CITATION: Boni v. Gary Jonas Computing Ltd.; 2022 ONSC 4304

COURT FILE NO.: CV-18-598339 RELEASED: 2022/07/22

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Paolo Boni v. Leonardo Worldwide Corporation Gary Jonas Computing Ltd.

BEFORE: Associate Justice Graham

COUNSEL: Daniel Chitiz and Kevin Massicotte for the plaintiff (moving party) Laura Brazil and Joseph Osborne for the defendant

HEARD: May 3, 2022

REASONS FOR DECISION

(Motions for examinations for discovery of representatives of non-parties and for a further and better affidavit of documents)

[1] Leonardo Worldwide Corporation (“Leonardo”) provided digital marketing services for the hotel and on-line travel industries. The plaintiff Paolo Boni’s action arises from the termination of his employment as CEO of Leonardo by way of a resolution of Leonardo’s Board of Directors dated March 19, 2018 that retroactively approved his apparently unauthorized termination on November 24, 2017. The current defendant Gary Jonas Computing Ltd. (“Jonas”) became the successor company to Leonardo through a series of amalgamations beginning on December 1, 2018.

[2] Mr. Boni claims damages for failing to provide reasonable notice of his termination, “Wallace” damages, and damages arising from the purported repurchase of his Management Incentive Plan shares in Leonardo upon his termination and the “drag” of his common shares as part of Leonardo’s sale to Jonas. The various claims include damages for bad faith conduct.

[3] The defendant Jonas has agreed to produce its CEO Barry Symons to be examined for discovery. Mr. Boni now brings this motion for an order to examine Paul Yovovich and John Albright as representatives of Lake Capital (“Lake”) and JL Albright Ventures (“JLA”) respectively, both of which the plaintiff submits are parties for whose benefit the action is defended. Lake and JLA were the two major shareholders of Leonardo at the time of Mr. Boni’s termination and immediately prior to the sale of Leonardo to Jonas in November, 2018. Mr. Boni also seeks an order for Jonas to serve a further and better affidavit of documents including relevant documents from these shareholders.

Background

[4] Mr. Boni was employed by Leonardo for 17 years and was its CEO for 14 years before his termination. He owned two categories of shares, consisting of 9 % of Leonardo’s Common Shares and 40% of Class B Shares.

[5] Lake Capital, as the major shareholder, had the right to nominate 2 Board members, one of whom was Mr. Yovovich. The second major shareholder was JLA, which nominated Mr. Tawfiq Arafat as a Board member. Mr. Arafat is not an officer, director or employee of any of the JLA entities, although he has been retained by the major shareholders for the day to day management of the litigation.

[6] In 2017, while Mr. Boni was still CEO of Leonardo, two entities, one of which was a predecessor to the defendant Gary Jonas Ltd., expressed an interest in acquiring Leonardo, but their proposals did not include Mr. Boni continuing as CEO. The shareholders were interested in the Jonas proposal, and Mr. Boni communicated with the Board in June, 2017 by email including a proposal with respect to his severance. In response, Mr. Yovovich stated there was no question with respect to Mr. Boni’s commitment and effort. Mr. Arafat also drafted an email referring to Mr. Boni’s exemplary conduct.

[7] Leonardo and Jonas then attempted to negotiate a sale of the shares in Leonardo to Jonas but no sale was achieved in 2017. Mr. Boni received a termination letter in November, 2017, but he disputes whether the termination was valid as of the receipt of that letter.

[8] In March, 2018, Mr. Boni commenced an application to prevent Leonardo from purchasing his Management Incentive Plan (“MIP”) shares, in which he brought a motion for an injunction to prevent the purchase of the shares. The motion proceeded based on a compressed timetable so there were no cross-examinations or reply evidence. Leonardo’s responding affidavits, to which Mr. Boni had no opportunity to reply or cross-examine on, included statements critical of Mr. Boni which Mr. Boni says were inaccurate.

[9] Allen J. dismissed the motion for an injunction (2018 ONSC 1875), accepting as true various of Leonardo’s statements about Mr. Boni. In her decision, Allen J. accepted the directors’ evidence regarding “the detriment Mr. Boni caused to the Company’s finances”, and the Company’s “financial decline in some substantial part because of Mr. Boni’s poor performance and imprudent decision-making.” Mr. Boni submits that these statements were in stark contrast to the complimentary statements made in the emails referred to above and were made in bad faith.

