Vander Griendt v Canvest Capital Management Corp, 2012 ABQB 620

Court of Queen ’ s Bench of Alberta Citation: Vander Griendt v Canvest Capital Management Corp, 2012 ABQB 620 Date: 20121015 Docket: 0901 15232 Registry: Calgary Between: Charles Vander Griendt Plaintiff - and - Canvest Capital Management Corp. and Canvest Capital Limited Partnership Defendants _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice S.L. Martin _______________________________________________________ 1. Introduction [ 1 ] The Plaintiff in this matter has applied to have it brought under the Class Proceedings Act (Alberta).

The parties are at the pre- certification stage and the Plaintiff has put forward two affidavits in support of certification. The first is the affidavit of Ms. Carolyn Scheil, an accountant. The second is the affidavit of Mr. Charles Vander Griendt, the proposed representative Plaintiff. The Defendants have cross-examined these affiants and come to court seeking to compel answers to various questions and undertaking requests which have been refused. [ 2 ] It is of note that there is more than one action involving these parties.

The within action seeks damages for an alleged misallocation of funds by the General Partner of Canvest Capital Management Corp. and Canvest Capital Limited Partnership

(“Canvest”; “the Canvest action”). Canvest has also commenced separate proceedings against a number of individual investors, including Mr. Vander Griendt, seeking payment on certain promissory notes which, it is alleged, have not been honoured (“the promissory note action”). The relevant link between the two actions is that the promissory notes are, it is alleged, the means by which the Defendants in the other actions were to have paid for their units in Canvest. [ 3 ] Counsel provided no brief or authorities in respect of any of the arguments raised.

At the time of the hearing, cross- examination transcripts had not been placed before the court. As a result, it was not possible to deal with each objection as argued and a reserve judgment became required. [ 4 ] Some of the Defendants’ demands in their Notice of Motion were addressed and resolved at the hearing. Various others were argued. In the result, none of the undertaking requests or questions argued before me needs to be answered for the reasons that follow. 2.

The Class Action Procedure [ 5 ] The Class Proceedings Act establishes a procedural mechanism to aggregate similar individual actions and avoid unnecessary duplication in order to enhance efficiency, distribute litigation costs, improve access to justice, and affect the behaviour of wrongdoers. The pragmatic objective is that class action procedure should bring about economies of time and expense, as well as uniformity of results as between people who are similarly situated. The basic requirements are set out in

section 5 of the Class Proceedings Act . Essentially, one or more members of a class of persons may commence an action on behalf of members of the class. The Court will certify the action as a class proceeding if: (

a) the pleadings disclose a cause of action; (

b) there is an identifiable class; (

c) the claims of prospective class members raise common issues of fact or law; (

d) a class proceeding would be the preferable procedure; and (

e) there is a representative plaintiff who would adequately represent the interests of the class without conflict of interest and who has produced a workable litigation plan. [ 6 ] Despite the unique nature of a class proceeding, s.18(1) of the Act provides that parties to a class proceeding have the same rights of discovery under the Rules of Court against one another as they would have in any other proceeding. [ 7 ] From my review of the transcripts of the cross-examination on these affidavits, it appears that counsel each have a very different

interpretation of their rights on questioning. Mr. Smith, for the Defendants, asserted at one point that there are no limits at all when questioning in relation to a class proceeding. Mr. Jones, acting for the representative Plaintiff, expressed surprise at this idea and suggested that the scope would be limited to the pleadings and the contents of the affidavit. [ 8 ] The law is clear that cross-examination on an affidavit produced in support of an application is not the same as a questioning for the purposes of discovery in the main action.

While the test for the scope of questioning in either case is that of materiality and relevance, the focus on an application is narrower. The questioner has the right to ask questions that are material and relevant to the application. Relevance is defined by the nature of the application taken and is informed in part by the affidavit itself. Questioning on an affidavit is not a form of extra discovery, nor is it a fishing expedition.

