Court File and Parties

COURT FILE NO.: CV- 14-00498963

DATE: 20210709

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Chemicheck Inc. Plaintiff

AND: Teva Canada Limited Defendant

BEFORE: J. WILSON J.

COUNSEL: Hedy Epstein, for the Plaintiff Jonathan Stainsby, for the Defendant

CONFERENCE HELD: June 11, 2021

Endorsement

The Issue

[1] This endorsement is in response to the letter from Defendant’s counsel received June 23, 2021. Mr. Tremblay agreed to participate in the conference held June 11, 2021 to answer factual questions about how the billing system worked between the parties. It appears that Defence counsel was not happy with the information given by Mr. Tremblay. Defence counsel now suggests that the discussions were without prejudice for the purpose of settlement and apparently attempts to limit the contents of the affidavit of Mr. Mario Tremblay to be filed in this matter proceeding as a summary trial.

[2] For the reasons I outline below, I do not accept the Defence arguments.

Background

[3] The Plaintiff provided engineering services for water purification systems to the Defendant/Plaintiff by Counterclaim, (the Defendant), a pharmaceutical company. The Plaintiff was responsible for treating and purifying the water used in the Defendant’s pharmaceutical manufacturing process, and for sterilizing manufacturing equipment.

[4] Following the termination of the relationship between the parties, the Plaintiff brought this action for $357,219.16, on account of unpaid invoices for services rendered. In response, the Defendant alleged that the Plaintiff had fraudulently overbilled the Defendant throughout the relationship and counterclaimed for the amount of overbilling ($650,000.00), or in the alternative, for the difference between the amount of the overbilling and the unpaid invoices ($292,780.00).

[5] This matter was set for a lengthy trial in May 2021. When the matter came before me for a conference/pre-trial on May 14, 2021 it was clear to me that the case was not remotely ready for trial. Nothing, including outstanding production of necessary documents, had been agreed to. The facts were all in dispute.

[6] At that initial conference the trial was adjourned, and it was agreed that this matter would proceed by way of a five-day summary trial scheduled for January 17, 2022.

[7] Both parties have filed experts’ reports with respect to the hours worked by the Plaintiff’s employees. The conflict between the experts relates to the basis for calculating the hours worked by the Plaintiff’s employees, which were then invoiced to the Defendant.

[8] The Defendant’s experts calculated the time worked by the Plaintiff’s employees based on the electronic sign in security system login at the Defendant’s premises.

[9] The Plaintiff and its expert allege that the electronic sign in security logs are not an accurate method of calculating hours worked by the Plaintiff employees as all employees did not have security access cards. The Plaintiff alleges that multiple employees would have access to the Defendant’s premises using one sign in security card.

[10] The Plaintiff asserts that there were manual sign in log books kept at the Defendant’s premises which recorded the hours worked by the Plaintiff employees including those who had security cards and those who did not. These documents are now not available. The Plaintiff asserts that it was these unavailable documents which were used to generate accounts prepared by the Plaintiff for services performed.

[11] The spread sheets were prepared by the Plaintiff’s accounting staff at the Defendant’s premises based upon the manual log in books kept at the Defendant’s premises. The spread sheets were sent by computer for the purpose of billing. Unfortunately, these spread sheets are also not available. The Defendant alleges that the computers in question have been wiped clean to hide the fraud, whereas the Plaintiff claims that the computers in question crashed or are no longer in their possession and hence the spreadsheets capturing the employee sign in sheets for the purpose of billing are not available.

The June 11, 2021 conference/pre-trial

[12] At the first conference held May 14, 2021, there was no one in attendance that had first-hand knowledge of the security system in place and the method of billing and recording hours worked by the Plaintiff’s employees.

[13] At my direction to clarify important underlying the facts, I requested evidence from two witnesses with first-hand knowledge of the billing system during the period that a fraud is alleged to explain how the billing took worked, one from the Plaintiff, and one from the Defendant. The purpose of the conference on June 11, 2021 was to clarify underlying facts based upon information from those with first-hand knowledge.

[14] The first witness who attended the June 11, 2021 conference included Sathiaseelan Sedumadavan (“Mr. Sedu”), who was primarily responsible for the preparation of invoices in question on behalf of the Plaintiff. Mr. Sedu prepared an affidavit that was filed on June 10, 2021 prior to the conference explaining how the Plaintiff’s billing system worked. He was also available by Zoom and did answer many questions posed by all counsel.

[15] As I found the organization, not the content, of Mr. Sedu’s affidavit difficult to follow, I suggested that he may consider reorganizing the affidavit for clarity for his final affidavit to be his evidence in chief in this proceeding if this case is not resolved.

