Murphy v. Cahill, 2012 ABQB 793

Court of Queen's Bench of Alberta Citation: Murphy v. Cahill, 2012 ABQB 793 Date: 20121227 Docket: 1203 04666 Registry: Edmonton Between: Gerald Murphy and Gerald Murphy in his capacity as Trustee of the Gerald Murphy's Children's Parallel Life Interest Settlement Trust Applicant - and - Margaret Cahill, Christopher Cahill, 1248429 Alberta Ltd., 554168 Alberta Ltd., 1247738 Alberta Ltd., and Canadian Consolidated Salvage Ltd. Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] Invoking what he characterizes as a pattern of delay and obstruction, Gerald Murphy - the applicant for an oppression remedy - applies to strike his sister's, the respondent Margaret Cahill's, affidavits. Invoking hearsay, irrelevance and improper opinion evidence, Mr. Murphy applies to redact the respondent Gerald Cahill's affidavit. Invoking irrelevance, Mr. Murphy applies to redact the affidavit of his sister, Alice Wilson. [ 2 ] Margaret Cahill's affidavits should not be struck: no sufficient pattern of delay and

obstruction justifies such an extreme measure. The court which appointed an Inspector of the Canadian Consolidated Salvage Ltd. group of companies did not identify "indicia of appearance of oppression" in the conduct of the Cahills; that judge limited himself to the conclusion that Mr. Murphy was entitled to receive information, that he had not yet been successful in obtaining that information, and that an Inspector could obtain the information for him. Although Ms.

Cahill failed to respect the original timelines set for the examination on her affidavits, after hearing Page: 2 evidence of a medical condition, the court granted an extension of the deadlines. When she did present herself for cross-examination within the extended deadline, Ms. Cahill objected to answering certain questions. The normal course in such a situation is for the party whose questions were not answered to consider if they will ask the court to rule on whether the affiant must answer the questions. In the circumstances here, some of the questions put by Mr.

Murphy raised issues which were legitimately topics for objection, such as whether the affiant was required to give an opinion on the credibility of other individuals, such as whether the question had been adequately answered and such as whether it was fair to put questions to the witness that were indistinguishable from discovery questions. Having a judge rule on the propriety of the objections is the course that should be followed here. [ 3 ] Christopher Cahill's affidavits should not be redacted. As to hearsay, on a motion for final relief, Rule 13.18 allows hearsay evidence in a responding affidavit.

As to relevance, where, as here, proceedings are commenced by way of originating application rather than by statement of claim, the absence of pleadings makes it unwise to rule precipitatedly on relevance. In any event, statements relating to the credibility of another party to the proceeding are relevant.

As to the improper use of opinion, in the circumstances here, the judge hearing the substantive motion will determine whether the challenged evidence is inadmissible opinion evidence and, if it is, will either not consider it or attach little weight to it. [ 4 ] Alice Wilson's affidavit should not be redacted: at this stage of the proceedings it can only be said that her affidavit deals mainly with issues of Gerald Murphy's credibility.

Cases and authority cited [ 5 ] By the applicant, Gerald Murphy: (On application to Strike Portions of the Affidavits of Christopher Cahill and Alice Wilson): Alberta Rules of Court , Alta. Reg. 124/2010, Rules 1.2, 3.68(4)(

a) and 13.18; Matthews v Great-West Life Assurance Co., 2002 ABQB 297; Alberta Treasury Branches v Leahy, 1999 ABQB 185 ; Engler v Engler, 2012 ABQB 442; CIBC v Williams, 2007 ABCA 340 ; Barker v Budget Rent-A-Car of Edmonton