Further, as the intent of a class proceeding is to streamline litigation, what is relevant and material should, to some degree, be limited to only such information as the court requires in order to make its certification decision. That information is bounded by the factors a court must consider as set out in s. 5 of the CPA.

[9] As noted by Cote J.A., as he then was, the scope of cross-examination on an affidavit is limited to the matters in issue in theapplication it was drafted to support, and to credibility: Paszkowski v. Canada (Minister of Employment & Immigration, [1993] A.J. No.448. See also Logan v. Canada, [2001] O.J. No. 6289 and BASF Canada Inc. v. Max Auto Supply

(1986) Inc., [1998] O.J. No. 3676, 75O.T.C. 58 (Ont. Master). [10] Further, as noted by Feehan J. in Ed Miller Sales & Rentals Ltd. v. Caterpillar Tractor Co., et al., [1981] A.J.

No. 978 at para.6: It must be kept in mind at all times that the reason for the examination on the affidavit is to assist the court to decide the application, andquestions and answers which would not assist the court and would not be relevant to the determination of the issue on the motion norquestion the truth of the statement contained in the affidavit or the credibility of the affiant and are obviously questions that should be puton examination for discovery should not be allowed. In J.& H. Singer Invt. Ltd v. Sigma Realty Ltd. (1957), (AB KB),24 W.W.R. 235 (Alta.

C.A.), Johnson J.A. said at p. 238: Turning to the questions which it is sought to have Singer answer, no attempt has been made to show and I am unable to see how any ofthese questions will assist the court to decide the application before it. They are therefore not relevant to the determination of the issue ofthe motion.

There remains the question of 'testing the truth of the statement.' Having regard to the limited nature of the facts deposed to, the questionof the truth of the statement contained in the affidavit and the credibility of this witness, if it arises at all, could not be decided by thequestions which have been asked, and not answered, in this case . . . [11] To summarize:

a) the principles of discovery are the same for class actions as for any other action;

b) the scope of cross-examination on an affidavit is limited by relevancy and materiality with regard to the application the affidavitsupports;

c) the Class Proceedings Act sets out the requirements for certification.

d) Questioning which does not assist the court in determining the application before it is irrelevant and immaterial. [12] With these principles outlined above, I will address the information the Defendants seek from Ms. Schiel and Mr. VanderGriendt separately. With regard to Ms. Schiel: [13] Counsel for the Defendants asked Ms. Schiel: Q: What about a limited partnership agreement, would you ever just interpret one of those yourself, and draw your own conclusions,and prepare financial statements and tax returns for the various partners of a limited partnership? [14] Mr.

Jones, counsel for the Plaintiff, objected on the basis that she should not be answering hypothetical questions. Mr. Smiththought she was being tendered as an expert and in any event he wanted to show that she should not be relied upon. I accept Mr. Jones’

statement that Ms. Schiel is not being called as an expert to give expert opinion. She is an accountant who is being put forward to make acalculation about how funds ought to have been allocated or treated under the limited partnership agreement. Mr. Smith had theopportunity to question Ms. Schiel on the methodology she actually used in making those calculations, but he did not ask the question inthat manner, either at the beginning or after the objection to his hypothetical question was made. He asked her what she “would do,” andnot what in fact she did do.

In the circumstances I find that the hypothetical question is irrelevant and she need not be recalled. With regard to Mr. Vander Griendt: [15] The cross-examination of Mr. Vander Griendt resulted in two very clear areas of inquiry that gave rise to either an objection ora refusal to undertake to produce more information. The two areas of contention had to do with the names and intentions of individualswho might become part of the class, and whether or not, and how, Mr. Vander Griendt paid for his investment in the defendantpartnership. Class Members [16] In his Affidavit, Mr.