[16] The second witness, Mario Tremblay, an engineer and former senior employee of the Defendant, was also in attendance by Zoom. He explained verbally in the presence of all how the system worked from the perspective of the Defendant. He explained his method of checking every invoice for accuracy before he signed it based upon the work performed and his knowledge of what work that was done, and how many hours were required for the tasks covered in the invoice. He also confirmed that aspects of the Plaintiff’s work was by purchase order, rather than simply hours worked, which would not involve calculation of hours worked.

[17] Mr. Tremblay did not file an affidavit prior to the June 11, 2021 conference, but agreed to prepare a summary in writing of what he confirmed orally.

[18] With respect to the preparation of Mr. Tremblay’s affidavit evidence for the summary trial, I ordered that both counsel jointly craft an affidavit confirming the factual information that Mr. Tremblay outlined at the conference and any other relevant evidence attaching his written summary to ensure that Mr. Tremblay would remain a neutral witness.

[19] As Defence counsel was in trial, the Plaintiff’s counsel agreed to do a first draft of Mr. Tremblay’s affidavit. No objection was taken by counsel to this approach to move the case forward, although Defence counsel did object to the conference being recorded.

The Law

[20] Broad powers are given to judges conducting pre-trial or case conferences under rr. 50.07 and 50.13 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including a variety of procedural orders as outlined in r. 20.05(2), including to make such order as the judge or case management master considers necessary or advisable with respect to the conduct of the proceeding, including any order under subrule 20.05 (1) or (2): r. 50.07(1)(c).

[21] The purpose of current pretrials goes far beyond making efforts to resolve cases, and involves significant with prejudice steps for management of the case.

[22] Making practical procedural orders to advance the case towards resolution or trial is the norm at case conference/ pretrials.

[23] In Rubner v. Lower Fourth Limited, 2017 ONSC 7520, at paras. 46-47, Myers J. explains the importance of the ability for judges to make case management orders summarily, under r. 50.13:

[46] Rule 50.13 was promulgated by the Rules Committee subsequent to and in response to the Hryniak decision. It is an important arrow in the quiver of judges to implement case management processes to enforce the culture shift required by the Supreme Court of Canada. It is a direct answer to the call for active case management of summary judgment motions in para. 70 of Hryniak. But on its terms, it goes much farther than that. Judges are empowered to make any order for interlocutory relief as long as they are satisfied that the parties have had sufficient notice. Case management orders are being made by judges in a wide number of circumstances to cut through procedural morasses and implement the culture shift. See for example, Duggan v. Lakeridge Health Corporation, 2017 ONSC 7340, at para. 21, in which Edwards J. resolved evidentiary issues with case management considerations; in Zuppinger and Yan v. TSCC No. 2139 et al,, 2017 ONSC 6771 Sanfilippo J. gave broad case management directions to assist with organizing a complex set of proceedings; in Griva v Griva, 2016 ONSC 1820, in which Firestone J. used Rule 50.13 to refuse to schedule a motion for partial summary judgment where doing do “would not serve the principles of ‘proportionality, timeliness and affordability’”; and in Schenk v. Valeant Pharmaceuticals International, Inc., 2017 ONSC 5101, at para. 8, I used case management directions to adopt a US initiative aimed at encouraging court appearances and mentoring of women and racialized lawyers who are predominantly at the junior end of the profession.

[47] In my view, Rule 50.13 (6) empowers case management judges to give directions and to make case management orders summarily where necessary to implement the culture shift so as to protect and enhance the administration of justice and access to civil justice in Ontario.

[24] In Apotex Inc. v. Eli Lilly and Company, 2021 ONSC 3448, Myers J. describes the purpose underlying these rules, as well as Rule 77, as being “to prevent parties from taking technical positions that may have all kinds of good tactical reasons but which do not advance the resolution of the merits, are unhelpful, costly for the parties, or a waste of judicial resources”: at para. 9.

[25] There are a number of other cases that use the powers under these rules to make broad case management orders.[^1]

[26] Aside from the powers given by the Rules of Civil Procedure, the court also has the inherent jurisdiction to control its own processes, and make orders to control the progress of a proceeding.

[27] In Abrams v. Abrams, 2010 ONSC 2703, 102 O.R. (3d) 645, at para. 41, Brown, J. (as he then was), in the context of an estate dispute, confirms the breadth of the court’s inherent jurisdiction and the necessity for the court to proactively manage files in the interests of justice:

[41] In sum, in the world of contemporary civil litigation, judges of the Ontario Superior Court of Justice necessarily possess the inherent power to give directions to the parties, in appropriate cases, about the conduct and completion of both pre-hearing and hearing steps in the proceeding, so that the case receives a just, expeditious and least expensive determination on its merits and that the pre-hearing and hearing steps unfold in a proportionate manner. Such inherent powers are necessary to enable the court to act effectively within its jurisdiction.

