Court File and Parties

COURT FILE NO.: CV-18-138335 DATE: 20190725 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Ryan Hunt Applicant – and – Michael Stassen, Daniel Locksley and Dealerpilot Intune Solutions Inc. Respondent

COUNSEL:

Rebecca Huang, for the Applicant Stephen Brunswick and Lesley Campbell, for the Respondents

HEARD: June 13, 2019

REASONS FOR DECISION

CHARNEY J.:

Introduction

[1] The Applicant, Ryan Hunt, brings this motion to strike certain paragraphs from the Affidavit of the Respondent, Michael Stassen, in advance of the application returnable November 1, 2019.

[2] Mr. Hunt is a minority shareholder of Dealerpilot Intune Solutions Inc. (Dealerpilot), one of the Respondents named in this application. Dealerpilot is in the business of licencing proprietary software that aids in human resources management and legislative compliance for automobile dealerships across Canada. Hunt, Stassen and the Respondent Daniel Locksley are founding shareholders of Dealerpilot.

[3] The Amended Notice of Application seeks a declaration that the Respondents have engaged in oppressive conduct against the Applicant, and an order that Dealerpilot provide annual financial statements for 2015 – 2018, and that an auditor be appointed to audit the financial statements. The Applicant relies on the terms of the Shareholder Agreement and various provisions of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (CBCA) in support of his application.

[4] The Applicant alleges that “tensions between the Respondent shareholders and the Applicant” in 2016 were such that the Applicant was compelled to resign from the company and that the Respondent shareholders have “established a pattern of exclusion, oppression, and withholding of information from the Applicant.”

[5] The Respondents filed an affidavit sworn by Mr. Stassen on February 26, 2019 (the Stassen Affidavit). The Applicant argues that 23 of the 74 paragraphs in that affidavit are “irrelevant and extraneous to the issues in the Application” and are “intended to create prejudice against, and impugn the behaviour or character of Hunt, or otherwise is clearly inadmissible”.

[6] The Respondents argue that the impugned paragraphs are all relevant to the legal issues raised in the proceeding. In any event, the Respondents argue, the admissibility of the impugned affidavit paragraphs should not be addressed in an interlocutory motion, but should be determined by the court that hears the application, since that court will be in the best position to assess the relevance of the impugned paragraphs.

[7] The Applicant’s motion originally raised a second procedural issue relating to a Cross-Application brought by the Respondents, but counsel have advised that this procedural issue has been resolved by the parties and is no longer being pursued on this motion.

Timing of Motion to Strike Affidavits

[8] In Holder v. Wray, 2018 ONSC 6133, Emery J. reviewed a number of cases dealing with the question of whether a court should hear a motion to strike inadmissible paragraphs from an affidavit in advance of the main application or whether the admissibility of affidavit evidence is a question best left to the court that hears the application. He concluded, at para. 40:

An advance ruling on striking all or parts of an affidavit can save the court the time of hearing and deciding evidentiary issues. A motion to strike can screen out evidence that is ultimately extraneous to the real issues between the parties, and that only increase the high cost of litigation. The motion to strike, used judiciously, provides the means by which to weed out frivolous or vexatious evidence that could require reply evidence, and might otherwise widen the scope of any cross-examination that is later found unnecessary. Although there are arguments for and against striking an affidavit in whole or in part prior to the main event, it is a discretionary order to make in the right circumstances. One “special reason” to make such an order in advance of the main hearing would be where the affidavit at issue is “clearly improper and it would inevitably give rise to extraordinary cost or difficulty for the other party.” See Allianz Global Risks at paragraphs 18 and 19, and Neighborhoods of Windfields Ltd. Partnership v. Death.

[9] Emery J. adopted a hybrid approach and struck some offending paragraphs from the affidavits but deferred a decision about other impugned paragraphs to the judge hearing the motion.

[10] Where the motion to strike is based on the relevance of the affidavit evidence it is often preferable to leave the question to the court hearing the application because relevance can often only be assessed in the context of the application as a whole. The judge who hears the application on its merits is usually best situated to make that determination.

[11] There are other cases, such as those described by Emery J., where screening inadmissible evidence at a preliminary stage will result in a more efficient use of parties’ and the court’s time and resources. For example, affidavits often contain inadmissible legal argument, opinions or comments on the legal position of the opposing party. “Legal argument and legal submissions belong in a factum and not an affidavit and may be struck out”: Gutierrez v. The Watchtower Bible and Tract Society of Canada et al., 2019 ONSC 3069, at para. 27. Permitting such inadmissible argument, opinions or comments to remain in the affidavit until the application is heard presents the opposing party with the dilemma of having to choose between ignoring, responding to and/or cross-examining on the inadmissible paragraphs. None of these options is ideal. A pre-emptive motion to strike the offending paragraphs may be the more appropriate route because it permits the parties to limit their response or cross-examination to those parts of the affidavits that contain admissible evidence.

[12] In this regard, I adopt the following statement of the Divisional Court in Sierra Club Canada v. Ontario (Ministry of Natural Resources and Ministry of Transportation), 2011 ONSC 4086, at paras. 7 and 8, which indicates a preference for having the record determined at a preliminary stage:

We are of the view that this motion should have been brought prior to the hearing by the panel, in order to clarify the contents of the record prior to factums being filed. Proceeding in such a manner would have enabled the parties to define the issues for the hearing based upon properly admissible evidence. I note that this was the procedure followed in the decision of Hanna v. Ontario (Attorney General), 2010 ONSC 4058 (Div. Ct.), If the motion judge is unsure about the relevance of certain material, those issues may be left to be determined by the panel hearing the judicial review.

