Andriuk v. Merrill Lynch Canada Inc., 2011 ABQB 59

Court of Queen ’ s Bench of Alberta Citation: Andriuk v. Merrill Lynch Canada Inc., 2011 ABQB 59 Date: 20110204 Docket: 1001 04055 Registry: Calgary Between: John Andriuk, John Andriuk Investments Ltd., and John Andriuk as Representative Plaintiff Plaintiffs - and - Merrill Lynch Canada Inc. Defendant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice S.L. Martin _______________________________________________________ 1.

Introduction [ 1 ] The Defendant applies to strike a Notice to Admit Facts served after the Plaintiffs filed a statement of claim pursuant to the Class Proceedings Act , S.A. 2003, c. C-16.5. The Defendant has stated its intention to not provide a statement of defence until after the certification hearing and the Plaintiffs have not objected to that approach. The Defendant claims the Notice to Admit is premature and otherwise improper and asks to be relieved from making reply.

2. Procedural History [ 2 ] This action was commenced on March 16, 2010 against the Defendant brokerage firm to impugn its conduct in relation to a particular stock. The Plaintiffs say Merrill breached its obligations to putative class members when it came to hold that stock in a concentrated and controlling position, and when it realized its position, in how it chose to reduce its holding to acceptable levels.

The Plaintiffs say this divestiture was done at their expense and to their prejudice. [ 3 ] Correspondence between counsel during the month of April 2010 was in evidence in which Merrill explained that it chose to defer the filing of a defence until after the certification motion was heard. This is not uncommon in relation to possible class proceedings. [ 4 ] On April 20, 2010 the Plaintiffs served the Notice to Admit Facts, under the old rules, at issue in this application.

Under the new rules it is called a Notice to Admit, the term used in this judgment. [ 5 ] The initial case management conference on June 10, 2010 addressed the order of the various motions filed and anticipated. As matters evolved the motion to strike the Notice to Admit was to be heard first; followed by the Defendant’s motion to remove the Plaintiffs’ lawyers as counsel of record on the basis of an alleged conflict of interest; followed by the certification hearing. [ 6 ] The Notice to Admit contains 61 statements directed to various subjects.

The Plaintiffs say the admissions sought are relevant to the upcoming conflicts motion and the impending certification hearing; as well as the trial proper. [ 7 ] Merrill has not replied to the Notice but has instead applied to set it aside by notice of motion dated September 10, 2010. [ 8 ] The evidence before me on this application includes an affidavit of Krista Collins filed September 10, 2010 for Merrill and an affidavit of Ashley Gregson filed January 29, 2010 for the Plaintiffs. The parties filed thorough briefs and authorities. 3. Issues A.

What Rule of Court Applies to this Application to Strike a Notice to Admit? B. Should the Notice to Admit be Set Aside? C. What is the Legal Effect, if any, of Merrill not responding to the Notice to Admit? 4. Analysis A. What Rule of Court Applies to this Application to Strike a Notice to Admit? [ 9 ] Merrill argues that as the Notice to Admit was taken under and tailored to the former rule 230, and that it’s motion to set aside the Plaintiffs’ Notice to Admit was filed before the new rules came into effect, that the matter should be determined under the old rule. [ 10 ] However, the transition rules in

Part 15.1 provide that the new rules should govern as this is an “existing proceeding”, being a court proceeding commenced but not concluded under the former rules.

[ 11 ] Rule 15.12 makes clear that: Where these rules impose a new test, provide new criteria or provide an additional ground for making an application in an existing proceeding, these rules apply in respect of the application if the application was made but has not been heard prior to the coming into force of these rules. [ 12 ] This application is therefore to be determined under rule 6.37 dealing with Notices to Admit, which falls within division 5: Facilitating Proceedings. It is cited in full: 6.37(1) A party may, by notice in Form 33, call on any other party to admit for the purposes of an application, originating application,

summary trial or trial, either or both of the following: (

a) any fact stated in the notice, including any fact in respect of a record; (

b) any written opinion included in or attached to the notice, which must state the facts on which the opinion is based.

(2) A copy of the notice must be served on each of the other parties.

(3) Each of the matters for which an admission is requested is presumed to be admitted unless, within 20 days after the date of service of the notice to admit, the party to whom the notice is addressed serves on the party requesting the admission a statement that (

a) denies the fact or the opinion, or both, for which an admission is requested and sets out in detail the reasons why the fact cannot be admitted or the opinion cannot be admitted, as the case requires, or (

b) sets out an objection on the ground that some or all of the matters for which admissions are requested are, in whole or in part, (

i) privileged, or (ii) irrelevant, improper or unnecessary.

(4) A copy of the statement must be served on each of the other parties.

(5) A denial by a party must fairly meet the substance of the requested admission and, when only some of the facts or opinions for which an admission is requested are denied, the denial must specify the facts or opinions that are admitted and deny only the remainder.

(6) A party may amend or withdraw an admission or denial made under this rule only (

a) with the Court’s permission, or (

b) by agreement of the parties.

