Court File and Parties

2023 ONSC 5058

Court File No.: CV-15-00542566

Motion Heard: 20230607

Superior Court of Justice - Ontario

Re: Kaboom Fireworks Inc., Plaintiffs

And: Pretty Packaging & Printing (HK) Limited, China Fireworks Trading Limited, Shogun (USA) Pyrotechnics Limited, Vulcan Fireworks International Inc., Mystical Distributing Company Ltd., Mystical Distributing International Ltd., Joseph Wan also known as Chalk Wah Joseph Wan also known as Joseph Wah Chalk Wan also known as Tong Foon Cheung Wan and Cindy Vermeulen Cheung also known as Ying Sau Cindy Vermeulen Cheung also known as Cindy Sau Ying Vermeulen Cheung, Defendants

Before: Associate Justice B. McAfee

Counsel: D. Collett, Counsel, for Kaboom Fireworks Inc., Plaintiff A. Schein and J. Arabi, Counsel, and D. Hayes-Narine, Student, for Vulcan Fireworks International Inc., Joseph Wan also known as Chalk Wah Joseph Wan also known as Joseph Wah Chalk Wan also known as Tong Foon Cheung Wan, Defendants M. Pretsell, Counsel, for Mystical Distributing Company Ltd. and Mystical Distributing International Ltd., Defendants

Heard: June 7, 2023

Reasons for Decision

[1] The plaintiff Kaboom Fireworks Inc. (Kaboom) brings this motion for an order requiring the defendants Vulcan Fireworks International Inc. (Vulcan), Joseph Wan also known as Chalk Wah Joseph Wan also known as Joseph Wah Chalk Wan also known as Tong Foon Cheung Wan (Wan), Mystical Distributing Company Ltd. (Mystical Distributing) and Mystical Distributing International Ltd. (Mystical International) (collectively Mystical) to answer undertakings and refusals given on examinations for discovery.

[2] This action arises as a result of a dispute concerning an Exclusive Supply Agreement dated June 30, 2009 (the Agreement). Kaboom alleges that the defendants’ actions caused the intentional breach of Vulcan’s obligations to Kaboom under the Agreement, leaving Kaboom without supply for its 2016 fireworks order. Kaboom alleges that the defendants’ conduct forced Kaboom to source alternative supply at a much greater cost when Kaboom ought to have had the benefit of the Agreement pricing and payment terms through to May 31, 2019. Kaboom seeks damages arising from the alleged unlawful termination of the Agreement.

[3] Kaboom is an Ontario corporation operating as a licensed wholesale and retail distributor of fireworks and related products.

[4] Vulcan is a dissolved Ontario corporation and at the material times was a distributor of fireworks that it obtained from manufacturers in China. Vulcan was Kaboom’s supplier of fireworks pursuant to the Agreement.

[5] Wan is the representative of Vulcan. Kaboom alleges that Wan exerted control over both Vulcan and Vulcan’s manufacturer in China, the defendant China Fireworks Trading Limited (China Fireworks).

[6] Kaboom further alleges that Wan, along with the defendant Cindy Vermeulen Cheung also known as Ying Sau Cindy Vermeulen Cheung also known as Cindy Sau Ying Vermeulen Cheung (Cheung) are controlling minds of China Fireworks and that China Fireworks is the successor entity to the manufacturer in China, the defendant Shogun Pyrotechnics Limited (Shogun). Shogun entered into the Agreement with Vulcan and Kaboom.

[7] It is Wan’s evidence that Shogun never operated, and the Agreement was intended to name the defendant Shogun (USA) Pyrotechnics Limited (Shogun USA) as the manufacturer.

[8] Kaboom pleads that the defendant Pretty Packaging & Printing (HK) Limited (Pretty Packaging) is a corporation in Hong Kong that was formerly named Shogun and carried on business as a manufacturer and supplier of fireworks. It is alleged that Wan and Cheung were the controlling minds, shareholders and directors of Pretty Packaging.

[9] Mystical Distributing is a British Columbia corporation and extra-provincially registered in Ontario. Mystical International is an Ontario corporation. It is alleged that Mystical is Kaboom’s competitor in the business of wholesaling and retailing fireworks and related products. On or about October 20, 2015, Mystical acquired Vulcan.