[10] On May 23, 2018, Mr. Boni commenced this action essentially as a wrongful dismissal claim. In their Fresh as Amended Statement of Defence, Jonas makes various allegations critical of Mr. Boni’s conduct as CEO. Mr. Boni disputes these allegations in his Reply and submits that these pleadings constitute bad faith, making relevant the production of further documents.

[11] Following the commencement of this action, Leonardo was sold to a Gary Jonas company. Mr. Boni owned 9% of Leonardo’s common shares. As part of the sale, Leonardo exercised a “drag-along right” with respect to Mr. Boni’s shares, requiring him to sell the shares as part of the sale. Mr. Boni objected to the sale on the basis that Leonardo repudiated the shareholders’ agreement including the “drag-along right”.

[12] There is therefore an issue as to whether the major shareholders had the right to force the sale of Mr. Boni’s shares. Mr. Boni’s position is that he still owns a share of the current named defendant Gary Jonas Computing Ltd., which is part of his oppression claim in the action. He submits that this is relevant to the production issue.

[13] Leonardo was sold to Jonas pursuant to a Share Purchase Agreement. Under this SPA, the majority shareholders, Lake and JLA, gave an indemnity to Leonardo which is now for the benefit of the current defendant Gary Jonas. As part of this sale, there were funds held back essentially to cover the costs and liability exposure in this litigation. The SPA also gives the major shareholders the right to conduct the defence of this action.

[14] Following the sale of Leonardo to Jonas, the Board of Directors was completely replaced. Mr. Boni submits that the new directors had little or no direct knowledge of the circumstances giving rise to his claims. Unknown to Mr. Boni, two weeks after the sale of Leonardo to the original Jonas company, Leonardo amalgamated with Jonas. Under Ontario Business Corporations Act s. 79(a.1), “the amalgamating corporations cease to exist as entities separate from the amalgamated corporation” so Leonardo ceased to exist.

[15] One of the issues in the action is why the original Jonas company did not proceed with the purchase of Leonardo in 2017, and Mr. Boni seeks production with respect to that factual dispute. Since Mr. Boni was not aware of the amalgamation of Leonardo and Jonas during the earlier stages of the litigation, he did not seek documents from Jonas. However, as the two companies are now amalgamated, he seeks documents from the amalgamated defendant regarding the reason for the failure of the sale of Leonardo to Jonas in 2017.

[16] In September, 2020, Mr. Boni sent a letter to Jonas’s legal counsel clearly based on the mistaken assumption that Leonardo still existed. As a result of this letter, Jonas added at least $750,000.00 (U.S.) to the litigation accrual defence fund.

[17] In late August, 2021, Mr. Boni did a corporate search for Leonardo and learned that it no longer existed. Following the receipt of this information, a case conference was held which led to a further amendment to the pleadings, with corresponding amendments to this motion. Now that Jonas is a party, the parties, as indicated, have agreed that its CEO Mr. Symons would be its representative for examinations for discovery. Jonas disputes that oral examinations of the two proposed major shareholders’ representatives Mr. Yovovich and Mr. Albright are warranted.

Applicable Rules of Civil Procedure

[18] The plaintiff’s motion to examine Mr. Yovovich and Mr. Albright is brought under sub-rules 31.03(8) and (9):

31.03(8) Where an action is brought or defended for the immediate benefit of a person who is not a party, the person may be examined in addition to the party bringing or defending the action.

(9) Where a party is entitled to examine for discovery

(a) more than one person under this rule; or

(b) multiple parties who are in the same interest,

but if the court is satisfied that multiple examinations would be oppressive, vexatious or unnecessary, the court may impose such limits on the right of discovery as are just.

[19] The plaintiff submits that the action is being defended for the benefit of Lake and JLA and, pursuant to rule 31.03(8), seeks the exercise of the court’s discretion to order examinations for discovery of representatives of those entities. The plaintiff acknowledges that under rule 31.03(9), the requested order is discretionary and that it must be proportional. However, the plaintiff submits that the onus is on the responding party to lead evidence regarding proportionality and there is no evidence in that regard.

Issues on the motion

[20] The issues are:

(1) Are Lake and JLA “beneficial parties” within the meaning of rule 31.03(8)?

