Court File and Parties

COURT FILE NO.: CV-19-143011 DATE: 20220401 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

The Estate of Michael Del Duca, by it’s Estate Trustee, Amanda Del Duca, Benjamin Del Duca, By his Litigation Guardian, Amanda Del Duca, Alexander Del Duca, by his Litigation Guardian, Amanda Del Duca, Amanda Del Duca, personally, Benedict Del Duca, Margaret Del Duca, Lorraine Fusco, Mark Del Duca and Steven Del Duca Plaintiffs – and – The Estate of Konstantinos Kazinakis, by its Estate Trustee, Elizabeth Roberts, Daro Industries Inc., Nove Ristorante Ltd., John Doe and Jane Doe Defendants

Counsel: Sloan Mandel, for the Plaintiffs Jennifer Kent, for the Defendants, The Estate of Konstantinos Kazinakis, by its Estate Trustee, Elizabeth Roberts, and Daro Industries Inc. Kimberly Newton, for the Defendant, Nove Ristorante Ltd.

HEARD: March 2, 2022

Reasons for Decision

CHARNEY J.:

Introduction

[1] This action arises out of motor vehicle accident on June 21, 2018. Both the driver and the passenger were fatally injured. The action is brought by the estate of the passenger and his family members against the estate of the driver and the restaurant where the driver and passenger were prior to the accident.

[2] The defendants believe that certain non-parties – Domenic Grossi and Bryce Coates – and certain corporations controlled by them, have information relevant to the plaintiffs’ claim for over $5,000,000 damages for past and future dependency loss.

[3] The defendants also seek documents from an unrelated corporate entity known as “Milani Group” on the basis of a letter provided by a principal of Milani Group to the plaintiffs that will be relied on by the plaintiffs’ expert at trial.

[4] The defendants argue that they have been unable to obtain the information sought from the plaintiffs whom they are entitled to examine for discovery, and have brought a motion under Rule 30.10 for production from these non-parties and Rule 31.10 for discovery of the non-parties.

[5] The defendants’ Fresh as Amended Notice of Motion seeks an Order pursuant to Rule 30.10:

a. That Trilend Inc. (Trilend) and/or Bryce Coates produce to the defendants:

i. Unedited copies of all employment contracts with respect to the deceased plaintiff “including but not limited to notes, correspondence, emails, photographs, and videos”;

ii. Unedited copies of financial statements and trial balance, corporate income tax returns, for the fiscal years ending December 31, 2018 and December 31, 2019;

iii. All business correspondence of Michael Del Duca stored, gathered, or generated by Trilend and/or Bryce Coates.

b. That Delgro Developments Inc. (Delgro Developments) and Delgro Capital Corp. (Delgro Capital) and/or Domenic Grossi produce to the defendants an unedited copy of the shareholder agreement, all business correspondence of Michael Del Duca, and valuation documents.

c. That the Milani Group produce to the defendants unedited copies of financial statements for the fiscal year prior to June 21, 2018 and a redacted payroll summary of all employees in 2018, and all business correspondence exchanged with Michael Del Duca.

[6] The defendants also seek an Order pursuant to Rule 31.10 granting leave to conduct examinations for discovery of Domenic Grossi, Director of Delgro Developments and Bryce Coates, Director of Trilend.

[7] The non-parties were served with the Fresh as Amended Notice of Motion but did not appear at the motion. Michael Milani of the Milani Group wrote to the defendants’ counsel and advised that he objected to the production of the Milani Group financial documents that were requested by the plaintiffs. The other non-parties have advised that they will not produce the documents requested unless ordered to do so by the court.

[8] The motion was opposed by the plaintiffs.

Facts

[9] Examinations for Discovery of the deceased’s plaintiff’s widow and brother were conducted on December 4, 2020. Those parties did not have personal knowledge of the deceased plaintiff’s businesses and could only provide limited information about them. Counsel for the plaintiffs undertook to request and produce relevant financial documents from various non-parties.

