1479021 Ontario Inc. v. Corporation of the Town of Hawksbury et al.

[Indexed as: 1479021 Ontario Inc. v. Hawksbury (Town)]

Ontario Reports

Ontario Superior Court of Justice

MacLeod J.

August 4, 2020

151 O.R. (3d) 678 | 2020 ONSC 4570

Case Summary

Civil procedure — Costs — Plaintiff corporation identifying insurance adjuster as witness for purpose of discovery — Days before scheduled discoveries of four witnesses, defendant insisting on examining plaintiff's sole director — Plaintiff rejecting alternate proposals and cancelling discoveries — Plaintiff and defendants bringing motions and cross-motions for costs of cancelled discoveries — Motions and cross-motions dismissed — Defendants should have anticipated situation to avoid last-minute switch but plaintiff acted unreasonably in cancelling discoveries.

Civil procedure — Discovery — Examination for discovery — Plaintiff corporation identifying insurance adjuster as witness for purpose of discovery — Days before scheduled discoveries of four witnesses, defendant insisting on examining plaintiff's sole director — Plaintiff rejecting alternate proposals and cancelling discoveries — Plaintiff and defendants bringing motions and cross-motions for costs of cancelled discoveries — Motions and cross-motions dismissed — Defendants should have anticipated situation to avoid last-minute switch but plaintiff acted unreasonably in cancelling discoveries.

The plaintiff purchased an apartment building and incurred extensive expenses in relation to problems with building and occupancy permits. Its insurer paid for the remedial work and repair costs and brought a subrogated [page679] action in negligence against the builder, the architect and the municipality. The parties were operating under a discovery plan first proposed by the plaintiff in June 2019, in which the plaintiff identified an independent insurance adjuster as its representative for the purposes of discovery. The discoveries were scheduled to take place over four days starting February 6, 2020, with the plaintiff's witness to be examined on February 11. Arrangements were confirmed on January 21, but on February 3 counsel for the builder advised that the adjuster would not be suitable because he would not have first-hand knowledge of liability issues. The defendants withdrew their notices of examination and served replacement notices with the name of the new witness proposed by the builder, being the plaintiff's sole director and owner. Counsel for the plaintiff refused a proposal to delay the discovery of the new witness and have the remaining discoveries proceed as scheduled. A proposal to proceed with the discoveries as originally planned but with a right to seek discovery of the new witness at a later date was also rejected. The discoveries were cancelled. The plaintiff brought a motion and the defendants brought cross motions for costs.

Held, the motion and cross-motions should be dismissed.

It was unfortunate that the defendants did not make their demand to change the witness until just before the scheduled discovery. However, they were within their rights to insist upon an officer or director of the plaintiff, and at least one of the defendants' proposals should have been accepted. It was wrong for the defendants to make a last-minute switch, but it was also wrong for the plaintiff to overreact. The unilateral decision to cancel the discoveries was unreasonable.

Cases referred to

Drywall Acoustic Lathing & Insulation Local 675 Pension Fund (Trustees of ) v. SNC-Lavalin Group Inc., [2014] O.J. No. 435, 2014 ONSC 660 (S.C.J.)

Statutes referred to

Law Society Act, R.S.O. 1990, c. L.8 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.03(1), 3, 3.04(4), 29.1, 29.1.03(4), 29.2, 31, 31.03(2), (b), 31.04(3), 50.13

MOTIONS AND CROSS-MOTIONS for costs arising from cancellation of discoveries.

Brendan Wong, for plaintiff.

John Lloyd, for defendant municipality.

Tracy Lyle, for defendant builder.

Charles Simco, for defendant architects.

C. MACLEOD J.: —

[1] The parties disagree as to who is at fault for the cancellation of discoveries that were scheduled to take place in February. Now the plaintiff seeks costs against the defendants and [page680] the defendants have brought cross motions seeking costs against the plaintiff. The parties have agreed to a timetable for completing the discoveries, but they have a disagreement over the word "peremptory".

[2] It is unfortunate that the response to a hiccup in the discovery plan was to call off the discoveries and to bring this motion. Not only has the action now been stalled by at least a year but the parties collectively spent something in the order of $50,000. At the very least that is disproportionate to the issue in question. They must now complete the discoveries while encumbered by COVID-19 restrictions.

Background

[3] This is a subrogated action arising under a policy of title insurance over an apartment building in Hawkesbury purchased by the plaintiff in 2011. Apparently, there were issues with building and occupancy permits which resulted in the plaintiff having to apply for new permits, meet new standards and engage in remedial work. In addition, the plaintiff claims there were significant construction deficiencies. The insurer has funded the remedial work and repair costs and brings this action in the plaintiff's name. According to the statement of claim, the damages are $800,000.

