COURT FILE NO.: CV-21-00660465-0000
DATE: 2022-09-12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ULRICH RATH and FOCUS-RATH & ASSOCIATES LTD.
Nora Refai, for the Plaintiffs (Defendants by Counterclaim)
Plaintiffs (Defendants by Counterclaim)
- and -
TANZANIAN GOLD CORPORATION
Matthew Cressatti, for the Defendant (Plaintiff by Counterclaim)
Defendant (Plaintiff by Counterclaim)
HEARD: April 7, 2022
ASSOCIATE JUSTICE: D. MICHAEL BROWN
REASONS
Background
[1] The plaintiffs bring this motion under rules 30.04(2) and 30.04(5) of the Rules of Civil Procedure for the production and inspection of documents referred to in the defendants’ Statement of Defence and Counterclaim. The plaintiff, Ulrich Rath (“Rath”), is a former director on the board of directors of the defendant, Tanzanian Gold Corporation, a publicly held mining company. According to the Statement of Claim, in addition to sitting on the board of directors, Rath held various positions with the defendant in his 17 years with the company and its predecessors.
[2] The plaintiffs’ claim arises from Rath’s departure from the defendant and the termination of an Independent Contractor Agreement (the “Agreement”) which the claim alleges governed the terms and conditions of Rath’s role at the defendant and the services that Rath provided to the defendant through his company and co-plaintiff, FOCUS-Rath & Associates Ltd. (“FRA”). The plaintiffs claim damages under various heads, including $800,000 plus 740,741 common shares of the defendant in respect of project completion fees said to be owing under the Agreement, $274,636.63 in outstanding director’s fees, and moral and punitive damages in the amount of $650,000.
[3] In its Statement of Defence and Counterclaim, the defendant denies that any of the amounts claimed are owing to the plaintiffs and takes the position that the Agreement is unenforceable and non-binding by reason of a number of factors, including the plaintiffs’ alleged failure to act in good faith, the lack of authority of the signatories to the Agreement to bind the defendant, the alleged material non-disclosure of the plaintiffs in the negotiation of the Agreement, Rath’s alleged conflict of interest, alleged breaches of Rath’s fiduciary duties to the defendant and the inclusion of unconscionable terms in the Agreement.
[4] The defendant counterclaims against the plaintiffs seeking damages of over $11 million including damages for alleged negligence, malfeasance and breach of fiduciary duty by Rath in performance of his duties to the company over the years, and damages relating to the alleged misappropriation of funds.
[5] The focus of the defendant’s attack on the enforceability of the Agreement is Rath’s alleged failure to submit the Agreement to the defendant’s Board of Directors for review and approval before executing the Agreement with the defendant’s then CEO, James Sinclair. The defendant alleges that the plaintiffs failed to follow the process for approval of the Agreement that was mandated by the Board of Directors (of which Rath was a member) at the meeting of the Board in September 2020 that was attended by Rath. The Defendant alleges that the mandated process was reflected in the September 2020 minutes of the Board (the “September Minutes”) which were approved by Rath and the other Board members in the November 2020 meeting of the Board, as would be reflected in the minutes of that meeting (the “November Minutes”, collectively with the September Minutes, the “Minutes”). The facts pleaded in support of this position are contained in paragraphs 12 to 16 of the Statement of Defence and Counterclaim:
A meeting of the Board of Directors of TGC [the defendant] was held on September 15, 2020 (the "September Meeting"). Mr. Rath attended the meeting in his capacity as a director of TGC. The minutes of the September Meeting, specifically contemplate the manner in which Mr. Rath's proposed agreement with FRA would be completed. Specifically, the minutes of that meeting reflect that Mr. Rath would provide a draft of the proposed agreement to the entire Board of Directors for review and consideration. This proposal received unanimous support, including from Mr. Rath. The minutes of the September Meeting were reviewed and approved as being complete and accurate by TGC' s entire Board of Directors, including Mr. Rath, when the Board of Directors met again on November 27, 2020.