[10] The action was commenced on December 14, 2015. Attempts have been made to serve the statement of claim on Cheung and Pretty Packaging through the Central Authority, but it does not appear that they were ever served. Shogun USA was noted in default on July 18, 2016. China Fireworks was previously represented by counsel who were removed from the record by order dated December 15, 2017.

[11] The applicable Rules of Civil Procedure are Rule 1.04(1) and (1.1), Rule 29.2.03(1), Rule 31.06(1) and (2), Rule 31.07(1) and Rule 34.15(1)(a).

[12] In Ontario v. Rothmans Inc., 2011 ONSC 2504 (Ont. S.C.J.) Justice Perell summarizes the principles concerning the scope of questioning on examinations for discovery at paragraph 129:

• The scope of the discovery is defined by the pleadings; discovery questions must be relevant to the issues as defined by the pleadings: Playfair v. Cormack (1913), 1913 ONSC 599, 4 O.W.N. 817 (H.C.J.).
• The examining party may not go beyond the pleadings in an effort to find a claim or defence that has not been pleaded. Overbroad or speculative discovery is known colloquially as a “fishing expedition” and it is not permitted. See Cominco Ltd. v. Westinghouse Can. Ltd. (1979), 1979 BCCA 489, 11 B.C.L.R. 142 (C.A.); Allarco Broadcasting Ltd. v. Duke (1981), 1981 BCSC 723, 26 C.P.C. 13 (B.C.S.C.).
• Under the former case law, where the rules provided for questions “relating to any matter in issue,” the scope of discovery was defined with wide latitude and a question would be proper if there is a semblance of relevancy: Kay v. Posluns (1989), 1989 ONSC 4297, 71 O.R. (2d) 238 (H.C.J.); Air Canada v. McConnell Douglas Corp. (1995), 1995 ONSC 7147, 22 O.R. (3d) 140 (Master), aff’d (1995), 1995 ONSC 7189, 23 O.R. (3d) 156 (Gen. Div.). The recently amended rule changes “relating to any matter in issue” to “relevant to any matter in issue,” which suggests a modest narrowing of the scope of examinations for discovery.
• The extent of discovery is not unlimited, and in controlling its process and to avoid discovery from being oppressive and uncontrollable, the court may keep discovery within reasonable and efficient bounds: Graydon v. Graydon (1921), 1921 ONSC 444, 67 D.L.R. 116 (Ont. S.C.) at pp. 118 and 119 per Justice Middleton (“Discovery is intended to be an engine to be prudently used for the extraction of truth, but it must not be made an instrument of torture …”); Kay v. Posluns (1989), 1989 ONSC 4297, 71 O.R. (2d) 238 (H.C.J.) at p. 246; Ontario (Attorney General) v. Ballard Estate (1995), 1995 ONCA 3509, 26 O.R. (3d) 39 (C.A.) at p. 48 (“The discovery process must also be kept within reasonable bounds.”); 671122 Ontario Ltd. v. Canadian Tire Corp., [1996] O.J. No. 2539 (Gen. Div.) at paras. 8-9; Caputo v. Imperial Tobacco Ltd., [2003] O.J. No. 2269 (S.C.J.). The court has the power to restrict an examination for discovery that is onerous or abusive: Andersen v. St. Jude Medical Inc., [2007] O.J. No. 5383 (Master).
• The witness on an examination for discovery may be questioned for hearsay evidence because an examination for discovery requires the witness to give not only his or her knowledge but his or her information and belief about the matters in issue: Van Horn v. Verrall (1911), 3 O.W.N. 439 (H.C.J.); Rubinoff v. Newton, 1966 ONSC 198, [1967] 1 O.R. 402 (H.C.J.); Kay v. Posluns (1989), 1989 ONSC 4297, 71 O.R. (2d) 238 (H.C.J.).
• The witness on an examination for discovery may be questioned about the party’s position on questions of law: Six Nations of the Grand River Indian Band v. Canada (Attorney General) (2000), 2000 ONSCDC 26988, 48 O.R. (3d) 377 (S.C.J.).

[13] I will now turn to the impugned undertakings and refusals. The undertaking and refusals numbers are taken from the Form 37C charts. The questions were argued in categories.