[10] The deceased plaintiff (Michael) was a shareholder in a holding company (BAAM) where income was paid to him as dividends. The dividends came from Delgro Capital Corp. (Delgro Capital), Delgro Developments Corp. (Delgro Developments) and Trilend Inc. (Triland). Michael, through his holding company, was also a shareholder in these companies.

[11] The nature of the business relationship between Michael and the non parties is summarized as follows:

(a) Delgro Capital and Delgro Developments

[12] Domenic Grossi was Michael’s equal business partner in Delgro Capital and Delgro Developments. These companies were involved in real estate brokerage and land acquisition and development. After Michael’s death, Domenic Grossi purchased Michael’s shares in these companies for $70,000. The defendants requested the paperwork related to the valuation of the companies, and the plaintiffs undertook to make best efforts to produce this paperwork and related documents, but these documents have not been produced.

[13] The plaintiffs asked Domenic Grossi for a copy of the shareholder agreement, but it has not been produced.

(b) Trilend

[14] Bryce Coates is the CEO of Trilend, which is a private mortgage investing company. Its primary purpose is to aggregate capital and lend it to real estate developments.

[15] Mr. Coates and Michael each had 30 shares in Trilend, and there were three other partners with a total of 40 shares.

[16] Mr. Coates did agree to be interviewed by the defendants’ counsel, and a transcript of that interview has been created but not disclosed. The defendants have provided a “synopsis” of the interview.

[17] After Michael’s death, Mr. Coates purchased Michael’s shares in Trilend for $147,500. Counsel for the plaintiff undertook to provide the relevant sales documents, but the defendants allege that they have not been provided with any of the paperwork associated with the negotiation of valuation of the share purchases.

(c) Milani Group

[18] On May 27, 2019, Cam Milani provided the plaintiffs with a letter stating that he knew Michael personally as hard working and industrious, and that Michael had an “exemplary reputation” for professionalism. The letter concludes:

While never formally coming to this point due to his untimely passing, it was likely that our company (ies) would have been pleased to offer Michael the opportunity to join our team at some point in the future and can confirm that, through salary, bonus, and incentives, Michael’s total compensation package would likely have been in the range of $400,000 to $450,000 per year.

[19] This letter is intended as a will-say for any upcoming trial. There is no suggestion in the letter that the Milani Group had offered Michael a job in the past or were in active discussions with Michael to offer him a job at the time of the accident. The purpose of the letter is to suggest what Michael might have earned in the future had he not been fatally injured in the motor vehicle accident. As indicated below, this letter was relied on by the plaintiffs’ expert in preparing a Dependency Loss Report for the plaintiff.

Position of the Defendants

[20] The defendants argue that the nature of Michael’s efforts that resulted in income to his holding company is known only to the principles of the Trilend and Delgro corporations. While the defendants have production of documents from Michael’s holding company, they have no access to the books and records of the companies from which the income was earned.

[21] Whether the Milani Group could have ever paid Michael the amount proposed by Cam Milani in his May 27, 2019 letter is based on financial information known only to the Milani Group.

[22] Documents and information requested of Delgro Developments are not available, and the Milani Group and Trilend will not share their corporate information. Counsel for the plaintiffs have advised that they have made best efforts to obtain the information requested during the examination for discovery and that no further production will be forthcoming.

[23] The defendants contend that the missing financial documents are necessary to complete the defence report on future dependency losses and reply to the plaintiffs’ future dependency loss expert report.

[24] In support of their motion the defendants rely on two letters from their expert, the first dated April 22, 2020 and the second dated September 30, 2020. These letters are appended to a lawyer’s affidavit based on “information and belief”.

[25] The April 22, 2020 letter sets out a list of requested documents including various documents from Delgro Development, Trilend and Milani Group.