(2) Are Mr. Yovovich and Mr. Albright appropriate representatives on behalf of those two parties?

(3) Should there be any limits on any examinations ordered?

(4) Should Jonas be required to serve a further and better affidavit of documents including relevant documents in the possession of Lake and JLA?

Submissions of the plaintiff

[21] Whether Lake and JLA are beneficial parties: The plaintiff refers to the Share Purchase Agreement dated November 15, 2018. This SPA includes as a defined term “Existing Litigation” which includes this action. It also includes, in s. 4.1, an Indemnification provision, whereby the Major Shareholders, including Lake and JLA, agree to indemnify Leonardo (and by virtue of the amalgamation, Jonas) in respect of all losses arising from (d) “all litigation arising from or related to Paolo Boni”.

[22] Further, any amount remaining in the Accrual following the conclusion of litigation would be returned to the Major Shareholders Lake and JLA, so a successful defence of the action is to their benefit. The Accrual originally contained $293,000.00 and $750,000.00 was added but the current amount is unknown. Mr. Boni’s current litigation is the only outstanding matter for which the Litigation Accrual is intended as protection.

[23] Mr. Boni submits that the litigation is for the benefit of the Major Shareholders because their interest in the Litigation Accrual imposes on them all the financial obligations of the litigation. They also have control over the litigation, based on the Share Purchase Agreement, s. 5.3 (a): “The Major Shareholders shall be entitled to fully control the management and disposition of the Existing Litigation, including with respect to the defence, negotiation or settlement thereof, and all decisions relating thereto.”

[24] On the basis of the Lake’s and JLA’s ultimate responsibility for any damages award payable by Jonas, and their right to control the litigation, Mr. Boni submits that he should be entitled to examine them for discovery as beneficial parties under rule 31.03(8).

[25] Whether Mr. Yovovich and Mr. Albright are appropriate representatives of Lake and JLA: The original Lake corporation was a Luxembourg corporation which has been dissolved, and passed its rights and liabilities to the current Lake entity which is a Delaware corporation, pursuant to a document signed by Mr. Yovovich. JL Albright III Venture Fund is a limited partnership for which the ultimate general partner is a corporation of which Mr. John Albright is the president. Mr. Yovovich and Mr. Albright are represented by the same firm as the defendant Jonas. They have filed no evidence that Lake and JLA are not beneficial parties and the plaintiff seeks an adverse inference arising from this omission.

[26] The proposed witness Mr. Yovovich submits that he would suffer prejudice from being examined because he would be required to take time away from his investment business and he would have to come from Chicago to Toronto to be examined. Plaintiff’s counsel submits that they are prepared to examine Mr. Yovovich remotely and questions will be limited to the involvement of Lake Capital in the events in issue in the litigation. Also, on his cross-examination, Mr. Arafat made a statement that “Yovovich is Lake”. The plaintiff further submits that examining the principal of a party for whose benefit the litigation is defended is not disproportionate.

[27] The defendant submits that requiring indemnifiers of parties to litigation to submit to examination for discovery would constitute a major change to Ontario law. Mr. Boni’s response is that Mr. Yovovich and Mr. Albright are more than mere indemnifiers; they are the controlling minds of entities involved in events leading to the litigation, and which, by virtue of those entities’ funding of the Litigation Accrual contained in the SPA, stand to benefit from Jonas’s defence of the plaintiff’s action.

[28] The defendant also suggests that the plaintiff is trying to pierce Jonas’s corporate veil. However, it is the Litigation Accrual in the SPA that makes Lake and Albright beneficial non-parties; their examination is not sought solely on the basis that they were shareholders of Leonardo.

[29] Whether there should be any limits on examinations: The plaintiff seeks a total of 10 hours of examinations, instead of seven hours, for all three proposed witnesses.

[30] Whether Jonas should be required to serve a further and better affidavit of documents: The plaintiff submits that, if Mr. Yovovich and Mr. Albright are ordered to be examined as the principals of non-parties for whose benefit the action is defended, Jonas ought to be required to serve a further and better affidavit of documents containing relevant documents in Lake’s and JLA’s possession, control or power. (See: Toronto Standard Condominium Corporation No. 1703 v. One King West Inc., 2008 CanLII 14181)

[31] Plaintiff’s counsel refers to a letter that he wrote to defendant’s counsel (Tab 7 of the plaintiff’s compendium) which has been highlighted in various colours. He seeks an order that Jonas and the beneficial non-parties, if ordered examined, conduct searches for the highlighted documents and disclose all such documents that they acknowledge are relevant.

