Cortés v. Yorkton Securities Date:, 2003 BCSC 482

Citation: Cortés v. Yorkton Securities Date: 20030401 2003 BCSC 482 Docket: S001142 Registry: Vancouver IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN: JOSE RICHARDO NAJAS CORT ÉS PLAINTIFF AND: YORKTON SECURITIES INC. DEFENDANT REASONS FOR JUDGMENT OF MASTER DOOLAN (IN CHAMBERS) Counsel for the Plaintiff: L. Beukman Counsel for the Defendant: D. Neave J. Oliver Date and Place of Hearing: February 5, 2003 Vancouver, BC [ 1 ] By notice of motion dated December 20, 2002, the plaintiff seeks an order that:

a) The Plaintiff be allowed to use the documents disclosed by the Defendant in its List of Documents dated August 4, 2000 and its Supplementary List of Documents dated November 17, 2000 for the assistance of counsel for the plaintiff in Ecuador to determine whether any right or remedy exists under Ecuadorian law to enable the plaintiff to pursue collection of his judgment;

b) The Defendant’s defence be struck out in terms of the provisions of Rule 2(5)(

d) due to its non-compliance with the provisions of Rule 29(5);

c) Alternatively compelling the Defendant to answer the Plaintiff’s Interrogatories;

d) The Defendant deliver a further and better list of documents disclosing such further documents in its possession or control;

e) The Plaintiff is entitled to the costs of this application, in any event of the cause. [ 2 ] The plaintiff relies upon Rules 2, 26, 28 and 57 of the Rules of Court. [ 3 ] By notice of motion dated December 30, 2002, the defendant seeks an order that:

1. The Plaintiff’s Interrogatories dated 22 October 2002 be struck out. 2. The Plaintiff forthwith pay costs to the Defendant in any event of the cause. [ 4 ] The defendant relies upon Rules 29(7) and 57 of the Rules of Court. [ 5 ] During the course of writing these reasons I was advised that the “interrogatories” issue raised in paragraphs (

b) and (

c) of the plaintiff’s motion and the sole issue raised in the defendant’s motion was argued before Master Tokarek on March 19, 2003. I understand the master gave reasons from the bench and as a result, I deal only with paras. (a), (

d) and (

e) of the plaintiff’s motion. [ 6 ] On February 29, 2000, the plaintiff commenced this action against the defendant. In his statement of claim the plaintiff asserts that he obtained judgment on February 8, 1999 against the defendant in the Eighth Civil Court of Pichincha, Ecuador, in the amount of $40,068,059.99 CDN. [ 7 ] The plaintiff asserts that this action and the Ecuador judgment arose out of a business relationship between himself and the defendant, which commenced in or about March 1993, and related to the acquisition of certain mining properties in Ecuador by the plaintiff for the defendant.

The plaintiff asserts as well that the judgment was obtained in an action which has a real and substantial connection to Ecuador, and that the judgment obtained on February 8, 1999 was final. The plaintiff pleads that the defendant has taken no steps to appeal the judgment, and that the time for appeal has expired. [ 8 ] The plaintiff declares he is entitled to enforce the Ecuador judgment in British Columbia and seeks judgment in this court in the amount ordered by the Ecuador court. [ 9 ] On April 12, 2000 the defendant filed its statement of defence.

The defendant pleads that it was not until September 1999 that they received notice of the action and judgment given by the Ecuador court, and further that the defendant had not done business in Ecuador since April 1995.

They plead that they were not present in Ecuador at the time the Ecuador court took jurisdiction, nor did they attorn to the jurisdiction of the court that granted judgment against them. [ 10 ] The defendant pleads that at no time did the plaintiff effect service ex juris on it of the proceedings issued out of the Ecuador court in accordance with Ecuador law, nor did he give the defendant notice of the Ecuador action in accordance with Ecuador law, and that at no time did the Ecuador court have jurisdiction over the defendant in respect to that action. [ 11 ] The defendant asserts that the plaintiff obtained the default judgment by fraud on the Ecuador court, and as such, the order sought by the plaintiff ought not to be made or enforced by this honourable court. [ 12 ] Filed with the statement of defence is a counterclaim seeking, among other things, a declaration that no agreement, oral or in writing, exists between the plaintiff and the defendant as alleged by the plaintiff.