[26] The September 30, 2020 letter purports to be an “updated” information request for additional supporting documents. It seeks the Delgro Capital Shareholder Agreement and the “names and roles of the employees” of Delgro Capital. The letter also seeks information about Delgro Capital’s revenue decrease from 2016 to 2019, and information about a reported Note Receivable of $1,325,000 in 2016 that was subsequently written off as bad debt in 2018.

[27] The documents requested in the defendants’ motion are referenced in those letters.

[28] The defendants argue that the documents requested are necessary to permit them to test the assumptions upon which the plaintiffs’ expert report on future dependency losses are based. The corporate organization of the plaintiff’s holding company is such that the documents required are not in the possession of the plaintiffs, but of non-parties. Had these documents been in the possession of the plaintiffs there is no real dispute that they would be relevant and producible.

Position of the Plaintiffs

[29] The plaintiffs take the position that the expert letters relied upon by the defendants to support their motion should be given little weight. The letter is not in the form of an affidavit from an expert. It is not signed by the individual at the accounting firm who prepared the letter. While admissible under Rule 39.01 (4) (affidavit based on information and belief) the letter does not explain why or how the requested information sought is necessary for the defendants’ future dependency loss expert report: Olendzki v. W.A. Baker Trucking Ltd., at paras. 12 – 13. The letters do not state that the defendants’ experts “are unable to formulate an opinion absent the records”.

[30] Moreover, the plaintiffs argue that their own accountants were able to quantify the dependency loss claim without the records sought by the defendant.

[31] The plaintiffs note that the defendants have already been provided with numerous documents from Trilend and Delgro, including:

a. Trilend Shareholder Agreement b. Trilend Financial Statements for 2017 c. Trilend income tax return for 2017 d. Delgro Developments financial statements for the fiscal years of 2015-2019 e. Delgro Developments corporate income tax returns for the fiscal years of 2015-2019 f. Delgro Developments Share Sale Agreement between BAAM and Delgro Group dated January 1, 2020 g. Delgro Capital financial statements, trial balance and corporate income tax returns for the fiscal years of 2018 and 2019

[32] With respect to the specific documents requested, the plaintiffs make the following additional submissions:

Records from the Milani Group

(a) There is no evidence that Michael was employed by the Milani Group prior to his death; (b) Michael had not been offered a job by the Milani Group by or at the time of his death.

Records from Delgro Developments & Delgro Capital

(a) There is uncontested evidence that the Shareholder Agreement sought from Delgro Developments does not exist; (b) The request for “all business correspondence” is both vague and overly broad; (c) The request for “valuation documents” is vague and of questionable relevance, given the information that Mr. Grossi has provided by way of a signed statement dated November 11, 2021.

Records from Trilend/Mr. Coates

(a) Michael was not an employee of Trilend (he was a shareholder); (b) The moving defendants are already aware, as per their evidence, of Michael’s ownership percentage in Trilend the year prior to the crash as well as his pay; (c) The moving defendants apparently already had an opportunity to obtain information and/or documentation from Mr. Coates, voluntarily, and have refused to produce any records relating to that exchange but for an “unofficial transcript”, such that there is no evidence that they ever sought additional information or documentation from Mr. Coates and/or that he refused to comply; (d) The request for “all business records” is vague and broad; (e) The request encompasses records that post-date Michael’s death;

[33] With respect to the request to examine Mr. Grossi and Mr. Coates, the plaintiffs assert that:

(a) both have already provided extensive and voluntary statements; (b) The moving defendants have failed to file any evidence that prior to bringing this motion, they made any efforts to directly request any further information and/or documentation from these non-parties (c) The moving defendants’ accounting experts do not explain how or why further information from Mr. Grossi or Mr. Coates is relevant and necessary to the quantification of the dependency loss claim, nor does their letter ever state that they are unable to formulate an opinion absent any of the “requested” information; (d) The plaintiffs’ accountants were able to quantify the dependency loss claim without requiring any additional information from Mr. Grossi and/or Mr. Coates.

