Court File and Parties

Court File No.: CV-18-1052 Date: 2019-06-14 Superior Court of Justice - Ontario

Re: P AND A HOLDINGS INC., Plaintiff And: JAE KIM, Defendant

Before: Justice D.A. Broad

Counsel: Lukasz (Luke) Szymura, for the Plaintiff Peter Neufeld, for the Defendant

Heard: May 13, 2019

Endorsement

[1] The motions before the court are for orders for further and better answers to undertakings and to answer questions refused on cross-examinations on affidavits conducted on a pending motion for summary judgment brought by the plaintiff.

The Pleadings

[2] The plaintiff seeks, pursuant to the Amended Statement of Claim, payment from the defendant of the sum of three hundred thousand ($300,000.00) dollars pursuant to a Promissory Note dated November 30, 2016 (the “Promissory Note”) plus interest thereon.

[3] The Promissory Note provided that the principal amount loaned by the plaintiff to the defendant was the sum of $300,000.00, $150,000.00 of which was due and payable on November 30, 2017 with the balance of the principal and any accrued and unpaid interest to be due and payable on November 30, 2018.

[4] The promissory note further provided that, if the loan was in good standing, interest would accrue on the outstanding principal balance at the rate of 8% per annum with the first interest payment to be due on February 28, 2017, and if the defendant failed to make a payment under the loan that was due and owing the interest rate would increase from 8% per annum to 16% per annum on the outstanding principal balance from the date of the event in default to the date that all amounts owing under the loan were paid in full.

[5] The Amended Statement of Claim alleges that as of July 31, 2018 the defendant owed to the plaintiff $373,906.85, plus interest at the rate of 16% per annum from and after that date.

[6] In his Amended Statement of Defence the defendant pleaded that Dr. Deepa Takhar (“Takhar”) was a director, officer, shareholder and directing mind of the plaintiff and that she was a partner of a business venture with the defendant and an individual named Danielle Goreski (“Goreski”).

[7] The Amended Statement of Defence alleges that, as a partner to the business venture and a shareholder of Cambridge Medical Imaging Inc. (“CMI”), Takhar owed a fiduciary duty to the defendant, including a duty of loyalty, good faith, honesty as well as a contractual duty of fair dealing.

[8] The Amended Statement of Defence alleges that Takhar breached her duties to the defendant by failing to disclose that she was facing disciplinary actions by the College of Physicians and Surgeons of Ontario (the “College”) and by failing to disclose that several of her former clients had made allegations of misconduct against her.

[9] The Amended Statement of Defence further alleges that the defendant was unaware of the allegations, either by the College or otherwise, against Takhar at the time of entering into the business venture with Takhar and the Promissory Note with the plaintiff.

[10] The defendant alleged that the success of the business venture was predicated on the ability to obtain referrals and to recruit other physicians through Takhar’s local network of physicians and that, with allegations against her by the College and by her former clients, the business venture was unable to generate its expected revenue. The defendant alleged that the allegations by the College and by Takhar’s former clients ultimately lead to the demise of the business venture and, as a consequence, left the defendant unable to pay the Promissory Note out of the revenues of CMI as intended. The defendant states in his Amended Statement of Defence that Takhar’s alleged breaches of fiduciary duty disentitled the plaintiff to any recovery against him for any amounts owing to it pursuant to the Promissory Note.

[11] The defendant further alleges that the plaintiff and Takhar made negligent misrepresentations to him by failing to disclose the allegations against Takhar and that such failure to disclose constituted a material omission or alternatively, an untrue, inaccurate or misleading statement, or both. The Amended Statement of Claim alleges that, reasonably relying on these alleged misrepresentations and omissions, the defendant entered into several financing agreements, including the Promissory Note, for the purposes of financing the business venture and suffered damages as a result.

[12] It is noteworthy that the Amended Statement of Defence does not expressly allege that the complaints made by Takhar’s former patients or the disciplinary actions by the College against Takhar were made or taken at any time prior to Takhar and the defendant entering into the business venture, the Promissory Note being executed by the defendant or the loan amount being advanced by the plaintiff to the defendant. Neither does the Amended Statement of Defence allege that Takhar was aware of any such complaints by former clients or disciplinary actions taken by the College against her at that time.

