Court File and Parties

COURT FILE NO.: CV-20-644516 MOTION HEARD: 20230203 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Triple-K Consult Ltd., Plaintiff AND: Bombardier Inc., Defendant

BEFORE: Associate Justice Jolley

COUNSEL: Jennifer Teskey and Erika Woolgar, counsel for the moving party defendant John Adair, counsel for the responding party plaintiff

HEARD: 3 February 2023

Reasons for Decision

[1] The defendant seeks an order requiring the plaintiff to deliver a further and better affidavit of documents.

[2] The plaintiff was appointed as a sales representative for the defendant in February 2015 pursuant to a sales representative agreement (the “Agreement”), which was renewed annually, with various amendments, until its expiry on 1 June 2018. It has sued for commissions owing on Bombardier’s sale of two CS300 aircraft to Air Tanzania in November 2016. The aircraft were delivered in December 2018 and January 2019 and the plaintiff invoiced Bombardier in January 2019. Bombardier did not pay the invoice but gave notice in February 2019 that it would conduct an audit of the plaintiff’s work.

[3] Under the auspices of the audit, the defendant sent the plaintiff its audit request in July 2019 and the plaintiff produced those documents in October. In November 2019, the plaintiff provided limited financial documents and delivered further information in March 2020 in response to the defendant’s request of December 2019. The plaintiff made its last attempt to satisfy the audit request by sending further information in June 2020.

[4] The plaintiff argues that it has complied with the audit request, as the defendant had characterized it in its original requests, i.e., for “information related to Triple K and the transactions involving Bombardier, Triple K and the TGFA [the Tanzania Government Flight Agency]” and the request for “documentation related to these relationship and transactions, including negotiations, and payments information”. What it has objected to is the expansion of that audit to matters beyond the plaintiff’s work for the defendant under the Agreement.

[5] The defendant argues that is permitted to audit the plaintiff’s activities to verify its compliance with the Agreement and with all applicable laws, before any commission is payable. It takes the position that it has a contractual right to audit the plaintiff for a period of five years as set out in article 2.5(n), excerpted here:

2.5 During the term of this Agreement, Representative shall:

(n) maintain complete and accurate records of work performed and services provided under or related to this Agreement. During the term of this Agreement and for a period of five (5) years thereafter, Representative will prepare and maintain accurate records as necessary to document its activities under this Agreement and to verify that Representative has complied with this Agreement, applicable laws and regulations and all representations and certifications it has made to Bombardier (“Compliance”). Representative grants Bombardier the right to access, examine and audit these records and the systems and facilities they are stored in and to interview its employees, managers and agents to verify Compliance ("Audit"). Audits will be done at Representative's premises at any time after reasonable written notice. Bombardier can conduct an Audit either by its own internal auditors and Investigators and/or through third party auditors and investigators of Bombardier's choice (the "Auditors"). Representative will cooperate with the Auditors in a timely matter and provide appropriate facilities and make employees and managers available to provide reasonable assistance as requested by Bombardier, including making employees, managers and agents available for interviews with the Auditors. The Auditors will limit disclosure of the Audit results to the sufficiency of the records, whether Representative is in Compliance and the nature, amount and details of any non-Compliance.

[6] While there are disputes over the scope of the audit, I do not agree that the plaintiff has been uncooperative. The plaintiff produced documents in October 2019 pursuant to the first Bombardier request, which included quarterly sales reports, all correspondence between it and Bombardier and between it and potential Bombardier customers, all presentations and proposals it delivered, its unaudited financial statements, an excel spreadsheet representing its general ledger and a list of all expenditures incurred relating to the sale of the aircraft, with supporting documentation. It produced financial documents as they related to Bombardier as requested in November 2019, but declined to produce documents that, in its view, did not relate to Bombardier or which extended beyond the end of the parties’ contractual relationship. Where the parties part company is on the scope of what must be produced.

[7] The list of requested documents is fairly extensive. It ranges from the plaintiff’s constating documents to its certified bank statements from 2015 to present, from its general ledger to a complete listing of all sales efforts to any client or potential client, from particulars on transactions involving the plaintiff’s lawyers and consultants to disclosure of the claimed expenses of the plaintiff’s principal.

[8] The plaintiff argues that it has fulfilled the audit request and that any additional documents fall outside its contractual obligation. It further argues that, even if it did not comply with the audit obligation (which it denies), such would permit the defendant to terminate the Agreement (which has already expired) but would not affect the defendant’s obligation to pay the commission owing. The latter part of section 2.5(n) provides that “Failure to comply with the terms of this section, restricting the Auditor's access to business records or employees, or hindering the Audit process is grounds for termination of this Agreement.”