Vander Griendt stated that approximately 69 people had made contact with his lawyer, Mr. Jones, toinquire about potentially becoming members of the class action. Mr. Smith asked the Plaintiff to disclose or undertake to disclose theirnames, any emails he exchanged with them or any notes he made regarding conversations about the class action, as follows: UNDERTAKING NO. 2: To produce the names of the 69 individuals that Mr. Vander Griendt says are likely to participate as classmembers in the proposed class action. UNDERTAKING NO. 3: To produce the e-mails that support Mr.

Vander Griendt’s statement that they are likely to participate as classmembers. UNDERTAKING NO. 4: To produce the notes of Mr. Vander Griendt’s conversations with any of the people that he talked to. [17] One criterion for certification is merely that two or more persons may start a class action.

The number of potential classmembers beyond that is one relevant consideration, among many others, in determining whether a class action is the preferableprocedure. [18] However, the names of potential class members, or the content of any discussions they may have had with the proposedrepresentative plaintiff or his lawyer does not materially assist the court. It also comes perilously close to impinging on solicitor-clientprivilege, which has a distinctive element in a class action proceeding, where communications are often between the representativeplaintiff and a potential class member.

In the event this matter is certified, the representative plaintiff will act as the “go-between” withthe lawyers and the other members of the class. His discussions with potential class members go directly to communications incontemplation of litigation. As noted by the Court of Appeal in YBM Magnex International, Inc. (Re), [2000] A.J.

No. 1231; 2000 ABCA284: 17 Litigation privilege, sometimes called legal professional privilege, protects documents from disclosure during litigation provided thedominant purpose of the creation of the documents is to submit the documents to a lawyer for advice and use in current or anticipatedlitigation: Nova v. Guelph Engineering 1984 ABCA 38 , [1984] 3 W.W.R. 314 (Alta. C.A.).

For example, a lawyer's clientobtains the written opinion of an expert to give to his lawyer to further the anticipated or current litigation. 18 Common interest privilege extends the litigation privilege where the document or information has been shared with a third party(other than the client and the lawyer) provided that third party has a common interest with the client in the same anticipated or currentlitigation. This general principle was first articulated in Buttes Gas and Oil v. Hammer (No. 3) [1980] 3 All E.R. 475 (C.A.) where

Denning, L.J. stated that it is a privilege in aid of anticipated litigation where several person have a common interest. They independentlymay prepare documents for their own lawyer. The exchange of those documents among and between those having a common interestdoes not operate to waive the litigation privilege. [19] Accordingly, although Mr.

Smith claimed that he was not seeking any information protected by privilege, I find that in thecircumstances in the case at bar, the names of individuals who have spoken to a lawyer, or to a person acting as the lawyer’srepresentative, are protected and need not be disclosed. I make a similar finding in respect of the request for the notes and emails aboutpotential class members as such notes would obviously have been intended for use by his solicitor in the pending litigation. [20] Mr.

Vander Griendt was concerned that if the particular names of the individuals he had spoken with were disclosed, theDefendants may attempt to effect private settlements with individual plaintiffs while the certification action is pending. There is noevidence that this is the Defendants’ intention, although that has been an issue in a number of cases in jurisdictions where classproceedings have been available much longer than is the case in Alberta. In Lewis v. Shell Canada, (ON SC), [2000]O.J.

No. 1825; 48 O.R. (3d) 612, for example, the defendant had retained the services of an independent appraiser to negotiate settlementwith potential class members. The Court found this was an unfair process unless the individual settlors were informed of the existence ofthe class action before settling, and an order was issued accordingly. [21] On a final and more practical note, the Defendants in this case are, or have been, in a contractual relationship with eachpotential plaintiff and are actually in a better position than the Plaintiff to learn the names of all the individuals who may fall within theclass.

The Plaintiff is not required to respond to the second, third or fourth Request for Undertaking. [22] In addition to the requests for undertakings to produce the names and notes respecting individuals Mr. Vander Griendt hadspoken to about the class action, Mr. Smith asked Mr. Vander Griendt to identify 19 people for whom his lawyer, Mr.