[28] In his subsequent decision, CN v. Holmes, 2011 ONSC 4837, at para. 59, Brown J. added, in blunt fashion, the need for the court during conferences to be proactive and to make appropriate orders to ensure cases are ready for trial.

[29] For these reasons I do not accept the Defendant’s arguments that the discussions that took place were without prejudice or privileged. Asking Mr. Tremblay to participate in the conference along with the person responsible for preparing the accounts on behalf of the Plaintiff was to promptly, efficiently obtain information for the parties, and to the court about how the billing arrangements between the parties functioned to be able to assess the allegations of fraud, and to assist in the management of this file.

[30] Counsel should proceed with preparing his affidavit in accordance with my directions following the June 11, 2021 conference. Hopefully Mr. Tremblay will prepare a comprehensive written summary in his own hand of his evidence which will reduce the need for communication between counsel on the contents of the affidavit.

Further Pre-trial

[31] There shall be a further conference/pre-trial with clients in attendance by Zoom, including either or both Mr. Ben Gray, and or Ms. Christine Poulin, the Canadian vice president or the President of the Defendant corporation.

[32] To date the Defendant has been represented at two conferences by the Defendant’s in-house counsel. He has made it clear that this matter is proceeding to trial. As noted above, r. 50.05(1) requires that, in order to be meaningful, the parties themselves, not just their lawyers, shall participate in pre-trial conferences. The in-house counsel is of course welcome to continue to participate in any further conferences, along with the representatives of the client.

[33] This further conference/pre-trial is to be scheduled through Theo at the trial office during the week of October 4, 2021 or October 11, 2021.

Procedural Order

[34] In the interim, as the conference in August is not proceeding as Mr Gray and Ms. Poulin are not available, and to ensure that the case will be ready for the summary trial scheduled in January 2022, I make the following orders for a timetable in accordance with the various steps required that I outlined in my endorsement of May 14, 2021.

[35] These steps need to take place for this matter to be ready to proceed by way of summary trial in January 2022. There was insufficient time at the last conference to establish the necessary timelines. If there is any issue with these timelines counsel may arrange a telephone conference by contacting my assistant.

[36] The following is a timetable to ensure that this matter will be ready to proceed in January 2022:

(a) The documents ordered to be produced by the Defendant in my endorsement of June 11, 2021 attached as A to this endorsement shall be produced by July 30, 2021.

(b) For the summary trial, counsel will prepare a joint brief of all documents to be hyperlinked with all pages numbered in each document. The Plaintiff shall prepare the first draft of a joint document brief referring to all documents relied upon by both parties by August 15, 2021. The Defendant may add any documents to the joint brief by August 30, 2021.

(c) As it is the Defendant alleging fraud, the Defendant shall prepare a request to admit outlining with particularity their position, with reference to the documents in the joint document brief by September 15, 2021. The Plaintiff shall respond with particularity fully outlining their position on any facts that are in dispute by October 7, 2021. These documents will be exchanged before any affidavits, other than the affidavit of the bookkeeper/ accountant referred to below.

(d) The request to admit and response will allow for an agreed statement of fact to be prepared, as well as a statement of disputed facts, with a clear outline of the position of each party on any facts in dispute. These documents shall be prepared by October 15, 2021.

(e) The Defendant’s affidavits and expert report alleging fraud will be served by November 7, 2021. Reference shall be made to the documents in the joint document brief, hyperlinked.

(f) The Plaintiff’s affidavits and any expert report contesting the allegations of fraud, and outlining the invoices outstanding with back up documentation shall be served by November 30, 2021. Reference shall be made to the documents in the joint document brief, hyperlinked.

(g) Brief reply affidavits, only on new issues raised shall be prepared by December 15, 2021.

(h) A hard copy of the Agreed Statement of Fact, the Statement of Disputed Fact with the position of each party on the disputed facts, as well as the affidavits and reports shall be provided to the trial judge by January 15, 2022.

Justice J. Wilson

Date: July 9, 2021

[^1]: TD Bank v. Lloyd’s Underwriters, 2021 ONSC 1171, at paras. 19-24, per Sanfilippo J; Chatham Street Realco (2012) Inc. v. Lalor et al., 2020 ONSC 5698, at paras. 11-20, per Myers J; Griva v Griva, 2016 ONSC 1820, at paras. 8-13, per Firestone J; Schenk v. Valeant Pharmaceuticals International, Inc., 2017 ONSC 5101, at paras. 5-7, per Myers J.