FOUNDATION GROUP MERGERS & ACQUISITIONS LTD Plaintiff - v. -, 1999 ABQB 442

Foundation Group Mergers & Acquisitions Ltd. v. Norterra Inc. , 1999 ABQB 442 Date: 1999 06 07 Action No. 9903-00582 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON BETWEEN: FOUNDATION GROUP MERGERS & ACQUISITIONS LTD Plaintiff - and - NORTERRA INC. Defendant [Note: An Erratum was filed on June 9, 1999; the correction has been made to the text and the Erratum is appended to this Judgment.] _______________________________________________________ REASONS FOR DECISION of M.

FUNDUK , Masters in Chambers _______________________________________________________ [ 1 ] This is an application by the Plaintiff for an order directing that two “employees” of the Defendant who will be examined by the Plaintiff be excluded from the examination for discovery of the Defendant's officer and from the examination of each other. [ 2 ] In other words, each employee is to be present only during his examination. [ 3 ] The Plaintiff sues for commission on alleged contracts between the parties. [ 4 ] It is common ground between counsel that three people with the Defendant had involvement in the transactions alleged by the Plaintiff.

Those people are Gunnar Anderson, David Burnett and Arthur Russell.

[ 5 ] Anderson is the Defendant’s vice-president of finance, Burnett is the chief executive officer and Russell is a financial officer. Burnett would be Anderson’s superior and Anderson would be Russell’s superior. Mr. Bilsland refers to that as the corporate pecking order. [ 6 ] It is common ground between counsel that Anderson will be the Defendant’s chosen officer to speak for it. That is, he will be examined for discovery as the Defendant within the context of Empire Financiers Limited v. Nance , 1920 CanLII 595 (AB CA) , [1920] 1 W.W.R. 694 (Alta. S.C.A.D.) ; Caven v.

Canadian Pacific Railway Company , 1924 CanLII 467 (AB KB) , [1924] 2 W.W.R. 200 (Alta. S.C.) and Her Majesty the Queen v. N.M. Paterson and Sons Limited , 1980 CanLII 227 (SCC) , [1980] 2 S.C.R. 679 . The chosen officer of a corporate litigant has sometimes been inelegantly referred to as the “mouthpiece” for the corporation. Issues One [ 7 ] Burnett and Russell will be examined as “employees” of the Defendant within the context of Rule 200. The notice of motion asks for: 2. An Order excluding the employees of the Defendant, David Burnett and Arthur Russell from Examinations for Discovery in this action. 3.

An Order otherwise dealing with the manner of proceeding with Examinations for Discovery. [ 8 ] The Plaintiff’s witness, Stephen Kent, who was cross-examined, clarifies exactly what is sought this way: 9. I am advised by John C. Bilsland and do verily believe that on May 10, 1999, before Examination for Discovery were to proceed, the solicitor for the Defendant, William J. Kenny advised that he would not proceed with Examinations if the Plaintiff’s lawyer, John C. Bilsland insisted on exclusion of employees from Examination for Discovery expecting only Gunnar Anderson as the selected officer of the Defendant.

In so far as I am aware, David Burnett and Arthur Russell are produced as employees only of the Defendant. 10. I am the selected officer of the Plaintiff and on behalf of the Plaintiff, object to the presence of Mr. Burnett and Mr. Russell at the Examination of the other, as well as at the Examination of the Plaintiff’s officer and employees. I believe there is a risk that the evidence of Burnett and Russell may be affected or influenced if they are present, together or review each other’s testimony. [ 9 ] I do not interpret that as requesting that Anderson be excluded when Burnett and Russell are examined.

The Defendant is entitled to be present when Burnett and Russell are examined. That can be done only by someone being present on behalf of the Defendant (i.e., a “silent” mouthpiece) and common sense dictates that that person be Anderson since he is also the Defendant’s chosen spokesman to be examined. See Baywood Paper Products Ltd. v. Paymaster Cheque-Writers (Canada) Ltd. , 1986 CanLII 2699 (ON SC) , 57 O.R. (2d) 229 (D.C.) on the basic principle. [ 10 ] The basic rule regarding the exclusion of litigants from examinations is spelled out in Lambart v. Lomore , 1997 ABCA 398 (CanLII) , 57 Alta.