Ltd., 20 11 ABQB 123; Renfrew Insurance Ltd. v Donald, 2012 ABQB 228; Korogonas v Andrew (1992), (AB KB), 1 Alta. L.R. (3d) 316; Gill v 735458 Alberta Inc., 2003 ABQB 501; Airco Aircraft Charters Ltd. v Edmonton Regional Airports Authority, 2010 ABQB 397; Murphy Oil Co. v Predator Corp., 2006 ABCA 69; Condominium Plan 9320022 v ACTA General Inc., 2004 ABQB 932; (On application to Strike Affidavits of Margaret Cahill): Alberta Rules of Court, Alta. Reg. 124/2010, Rules 1.2, 3.68(4)(

a) and 13.18(a); Reference re: Firearms Act (Canada), 1988 ABCA 306; Cameron Corporation v Edmonton (Subdivision and Development Appeal Board), 2012 ABCA 243; Dow Chemical Canada Inc. v Shell Chemicals Canada Ltd., 2008 ABQB 501; Alberta (Workers' Compensation Board) v Berndt, 1998 ABQB 837; Gill v 735458 Alberta Inc., 2003 ABQB 501; Alberta Treasury Branches v Leahy, 1999 ABQB 829; R. v Mian, 2012 ABCA 302.

Page: 3 [6] By the respondent, Margaret Cahill: R. v Mian 2012 ABCA 302; Ed Miller Sales and Rentals Ltd. v Caterpillar Tractor Ltd. (AB KB), [1981] 4 W.W.R. 760 at 762; ATB v Leahy 1999 ABQB 829 at paras 23, 24, 25, 26; Gill v 735458 Alberta Inc. 2003 ABQB 501; Trimly Wear Plate Ltd. v Keith Way 2009 ABQB 47 at pars 14, 15, 16; K & J Singer Investments Ltd. v Sigma Realty Ltd. (1957) (AB KB), 24 W.W.R. 235; Northern Cable Vision Ltd. v Chinook Cable TV Ltd. (1996) 43 A.L.R. 93d) 88 By the respondent, Christopher Cahill: Alberta Rules of Court, Alta Reg 124/2010; [7] Alberta Treasury Branches v Leahy, 1999 ABQB 185 (ABQB); Banff Transportation & Tour Inc. v Buchan, 2002 ABQB 423 (ABQB); Cie Financiere du Pac. v Peruvian Guano Co. (1882), 11 Q.B.D. 55 (C.A.); Elkow v Sana, 2006 ABQB 851 (ABQB); Engler v Engler, 2012 ABQB 442 (ABQB); Langlois v Ordorfer (1978), (BC SC), 6 B.C.L.R. 260 (BCSC); NAC Contractors Ltd. v Alberta (Capital Region Wastewater Commission), 2006 ABCA 246 (ABCA); R. v German, (ON CA), [1947] O.R. 395 (Ont.

CA); R. v Graat, (SCC), [1982] 2 S.C.R. 819 (SCC); R. vSmith, [1992] 2 S.C.R. 915 (SCC); R. v Starr, 2000 SCC 40 , [2000] 2 S.C.R 144 (SCC); Royal Bank v W. Got & Associates Electric Ltd. (1993), (AB KB), 10 Alta L.R. (3d) 440 (ABQB); Rudolph Pfeifer and Her Majesty the Queen in Right of Alberta v Westfair Foods Ltd., 2004 ABCA 422 (ABCA); Saskpower International Inc. v UMA Group Ltd. et al, 2008 SKQB 294 (SKQB); Saturley v CIBC World Markets Inc., 2011 NSSC 4 (NSSC); Court v Debaie 2012 ABQB 640. [8] By the court: R. v K.G.B. (SCC), [1993] 1 S.C.R. 740, 1993 S.C.J. No. 22

1. Background [9] Gerald Murphy invested approximately $10 million in Canadian Consolidated Salvage Ltd., and related companies. That original investment has increased in value, mainly as a result of the increase in the value of the real property owned by the various companies rather than as a result of the profitable operation of the salvage business.

Murphy resides in Ireland; Canadian Consolidated Salvage Ltd. is operated by Murphy's sister, Margaret Cahill. [10] On March 23, 2012, Murphy filed an originating application for relief from oppression arising out of the operation of Canadian Consolidated Salvage Ltd.; he is a director and at least a 50%, and perhaps an 80% or even greater, shareholder in CCSL. [11] In a previous application in these proceedings, this court appointed an Inspector to provide Murphy with corporate information to which he was entitled: see the Murphy decisions cited above. [12] In an earlier procedural application in these proceedings, this court set time lines for the taking of steps in these proceedings.