Jones, was acting.This touches not only on privilege, it is information that appears to be more related to the promissory note action than to the applicationfor certification, as the list of names appeared to be identical to the list of names of Defendants in the promissory note action. [23] Mr. Smith went on to ask for a list of people who told Mr.

Vander Griendt they had sold their units to Cambrian CapitalCorporation but still intended to sue Canvest (Undertaking No. 5), as follows: Q: Would you undertake to advise me of all the people you say you have spoken to who have confirmed to you that they sold theirunits to Cambrian Capital Corp. but wish to somehow sue for that, because I think that's your evidence, will you do that for me? A: I didn't say that. Q: All right. Just tell me, then, who these people are, then I'll get you back and find out how you know what you think they're goingto do. Will you do that?

A: I don't know what somebody else is going to do. Q: You do if they tell you. I'm asking you, first, to tell me who they are. Will you undertake to do that, please? A: Well, we're getting a little bit ahead of ourselves. I'm saying if they're presented with the facts – Q: Mr. Vander Griendt, I just want – A: I'm saying – Q: a yes or no. Will you or will you not – A: I know you want a yes or a no, but there's not a yes or no answer. Q: – provide that information? A: It's not a yes or a no answer. I'm saying if they are provided with all of the evidence, they may choose to join. Q: I don't care about that.

I'm just asking you to tell me who they are. A: They are the original investors. I think that anybody – Q: Who are they?

A: Anybody who was an original investor, who wasn't provided with all information, and should have gotten more money out of the investment, may well want to join, that's common sense. Q: Who are they, Mr. Vander Griendt? A: Original investors, I keep telling you they're original investors. They're on the list. You have the list. Q: I'm asking you to undertake to provide me with the names of those people. Are you going to give me that undertaking? MR. JONES: You're asking us to undertake to request from your client a list of original investors? MR. SMITH: No.

I'm asking him to tell me who these people are if he knows. He claims to know. He offered to tell me one of them. I thought we would just ask for all of them rather than asking for separate undertakings for each one that he might remember. And I'm asking whether he will give that undertaking, and I'm waiting for an answer to that request. A: Well, based on the fact that I don't know whether or not they will join the action because they haven't yet been provided with all the information, nor have any of us, how could I make that decision for somebody else? Q: MR. SMITH: I'm not asking you that.

I'm asking you for the names of the people you think sold their units to Cambrian Capital Corporation, and I'm asking you to undertake to provide those A: The names of the people that I think – Q: – if you know them. A: You just asked me to provide the names of the people you think sold their units to Cambrian. Well, it's the people who were on the original list and who aren't there anymore. Q: Do you know that list? Do you know who those people are, or are you just making this stuff up as you have been most of this afternoon? MR.

JONES: Objection. [ 24 ] Again, the names of potential class members are not relevant at this stage of the proceedings although they certainly will become so at some point. Moreover, the names of all the investors are or should already be known to Mr. Smith’s client and do not assist the court. Payment [ 25 ] The following questions in relation to payment by Mr. Vander Griendt were objected to: First Objection : Q: And you didn’t make any payments under the promissory note, did you? A: Yes and no. My RRSP did. Q: Can you produce the proof that your RRSP made any payments under the note? MR.

JONES: Which – what affidavit are you questioning under? MR. SMITH: His affidavit of November 15 th , 2011. MR. JONES: The one filed in the class action? MR. SMITH: Well it’s not a class action yet. MR. JONES: It’s brought under the Class Proceedings Act. MR. SMITH: Yes. So you have to be certified. MR. JONES: Right. And in those pleadings, where does it refer to the promissory notes? MR. SMITH: He says somewhere in here that he’s a member and that he made a contribution of $10,000.