[32] The plaintiff submits that most documents produced to date are Leonardo’s documents and not Jonas’s documents, so there are documents that Jonas must produce. First, there are no documents produced from Jonas with respect to the failed purchase of Leonardo in 2017, which as noted above, is referred to in the pleadings. Second, Mr. Arafat acknowledged on cross-examination that Jonas was informed that Mr. Boni objected to the “drag-along” of his common shares in the sale to Jonas and no internal Jonas documents have been produced in that regard. Third, Jonas has not produced any financial documents that would reflect the value of what Mr. Boni says is his equity interest in Leonardo and by extension Jonas.

[33] The defendant says that they have searched 80,000 documents, but the plaintiff submits that the evidence with respect to the collection of documents is double hearsay so there was no ability to cross-examine someone with actual knowledge of the efforts to locate documents.

Submissions of the defendant

[34] The defendant Jonas acknowledges that the issues on the motion are whether Mr. Yovovich and Mr. Albright must attend to be examined for discovery on the basis that Lake and JLA are parties for whose immediate benefit the action is being defended, and if so, whether Jonas must serve a further and better affidavit of documents including documents in their possession. Any limit on their examinations would simply be a term of an order for their examinations.

[35] The defendant does not dispute that an indemnity was given and that Lake and JLA might have to indemnify Jonas but submits that requiring the shareholders to submit to examination for discovery would constitute an unwarranted expansion of examination and production rights. Specifically, the defendant submits that the former shareholders are not immediate beneficiaries under rule 31.03(8) and that to require them to be examined for discovery would be unnecessary and disproportionate. The defendant submits that in most of the relevant cases, the parties ordered examined could have been named as parties to the litigation.

[36] For example, in Eisen v. Altus, 2016 ONSC 3212, a claim by a trustee for a group of trust beneficiaries against a real estate appraiser, the court ordered examinations of each of the individual beneficiaries, all of whom Jonas submits could have been named as plaintiffs themselves. In TSCC 1703 v. One King West Inc., 2008 CanLII 14181 (Ont.S.C.), the plaintiff condominium corporation brought the action on behalf of individual unit holders, who otherwise would have had to be named individually as plaintiffs. In Ontario Securities Commission v. Re-more Investment Corp., 1982 CarswellOnt 392, the plaintiff brought a class action on behalf of members of the class who were ordered to attend examinations for discovery.

[37] As stated above, Mr. Boni submits that the shareholders Lake and JLA control the litigation. The defendant submits that the right to control the litigation does not make those shareholders the beneficiaries of the litigation. Further, the shareholders are required to consult with Jonas before taking any step in the litigation. Specifically, s. 5.3(a)(ii) of the SPA states that “the Major Shareholders shall not take any action with respect to the Existing Litigation, including consenting to the entry of any judgment with respect to the Existing Litigation or entering into any settlement with respect to the Existing Litigation, without first consulting with the Purchaser [i.e. Jonas].”

[38] The court has discretion as to whether to order the examinations and must also consider the issue of proportionality. The defendant argues that to order examinations of Mr. Yovovich and Mr. Albright as representatives of two of the shareholders would be unnecessary and disproportionate.

[39] The defendant has agreed to produce for examination Mr. Symons as Jonas’s CEO and submits that there is no evidence that Mr. Symons would not be able to inform himself adequately to answer questions regarding the obligations of the shareholders under the SPA. Therefore, even if the major shareholders were found to be immediate beneficiaries, their examinations are not necessary because there is no evidence that Mr. Symons cannot answer questions relevant to matters in issue in the action. Also, the plaintiff declined to examine Mr. Arafat, who had the most first hand knowledge of the events in question.

[40] With respect to proportionality, the defendant also submits that the action is highly complex, and the two proposed witnesses will have to prepare themselves based not only on their own knowledge of and involvement in events, but also will have to inform themselves of the larger context of the action.

[41] The production issue requires a consideration of (1) what has been produced, (2) what is missing, (3) the test on a motion for a further and better affidavit of documents, and (4) the defendant’s response to categories of documents that are allegedly missing.