Margaret Cahill was to be presented for cross examination on her affidavit prior to July 13, 2012; she presented herself for questioning on July 10, 2012, Page: 4 but, after two hours of questioning, she claimed to be too ill to continue. On August 22, 2012, Ms. Cahill submitted an affidavit in which she swore: because of the court actions in this matter I have developed anxiety and depression and as a result I developed shingles. I sought the advice of Dr. Paul Arnold. I have attended at Dr. Arnold's office on the following dates: July 4, 2012, July 25, 2012, August 9, 2012, August 17, 2012. I also attended Dr.

Ramadan on June 10, 2012. Dr Ramadan was filling in for Dr. Arnold. . . .Attached hereto and marked Exhibit "A" to this my affidavit, is a copy of Dr. Arnold's report. I was informed by Dr. Arnold that I was developing shingles which was being caused by pressure, anxiety and depression. I developed blisters in my mouth, cheeks and back of my throat. I have faithfully followed Dr. Arnold's instructions and I believe I should be in a position, assuming the medication I am taking becomes effective, to continue with questioning subsequent to September 30, 2012. [13] Dr. Arnold's letter of August 15, 2012 states:

Mrs. Cahill has been prescribed Effexor XR and her dose has been increased twice because as yet we do not have good control over her depression. To titrate her anti- depressant to an optimum dose takes time and this has obviously caused inconvenience in her discovery process. I would imagine that we will need a further month to come to a stage where she should be able to collect her thought sufficient for her discovery. [14] The court then extended the deadline for Margaret Cahill's questioning to November 1, 2012. On November 1, 2012, when Ms.

Cahill presented herself for questioning, she made 23 recorded objections during the first hour of questioning. Taking the view that the objections were obstructionist, Mr. Murphy terminated questioning. 2. Should Margaret Cahill's affidavits be struck out? [15] Gerald Murphy argues that Margaret Cahill's affidavits should be struck out because she has shown a pattern of delay and obstruction. The court has concluded that her affidavits should not be struck because the alleged delay and obstruction have not been established. [16] On the issue of delay, I note that the current application by Mr.

Murphy was brought in March of this year. Given the comprehensive nature of the issues raised in Mr. Murphy's application, and given the procedural framework of legal proceedings in Alberta which authorizes discovery of documents and people as opposed, for example, to procedural frameworks in other common law jurisdictions which shorten discovery in favour, inter alia, of witness statements, it cannot be said that, objectively, the proceedings have been long delayed.

As our Court of Appeal has recently noted, the foundational rule referring to objectives of timeliness and cost effectiveness does not overrule specific rules allowing, for example, discovery. It is true, of course, that since 2011 Mr. Murphy has attempted various avenues for remedies against Ms. Cahill, but those were not awarded by this court. Such attempts cannot, therefore, be presented as evidence of Ms. Cahill's bad behaviour; she is entitled to defend Page: 5 herself against Mr. Murphy's initiatives.

Litigants must do what the rules, and court orders, require them to do; they are not required to cooperate with the party opposite who is attempting to obtain judgment against them. [17] On the issue of delay, I also note that an order was previously issued extending the time for Ms. Cahill to appear for questioning. If Mr. Murphy was of the view that that order should not have been granted, he should have appealed that order. It is not open to him on this application to indirectly contest the previous order by suggesting that the medical evidence

presented by Ms. Cahill did not warrant the granting of an extension. [18] Mr. Murphy's first argument relating to obstruction is that, earlier in these proceedings, another judge has already found that the Cahills' behaviour is marked by indicia of apprehension of oppression. With respect, that argument is incorrect: in a written decision, Lee J. specifically rejected the suggestion that he had found indicia of apprehension of oppression: 2012 ABQB 531. [19] Another example given by Mr. Murphy is that Ms.