(7) An admission under this rule is made only for the specific purpose for which it is made and may not be used as an admission against

the party making it on any other occasion, or in favour of a person other than the person requesting the admission, without the agreementof the party making the admission.

(8) On application, the Court may set aside a notice to admit. [13] A failure to admit anything that should have been admitted is a specific matter that the Court can consider under rule 10.33(2)(

b) when a court is asked to make a costs award. B. Should the Notice to Admit be Set Aside? [14] Merrill applies to set aside the Notice to Admit on the basis that it is premature, especially since pleadings have not closed,the issues are not set and the composition of any class is not defined. Merrill states that a Notice to Admit is a proof tool designed toexpedite trial procedure and minimize expense by obviating the need to call evidence at trial and should not apply in “interlocutoryproceedings”.

Merrill argues further that a court should not be addressing facts to prove the merits of the case at the pre-certificationstage. It points out that the certification hearing is based on statutory criteria directed towards ascertaining whether a class proceeding isthe preferable procedure and is not a merits based inquiry. Merrill says this Notice would not assist on certification and that the mannerof its drafting is such that it should not be answered but set aside instead.

Alternatively Merrill seeks to extend the period of responseuntil after certification, if certification occurs. [15] Unlike the old rule 230, rule 6. 37(8) does not outline when a court should set aside a Notice to Admit, leaving it to thediscretion of the presiding judge. [16] Merrill’s primary argument on prematurity is based on the premise that the singular purpose of a Notice to Admit is directedtoward proof at trial. Merrill cited previous case authorities under the old rule 230 and relied upon the following observations ofO’Leary, J. (as he then was) in Canadian Southern Petroleum Ltd. v.

Amoco Canada Petroleum Co. (1994), (ABKB), 168 A.R. 126 at paras. 22 and 28: The Notice to Admit Facts, although I have not been able to find a history of it, is not, in my view, primarily a discovery tool. It is aproof tool. Discovery undoubtedly involves proof of facts, that is developing evidence which can be used to prove facts at trial. That isonly one use for discovery, that is oral discovery and discovery of documents. Notices to Admit Facts are not, in my view, primarilydesigned to discover the truth of matters but, rather, to obviate the necessity and expense of calling evidence at trial.

This is, I believe, atraditional view and there is certainly no authority for it. The nature of the procedure is such that as time proceeds and the matter inches closer to trial, the ability of the parties to makeadmissions without risking liability or without risking placing themselves in an awkward position will crystallize and they can be mademuch more freely as they are often done informally as the trial approaches. I do not believe, though, that the procedure should be used asa form of discovery or as a substitute for interrogatories.

To do so, in my view, would result in a serious problem for the courts and aserious problem for counsel attempting to sort out all these various things on an interlocutory basis. [17] With respect, these obiter statements cannot bear the weight ascribed to them. The Notice to Admit in that case was servedunder old rule 230, four years after the action was commenced, after there had been extensive discovery by and between the parties.Before the officer of the plaintiff was to be examined the defendant served a Notice to Admit covering one hundred pages and containing1,200 separate requests for admissions.

The plaintiff provided a response. In some instances the response was equivocal, or qualified insome manner short of an absolute admission or denial. The issue before the court was whether the Court should determine the validity ofthe responses provided to a Notice to Admit Facts and not whether a Notice to Admit should be struck as premature.

At para.15 theCourt said: The threshold issue is how far the Court should go in investigating and compelling responses to a Notice to Admit Facts when therequesting party is unhappy with the responses received, as is the case here. [18] That case cannot therefore stand for the proposition that a Notice to Admit should be set aside as premature if taken in respect

of an interlocutory or pre-trial matter. [19] Even under the old rule others took a more expansive view, reasoning that admissions do away with the need for proof at anytime in the process and are directed towards goals that include, but are not limited to dispensing with the need to call evidence at trial.Indeed, sometimes their purpose is to replace and/or limit discoveries. In Lisioli v. Marcier (2002), (AB KB), 329A.R. 203 the court allowed a Notice to Admit Facts to be served prior to a Statement of Defence being entered. See for another example,Alberta River Conservation Foundation v.

Alberta (Minister of Environmental Protection), 1998 ABQB 129. The court refused to setaside a Notice to Admit under the old rule 230 in a case which involved an application for judicial review. The Court permitted theNotice in a proceeding that did not, and never would involve proof at trial. [20] While such cases provide interesting historical context and some guidance, the current starting point for analysis is the newrules themselves.

Under rule 1.7(1) the meaning of any rule is to be ascertained by its text, in light of the purpose and intention of therules, and in the context in which a particular rule appears. [21] Rule 6.37(8) expressly states that a Notice to Admit can be used in “applications” as well as “originating applications,summary trial or trial”.“Application” is not a term with a defined meaning but it is used to apply to a variety of proceedings. Parties seekadmissions to obviate the need to prove that fact in issue and this has value at various points in the litigation process.

