SUPERIOR COURT OF JUSTICE - ONTARIO
RE: AURORA TECHNOLOGY DEVELOPMENT INC., Plaintiff
- and -
MENGFEI ZHANG also known as JOHN ZHANG, PEIZHI YANG also known as JAY YANG and KEYHI TECH INC., Defendants
BEFORE: Master Todd Robinson
COUNSEL: J.A. De Bousquet, for the plaintiff / moving party
A. Rousseau, for the defendants, Mengfei Zhang and Keyhi Tech Inc.
HEARD: July 31, 2019
REASONS FOR DECISION
1The plaintiff, Aurora Technology Development Inc. (“Aurora”), moves pursuant to Rule 30.06 of the Rules of Civil Procedure, RRO 1990, Reg 194 for a further and better affidavit of documents from the defendants, Mengfei Zhang and Keyhi Tech Inc. (“Keyhi”) (together, the “Zhang Defendants”). In particular, Aurora seeks the following additional documents:
(a) the complete client list of Keyhi that discloses identities of all of its clients since the date of incorporation on or about April 1, 2017;
(b) all contracts, agreements, and relevant correspondence between Keyhi and all of its clients and/or prospective clients since its incorporation;
(c) full accounting records documenting all transactions between Keyhi and its client since its incorporation; and
(d) all relevant correspondence between Keyhi including its key persons (including but not limited to Mengfei Zhang and Peizhi Yang) and Liyan Wang, Ryan Wu, Newtrend Hospitality Inc. (c.o.b. as Morals Village), Hey Noodles, Zishi Gu, Bon Meats, and all clients and/or potential clients of Keyhi that it had and/or has been in contact with since its incorporation.
2At the motion hearing, Aurora confirmed that its motion in respect of (a) above was withdrawn, but argument proceeded on (b)-(d).
3Before dealing with the substantive motion before me, I note that curiously excluded from the title of proceedings in all motion materials filed by both Aurora and the Zhang Defendants is the third defendant in this action. Peizhi Yang is a named defendant in the statement of claim. The statement of defence was delivered on behalf of all three defendants. I did not appreciate that Mr. Yang (whose affidavit was relied upon by Aurora on this motion and both sides apparently agree has material evidence and documents relevant to this action) was previously a party. Neither side explained the status of the action as against Mr. Yang. From my own review of the court file, it appears that Mr. Yang served a notice of intention to act in person dated December 15, 2018 (not filed until April 17, 2019) and that the action was subsequently discontinued as against him by Aurora. This information should have been included in the motion materials.
4It is unclear why Aurora and the Zhang Defendants have removed Mr. Yang from the title of proceedings. Neither the motion materials nor case history disclose any order amending the title of proceedings. A discontinuance does not change the title of proceedings. Counsel for the parties should ensure further documents filed with the court include the proper title of proceedings.
Analysis
Applicable Law
5Aurora has correctly set out the relevant law regarding its evidentiary onus on this motion. Aurora must prove that the subject documents exist on a balance of probabilities before an order is made that they be disclosed in a further and better affidavit of documents: Seelster v. HMTQ and OLG, 2016 ONSC 97 at para. 46, and Apotex Inc. v. Richter Gedeon Vegyeszeti Gyar RT, 2010 ONSC 4070 at para. 119. While evidence in support of the motion cannot be based on speculation or guesswork, the level of proof required must take into account that one party has access to the documents and the moving party does not: Apotex Inc., supra at para. 119.
6In determining this motion, I have also considered and applied the relevance test stated at Rule 30.03 and the principles of proportionality set out at Rule 29.2.03.
Contracts/Agreements
7I accept the position of the Zhang Defendants that the evidence supports they do not have continued possession, control or power of any of Keyhi’s contracts or agreements. That effectively renders arguments about whether or not they are relevant documents somewhat moot. Schedule C to Keyhi’s now-sworn affidavit of documents specifically lists “All Contracts with Other Clients”, and states, “Control lost February 4, 2018, on Peizhi Yang’s resignation; presently with Peizhi Yang.”
8However, that position of the Zhang Defendants was only relayed to Aurora for the first time in the sworn affidavit of documents, which was updated from the previously unsworn version, sworn concurrently with Mr. Zhang’s responding affidavit to this motion, and apparently served concurrently with Zhang Defendants’ responding materials. A determination on relevance may bear on costs, so I have considered the relevance of all contracts/agreements between Keyhi and its clients. I am satisfied that they would be relevant. Understanding the scope and terms of the services provided to Keyhi’s clients is reasonably necessary to assessing if these were legitimately corporate opportunities for Aurora that were appropriated as alleged: see paras. 17-22 of the statement of claim. Absent the clear evidence that they are not in the possession, control or power of the Zhang Defendants, I would have ordered that they be produced.
9If Aurora is unable to obtain the contracts/agreements from Mr. Yang (who Mr. Zhang states has actual possession of them), then Aurora will be able to examine the Zhang Defendants at discoveries on the circumstances under which they ceased to have possession, control or power in an effort to locate them.