[42] Mr. Boni seeks various categories of documents including those listed in a letter from counsel, documents relating to litigation by Leonardo when Mr. Boni was CEO, financial and tax records required for him to value his interest in Jonas’s common shares, and documents relating to the “drag-along” of his common shares when Leonardo was sold to Jonas.

[43] Jonas’s evidence is that they accumulated approximately 80,000 documents from Leonardo’s legacy computers and from Jonas’s servers. The defendant also asked former Board members of Leonardo about documents possibly stored in their personal computers. They also produced corporate documents.

[44] Jonas submits that on a motion for a further and better affidavit of documents, the moving party must provide evidence that there are documents in the opposing party’s possession that have not been produced. Evidence in support of the motion cannot be based on speculation or guesswork but the level of proof must take into account that the moving party does not have access to the documents and the responding party does. (See: Galea v. Best Water Limited, 2019 ONSC 7213 at para. 15)

[45] The defendant submits that the plaintiff has failed to meet his onus and submits that the only evidence about missing documents is at paras. 32 and 33 of Mr. Boni’s reply affidavit sworn February 25, 2022.

32 In preparation of this Affidavit, I reviewed the documents listed in Schedule “A” of the Defendant’s Latest AOD with reference to the specific categories of relevant documents identified in the Missing Productions List to confirm the extent to which Defendant has now included those missing document productions. Based on this review, I feel strongly that Arafat’s latest statement regarding the completeness of Defendant’s documentary disclosure is no more truthful than when he made that same statement in his Original Affidavit (at which time the Defendant’s 1st Supp. AOD listed less than half of the documents listed in Defendant’s Latest AOD). Indeed, while Jonas has now produced a significant number of new documents that are (and were always) relevant to some of the issues in dispute in the Action, as detailed below, it has failed to produce many other relevant documents that I know (or I am reasonably certain) exist and which I believe are relevant and supportive of my claims in the Action.

33 For the sake of brevity, I will not list herein all the individual and categories of documents that were identified in the Missing Productions List that Jonas has again failed to produce as that would require me to replicate much of that list. Instead I have attached hereto as Exhibit “C” the Missing Productions List (extracted from the Document Production Letter) which I have highlighted as follows:

(a) highlighted in yellow are document categories where, based on my personal knowledge of the existence of such documents, I believe the production is missing a material number of responsive relevant documents;

(b) highlighted in red are the document categories that I am certain exist but have been completely omitted from Jonas’ latest production; and

(c) highlighted in blue are those document categories where, although I have no direct knowledge about the existence of any such specific documents, based on my knowledge and experience (including my knowledge of how the parties involved operate) and based on other information, I am reasonably certain would exist but have not been produced at all.

[46] The defendant submits that these are declaratory statements of belief that other documents exist but do not constitute evidence that they exist or even that they likely exist. In some cases, the documents in the list of allegedly missing documents include emails from Mr. Boni that are not included in his own affidavit. Further, the defendant has made efforts to locate them and has not been able to do so. The defendant did not refuse to look for additional documents; they looked for them and to the extent that other documents were located, they have disclosed them.

[47] With respect to documents from the shareholders, the Lake entity is a dissolved corporation, so the records would have to be located. However, it is questionable that any new documents would be located because Mr. Yovovich was already asked to search for documents in his capacity as a former Board member of Leonardo. In any event, because the Lake corporation involved in the share purchase from Leonardo is defunct, it is uncertain how any further documents would be located.

[48] With respect to JLA, the defendant submits that the efforts that they already made would have revealed any other documents that JLA would have. It is unclear why they would have any additional relevant documents.

[49] The defendant’s submission that they have looked for all relevant documents is subject to two reservations. First, with respect to documents regarding litigation in which Leonardo was involved during Mr. Boni’s tenure as CEO, the defendant submits that the request is disproportionate because they are not sufficiently relevant to the issues in the action.

[50] Second, Mr. Boni has submitted that financial and tax records are relevant to the valuation of his common shares. The defendant submits that the valuation of the shares is not possible beyond the first amalgamation of Leonardo and Jonas. The first amalgamation between Leonardo and Jonas allowed for cancellation of shares for no consideration, so there would be no means to trace any shareholding by Mr. Boni into the current Jonas corporation.