The defendant seeks general and punitive damages, injunctive relief and special costs. [ 13 ] The plaintiff acknowledges that he has no right to use the defendant’s list of documents in another proceeding or in another court, without first having obtained the permission of the defendant or an order of this court. [ 14 ] Paragraphs 8 and 9 of the plaintiff’s argument reads as follows: 8.

The Plaintiff is desirous of providing his Ecuadorian counsel with the documents disclosed by the Defendant for purposes of advising him whether any right or remedy exists under Ecuadorian law to enable the Plaintiff to pursue collection of his judgment under Ecuadorian law. 9.

The Plaintiff may not, however, use the documents other than in the proceedings in which they are disclosed and as the Defendant has not consented to the Plaintiff so using the documents disclosed by the Defendant, the Plaintiff is applying for a court order to allow such use of the documents. [ 15 ] The plaintiff refers to two cases: Hunt v. T & N plc (1995), C.P.C. (3d) 133 (B.C.C.A.), and Discovery Enterprises Inc. v. Ebco Industries Ltd. [1997] B.C.J.

No. 2360 (S.C.) . [ 16 ] In Hunt , the appeal was heard by a five-member panel as the court was being asked to consider and reverse its earlier decision in Kyuquot Logging Ltd. v. British Columbia Forest Products Ltd. (1986), 1986 CanLII 167 (BC CA) , 15 C.P.C. (2d) 52 (B.C.C.A.).

The headnote in Hunt , p. 134, comments on Kyuquot as follows: . . .That precedent held that, absent an express undertaking or order, a party obtaining production of documents could use them for purposes other than the conduct of the proceedings in which those documents had been produced. [ 17 ] At p. 150 in Hunt the court refers to the powerful dissent of Esson, J.A. in Kyuquot , pp. 10-11 of his reasons: I do not, with all respect to those of contrary opinion, see the question as one which we can decide on grounds of policy. In arguing that

the law should be that there is no restriction in the absence of an order or express undertaking, counsel for the appellant urged that such a rule would be more practical and less cumbersome than one requiring the party obtaining discovery to apply for an exemption. It is not obvious to me that, if it were open to us to decide the matter on that basis, the course urged by the appellant would be advantageous. Our rules for discovery of documents are very broad. The reality, in many cases, is that great volumes of paper must be disclosed.

That disclosure is often made, in practice, without much consideration to the question whether some parts of it could be damaging or embarrassing to the person making production. Under the present law, there is not much point in considering those questions. If the documents can only be used for the proper purposes of the action in which they are produced, it does not matter whether they are prejudicial or embarrassing – that is a cost required by the rule.

So there is no practical reason for the party giving production to make the effort, which will sometimes be very great, to cull out any potentially embarrassing material. But if the party receiving production is to be free to make any use it wishes unless and until the owner of the documents obtains a special order or undertaking, that kind of effort will have to be made in every case.

That will not further the ends of keeping costs to a reasonable minimum and of bringing about a broad, open and reasonably expeditious discovery. [ 18 ] Reading from the headnote in Hunt , supra, p. 135, the court held as follows: The Kyuquot decision should be reversed. Canadian jurisprudence has been almost unanimous in imposing an obligation of confidence on a party obtaining documents on discovery.

The dissenting views of Esson J.A. in Kyuquot were preferable to those of the majority because it was anomalous to recognize a right of privacy and an obligation to use discovery documents only in the proceedings in which they were produced, but then require the owner of the documents to take steps to prevent a breach of that obligation.

Accordingly, the party obtaining discovery of documents should be required to obtain the permission of the owner or leave of the court to use the documents other than in the proceedings in which they had been produced. [ 19 ] The court’s statement on that matter is succinctly set out at pp. 150-151 of Hunt , para. 64: Accordingly, we would uphold the obligation which the law has generally imposed upon a party obtaining discovery of documents, and we would require such party, in appropriate cases, to obtain the owner’s permission or the court’s leave to use the documents other than in the proceedings in which they are produced. [ 20 ] What then is the test?