[9] The Agreement further provides that “no termination or expiration of the Agreement shall relieve either party hereto of the obligation to pay any amounts legally payable to the other pursuant to this Agreement.” (section 5.6)

[10] While the defendant has not terminated the Agreement, which ended by its own terms before the payment issue arose, the ultimate remedy available to the defendant in the event of non-compliance is found in sections 2.5(i) and 3.4(e) of the Agreement. The Agreement obliges the plaintiff to provide evidence that it was “actively involved in and instrumental to a specific transaction”. Further, Bombardier must be satisfied that the commission payment is not illegal and that the plaintiff’s representations in the Agreement are true. The contractual remedy for failure to provide that information is set out, as follows:

2.5(i) Should any such reports be determined by Bombardier to be insufficient to allow it to determine that Representative has been actively involved in and instrumental to a specific transaction, Bombardier shall be entitled to refuse payment of any fees or commission to Representative until such time as Representative provides such further information as Bombardier may require.”

3.4 Notwithstanding anything to the contrary in this Agreement, in no event shall Bombardier be required to pay any fee or commission under this Agreement to Representative or to compensate Representative, in any way whatsoever, for any services performed by Representative or any expenses or liabilities incurred by Representative in connection with:

(e) any Sale of any Aircraft with respect to which payment of a fee or commission is prohibited by any law or regulation of Canada, the United States, the United Kingdom or any laws of the Territory, or any policy or requirement of the Customer (or, in the case of a SLB Transaction, the applicable Third Party Lessor), and is conditional in each case upon the representations made by the Representative in connection with this Agreement to be true and correct;

[11] Relevance is governed by the pleadings. In its defence, Bombardier pleads that the plaintiff has not complied with the audit which is a necessary precondition to payment. It is the failure to comply with the audit request that is the crux of the defence. Yet, the import of this motion would be to have the plaintiff comply with the audit rather than support the defence that it has not complied.

[12] The defendant may maintain its position at trial or on summary judgment that the plaintiff has failed to disclose the necessary documents and satisfactorily complete the ongoing audit or that it has otherwise not fulfilled the preconditions of the Agreement, such as providing sufficient documentation to satisfy the defendant that it was instrumental in the sale of the aircraft. As it has failed to meet these pre-conditions for payment as set out in the Agreement, no payment is due. It has specifically pleaded this in paragraph 58 and elsewhere in its defence, noting “conditions to payment have not been met”. The risk of non-production will then fall on the plaintiff, rather than the defendant.

[13] While I am of the view, as a result, that the plaintiff has not met the test under rule 30.06, I will comment on the specific documentary requests. The defendant has requested eight categories of documents.

(1) Constating documents

[14] The defendant has known of the plaintiff’s corporate structure, including its nominees, since it was first disclosed in the Agreement signed in December 2014. There is no evidence that it questioned the legitimacy of the structure at all, or did any due diligence concerning the structure or the parties referenced, until after the aircraft sales were made and the commission due.

[15] Additionally, while the plaintiff may have put the ownership structure in issue by pleading that Dr. Kariuki is the ultimate beneficiary of the plaintiff, the defendant has conceded that point in paragraph 4 of its defence. The plaintiff has acknowledged on this motion that it will be required to answer questions concerning the representations made in the Agreement as they relate to the plaintiff and to Dr. Kariuki. The defendant is at liberty to ask about the structure and the plaintiff’s ultimate ownership on discovery and lay the groundwork for any further productions at that time.

(2) Certified bank statements from 2015 to present

[16] The defendant requests these statements to verify receipts and expenditures allegedly made by the plaintiff in connection with the sale of the aircraft, to verify other “transactions of interest” and to trace the use of the commissions it paid on earlier sales in 2017 and 2018. While the defendant argued that it does not intend to audit the plaintiff’s every coming and going, it is difficult to see how production of the unredacted bank statements over a seven year period would lead to anything but a wholesale audit of the business. The plaintiff deposed that it had no objection to Bombardier’s request for “a list of expenditures incurred related to the sale of Bombardier aircrafts and their correspondent supporting documentation” and has provided that.

[17] The defendant may ask about these issues during discovery and the parties may be able to agree on a narrower approach or the request can be renewed after a better foundation is laid. The defendant can also question the plaintiff on the bank statements it has provided to determine how and when they were created and received and lay the foundation for a motion if the statements are not confirmed as authentic. The defendant indicated it would also consider a resolution of this category based on receipt of a certified copy of exhibit V and confirmation that the statement activity ends in February 2018, which I encourage the plaintiff to consider.