Plaintiff’s reply submissions

[51] Mr. Boni submits that in the short form amalgamation, all the issued shares of Leonardo would have to be owned by one shareholder. Because he seeks an oppression remedy based on the shares that he held in Leonardo, the trial judge will be asked to place a value on those shares and will have flexibility with respect to valuation. On this basis, Mr. Boni seeks the financial information for Jonas subsequent to the first amalgamation with Leonardo.

[52] The plaintiff submits that the defendant is incorrect that the only evidence with respect to the existence of other documents is contained in paras. 32 and 33 of Mr. Boni’s reply affidavit. In para. 35 of the same affidavit, Mr. Boni deposes:

35 The missing internal “Jonas” (i.e. non-Leonardo) productions include documents that are clearly relevant to my claims, including:

(a) As listed under Item “viii” of the Missing Productions List, internal and external “Jonas” correspondence, meeting notes and memoranda that I am certain exist relating to Jonas’ 2017 proposed acquisition of Leonardo, its subsequent decision to walk away from the transaction and the reasons therefor, and the “threats” Jonas has alleged I made that allegedly caused such decision. These documents are relevant to my Bad Faith Claims;

(b) As listed under Item “xii” of the Missing Productions List, various Jonas internal and external communications as well as internal documents that I am certain exist relating to Jonas’ 2018 acquisition of Leonardo and, in particular, the issue of the Major Shareholders’ purported “drag” and sale of my Leonardo common shares to Jonas without my consent. These documents are clearly relevant to my oppression claims arising from Jonas’ purported purchase of my Common Shares as well as, importantly, to the issue of Jonas’ knowledge that it was purporting to purchase those shares despite my reasonable objections thereto; and

(c) As listed under Item “xii” of the Missing Productions List, certain discrete Jonas amalgamation-related and other financial documents and tax filings that clearly must exist and that are directly relevant to my claims related to the purported purchase by Jonas of my Common Shares and the determination of the value thereof and the damages arising therefrom which may be awarded at trial.

[53] Mr. Boni relies on Sherman v. Gordon, 2009 CanLII 58972, to argue that the defendant must provide specific evidence regarding the alleged lack of proportionality in a request. He pleads in his reply that any litigation strategy was determined between himself and the Board. Further, the documents sought by Mr. Boni consist of communications between himself and the Board regarding the conduct of any litigation in which Leonardo was involved.

[54] The documents sought consist of email correspondence between Mr. Boni and Board members relating to litigation involving Leonardo commencing in December, 2012. Any such documents would be relevant to issues of Leonardo’s alleged bad faith in alleging malfeasance on the part of Mr. Boni in the conduct of litigation on behalf of Leonardo.

[55] With respect to the burden of proof on a motion for a further and better affidavit of documents, based on Galea v. Best Water Ltd., supra the evidence must be considered in light of the fact that the moving party does not have the documents and the responding party does. The motion is not about whether the defendant or its counsel conducted a search, but rather arises from the fact that there are no internal Jonas documents. There is also no evidence as to how Mr. Yovovich’s email account was searched. Further, both Mr. Yovovich and Mr. Albright had email accounts that were neither Leonardo nor Jonas accounts.

Decision

[56] The issues with respect to whether Mr. Yovovich and Mr. Albright must attend to be examined for discovery are whether their respective companies Lake and JLA are parties for whose benefit Jonas is defending this action, and if so, whether the court should exercise its discretion to order that they be required to attend examinations.

[57] The evidence on this motion is that Lake and JLA were majority shareholders of Leonardo and, pursuant to the Share Purchase Agreement whereby Jonas acquired Leonardo, have funded the Litigation Accrual from which any judgment will be paid. Jonas’s submission that Lake and JLA are not parties for whose benefit the litigation is being defended is untenable because the Litigation Accrual under the SPA consists of their money so the litigation exposure is ultimately theirs. Unlike shareholders whose financial interest is tied to the value of the corporation as a whole, they have a direct financial interest in the outcome of the action because any judgment against Jonas would result in a direct loss to them. Jonas is therefore defending this action “for the immediate benefit” of the non-parties Lake and JLA.