Motion for Summary Judgment

[13] By Notice of Motion dated November 26, 2018 the plaintiff moved, inter alia, for summary judgment on the claims in the Statement of Claim, namely for payment of the principal and accrued interest alleged to be owing to it pursuant to the Promissory Note.

[14] The defendant responded to the plaintiff’s motion for summary judgment by delivery of an affidavit sworn by him December 24, 2018 (the “Defendant’s Responding Affidavit”). In the Defendant’s Responding Affidavit he deposed, inter alia, to the following:

(a) To meet the financial needs of CMI in November 2016 the defendant entered into separate loan agreements with both Takhar, through her company P and A Holdings Inc. and Goreski, pursuant to which P and A Holdings Inc. and Goreski each agreed to loan him $300,000;

(b) after 24 months of operation the CMI business venture ultimately proved unsuccessful, the most significant cause of which was its inability to obtain referrals from physicians in the Region;

(c) the defendant later learned that Takhar was facing disciplinary actions by the College for incompetence, failing to maintain the required standard of practice, and engaging in disgraceful, dishonourable or unprofessional conduct in her administrative conduct and practice management. A summary extracted from the college’s website regarding Takhar’s alleged conduct was appended as Exhibit “D”;

(d) Exhibit “D” disclosed under “Pending Hearings” a “Summary” bearing the date September 21, 2017 stating that allegations of Takhar’s professional misconduct and incompetence were referred to the discipline committee of the College with hearing dates on various specified dates between April 1 and May 24, 2019; and

(e) He was unaware of the allegations against Takhar or her pending hearing before the College.

[15] The defendant did not depose in his affidavit that allegations were made by former clients against Takhar or disciplinary proceedings were initiated by the College prior to the date of the Promissory Note or the advance of funds by the plaintiff to the defendant under the Promissory Note. Exhibit D did not indicate any date prior to September 21, 2017 in reference to the allegations of professional misconduct or the associated disciplinary proceedings.

[16] In her affidavit replying to the Defendant’s Responding Affidavit sworn January 25, 2019 (“Takhar’s Reply Affidavit”) Takhar deposed, inter alia, to the following:

(a) She became aware of the allegations made against her to the College in the fall of 2017 approximately one year after the completion of the transaction involving the advance of funds by the plaintiff and the giving of the Promissory Note by the defendant;

(b) at no point in time was her medical practice shutdown or was she required to cease practising medicine.

Cross-Examinations

[17] Takhar was cross-examined on her affidavit in support of the plaintiff’s motion for summary judgment and on her Reply Affidavit on February 8, 2019.

[18] On her cross-examination Takhar refused to answer a series of questions regarding the allegations made against her to the College. It is not necessary for the purposes of the motion to reproduce verbatim the specific questions refused. In general they include production of any documents in her power, possession or control with respect to the complaints to the College, when any patients conveyed to her that they were going to report her to the College, whether she communicated with Goreski about the allegations that were reported to the College, and all communications between Takhar and any other individuals about the allegations made to the College. The specific questions that Takhar refused to answer were numbered 288, 292, 294 305, 309, 310, 313, 316, and 317 of the transcript of her cross-examination.

[19] Takhar also refused to provide complete answers to certain questions that she took under advisement at her cross-examination relating generally to the relationship between herself, the Takhar Family Trust (which is a shareholder in CMI) and the plaintiff. Included in Takhar’s response to the questions taken under advisement was the position that the questions are irrelevant. These questions included questions relating to production of bank account statements of the plaintiff between September and December, 2016, documents regarding the plaintiff’s financial commitments with respect to rental properties, whether the Takhar Family Trust has received the share certificates in CMI, production of trust documents respecting the Takhar Family Trust, and bank account statements of the Takhar Family Trust from October 2016 to January 2017. The specific questions which Takhar took under advisement were numbered 37, 46, 66, 68, and 91 of the transcript of her cross-examination.

[20] The defendant was cross-examined on the Defendant’s Responding Affidavit on February 13, 2019. On his cross-examination the defendant refused to answer certain questions respecting cash advances from a company Oxford Advanced Imaging Inc. to corporations he had an interest in, whether complaints by patients have been made about him to the College or to regulatory bodies in Saskatchewan and Arizona or online. The specific questions that the defendant refused to answer were numbered 199-201, 534, 535, 538, 541, and 555 of the transcript of his cross-examination.