Financial Records
10Paragraph 13 of Mr. Zhang’s affidavit states unequivocally, “Keyhi and I have provided all the financial records we have, which consist of included [sic] in our initial Affidavit of Documents”, with a list of the produced financial records, copies of which are also appended to Mr. Zhang’s affidavit as an exhibit. Aurora concedes that there is no evidence before the court supporting existence of any further financial records beyond what has already been listed in Keyhi’s affidavit of documents, except for “cheques” referenced in paragraph 12 of Mr. Zhang’s affidavit. That paragraph provides as follows:
Keyhi was not a large business. Keyhi has never used any accounting software. Keyhi also has never maintained ledgers or other accounting records. To calculate revenue for Keyhi’s tax submissions, Mr. Yang and I counted up the prices on signed contracts and provided the number to Keyhi’s accountant. To the best of my knowledge, no one made copies of the cheques we deposited.
11I am not satisfied, on a balance of probabilities, the evidence supports that the “cheques” remain in the possession, control or power of the Zhang Defendants. Many cheques are specifically listed in Schedule C to Keyhi’s affidavit of documents. Mr. Zhang’s statement above is unequivocal that the Zhang Defendants do not have further unproduced financial records. Aurora submits that inquiries of Keyhi’s accountant and bank should be made. I do not read the statement as suggesting that Keyhi’s accountant ever had the cheques. I also do not believe it is correct that Keyhi’s bank would have the cheques. Although not in evidence, counsel for the Zhang Defendants noted his understanding that a depositor’s bank does not itself keep deposited cheques. Aurora has tendered no evidence to support that either Keyhi’s or Mr. Zhang’s bank should have or likely has copies of negotiated cheques.
12While I am satisfied that “cheques” exist, Aurora has not met its onus of establishing that the cheques likely remain in the possession, control or power of the Zhang Defendants. I accordingly need not address whether or not the cheques themselves are relevant based on the pleadings. I note, though, that even if relevant and available, I would still have declined to order production. I am not satisfied on the evidence that such an order would be proportional. Mr. Zhang’s sworn evidence is that all available financial records have been produced, and a review of those records discloses that they are unredacted. Aurora’s counsel was unable to satisfy me that there is likely relevant information in the cheques themselves that is not available in the financial records already disclosed.
13Aurora is entitled to examine the Zhang Defendants on the nature of the cheques and make inquiries regarding the produced financial records. Discoveries may yield evidence supporting additional relevant and necessary financial records.
Communication Records
14Counsel for the Zhang Defendants confirmed during oral argument that an undertaking has now been given to Aurora to confirm if any communications with clients leading up to their engagement exist and are within the possession, control or power of the Zhang Defendants and, if so, to produce them. On that basis, I see no need to determine whether or not communications in this period are relevant or available, since, in my view, the undertaking by the Zhang Defendants concedes relevance. Master Muir’s rationale for ordering production of similar records in Xpera Risk Mitigation and Investigation LP v. King, 2019 ONSC 3449, at para. 6, supports that such written communications, if any, are relevant based on the pleadings in this case.
15Aurora submits that the undertaking is insufficient and that all communications both before and after entering agreements should be produced. The evidence before me does not support the existence of relevant, unproduced written communications with Keyhi’s clients remaining in the possession, control or power of the Zhang Defendants. The evidence of the Zhang Defendants is silent on whether or not such communication records exist and, if so, if they remain within their possession, control or power. Mr. Zhang’s affidavit only challenges that Mr. Yang’s affidavit does not refer to any specific documents. Aurora bears the evidentiary onus of demonstrating the existence of communication records on a balance of probabilities. While Aurora’s evidence, particularly the affidavit of Mr. Yang, does support that communications occurred, it does not support that such communications were clearly in any written form. Aurora has not met its evidentiary onus of satisfying me of the likely existence of the records sought.
16Moreover, I am not satisfied that all communications are relevant or that it would be proportional to make such a potentially broad order for production at this stage. Further evidence of what written communications were exchanged in respect of specific relevant issues is required before the order sought is reasonably granted. Aurora is entitled to explore the nature and extent of communications with Keyhi’s clients during discoveries. That may yield evidence regarding existence of relevant communications after contracts or agreements were negotiated and entered, and whether such communications remain available to the Zhang Defendants.
Disposition
17For the foregoing reasons, Aurora’s motion is dismissed without prejudice to bringing it again on further evidence following discoveries. There shall be compliance with the undertaking discussed at paragraph 14 above within the time agreed for doing so or, if no deadline has been agreed, within 30 days.
18The parties have exchanged and filed costs outlines. If the parties cannot agree on costs of the motion, then the Zhang Defendants shall deliver written costs submissions by August 30, 2019. Aurora shall deliver its responding submissions by September 13, 2019. There shall be no reply or oral costs submissions unless I direct otherwise. Costs submissions shall not exceed four pages, excluding costs outlines and any offers to settle or case law. They may be submitted directly to me by email.
MASTER TODD ROBINSON
DATE: August 16, 2019