Category No. 1: Refusals regarding the relationship between China Fireworks, Shogun USA and Pretty Packaging (Refusal Nos. 1-16 from the examination for discovery of Wan personally and on behalf of Vulcan; Refusal No. 14 from the examination for discovery of Rod Cameron (Cameron) on behalf of Mystical)

[14] Wan/Vulcan have refused to provide certain information regarding the relationship between the defendant entities. Mystical has refused to make an inquiry of Cheung for the addresses where the fireworks imported from China Fireworks are manufactured.

[15] I am satisfied that the questions in this category are relevant based on the pleadings. The questions are relevant to the issue of the relationship between China Fireworks, Shogun USA and Pretty Packing.

[16] It is alleged that Shogun USA and China Fireworks are the successor entities to Pretty Packaging (statement of claim, para. 4). It is alleged that Shogun’s obligations under the Agreement are binding on Shogun USA and/or China Fireworks, the successors to Shogun (statement of claim, para. 28).

[17] Despite signing the Agreement on behalf of Shogun, Wan testified that Shogun never conducted business (Wan transcript, page 37). Wan pleads that his signing of the Agreement on behalf of Shogun was an inadvertent error and the Agreement should have been signed on behalf of Shogun USA (statement of defence of Vulcan and Wan, paras. 7 and 8).

[18] With respect to the requested inquiries by Wan/Vulcan of Cheung, I am satisfied that it is reasonable for them to make the inquiries given Wan’s relationship with Cheung and Kaboom’s difficulty effecting service of the statement of claim on Cheung. Wan’s evidence is that he provided services for China Fireworks (Wan transcript, pages 41, 49-50). Wan testified that he communicated with Cheung only a few days prior to his examination (Wan transcript, page 70). Mystical is also in a better position than Kaboom to make an inquiry of Cheung to advise of the addresses where its products imported from China Fireworks are manufactured.

[19] The questions in this category shall be answered.

Category No. 2: Refusals regarding Kaboom’s damage calculation (Refusal Nos. 17-19 from the examination for discovery of Wan personally and on behalf of Vulcan; Refusal Nos. 1-18 from the examination for discovery of Mark Phillips (Phillips) on behalf of Mystical Distribution; Refusal No. 1-4, 8-10 and 15-16 from the examination for discovery of Cameron on behalf of Mystical)

[20] With respect to refusal No. 17 from the examination for discovery of Wan personally and on behalf of Vulcan, in argument in response, the position taken is that the question has been answered at question 202. Kaboom agrees that the question has been answered at question 202.

[21] With respect to the remaining questions in this category, I am satisfied that the questions are relevant based on the pleadings. The questions are relevant to Kaboom’s claim for damages (statement of claim, paras. 1(a)-(e), 33- 35(f) and 35(g)).

[22] To the extent that it is argued that the questions would only be relevant if Kaboom had expressly pleaded disgorgement of profits, a claim of disgorgement is not a necessary precondition for production of documents relevant to Kaboom’s claim for damages. The claim for damages is broadly pleaded and includes a claim for lost profits and lost customers.

[23] To the extent it is argued that certain records are proprietary and confidential, Kaboom acknowledges that the records produced are subject to the deemed undertaking rule. In the event that production was ordered, no protective or confidentiality order was proposed or sought. If a confidentiality order is sought, the parties shall make all reasonable attempts to agree to same. Should this be an issue that the parties are unable to resolve, the parties may return before me to address the issue of a confidentiality order.

[24] The questions in this category, save for refusal no. 17 from the examination for discovery of Wan personally and on behalf of Vulcan which has been answered, shall be answered. Should a confidentiality order be sought that cannot be agreed to, the parties may return before me to address this issue.

Category No. 3: Refusals regarding the nature of the sale of Vulcan (Refusal No. 20 from the examination for discovery of Wan personally and on behalf of Vulcan; Refusal Nos. 19-20 from the examination for discovery of Phillips on behalf of Mystical Distribution)

[25] I am satisfied that the questions are relevant based on the pleadings. Kaboom alleges that Mystical acquired Vulcan and has become the successor to it, such that it is liable for Vulcan’s obligations under the Agreement (statement of claim, paras. 1(a), 8, 17-19, 22 and 27).

