Toronto-Dominion Bank v. Suitel Canada Executive Suites Corporation, 2012 ABQB 699

Court of Queen ’ s Bench of Alberta Citation: Toronto-Dominion Bank v.

Suitel Canada Executive Suites Corporation, 2012 ABQB 699 Date: 20121109 Docket: 0703 01735 Registry: Edmonton Between: The Toronto-Dominion Bank Plaintiff - and - Suitel Canada Executive Suites Corporation, Executive Loft Inc., Dan White, John Collins, 1041104 Alberta Ltd., Emilio Valerio, 1057029 Alberta Ltd., Malcolm Robert MacKinnon, Malcolm Robert MacKinnon Professional Corporation, Brian McGlashan Professional Corporation, Malcolm Robert MacKinnon Professional Corporation and Brian McGlashan Professional Corporation carrying on business under the name of McGlashan & MacKinnon, and Worthington Properties Inc.

Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice M. David Gates _______________________________________________________ Overview [ 1 ] This is an application brought by the Toronto-Dominion Bank ( “ TD Bank ” ) to compel the Defendant John Collins ( “ Collins ” ) to provide answers to undertakings (No. 20-34) arising from his Questioning on October 28, 2011. TD Bank also seeks an Order declaring that the subject of these same undertakings are relevant and material and allowing counsel for TD Bank to question Collins on these matters.

TD Bank also seeks costs payable forthwith and regardless of the cause.

[ 2 ] For the reasons which follow, the application is granted in part. Background Facts [ 3 ] The Applicant, the Toronto-Dominion Bank (the “ TD Bank ” ), is the plaintiff in Action No. 0703 01735 (the “ TD Action ” ), a mortgage fraud action alleging breach of contract, breach of fiduciary duties, fraud, fraudulent misrepresentation, and conspiracy against the defendants arising from real estate transactions involving 3 residential condominium units.

As well, TD Bank alleges negligence and breach of fiduciary duty as against the solicitor defendants. [ 4 ] Executive Loft Inc. ( “ Executive ” ) is the Plaintiff in a related action, Action No. 0603 01578 (the “ Executive Loft Action ” ), a mortgage fraud action alleging that the defendants altered the mortgage documents without the knowledge or consent of Executive and breach of contract against the defendants arising from real estate transactions involving 5 residential condominium units. As well, Executive alleges negligence, breach of trust and breach of fiduciary duty as against the solicitor defendants.

Executive also alleges that the defendants were each party to actions that were designed to cause loss to Executive. [ 5 ] The Applicant Bank of Montreal ( “ BMO ” ) is the Plaintiff in a further related action, Action No. 0603 05685 (the “ BMO Action ” ), a mortgage fraud action alleging breach of contract, fraud and fraudulent misrepresentation against one of its defendants arising from real estate transactions involving 2 residential condominium units.

As well, BMO alleges negligence, breach of trust and breach of fiduciary duty as against the solicitor defendants. [ 6 ] On October 28, 2011, the Defendant John Collins ( “ Collins ” ) attended Questioning. In the course of his examination, he gave 19 undertakings, 15 of which were refused.

Collins has not provided Answers to any of the Undertakings. [ 7 ] The outstanding undertakings relate to 56 foreclosure-type actions brought against Collins and/or the 105 Company, a corporation solely owned by Collins, during the period 2003-2005. [ 8 ] According to the materials filed by the Applicant, Collins testified during questioning that he “ erred ” when he swore to the current value of the units in the various Affidavits of Value related to this proceeding. Further, Collins offered the explanation that he did not realize his error until after this action was commenced.

Finally, Collins specifically acknowledged that he had previously been involved in numerous other foreclosures. Collins filed no evidence or other material in responding to this application. [ 9 ] On July 22, 2011, Yamauchi J., then the Case Management Justice responsible for this matter, dealt with a number of issues, including an application by TD Bank seeking to compel Collins to answer undertakings refused at his January 2010 Questioning. This application was partially granted in that Collins was directed to respond to Undertaking #5 in the transcript of the questioning which took place on January 29, 2010.

