Court File and Parties
COURT FILE NO.: CV-17-571659 DATE: 20200423 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
TALLMAN TRUCK CENTRE LIMITED Plaintiff – and – K.S.P. HOLDINGS INC. and SECURE CAPITAL ADVISORS INC. Defendants
Counsel: Simon Bieber & Jordan Katz, for the Plaintiff (Respondent) Sarah W. Corman & Jeffrey E. Feiner, for the Defendant (Appellant), K.S.P. Holdings Inc.
HEARD: September 9, 2019
BEFORE: M. D. FAIETA j.
Reasons for Decision
Introduction
[1] The defendant K.S.P. Holdings Inc. (“KSP”) has a pending motion to stay this action on the basis that the plaintiff, Tallman Truck Centre Limited (“Tallman”) failed to immediately disclose the existence of a settlement agreement between Tallman and the co-defendant Secure Capital Advisors Inc. (“Secure”) that was concluded on June 7, 2018 as it was not delivered until June 27, 2018.
[2] On June 7, 2018 Secure delivered the affidavit of a representative, sworn May 22, 2018, for use on Tallman’s pending motion for summary judgment, that took positions which were inconsistent with Secure’s Statement of Defence. On June 8, 2018, Tallman delivered a Notice of Discontinuance of its action against Secure “without costs and without prejudice” to KSP. Tallman did not deliver a copy of the settlement agreement until almost one week after KSP asked whether it had entered a settlement agreement with Secure given the receipt of the above documents.
[3] In responding to the stay motion, Tallman seeks to examine counsel for KSP regarding when he learned of the settlement and the affidavit evidence of Linda Rothstein regarding when a “reasonable commercial litigator” would have concluded that Tallman and Secure had entered a settlement. Tallman submits that this evidence will demonstrate that KSP knew or ought to have known, a result of the documents delivered on June 7 and June 8, 2018, that Tallman had reached a settlement with Secure.
[4] KSP’s motion to strike the summons to examine its counsel, Jeffrey Feiner, and its motion to strike the affidavit evidence of Linda Rothstein was dismissed by Master Abrams on February 28, 2019.
[5] For reasons described below, I have granted the appeal.
Background
[6] Tallman operates a number of truck dealerships and service centres across Ontario. KSP owned a property, municipally known as 7440-7450 Torbram Road, Mississauga (the “Property”). A portion of the Property was leased to a third party who in turn sub-leased it to a predecessor of Tallman (the “Tallman Property”). KSP operated a business under the name Coyote Terminals on the remainder of the Property (the “Coyote Property”). The main lease in respect of the Tallman Property contained a right of first refusal (“ROFR”) over all of the Property.
[7] Tallman alleges that KSP entered into an agreement in 2014 to sell the Property to Secure for $28.6 million and that KSP would lease back the Coyote lands for a five-year term. KSP denies that the sale agreement provided for a lease-back. Tallman alleges that KSP and Secure conspired to conceal the alleged lease-back provision. The sale agreement was not completed. Tallman alleges that, in August, 2014, KSP entered into a Letter of Intent to sell the Property to Secure for $28.6 million. To assist Secure with the purchase, the LOI provided that KSP would take back a $3 million second mortgage and would lease back the Coyote Property. The Agreement of Purchase and Sale, entered in October, 2014, between KSP and Secure did not contain a lease back provision. Although it provided for a vendor take back mortgage, its terms were less favourable to Secure than the terms found in the LOI.
[8] KSP alleges that it was notified by Tallman in December 2014 that it wished to purchase the Property on the same terms as the APS with Secure. KSP alleges that such notice terminated its APS with Secure. Nevertheless, KSP alleges that Tallman refused to complete the purchase as it only wished to purchase the Tallman Property.
[9] In February, 2015, KSP sold the Tallman Property to Tallman for $11.6 million along with a right of first refusal over the Coyote Property.
[10] After this transaction, Secure commenced a claim against KSP and Tallman claiming breach of contract and specific performance. KSP alleges that this action was resolved in 2015 at considerable expense to KSP.