Analysis

[34] Rule 30.10 of the Rules of Civil Procedure provides:

Production from Non-Parties with Leave

Order for Inspection

30.10 (1) The court may, on motion by a party, order production for inspection of a document that is in the possession, control or power of a person not a party and is not privileged where the court is satisfied that,

(a) the document is relevant to a material issue in the action; and

(b) it would be unfair to require the moving party to proceed to trial without having discovery of the document.

(5) The moving party is responsible for the reasonable cost incurred or to be incurred by the person not a party to produce a document referred to in subrule (1), unless the court orders otherwise.

[35] Rule 31.10 of the Rules of Civil Procedure provides:

Discovery of Non-Parties with Leave

General

31.10 (1) The court may grant leave, on such terms respecting costs and other matters as are just, to examine for discovery any person who there is reason to believe has information relevant to a material issue in the action, other than an expert engaged by or on behalf of a party in preparation for contemplated or pending litigation.

Test for Granting Leave

(2) An order under subrule (1) shall not be made unless the court is satisfied that,

(a) the moving party has been unable to obtain the information from other persons whom the moving party is entitled to examine for discovery, or from the person the party seeks to examine;

(b) it would be unfair to require the moving party to proceed to trial without having the opportunity of examining the person; and

(c) the examination will not,

(i) unduly delay the commencement of the trial of the action,

(ii) entail unreasonable expense for other parties, or

(iii) result in unfairness to the person the moving party seeks to examine.

[36] The onus on a motion for non-party disclosure and/or questioning is on the moving party: Ontario (Attorney General) v. Stavro [1].

[37] The second branch of Rule 30.10 (1) requires the moving party to demonstrate that it would be unfair to proceed to trial without production of the records in question. In Ballard Estate, the Ontario Court of Appeal set out six factors to be considered by the Motions judge when faced with a motion for non-party disclosure:

In deciding whether to order production in the circumstances of this case, the factors to be considered by the motion judge should include:

1. the importance of the documents in the litigation;

2. whether production at the discovery stage of the process as opposed to production at trial is necessary to avoid unfairness to the appellant;

3. whether the discovery of the [responding party] with respect to the issues to which the documents are relevant is adequate and if not, whether responsibility for that inadequacy rests with the [responding party];

4. the position of the non-parties with respect to production;

5. the availability of the documents or their informational equivalent from some other source which is accessible to the moving parties;

6. the relationship of the non-parties from whom production is sought, to the litigation and the parties to the litigation. Non-parties who have an interest in the subject-matter of the litigation and whose interests are allied with the party opposing production should be more susceptible to a production order than a true “stranger” to the litigation.

[38] In Ballard, the Court of Appeal stated:

In making the fairness assessment required by Rule 30.10(1)(b), the motion judge must be guided by the policy underlying the discovery régime presently operating in Ontario. That régime provides for full discovery of, and production from parties to the litigation. It also imposes ongoing disclosure obligations on those parties. Save in the circumstances specifically addressed by the Rules, non-parties are immune from the potentially intrusive, costly and time-consuming process of discovery and production. By its terms, Rule 30.10 assumes that requiring a party to go to trial without the forced production of relevant documents in the hands of non- parties is not per se unfair.

[39] Orders providing for the disclosure and production of records in the hands of non-parties pursuant to Rule 30.10 are exceptional remedies in the context of civil litigation. Such orders are not routinely granted and require a careful review of the considerations called for under that rule: Regional Municipality of Halton v. Alizadeh, 2021 ONSC 6958, at para. 41; Morse shoe (Canada) Ltd. v. Zellers Inc., at para. 19; Marshall et al and Estate of Sheldon Gladders, 2014 ONSC 2821, at para. 32.

[40] In my view, some, but not all of the documents requested by the defendants do meet the requirements of Rule 30.10.

[41] A central issue in this litigation is how much Michael might have earned had he not been fatally injured in the automobile accident. To support their claim for damages, the plaintiffs have served on the defendants a Dependency Loss Report (the Report) that calculates the past and future dependency losses sustained by the plaintiffs. The Report is based on two alternative scenarios.

