Court File and Parties

COURT FILE NO.: CV-16-566632 DATE: July 19, 2019

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Multiplex Construction Canada Limited v. Princes Gates Hotel Limited Partnership by its General Partner Princes Gates GP Inc., Roth Toronto Management Inc. and Romspen Investment Corporation;

BEFORE: MASTER C. WIEBE

COUNSEL: Brendan Bowles for Multiplex Construction Canada Limited (“Multiplex”); Riccardo Del Vecchio and Sam De Caprio for Princes Gates Hotel Limited Partnership by its General Partner Princes Gates GL Inc. (“PGH”) and Roth Toronto Management; Michael Miller for George Colk.

HEARD: April 23, May 21 and 22, and July 15, 2019.

REASONS FOR DECISION

[1] On April 23, 2019 several motions in the matter were brought before me. One of them was by PGH for an order allowing it to amend its pleading to include inter alia allegations of fraud as against Multiplex. This motion proceeded on consent. Another was by Multiplex for an order sealing all documents in this proceeding alleging or addressing this fraud. I adjourned that motion to May 21, 2019 and granted an interim sealing order pending this motion. I also scheduled a motion by Multiplex returnable May 21, 2019 for an order authorizing Rule 31.10 examinations for discovery of two non-party individuals, George Colk (an ex-employee of Multiplex) and Sean Wilson (the principal of a Multiplex subcontractor, Clonard Group Inc., on the subject project).

[2] On May 21, 2019 these two Mulitplex motions came before me along with other motions. Concerning the Multiplex Rule 31.10 motion pertaining to Mr. Wilson, this motion proceeded unopposed and I ordered that this examination take place on terms. Concerning the Rule 31.10 motion pertaining to Mr. Colk, it came out that Mr. Colk resides in North Lincolnshire, United Kingdom, that Mr. Bowles had trouble establishing contact with Mr. Colk but eventually did so no sooner than just prior to the motion, and that Mr. Colk wanted time to retain and instruct counsel. As a result, I adjourned that motion to July 15, 2019. Concerning the Multiplex sealing order motion, I adjourned that motion to July 15, 2015 as well to allow Multiplex to obtain further evidence relating to the sealing order issue, and I extended the interim sealing order accordingly.

[3] On July 15, 2019, Multiplex moved not only for the sealing order, but also, by way of alternative relief, for an order striking reference to three Multiplex officers, Hamish Pryor, Ralph Tulipano and Steve Crosby, from paragraph 51 of the amended PGH pleading on the grounds that these pleadings are scandalous, frivolous or vexatious under Rule 25(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Multiplex also moved not only for the Rule 31.10 examination for discovery of Mr. Colk, but also for orders that the examination could take place by way of video conference and that Mr. Colk be excluded from testifying at trial should he not attend on the examination. Mr. Colk had just prior to the motion date hired lawyer Michael Miller, who appeared before me ready to address the motion. It also came out that the Rule 31.10 examination of Mr. Wilson took place on June 4, 2019.

Sealing Order Motion

[4] The test for a sealing order is a high one. The leading case in this area is Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, [2002] 2 SCR 522. In this case the Supreme Court of Canada laid out in paragraph 53 the two branch test that must be met: (a) the order must be necessary to prevent a serious risk to an important interest, including a commercial interest, in the context of litigation because reasonably alternative measures will not prevent the risk (“the Necessity Branch”); and (b) the salutary effects of the sealing order, including the rights of civil litigants to a fair trial, outweigh its deleterious effects, including the effects on the right to free expression, which in this context includes the public interest in open and accessible court proceedings (‘the Proportionality Branch”). The Court found that the “commercial interest” in the Necessity Branch of the test must not be specific to the individual in question, such as the business damage caused to a company by the disclosure of a confidential contract. The commercial interest must be more of a public interest such as a breach of a confidentiality agreement.

[5] Mr. Bowles argued that the interests that will be protected by the requested sealing order in this case are the following: the commercial interest of Multiplex from being damaged in its business by groundless allegations of fraud; and the personal and professional interests of Messrs. Pryor, Tulipano and Crosby from being reputationally damaged by groundless allegations of fraud. He pointed to the evidence of Mr. Wilson and showed that Mr. Wilson implicated only Mr. Colk in the alleged scheme to charge labour on other projects to the subject Hotel X project. He pointed out that Messrs. Pryor, Tulipano and Crosby were not named by Mr. Wilson. He also pointed out that the names of these three gentlemen only appear in the signed will-say statements of Messrs. Muzzo and Stewart, and that these statements do not indicate that a fraudulent scheme was in fact put into action.

[6] That may all be true, but in my view that does not meet the test outlined in Sierra Club. Concerning Multiplex and the Necessity Branch of the governing test, the commercial interest Multiplex seeks to protect is in my view the same narrow, party specific, commercial interest that the Supreme Court in Sierra Club specifically stated did not justify a sealing order. There is no broader public interest to be protected here.