[21] The defendant has not fulfilled an undertaking at question 177 to advise whether the funds advanced by the plaintiff and by Goreski ($300,000 each) on the promissory note, were used to buy the defendant’s shares in CMI.

[22] The defendant also refused to answer certain questions taken under advisement on his cross-examination relating to the defendant’s dealings involving Oxford Advanced Imaging Inc. on the basis that the questions are irrelevant to the plaintiff’s claim in the Amended Statement of Claim. The specific questions which the defendant took under advisement and has refused to answer are at questions 46, 47, and 48 of the transcript of his cross-examination.

Motions

[23] On March 28, 2019 and the defendant brought a motion for an order that the plaintiff provide further and better answers to questions taken under advisement given at Takhar’s cross-examination and that the plaintiff answer questions improperly refused at Takhar’s cross-examination.

[24] On April 4, 2019 the plaintiff brought a motion for an order that the defendant answer all of his outstanding undertakings, refusals and under-advisements on his cross-examination.

Guiding Principles

[25] Rule 34.12(3) of the Rules of Civil Procedure provides that where a question is objected to on an examination out of court a ruling on the propriety of the question may be obtained on motion to the court.

[26] Rule 34.15(1)(a) provides that where a person fails to answer any proper question or to produce a document or thing that he or she is required to produce, the court may, where an objection to a question is held to be improper, order or permit the person being examined to re-attend at his or her own expense and answer the questions, in which case the person shall also answer any proper question arising from the answer.

[27] Perell, J. set out a helpful synopsis of the principles derived from the authorities governing the scope of a cross-examination of an affiant of an affidavit for use on an application or motion in Ontario v. Rothmans Inc., 2011 ONSC 2504 (S.C.J.) at para. 143. The principles which are applicable to the motions in the case at bar are as follows (citations omitted):

The scope of a cross-examination of a deponent for an application or motion is narrower than an examination for discovery;
A cross-examination is not a substitute for examinations for discovery or for the production of documents available under the Rules of Civil Procedure;
The examining party may not ask questions on issues that go beyond the scope of the cross-examination for the application or motion;
The questions must be relevant to: (a) the issues on the particular application or motion; (b) the matters raised in the affidavit by the deponent, even if those issues are irrelevant to the application or motion; or (c) the credibility and reliability of the deponent's evidence;
If a matter is raised in, or put in issue by the deponent in his or her affidavit, the opposite party is entitled to cross-examine on the matter even if it is irrelevant and immaterial to the motion before the court; and
The proper scope of the cross-examination of a deponent for an application or motion will vary depending upon the nature of the application or motion.

[28] In Caputo v. Imperial Tobacco Ltd., [2002] O.J. No. 3767 Master MacLeod, as he then was, summarized the law respecting the scope and relevance for questions on a cross-examination, and observed, at para. 14, that a deponent may be cross-examined on any facts set out in his or her affidavit but also on any fact in his or her knowledge which is relevant to the determination of the motion. Citing his earlier decision in Logan v. Canada (Minister of Health), [2002] CarswellOnt 484 (Ont. S.C.J.), Master MacLeod offered the following simplified version of rules of governing the scope of cross-examination as follows:

If you put it in, you admit its relevance and can be cross examined on it - at least within the four corners of the affidavit;
You can't avoid cross examination on a relevant issue by leaving it out;
You can't get the right to cross examine on an irrelevant issue by putting it in your own affidavit; and,
You can be cross examined on the truth of facts deposed or answers given but not on irrelevant issues directed solely at credibility.

[29] At para. 18 Master MacLeod made the important observation that a determination of the relevance of a question on cross-examination is to be made from the perspective of the judge who will ultimately hear the motion, stating:

To the extent that this is a screening function, it is a wide screen. Any proper question which may lead to evidence that could legitimately influence the judge hearing the motion should be allowed. To exclude potentially relevant evidence by too narrow a definition of relevance is to usurp the function of the motions judge.