[4] David Friesen is an independent insurance adjuster who was retained by Stewart Title Guaranty Company to investigate and assess the plaintiff's insurance claim and the necessity of the remedial work. He apparently has a detailed knowledge of what costs were incurred and why they were necessary. He will be a key witness in relation to the quantification of damages.

[5] Alain Lanthier is the sole director and owner of the plaintiff corporation. Presumably he has detailed knowledge concerning the acquisition of the property and the events leading up to a claim under the policy of title insurance.

[6] This action was started on April 18, 2018. It is a claim in negligence against the builder, architect and municipality. All parties have defended. There is also a third-party action, but the third party has not defended the main action and did not appear on the motion.

[7] It is common ground that the parties were operating under a discovery plan first proposed by the plaintiff in June of 2019. In that plan and in all subsequent iterations of the plan, the plaintiff proposed to produce David Friesen as the plaintiff's representative for the purposes of discovery. The discoveries were scheduled on that basis and notices of examination [page681] were served. All of the defendants served notices naming Mr. Friesen.

[8] The discoveries were scheduled to take place on February 6, 7, 10 and 11, 2020. One day was allocated to the examination of each party and, though the order of discovery was changed at least once, it was ultimately agreed that Mr. Friesen would be examined on February 11. The arrangements were confirmed on January 21, 2020. The discoveries were to take place in Ottawa at ASAP Reporting. Notices of examination were subsequently served.

[9] On February 3, 2020, counsel for the builder advised for the first time that she did not consider Mr. Friesen to be a suitable witness because he would not have first-hand knowledge of liability issues. She indicated that she had spoken with the other defendants who were in agreement and the defendants proposed instead to examine Mr. Lanthier. The defendants then withdrew their notices of examination naming Mr. Friesen and served replacement notices naming Mr. Lanthier.

[10] This position apparently came as a shock to counsel for the plaintiff who had spent considerable time preparing for discovery with Mr. Friesen. This preparation included working with the substantial number of productions. The plaintiff's counsel did not think this last-minute change was reasonable and did not think he could prepare for a discovery of Mr. Lanthier on such short notice.

[11] Counsel for the defendants proposed that the discovery of the three defendants should proceed as scheduled, but the discovery of Mr. Lanthier take place at a later date. Counsel for the plaintiff refused to proceed in this manner because it would necessitate another trip to Ottawa and also, as he now argues, because it might provide an unfair advantage to the defendants if they had transcripts of his examination of their clients before they examined the representative of the plaintiff.

[12] It should be noted that at least one of the defendants proposed to proceed with the discoveries as originally planned, but to reserve the right to seek discovery of Mr. Lanthier at a later date either by agreement or by motion. This was also rejected.

[13] In any event the discoveries were cancelled. The plaintiff demanded costs be thrown away including all of the time preparing Mr. Friesen for the discovery which is said to be wasted since the defendants will now be examining Mr. Lanthier. The defendants brought cross motions in response asking for their costs -- though on a more modest scale. [page682]

Analysis

[14] This is an example of the old adage that "two wrongs do not make a right". It is unfortunate that the defendants did not make the demand to examine Mr. Lanthier until just before the scheduled discovery. This issue should have been anticipated at the time of the original discovery plan and well in advance of the scheduled date. Nevertheless, the defendants were within their rights to insist upon an officer or director of the plaintiff and at least one of the defendants' proposals should have been accepted.

[15] To review the discovery regime briefly, in Ontario, civil procedure parties are now expected to discuss and adopt a discovery plan dealing with documentary production, examination for discovery and other examinations such as medical exams or inspection of property. (See rule 29.1.)[^1] This rule has not worked exactly as envisioned and frequently counsel do not give it adequate attention.

[16] The point of the planning exercise is to avoid delay, complexity and wasted costs due to disputes about the scope of discovery and to fashion a discovery regime that is proportionate to the issues in dispute. (See rule 29.2.) Although a discovery plan is to be in writing and will include a timetable enforceable under Rule 3, the plan is not supposed to be static or immutable. There is a duty to engage in ongoing discussion and to update the plan as necessary. Rule 29.1.03(4) incorporates the Sedona Canada Principles,[^2] and although those principles focus on electronic discovery, the Principles include extensive guidance on proportionality, collaboration and civility. Similarly, the Principles of Civility and Professionalism for Advocates and Rules of Professional Conduct[^3] all speak to the need for lawyers to work collaboratively at a procedural level. If there are legitimate discovery disputes that cannot be resolved, then a discovery plan may be imposed by the court either on motion or at a case conference pursuant to rule 50.13. (See the extensive review of discovery planning in Drywall Acoustic Lathing & Insulation Local 675 Pension Fund (Trustees of) v. SNC-Lavalin Group Inc., [2014] O.J. No. 435, 2014 ONSC 660 (S.C.J.).) [page683]

[17] Rule 31 deals with oral examination for discovery. Pursuant to rule 31.03(2) where a corporation may be examined for discovery, the examining party may examine "any officer, director or employee on behalf of the corporation" but the rule also provides for the corporation to seek relief from the court if the corporation objects to the person named in the notice of examination. Rule 31.03(2)(b) provides that more than one representative of the corporation may be examined on consent or with leave of the court.