Cahill did not do enough to require the lawyer who represented CCSL on its occupational health and safety charges to provide more than just the decision of the trial court, but to provide his file to Mr. Murphy. With respect, this example does not demonstrate obstruction by Ms. Cahill; she undertook to request the file and she did so. She is not responsible for CCSL's lawyer's response. There is a mechanism in the Rules of Court which allows Mr. Murphy to require the lawyer to respond to Mr. Murphy's request for information; to date, Mr. Murphy has not chosen to deploy that mechanism.

Nor is it surprising that the lawyer in question would not turn over his file to Mr. Murphy: we don't know if the lawyer has a lien on the file in relation to work done but as yet unpaid and, in that context, we don't know if some portions of what is now on the file represent the professional property of the lawyer. In

summary, there is a well established mechanism for Mr. Murphy to attempt to obtain material which is not in Ms. Cahill's hands; his decision not to use that mechanism cannot be characterized as Ms. Cahill's responsibility. [20] Another example given by Mr. Murphy of Ms. Cahill's obstructionism is the latter's refusal to answer the question of who paid the realty taxes on the properties owned by CCSL. Mr. Murphy has obtained information about the date on which they were paid; he can, of course, use that information in an argument that Ms. Cahill is a poor manager.

And, theoretically at least, a specific answer about which person paid the taxes is important although in practical terms, as long as CCSL has the benefit of the payment and given the loose accounting structures within the CCSL group of companies, it may not be important to know exactly which person paid the taxes. In any event, Ms. Cahill asserts that information about exactly which person paid the taxes has been provided to Mr. Murphy. [21] Another example given by Mr. Murphy of Ms.

Cahill's obstructionism is her inability to give a precise answer to what happened to the $400,000.00 in surplus funds that had been provided by Mr. Murphy for one purpose but which were not required for that purpose. Ms. Cahill did attempt to answer the question, and couched her answers in phrases such as "I think Page: 6

that's right". Indeed, in answer to other questions, Ms. Cahill replied in language stating that she was not an accountant, did not understand how transactions were recorded, that Mr. Murphy should ask the corporate inhouse accountant and the external accountant - Ernst & Young - about specifics of various transactions, but that she knew that certain monies were owed, etc. Ms. Cahill's answers might provide ammunition for Mr. Murphy's contention that she is an incompetent manager, but they can't be used in support of an argument that she is being obstructionist. [22] Overall with respect to Ms.

Cahill's stance on questioning on November 1, 2012, the court observes that the normal course in such a situation is for the party whose questions were not answered to consider if they will ask the court to rule on whether the affiant must answer the questions. In the circumstances here, some of the questions put by Mr.

Murphy raised issues which were legitimately topics for objection, such as whether the affiant was required to give an opinion on the credibility of other individuals, such as whether the question had been adequately answered and such as whether it was fair to put questions to the witness that were indistinguishable from discovery questions. Having a judge rule on the propriety of the objections is the course that should be followed here.

For that reason, it would not be wise for me to adumbrate on the objections raised. [23] Finally, a court which is asked to strike out a party's affidavits should be struck out, leaving that party with no evidence on a contested application, must carefully assess whether the remedy sought is proportional to the alleged offence. In situations such as the one here, striking out a respondent's affidavits is an extreme measure. For the reasons set out above, I have concluded that the use of such a measure is not justified in the circumstances. 3. Should Gerald Cahill's affidavit be redacted? [24] Mr.

Murphy acknowledges that Christopher Cahill has, since objections were first raised to the content of his affidavit, consented to some redactions. However, he requests additional redactions of Christopher Cahill's affidavit. He prefaces this request with evidence that, so far as he is aware, Mr. Cahill did not in fact participate in legal proceedings while he was in Ireland and suggests that this is additional evidence of obstructionism on Mr. Cahill's part. However, his claim for redaction is based on three separate concerns.

a) On the grounds of hearsay - Rule 13.18 [25] With respect, Mr. Murphy's complaint about hearsay in Gerald Cahill's affidavit is misguided. First, the current Rule, 13.18, does not prevent the use of hearsay in responding

affidavits. That Rule contains significant changes from the previous Rule. The current rule reads: 13.18(1) An affidavit may be sworn (

a) on the basis of personal knowledge, or Page: 7 (

b) on the basis of information known to the person swearing the affidavit and that person's belief.