[11] From the materials filed by Secure in that action, Tallman learned of the LOI. Tallman alleges that it was not until 2017 that it discovered the alleged concealments. Tallman states that the alleged concealed differences between the LOI and the APS made it more difficult for Tallman to exercise the ROFR. If such concealments were intentional, Tallman claims that the actions of Secure and KSP conspired to inflict economic harm by defeating the benefit of the ROFR. Tallman seeks specific performance of the purchase of the Coyote Property on terms substantially similar to those contained in the LOI.
[12] KSP states that the LOI, on its face, was not intended to be legally binding and contemplated a 21-day period of negotiation. KSP states that during this period of negotiation, it refused to lease back the Coyote Property. Further, while it agreed to provide a vendor take back mortgage of $3 million, KSP required that this second mortgage would only be subject to a mortgage of up to $9 million over the Property rather than only the Coyote Property. KSP states that the APS, not the LOI, contained the final and binding terms between KSP and Secure that formed the Third Party Offer that it was required to disclose under the ROFR.
[13] In its Statement of Defence, Secure denies that it had any obligation to provide the LOI to Tallman or that it had any influence or control over KSP in this regard. It specifically denied that there was any concealment of the terms of the LOI as well as any fraud or conspiracy. It also took the position that Tallman’s “… purported exercise of the Navistar ROFR was invalid”.
[14] On February 12, 2018, Tallman brought a motion for summary judgment seeking specific performance against KSP and costs of the motion and action against Secure. This motion was returnable in December 2018.
[15] Mr. Kestenberg, counsel for Tallman, states that in the ensuing two months he discussed the possibility of a settlement with Mr. Resnick, counsel for Secure. The settlement contemplated the delivery of an affidavit from one of Secure’s principals, David Ogden, which could be relied upon by Tallman at the motion for summary judgment in exchange for discontinuing the action against Secure. On April 12, 2018, Mr. Kestenberg provided a draft affidavit for Secure’s approval. On May 14, 2018 counsel returned a draft affidavit with proposed changes. On May 15, 2018, Mr. Kestenberg requested further changes to the draft affidavit. On May 16, 2018, counsel for Tallman was advised by counsel for Secure that the affidavit was satisfactory and that it would be executed.
[16] Secure sought a release as well as a discontinuance of the action. Tallman also sought an agreement that Mr. Ogden would cooperate throughout the litigation. On May 24, 2018, counsel for Tallman sent counsel for Secure an email stating that “it sounds like we are on the same page” and that Mr. Kestenberg would work towards clarifying the outstanding issues once he returned to the office on June 4, 2018. On June 4, 2018, Mr. Kestenberg sent an email outlining a draft settlement. On June 5, 2018, counsel for Secure requested certain changes to the settlement agreement and the terms of the Release.
[17] The litigation agreement is in the form of a letter dated June 6, 2018 sent by counsel for Tallman to counsel for Secure. It states:
This letter outlines the agreement between our client, Tallman Truck Centers Limited (“Tallman”) and your client, Secure Capital Advisor Inc. (“Secure”), regarding the court action bearing Court File No. CV-17-571659 (the “Litigation”), also involving KSP Holdings Inc. (“KSP”).
Tallman shall immediately discontinue the Litigation against Secure on a with prejudice and without costs basis and execute a Full and Final Release in favour of Secure in the form attached (the “Release”) that will be held in escrow by our firm and will be provided upon completion of the Litigation with KSP, provided that Secure fulfils its continuing obligation to provide support and cooperation to Tallman throughout the Litigation.
Secure’s continuing obligation to provide support and cooperation to Tallman throughout the Litigation includes the following:
Secure will immediately, but before the discontinuance, referred to above, provide Tallman with the original Affidavit sworn by David Ogden (the “Ogden Affidavit”) and in response to the outstanding summary judgment motion brought by Tallman (the “Summary Judgment Motion”);
David Ogden will attend at cross-examinations on the Ogden Affidavit, if requested, by any party to the Litigation;
David Ogden will provide evidence on cross-examination consistent with the evidence contained in the Ogden Affidavit and otherwise to the best of his recollection;
Secure will provide answers to undertakings (any questions taken under advisement that are appropriate to be answered) arising from the cross examination of David Ogden; and
Secure will not file any affidavit evidence on the Summary Judgment Motion other than the Ogden Affidavit.