A draft of the agreement was prepared by FRA' s legal counsel pursuant to Mr. Rath' s instructions. However, despite the protocols approved by Mr. Rath and the entire Board of Directors of TGC at the September Meeting, the proposed terms were never discussed, negotiated, amended or ever reviewed by Mr. Sinclair, TGC's Board of Directors or TGC's legal counsel. This was done in direct contravention of the procedures agreed to by the Board of Directors, including Mr. Rath. TGC provided absolutely no input in the preparation of the agreement. It was never shared or circulated by Mr. Rath with anyone at TGC, let alone reviewed and approved by the Board of Directors and TGC's legal counsel. The agreement contained terms and conditions that were never negotiated or discussed in good faith with TGC, and the resulting document contained terms and provisions which were commercially unreasonable and completely unconscionable.
At all material times, Mr. Rath was fully aware that any agreement for the provision of consulting services between FRA and TGC legally required the approval of the company's Board of Directors. The minutes of the September Meeting were explicit on this point. Moreover, as a Director on the Audit and Compensation Committee of TGC, Mr. Rath was fully aware the agreement required the approval of Board of Directors. Despite this, Mr. Rath deliberately circumvented this process, failed to submit the agreement to Board of Directors for approval and in November of 2020 asked Mr. Sinclair to sign the agreement.
Mr. Rath misled Mr. Sinclair regarding the terms and conditions contained in the agreement, and he misrepresented the fact that the document had been reviewed and approved by TGC's Board of Directors when he knew this to be false. Based on these and other material misrepresentations, Mr. Sinclair trusted Mr. Rath as a fiduciary and signed the document with an inaccurate knowledge of its contents.
This was orchestrated by Mr. Rath in order to have the document finalized before Mr. Mullowney was appointed as the new CEO on December 1, 2020. Mr. Rath knew the Board of Directors of TGC was to review and approve the agreement before it was finalized. Mr. Rath circumvented the process established by the Board of Directors at the September Meeting and induced Mr. Sinclair to sign the agreement.
[6] The Statement of Defence and Counterclaim repeatedly refers to, and relies on, the meeting of the Board of Directors in September 2020. Including the paragraphs excerpted above, the September 2020 Board meeting and/or the September Minutes are specifically referenced in seven different paragraphs of the Statement of Defence and Counterclaim.
[7] The plaintiffs have served a Reply and Defence to Counterclaim which disputes, in detail, the defendant’s version of events relating to the preparation and execution of the Agreement. The plaintiffs deny the allegations of negligence, misfeasance, malfeasance, breach of contract and breach of fiduciary duty in the counterclaim, which the plaintiffs assert are scandalous and frivolous.
Request to Inspect
[8] On July 14, 2021, one week after having been served with the Statement of Defence and Counterclaim, the plaintiffs served a Request to Inspect on the defendant pursuant to Rule 30.04(2) of the Rules of Civil Procedure seeking production for inspection of the following documents:
a) The September 15, 2020 Meeting Minutes referred to at paragraphs 12, 14, 19, and 42 of the Statement of Defence and Counterclaim; and
b) The November 27, 2020 Meeting Minutes referred to at paragraph 12 of the Statement of Defence and Counterclaim.
[9] Rule 30.04(3) requires a party receiving a Request to Inspect to respond to the request within 5 days. The defendant did not respond within 5 days, nor did it respond to follow-up requests sent by plaintiffs’ counsel on July 27, 28 and 29 and August 3, 4, 6, 11 and 18, 2021. In the final follow-up request on August 18, 2021, plaintiffs’ counsel advised that if the documents were not produced for inspection by August 24, 2021 they would be bringing a motion to compel such production. On September 20, 2021, having still not received a response, the plaintiffs served their motion record on this motion.
[10] On October 19, 2021, the defendant responded to the Request to Inspect by delivering redacted copies of the September and November Minutes. Approximately 60-70% of the substantive content of the September Minutes produced by the defendant appears to have been redacted, such that all that remains is the discussion of the Agreement, the headings for other business discussed, and the record of non-substantive, procedural, matters such as attendance and quorum. The November Minutes were redacted to remove all substantive content except for certain headings and the resolution approving the minutes of the five previous Board meetings, including the September Minutes.