Discussion

(i) The Defendant’s Motion

[30] The defendant has pleaded in his Amended Statement of Defence that he should not be liable to repay the amount advanced to him by the plaintiff P and A Holdings Inc. on the basis that Takhar, the principal the plaintiff, failed to disclose the fact that complaints had been made against her by former “clients” (patients) to the College, which had in turn commenced an an investigation with respect to her professional conduct, when she was under a fiduciary or other duty to do so.

[31] The defendant’s theory is that the fact that complaints had been made about Takhar to the College and that the College had initiated an investigation into Takhar’s conduct had an adverse impact on the volume of referrals of patients by other physicians in the community to CMI imaging services. The defendant depended upon revenues from CMI to be able to repay the loan to the plaintiff. Since the revenues of CMI were adversely impacted by the lack of referrals from other physicians, the defendant says he should be relieved of any obligation to repay the loan.

[32] It is not my role as the judge hearing the motions respecting questions asked on cross-examination to rule or opine upon the merits of the defendant’s defence to the action, as that would usurp the function of the judge hearing the motion for summary judgment. My function is to determine whether the questions at issue are proper on the basis that they may lead to evidence that could legitimately influence the judge hearing the motion for summary judgment.

[33] As noted previously, the defendant did not expressly allege in the Amended Statement of Defence or in his Defendant’s Responding Affidavit that Takhar was aware of any complaints having been made to the College at the time that the loan advance by the plaintiff was made in exchange for the Promissory Note.

[34] Assuming for the moment that at the time of the loan advance Takhar was under a duty, fiduciary or otherwise, to disclose to the defendant the existence of any complaints made against her to the College or any ongoing investigation being carried out by the College respecting her professional conduct, the defence theory would depend upon:

(a) a finding that members of the pool of potential referring physicians became aware of the existence of such complaints or investigations;

(b) as a result, decided not to refer patients to CMI when they would otherwise have done so; and

[35] The defendant has not alleged in the Amended Statement of Defence, nor has he led evidence in his Defendant’s Responding Affidavit, that potential referring physicians in fact became aware of the existence of complaints or College investigations respecting Takhar’s conduct and, if they did, that it altered their referral decision-making as a result.

[36] The fact that certain patients complained to the College and that the College initiated an investigation and scheduled hearings respecting the complaints is not disputed. Takhar has deposed that she became aware of the existence of the complaints to the College in the fall of 2017, approximately one year after the loan advance. As set forth in the Affidavit of Matthew T. Kelly in response to the defendant’s motion, counsel for the defendant was provided with a copy of the letter (with patient information redacted) dated September 21, 2017 from the College notifying Takhar of the allegations. The defendant has offered no evidence to dispute the plaintiff’s evidence that Takhar first learned of the complaints to the College in the fall of 2017.

[37] The important issue for the defence theory (assuming it can overcome the hurdle that Takhar was not aware of any complaints or any College investigation into her conduct until September 2017) is whether the revenues of CMI suffered as a result of one or more potential referring physicians learning of the existence of complaints to the College respecting Takhar and deciding to reduce or eliminate their referrals to CMI as a result.

[38] There is no dispute that the merits of the complaints have not been adjudicated to date by the discipline committee of the College and accordingly, the nature of the complaints and their merits are not relevant to the defence theory. The defence theory rests solely on the fact that complaints were made to the College and the suggestion that this influenced the decisions of potential referring physicians. What is relevant is what the referring physicians thought about the complaints (assuming they learned of them) and whether it influenced their decision-making, not what was communicated by the College or by the complaining patients to Takhar.

[39] In my view, production of documents in the possession of Takhar respecting the details complaints to the College and the investigation of the College after she became aware of them in the fall of 2017 and the question of whether she communicated to Goreski about the College’s investigation are not relevant as they would not lead to evidence that could legitimately influence the judge hearing the motion for summary judgment.

[40] It is difficult to follow the defendant’s argument that Takhar should be ordered to answer questions put to her regarding her relationship between herself, the plaintiff, and the Takhar Family Trust.

[41] The defendant submits that Takhar and the defendant “share responsibilities as directors and officers of CMI, the corporation and business venture for which the loan and Promissory Note was executed” and that “it is also quite possible that Dr. Takhar and Dr. Kim share responsibilities as shareholders of CMI.”