The courts have held that there must be special circumstances before a party can be released from the implied undertaking. The order must be based on justice and fair play after consideration of any prejudice advanced by the owner of the documents and the party seeking to be relieved of its obligation of confidentiality? [ 21 ] In Goodman v.

Rossi (1995), 1995 CanLII 1888 (ON CA) , 125 D.L.R. (4th) 613 (Ont.C.A.), Morden, A.C.J.O. affirmed the implied undertaking rule with respect to discovered documents at p. 621: Up to this point, the rationale of the principle had not been articulated, nor had the enforcement mechanism of an implied undertaking to the court been mentioned in any case. I will deal with the rationale of the principle more fully later in these reasons but mention now, very briefly, that the principle is based on recognition of the general right of privacy which a person has with respect to his or her documents.

The discovery process represents an intrusion on this right under the compulsory processes of the court. The necessary corollary is that this intrusion should not be allowed for any purpose other than that of securing justice in the proceeding in which the discovery takes place. And again at p. 631: The criteria for granting relief from the implied undertaking rule are an important part of the rule itself. In Crest Homes plc v.

Marks , [1987] 2 All E.R. 1074 , Lord Oliver said at p. 1085, on behalf of the House of Lords, that the authorities on the question “illustrate no general principle beyond this, that the court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery”. For the purposes of resolving the case before us I need not deal with this question exhaustively or definitively.

Certainly, the accepted grounds for granting relief from the implied undertaking rule should not be so broadly based that the integrity of the rule is routinely infringed. In Carbone v. De La Roche , supra, a defamation action based on documents held to have been produced in the context of discovery in an earlier action, Whalen J. refused to grant leave to use the documents as a basis of the claim. His reasons, which include extensive reference to the similar case of Riddick v. Thames Board Mills , supra , are a helpful consideration of the “injustice” to the person giving the discovery.

He concluded his reasons on this question at p. 369 as follows: The process of this court cannot be or appear to be an instrument of the initiation of litigation not otherwise contemplated or part of the cause of action which disclosed the potentially new claim. To be so would undermine full and frank disclosure by parties. This would be contrary to the public interest and is an abuse of the process of the court.

[ 22 ] In his motion, the plaintiff states that the intended use of the defendant’s documents is: ...for the assistance of counsel for the plaintiff in Ecuador to determine whether any right or remedy exists under Ecuadorian law to enable the plaintiff to pursue collection of his judgment. [ 23 ] The following are excerpts from correspondence between counsel concerning these matters: 1. In a letter October 8, 2002 from defendant’s counsel to plaintiff’s counsel: In respect to your request that we consent to your waiver of your undertaking in respect to Yorkton’s documents for the “possibility of further action in Ecuador” if you will provide us with the nature of the action(

s) under consideration and the parties or potential parties against whom such action(

s) may be advanced, we can consider fully your request in context. 2. In a letter October 31, 2002 from plaintiff’s counsel to defendant’s counsel: Thank you for your letter dated October 8, 2002. You ask for the nature of the proposed action in Ecuador and the intended parties. We are not able to do more at this stage than to say there appears to exist documents which, when considered by Ecuador counsel, may assist our client in pursuing his remedies there as well as here. We cannot pursue that aspect of the matter until we obtain consent or a court order. 3.

Letter November 13, 2002 from defendant’s counsel to plaintiff’s counsel: Further to your letter of 16 September 2002 in which you effectively requested that Yorkton consent to a waiver of your undertaking not to use any of the documents Yorkton produced in this action in any other proceedings and your letter of 8 November 2002, our position is unchanged from that in our letter of 8 October 2002. As stated, we cannot properly consider your request without further information from you, including the nature of the proceeding(

s) under consideration in Ecuador or elsewhere and the parties or potential parties against whom such proceeding(

s) may be advanced. Accordingly, before we consider your request kindly provide us with the information we previously requested. Would you also confirm, by return, whether Mr. Najas Cortés has used or relied upon any of the documents Yorkton produced in this action, or any of the information contained therein, in any other proceeding(

s) in Ecuador or elsewhere. 4. In a letter November 18, 2002 from plaintiff’s counsel to defendant’s counsel: With regard to the request that your client consent to the use of its documents disclosed in the present case, I can tell you the immediate purpose will be to inform Mr. Najas’ Ecuador counsel of certain documents involving Zamora Gold for the purpose of enabling them to determine whether any right or remedy exists under the laws of Ecuador to pursue collection of his judgment against Zamora or others. 5.

