Court File and Parties

COURT FILE NO.: 16-68404 DATE: 2020/10/07

COURT OF ONTARIO, SUPERIOR COURT OF JUSTICE

RE: Joseph Hickey, Plaintiff AND: Christie and Walther Communications Limited, Defendant

BEFORE: Mr. Justice Calum MacLeod

COUNSEL: Jock Climie and Erica Bennett, for the Defendant, moving party Janice B. Payne and Malini Vijaykumar, for the Plaintiff, responding party

HEARD: October 5, 2020

REASONS FOR DECISION

[1] This is a wrongful dismissal action in which the plaintiff seeks damages equivalent to one year of compensation or just under $300,000.00. The matter was scheduled for trial and the trial was scheduled to commence on October 5, 2020.

[2] The defendant brings this motion to adjourn the trial for further disclosure and for a further round of discoveries. The issue is mitigation or failure to mitigate and the defendant seeks information and evidence in relation to revenue earned by the plaintiff during the notice period through his corporation, ROCK Networks Inc.

[3] It is conceded by the plaintiff, that mitigation is relevant. In fact, it is likely to be the central issue in the trial. The question is whether the motion should be permitted on the eve of trial and the scope of the production the defendant now seeks.

[4] I have concluded that leave should be granted to bring the motion, that some minor additional disclosure is warranted and there should be a brief discovery to be completed this week, but the trial should not be adjourned. The discovery is to be completed by the weekend and the trial will begin on Tuesday or Wednesday as directed by the trial coordinator.

Background

[5] The plaintiff was employed by the defendant as Vice President of Sales for just over four years. There was a written employment contract which entitled the plaintiff to 12 months written notice of termination subject to his duty to mitigate. On January 22, 2016, the business of the defendant was sold and the plaintiff declined an offer of employment with its successor. He regarded the offer as significantly inferior to the position he held with the defendant. On April 28, 2016, he commenced this action.

[6] Mr. Hickey attended an examination for discovery on December 1, 2017. During that discovery, he was asked questions about mitigation and a series of questions related to ROCK Networks Inc., which was evidently a corporation he had owned before working for the defendant and which was still in existence at the time of his departure.[^1] The plaintiff was asked if he generated any income from Rock Networks during the 12 months after he left Christie. He responded that there was "income generated" and then corrected himself to say, "revenue generated" and said that he "can't say it was income generated" from bidding on government contracts.

[7] At Q. 272 of the discovery, the plaintiff was asked for an undertaking to provide a breakdown of all revenues generated by himself personally or by a corporate entity that he owned during the 12 month notice period. He gave an undertaking for personal revenues, but took the question of corporate revenues under advisement. There was a similar response for a demand to produce tax returns (Q. 278). At Q. 279 the plaintiff was asked to estimate what he earned from Employment Insurance and through Rock. There was a refusal or under advisement to answer the question about earnings through the corporation.[^2]

[8] Ms. Lewis, who was the lawyer attending the discovery with the plaintiff then, explained that "not all income that goes to Rock is going to my client", mentioning shareholder loans and "other purposes" and then "the income for ROCK, we're taking under advisement". The plaintiff was then asked how much money he personally took from ROCK and the plaintiff asked if he meant "that weren't shareholder loans". The plaintiff was then told by Ms. Lewis that the question was not limited in that fashion and was "how much money did you personally get?" The answer given was "zero".[^3]

[9] By virtue of Rule 31.07 (1) (b)[^4] all questions taken under advisement became refusals 60 days later. No motion was ever brought to compel answers to these questions.

[10] On August 1, 2019 the plaintiff set the matter down for trial. In doing so, the plaintiff was deemed to be ready for trial and to have completed all necessary discoveries. A defendant is deemed to be ready for trial 60 days later.[^5]

[11] On March 11, 2020, a pre-trial was held pursuant to Rule 50. In preparation for that pre-trial, on March 5, 2020, the defendant filed a pre-trial memorandum in which its counsel acknowledged that all motions were complete, all productions were complete, all examinations were complete and the case was ready for trial. Following the pre-trial, the Master endorsed the record that the matter was ready for trial and was to proceed as scheduled on October 5, 2020. This of course was pre-COVID, but there was no suggestion by anyone that the matter was not ready for trial.

