Thornton v Swirski-Cowndon, 2016 ABQB 88

Court of Queen ’ s Bench of Alberta Citation: Thornton v Swirski-Cowndon, 2016 ABQB 88 Date: 20160212 Docket: 0601 04621 Registry: Calgary Between: John Thornton Plaintiff - and - Shelley Swirski-Cowndon, Randy Hiebert, Inn-Credible Condominium Development Incorporated and 1100413 Alberta Ltd. Defendants _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice B.E. Romaine _______________________________________________________ I.

Introduction [ 1 ] The Plaintiff John Thornton alleges that the Defendant Shelly Swirski-Cowndon, as an officer and director of the Defendant Inn-Credible Condominium Development Incorporated, improperly waived a financing condition to a purchase and sale agreement made

by Inn-Credible, and, as a result, he lost funds he had provided to Inn-Credible to be used as a deposit. [ 2 ] This is an appeal of an order made by a Master. Mr. Thornton applies for an order requiring Ms. Swirski-Cowndon to include the contents the company’s solicitor’s file in her affidavit of records, and to make certain inquiries of the solicitor. Mr. Thornton wishes to be able to use such documents and the answers to such inquiries at trial as admissions contrary to Ms. Swirski-Cowndon’s interests. II. Facts [ 3 ] Ms.

Swirski-Cowndon was a director and officer of Inn-Credible and of the defendant 1100413 Alberta Ltd. Ms. Swirski- Cowndon has been sued in her personal capacity for her conduct while she was a director, officer and employee of Inn-Credible. Mr. Thornton was also a director of Inn-Credible. Inn-Credible has been struck from the corporate registry and Mr. Thornton has obtained default judgment against it. [ 4 ] Mr. Thornton brought an application before a Master to compel Ms. Swirski-Cowndon to produce records in the possession of Randy Mabbott, the solicitor of the corporate defendants and to compel Ms.

Swirski-Cowndon to make inquiries of Mr. Mabbott in connection with any advice given to her by him with respect to the risks associated with waiving financing conditions to the prejudice of Mr. Thornton. [ 5 ] Mr. Thornton examined Mr. Mabbott in these proceedings, who produced the contents of his file. The Defendants do not claim privilege with respect to any evidence of Mr. Mabbott or with respect to any corporate documentation or the contents of his file. Mr. Thornton had the full ability to question Mr. Mabbott and to obtain his records. [ 6 ] The only portions of Mr.

Mabbott’s file that he objected to producing were his billing records and certain documents relating to a Law Society complaint. Mr. Thornton was not precluded from asking Mr. Mabbott about the nature of advice given to Ms. Swirski- Cowndon about the risks of waiving the financing conditions, and he in fact was asked that question. [ 7 ] During the examination of Mr. Mabbott, counsel for Mr. Thornton asked him whether he understood he was working for the corporation, the individuals, or both. His answer was that his retainer letter was addressed to the corporation, marked to the attention of Ms.

Swirski-Cowndon and Randy Hiebert, and that he took instructions from Ms. Swirski-Cowndon and Mr. Hiebert, the other defendant, also an officer and director of Inn-Credible. [ 8 ] Mr. Thornton has included the documents produced by Mr. Mabbott in his affidavit of records. He wants Ms. Swirski- Cowndon to do the same, and to undertake to take steps to ensure that the records provided by Mr. Mabbott are complete. He also wants her to include in her affidavit of records, and to produce, billing records that Mr. Thornton was unable to obtain from Mr. Mabbott. [ 9 ] Mr. Thornton also wants Ms.

Swirski-Cowndon to inquire of Mr. Mabbott the nature and circumstances of the advice that she was given by him with respect to the waiver of the financing condition. As pointed out by counsel to Ms. Swirski-Cowndon, if Ms. Swirski-Cowndon does not remember this advice, or remembers it differently from Mr. Mabbott, producing the information as part of her questioning may mean that she would be bound by whatever Mr. Mabbott says about their communications. [ 10 ] The Master noted that, on the face of what Mr. Mabbott had said, his client was the corporation. Mr.