Letter December 3, 2002 from defendant’s counsel to plaintiff’s counsel: We write to you in response to your letter dated 18 November 2002, in which you requested Yorkton’s consent to waive your undertaking of confidentiality so that Mr. Najas Cortes may use the majority of the documents Yorkton listed in the above-noted action, or the information contained therein, for the purposes of some other proceeding. As we advised in our letters to your Mr.

Beukman dated 8 October 2002 and 13 November 2002, we require more specific information from your client as to the nature of the use which he intends to make of Yorkton’s documents, including the identities of potential defendants, the precise cause or causes of action and where such proceedings, if any, have been or may be taken. You will appreciate we require this information so that we can properly advise our client. Our position remains unchanged. Your recent advice that Mr.

Najas Cortes has taken further steps against Yorkton in Ecuador, again without any notice whatsoever to Yorkton despite having commenced an action in British Columbia some 2 years ago, causes us additional concern. In our letter of 13 November 2002, we specifically requested confirmation that Mr. Najas Cortes had not already used or relied upon Yorkton’s documents, or the information contained therein, in any other action(

s) in Ecuador or elsewhere. To date, we have not received that confirmation and we reiterate that request. When you provide us with the specific information we require we can properly advise Yorkton and seek its instructions in respect to your request.

6. In a letter December 5, 2002 from plaintiff’s counsel to defendant’s counsel: I believe my letter to Mr. Kaplan at his request to be more specific is sufficient. I have endeavoured to give you, in considerable detail, the documents I want to send to Ecuador counsel at this point. It will, of course, be up to Ecuador counsel to determine if remedies exist there and if so against whom and the nature of those remedies. I have further, admittedly without confining any advice Ecuador counsel may give, told you the immediate purpose from my viewpoint. I note your comment concerning the steps taken in Ecuador by Mr.

Najas. I am not sure what your point is since it is obvious his judgment in Ecuador has remained unsatisfied in whole or in part for several years. I understand your client has, or will be receiving notice of the Canadian proceedings. As to your request for a confirmation that Mr. Najas has not used documents I am not clear on your authority for that request. It is an unusual way to proceed in my experience. Certainly under any normal circumstances you are not entitled to demand that opposing counsel interrogate his client and disclose information to you.

If there is some authority unknown to me please advise me of it. 7. In a letter December 12, 2002 from plaintiff’s counsel to defendant’s counsel: As to the request to use the disclosed documents although I can make no assurance as to ultimate effect the immediate purpose is to put Ecuador counsel in a position to determine whether there is a basis to pursue Zamora Gold or associated entities there. 8.

In a letter December 12, 2002 from defendant’s counsel to plaintiff’s counsel: With respect to your request that Yorkton consent to the disclosure of virtually all of its listed documents for a purpose other than this action we agree that you have outlined, in general terms, the use you anticipate your client may make of such documents. However, our client can only properly consider your request upon being informed of the specific uses your client intends for these documents or the information contained therein including the nature of any proceeding(

s) underway or contemplated in Ecuador, or elsewhere, and the names of the parties or potential parties to such proceedings. Without this information, our client is unable to assess fully the consequences, if any, to consenting to your request. We would not expect that you would take any different position, should we make such a request of you. In your 5 December 2002 letter you also questioned our authority to request a confirmation that your client has not used Yorkton’s documents disclosed in this proceeding in another proceeding in Ecuador or elsewhere.

As you are aware, there is an implied undertaking not to use Yorkton’s documents except in this proceeding.

In light of your client’s practice of taking steps against Yorkton without notice, a concern recently reinforced by the issuance of letters rogatory in Ecuador without notice to Yorkton and without knowledge of the submissions or documents placed before the Ecuador Court, we do not believe that there is anything surprising about our request. [ 24 ] It is clear that on a number of occasions the defendant has asked for clarification with respect to the plaintiff’s intended purpose and use of its discovered documents in this proceeding by his counsel in Ecuador.