L.R. (3d) 110 (C.A.) . Without more, litigants are entitled to be present at examinations. That applies to examination of other litigants as well as mere witnesses. [ 11 ] That rule, which is a rule of exclusion, is not the issue before me. The Plaintiff does not seek to exclude Anderson when Burnett and Russell are examined. If it did the burden would be on it to justify Anderson being excluded. Two

[ 12 ] The issue before me is what I would call the "rule of inclusion". (It really is not a rule but that does not matter). [ 13 ] Examinations for discovery are a private process. Without more, a non-litigant is not entitled to be present when a litigant is examined for discovery. So without more Burnett and Russell are not entitled to be present when Anderson is examined for discovery. [ 14 ] Here the Plaintiff is the applicant. However, the burden does not rest on the Plaintiff to satisfy me that Burnett and Russell should be excluded.

Rather, the burden rests on the Defendant to satisfy me that Burnett and Russell should be allowed to be present when Anderson is examined for discovery. (That is why I call it a "rule of inclusion"). The Plaintiff can simply rest on the basic rule that without more non-litigants are not entitled to be present when a litigant is examined for discovery. How this issue comes before me procedurally is irrelevant. [ 15 ] The case law establishes that the court can, where it is appropriate, let a non-litigant be present when a litigant is being examined for discovery.

Our Civil Procedure Guide (1996), v. 1, p. 871, discusses this under heading 3. Each case is fact driven. [ 16 ] Burnett and Russell have some personal knowledge touching on the issues in the lawsuit. Building on that Mr. Kenny relies on the two part analysis found in Brown v. Normanview Daycare Corp. , (1986) 46 Sask. L.R. 227 (Q.B.). There the issue was whether a non-litigant should be allowed to be present when the corporate defendant's officer was examined for discovery.

In deciding that the non- litigant could be present the court says, pp. 228-29: An examination for discovery is not held in open court; the place where it is held is deemed to be a private place. As a result, the public have no right to attend at examinations for discovery (see: In re Western of Canada Oil, Lands, and Works Company (1877), 6 Ch.D. 109 ). As the defendant is a corporation, it can only appear by its agents, and the question arises: Can only the proper officer of the company attend at the examination or can other agents attend as well? The defendant wants Mr.

Baulin to be present as a resource person to assist the proper officer in providing answers to questions she may be asked in relation to the action and which she might not be able to answer of her own knowledge. He would not be present to answer questions but to provide the proper officer with information so that she could answer them. The usual procedure to be followed, when the presence of a person at an examination for discovery is objected to, is to ask the examiner, in this case the local registrar, to exclude that person.

If the examiner's ruling is objected to, the examination for discovery can be adjourned and an application made to review his decision. The usual procedure was not followed in this case. However, the parties are before me by agreement and I will dispose of the application without the necessity of having it referred back to the local registrar for a ruling. It is apparent from Rule 272 that the examiner has the discretion to exclude persons, even parties from the examination.

In exercising this discretion, I am satisfied "[t]he proper principle on which that discretion should be exercised is whether the examination would be prejudiced by the person whose presence is being questioned" (The Law of Civil Procedure by Williston and Rolls, p. 863). A person being discovered has an obligation to inform himself on all matters material to the issues; however, invariably that person does not have all the information required by the examining party and undertakes to provide it at a later date.

Much time is wasted in this procedure and it would be helpful for the person being examined to have resource persons available at the examination to inform him on these matters (see: Miles v. Miles , [1960] O.W.N. 57 ). The plaintiff suggests Mr. Baulin should be excluded because "he may very possibly be a witness at the trial". It is true witnesses are sometimes excluded to prevent their "tailoring" their evidence and as a means of testing their credibility. However, an unsubstantiated

allegation that a person might possibly be a witness at trial should not automatically result in his exclusion. The party seeking exclusion must lay a proper foundation for his request. I cannot assume Mr. Baulin will be a witness at trial and that his credibility will be a factor. On the evidence before me, I am not satisfied the examination for discovery would be prejudiced by the presence of Mr. Baulin. In fact, it might be enhanced by his presence.

He might be able to provide the proper officer with information so that needless undertakings can be avoided, thereby saving both time and expense for the parties. [ 17 ] That would be a layperson's logic, but it does not appeal to me. [ 18 ] First, the suggestion that employees who have some knowledge should be present at the officer's examination for discovery because it might "speed up" the discovery process is not legally sound.

Taken to its logical conclusion it would mean that all employees who have some knowledge could be present at the officer's examination for discovery so the officer could inform himself "on the spot" so to speak. [ 19 ] (The blunt speaking person might say that if the Defendant is so concerned about "speeding up" the process the lawsuit could be greatly speeded up by the Defendant simply consenting to a judgment against itself). [ 20 ] It is Anderson's duty to inform himself: Miller (Ed) Sales and Rentals Ltd. v.