Mabbott produced his file, other than billing records and certain privileged material, and the Master noted that, on the face of it, the records were the records of the corporation. The Master questioned why an officer or director of a corporation would have to put corporate records in their personal affidavit of records. He also asked why it mattered, if they were in front of the Court in any event. [ 11 ] Counsel for Mr. Thornton submitted that the records were in the possession or power of Ms. Swirski-Cowndon, and therefore she had to produce them. He also submitted that Ms.

Swirski-Cowndon had an obligation to organize the records properly, to index and briefly describe them and to determine whether they are complete. [ 12 ] The Master accepted that if the documents were under Ms. Swirski-Cowndon’s possession and control, were relevant and not privileged, they would need to be produced whether or not they had already been produced by someone else.

He identified as the issue, however, the question of whether an officer or director with authority to provide instructions to legal counsel had sufficient possession or control of the documents to have to list the documents in their affidavit of records. [ 13 ] He also identified a second issue: to what extent a witness on questioning can be asked to inquire of a third party with whom they may have discussed relevant events about what the third party recalls of that conversation and then report the answers back as part of the questioning. It is clear that Ms. Swirski-Cowndon does not object to Mr.

Thornton contacting Mr. Mabbott directly. [ 14 ] Counsel for Mr. Thornton submits that Ms. Swirski-Cowndon is being sued, not only in her personal capacity, but in her capacity as a director and officer of Inn-Credible, and in that capacity, has a duty to inform herself. However, Ms. Swirski-Cowndon is not the representative of Inn-Credible for the purposes of litigation. Counsel for Ms. Swirski-Cowndon submits that only the corporate representative has that duty to inform. [ 15 ] Counsel for Mr. Thornton also submits that Ms.

Swirski-Cowndon was the instructing party to an agent who was acting for her in the circumstances, an agent who has a positive duty to respond to her inquiries. [ 16 ] The Master decided that Ms. Swirski-Cowndon did not have a duty to inform herself of conversations with a third party if she cannot recall the conversation herself in the context of the lawsuit against her personally. He noted that Mr. Thornton had default judgment against Inn-Credible. While the questions of Ms. Swirski-Cowndon were relevant, she did not have to interview Mr.

Mabbott, a third party witness, and report back on his recollections when Mr. Thornton is equally able to interview him. [ 17 ] He decided that Ms. Swirski-Cowndon did not have the obligation to obtain and list the corporate records. As they are the

corporation’s records, Mr. Thornton had the right as a director to obtain them himself and to question Mr. Mabbott on theircompleteness, which he has in fact done. The Master agreed with the proposition that because someone had the requisite corporateauthority to cause something to be done did not mean that the records became their personal records over which they have the power andpossession to produce. III. Standard of Review [18] The standard of review on appeal of a Master to a judge is correctness: Bahcheli v Yorkton Securities, 2012 ABCA 166 at para30. IV. Issues [19] I agree with the Master that there are two issues in this application:

a) Does an officer or director with authority to provide instructions to legal counsel have sufficient possession or control of documentsin the possession of such counsel to be required to list the documents in an affidavit of records?

b) To what extent can a witness on questioning be asked to inquire of a third party with whom they may have discussed relevantevents about that third party’s recollection, and to report the results of that inquiry in a form that may bind them as an admission? V. Analysis A. Does an officer or director with authority to provideinstructions to legal counsel have sufficient possession or controlof documents in the possession of such counsel to be required tolist the documents in an affidavit of records? [20] Mr.

Thornton relies on Rule 5.6(1)(b)(ii) of the Alberta Rules of Court, Alta Reg 124/2010, which states that a party mustdisclose all records that are or have been under that party’s control. For a party to have power over a record held by a non-party, the partymust have a legal right to access it: McAllister v Calgary (City), 2012 ABCA 326. The requesting party must have an ability to enforcecompliance by the third party; McAllister at para 7. [21] It is clear that it is not an answer to say that Mr. Thornton already has the documents from Mr.