However, Yamauchi J. found that Collins was not required to respond to Undertakings #11, 12 and 13 from the same date. [ 10 ] In declining to compel Collins to response to these undertakings, Yamauchi J. found that TD Bank had not established the necessary factual nexus or connection between the previous transactions (those upon which the undertakings focussed) and the acts alleged to comprise the subject of the within litigation. He held (at 52): The other comment that Mr. Justice Gallant makes in the Grams case in quoting another - - this is not a criminal case, it is actually a civil case, called MacDonald v.

Canada Kelp Co. Ltd et al. at paragraph 172 where the Court in that case said, quote: Where there is a real and substantial nexus or connection between the act or allegations made and facts relating to previous or subsequent transactions are sought to be given in evidence, then those facts have relevancy and are admissible not only to rebut a defence, but to prove the face of the act or allegation made.

But there has to be a real and substantial nexus before that information will be produced, and Toronto Dominion Bank, or whoever ultimately questions Mr. Valerio and Mr. Collins in the future, may choose to establish that foundation on which they can build the substantial nexus or connection, but asking the question in a vacuum does not establish that foundation or that nexus for them to build a house on that foundation. It is not sturdy enough. The Law [ 11 ]

Part 5 of the Alberta Rules of Court deal with the Disclosure of Information. The relevant portions of this Part read as follows: 5.1(1) Within the context of rule 1.2, the purpose of this

Part is

a) to obtain evidence that will be relied on in the action,

b) to narrow and define the issues between the parties,

c) to encourage early disclosure of facts and records,

d) to facilitate evaluation of the parties ’ positions and, if possible, resolution of issues in dispute, and

e) to discourage conduct that unnecessarily or improperly delays proceedings or unnecessarily increases the cost of them.

(2) The Court may give directions or make any order necessary to achieve the purpose of this Part. 5.2(1) For the purposes of this Part, a question, record or information is relevant and material only if the answers to the question, or the record or information, could reasonably be expected. (

a) to significantly help determine one or more of the issues raised in the pleadings, or (

b) to ascertain evidence that could reasonably be expected to significantly help determine one or more of the issues raised in the pleadings.

(2) The disclosure or production of a record under this Division is not, by reason of that fact alone, to be considered as an agreement or acknowledgement that the record is admissible or relevant and material. 5.25(1) During questioning, a person is required to answer only (

a) relevant and material questions, and (

b) questions in respect of which an objection is not upheld under subrule (2).

(2) A party or a witness being questioned may object to an oral or written question during questioning but only for one or more of the following reasons: (

a) privilege; (

b) the question is not relevant and material;

(

c) the question is unreasonable or unnecessary; (

d) any other ground recognized at law.

(3) A corporate representative may object to an oral or written question during questioning on the basis that it would be unduly onerous for the corporate representative to inform himself or herself in the circumstances. 5.30(1) If, during questioning, a person answering questions (

a) does not know the answer to a question but would have known the answer if the person had reasonably prepared for questioning, or if as a corporate representative the person had reasonably informed himself or herself, or (

b) has under the person ’ s control a relevant and material record that is not privileged, the person must undertake to inform himself or herself and provide an answer, or produce the record, within a reasonable time.

(2) After the undertaking has been discharged, the person who gave the undertaking may be questioned on the answer given or record provided. [ 12 ] The wording of Rule 5.2(1) of the new Rules of Court is identical to the wording of the former Rule 186.1. As such, case authority interpreting the former provision is applicable to the proper

interpretation of the new provision. [ 13 ] Under the old Rule 186.1, oral examination for discovery was confined to eliciting primary facts which are directly at issue or facts from which the existence of primary facts may be inferred directly. In either instance, the question is to be determined by reference to the issues raised by the pleadings. (See NAC Constructors Ltd. v. Alberta Capital Region Wasterwater Commission , 2006 ABCA 246 at para. 11 .13.) [ 14 ] In Weatherill (Estate of) v. Weatherill , 2003 ABQB, Slatter J. (as he then was) dealt with the issue of whether a document is relevant and material.