[58] Further, Mr. Yovovich and Mr. Albright, as principals of Lake and JLA, have decision-making authority with respect to the conduct and settlement of the litigation. Jonas relies on s. 5.3(a)(ii) of the SPA to argue that the “Major Shareholders’” right to take action in this litigation, including settlement, is subject to consultation with Jonas, but regardless of this obligation to consult, it is ultimately those shareholders’ funds at stake.

[59] Accordingly, Lake and JLA fall within the scope of rule 31.03(8) such that their respective principals Mr. Yovovich and Mr. Albright may be examined in addition to a representative of the named defendant Jonas. Having made this finding, the court must decide whether to exercise its discretion to order that Mr. Yovovich and Mr. Albright be examined, and if so, whether to impose limits on the plaintiff’s right of discovery under rule 31.03(9).

[60] The main issue with respect to the court’s exercise of discretion is whether Mr. Yovovich and Mr. Albright have some direct knowledge of the matters in issue in the litigation beyond the knowledge of Jonas’s representative.

[61] The issues in the action include the following:

1. Mr. Boni’s entitlement to damages arising from his termination as Leonardo Worldwide Corporation’s CEO.

2. Whether Jonas’s allegations regarding Mr. Boni’s performance as Leonardo’s CEO are made in bad faith.

3. Whether the major shareholders in Leonardo repudiated the securityholders’ agreement and if so, whether the “drag and sale” of Mr. Boni’s common shares was invalid so that he remains a shareholder in Jonas such that the value of those shares is also an issue.

[62] Jonas, in its Fresh as Amended Statement of Defence, provides particulars regarding why certain directors, described as “the Dissatisfied Directors”, believed that the termination of Mr. Boni’s employment was in the best interests of Leonardo, including his participation in and direction of various litigation on behalf of Leonardo. The specific pleading is:

27 In particular, the Dissatisfied Directors believed that the termination of Mr. Boni’s employment was in the best interests of Leonardo because, among other things, under Mr. Boni’s direction and leadership:

(a) Leonardo’s revenue continuously declined since December 2014;

(b) Mr. Boni failed to complete a sale of Leonardo to TravelClick, Inc. (“TravelClick”) or Jonas, both of whom provided letters of intent to purchase Leonardo in 2017. In particular, Jonas had walked away from the sale in 2017 due to, among other things, concerns with Leonardo’s history of litigation against its competitors and former business partners, as well as threats made by Mr. Boni himself to commence litigation against Leonardo following closing;

(c) On November 17, 2017, the Board learned that Leonardo would be required to pay approximately US$1.5-million in legal costs in connection with an unsuccessful arbitration claim against ICE Portal, Inc. (“ICE”) which was primarily perpetuated by Mr. Boni;

(d) Leonardo incurred approximately US$6-million in legal expenses in connection with litigation against its competitors and former business partners since fiscal 2014 which was also primarily perpetuated by Mr. Boni;

(e) Leonardo initiated a restructuring of its operations in November 2017 that resulted in the dismissal of approximately 25 employees; and

(f) The dire financial state of Leonardo in general.

[63] Mr. Boni submits that these allegations were made in bad faith to justify Leonardo’s decision to terminate him as its CEO.

[64] Mr. Yovovich was Lake’s former senior nominee on the Board of Directors of Leonardo. Mr. Boni provides evidence of Mr. Yovovich’s knowledge of what transpired between Leonardo and himself in paragraphs 24-26 of his affidavit sworn May 21, 2021:

24 For a number of years prior to my Termination, Yovovich, Lake’s Co-Founder and Principal, was Lake’s senior representative and de facto decision-maker on the Board. Given Lake’s significant approval and veto rights over the Company’s affairs, Yovovich was the Board’s most influential member and was closely involved in all major Leonardo decisions impacting Leonardo.

25 Although the decision to terminate my employment was namely [sic] taken by the Board, Yovovich, Arafat and Pennal were the Directors who were most closely involved in and effectively responsible for that decision, as well as the Company’s and the Board’s subsequent decisions and actions giving rise to my claims in the Action.

26 Due to Mr. Pennal’s passing, Yovovich, together with Arafat, have the most direct and relevant knowledge on behalf of Leonardo with respect to the events leading and subsequent to my Termination, however Yovovich has the most direct and relevant knowledge with respect to the matters most salient to my Bad Faith Claims. As Lake’s ultimate decision-maker with respect to its Leonardo investment, he also had the most relevant knowledge with respect to such matters on behalf of Lake.