Mabbott: Allied Signal Inc vDome Petroleum Ltd (1995), (AB KB), 28 Alta LR (3d) 79 at para 10. It is also clear that “control” includes allrecords held for a party by a solicitor. The issue is whether an officer or director of a corporation with authority to provide instructions tolegal counsel also has such control. The answer must be yes: a corporation can only act through its officers and directors. In this case,Ms. Swirski-Cowndon was such an officer, and must therefore be considered to have the right to obtain the records in Mr.

Mabbott’spossession. [22] In my view, it makes no difference to this issue whether or not Inn-Credible has been struck from the Corporate Registry. Theissue is not the status of the corporation, but access to its records. [23] In addition,

section 26 of the Alberta Business Corporation Act provides that a person who has been granted custody of thedocuments and records of a dissolved corporation remains liable to produce those documents for six years following the date ofdissolution. It appears that Mr. Mabbott is such person in this case.

Although there is no express provision in the Act regarding the abilityof a former director or officer to access such records, the existence of the obligation to retain records under the Act implies the ability of adirector of a dissolved corporation to obtain access in accordance with the provisions of the Act. [24] Therefore, unless there is any valid opposition, Ms. Swirski-Cowndon must be considered to have control of the records. Mr.Mabbott has produced the records and there is no indication that he is asserting that Ms.

Swirski-Cowndon would have any improperpurpose in obtaining access to the records or that he is refusing access on the basis that Mr. Thornton and Ms. Swirski-Cowndon are nolonger directors. [25] There is no doubt that the documents are relevant and material to the issues in the action against Ms. Swirski-Cowndon. I findthat, given there has been no challenge to access by Mr. Mabbott, the person with custody of the documents, Ms. Swirski-Cowndon hasde facto control of the contents of Mr. Mabbott’s file, and must list them in her affidavit of records. [26] Ms. Swirski-Cowndon has the same obligation as Mr.

Thornton once the documents are listed in her affidavit of records: tonumber them in a convenient order and to briefly describe them. She has the same obligation to ensure that the records are complete. [27] What she is not required to do is to take steps to compel Mr. Mabbott to produce his billing records for inclusion in heraffidavit of records. Mr. Mabbott has taken the position that these are not producible. Ms. Swirski-Cowndon is in no better position thanMr. Thornton to bring an application to compel production.

B. To what extent can a witness on questioning be asked to inquire of a third party with whom they may have discussed relevant events about that third party’s recollection and to report the results back in a form that may bind them as an admission? [ 28 ] While it may make no difference to the first issue that Inn-Credible has been struck, it makes a difference to this issue that it has been noted in default. [ 29 ] Mr. Thornton requires no more evidence from Inn-Credible to obtain a judgment against it. Ms.

Swirski-Cowndon was not questioned as a corporate representative of Inn-Credible, but in her personal capacity. In that capacity and given the allegations, she may be questioned about what she did as a director or employee of Inn-Credible, but she is not under a duty to inform herself in the same way as a corporate representative. Ms. Swirski-Cowndon’s obligation is to be reasonably prepared for questioning: Rule 5.23. She is not required to adopt as her evidence, or to refresh her memory by reference to, the evidence of a third-party whom she does not control in her personal capacity.

There is no evidence that Mr. Mabbott was acting as Ms. Swirski-Cowndon’s agent, as opposed to agent for Inn- Credible. Conclusion [ 30 ] Ms. Swirski-Cowndon is obligated to add the contents of Mr. Mabbott’s file to her affidavit of records. She is not, however, obligated to make inquiries of Mr. Mabbott with respect to advice he may have given her, or to incorporate the results of that inquiry as part of her questioning. [ 31 ] If the parties are unable to agree on costs, they may make written submissions on the issue. Dated at the City of Calgary, Alberta this 12 th day of February, 2016. B.E.

Romaine J.C.Q.B.A. Appearances: Grant Stapon, Q.C. Bennett Jones LLP for the Plaintiff Michael D. Aasen McLennan Ross LLP for the Defendants Frank H. Monaghan