At para. 16, he stated: In determining whether a document is relevant and material, the starting point is the pleadings. The pleadings define the issues, and relevance must be determined with respect to the issues. The pleadings are also relevant with respect to the issue of materiality. However, with respect to materiality one must also have regard to the issues in question. Where does the burden of proof lie? Is the issue something that is capable of direct proof, or is it something like a person ’ s state of mind, which can only be proved indirectly. Does one party essentially have to try and prove a negative?

How are cases of this type usually proven at trial? The less amenable a fact is to direct proof, the wider will be the circle of materiality. There are some facts that can only be proven by essentially eliminating the competing scenarios, thereby leaving the fact in issue as the sole logical inference. When a state of mind is in issue, it can generally only be proven by demonstrating a pattern of conduct of the person whose state of mind it is.

In deciding whether a particular document is material, one must take a very pragmatic view, viewing the situation from the perspective of the party who must prove the fact in question. At an interlocutory state of proceedings, the Court should not measure counsels ’ proposed line of argument too finely; if counsel can disclose a rational strategy in which the disputed document plays a material part, that should be sufficient.

Again it must be remembered that the purpose of the Rule was to avoid abusive, excessive, and unnecessarily expensive discovery, not to cut off legitimate lines of inquiry. [ 15 ] Collins relies on the decision of Wilson J. in Tanner v. McIlveen , 2009 Can LII 18676 (Ont. S.C.) In Tanner , supra , the plaintiffs commenced an action claiming damages arising out of alleged sexual assaults and other abuse perpetrated upon them while they were patients of the Defendant.

The Statement of Claim referred to the fact that the Defendant “ was charged ...with multiple counts of sexual assault and indecent assault against dozens of his current and former patients. ” During examination for discovery, the Defendant was questioned about prior complaints, including complaints to the College of Physicians and Surgeons; criminal charges alleging sexual and indecent assault against patients; and questions relative to a class action brought against the Defendant. [ 16 ] On a motion seeking an order compelling the Defendant to answer questions refused, the Master held that the plaintiffs had

[16] On a motion seeking an order compelling the Defendant to answer questions refused, the Master held that the plaintiffs hadno other means to obtain the similar fact evidence they required to challenge the Defendant’s credibility.

In granting the application, theMaster found that the key issue for trial was the credibility of the plaintiffs and the defendant and that “the trial judge will have todetermine who is telling the truth.” The Master went on to state that the role of the court on a motion of this nature was “to determinewhether the questions may lead to a line of inquiry which uncovers admissible evidence.” [17] On appeal, Wilson J. cited Ontario Rule 31.06 which states: The question posed must be proper and it must relate to a matter in issue in the action.

The deponent may be cross-examined, unless thequestion goes solely to the issue of the credibility of the witness. [18] Wilson J. also referred to the “semblance of relevance to the matters in issue” test set forth in Kay v. Posluns, (ON SC), [1989] Carswell Ont 917 (Ont. H.C.J). In setting aside the order of the Master, the Court found that the pleadings did notlay the proper foundation for similar fact evidence concerning prior complaints against the defendant and, as such, did not meet thesemblance of relevance test.

The Court also found that the Master had applied the wrong test in considering how the plaintiffs couldobtain similar fact evidence for trial when considering the propriety of the refused questions.

Further, the Court determined that thequestions offended Ontario Rule 31.06 as being asked in order to attack the Defendant’s credibility and enhance that of the Plaintiffs. [19] The Court concluded (at para. 23): In my view, the Master erred in law in determining the test for the propriety of a discovery question concerning criminal charges was thatit might uncover evidence which potentially could meet the similar fact test criteria at trial. In doing so the Master ignored the proper testof semblance of relevance. The fact that an individual is charged with an offence is evidence of very little.

In this particular case, in myview, the existence of criminal charges bears no relevance to the conduct which forms the basis of the claims by the plaintiff against Dr.McIlveen, as set out in the pleadings. Therefore, the questions were properly refused. Position of the Parties [20] The Plaintiff says that Collins’ state of mind is a central issue in the pleadings in this case. As such, the Plaintiff says that thealleged torts of conspiracy and fraudulent misrepresentation are intentional torts which require proof of his guilty intention.