(2) If an affidavit is sworn on the basis of information and belief, the source of the information must be disclosed in the affidavit.

(3) If an affidavit is used in support of an application that may dispose of all or part of a claim, the affidavit must be sworn on the basis of the personal knowledge of the person swearing the affidavit. Rule 13.18 thus clearly states that only affidavits used in support of applications for final relief must be based on personal knowledge. This is, of course, a sensible rule: litigants should not be vulnerable to having their rights finally determined by evidence that would not be admissible at trial.

Relying on inadmissible evidence is having no evidence at all; a litigant's rights cannot be finally determined without evidence. [26] Rule 13.18 sensibly recognizes that the onus of establishing an entitlement to a decision that will finally determine the rights of the parties is on the person who is applying for such relief. The person who is opposing such relief can be given much more latitude in the quality of the evidence led on the motion.

If the quality of the evidence is insufficient, because it is hearsay, that can be taken into account by the presiding judge. [27] Rule 13.18 incorporates important differences, both with respect to the formal contents of affidavits and with respect to the different emphasis on interlocutory and final applications. The previous rule stated: 305

(1) Affidavits shall be confined to the statement of facts within the knowledge of the deponent.

(2) In an action or proceeding to which a corporation is a party any affidavit required by these Rules to be made by a party may be made by an officer, servant or agent of the corporation having knowledge of the facts required to be deposed to, who shall state therein that he has that knowledge.

(3) On interlocutory motions affidavits containing statements as to the belief of the

deponent with the source and grounds thereof may be admitted. [28] As Ross J. points out in Court, R. 305(1) required courts which applied the former Rule to go to sometimes acrobatic lengths to authorize consideration of affidavits in support of applications for final relief which contained only information and belief, rather than personal knowledge. These acrobatics were required because of the explicit reference in the rule to personal knowledge rather than reference to evidence that would be admissible at trial for the proof of its content. A similar approach is found in Topolniski J.'s comments in Arco.

In my view, decisions based on the previous Rule which set standards respecting the kind of hearsay that was admissible on an application for final relief simply have no remaining relevance because of the clarification on that issue which has been brought by the wording of Rule 13.18(3). Page: 8 [29] However, as Ross J. observes, the Rule in both its present and former formats, is presumably inadequate in that it does not distinguish between admissible and inadmissible hearsay.

For over 20 years, Canadian courts have preferred a principled approach to the admission of hearsay evidence, even in criminal trials, rather than the application of the orthodox approach. Even under the orthodox approach, however, there were exceptions to the exclusion of hearsay from admissibility concerning the truth of the content. Since Khan, in 1990, Canadian courts have treated as admissible to prove the truth of its content hearsay evidence which is necessary and reliable. The history of the evolution of the treatment of hearsay evidence in Canada is conveniently set out in K.G.B.

In light of that well established jurisprudence, it is therefore somewhat surprising that the drafters of the New Rules maintained the approach of the Old Rules concerning hearsay evidence. One might have expected that Rules enacted nearly a quarter of a century after Khan to have at least recognized the effect of the orthodox approach, in which some hearsay evidence has always been admissible for the proof of the content, even if they did not want to adopt what has clearly been Canadian law since 1990.

It is possible, of course, that the drafters felt constrained by the difficulty of explaining the principled approach to hearsay to unrepresented litigants who must look to the Rules to guide their own actions in the court. Although it is not inconceivable that the drafters of the new Rules intended to set a higher standard for applications than for trials, I think that, in interpreting the effect of Rule 13.18, courts are likely to apply the same standard on applications as they apply in trials, including criminal trials.