MR. JONES: Yes. MR. SMITH: Then he’s just said that his RRSP made that contribution. MR. JONES: Right. MR. SMITH: So I’m asking him to prove that. MR. JONES: No, you’re asking for proof of payment out. MR. SMITH: I’m asking for proof that the RRSP paid payments under the promissory note. MR. JONES: Okay, so you’re asking for proof of payment that he paid $10,000 for the initial – MR. SMITH: Mr. Jones, this is entirely improper. This is a cross-examination of your client – MR. JONES: Yes, and – MR. SMITH: – on his affidavit. MR. JONES: That’s right. So stick to the affidavit.

You’re asking him questions on the promissory note action. MR. SMITH: I’m allowed to ask any questions about the action when you’re trying to certify a class because the issue of what the actions is and whether you’ve gone one even is live, so don’t tell me – MR. JONES: That’s correct. But you’re limited by the pleadings. MR. SMITH: No, I’m not. MR. JONES: Pardon? MR. SMITH: I’m not limited by anything. MR. JONES: Your questions are not limited by the pleadings, is that what your response is? MR. SMITH: That’s correct, that’s the law. MR. JONES: I think your – MR.

SMITH: The cross-examination on a certification of a class actions is not limited. MR. JONES: It’s not limited by the pleadings? MR. SMITH: No, that is correct. MR. JONES: I think the Supreme Court of Canada would disagree with you. MR. SMITH: Well, I’m happy to be educated. You show me the Supreme Court of Canada’s authority that says that. MR. JONES: Well, we’re not answering any questions except those which relate to the pleadings in this action and are contained in the affidavit. MR. SMITH: I don’t want to hear from you. I’m examining your witness. MR.

JONES: Of course you don’t because you’re asking improper questions, and we object to any questions in relation to the promissory note action. [ 26 ] Similar objections were raised later, as follows: Second Objection A: I know because I received something, signed a document signed by your client evidencing my investment. Q : Ask you to undertake to produce the form of payment you say you made when you made the capital contribution you referred to in paragraph 7 of your affidavit, would you do that, please? MR. JONES: We object on the basis that your defence which is filed does not deal with lack of consideration.

[ 27 ] Proof that the notes were paid is not relevant to the certification action given that the Defendants are not defending on the basis of an absence of a contractual relationship or a lack of consideration.

Proof of payment may assist in the Defendants’ promissory note action but the Defendants do not need such documentation to make argument in respect of the certification application. [ 28 ] Undertakings No. 6, 7 and 8 were not refused, but there was a dispute on whether an agreement to produce financial information, redacted for the purposes of keeping unrelated transactions confidential, was a technical refusal.

This was not actually part of the information requested in this application, except tangentially, but I would suggest that if this is still a concern, unrelated financial information of the representative Plaintiff is neither relevant nor material to this application. [ 29 ] One other question relating to the promissory note action was asked and refused: Third Objection Q: Were you aware of that, that Mr. Jones acts for 19 people including yourself? A: As advocate for my clients in having this action certified as a class action and initiating meetings with my clients and Mr.

Jones, I would say that that is a number – I can’t give you the exact number off the top of my head, but I would say that sounds pretty close to correct, but it will likely be many more. (Mr. Smith then states a series of names, asking in each case if they are represented by Mr. Jones,) Q: Everett Page? A: Again, yes, Everett Page, I just met him as a result of this action; and he’s totally dissatisfied; and, in fact, we’re glad that he joined because he brought forth additional evidence that we didn’t have. Q: What’s that? A: Well, you’ll see.

Q: I’m asking you, are you going to disclose the evidence you just referred to? MR. JONES: That’s in the promissory note action. [ 30 ] Evidence relating to the promissory note action, which does not relate to the issues in the class proceeding certification application, is irrelevant. [ 31 ] The parties may speak to costs at a later date. Heard on the 23 day of July, 2012. Dated at the City of Calgary, Alberta this 15 day of October 2012. S.L. Martin J.C.Q.B.A. Appearances:

C. R. Jones for the Plaintiff C. M. Smith, Q.C. for the Defendants