[42] The defendant says that the following questions are raised by the “disputed connection” between Takhar, the Takhar Family Trust and the plaintiff:

(a) Did the plaintiff actually pay the $300,000 loan to the defendant or was it paid from an account held by the Takhar Family Trust or Takhar personally?

(b) Does the Takhar Family Trust, the purported shareholder of CMI, actually exist?

[43] The defendant suggests that “answers to these questions could have significant consequences for the scope of fiduciary duties owed by Dr. Takhar to Dr. Kim and CMI.”

[44] The Promissory Note recites that “for value received” the defendant as “Borrower” promises to pay to the plaintiff as “Holder” the principal sum of $300,000.00 plus all accrued interest thereon. The use to which the defendant intended to put the loan advance was not specified or referred to in the Promissory Note. There is nothing in the Promissory Note tying it to CMI, Takhar or the Takhar Family Trust.

[45] The defendant admitted on cross-examination that he received the loan advance of $300,000. There is no dispute that he executed the Promissory Note thereby promising to repay the loan advance and accrued interest to the plaintiff.

[46] The question of who the shareholders of CMI are is not relevant to the defendant’s liability on the Promissory Note nor to the defence theory referred to above. Even if Takhar is a shareholder of CMI and not the Takhar Family Trust, the defendant has not explained any legal basis upon which she would owe any duty or have any responsibilities to him as shareholder apart from contract. He has not alleged that Takhar owed him any contractual duty.

[47] In my view answers to questions respecting the relationships between Takhar, the plaintiff, and the Takhar Family Trust and details of the bank accounts of the plaintiff and the Takhar Family Trust would not lead to evidence that could legitimately influence the judge hearing the motion for summary judgment and are therefore not relevant.

[48] The defendant’s motion is therefore dismissed.

(ii) The Plaintiff’s Motion

[49] The plaintiff’s motion can be readily addressed.

[50] The plaintiff submits that if Takhar owed a fiduciary duty to the defendant such duty would be reciprocal and accordingly the defendant was under an obligation to disclose information respecting his involvement in Oxford Advanced Imaging Inc. to Takhar.

[51] The defendant’s dealings with Oxford Advanced Imaging Inc. are clearly not relevant to the plaintiff’s claim on the Promissory Note.

[52] The plaintiff did not serve a Reply in response to the Amended Statement of Defence suggesting that the defendant’s dealings with Oxford Advanced Imaging Inc. had any effect on the financial performance of CMI or were otherwise relevant to the defendant’s theory of why he should be relieved of any obligation under the Promissory Note. In the absence of any Reply, there is nothing in the pleadings tying the defendant’s dealings with Oxford Advanced Imaging Inc. to the issues in the proceeding.

[53] The answers to questions respecting the defendant’s dealings with Oxford Advanced Imaging Inc. would not, in my view, lead to evidence that could legitimately influence the judge hearing the motion for summary judgment and are therefore not relevant.

[54] As indicated above, the defendant undertook at question 177 of his cross-examination to advise whether the funds advanced by the plaintiff and by Goreski ($300,000 each) on the promissory note was used to buy the defendant’s shares in CMI.

[55] The defendant did not advance any basis for suggesting that this undertaking should not be fulfilled.

[56] It is therefore ordered that the defendant fulfil his undertaking at question 177 within fifteen (15) days hereof.

[57] The balance of the plaintiff’s motion is dismissed.

Costs

[58] At the conclusion of submissions counsel agreed that the successful party should be entitled to costs in the sum of $4,000.00.

[59] Given that both motions have been dismissed (with the exception of the defendant’s undertaking at Question 177 which was not disputed) it appears to be appropriate that each party bear their own costs.

[60] In the event that any party seeks entitlement to costs in the agreed amount it may make written submissions as to costs within 14 days of the release of this Endorsement. Any party against whom an award of costs is sought has 10 days after receipt of the other side’s submissions to respond. There shall be no reply submissions without leave. Each party’s written submissions shall not exceed three double-spaced pages, exclusive of Offers to Settle and authorities. All submissions shall be forwarded to me at my chambers at 85 Frederick Street, 7th Floor, Kitchener, Ontario N2H 0A7. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

D.A. Broad Date: June 14, 2019

P and A Holdings Inc. v. Jae Kim, 2019 ONSC 3680

Case Summary