David Walsh v. LENORA WALSH, 2019 NLSC 168

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Walsh v. TRA Company Limited , 2019 NLSC 168 Date : September 25, 2019 Docket : 200101T1035 Between: David Walsh and LENORA WALSH Plaintiffs And: TRA Company Limited First Defendant And: Foodland Limited Second Defendant And: Sobeys Group Inc. Third Defendant AND: SOBEYS CAPITAL INCORPORATED FOURTH DEFENDANT AND: SOBEY’s LAND HOLDINGS LIMITED FIFTH DEFENDANT AND: JOSEPH GREEN SIXTH DEFENDANT

Before: Justice Glen L.C. Noel Edited Transcript of Oral Reasons for Judgment Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: August 27 and 28, 2019 Date of Oral Judgment: August 30, 2019

Summary: The Court allowed the Plaintiffs’ Application for production by Defendants of the Sobeys Departmental Analysis documents for theperiod May 1991 – November 1997. It was further ordered if the records for May 1991 – April 1992 cannot be produced, the Directorof Finance for Sobeys file an Affidavit with the Court detailing the efforts made to locate the records, and providing explanation as towhy the documents do not exist or could not be retrieved.

The Defendants unreasonably withheld production of the documents known to be in their possession, and a separate hearing was orderedfor the determination of costs. Appearances: Paul D. Dicks, Q.C. Megan S. Reynolds Appearing on behalf of the Plaintiffs Colm St. R J Seviour, Q.C. Jonathan D. Dale Appearing on behalf of the Defendants Authorities Cited: CASES CONSIDERED: Donovan Homes Ltd. v. Modern Paving Ltd., 2012 NLTD(G) 73; Carter v. Municipal Construction Ltd.(2001), (NL SC), 204 Nfld. & P.E.I.R. 112, 107 A.C.W.S. (3d) 750 (Nfld. S.C. (T.D.)); Carter v.

MunicipalConstruction Ltd., 2001 NFCA 58, aff’ing (2001), 204 Nfld. & P.E.I.R. 112, 107 A.C.W.S. (3d) 750 (Nfld. S.C. (T.D.)); GRISimulations Inc. v. Oceaneering International Inc., 2010 NLTD 85; Eason v. L.I.U.N.A., Local 1208, 2003 NLSCTD 157; Szeto v.Dwyer, 2010 NLCA 36; Walsh v. T.R.A. Company Limited, 2018 NLSC 178 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch.

D REASONS FOR JUDGMENT Noel, J.: INTRODUCTION [1] I have decided it is in the best interests of the parties in moving this litigation forward to render an oral decision in respect tothe Plaintiffs' Application for document production. [2] The parties may request the transcript of this Judgment, which I reserve the right to review for syntax, paragraphing, and

citations before release. OVERVIEW [3] The Plaintiffs’ Amended Application is under Rule 32.07 of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. Dfor production of the Sobeys Departmental Analysis documents (“SDAs”) for the years 1991 to 1997. [4] The documents in question are dated May 1994, May 1995, May 1996 and May 1997, which are fiscal year summaries for theperiod of May to May in each of 1993 - 1994; 1994 - 1995; 1995 - 1996; and 1996 - 1997 (which documents are currently in thepossession of counsel for the Defendants).

In addition, counsel for the Defendants have been instructed that there exists two monthlyreports for June and November 1997. The May 1997 document includes the period up to April 1997, and the 1994 document includesprior year data back to May 1992. The only documents in question not in possession of Defence counsel then would be for the fiscal yearMay 1991 to April 1992. ORDER [5] I am ordering production within the next five business days of the Sobeys SDAs in the possession of Defence counsel. I amfurther ordering production of the fiscal year May 1991 to April 1992 SDAs by September 23, 2019.

If such documents cannot belocated and produced by the Defendants, I order that Mrs. Nancy Sharpe (“Sharpe”), the Director of Finance for Sobeys, file with theCourt by September 20, 2019 a duly affirmed or sworn Affidavit setting out the following: • Confirming the documents cannot be found in the records of Sobeys; • Detailing the efforts made by Mrs. Sharpe and others on her behalf to locate the documents; and • Providing an explanation as to why the documents do not exist or could not be retrieved. ANALYSIS [6] I will explain my reasons for so ordering.

LAW [7] The guiding legal framework is set out by Faour, J. in Donovan Homes Ltd. v. Modern Paving Ltd., 2012 NLTD(G) 73. Rule32.07(1) permits a party to seek any document in the possession of another party related to the matters in issue. As per Carter v.Municipal Construction Ltd. (2001), (NL SC), 204 Nfld. & P.E.I.R. 112, 107 A.C.W.S. (3d) 750 (Nfld.