[12] On August 28, 2020 Mr. Climie wrote to Ms. Payne. He advised that he had just come into possession of evidence that the plaintiff was carrying on business through ROCK in the weeks following his departure from the plaintiff. That information was an email obtained from the corporation that had purchased the business and had offered the plaintiff employment. Mr. Climie then advised that he had reviewed the discovery transcript and the refusals and under advisements, believed the plaintiff had been misleading in his discovery evidence and he made demand for various documents. Specifically, he asked for production of ROCK's financial statements, tax returns, quotes for products and supplies, bids submitted by ROCK, contracts awarded to ROCK, records relating to hiring of employees or contractors and any purchases of equipment or leasing of office space by ROCK during the notice period. This demand was made just over six weeks before the scheduled trial date.

[13] On September 10, 2020 a response was sent. In that letter, counsel for the plaintiff accused the defendant of being remiss in its production obligations, specifically for the late production of a spreadsheet purporting to show what the plaintiff would have earned had he accepted the position he was offered and failure to produce underlying documents. The letter went on to dispute that the email was new information, emphasising the questions about income earned through ROCK at Q. 269 & 270 of the discovery and disputing that there had been any failure to disclose relevant documents on the part of the plaintiff. This led to a further exchange of correspondence and a threat by the defendant to bring this motion.

[14] On September 17, 2020, Ms. Vijaykumar sent a letter indicating that any such motion should have been brought years before and not on the eve of trial, but also containing the following:

"For abundant clarity, we confirm the evidence Mr. Hickey gave on discoveries, which is that he earned no income from ROCK during the 12-month notice period. As a show of good faith, we are attaching ROCK's Shareholder Loan Ledger for the 12-month notice period, which shows that Mr. Hickey's shareholder account with ROCK remained net negative as to ROCK throughout this period (i.e., that ROCK remained in debt to Mr. Hickey and Mr. Hickey did not take any over-repayment of shareholder loan monies from the company). Please note that the displayed transactions constitute all of the shareholder loan transactions that took place between February 16, 2016 and February 16, 2017."

[15] What the ledger appears to show is that over the 12 months between February of 2016 and February of 2017, the plaintiff received regular draws from ROCK in the form of repayment of his shareholder loans and those draws totalled at least $140,000.00. While the question of how those withdrawals should be treated and whether or not they constitute mitigation is not answered by this ledger, it is certainly information that is relevant. It certainly casts doubt on the accuracy of the answer "zero" to the question "how much money did you personally get?"

[16] The consequence of this was a series of investigations by the defendant into what contracts ROCK had obtained from the government tendering website. The result of that investigation suggested to the defendant that not only had ROCK earned significant income during the mitigation period, but that the plaintiff had also been carrying on business through ROCK throughout the time he was employed by the defendant in breach of his employment contract. On September 23, 2020, counsel for the defendant wrote to Ms. Payne demanding the production of documents not only for the notice period, but back to 2012 and to the end of 2018. That demand read as follows:

In order to determine the full extent of Mr. Hickey's involvement with ROCK Enterprises during the material times, we require that you provide the following documents:

1. All documents relating to the Request for Proposal for Moseley Telecom that Mr. Hickey was working on in and around March 2016. The email from Moseley Telecom which provided Mr. Hickey with pricing on various products being sought by ROCK Networks was included in our correspondence to you dated August 28, 2020.

2. All corporate documents relating to ROCK Networks Inc. from 2012 to 2018, including bank account statements, corporate minute book, tax returns and financial statements.

3. All correspondence relating to ROCK Networks Inc.'s purchase of Nova Communications detailing when such negotiations started.

4. All bank records from Mr. Hickey showing amounts received from ROCK Networks Inc. from 2012 to 2018.

5. All bids submitted by ROCK Networks Inc. from 2012 to 2018.

6. All contracts awarded to ROCK Networks Inc. from 2012 to 2018.

7. All quotes for products and/or supplies to be purchased or sold by ROCK Networks Inc. from 2012 to 2018.

8. Records of any purchases and/or rentals of equipment and/or office space for ROCK Networks Inc. between 2012 and 2018.

9. All documentation relating to the hiring of employees or independent contractors at ROCK Networks Inc. from 2012 to 2018.

[17] On September 24, 2020, there was a trial management conference at which this motion was discussed. The Master made an order that the motion could be argued at the opening of trial and it was therefore scheduled for October 5, 2020.