[18] In preparing a discovery plan or simply in arranging discoveries, it is usual for the parties to discuss who should be produced on behalf of a corporation. In this case, the plaintiff had always proposed to produce Mr. Friesen although he is not an officer, director or employee of the named plaintiff. The defendants had explicitly or implicitly accepted this proposal, but the plaintiff concedes the defendants are entitled to examine Mr. Lanthier if they prefer to do so. The objection is to their decision to do so at the eleventh hour.

[19] I agree this is unfortunate and I agree it would have been preferable for the defendants to turn their attention to this issue far in advance of the scheduled discovery. In choosing to examine Mr. Lanthier, of course, the defendants run the risk that Mr. Lanthier will not have detailed knowledge of the damages and will have to advise himself by consulting with Mr. Friesen. There is nothing in the record to suggest that the proposal to produce Mr. Friesen was not made in good faith or was only an attempt to screen Mr. Lanthier from discovery. Nevertheless, Mr. Friesen is not an officer, director or employee of the plaintiff and the plaintiff cannot impose him upon the defendants as a proper person to be discovered unless the defendants agree to conduct the discovery in that manner and the plaintiff agrees to be bound by his answers. There is nothing in the record to suggest that the parties entered into that kind of detailed discussion in creating the discovery plan.

[20] It would have been courteous for the defendants to have realized sooner that they required to examine Mr. Lanthier and to have anticipated that deciding to change the witness just prior to the discovery might create some inconvenience, expense and time pressures for opposing counsel. It was wrong to make a last-minute switch, but it was also wrong for the plaintiff to overreact. The defendants are correct that they are entitled to an officer, director or employee and not the insurance adjuster. In addition, once they were advised of the time that had been spent in discovery [page684] preparation and the plaintiff's proposal to cancel the discoveries, at least one of the defendants proposed to proceed with Mr. Friesen on the understanding that they could subsequently seek discovery of Mr. Lanthier if necessary. Rule 31.03(2)(b) would have given them the right to seek such relief. That was an eminently reasonable proposal under the circumstances.

[21] I consider the unilateral decision to cancel discoveries to be unreasonable. The plaintiff has no automatic right to decide the order of examinations. Rule 31.04(3) provides that the person who first serves notice may examine first unless the court orders otherwise, but there is no rule that provides that any party may insist they be examined first or at the same time as other parties. Certainly, if it is possible to do so, agreement on the order of examinations, location of examinations and date of examinations is desirable. All counsel should be seeking a discovery schedule that is convenient, cost effective and reasonable for everyone concerned.

[22] Mr. Friesen could have been produced, albeit at the risk of having to produce Mr. Lanthier at a later date, but that would have been a risk in any event. It is always open to the other party to seek an additional discovery and I agree with counsel for the defendant architect that divided discovery on liability and damages is not uncommon in subrogated insurance disputes. Alternatively, the plaintiff could have completed its own discovery of the defendants and produced Mr. Lanthier at a later date.

[23] Under the circumstances, I would not order compensation to the plaintiff for the costs of preparing for discoveries. In any event I consider the requested costs to be unreasonable. I do not agree that all of the time spent with Mr. Friesen reviewing the damage documentation would be wasted. These documents will still be germane to the discoveries and will certainly be germane if there is a trial.

[24] I would not grant the cross motions for costs thrown away on the adjourned discoveries. Those motions are clearly retaliatory, but in any event, the discoveries are simply adjourned. The problem was triggered by the last-minute decision to ask for Mr. Lanthier and to withdraw the notices of examination directed to Mr. Friesen. The defendants should have given more attention to this issue when they were presented with a discovery plan. Had they turned their mind to the question, they would have realized that Mr. Friesen was the insurance adjuster and not the principal of the plaintiff. [page685]

[25] It follows that both the motion and cross motions are dismissed and there will be no costs of either motion. The parties are to proceed in accordance with the revised timetable.

[26] There is no reason to quibble about whether or not the timetable should be made peremptory. Rule 1.03(1) defines a "timetable" to include a schedule ordered by the court or agreed to by the parties in writing. Rule 3.04(4) sets out possible consequences for breaching a timetable. Timetables may be amended by agreement in writing but are otherwise enforceable.

Conclusion

[27] In conclusion, the motion and cross motions are dismissed. There will be no costs.

Motions and cross-motions dismissed.

Notes

[^1]: Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[^2]: The Sedona Canada Principles, Sedona Conference Working Group 7, 2008.

[^3]: Law Society Act, R.S.O. 1990, c. L.8.

End of Document