[11] Following production of the redacted Minutes, counsel for the defendant invited the lawyers for the plaintiffs (but not their clients) to attend a Zoom videoconference where counsel for the defendant displayed on the screen the unredacted September and November Minutes, allowing the plaintiffs’ lawyers to briefly review the documents as defendant’s counsel scrolled through them. Copies of the unredacted Minutes were not provided. One of the plaintiffs’ lawyers swore an affidavit on this motion stating that during the course of the videoconference, “it became clear … that relevant portions of the September Minutes had been improperly redacted” and that the redacted portions of the Minutes contain information relevant to the Agreement and “the context in which the terms of the Agreement were negotiated”.
[12] The day after the Zoom videoconference, counsel for the plaintiffs wrote to defence counsel seeking production of the full unredacted Minutes. As of the hearing date of the motion, the defendant has refused to produce the unredacted Minutes.
Positions of the Parties
[13] On this motion, the plaintiffs seek production of the unredacted Minutes in accordance with their Request to Inspect pursuant rules 30.04(2) and 30.04(5). The plaintiffs take the position that compliance with a request to inspect documents referenced in a pleading pursuant to rule 30.04(2) is both “immediate and mandatory”, relying on the decision of D.M. Brown J (as he then was) in Timminco Limited v. Asensio, 2009 CanLII 9431 (ON SC), at para. 19. The plaintiffs submit that a document produced in response to a request to inspect may not be redacted for relevance; if any part of the document is relevant, the entire document must be produced. In the alternative, the plaintiffs argue that, based on the unredacted headings in the minutes, the redacted portions of the Minutes are relevant to the issues in the action.
[14] The defendant’s position is that rule 30.04(2) does not require immediate compliance and that Timminco is no longer good law in that regard. The defendant relies on two decisions on motions under rule 30.04 brought in putative class proceedings where the court declined to order production of documents referenced in a pleading or affidavit, in part on the basis that the Request to Inspect was premature: Harris v Bayerische Motoren Werke Aktiengesellschaft, 2019 ONSC 5958, and Mask v Silvercorp Metals Inc, 2014 ONSC 4161. The defendant submits that the plaintiffs’ demand for production of the Minutes is premature as the plaintiff has already served a Reply and Defence to Counterclaim and therefore does not require such production for the purpose of pleading.
[15] The defendant further submits that the law permits the redaction of irrelevant and commercially sensitive information from corporate minutes produced in civil litigation. The defendant relies on the decision of Strathy J (as he then was) in McGee v London Life Insurance Company Limited, 2010 ONSC 1408. The defendant submits that McGee establishes a framework for assessing whether publicly traded companies can produce redacted documents in the face of a Rule 30.04(2) request. The defendant argues that the Minutes have been properly redacted in accordance with McGee in that the redacted information is irrelevant to the issues in the litigation and production of this information would be harmful to the defendant’s commercial interests.
Analysis
[16] Rule 30.04 provides, in relevant part:
Request to Inspect
30.04
(2) A request to inspect documents may also be used to obtain the inspection of any document in another party’s possession, control or power that is referred to in the originating process, pleadings or an affidavit served by the other party.
(3) A party on whom a request to inspect documents is served shall forthwith inform the party making the request of a date within five days after the service of the request to inspect documents and of a time between 9:30 a.m. and 4:30 p.m. when the documents may be inspected at the office of the lawyer of the party served, or at some other convenient place, and shall at the time and place named make the documents available for inspection.
Court may Order Production
(5) The court may at any time order production for inspection of documents that are not privileged and that are in the possession, control or power of a party.