[18] In the meantime, on September 25, 2020, Ms. Payne wrote to provide some, but not all, of the documents sought by the defendant. The documents produced were limited to the notice period and consisted of the following:

• All relevant documents regarding the Moseley RFP;

• All bank account statements, tax returns, and financial statements of ROCK from February 16, 2016 to February 16, 2017;

• The Letter of Intent and Letter of Approval for Financing for ROCK's acquisition of Nova Communications (please note that as a matter of public record, the acquisition itself was completed well after the end of the notice period);

• Any bank records from Mr. Hickey showing amounts he personally received from ROCK between February 16, 2016 and February 16, 2017; and,

• Confirmation of all contracts awarded to ROCK between February 16, 2016 and February16, 2017. Please note that there was one additional contract whose revenue is reflected in ROCK's FY2017 financial statements; however, given that this contract is subject to Secret-level classification, Mr. Hickey is currently unable to disclose any details of the agreement. Mr. Hickey has sent a request to the customer for permission to disclose the date and quantum, and we will provide these details if and when such permission is granted.

[19] This information was provided without prejudice to the position that the documents are not relevant and the plaintiff had complied with the rules, but also in purported answer to Q. 272, 278 and 279 (which had been taken under advisement). Finally, the letter proposed to produce the plaintiff for a brief discovery on these documents and queried whether this motion was going to proceed and if the defendant had any intention of amending the defence. The motion was brought, but the defendant does not seek an amendment.

Analysis

[20] Interestingly, nothing about this matter involves COVID-19 or the temporary suspension of in-court operations. This trial is scheduled to proceed as a virtual trial and was scheduled to proceed on October 5, which was the original trial date. No one is arguing that delay was caused or justified by the COVID restrictions. The question is simply whether justice is served by requiring the trial to proceed without additional disclosure or discovery or whether an adjournment is required to ensure trial fairness. In fact, however, the court has other alternatives than a binary choice. A short adjournment was forced by the need to consider this motion. Even if I grant some of the relief sought by the defendant, it is still possible for the trial to proceed.

[21] Let me begin by observing that the Rules of Civil Procedure are not ends in themselves nor are they designed to be technical traps for the unwary. As has been observed many times in the past, the Rules "are the servants of justice and not its master"[^6]. Rule 1.04 requires that the Rules be interpreted and applied in a manner that is proportionate to the importance and complexity of the issues and shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. This is a mandate for both fairness and efficiency rather than an exacting concern for technical compliance. This does not mean the rules can be ignored with impunity but the court must always consider the purpose of the rules which is ultimately to achieve justice.

[22] Rule 48.04 imposes a restriction on "any party who has set an action down for trial and any party who has consented to the action being placed on a trial list" by prohibiting the continuation of "any motion or form of discovery without leave of the court." While it was the plaintiff who set the matter down for trial and the consent referred to in Rule 48.04 may originally have referred to the consent mentioned in Rule 48.06, it is now accepted that both the plaintiff and defendant are caught by the rule when the defendant consents to setting of a trial and pre-trial date without any objection.[^7] Even if Rule 48.04 was not engaged, Rule 48.07 deems the parties to be ready for trial once it has been set down and requires that the trial proceed when the action is reached on the trial list unless a judge orders otherwise. The fixing of a trial date and attendance at a pre-trial where both parties have certified that they are ready to proceed underscores the expectation that the case will proceed when it is scheduled. Fairness dictates that the court will not condone last minute surprizes which might change the outcome of a trial. So certification that the matter is ready for trial is a significant and serious commitment.

[23] The courts have been quite stringent in granting leave for additional production or discovery motions, particularly if the motion might force the adjournment of a trial. The test is whether there has been a substantial or unexpected change in circumstances which requires such relief to ensure fairness.[^8] In this case, the plaintiff argues that the defendant was well aware that refusals had been given at the time of the discovery and elected not to bring a motion. Simply deciding during trial preparation that the motion should have been brought or conducting last minute investigation that turns up documents felt to be relevant, would not meet the test of "substantial or unexpected change in circumstances."

[24] On the other hand, there are also obligations on litigants to make ongoing disclosure and to correct answers given in error. Rule 48.04 (2) articulates obligations that survive setting the matter down for trial. Subrules 48.04 (2) (b) (i), (iii) and, (iv) are particularly pertinent. Subrule (3) permits motions to be brought to enforce those obligations without leave.[^9] Furthermore, it would be fundamentally unjust to allow a party to knowingly fail to disclose relevant information or to correct information on the record in the hopes that the other side might make a mistake and fail to bring a motion. In general, a party will not be taken to have waived its rights unless the party does so knowingly and with full appreciation of the facts.