[7] Concerning the individuals, Messrs. Pryor, Tulipano and Crosby, their potential reputational damage due to the allegations of fraud also does not engage a public interest that justifies the sealing order. In John Doe v. Jane Roe, 2018 NSSC 174 the allegations in issue were arguably more serious in nature and potentially more damaging to the party’s reputation as they concerned conduct of a sexual nature. The court nevertheless denied the sealing order stating that allegations in pleadings are often inflammatory as they are pleadings, not evidence. The court went on to describe the example of business people being concerned about reputational damage due to allegations of fraud or theft, namely the very scenario at issue in this motion. The court stated that “the caselaw is quite clear that those types of concerns in and of themselves are not sufficient reason to allow a restriction on our open courts. Nor, in fact, is the concern that a defendant might suffer personal embarrassment at the filing of certain allegations.” I agree with this statement.

[8] I would only add that to grant a sealing order in this case would potentially create the precedent that would lead to sealing orders in virtually every case where fraud is alleged. Such allegations are by their nature inflammatory. That is not a precedent that accords with our core value of open courts.

[9] This motion is, therefore, denied due to Multiplex’s failure to meet the Necessity Branch of the governing test. I, therefore, do not have to and will not deal the Proportionality Branch.

[10] As a final submission, Mr. Bowles requested that I simply extend the interim sealing order until the conclusion of the mediation with Mr. Morrison, presently scheduled to take place in mid-October, 2019, to facilitate the mediation. I find no justification for this. First, there was no evidence before the court that Multiplex and the named individuals will in fact have their reputations damaged in the next three months by having their names appear in a fraud allegation in a pleading. Second, I have already given Multiplex the benefit of an interim sealing order for the last three months to allow it to get evidence that would justify a longer sealing order, and it has not in my view provided the necessary evidence. Given the stringency of the governing test and the ongoing and strong need to maintain open courts, I cannot extend this privilege any further and this reference needs to move forward.

Amendment motion

[11] Mr. Bowles also argued in the alternative that I should require pursuant to Rule 25.11(b) that the Amended Statement of Defence and Counterclaim of PGH be amended to delete the names of Messrs. Pryor, Tupilano and Crosby from paragraph 51. This is the paragraph where PGH alleges that Multiplex, through Messrs. Pryor, Colk, Crosby and Tulipano, “approached and requested” trades and suppliers on the Hotel X project to charge labour and material they spent on other Multiplex projects to the Hotel X project. This is the first of a series of paragraphs in the amended pleading that particularize the alleged fraud. Mr. Bowles argued that in light of the evidence of Mr. Wilson, there was now no evidence in support of the allegations naming these individuals as being a part of the alleged fraudulent scheme.

[12] I do not accept this argument. This is not a motion for summary judgment. It is a pleadings motion under Rule 25.11. That means that the issue to be determined is the pleading sufficiency for the alleged fraud, namely whether sufficient material facts have been pleaded to support the alleged fraud. In this regard, the pleadings are to be read generously and the pleaded material facts to be taken as proven; see Keselman v. Marktech Services Inc., 2019 ONSC 2934 at paragraph 31. It is true that pleadings of fraud are required by Rule 25.06(8) to contain “full particulars.” But, again, the issue is the sufficiency of the pleading.

[13] In his factum Mr. Bowles asserts that he was attacking the pleading sufficiency of the fraud allegations in the PGH amended pleading. But in argument it became clear that he was really attacking the evidentiary basis for the fraud allegations. I pointed out to Mr. Bowles that his client had consented on April 23, 2019 to the amended pleading that he was now attacking, and I asked him what had changed in the interim. He frankly stated that it was the “evidence” of Mr. Wilson. That may be appropriate for a motion for summary judgment or indeed for the upcoming trial of an issue that has been scheduled, but not for a pleadings motions like this. Mr. Bowles relied on several cases; but all of them are pleadings motion decisions concerning allegations of fraud, and the court in each case focused on the issue of whether there were sufficient material facts pleaded to meet the higher test of a fraud pleading. In the one case where the court struck the pleading, there were simply no material facts pleaded, which is certainly not the case before me; see Vicor Mechanical Ltd. v. Pegah Construction Ltd., 2009 CarswellOnt 7682 at paragraph 8.

[14] In summary, Multiplex essentially conceded the pleading sufficiency of the fraud allegation by consenting to the pleading amendment. Its present attack is on the evidentiary basis for the fraud allegations and is inappropriate as this is a pleadings motion. Furthermore, I find in any event that PGH has pleaded sufficient material facts to meet the higher test of a fraud pleading. I, therefore deny this motion as well.

Rule 31.10 motion

[15] In the end, the only issues on this Rule 31.10 motion were the terms and conditions under which Mr. Colk would be examined by Multiplex for discovery under Rule 31.10. Mr. Miller made that clear.

[16] For the record, I was in any event satisfied based on the evidence in this motion, that Multiplex was entitled under Rule 31.10 to an examination of Mr. Colk. The evidence shows that Mr. Colk is the only one with the critical evidence concerning the alleged fraud, resides in a foreign jurisdiction and has not been forthcoming in giving his evidence. Given the gravity of these allegations, it would also be unfair to Multiplex to require that it proceed to the scheduled trial hearing without having timely clarification of the evidence on this issue. Furthermore, the examination can take place without an interruption to the existing schedule in this reference.