[17] The rationale behind rule 30.04(2) as it applies to pleadings is based in part on the principle that a document referred to and relied on in a pleading becomes part of the pleading. As Master MacLeod (as he then was) explained in 1483881 Ontario Inc. (c.o.b. EPM) v. KPMG, LLP, [2003] O.J. No. 2993:
There is no doubt that relying upon documents in a statement of claim incorporates the documents in the pleading and makes them subject to inspection under Rule 30.04. (at para. 2)
[18] Justice Brown further described the history and rationale for 30.04(2) in Timminco:
[17] The rule traces its origins back to the 19th century English rules of court, and it appeared as Rule 350 in our pre-1985 Rules of Practice and Procedure, R.R.O. 1980, Reg. 540. In Quilter v. Heatly (1883), 23 Ch. D. 42 (C.A.), the English Court of Appeal held that the rule was "intended to give the opposite party the same advantage as if the documents referred to had been full set out in the pleadings": quoted with approval in Durall Construction Ltd. v. H.J. O'Connell Ltd., 1973 CanLII 696 (ON SC), [1973] 3 O.R. 59, [1973] O.J. No. 1985 (Master); see, also, Kenning v. Odaguchi, [1992] O.J. No. 1416 (Master). Requests to inspect operate, in addition, to enable parties to review documents referred to in another's pleading to assist in preparing a responding pleading and to aid the requesting party in determining if the other's pleading discloses a reasonable cause of action or defence: Montreal Trust Co. of Canada v. Toronto-Dominion Bank, [1992] O.J. No. 1274, 40 C.P.C. (3d) 389 (Gen. Div.).
[18] Nevertheless, it is not a pre-condition to an order for inspection that the documents be required for pleading: 1483881 Ontario Inc. (c.o.b. EPM) v. KPMG, LLP, [2003] O.J. No. 2993, 2003 CarswellOnt 2866 (Master), at para. 7. In fact, the service of a request to inspect does not automatically extend the time for filing a defence. Where a request has been made and refused, courts have taken into account the necessity to inspect the documents before pleading over in considering whether to extend the time for filing a responding pleading: 1483881 Ontario Inc., supra, at para. 10.
[19] The jurisprudence surrounding rule 30.04(2) reveals that courts regard compliance with a request to inspect as immediate and mandatory. In 1483881 Ontario, supra, Master McLeod wrote, at para. 6:
In the case of [a demand for particulars], the cases are clear that pre-defence particulars will only be ordered when they are necessary for the purpose of pleading. There is no such requirement in Rule 30.04. Referring to a document in an originating process gives rise to an immediate right of inspection. The defendant need only serve a request to inspect documents in form 30C and a date and time for inspection must be provided within 5 days of the demand. There is no basis for refusing to do so.
[20] The mandatory nature of the production obligation under rule 30.04(2) is emphasized by the obligation of a party to produce a document referred to in its pleading whether or not the document otherwise would be privileged: Durall Construction, supra, at para. 7.(Timminco, supra, at paras. 17-20)
[19] For rule 30.04(2) to be engaged, the document in question must be specifically referred to in the pleading. General references to non-specific documents do not give rise to a right to inspect under the rule: Harris, supra, at para. 42.
[20] In the event of non-compliance with rule 30.04(2), the requesting party may seek an order compelling production of the subject documents under rule 30.04(5). An order under Rule 30.04(5) is discretionary. The court’s discretion under rule 30.04(5) includes the discretion not to enforce a rule 30.04(2) request to inspect:
[44] Courts may refuse to enforce a request to inspect made pursuant to rules 30.04 (1) or 30.04 (2) by refusing to order the production of the document pursuant to rule 30.05 (5) based on immateriality, irrelevance, prejudicial effect overcoming probative value, disproportionality, untimeliness (i.e., premature documentary discovery), and privilege. Courts may refuse to enforce a request to inspect documents when the document requested is a public document or is a document already available to the party seeking production. (Harris, supra at para. 44)
[21] In support of its position that I should exercise my discretion not to enforce the rule 30.04(2) request to inspect on this motion, the defendant relies on the Harris and Mask decisions. Harris involved a motion under rule 30.04(5) brought by a putative representative plaintiff in a proposed class action prior to the certification of the action as a class proceeding. Mask involved a rule 30.04(5) motion by a proposed representative plaintiff for production of documents referenced in affidavit filed by defendants in response to the plaintiff’s motion for leave to commence a secondary market liability action under s. 138.8 of the Securities Act and for certification of the action as a class proceeding. In my view, both cases are distinguishable and do not support the defendant’s position.