(3) Detailed general ledger from 2015 to present

[18] The plaintiff indicated in its factum and on the motion that it does not have a formal general ledger and has produced the excel spreadsheet that it does have. The defendant may elicit information about what financial documents the plaintiff does have during discovery including what it did with the funds it received. At present, based on the plaintiff’s representations, there are no further general ledger productions to be had.

(4) Documents pertaining to the plaintiff’s sales efforts

[19] The plaintiff has advised that it has produced all the documents it has and has sworn an affidavit to that effect. While the defendant believes there must be further notes or records, this is an area better pursued on discovery or cross examination. The defendant can also ask the plaintiff specifically about the work it pleaded it undertook in paragraphs 30-32 and elsewhere to enable Bombardier to obtain the sale.

(5) Documents pertaining to transactions from July 2014 to December 2017 for which the plaintiff’s lawyers, Robson Harris & Co. Advocates received fees

[20] The defendant intends to question the fees the plaintiff paid to its lawyers, as, in its view, they appear disproportionate to the plaintiff’s commercial activity during that time. It would be almost impossible to comply with the defendant’s request for production of the “supporting documents for the plaintiffs transactions throughout Africa from 2014 to 2017” that involved the plaintiff’s lawyers without breaching solicitor client privilege. It is open to the defendant to ask the plaintiff to expand on the “limited explanation” it has provided to date for these payments. If it can establish relevance, it can ask Dr. Kariuki about any purchases he made through the law firm without the need to obtain documents from or related to the plaintiff’s lawyers.

(6) Documents concerning services rendered to the plaintiff by a consultant, Lewis Nathan Advocates (“LNA”) or Lewis Mosho

(7) Documents concerning payments made by the plaintiff to LNA or Lewis Mosho

[21] The records disclosed to date show the plaintiff made a $50,000 payment to LNA in 2015 and another $25,000 payment in 2016 related to the sale of Bombardier aircraft in Zambia. The defendant argues that sub-contractors are prohibited under the Agreement and that the plaintiff must have additional documents about these services and payments.

[22] The plaintiff has already produced the Consultancy Partnership Agreement between it and LNA made 22 August 2015, along with the two invoices and confirmed in its affidavit of documents that it has produced all relevant documents. The Consultancy Partnership Agreement indicates on its face that the client in question is Bombardier and the scope of work relates to aviation business opportunities in Zambia. The defendant is able to examine the nature of and rationale for these payments on discovery to determine what role, if any, Lewis Nathan played in the prior sales and renew its request for further productions at that time if it establishes that additional relevant documents exist.

(8) Documents to support the payment of $75,000 to the plaintiff’s principal, Dr. Kariuki

[23] The plaintiff has explained that this payment of $75,000 was an advance on future business expenses. The defendant seeks documentary support for the expenses. The defendant wishes to know whether Dr. Kariuki spent the money and, if so, on what, questions that can be put to him on discovery. It is appropriate that the plaintiff deliver up supporting documents for the $35,000 Dr. Kariuki says he did spend. The balance can be dealt with during discoveries.

[24] This decision does not preclude the defendant examining the plaintiff about these issues in order to establish a basis for their production beyond “speculation, intuition or guesswork” (Glover v. IBM Canada Ltd. 2020 ONSC 544).

[25] I decline to make the order requested by the plaintiff that I direct that the audit right does not include a right to trace the use of Bombardier’s funds. First, there is no motion before me to that effect. Second, Bombardier is entitled to argue that the Agreement audit right allows it to monitor the plaintiff’s legal compliance generally, including any restrictions on the use of payments that originated from Bombardier and it is free to pursue that line of inquiry both on discovery and on the summary judgment motion or at trial.

[26] While there has not been agreement on discoveries, the plaintiff advised on the motion that it is amenable to conducting cross-examinations and treating them as discoveries should its summary judgment motion be denied. It is also amenable to having discoveries before the motion, should the defendant prefer. In either case, the defendant will not be put in the position of having to defend the summary judgment motion without the opportunity to question the plaintiff.

[27] Other than production of the documents to support the $35,000 that Dr. Kariuki advised he spent on Bombardier-related endeavours, the motion is dismissed.

[28] Having reviewed both parties’ costs outlines, I find that $5,500 is a reasonable sum for the defendant to have expected to pay the plaintiff if it did not succeed on its motion. The defendant shall pay the plaintiff that all-inclusive sum set on a partial indemnity basis within 30 days of today’s date.

Associate Justice Jolley Date: 1 March 2023