No Limits Sportswear Inc. v., 2015 BCSC 1121

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: No Limits Sportswear Inc. v. 0912139 B.C. Ltd., 2015 BCSC 1121 Date: 20150626 Docket: S124144 Registry: Vancouver Between: No Limits Sportswear Inc. and Saxx Underwear Co. Ltd. Plaintiffs And 0912139 B.C. Ltd., Pakage Holdings Inc., Keyhole Technologies Inc., Dustin Bigney, Desmond Price, Scott Hannan, Pakage Apparel Inc. and Gregg Alfonso Defendants Before: The Honourable Madam Justice S.

Griffin Oral Ruling on Use of Examination for Discovery Evidence of Former Employee of Plaintiff Counsel for the Plaintiffs: Paul Smith Counsel for the Defendants other than Alfonso: Caily DiPuma Counsel for the Defendant Gregg Alfonso: Joelle Walker Place and Dates of Hearing: Vancouver, B.C. June 25, 2015 Place and Date of Judgment: Vancouver, B.C. June 26, 2015 [ 1 ] In this trial the plaintiffs seek to read-in passages from the examination for discovery of Mr.

Darren Hawrish, who was examined by opposite parties as a former corporate officer or director, and past CEO, of the plaintiff company No Limits Sportswear Inc. The plaintiffs submit that they wish the evidence they read-in from Mr. Hawrish’s discovery to become “evidence at large” in the case, presumably to support the plaintiffs’ case or be used against any of the defendants. [ 2 ] One of the defendants, Mr. Gregg Alfonso, a lawyer, is represented separately by his own counsel. The other defendants will be referred to as the “Pakage Defendants”. [ 3 ] It was the Pakage Defendants who examined for discovery Mr.

Hawrish pursuant to R. 7-2(5)(

c) of the Supreme Court Civil Rules , B.C. Reg. 168/2009 [ Rules ]. [ 4 ] The Pakage Defendants say that the plaintiffs are not entitled to read-in passages of Mr. Hawrish’s examination for discovery. The Pakage Defendants have given notice of their intention to possibly read-in some of Mr. Hawrish’s examination for discovery at trial, pursuant to R. 12-5(47), although they reserve the right to choose not to read-in this evidence. [ 5 ] The following Rules are relevant to the issue:

a) Rule 7-2(1): each party of record must make himself or a person referred to in subrules (5) to (10) available for discovery by the parties of record who are adverse in interest to the party subject to examination;

b) Rule 7-2(5)(c)(ii): for non-individual parties to be examined for discovery, the examining party may examine a person “who is or has been a director, officer, employee, agent or external auditor of the party to be examined”;

c) Rule 7-2(17): the “examination for discovery is in the nature of a cross-examination”;

d) Rule 12-5(19): “For the purpose of subrules (20) to (23), “adverse party” means a party who is adverse in interest”;

e) Rule 12-5(46), (47) and (48):

(46) If otherwise admissible, the evidence given on an examination for discovery by a party or by a person examined under Rule 7-2 (5) to (10) may be tendered in evidence at trial by any party adverse in interest , unless the court otherwise orders, but the evidence is admissible against the following persons only : (

a) the adverse party who was examined; (

b) the adverse party whose status as a party entitled the examining party to conduct the examination under Rule 7-2 (5) to (10); (

c) if the person was examined under

section 17 of the Class Proceedings Act as a member of a class, the members of that class.

(47) If a person examined for discovery was, at the time of the examination, a former director, officer, employee, agent or external auditor of a party, any part of his or her evidence may be tendered at trial if notice has been served on all parties of record at least 14 days before trial specifying the part of the evidence intended to be given at trial.

(48) Any party of record may require the attendance at trial of a person whose evidence taken on examination for discovery is intended to be tendered under subrule (47), and, if the evidence is tendered, all parties of record may cross-examine that person. [Emphasis added.] [ 6 ] The plaintiffs base their position on the argument that R. 12-5(47) allows any party to read-in the examination for discovery evidence of a former director, officer, employee, agent or external auditor of a party (for ease of reference I will refer to this group of people as former employees).

This means that even the party who formerly employed the former employee can read-in portions of the witness’s discovery evidence. They say that R. 12-5(47) does not expressly state that it is subject to R. 12-5(46), which only allows an adverse party to tender the discovery evidence. [ 7 ] The plaintiffs do not argue that Mr. Hawrish has passed away or that he is otherwise unavailable as a witness. [ 8 ] The Pakage Defendants argue that R. 12-5(47) is subject to the restriction in R. 12-5(46) that discovery evidence can only be tendered by an adverse party. [ 9 ] I agree with the

interpretation of the Rules argued by the Pakage Defendants, for several reasons. [ 10 ] An examination for discovery of a witness is conducted as though a cross-examination, by a party adverse in interest.

The purposes of the procedure include allowing an opposite party to obtain admissions before trial, to be used against the adverse party at trial, and allowing the opposite party to learn evidence which will help it prepare its own case for trial and educate it so that it can consider settlement. [ 11 ] In order that the purposes of pre-trial examination for discovery may be achieved, the questioning party must be allowed considerable scope in the questions asked on discovery.