While a Notice toAdmit may be useful, as noted in Southern Petroleum, to crystallize certain facts after discovery and before the trial begins, it is alsouseful at other times, including the beginning. Among the express purposes of the new rules is the intention to help parties and courtsidentify the real issues in dispute and to facilitate the quickest means of resolving a claim at the least expense (see rule 1.2(1)(2)).

ANotice to Admit advances these purposes and is not, on its face, or by intention limited to proof of evidence at trial. [22] There will need to be a good reason, which is inconsistent with the goals and purposes of the new rules, as well as the wordingand intention of rule 6.37 before a Notice to Admit will be struck: something that amounts to an abuse of process or strikes at the heart ofadjudicative fairness. For example, in Ironstone v. Jansen, 2005 ABQB 21 Watson, J., as he then was, recognized in para. 20 that aNotice to Admit has a “forensic value” and its purpose is to gain a “forensic advantage”.

As such he said it was not unfair to have a longNotice, when a plaintiff is asked to admit facts it ought to know, even if it involved significant work to answer. Such a Notice can only beset aside under the old 230(7) where the Notice involves a denial of adjudicative fairness. He dismissed the application to strike theNotice to Admit. In the Ontario case of Slate Falls Nation v.

Canada( Attorney General)(2005), 144 A.C.W.S. 93d) 241, the equivalentto a Notice to Admit was struck by the Master as an abuse of process because there had already been significant and extensive discovery.There is nothing of this nature in the case at bar. [23] Further, Merrill created categories of objection about the type, manner and content of admissions sought including ambiguity,generality, legal determinations, conclusory statements that lack a foundation, improper form and opinions on highly specializedsubjects.

These objections are not such that they operate to provide grounds to set aside the Notice to Admit. A party responding to a Notice to Admit is obliged to “fairly meet the substance of the requested admission” but has a full range ofresponse. If as matters come closer to trial it appears an earlier admission was inaccurate the rules provide that admitted facts can bewithdrawn. [24] There is no therefore no reason to set aside this Notice to Admit. Does the fact that this action is taken pursuant to the C.P.A.change this conclusion?

In my view it does not .The C.P.A. provides that the Rules of Court continue to apply in s.41(1). Certification isan “application” and while it is not merits based, some evidentiary foundation is required for at least four of the five statutory criteria.Hollick v. Metropolitan Toronto (Municipality), 2001 SCC 68, 2001 CarswellOnt 3577, Windsor v. Canadian Pacific Railway 2006ABQB 348 , [2006] 8 W.W.R. 672, 60 Alta.

L.R. 56. [25] Even if none of the 61 matters in the Notice to Admit are relevant to either application, which is not the case, rule 6.37 issufficiently wide to allow a party to seek admissions to be used at trial even before a statement of defence has been filed. There is noreason why such an approach should not apply to an action filed under the C.P.A., especially since, if certification fails, the matter willproceed as an individual action. There is also no basis on which to defer the response to the Notice to Admit until after the certificationapplication. C.

What is the Legal Effect, if any, of Merrill not responding to the Notice to Admit?

[ 26 ] The Plaintiffs claim that as no reply was received within the designated time that the Defendants are deemed to have admitted the facts as outlined in the Notice to Admit. The Plaintiffs assert that if Merrill now wishes to retract these deemed admissions it must meet the standards established by the Court of Appeal in Dwyer v.

Fox , (1996) 181 A.R. 233, namely: “that the evidence available about the fact in question is such that a determination about the truth at a trial is the only satisfactory means to settle the issue” (at para. 16). [ 27 ] The nature of the relief sought by Merrill was to set aside the Notice to Admit, as contemplated under both rule 230(7) and now rule 6.37(8), which states that “on application, the Court may set aside a notice to admit.” It does not say when such an application must be taken or if, pending the hearing of the application, the running of time is suspended.

On the facts of the case it would not be appropriate or fair to have the statements become deemed admissions. As early as June the Plaintiffs understood that a motion to set aside the Notice was forthcoming and it was filed on September 12, 2010. To accept the Plaintiffs’ approach would only create an unnecessary step by requiring a further application to determine, which if, any deemed admissions ought to be set aside by the court. In theses circumstances Merrill is therefore given relief from the automatic application of rule 6. 37 and should be afforded an extension of time to respond. 5.

Conclusion [ 28 ] While the Defendant makes the point that the Notice to Admit was not filed, it was served and that is all the rules require. As I have dismissed the motion to set aside the Notice to Admit it is to be treated as served as of this date, with the obligation on Merrill to respond at a time set by the parties with an eye towards the existing case management schedule, or failing agreement, according to rule 6.37. [ 29 ] If the parties cannot agree on costs they may be addressed before me. Heard on the 24 th day of January, 2011. Dated at the City of Calgary, Alberta this 4 th day of February, 2011.

S.L. Martin J.C.Q.B.A. Appearances: Kevin McGuigan Byron Nelson for the Plaintiffs Tristram J. Mallett

Kelly Osaka W.K. Levi Cammack Hena Ahuja for the Defendant