In the event that the Summary Judgment Motion does not result in the completion of the Litigation, Secure’s continuing obligation to provide support and cooperation to Tallman throughout the Litigation includes the following:
Secure will assist with providing answers to undertakings (and questions taken under advisement that are appropriate to be answered) arising from the examinations for discovery of Tallman, if possible; and
If Secure’s evidence is required at trial, it will be provided by David Ogden in a manner consistent with the Ogden Affidavit and otherwise to the best of his recollection
In the event that Secure complies with its continuing obligations set out above, once the Litigation as against KSP comes to an end, you have my undertaking and that of my firm that the Release will be provided by our firm to you.
Please confirm the foregoing is acceptable.
[18] On June 7, 2018, according to Tallman’s counsel, Secure communicated its acceptance of the settlement agreement. As well, on that day, Secure served its Responding Motion Record and the affidavit of David Ogden, sworn May 22, 2018. Mr. Ogden is Secure’s Managing Director. In his affidavit, Mr. Ogden took positions that were inconsistent with Secure’s Statement of Defence. In particular, he maintained that the leaseback formed part of KSP’s agreement to sell the Property to Secure.
[19] On June 8, 2018, Tallman served a Notice of Discontinuance of its action against Secure “without costs and without prejudice”.
[20] On June 13, 2018, Tallman served a second Notice of Discontinuance removing the reference to the discontinuance being without costs and without prejudice.
[21] On June 18, 2018, KSP served its Responding Motion Record on Tallman and Secure. Counsel for KSP states that her firm was unaware of the existence of a litigation agreement between Tallman and Secure at that time.
[22] On June 19, 2018, counsel for Tallman asked KSP for its consent to file the Notice of Discontinuance.
[23] On June 21, 2018, counsel for KSP advised that he did not have instructions to consent to a discontinuance. His email further stated:
… With respect to Secure’s Responding Motion Record, do you intend this to be filed for the upcoming motion? I had understood from out attendance before Justice Glustein in April 2018 that you were not bringing the motion as against Secure and therefore responding material from Secure was not required. In light of Secure’s delivery of a Responding Motion Record and your seemingly related request that we consent to a discontinuance of the action as against Secure, please provide a copy of any settlement agreement reached between your client and Secure in respect of this litigation. To the extent that such agreement is unwritten, please provide the terms of the agreement. Finally, please produce any correspondence as between Tallman and Secure and between its counsel, including any summaries of evidence, drafts of affidavits, and any other relevant documents that have not yet been produced. … [Emphasis added]
[24] On June 27, 2018, Mr. Kestenberg delivered the settlement agreement to Mr. Feiner. His email states:
While I am not persuaded that you are entitled to any documents between Secure and Tallman, and without waiving any of our rights in that respect, here is a copy of my letter to Secure outlining the terms of our agreement. Secure confirmed the terms of this letter were acceptable. We will not be producing any of the other documents that you have requested in this regard.
[25] On June 29, 2018, KSP advised Tallman that it would bring a motion for an order staying or dismissing the action as against KSP on the grounds that it is an abuse of process of the Court due to Tallman’s failure to immediately disclose a litigation agreement with the co-defendant, Secure. Mr. Feiner, for KSP, stated:
… The main purpose of this email is to express my serious concern about the late disclosure of the settlement agreement between your client and Secure. As you know, the Court has very clearly and directly outlined the obligations regarding partial settlement agreements of this nature and that they must be disclosed to the Court and the non-settling parties immediately, as soon as they are concluded. The Court has also warned counsel that a failure to comply with this directive constitutes an abuse of process and will result in a stay of the non-disclosing party’s claim.
We delivered our client’s responding materials on June 18 unaware that your client had already entered into a settlement agreement with Secure. The case management timetable fixed by Justice Glustein contemplated that materials in support of your client’s motion had already been filed. …. However, Secure’s “Responding” Record, delivered on June 7, and containing Mr. Ogden’s affidavit sworn May 22, 2018 is not a responding record at all. Mr. Ogden’s Affidavit ought to have formed part of your client’s motion materials. At a minimum, the settlement agreement ought to have been disclosed at that time.