[22] Mask and Harris were decided on principles of pleading and discovery that are specific to the form of proceeding the motion was brought in: respectively, an application for leave to commence a secondary market liability action under s. 138.8 of the Securities Act, and a proposed class proceeding prior to certification. In each case, the court denied the production request, in part, on the grounds that such production would amount to premature discovery as it was prior to the granting of such leave and/or certification as a class proceeding.
[23] Justice Perell explained the limited scope of rule 30.04(5) in a proposed class proceeding in Harris:
[45] In a proposed class action, a request to inspect under rule 30.04 (5) may be denied unless the pre-certification disclosure can be justified for the purposes of the certification motion. In class actions in Ontario, courts limit or restrict pre-certification discovery and require the production of documents and examinations to be focused on the criteria for certification. The law in Ontario is that pre-certification, there should be a focused and limited production of those documents that are shown to be relevant to the issues on certification. The law in Ontario for pre-certification discovery is that the onus is on the party seeking documents for the certification motion to explain why the requested documents are relevant to the issues on certification. Pre-certification discovery is only available where the moving party shows that the discovery is necessary to inform the certification process.
[55] … And I also disagree with Mr. Harris that the circumstance that the action is a proposed class action is irrelevant to whether the court should order production pursuant to rule 30.05. Mr. Harris' request fails to circumnavigate the principle that pre-certification for documentary discovery the onus is on the party seeking documents to explain why the requested documents are relevant to the issues on certification. (Harris, supra at paras. 45 and 55)
[24] Similarly, in Mask, Justice Belobaba, denied the plaintiff’s motion under rule 30.04(5), based in part on the restrictions on discovery on a motion under s. 138.8 of the Securities Act. Although s. 138.8(3) of the Act provides for cross-examination on a defendant’s affidavit filed on the motion, Belobaba J held that “the legislature intended that s. 138.8(3) be read restrictively to prevent the moving party from compelling oral and documentary evidence from respondent affiants in an effort to make his or her case from their evidence.”
[25] The prohibitions against premature discovery described in Mask and Harris have no application to a normal civil action such as the present case. In a typical civil action, the plaintiff does not require leave of the court to continue with the action to the discovery stage; discoveries follow immediately after the close of pleadings as of right. In this case, the parties have agreed to a discovery plan and they are effectively already in discoveries. Even if the parties were not yet in discoveries, the defendant has provided no evidence that it would suffer prejudice as a result of producing the documents now as opposed to producing them with its affidavit of documents.
[26] Mask and Harris are also distinguishable in that they both involve requests to inspect large volumes of documents based on general, non-specific references in a pleading or affidavit. Justice Belobaba summarized the nature of plaintiff ‘s request to inspect in his conclusion in Mask:
[46] The request to inspect documents under rule 30.04(2) is an important remedy when used fairly and appropriately. But it was never designed nor has it been judicially interpreted to allow counsel for Mr. Mask to request (with a straight face) all of the local exploration, production and financial records from every one of Silvercorp's offices in China over the 18 months of the class period just because Ms. Tang, the company CFO, mentioned in her affidavit that "E&Y attended at Silvercorp's offices in China where we retain local exploration, production and financial records". Rule 30.04(2) was never designed nor has it been judicially interpreted to allow counsel for Mr. Mask to request all of Silvercorp's quarterly and annual financial records without any further specification and without regard to any notions of relevance or proportionality just because they were generally mentioned in an affidavit narrative. (Mask, supra at para. 46)
[27] In Harris, Justice Perell found that the plaintiff’s requests to inspect were improper in that they were “(a) improper requests for unspecified documents; or (b) improper requests for intangible things that are not documents; visualize: communications, analyses, or processes that have not been memorialized into a specific document that is referred to in the pleading.”: Harris, supra, at para. 52.