It has inquired as well as to whether the plaintiff, without its permission or court order, has already used its discovery documents, in whole or in part, by delivering same to his counsel or the court in Ecuador. In Livent Inc. v. Drabinsky et al (2001), 2001 CanLII 28039 (ON SC) , 53 O.R. (3d) 126 (S.C.J.), Lederman, J. denied the application of a third party for relief from the deemed undertaking imposed by their rules. His reasons are succinctly set out at p. 130: Even if the common law right in non-parties to seek relief has been incorporated into subrule (8), the burden upon them is heavy.

It has not been satisfied in this case because of the following reasons: (

a) The conduct of Furman’s U.S. counsel in playing fast and loose with the deemed undertaking rule should not be condoned indirectly by permitting the CIBC to gain access to this material directly; (

b) The CIBC settled a much larger claim ($20 million) with Ovitz without the benefit of Gottlieb’s discovery evidence. The threatened Furman claim is a mirror image of the Ovitz claim but would be for $2 million. It is unclear why CIBC was able to settle with Ovitz without the benefit of the Gottlieb discovery, but requires it with respect to the Furman claim; (

c) There is no related proceeding in existence as yet, only a threat of action by Furman. The interests of justice do not require the foregoing of the privacy of the discovery evidence as much in this context as it would if it were required in related litigation. [ 25 ] On this application the plaintiff’s purpose may be to assist his counsel in Ecuador to collection on his judgment or possibly to commence action against Zamora Gold or associated entities. The plaintiff’s purpose as stated by counsel has been varied and vague.

[ 26 ] On all the evidence, including the correspondence between counsel, I conclude that the intended purpose for the use in Ecuador of the defendant’s documents delivered in this proceeding is with respect to an action or proceeding not yet commenced in that jurisdiction. [ 27 ] As it is the plaintiff that is asking this court to relieve him of his implied undertaking to recognize and protect the defendant’s right of privacy over its documents, I find it surprising that no affidavit of the plaintiff or his counsel in Ecuador has been filed in support of the application. [ 28 ] It seems to me that the within action is a first step to collect on the judgment with respect to Canadian assets of the defendant, otherwise why would they seek to obtain an order of the Supreme Court of British Columbia to parallel the Ecuadorian judgment.

That being the case, steps that may be taken in a possible or proposed litigation in Ecuador, against others, aimed at collecting on the judgment may cause prejudice to this defendant by the effect of dual execution proceeding in two separate countries and judicial jurisdictions. The prejudice to the defendant if the order sought is granted would, in my view, greatly exceed any prejudice to the plaintiff if the order is not granted.

This is particularly so when the very process taken by the plaintiff in Ecuador is subject to serious question in this action. [ 29 ] The defendant’s request for confirmation that the plaintiff has not already used documents produced in this proceeding in another proceeding without the consent of this defendant or court order is in all the circumstances reasonable. The question of whether the interests of justice are best served by granting the order sought depends upon proof that “special circumstances” exist.

That determination is made based upon consideration of all of the facts, including the conduct of the parties. Disclosure of documents without consent or court order was one of the factors referred to in Livent , supra . [ 30 ] The plaintiff must come to court with clean hands and should not now be granted the relief he seeks if he has, without consent of the defendant, dealt with the defendant’s documents in breach of the presumption in favour of preserving his implied undertaking.

His failure to assure the defendant and this court on this point is critical. [ 31 ] An order relieving the recipient of documents in a proceeding of the implied undertaking has been granted only if the applicant has shown, on a balance of probabilities, that the interests of justice will be fostered by such order. In this case, the plaintiff has not presented evidence on which the court can conclude that special circumstances exist. [ 32 ] The plaintiff’s application he be granted relief from his implied undertaking is dismissed. [ 33 ] At para. (

d) of his motion the plaintiff seeks an order the defendant deliver a further and better list of documents disclosing such further documents in its possession or control. As no evidence was presented or argument advanced on this part of the application, it is dismissed. [ 34 ] The defendant will have costs of this application. As the plaintiff is not a resident of British Columbia, it is appropriate that these costs be paid forthwith after assessment by the district registrar. “Master K. Doolan”