You had numerous opportunities to disclose the existence of the settlement agreement between when it was concluded on June 6 and our extended deadline of June 18. Moreover, you attempted to file a Notice of Discontinuance with respect to the claim against Secure without disclosing the settlement agreement to the Court. When the Court rejected the Notice of Discontinuance, your office requested our consent to the Discontinuance without disclosing the existence of the settlement agreement.
The only reason we were advised that there was a settlement agreement between Secure and Tallman was because I made the inquiry to you, copying Secure’s counsel, on June 21. Despite this clear request, you did not disclose the existence of the settlement agreement until June 27, more than three weeks after the settlement agreement was made.
My client has been irreparably prejudiced on this summary judgment motion by this failure to disclose the settlement agreement prior to the delivery of our responding motion materials. The Court cannot be clearer about the serious consequences of this non-disclosure.
Accordingly, I have no choice but to bring a motion to stay your client’s claim for abuse process and will be seeking the earliest possible return date. … [Emphasis added]
[26] On July 4, 2018, counsel for Tallman advised that he had reported this matter to LawPRO.
[27] On July 19, 2018, KSP delivered its materials for the Stay Motion.
[28] In late July, 2018, additional counsel was retained to represent Tallman.
[29] On August 8, 2018, Tallman delivered a Responding Motion Record which included the affidavit of Marc Kestenberg. On August 14, 2018, KSP asked Tallman to produce documents referenced in the Kestenberg affidavit that had not been disclosed such as a draft affidavit for Mr. Ogden that Mr. Kestenberg had prepared prior to his June 6, 2018 email. Tallman refused to disclose these documents, however, Master Jolley ordered their production on October 4, 2018: See Tallman Truck Centre Limited v. KSP Holdings Inc, 2018 ONSC 5897. In finding that the documents were relevant, Master Jolley stated at paras. 11-14:
KSP argues that it is entitled to those documents to test whether in fact that settlement was reached on 6 June 2018 or was reached earlier. It argues that Secure and the plaintiff started to cooperate is the crux of its upcoming stay motion. As noted in Handley Estate v DTE Industries Limited, 2018 ONCA 324 at paragraph 29, the date when the parties ceased to “maintain adversity” is a relevant issue on a motion to stay.
Kestenberg references the various drafts of the Ogden Affidavit in support of the conclusion he asks the court to draw on the stay motion that “For the reasons set out above, I feel that I took the required steps to ensure that the change of the relationship between Tallman and Secure, from an adversarial relationship to one that was cooperative, was disclosed to KSP immediately upon the settlement being agreed to.”
It argues that as long as changes were being made to the Ogden Affidavit, there was no settlement. It disclosed the email chains demonstrating that changes were being made and that there was no settlement on the content of the Ogden Affidavit and the related settlement documents until 6 June 2018.
In my view, KSP does not have to accept that assertion of the settlement date at face value. It is entitled to test that statement by reviewing the changes negotiated to the Ogden Affidavit by the plaintiff and Secure and argue that the relationship between those parties changed at an earlier date. This may be particularly so where the Ogden Affidavit was sworn 22 May 2018 purportedly pursuant to a settlement with the plaintiff that was not reached until 6 June 2018. …
[30] On November 5, 2018, Tallman’s new counsel advised that it intended to cross-examine KSP’s lead counsel, Mr. Feiner, on the stay motion pursuant to Rule 39.03. He also advised that Tallman intended to deliver an expert report.
[31] On December 3, 2018, Tallman delivered its Supplementary Responding Record on the Stay Motion that contained the Affidavit of Linda Rothstein, sworn December 3, 2018 and the Affidavit of Daniel Resnick, counsel to Secure, sworn November 19, 2018.
