice Peter A. Daley COUNSEL: Michael A. Crystal, for the Plaintiff, Robert Glegg Alexander B Paul, for the Defendants, 2137691 Ontario Limited operating as Grand Estate Homes, Leonora Falbo, a.k.a. Eleonor Falbo a.k.a. Leonora Brewda a.k.a. Eleonor Brewda And Andrew Cottreau, for the Defendants, Tron Electric and Giuseppe Cerasuolo Danielle Marks, for Non-Party Co-Operators General Insurance Company. REASONS FOR DECISION Daley RSJ. DATE: March 27, 2019