Further, thePlaintiff says that the refused undertaking relate to “the same type of issues raised in TD Bank’s pleadings insofar as Collins has engagedin a similar pattern of conduct in the Other Foreclosures” (TD’s Brief, para. 35). TD Bank also says that the answers to the RefusedUndertakings could reasonably be expected to help determine Collins’ state of mind in this instance.

As such, TD Bank says that theseanswers could speak to Collins’ experience in dealing with these types of transactions and refute his answers given in Questioning that heerred when he swore to the present value of the properties. [21] The Defendant Collins resists this application on a number of grounds. First of all, he says that the information being soughtdoes not fall properly within the scope of permitted questioning. Next, Collins says that this is tertiary evidence directed towards theissue of credibility and that this is not a proper basis for questioning.

Finally, Collins says that the decision of Yamauchi J. dated July 22,2011 forecloses this line of questioning. As such, he says that Justice Yamauchi previously determined that there was no substantialnexus between the current proceedings and the earlier foreclosure transactions. Collins did, however acknowledge that the decision ofYamauchi J. did leave the door open for the Applicants to seek out the relevant information which could conceivably lay the foundationfor further questioning.

Analysis [22] The formal order which flowed from the July 22, 2011 application before Yamauchi J. simply states that Collins is requiredto provide a response to undertaking no. 5 from the January 29, 2010 examination for discovery, but not required to respond toundertaking no. 11, 12 and 13. A review of a transcript of Justice Yamauchi’s reasons from this same date provide substantially moreinformation. What I take from that transcript is that Yamauchi J. would not permit TD Bank to ask questions of Collins related to earlierforeclosure proceedings without first establishing a substantial nexus or connection.

As conceded by Collin in the within application,Yamauchi J. specifically left open the possibility that TD Bank might well establish that factual nexus or connection at some point in thefuture and thereby create the necessary foundation for this line of questioning.

[ 23 ] In my view, TD Bank has, indeed, now created this foundation through the evidence of Collins himself obtained during questioning on October 28, 2011, and through the various court records that it obtained relative to the earlier foreclosure proceeding. In acknowledging that he was mistaken as to the then current value of the property when he swore the Affidavits of Value in the relating to the within proceedings, Collins opened the door to further questioning relative to other Affidavits of Value sworn in relation to properties that were subject to earlier foreclosure proceedings.

As such, I accept the Applicant Bank ’ s argument that questioning relative to these earlier transactions could significantly help determine an issue raised in the pleadings (Rule 5.2(1)(a)). In my view, the proposed line of questioning does not go solely to the issue of credibility and, as such, this case is readily distinguishable from the Ontario decision of Tanner v.

McIlveen . [ 24 ] While I am prepared to direct that Collins respond to questions relating to earlier foreclosure proceedings, I am not prepared to go so far as to allow the Applicant Bank to question Collins on all 56 foreclosure-type actions against Collins and/or the 105 Company during the period 2003-05. In my view, permitting such a broad range of questioning would serve little purpose other than to unnecessarily delay these proceedings.

Rather than specify a number of these earlier foreclosure-type actions that may be the subject of questioning, I leave it to the Bank to identify a reasonable number for the purposes of questioning. [ 25 ] In allowing the Applicant Bank ’ s application, I also direct that the Bank must obtain any of the relevant documents from these earlier foreclosure-type actions that it wishes to present to Collins during the continued questioning.

The Bank cannot use this order allowing Collins to be questioned relative to these earlier proceedings as a way to indirectly require Collins to expand his document production obligations. Costs [ 26 ] TD Bank has been substantially successful in this application and is entitled to costs in any event of the cause. Heard on the 28 th day of March, 2012. Dated at the City of Edmonton, Alberta this 9th day of November, 2012. M. David Gates J.C.Q.B.A. Appearances: K. Dhir and A. Danielle Bourgeois for the Plaintiff

T.E. Plupek for the Defendants