The style of questioning is different than what it would be at trial, because the questioner is not concerned that self-serving evidence from the witness will be placed before the trial judge. [ 12 ] The purposes of examination for discovery do not change when the witness being examined is a former employee. [ 13 ] Mr. Hawrish was chosen by the Pakage Defendants as the plaintiffs’ representative on discovery, even though the plaintiffs did not choose him to be so. Presumably, as in most examinations for discovery, the Pakage Defendants were in part examining Mr.

Hawrish to seek admissions to use against the plaintiffs at trial, and in part to educate themselves more generally about the facts and evidence relevant to the parties’ dispute. [ 14 ] The

interpretation of the Rules suggested by the plaintiffs regarding the use at trial of the examination for discovery of a former employee is contrary to the underlying purposes of the procedure. [ 15 ] The utility of an examination for discovery would be undermined if self-serving parts of evidence of the former employee given on discovery could be read-in at trial by the party who used to employ the witness.

Such a result would seriously inhibit the scope of questioning by the examining party, limiting the fact-finding nature of the discovery and its usefulness as a tool to avoid surprise at trial and to encourage settlement. [ 16 ] The former employer does not need to use the examination for discovery transcript in order to call helpful evidence from its former employee at trial.

The former employer always has a choice of calling him as a witness at trial. [ 17 ] Contrary to the submissions of the plaintiffs, the fact that subrules 12-5(46), (47) and (48) are separate subrules does not lead to the conclusion that each subrule stands alone and that any party can tender the examination for discovery evidence of a former employee. [ 18 ] Rule 12-5(46) states that evidence given on examination for discovery may be tendered by “any party adverse in interest”.

Rule 12-5(47) does not say who it may be tendered by, but instead, deals with the requirement of giving notice of the intention to tender the evidence if it is from a former employee. Subrule (47) does not say the evidence can be tendered by any party and does not supersede the requirement in R. 12-5(46) that it be tendered by a party adverse in interest. [ 19 ] Also relevant is the restriction on the use of the evidence as set out in R. 12-5(46)(b).

This subrule provides that the evidence is admissible only “against” the adverse party whose status as a party entitled the examining party to conduct the examination. In other words, the evidence of the former employee, if read-in at trial, is only admissible against his former employer, the plaintiff company. It cannot be read-in by one group of defendants as evidence to be used against the other defendant. The plaintiffs’ submission that the plaintiffs should be entitled to read-in portions of the evidence to be used “at large” in the trial would be contrary to these restrictions.

[20] The purposes of subrules 12-5(47) and (48) are to deal with the situation where the former employee who was examined fordiscovery is hostile to his former employer, and gave evidence on discovery which the former employer does not accept and wishes tochallenge. Subrule (47) requires that the party tendering the former employee’s evidence, which again by subrule (46) must be a partyadverse in interest to the party who formerly employed the witness, must give 14 days’ notice before trial of the intention to tender theevidence.

This then gives the party who formerly employed the witness, and any other party, the opportunity to require the witness to beproduced for cross-examination at trial pursuant to subrule (48). [21] To deal with the possibility that the former employee may have loyalties to none of the parties at trial, subrule (48) allows allparties to cross-examine the witness if his presence is required at trial. [22] I find support in this

interpretation in the commentary to R. 12-5(47) found in McLachlin & Taylor, British Columbia Practice,vol. 2, 3d ed. (Markham, Ont: LexisNexis, 2006) at 12-51 as follows: Under SCR 1961, M.R. 370rr, only the examination of a person who was an officer or servant of the corporation at the time of trial couldbe used as evidence.

This was subject to SCR 1961, M.R. 370s which effectively excluded the use of discovery of a former officer orservant who had been dismissed from employment except where such dismissal occurred after service of the appointment forexamination for discovery, in which case his examination could be used with leave of the court: Seymour v. Fleetwood Logging Co., (BC SC), [1963] B.C.J. No. 64, 45 W.W.R. 511 (S.C.). The apparent reason for these rules was the prospect of theunfair use against a corporation of the discovery of a person no longer in its employ and possibly hostile to it.

These restrictions on the use of examination for discovery of former director, officer, employee, agent or external auditor of a party wasabolished by the enactment of SCR 1976, Rule 40(24) (which became SCR 1990, Rule 40(27)): Robitaille v. Vancouver Hockey ClubLtd. (No. 2), (BC SC), [1979] B.C.J. No. 526, 13 B.C.L.R. 309 (S.C.), affd (BC CA), [1981] B.C.J.No. 555, 30 B.C.L.R. 286 (C.A.). Because a party has no choice in the selection of who is examined on his behalf under Rule 7-2(5), it isarguably unfair to burden him with such a person’s answers: see Rule 7-2(5) and comments thereunder.

Accordingly, SCR 1976, Rule 40(27) (which became SCR 1990, Rule 40(24)) was amended in 1985 to provide that the examination fordiscovery of a former director, officer or servant may be given at trial only if notice of the intention to do so is delivered to all parties atleast 14 days before the trial.

Any party may then require that the person examined attend at the trial and, if any part of the examinationfor discovery is given in evidence, all parties may then cross-examine the former director, officer or servant. [23] I conclude that the plaintiffs are not entitled to read-in passages of the examination for discovery of its former employee,Mr. Darren Hawrish. “The Honourable Madam Justice S. Griffin”