Caterpillar Tractor Co. (No. 2) , (1988) 1988 CanLII 3430 (AB KB) , 88 A.R. 110 (Q.B.) , para. 3 : It is clear that a party being examined is bound to inform himself as to matters in question within the knowledge of servants or agents ( Culver v. Lloydminster , 1928 CanLII 131 (SK KB) , [1928] 1 W.W.R. 406 ; Canadian Utilities Ltd. v. Mannix Ltd. (1959), 1959 CanLII 277 (AB CA) , 29 W.W.R. (N.S.) 289 (Alta. C.A.) ). ... Anderson is supposed to inform himself in advance of his examination for discovery.

It would be naive, and even stupid, to think that an officer should be able to inform himself "100 percent" in advance, nor should we expect that. The wide latitude given to examinations for discovery would require the officer to be omniscient and we should not expect that. However, the inability of the officer to be omniscient and the delay caused by that is not a rational legal basis to let employees be present when the officer is examined.

Speed and convenience should not be the driving forces to lawsuits. [ 21 ] Second. there are practical logistical problems to simply letting employees be present for the first reason given in Brown . For example, are discussions between Anderson and Burnett to be "on the record"? Will the discussions be in the examination room? Will the Plaintiff's officer and Mr. Bilsland be present at the discussions? Should they leave the examination room during the discussion? Should Anderson and Burnett leave the examination room to have their discussions?

Will people be popping in and out of the examination room? (Perhaps the examination room should have the spy chief's "cone of silence", as in the TV series Get Smart). [ 22 ] I am not at all convinced that having employees present during the officer's examination will greatly speed up the examination for discovery process. [ 23 ] Third, I do not accept Brown's view that the discretion by the court to let a non-party be present at the officer's examination is to be decided by whether there will be prejudice if the non-party is allowed to be present. That is a wrong test.

It is a right test, or part of a right test, when exclusion of a litigant is sought. It is the wrong test to apply when the issue is whether a non-party should be present. Because there is no basic right for a non-party to be present the test enunciated by Brown converts the "no right" to a "right". [ 24 ] If the Defendant makes out a case for Burnett and Russell being present at Anderson's examination for discovery the burden then shifts to the Plaintiff to show why that should not be so and, if it wants, it can argue prejudice.

But the Plaintiff need not show prejudice unless the Defendant first makes out a case for attendance. [ 25 ] Mr. Kenny says that questions whose sole object is credibility cannot be asked and so there is no danger if Burnett and

Russell are present at Anderson's discovery. That is a red herring argument. It has nothing to do with whether a non-party should be allowed to be present at a litigant's examination for discovery. [ 26 ] The Defendant has not satisfied me that it would be appropriate to let Burnett and Russell be present at Anderson's examination for discovery. Convenience is not a sufficient reason. Labelling the employee as a "resource person", as was done in Brown , is almost an insult to a person's intelligence.

"A rose is a rose is a rose is a rose": Sacred Emily, Gertrude Stein. [ 27 ] It is not suggested, and more important there is no evidence to support it, that Burnett and Russell are "experts" or would be present at Anderson's examination for discovery to assist him in "very technical matters", a phrase used in our Civil Procedure Guide previously referred to. [ 28 ] This is also not a case like Ian MacDonald Library Services Ltd. v. P.Z. Resort Systems Inc., 1985 CanLII 259 (BC SC) , 67 B.C.L.R. 269 (S.C.) where the presence of an expert was required to assist counsel. Mr.

Kenny does not suggest that he needs the presence of Burnett and Russell to assist him on "technical" matters. [ 29 ] Mr. Bilsland has cited Abulnar v. Varity Corporation, 36 C.P.C. (2d) 101 (Ont. S.C.) and Dale Point Enterprises Ltd. v. Enterprise Newfoundland and Labrador Corp. , (1994) 383 A.P.R. 43 (Nfld S.C.) .

In the second case the court says, para. 22: In order for a person, not a party to an action to be present at discovery proceedings involving a corporate litigant whose representative will be present, it must be shown that such proceedings cannot be conducted effectively and fairly without his or her presence. Maude Burry does not meet that test and as a consequence, the plaintiff is not entitled to an order directing that she be permitted to attend at the examination of the defendant's witnesses.

Even with that liberal test (which I make no comment on) the Defendant has not made out a case for Burnett and Russell being present at Anderson's examination for discovery. Three [ 30 ] I turn now to whether Burnett and Russell should be present at each others examination. [ 31 ] Those arguments discussed under the previous heading which were also raised in this part of the application need not be repeated and again debated. They do not help the Defendant. [ 32 ] That leaves the chronology argument advanced by Mr. Kenny. [ 33 ] Mr.