[28] In the present case, the references to the September Minutes in the Statement of Defence and Counterclaim could not have been more specific. The document is identified by name and by date on multiple instances in the pleading and specific contents of the document are referred to and relied on. The plaintiffs’ Request to Inspect the September Minutes was a proper request under rule 34.04(2). Conversely, the November Minutes are not specifically referred to in the Statement of Defence and Counterclaim. The pleading references a Board of Directors meeting on November 27, 2020 and certain business conducted at the meeting (the approval of the September Minutes) is referred to and relied on, but the minutes of the November meeting are not referenced anywhere in the pleading. For this reason, I find that the Request to Inspect the November Minutes was not a proper request under rule 30.04(2). However, as explained below, that does not end the inquiry as to whether the November Minutes ought to be produced pursuant to rule 30.04(5).
[29] In this case, the defendant objects only to the production of the portions of the Minutes which it says are irrelevant and commercially sensitive. Neither Harris nor Mask deals with the issue of a document that is alleged to be partially relevant. In both Harris and Mask, the court dismissed the request to produce each document in its entirety. Neither case provides support for the proposition that a party may redact irrelevant portions of an otherwise relevant document in response to a request to admit. In support of that argument, the defendant relies on the decision in McGee v. London Life Insurance Co.
[30] Before turning to McGee, I pause to note that, in my view, the defendant’s proposal to redact irrelevant information from the September Minutes is fundamentally flawed as the entire document is deemed relevant by operation of law. Per 1483881 Ontario Inc. and Timminco, the September Minutes have been incorporated by reference in their entirety into the Statement of Defence and Counterclaim. As relevance for discovery purposes is determined by reference to the pleadings, the entirety of the September Minutes is relevant for the purpose of documentary discovery. I would order the production of the unredacted September Minutes under Rule 30.04(5) on this basis alone. However, in the event I am wrong that the reference to the September Minutes in the pleading renders the document relevant in its entirety, I have considered below whether it may otherwise be redacted for relevance.
[31] As a general rule, a party is not entitled to redact out the irrelevant portions of an otherwise relevant document produced in litigation, whether the document is produced in response to a request to inspect, as part of documentary discovery or otherwise. Albrecht v. Northwest Protections Services Ltd., [2005] O.J. No 2149, 139 A.C.W.S. (3d) 644 (S.C.J.) at para. 11. That is the starting point of Justice Strathy (as he then was) in McGee: “It is impermissible for a party to redact portions of a relevant document simply on the basis of its assertion that those portions are not relevant”: McGee, supra at para. 8.
[32] The motion in McGee, was not a motion under Rule 30.04(2) or (5) seeking documents referred to in a pleading or affidavit. It was a motion by an applicant seeking production of documents refused on cross-examination of the respondent’s affiant in the application. The documents requested included minutes of the meetings of the respondent’s board of directors, which the respondent sought to redact for relevance. In his reasons on the motion, Justice Strathy (as he the was) describes an exception to the rule against redacting for relevance, adopting the statement of Lowry J. (as he then was) in North American Trust Co. v. Mercer International Inc. 1999 CanLII 4550 (BC SC), [1999] B.C.J. No. 2107 (S.C.):
Under the rules of this court, a litigant cannot avoid producing a document in its entirety simply because some parts of it may not be relevant. The whole of a document is producible if a part of it relates to a matter in question. But where what is clearly not relevant is by its nature such that there is good reason why it should not be disclosed, a litigant may be excused from having to make a disclosure that will in no way serve to resolve the issues. In controlling its process, the court will not permit one party to take unfair advantage or to create undue embarrassment by requiring another to disclose part of a document that could cause considerable harm but serve no legitimate purpose in resolving the issues. (McGee, supra at para 9, citing with approval North American Trust Co., supra at para 13)
[33] Justice Strathy went on to order the respondent in McGee (London Life) to produce the board minutes in unredacted form, finding that the respondent had failed to sufficiently demonstrate that production of the irrelevant portions of the minutes would cause harm:
[21] In this case, London Life has identified no aspect of any of the documents at issue that gives rise to an interest requiring protection, other than the general interest that every company would have in the confidentiality of minutes of board and committee meetings and other corporate records. Nothing has been identified that could be in any way harmful to the commercial interests of London Life or that would cause embarrassment or prejudice to any third party. (McGee, supra at para 21)
[34] In coming to this determination, Justice Strathy had the benefit of reviewing unredacted copies of all the documents at issue. These documents had been provided to the court by the respondent under seal without being served on the applicant, employing a procedure similar to that used for the court’s assessment of privilege claims under rule 30.04(6). The defendant in this case has not provided the court with sealed unredacted copies of the documents at issue, despite being specifically invited to do so by the plaintiffs in their supplementary motion record served four months before the hearing of this motion. The defendant relies heavily, if not exclusively, on McGee in resisting production of the redacted portions of the Minutes, and yet has provided no explanation as to why unredacted copies of the Minutes were not provided to the court as was done in that case.