[65] Mr. Boni’s evidence with respect to the knowledge of the proposed witness John Albright is in paragraphs 30 and 31 of his affidavit:

30 Albright is JLA’s Founder who was responsible for JLA’s investment in Leonardo and thereafter remained, and to this day is, JLA’s ultimate decision-maker with respect to Leonardo and therefore, with respect to JLA’s role in the Major Shareholders’ defence of the Action.

31 Although he was never a Leonardo Director, Albright was directly involved, particularly prior to Lake becoming a shareholder in 2008, in major events and decisions relating to Leonardo and has direct knowledge on behalf of JLA that I believe is germane to my claims in the Action and, in particular, to my Bad Faith Claims.

[66] There is no evidence from Mr. Yovovich or Mr. Albright to contradict Mr. Boni’s evidence as to their likely knowledge of events in issue and no evidence as to why their examinations would be disproportionate. Any inconvenience to them from having to prepare for and attend at examinations for discovery would not be disproportionate to the benefit to Lake and JLA arising from Jonas’s defence of this action on their behalf.

[67] Mr. Yovovich, who is a controlling shareholder of the current defendant Jonas, was a member of Leonardo’s Board at the time of Mr. Boni’s termination. He is now both the directing mind of one of the corporations for the benefit of which the action is being defended, and there is evidence that he has knowledge of the circumstances of Mr. Boni’s termination. He would therefore have knowledge of Mr. Boni’s employment claims, the bad faith claims that are pleaded in the statement of defence, and Mr. Boni’s claim that he remains a shareholder of the current defendant. There is therefore a sufficient basis for the court’s exercise of discretion to order that Mr. Yovovich be examined for discovery.

[68] Similarly, the uncontradicted evidence that Mr. Albright was directly involved in decisions relating to Leonardo, which would include decisions relating to Mr. Boni’s termination as its CEO, litigation in which Leonardo was involved while he was CEO, and the forced sale of Mr. Boni’s shares in Leonardo, warrant an order that he be examined for discovery.

[69] The plaintiff’s proposal that the examinations of the three proposed witnesses Mr. Symons, Mr. Yovovich and Mr. Albright be conducted over a total of 10 hours is reasonable and I so order. Unless the parties agree otherwise, these examinations shall be held by videoconference.

[70] Based on Toronto Standard Condominium Corporation No. 1703 v. One King West Inc., supra, as Lake and JLA plausibly have relevant documents in their possession that Jonas does not have, Jonas shall serve a further and better affidavit of documents disclosing any such documents and indicating in which non-party’s possession they are. These documents shall include, inter alia, all documents relating to the transactions and litigation referred to in paragraph 27 of Jonas’s Fresh as Amended Statement of Defence quoted above. In addition, Jonas shall ensure that its further and better affidavit of documents includes the documents described in paragraph 35 of Mr. Boni’s reply affidavit.

[71] To avoid further pre-discovery motions, any issues with respect to the scope and completeness of production by Jonas, Lake and JLA may be explored at the examinations for discovery of Mr. Symons, Mr. Yovovich and Mr. Albright, with any production motions brought thereafter.

Costs

[72] The parties have both filed costs outlines. The plaintiff was successful on the motion and should recover costs. My current view, without hearing or receiving costs submissions, is that the defendant did not engage in reprehensible, scandalous or outrageous conduct that would warrant substantial indemnity costs. Plaintiff’s counsel’s partial indemnity costs figure totals $92,583.86 inclusive of fees, HST and disbursements and the defendant’s partial indemnity costs figure is $92,060.87. Although these amounts strike me as very high for a motion to determine whether non-parties should be examined for discovery and to address production issues, the fact that they are within $525.00 of each other means that neither party can realistically suggest that the other’s figure is unreasonable. I would therefore be inclined to award the plaintiff his costs of the motion on a partial indemnity scale fixed at $92,583.86 payable within 60 days.

[73] If the parties cannot resolve the issue of costs, they may deliver written submissions, the plaintiff within 30 days and the defendant within 20 days thereafter. Written submissions shall not exceed three pages not including the costs outlines already filed, and shall not include attachments. Costs submissions shall be filed with ATC Teanna Charlebois (teanna.charlebois@ontario.ca).

ASSOCIATE JUSTICE GRAHAM

Date: July 22, 2022