Kenny says that if a non-litigant witness is excluded from the courtroom at a trial the witness is usually allowed to remain in the courtroom after he has testified. I would not disagree with that statement. Building on that Mr. Kenny says that after Burnett has been examined he should be allowed to remain if anyone else is examined after him. The same is said of Mr.

Russell. [ 34 ] Of course I do not know in what order Anderson, Burnett and Russell will be examined. [ 35 ] Support for that position is found in Dale Point Enterprises Ltd. paras. 12, 15 and 16: Discovery proceedings are not intended to be confrontational. They are usually conducted outside the courthouse and in a quiet and calm atmosphere. While such atmosphere is desirable to ensure the effectiveness of discovery proceedings, it is still necessary, in my view,

that evidentiary rules and practices be followed. The right of a person, other than a party to an action, to be present at the discovery of witnesses is subject, to a large degree, to the same evidentiary rules which apply at trial. . . . . . In R. v. Murphy (P.A.) (1994), 1994 CanLII 9737 (NL CA) , 114 Nfld. & P.E.I.R. 148 ; 356 A.P.R. 148 (Nfld. C.A.), the Court of Appeal of Newfoundland stated at page 16: It has long been the practice for trial courts in Newfoundland to exclude witnesses in a cause from court until after they have testified.

The primary reason for this is so that they may not hear the evidence of witnesses called before them and thus create a concern that their own testimony may be thereby coloured. A trial judge, by permitting witnesses to remain in court, makes the task of assessing credibility more difficult.

While the rules of evidence are sometimes more stringently applied at trial than at discovery proceedings, the principle laid down in the Murphy case with respect to the presence of prospective witnesses at trial is, in my view, equally applicable to the issues before me at this time. [ 36 ] I do not accept the analogy. [ 37 ] A trial is open to the public while a discovery process is not. The non-litigant witness who is excluded at trial until he gives his evidence can remain in the courtroom after he has given his evidence because it is an open courtroom, i.e, open to the public.

The non-litigant witness simply becomes a member of the public after he has given his evidence and so can remain in the courtroom on that basis. [ 38 ] Because an examination for discovery process, or an examination of an employee under Rule 200, is not open to the public the "open court" concept for trials is just not apt. There is no principled reason why an employee examined under Rule 200 should have a right to be present to hear what is said by those that are examined after him.

It does not take a rocket scientist to readily see that opposing counsel would set different dates for examinations of litigants and non-litigant witnesses to avoid people piling up in the examination room as "spectators". [ 39 ] An employee examined under Rule 200 does not have a right to be present at the examinations of those that follow him. Here too, arguments about evidence being tailored or not being tailored are just a red herring. [ 40 ] Burnett cannot be present at Russell's examination and Russell cannot be present at Burnett's examination.

Four [ 41 ] To the extent that the chronology argument is used to let Burnett and Russell be present when Anderson is examined for discovery if Anderson is examined last the reasoning under heading Three applies. The chronology should not dictate the result. Five [ 42 ] Formal appointments were served on Anderson, Burnett and Russell. All are returnable the same date and same time. That is irrelevant to the issues before me. It is not a concession by Mr. Bilsland that Burnett and Russell can be present at the examinations of others. It is common practice to set examinations for the same date and time.

It is difficult and often impossible for counsel to be able to judge accurately how long each examination will take.

Decision 1. Anderson is entitled to be present at the examinations of Burnett and Russell, although this is not an issue in the notice of motion or evidence. 2. Burnett cannot be present at Anderson's examination or Russell's examination. 3. Russell cannot be present at Anderson's examination or Burnett's examination. 4. The Plaintiff will have costs of this application in any event, on column 4, the taxation and payment to be stayed until the conclusion of the lawsuit. DATED at Edmonton, Alberta this 7th day of June , 1999. M. FUNDUK M.C. C.Q.B.A. APPEARANCES: J. C.

Bilsland Corbett & Company Counsel for the Plaintiff W. J. Kenny Miller Thomson Counsel for the Defendant ______________________________________________ ERRATA OF THE REASONS FOR DECISION OF M. FUNDUK, Master in Chambers

________________________________________________ In paragraph [5] of the above judgment, the word “Burkett” has been changed to read “Burnett”. In paragraphs [7], [9], [11], of the above judgment, the word “Barnett” has been changed to read “Burnett” In paragraph [25] of the above judgment, the word “Russel” has been changed to read “Russell”. In paragraph [29] of the above judgment, the word “Event” has been changed to read “Even”. Please replace pages 1, 2, 3, and 6.