[35] Assuming the exception to the rule against redaction for relevance described in McGee applies to a request to inspect under rule 30.04, before denying the production of unredacted records I must be satisfied that the redacted information is both irrelevant to the issues (serving “no legitimate purpose in resolving the issues”) and that production of the redacted information could cause considerable harm. The onus in demonstrating both irrelevance and harm is on the defendant as the producing party.
[36] The only evidence before me on the issue of relevance are competing affidavits from the defendant’s current CEO and the plaintiff’s lawyer, both of whom have seen the unredacted Minutes. The defendant CEO’s affidavit attaches copies of the redacted Minutes, and notes that headings for the redacted sections of the Minutes have not been redacted. The affidavit states that a “review of the headings clearly indicates that the redacted portions of the Minutes relate to commercially sensitive aspects of TGC’s affairs which are irrelevant to this matter” [my emphasis]. The affidavit provides very little evidence about the content of the redacted sections of the minutes beyond what is indicated by the headings. The repeated assertion in the affidavit that headings clearly demonstrate the irrelevance of redacted information is argument, not evidence.
[37] The affidavit of the plaintiff’s lawyer states that during the Zoom videoconference when he was shown copies of the unredacted Minutes, “it became clear to both it became clear to both myself and Ms. Refai that relevant portions of the September Minutes had been improperly redacted in the versions produced for inspection on October 19, 2021.” This is also argument, not evidence, although I note that the plaintiff’s counsel is at a serious disadvantage from an evidentiary standpoint not having a copy of the unredacted Minutes available to him at the time the affidavit was sworn.
[38] Even if I were to accept the affidavit evidence of both parties on the issue of relevance, I have no way of resolving the conflict between the two without reviewing to the unredacted Minutes. As the defendant bears the onus of demonstrating lack of relevance, the defendant’s failure to provide a copy of the unredacted minutes to the court is determinative of this issue in the plaintiffs’ favour. I find that the defendant has not met its onus in demonstrating that the redacted information is irrelevant to the issues in the litigation.
[39] I also find that the defendant has failed to satisfy its onus on the issue of harm. There is an important distinction between this case and McGee when it comes to the consideration of the harm flowing from the production of documents. In McGee, the subject board minutes were requested on the cross-examination on affidavits sworn in the application. As such, the documents were sought as evidence in a proceeding before the court, and not as documentary discovery. Importantly, unlike the production of documents made in response to a request to inspect under rule 30.04, the productions sought in McGee would not have been subject to the deemed undertaking in rule 30.1.01. The potential harm from the production ordered in McGee would have included any harm that might flow from disclosure of the documents to third parties (unrestricted by the deemed undertaking rule) and the imminent disclosure of the documents to the public on the filing of the application record.
[40] In contrast, an order for production under rule 30.04(5) is not an evidentiary order, but an order for documentary discovery. Documents produced under such an order are produced only to the requesting party in the litigation and are subject to the deemed undertaking rule. To establish harm flowing from such an order the producing party would have to provide evidence demonstrating that production to the requesting party, on its own, would be harmful to the producing party. The defendant’s evidence of harm in this case focusses on the harm from the potential public disclosure of the unredacted Minutes, not from the disclosure to the plaintiff.