[32] With the stay motion having been scheduled for December 10, 2018 for at least four months, Mr. Feiner was served with a Summons to Witness returnable on December 3, 2018 without canvassing his availability. On December 10, 2018, Justice Archibald ordered that KSP’s motion to quash the summons and to cross-examine counsel would be heard on January 29, 2019 and that the motion to stay for abuse of process would be heard on April 26, 2019.
Analysis
[33] The standard of review in respect of the appeal of a decision of a judge as set out in Housen v. Nikolaisen, 2002 SCC 33 also applies to the appeal of a decision of a Master: Zeitoun v. The Economical Insurance Group, 2009 ONCA 415, para. 1. An appeal is not a rehearing: Wellwood v. Ontario Provincial Police, 2010 ONCA 386, para. 28. The applicable standard of review depends on the nature of alleged error: (1) On a question of law, the standard of review is correctness; (2) A finding a fact, including a factual inference, is not to be reversed unless the Master made a “palpable and overriding error”; (3) On a question of mixed fact and law, which involves the application of a legal standard to a set of facts, the standard of correctness applies if it is clear that the Master made an extricable error in principle with respect to the characterization of the standard or its application: Housen, paras. 8, 10, 25-28; Rojas v. Porto, 2019 ONSC 6822, para. 3 (Div. Ct.).
Issue #1: Did the Master err in finding that the summons should not be quashed?
[34] Rule 39.03(1) provides that “… a person may be examined as a witness before the hearing of a pending motion or application for the purpose of having a transcript of his or her evidence available for use at the hearing. A person should only be compelled to attend an examination under Rule 39.03 if the party seeking to conduct the examination shows: (1) the examination would be conducted on issues relevant to the pending motion or application; (2) the proposed witness is in a position to offer relevant evidence: see Ontario Federation of Anglers & Hunters v. Ontario (Ministry of Natural Resources) (2002), 211 D.L.R. (4th) 741 (C.A.), at para. 30.
[35] The Master stated:
Tallman wishes to obtain evidence from Mr. Feiner because it believes that his “state of knowledge arising from the correspondence in both parties’ motion records is at issue on the [stay] motion”. It wishes to hear from him, and not from his associate, as to what he knew (or didn’t know) and thought (or didn’t think) in respect of the communications received in respect to Secure.
[36] The Master went on to state:
KSP says that the evidence sought from Mr. Feiner is neither relevant nor material to the issues to be determined on the stay motion given the obligation immediate disclosure of the existence of litigation agreements, affirmed by the Court of Appeal in Handley Estate v. DTE Industries Limited (2018 ONCA 324). KSP’s perspective is that what is relevant to this end, is the question of when counsel for the plaintiff provided Mr. Feiner with the settlement letter.
Tallman’s perspective on relevance is broader in scope. Given that the parties entering into a litigation agreement must “immediately disclose the fact” of the agreement or “the existence of” the agreement (Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, at para. 15; 2011 SCC 3, at para. 5) and the issue to be determined is whether the agreement “changed the landscape of the litigation”. [Footnote 1: To now rule that the scope of relevance is the narrow scope proposed by KSP is to usurp the role of the motion judge, says Tallman. I agree.]. Tallman says there are two live issues on which Mr. Feiner’s evidence is material and necessary: 1. Whether the Secure affidavit and notice of discontinuance, served on June 7 and 8/18, were sufficient to disclose the fact of a change in adversarial position and in the litigation landscape; and 2. Whether the landscape of the litigation had in fact changed upon service of the Secure affidavit and notice of discontinuance.
Tallman says that the answer to the two questions, here, is yes given that Mr. Feiner wrote to counsel on June 21/18, addressing the fact of service of the notice of discontinuance and the Secure affidavit, as follows: “[In] light of Secure’s delivery of a Responding Motion Record and your seemingly related request that we consent to a discontinuance of the action as against Secure, please provide a copy of any settlement agreement reached between your client and Secure in respect of this litigation. To the extent that the agreement is unwritten, pleased provide the terms of the agreement”. Whether Mr. Feiner knew that there was a settlement upon being served with the Secure affidavit and whether Mr. Feiner understood there to have been a change in the litigation landscape when he wrote his June 21/18 letter, Tallman says, are relevant and material issues for the stay motion and better learned from Mr. Feiner directly. [Footnote 2: It is hard to reconcile the notion, it says, that evidence from Mr. Feiner’s associate can be relevant but not evidence from Mr. Feiner himself.]