[26] With respect to Refusal No. 19 from the examination for discovery of Phillips on behalf of Mystical Distribution, it is argued that the question is too wide because it seeks production of all correspondence. Kaboom argues that it is implicit that only relevant correspondence would need to be produced. I agree that the question as phrased is overly broad. However, because there is an obligation to produce such relevant correspondence, the refusal shall be answered to the extent the correspondence is relevant.

[27] The questions in this category shall be answered with refusal no. 19 being limited to relevant correspondence.

Category No. 4: Refusals regarding Wan’s role and knowledge of the defendant companies (Refusal Nos. 21-23 from the examination for discovery of Wan personally and on behalf of Vulcan)

[28] I am satisfied that the questions are relevant based on the pleadings. Kaboom alleges that Shogun/China Fireworks’ purported cancellation of the Agreement was part of an intentional effort by Wan and Cheung to evade liability for their companies’ contractual duties by using Shogun as a mere façade (statement of claim, para. 29).

[29] The questions in this category shall be answered.

Category No. 5: Outstanding undertakings (Undertaking Nos. 1-6 from the examination for discovery of Cameron on behalf of Mystical)

[30] The questions in this category have been resolved. On consent, undertaking nos. 1, 2, 3, 4, 5 and 6 from the continued examination for discovery of Cameron on behalf of Mystical shall be answered within 90 days of the date of the motion without prejudice to the Kaboom’s entitlement to ask questions arising from the answers provided.

Category No. 6: Refusals regarding documentary disclosure (Refusal Nos. 5-7 from the examination for discovery of Cameron on behalf of Mystical)

[31] Refusal nos. 5 and 6 have been resolved. On consent, refusal nos. 5 and 6 from the examination for discovery of Cameron on behalf of Mystical shall be answered within 90 days of the date of the motion.

[32] Refusal no. 7 has been resolved. It is agreed that the question has been answered at CaseLines A1060 (Cameron transcript, page 9) and CaseLines A828 (Phillips transcript, page 16) and by the confirmation by Mystical’s counsel on the motion that only Mystical Distributing is involved in the fireworks business.

Category No. 7: Refusal regarding Mystical’s knowledge of Kaboom’s contractual arrangements with Vulcan (Refusal No. 11 from the examination for discovery of Cameron on behalf of Mystical)

[33] I am satisfied that the question in this category is relevant based on the pleadings. Kaboom alleges that Mystical obtained a copy of the Agreement prior to the transaction but refused to comply with it because Mystical believed its terms were too favourable to Kaboom (statement of claim, paras. 18-19, Mystical defence, paras. 2, 3 and 12, see also affidavit of D. Hodgson sworn February 16, 2023, exhibit “I”, email dated October 13, 2015, from Wan stating “Vendor has an existing contract with Kaboom…”).

[34] The question shall be answered.

Category No. 8: Refusals regarding Mystical’s purchase of Vulcan, arrangements with China Fireworks and Mystical’s knowledge of Kaboom’s contract with Vulcan (Refusal Nos. 12-13 from the examination for discovery of Cameron)

[35] The questions in this category have been resolved. On consent, refusal nos. 12-13 from the examination for discovery of Cameron on behalf of Mystical shall be answered by Mystical’s counsel writing to the cell phone provider for the records, reviewing any records received and producing any relevant records received.

Other Relief

[36] In the notice of motion Kaboom also seeks an order for re-attendance on examinations for discovery. The relief concerning re-attendance was not pursued at the return of the motion, without prejudice.

[37] Kaboom also seeks an order to strike the statement of defence of China Fireworks. This relief was not raised during the case conference convened to schedule this motion. In any event, China Fireworks was not provided with notice of the motion. The motion in this regard is adjourned.

Costs

[38] The parties shall make all reasonable attempts to agree on costs of the motion. After making all reasonable attempts to agree on costs, if the parties are unable to agree, any party seeking costs shall serve brief written submissions on costs of three (3) pages or less in length on or before September 29, 2023. Any responding costs submissions shall be three (3) pages or less in length and served on or before October 13, 2023. Any reply costs submissions shall be two (2) pages or less in length and served on or before October 20, 2023. The costs submissions shall be emailed to Assistant Trial Coordinator Teanna.Charlebois@ontario.ca by the above deadlines and shall be accompanied by an affidavit of service. I note costs outlines have been uploaded to CaseLines as agreed at the conclusion of argument.

[39] Order accordingly.

Associate Justice B. McAfee Date: September 7, 2023