[25] I need not accept the assertion by counsel for the defendant that the plaintiff was lying on discovery or has sought to conceal the income he earned through his corporation. Perhaps the question was misunderstood. Perhaps the plaintiff and his counsel may persuade the trial judge that any income earned through the corporation is offset by legitimate expenses or that the repayment of a shareholder loan should not count as income. The point is that evidence of income which was earned or could have been earned during the mitigation period is always relevant in such cases. The plaintiff, it must be recalled, has the onus of proving damages, but the defendant has the onus of proving failure to mitigate. The defendant is entitled to full and frank disclosure of all relevant documents and to obtain correct answers that are not misleading.

[26] In this case, the answer that "zero" was received by the plaintiff through the corporation is in error. It should have been corrected. The documents which have now been produced are relevant and in my view were always relevant. It is an error to conflate relevance and probative value. The documents may not prove what the defendant thinks they do, but the defendant is entitled to explore these issues. These are documents which should have been disclosed and should have been included in the affidavit of documents. The plaintiff should have known that mitigation would be the major issue or perhaps the only issue at the trial.

[27] Relevance, however, is defined by the pleadings. It is not defined by what a party wishes to know or by suspicions about behaviour they would like to investigate. In the absence of a pleading amendment, there is no relevance to income earned by the plaintiff outside of the notice period in question. This does not mean that nothing outside of those 12 months is relevant. When it comes to corporate financial statements or the genesis of shareholder loans that are being repaid by a corporation or income earned during the notice period but deferred to the following year, it may be necessary to have specific information from before or after the notice period. What the court will not sanction is an open-ended fishing expedition unmoored from the pleadings.

[28] I have concluded that justice is best served by permitting the motion, by ordering production of documents necessary to understand the revenues earned by the corporation during the notice period (even if funds were received afterwards) and to understand the basis for the shareholder loan which underpins the argument that repayment of the loan was not income for mitigation purposes. I will also permit limited additional discovery.

[29] Counsel and parties are available this week because they were supposed to be in trial. There is no reason the documents cannot be produced immediately and the discovery completed this week. While there are one or two days on which counsel or parties have previous commitments, there is no good reason that the trial cannot proceed next week.

Conclusion and Order

[30] To the extent that it is necessary, leave is granted to bring this motion.

[31] In addition to the documents already produced, the plaintiff is to produce the financial statements for the corporation for the year before and after the 2016 fiscal year. The plaintiff is also to produce the shareholder ledger showing the genesis of the shareholder loan which stood at $106,359.77 in February of 2016. The plaintiff is to produce the record of all contracts he or the corporation bid upon in 2016 and which he successfully obtained during 2016 or 2017 if he has not already done so.

[32] These documents are to be produced immediately. The plaintiff does not wish the trial to be adjourned and has known the scope of the requested production for many weeks. The documents should be readily available. To the extent that documents may not answer all of the questions and because it will be necessary to determine what documents go into the joint document brief, trial efficiency may be best served by a brief pre-trial discovery. Again, the plaintiff is expecting this and should readily anticipate the focus of the discovery. The defendant may conduct a further focused discovery of up to two hours. The discovery is to be completed no later than the end of the week.

[33] Unless counsel agree to do so, there is no reason to adjourn the trial. The trial will commence on Tuesday or Wednesday of next week as advised by the trial coordinator. There are one or two days in the following two weeks when one or other of the counsel are unavailable. Counsel shall confirm their availability with the trial coordinator.

[34] I was asked not to dispose of costs without hearing argument. That is reasonable and, in any event, given the proximity to trial, the most reasonable disposition is to reserve the question of costs of the motion to the trial judge.

[35] Order to go accordingly.

C. MacLeod J.

Date: October 7, 2020

COURT FILE NO.: 16-68404 DATE: 2020/10/07

ONTARIO SUPERIOR COURT OF JUSTICE

RE: Joseph Hickey, Plaintiff AND: Christie and Walther Communications Limited, Defendant

BEFORE: Mr. Justice Calum MacLeod

COUNSEL: Jock Climie and Erica Bennett, for the Defendant, moving party Janice B. Payne and Malini Vijaykumar, for the Plaintiff, responding party

REASONS FOR DECISION

Mr. Justice C. MacLeod

Released: October 7, 2020

[^1]: Q. 268 & 269, discovery transcript [^2]: Q. 282 [^3]: Q. 282, p. 106, line 9 [^4]: Rules of Civil Procedure, RRO 1990, Reg 194 [^5]: See rules 48.06 and 48.07 [^6]: For example, 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 @ para. 19 [^7]: See for example, Kirschner v. The Corporation of the Municipality of Chatham-Kent, 2019 ONSC 5227 @ par. 11 [^8]: Denis v. Lalonde, 2016 ONSC 5960 [^9]: This subrule was enacted in 2010.