S.C. (T.D.))at paragraph 7(2), under Rule 32.07(3) the Court must be of the opinion that an Order for production is “necessary for disposing fairly ofthe proceeding or for saving costs.” The aspect of the Rule about being injurious to the public interest is not of relevance in thisproceeding. There has been no evidence or argument of such. Likewise, there has been no argument that the documents are privilegedfrom production. [8] The Court of Appeal in Carter v. Municipal Construction Ltd., 2001 NFCA 58, aff’ing (2001), (NL SC),204 Nfld. & P.E.I.R. 112, 107 A.C.W.S. (3d) 750 (Nfld.

S.C. (T.D.)) at paragraph 9 states that the determination that documents “relate”to the matter is to be undertaken by the party and solicitor. It is not for Sobeys, its expert or counsel to determine whether they considerthe SDAs to relate to the matters in issue. The Plaintiffs and their counsel upon reviewing the documents must determine whether thematerial contained in the SDAs is of aid to them. Further, Faour, J. at paragraph 15 of Donovan references the decision of GRISimulations Inc. v.

Oceaneering International Inc., 2010 NLTD 85 where Hoegg, J. noted, “parties are presumed to be entitled todocuments relating to matters in issue without providing justification”. [9] Green, C.J. in Eason v. L.I.U.N.A., Local 1208, 2003 NLSCTD 157, at paragraph 47 indicates, “Generally speaking, if thedocuments relate to a matter in question in the proceeding, then their production will be needed to dispose fairly of the litigation. Theparties seeking production will have a prima facie right to see them.” [10] Further, Green, C.J. at paragraph 48 in Szeto v.

Dwyer, 2010 NLCA 36 explains it will often make sense to save the questioningin respect to Discovery examinations until the parties have the opportunity to analyze the documentary record. [11] In determining whether the documents “relate” to the questions to be determined in the trial, Donovan at paragraph 25establishes I must consider the following factors: 1. Notwithstanding the need for a broad and liberal

interpretation of the Rules, there is not an unlimited right to seek disclosure, andthe request must be in keeping with the pleadings and the issues raised; 2. There must be evidence, not necessarily of relevance to the issues raised by the pleadings, but certainly that what is sought relatesto the issues raised by the pleadings; 3. The scope of production sought must be proportionate to the issues at stake, essentially a reality check on requests for disclosure;and, … 1. Scope of the Pleadings

[ 12 ] I turn now to the pleadings.

The Further Amended Statement of Claim clearly puts the SDAs in issue. [ 13 ] Paragraphs 19 through 26 indicate that the SDAs in question fall within the scope of the pleadings. [1] Paragraph 19 speaks to the key representations allegedly made to the Plaintiffs: The key representation made to the Walsh's to have their corporation become an affiliate of TRA was that it would be the beneficiary of the buying power that TRA and Sobey's could bring to bear on suppliers and manufacturers in the food industry to achieve low prices which would be passed on to the Walsh's with a mark-up of five percent for TRA. [ 14 ] Paragraph 20 indicates that the trade deals offered to TRA by suppliers and manufacturers and provided to TRA and Sobeys were not passed on to the Plaintiffs.

Paragraph 21 notes trade deals available throughout the Walsh's association with TRA and Sobeys. Paragraph 22 references significant amounts of discounts and benefits to TRA and Sobeys. Paragraph 23 states, “the Walsh's observed that Sobeys stores were selling products at considerably lower price.” Paragraph 24 pleads, “the difference in price between Sobeys stores and the Walsh store(s),” and further in paragraph 24, “the Sobeys stores and the Walsh store(

s) had identical cost arrangements, that being TRA's cost plus five percent.” Paragraph 25 alleges the Defendants “did not accurately represent the true cost of product for the Sobeys stores.” In Paragraph 26, again, there is reference to not just TRA but Sobeys stores. [ 15 ] These records fall squarely within the scope of the pleadings. 2. Evidence Relating to the Issues [ 16 ] Butler, J. in Walsh v. T.R.A. Company Limited , 2018 NLSC 178 , the Bifurcation Decision, identified the Issues for trial. I refer to her decision, in particular: 17 . … (

b) what representations (if any) were made to the Plaintiffs by the Defendants; (