Ms. Brown had already deposed: “ We [emphasis added] were unaware of the existence of a settlement agreement between Tallman and Secure at the time that the Responding Motion Record was served”. Only Mr. Feiner can reliably give evidence as to what he knew and didn’t know (v. what he was told or wasn’t told). And if Ms. Brown purports to speak on Mr. Feiner’s behalf, why ought Mr. Feiner not speak on his own behalf? It is noteworthy that all correspondence on behalf of KSP about the summary judgment motion, the stay motion and this motion were sent by or to Mr. Feiner. Mr. Feiner’s evidence is also highly material to KSP’s allegation that it suffered actual prejudice as a result of when the settlement letter as between Secure and Tallman was disclosed, given that Mr. Feiner had served KSP’s materials on the summary judgment motion on June 18/18. … [Emphasis added]
[37] In Handley Estate v. DTE Industries Limited, 2018 ONCA 324, the Ontario Court of Appeal stated:
A litigation agreement that has the effect of changing the adversarial position of the parties set out in their pleadings into a co-operative one must be immediately disclosed upon its completion to the court and other parties: paras. 39, 45;
A case-specific proportionality analysis should not be conducted in order to determine whether an action should be stayed as an abuse of process because of the late disclosure of a litigation agreement. Furthermore, the absence of prejudice does not excuse the late disclosure of such agreement. Judicial time should not be spent on inquiring into what, if any, prejudice was caused by a breach of the party’s clear obligation: paras. 42, 45, 46.
The only remedy to redress the abuse of process in such cases is to stay the claim asserted by the defaulting, non-disclosing party: paras. 45, 46.
[38] The information sought by Tallman from Mr. Feiner is irrelevant to the analysis of when the litigation agreement should have been disclosed and when the terms of the litigation agreement were, in fact, disclosed given the principles in Handley Estate. When counsel began to speculate, or came to believe, that a litigation agreement had been entered into by the other parties is not a relevant consideration. Thus, whether the Secure affidavit and notice of discontinuance were sufficient to disclose the fact of a change in adversarial position and in the litigation landscape to Mr. Feiner is irrelevant. Further, whether the landscape of the litigation had in fact changed upon delivery of the Secure affidavit and the notice of discontinuance does not, with respect, turn on Mr. Feiner’s evidence and assessment of those documents and the pleadings, but rather by this Court’s view of their impact. Such assessment is objective, not subjective. Finally, a non-settling party need not establish prejudice in order to establish that the action should be stayed and thus such evidence is also irrelevant.
[39] Finally, the Master found, at para. 13:
And where, as here, a stay motion has been brought Tallman “should be afforded a full opportunity to respond to this very serious form of relief”
[40] In my view, the aforementioned general principle does not afford the responding party an opportunity to ask questions to elicit clearly irrelevant evidence particularly in these circumstances where decades of case law, as summarized and adopted in Handley Estate, clearly outlines what is relevant (and irrelevant) for purposes of determining whether an action should be stayed where settling parties have failed to disclose a litigation agreement that changes the position of the settling parties from adversarial to co-operative.
[41] A further constraint applies given that the summonsed witness is opposing counsel. The Master referenced Opara v. Opara, 2014 ONSC 5579, at paras. 11-12, Justice Pattillo stated:
The practice of summonsing counsel for the opposing party to testify against their client is the exception and should be avoided wherever possible. Such a course should only be resorted to where the administration of justice demands it: … At a minimum, such a step requires a high degree of materiality and necessity: …
[42] Necessity turns on the consideration of a variety of factors including the importance of the issue for which the testimony is sought: R. v. 1504413 Ontario Ltd., 2018 ONCA 253, at para. 17.
[43] Given my finding that the questions sought to be asked of Mr. Feiner on his examination are irrelevant under the principles described in Handley Estate, I also find that the Master erred in finding that such evidence has a high degree of materiality and necessity.