To fail to define the appropriate record for the Court before the hearing encourages the proliferation of collateral issues, as occurred in this application. Filing material by one party inevitably precipitates a response from the opposite party. The consequence of failing to define the record is a proceeding before this court that becomes unnecessarily complicated, expensive and lengthy. For the parties and for the court, the ground is continually shifting, and the core issues may be eclipsed by the procedural issues.

[13] If the inadmissible evidence accounts for one or two isolated paragraphs in an affidavit, it may be more efficient to wait and have the issue of admissibility determined by the court hearing the case on its merits. In cases in which the affidavit is replete with inadmissible paragraphs, it may be fairer and more efficient to have the questions of admissibility determined in advance.

[14] The question of whether a motion to strike paragraphs from an affidavit should proceed as an interlocutory motion or at the same time as the primary motion was also considered by Perell J. in Gutierrez. After reviewing a number of cases that canvassed the advantages and disadvantages of each procedure, Perell J. summarized the law at para. 35:

By way of my own summary, in the majority of cases, rather than a pre-emptive motion to strike affidavits in whole or in part for non-compliance with the Rules of Civil Procedure, it is preferable that the judge or master hearing the substantive motion rule on the admissibility of the evidence. However, there is no absolute rule, and a pre-emptive motion may be appropriate where either efficiency or fairness require that disputes about the factual record be determined before the substantive motion. On a case-by-case basis, it will be for the judge or master hearing the pre-emptive motion to decide whether to strike the impugned material or to defer the issues of admissibility to the judge or master hearing the substantive motion.

Analysis

[15] Rule 4.06(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides:

An affidavit shall be confined to the statement of facts within the personal knowledge of the deponent or to other evidence that the deponent could give if testifying as a witness in court, except where these rules provide otherwise.

[16] Rule 39.01(5) provides:

An affidavit for use on an application may contain statements of the deponent’s information and belief with respect to facts that are not contentious, if the source of the information and the fact of the belief are specified in the affidavit.

[17] Rule 25.11 provides:

The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action; (b) is scandalous, frivolous or vexatious; or (c) is an abuse of the process of the court.

[18] There is no dispute that an affidavit qualifies as an “other document” within the meaning of Rule 25.11: Holder at para. 32.

Paragraphs 2, 4, 5, 6, 7 and 8

[19] The Applicant challenges the admissibility of paragraphs 2, 4, 5, 6, 7 and 8 of the Stassen Affidavit. These paragraphs fall under the heading “Overview”, and summarize the Respondents’ legal position in these proceedings. The Respondent takes the position that these paragraphs are intended to provide “context” for the evidence to assist the judge who hears the application.

[20] Having reviewed these paragraphs I am satisfied that they are primarily legal argument and legal conclusions. While some passages in these paragraphs also include a reference to facts that appear later in the Affidavit, these facts are intertwined with the legal argument and it is not for the court to parse each sentence to delineate between the legal argument and the facts. While legal overview paragraphs of this nature are useful in a factum, they are not permitted in an affidavit.

Paragraphs 21, 26, 33-46

[21] Paragraphs 21, 26, 33-46 of the Stassen Affidavit are challenged on the basis of relevance. The Applicant alleges that these paragraphs, which relate to the Applicant’s conduct as an employee of Dealerpilot and his access to IT infrastructure in the company, are intended only to impugn the Applicant’s character, and are irrelevant to the statutory and legal rights that he had as a shareholder. Accordingly, they should be struck on the ground that they are irrelevant to the legal issues raised in the Application.

[22] The Applicant also challenged para. 25 of the Stassen Affidavit, but this paragraph was revised by the Respondent and is now acceptable to the Applicant.

[23] Revisions were also made to paragraphs 34, 35 and 36 of the Stassen Affidavit. While these revisions purged the most offensive language, the revisions were not sufficient for the Applicant and these paragraphs are still being challenged. I will consider these paragraphs in their revised form.

[24] The Applicant relies on the decision of Emery J. in Holder, where he states at para. 48:

It is therefore appropriate to strike all or any parts of an affidavit that are clearly irrelevant to the issues on the application where the facts given in evidence are intended to impugn the character of the other party or a fundamental witness, or to create prejudice with the result the evidence given is scandalous, frivolous or vexatious. Evidence that is irrelevant is not enough. Evidence given in an affidavit that is not relevant but seeks to embarrass, scandalize or prejudice a person or a position taken in the litigation is too much, and should be taken out.

[25] The Respondent replies that these paragraphs are relevant because they provide background facts that explain the Respondents’ decision to limit the financial disclosure available to the Applicant, set out material facts underlying the breakdown of the relationship between the parties, and are relevant to the “safeguards” they will argue must be attached to any financial disclosure remedy that the court may grant to the Applicant.

[26] These impugned paragraphs are, at best, of tangential relevance to the legal rights of the Applicant as a shareholder under the CBCA. In my view, however, the admissibility of these paragraphs should wait to be determined by the judge who hears the application on its merits. That judge will be in the best position to assess the relevance of these allegations in the context of the application as a whole, and whether the evidence is relevant to whatever remedy may be ordered if the Applicant is successful. Neither efficiency nor fairness requires the admissibility of these paragraphs be determined before the hearing of the application.

Conclusion

[27] This Court orders that paragraphs 2, 4, 5, 6, 7 and 8 of the Affidavit of Michael Stassen dated February 26, 2019 be struck.

[28] The balance of the Applicant’s motion is adjourned to be dealt with by the judge hearing the application on November 1, 2019.

[29] If the parties are unable to agree on costs, the Applicant may serve and file costs submissions of not more than two pages plus costs outline and any offers to settle within 20 days of the release of this decision, and the Respondents may file responding submissions on the same terms within 15 days thereafter.

Justice R.E. Charney Released: July 25, 2019