[42] Scenario 1 is based on Michael’s actual historical earnings as a benchmark for his future earnings. This assumes an annual income of $366,363 in 2019 dollars.

[43] Scenario 2 is based his projected market earnings based on his earning $425,000 per year. The Report states that this Scenario is based on the assumption that Michael could earn this income:

from working with the Milani Group or similar employer, per correspondence dated May 27, 2019, from Cam Milani of the Milani Group. The projected income of $425,000 per annum is the mid-point of the range of $400,000 to $450,000 per annum suggested in correspondence from the Milani Group.

[44] Some of the documents relied on by the Report include:

a. Financial Statements of Delgro Capital for the fiscal years ending December 31, 2015, December 31, 2016 and December 31, 2017;

b. T2 Corporate Income Tax Return of Delgro Capital for the fiscal year ended December 31, 2017 (with comparatives for 2016);

c. Financial Statements of Delgro Developments for the fiscal year ended December 31, 2016;

d. T2 Corporate Income Tax Return of Delgro Developments for the fiscal year ended December 31, 2017;

e. Financial Statements and T2 Corporate Income Tax Return for Trilend for the fiscal year ended December 31, 2017 (with comparatives for 2016); and

f. Correspondence dated May 27, 2019 from Cam Milani of the Milani Group.

[45] Thus, the plaintiffs’ expert had access to financial documents from Trilend, Delgro Developments and Delgro Capital in preparing its report. The plaintiffs’ expert obviously thought that these documents were relevant to its analysis.

[46] The fact, as argued by the plaintiffs, that “the Plaintiffs’ accountants were able to quantify the dependency loss claim without [the] records” requested by the defendants, is no answer to whether the defendants’ accountants may want to see different documents to test the validity of the assumptions relied on by the plaintiffs’ accountants.

[47] Similarly, the fact that the plaintiffs’ accountants were prepared to accept the May 27, 2019 correspondence from the Milani Group at face value and adopt it as a valid scenario, does not mean that the defendants’ accountants are precluded from testing the validity of that assumption. It is precisely because Michael was never employed, or offered a job, by the Milani Group prior to his death that the ability of the Milani Group to pay Michael the amount proposed in their letter is a live issue if the plaintiff’s expert is going to rely on that figure as the basis for its second future loss scenario.

[48] Given that these are future loss scenarios, it is not surprising that the defendants’ expert might want to test the validity of these scenarios by reviewing financial documents that post-date Michael’s death.

[49] In my view, production of these documents at the discovery stage of the process is necessary to avoid trial unfairness. The plaintiffs have had access to Delgro and Trilend documents to support their claim for damages, and it would be unfair to the defendants to deny them access to the documents that they believe are necessary to test the plaintiffs’ claim.

[50] The defendants have sought these documents from the plaintiffs, but the plaintiffs have been unable to provide them.

[51] The non-parties have not appeared at this motion. Cam Milani has advised that he objected to the production of the Milani Group financial documents that were requested by the plaintiffs. The other non-parties have advised that they will not produce the documents requested unless ordered to do so by the court. The non-parties have not provided any explanation as to why they object to providing these documents. I have no evidence that the provision of these documents will be unduly onerous or otherwise prejudicial to the non-parties.

[52] While the non-parties have no direct interest in the outcome of the litigation, they have provided the plaintiffs with the financial documents requested by the plaintiffs’ experts without the need for a non-party production order. In this regard their interests appear allied with the plaintiff, which makes them more susceptible to a production order than a true “stranger” to the litigation. I also note that these are all closely held, private corporations, which, until recently, had closely intertwined financial relationships with the plaintiffs.

[53] The plaintiffs’ claim for future dependency loss is for $5 million. With the exception noted below, the documents requested appear to meet the proportionality requirement of Rule 29.2.03 of the Rules of Civil Procedure.