[44] Given the errors outlined above, I allow KSP’s appeal in respect of the summons and quash the summons served on Mr. Feiner.
Issue #2: Did the Master err in refusing to strike the affidavit under Rule 25.11?
[45] Tallman asked Ms. Rothstein to answer the following question:
What would a commercial litigator have concluded in all of the circumstances about the relationship between the plaintiff, Tallman Truck Centre Limited (“Tallman”) and the defendant, Secure Capital Advisors (“Secure”), once that lawyer had received the affidavit of Secure’s principal delivered on Tallman’s summary judgment motion, and Tallman’s notice of discontinuance against Secure, which purported to be with prejudice and costs?
[46] The Rothstein Affidavit, at paras. 34, 36 & 40, includes the following opinions:
In my opinion, in the circumstances of this case, a reasonable commercial litigator acting for KSP would have concluded no later than June 8, 2018, that the adversarial relationship of Tallman and Secure as reflected in the pleadings had significantly changed into a cooperative relationship. Once a reasonable commercial litigator had received the Ogden Affidavit (on June 7) followed by the notice of discontinuance (on June 8), which purported to be with prejudice and without costs, that lawyer would assume that the relationship between Tallman and Secure had changed from an adversarial to cooperative. …
In my opinion, a reasonable commercial litigator acting for KSP would have started to become concerned about Secure’s role in the litigation as early as May 2018 when counsel for Secure would neither permit KSP to meet with Mr. Ogden nor confirm that Mr. Ogden would provide oral evidence that was consistent with Secure’s statement of defence. …
In my opinion, a reasonable commercial litigator would conclude, in all these circumstances that Tallman and Secure reached a settlement agreement and that their relationship had changed from the relationship reflected in the pleadings. Nothing more was required to reach that conclusion.
[47] KSP moved for an Order pursuant to Rule 25.11 to strike the Rothstein Affidavit.
[48] Rule 25.11 of the Rules of Civil Procedure states:
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;
(c) is an abuse of process of the court.
[49] KSP submitted that the Rothstein Affidavit provided opinions that were: (1) not relevant to the issues to be determined on the stay motion and would not assist the Court in determining whether Tallman complied with its obligation to immediately disclose the litigation agreement to KSP and the Court; (2) inadmissible and an abuse of process in that attempts to usurp the function of the court to determine the issues to be adjudicated on the motion.
[50] In addition to other requirements, expert evidence is only admissible when it is logically relevant and necessary to assist the trier of fact: White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23, para. 23.
[51] The Master refused to strike the Rothstein Affidavit for two reasons. First, it was not plain and obvious that the affidavit is scandalous, frivolous, vexatious or an abuse of process. Second, it would usurp the role of the motions judge by pre-determining the relevance and necessity of the evidence upon which it could advance the argument that sufficient disclosure of a change in the litigation landscape can be determined both subjectively and objectively.
[52] In 1196303 Ontario Inc. v. Glen Grove Suites Inc., 2012 ONSC 758, at para. 12, Justice D.M. Brown, as he then was, stated at para. 12:
As a general rule the proper time and place to request a court to strike out, in whole or in part, an affidavit filed in support of a motion or application is on the return of the main motion or application.
[53] Given the clarity of the test for a stay outlined in Handley Estate there is no need to defer this matter to the judge hearing the stay motion. The opinions in the Rothstein Affidavit are clearly irrelevant to the issues to be determined on the stay motion. Further, even if the motions judge decides that the issues addressed in her affidavit are relevant, her evidence is unnecessary as the motions judge will not require her assistance to determine the matters she has opined upon, such as when a reasonable commercial litigator would have concluded that a settlement had been reached by the settling parties in these circumstances. Responding to clearly inadmissible affidavit evidence requires a party to needlessly waste time and resources. I find that the Master erred in failing to strike the Rothstein Affidavit pursuant to Rule 25.11.
Conclusions
[54] The appeal is granted.
[55] I encourage the parties to resolve the issue of costs failing which KSP may make written submissions within two weeks, Tallman within three weeks and a reply within four weeks. Each submission shall be a maximum of five pages.
Mr. Justice M. D. Faieta