[41] The defendant has provided no evidence that production of the unredacted Minutes to the plaintiffs would be per se harmful, nor could the defendant reasonably assert such a position given that the plaintiff, Rath, attended both board meetings and had full disclosure of the contents of the Minutes in the course of those meetings. Instead, the defendant argues that production to the plaintiff will necessarily lead to public disclosure. The defendant’s only evidence in this regard is the following unfounded, and arguably vexatious, assertion by the defendant’s CEO in his affidavit: “I verily believe that Rath is seeking the production of the full unredacted Minutes in an attempt to make TGC’s commercially sensitive information publicly available”.
[42] In the absence of compelling evidence to the contrary, I am not prepared to assume that there is any risk that the unredacted Minutes would be publicly disclosed by the plaintiff in breach of the deemed undertaking rule. While the unredacted Minutes could eventually find their way into the public record in evidence filed on a motion or at trial in this action, there is no evidence before me that such court filing is imminent or even contemplated. In any event, the remedy to protect against such disclosure in a public court filing is a sealing order, not the restriction of one party’s rights of documentary discovery.
Conclusion
[43] In summary, to the extent that the exception to the prohibition against redacting for relevance described in McGee applies to a request to inspect under rule 30.04(2) or an order for production under rule 30.04(5), I find that the defendant has failed to demonstrate that the redacted portions of the Minutes are irrelevant and has failed to demonstrate that the production of the unredacted minutes to the plaintiffs would be harmful to the defendant. For this reason and the reasons given above, the plaintiffs’ motion for production of the unredacted September Minutes is granted.
[44] I also grant the plaintiff’s motion as it relates to the production of the unredacted November Minutes. While the November Minutes were not specifically referenced in the pleadings, they clearly contain information relevant to the issues in the action given the defendant’s reference to, and reliance on, the approval of the September Minutes at the November board meeting. While the November Minutes would not normally be producible until after the delivery of the defendant’s affidavit of documents, rule 30.04(5) provides for production “at any time” and I am exercising my discretion to order that production now.
[45] The plaintiffs also seek an order under rule 30.08(2) striking out the Statement of Defence and Counterclaim if the defendant fails to produce the unredacted minutes if ordered. I am not prepared to grant such an order as it is premature. In the event that the defendants fail to comply with the order to produce the unredacted Minutes the plaintiffs may seek a remedy at that time. The appropriate remedy will depend on the nature of the non-compliance and the circumstances surrounding it.
Costs
[46] As the plaintiffs were entirely successful on the motion, they shall have their costs. The plaintiffs submit that the defendant’s failure to respond to the request to inspect or even provide its position until more than three months after service of the request and a month after service of the plaintiffs’ motion record has unnecessarily increased the costs of this motion and warrants an award of full indemnity costs. While I agree that an increased cost award is warranted, in my view substantial indemnity costs are sufficient. The plaintiffs’ costs outline calculates their substantial indemnity costs at $7,119.81, inclusive of HST. Given that this is less than half the defendant’s calculation of its own partial indemnity costs of $15,889.27 in its costs outline, the amount claimed by the plaintiffs is clearly within the reasonable expectations of the parties.
Result
[47] The defendant shall produce to the plaintiffs a full and unredacted copy of the September Minutes and a full and unredacted copy of the November Minutes within 15 days of the release of these Reasons. The defendant shall pay to the plaintiffs their costs of this motion on a substantial indemnity scale, fixed at $7,119.81, inclusive of HST, payable forthwith.
D. Michael Brown, Associate Judge
Released: September 13, 2022
COURT FILE NO.: CV-21-00660465-0000
DATE: 2022-09-12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ULRICH RATH and FOCUS-RATH & ASSOCIATES LTD.
Plaintiffs (Defendants by Counterclaim)
- and –
TANZANIAN GOLD CORPORATION
Defendant (Plaintiff by Counterclaim)
REASONS
ASSOCIATE JUSTICE D. MICHAEL BROWN
Released: September 13, 2022