[17] Mr. Miller stated that his client, Mr. Colk, had essentially one stipulation, namely that Multiplex pay Mr. Colk up front the amount of $15,000 CAN for the cost of the examination. Mr. Miller stated that his client did not oppose the requested video conference examination of Mr. Colk in London, England, on condition that he had Mr. Miller physically present beside him to assist with the evidence and the examination and that Multiplex pay Mr. Colk up front the estimated cost to have Mr. Miller flown to London, stay there for about two or three days and assist Mr. Colk with the examination. The $15,000 CAN would, according to Mr. Miller, cover those costs and the costs Mr. Colk himself would incur in missing work due to the examination. There was no evidence in support of these submissions.

[18] Mr. Bowles opposed this stipulation. He pointed out that Rule 31.10 did not expressly provide for such entitlement. All that Rule 31.10(1) says about costs on such an examination is that the court can impose terms that are “just.” The Rule states expressly that the examining party must provide all parties who attended the examination with copies of the transcript, and that the examining party cannot recover the costs of the examination from other parties unless the court orders otherwise. Mr. Bowles pointed out that Mr. Colk is now directly implicated in the sworn evidence of Mr. Wilson in a fraudulent scheme that may have damaged not only PGH, but also Multiplex, and that there should be no such up-front payment of costs, particularly as Mr. Colk has not provided any evidentiary backup for or breakdown of the $15,000 CAN amount. Mr. Bowles also pointed out that Mr. Colk has not been cooperative in this matter to this point.

[19] There was then a discussion about the effect of my order in the event Mr. Colk does not comply with my order. I obviously have no jurisdiction over Mr. Colk in England. My order in that event would have to be enforced by letters of request sent from a judge of the Ontario Superior Court issued to the relevant court in England and then enforced by that English court. Mr. Bowles submitted that I can nevertheless achieve fairness in that event by simply prohibiting Mr. Colk from giving evidence at the trial hearing in this case in the event he does not attend on the ordered examination. I believe that submission has merit.

[20] As to the issue of the up-front costs required by Mr. Colk, I believe that the better approach is to have that issue determined after the event, namely have Mr. Colk make an application to me after the examination to have Multiplex pay him his costs of the examination. At such an application Mr. Colk could present evidence of the costs he has actually incurred in that regard. There was no evidence before me that Mr. Colk cannot afford the up-front costs. I also note for the record that it was Mr. Colk who introduced this fraud issue by making documents available to PGH in the first place. Therefore, it should come as no surprise to Mr. Colk that this examination is taking place. I also note that Mr. Colk has not been cooperative in this matter up to this point. I also believe that the issue of costs should be determined in light of Mr. Colk’s evidence on the fraud issue.

[21] I, therefore, make the following orders:

a) There will be a Rule 31.10 examination for discovery of Mr. Colk by Multiplex; b) The examination will be for no more than a total of seven (7) hours; c) This examination may be done by video conference; d) The examination must take place on a date agreed upon that is on or before August 31, 2019 in light of the immediacy of the upcoming mediation in mid-October, 2019. Should the parties not agree on a date, they can arrange a conference call with me on short notice to obtain an order in this regard; e) Undertakings given at this examination must be complied with in thirty (30) days from the date they are given; f) Should Mr. Colk wish to have his costs of this examination reimbursed by Multiplex or any other party, he can bring a motion before me (with proper evidence) for an order in this regard, and this motion can be arranged through my Assistant Trial Coordinator; g) Should Mr. Colk fail to attend on the ordered examination, he will be prohibited from giving evidence at the trial hearing in this case.

Costs of the motions

[22] As to costs, I realized after the conclusion of the argument that I had overlooked obtaining costs outlines of the parties who appeared on these motions. Therefore, on July 17, 2019 I had my Assistant Trial Coordinator email counsel requiring them to deliver costs outlines.

[23] Two of the three parties have done so. On behalf of Multiplex, Mr. Bowles submitted two costs outlines. One is for the sealing order motion which no doubt included the work on the pleading amendment issue, and which shows $19,842.24 for actual costs, $16,076.94 for substantial indemnity costs and $10,997.56 for partial indemnity costs. The other is for the Rule 31.10 motion which shows $13,376.66 for actual costs, $10,205.20 for substantial indemnity costs and $6,803.45 in partial indemnity costs. On behalf of PGH, Mr. Singhla submitted one costs outline for both motions, which showed $36,552.11 for actual costs, $29,255.25 in substantial indemnity costs, and $22, 654.36 in partial indemnity costs.

[24] If parties to these motions cannot otherwise agree as to costs, those seeking costs have up to and including July 31, 2019 to serve and file written submissions in this regard of no more than two pages. Any responding written submissions of no more than two pages must be served and filed on or before August 12, 2019. Any reply written submissions of no more than one page must be served and filed on or before August 14, 2019.

DATE: July 19, 2019

MASTER C. WIEBE