[54] The plaintiffs take the position that some of the documents requested may not exist. If that is so, then the party ordered to produce the documents can advise the defendants directly, although adverse inferences may be drawn by the court if appropriate.

[55] I agree with the plaintiffs that the request for “all business correspondence of Michael Del Duca” appears to be overly broad, and I see no support for such a broad request in the letters of April 22, 2020 or September 30, 2020 provided by the defendants’ accountants and appended as exhibits to the affidavit filed in support the defendants’ motion.

[56] I am not persuaded that the defendants are entitled to an order under Rule 31.10 granting leave to conduct examinations for discovery of Domenic Grossi or Bryce Coates. At this point the motion to discover these non-parties is premature. In my view, such discovery of non-parties should only occur if the documents disclosed give rise to specific areas of concern and are not sufficient for the purposes of the defendants’ responding expert reports. It may be that the defendants’ experts are able to obtain all the information they need from the documents produced. Once documents are produced pursuant to this order, the defendants may renew their motion to conduct examinations for discovery if the documents produced are insufficient and there are specific areas that require further exploration.

Conclusion

[57] Based on this foregoing, this Court Orders:

(a) An Order pursuant to Rule 30.10 that Trilend Inc. (“Trilend”) and/or Bryce Coates produce to the defendants, within thirty (30) days from the date of the Order, unedited copies of all employment contracts with respect to Michael Del Duca.

(b) An Order pursuant to Rule 30.10 that Trilend and/or Bryce Coates produce to the defendants, within thirty (30) days from the date of the Order, unedited copies of financial statements and trial balance for the fiscal years ending December 31, 2018 and December 31, 2019, corporate income tax returns for the fiscal years ending December 31, 2018 and December 31, 2019,

(c) An Order pursuant to Rule 30.10 that Delgro Developments Corp. (“Delgro Developments”) and/or Domenic Grossi produce to the defendants, within thirty (30) days from the date of the Order, an unedited copy of the shareholder agreement, and valuation documents stored, gathered, or generated by Delgro Developments;

(d) An Order pursuant to Rule 30.10 that Delgro Capital Corp. (“Delgro Capital”) and/or Domenic Grossi produce to the defendants, within thirty (30) days from the date of the Order, an unedited copy of the shareholder agreement generated by Delgro Capital, and valuation documents;

(e) An Order pursuant to Rule 30.10 that the Milani Group produce to the defendants, within thirty (30) days from the date of the Order, unedited copies of financial statements for the fiscal year prior to June 21, 2018, redacted payroll summary of all employees in 2018, and all business correspondence exchanged with Michael Del Duca;

(f) The defendants’ motion for an Order pursuant to Rule 31.10 granting leave to the defendants to conduct examinations for discovery of the non-parties Domenic Grossi and Bryce Coates is dismissed without prejudice to their right to renew the motion if the documents produced give rise to specific areas of concern.

[58] The defendants were partially successful on this motion. They have indicated that they are not seeking costs. The plaintiffs were seeking costs if they were successful. Given the divided success on this motion, it is my view that there should be no order as to costs.

Released: April 1, 2022

Justice R.E. Charney

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: The Estate of Michael Del Duca, by it’s Estate Trustee, Amanda Del Duca, Benjamin Del Duca, By his Litigation Guardian, Amanda Del Duca, Alexander Del Duca, by his Litigation Guardian, Amanda Del Duca, Amanda Del Duca, personally, Benedict Del Duca, Margaret Del Duca, Lorraine Fusco, Mark Del Duca and Steven Del Duca Plaintiffs – and – The Estate of Konstantinos Kazinakis, by its Estate Trustee, Elizabeth Roberts, Daro Industries Inc., Nove Ristorante Ltd., John Doe and Jane Doe Defendants REASONS FOR DECISION Justice R.E. Charney Released: April 1, 2022

1. This case is frequently cited as Ontario (Attorney General) v. Ballard, but is officially cited as Ontario (Attorney General) v. Stavro.