Therefore, courts are likely to interpret Rule 13.18 as saying that where a litigant is applying for relief that may dispose of all or part of a claim, that litigant can only use in support affidavits containing either statements of fact within the knowledge of the deponent or statements containing hearsay evidence that would be admissible at trial for the truth of the content.

[30] However, to circle back to the issue as raised, a responding affidavit is entitled to include hearsay evidence.

b) On the grounds of irrelevance [31] The problem with Mr. Murphy's objection to parts of Mr. Cahill's affidavit on the grounds of relevance is that Mr. Murphy has chosen to commence these proceedings by way of application rather than by statement of claim. In such a situation, the absence of complete pleadings makes it unwise to rule precipitatedly on relevance. It is true, of course, that the respondents might move to, or the court might on its own motion, convert the proceedings from an originating application to proceedings that must be structured in the ordinary way as a statement of claim, etc.

However, where, as here, the parties are represented by experience counsel, a court is unlikely to introduce its own view of the most appropriate format for the proceedings because it will be well aware that counsel are more knowledgeable about all surrounding factors than is the court. [32] It must also be said that, generally, evidence concerning the credibility of another party is generally admissible in civil proceedings, although a trial judge will, of course, have the ability to Page: 9 restrict or limit the use of such evidence if it were really used only to attempt to establish moral prejudice or propensity or if it required exploration of completely irrelevant tangents.

c) On the grounds of improper opinion evidence [33] Mr. Cahill's affidavit may contain inadmissible opinion evidence although the judge who considers the substantive application in relation to which this affidavit responds may have to properly characterize the disputed evidence. Some opinions, eg. to give an easy example, on scientific matters, are clearly inadmissible evidence. For example an occupational therapist, qualified as such, is not permitted to give an opinion on the etiology of liver cancer. Some lay opinions, e.g.

"this convenience store video of the incident which is the subject of the proceedings, depicts X, an individual with whom I am well acquainted", may well be admissible.

Lay opinion about the speed of a passing vehicle may be admitted, but may be easily characterized as not determinative or as less weighty than the opinion of an expert. [34] The case law suggests that, normally, the best way to deal with inadmissible opinion evidence in civil proceedings is not to apply to strike it out prior to the substantive hearing, but to make submissions at the hearing that it is either inadmissible or that it should be given no weight.

That is the course that is called for in relation to Mr. Cahill's evidence.

d) Conclusion [35] In

summary, no further redaction of Christopher Cahill's affidavit is warranted. 4. Should Alice Wilson's affidavit be struck out, or redacted, on the basis of irrelevance? [36] Mr. Murphy is right to be concerned about the eventual relevancy of his sister Alice Wilson's evidence. As indicated above in relation to Christopher Cahill's evidence, the admission of character evidence in civil proceedings is somewhat complex: as I understand the law, such evidence may be used to attack credibility but is usually not admissible to prove a fact in issue. However, although she resides in Ireland, not all of Ms.

Wilson's affidavit relates to family discord in Ireland. In part, Ms. Wilson's evidence in touches upon alleged facts relating to the Alberta investment. Just as in the case of any inadmissible opinion evidence preferred by Christopher Cahill, Mr. Murphy will be able to track the use which the judge who hears his application for the appointment of a receiver-manager makes of Ms. Wilson's evidence in the reasons given for the disposition of the application. Page: 10 5. Costs [37] If the parties are not agreed on costs, I may be spoken to within 30 days of the release of this decision.

Heard on the 28th day of November, 2012. Dated at the City of Edmonton, Alberta this 21st day of December, 2012. J.B. Veit J.C.Q.B.A. Appearances: Sandeep K. Dhir, Lindsey E. Miller, Field LLP

for the Applicant, Gerald Murphy Rostyk Sadownik, Wheatley Sadownik for the Respondent, Margaret Cahill Terrence Warner, Thomas Gusa, Miller Thomson LLP for the Respondent, Christopher Cahill