c) if any of the representations made were made negligently or fraudulently; (

d) what reliance (if any) was made by the Plaintiffs on the representations made; … [ 17 ] The evidence establishes the SDAs relate to the issues raised by the pleadings as well as the issues for trial identified by Butler, J. [ 18 ] Karl Vokey (“Vokey”), the Defendants’ corporate representative, was asked in Interrogatories dated November 22, 2018, the following: 11. Did Sobeys prepare Sobeys Departmental analysis and/or Sobeys Sales Analysis for the years 1984 to and including 1997 for the stores in Newfoundland and Labrador identified in your answers to question 9. If so: (

a) provide copies of the Sobeys Departmental Analysis and/or Sobeys Sales Analysis for the years 1984 to and including 1997. [ 19 ] At the Case Management Meeting on July 31, 2019 counsel for the Plaintiffs confirmed their Application for production covers only the SDAs back to 1991. [ 20 ] Vokey, in his Answers to the Interrogatories dated January 22, 2019, indicated: Interrogatory #11 does not define the terms “Sobeys Departmental Analysis” and/or “Sobeys Sales Analysis”.

For the purpose of my Answer to this Interrogatory #11, I am presuming the Interrogatory is inquiring about documentation similar to that located at Tab 4 of the Plaintiff’s List of Documents. [ 21 ] Vokey further stated: As of the date of these Answers, I am aware that documentation similar to that located at Tab 4 of the Plaintiffs' List of Documents were prepared for fiscal years 1994, 1995, 1996 and 1997.

As of the date of these Answers, I do not know and cannot ascertain whether the referenced documentation was prepared for fiscal years 1984 - 1993. [ 22 ] Vokey, under examination for this hearing, did not explain or inform himself that the 1994 document includes prior year data back to May 1992, but certainly when that was put to him, he had no difficulty accepting that to be the case. [ 23 ] The Walsh Supplementary Affidavit of July 3, 2019 offers further evidence supporting the issues identified.

Paragraphs 4 through 8 establish evidence that these SDAs relate to the matters in question. [ 24 ] Walsh was not aware that the Defendants had these documents, as the Defendants’ List of Documents did not disclose them.

Walsh states, at paragraph 6 of his Affidavit, he has been seeking the “Sobeys Departmental Analysis” and/or “Sobey’s Sales Analysis”, since he obtained a copy of what he understood to be the period 1996 - 1997, which was attached to the Plaintiffs’ first List of Documents dated July 8, 2004. [ 25 ] Walsh further stated at paragraph 7 he was advised by his solicitors that the SDAs for the period April 3 to May 7, 1994 were included in materials forwarded to his counsel on November 11, 2018 by counsel for the Defendant, in response to the request for the working papers of Susan Glass.

Susan Glass (“Glass”) is the author of the Defendants’ Expert Report (the “Defendants’ Report”) that was provided to the Plaintiffs. The Defendants’ Report lists the “Sobeys’ Sales Analysis for 1994” in Appendix C under “Other Financial Information,” which Glass had reviewed and on which she relied in preparing her report. [ 26 ] As well, paragraph 8 of the Walsh Affidavit refers to paragraphs 23 - 29 of the pleadings. He states the Sales Analysis contains information about the rebates received by the stores listed therein.

There is an example provided on the fifth entry from the bottom of page 4 of Exhibit B, where it is entitled Allowances, giving a monetary amount and the year to date.

Walsh says these entries are the same allowances that the Plaintiffs’ Stores were to have received, and that a comparison with the allowances paid to the Plaintiffs’ Stores and the difference between them is critical to the Plaintiffs’ ability to prove their claims in this matter. [ 27 ] The Plaintiffs’ Expert Report of Duff & Phelps dated October 13, 2017 (the “Plaintiffs’ Report”), filed as an Exhibit to the Vokey Affidavit, makes reference to the cost basis on which the Sobeys-owned stores were supplied: 6.33 We understand, however, that the gross margins and allowances of Sobeys Newfoundland Stores may also have been impacted by the same or similar Alleged Actions of TRA.

Mr. Green noted during his examination for discovery that Walshes' Stores and the Sobeys-owned stores were supplied at exactly the same cost, with the exception of milk, sugar, and flour, on which TRA did not apply any upcharge to the Walshes' Stores. [ 28 ] I am not getting into an evidence-based determination on assessing the evidence of Mr. Green or any other witness, as to what was said or not said on Discovery.

It is not required to do so for this application. [ 29 ] Paragraph 6.34 of the Plaintiffs’ Report calls attention to the SDAs the Plaintiffs did have in their possession: 6.34 In this regard, although we did obtain certain gross margin and allowances data for the Sobeys Newfoundland Store during the 1996-1997 period, we have not relied on such data for the purposes of this Report. [ 30 ] Counsel for the Plaintiffs stressed in submissions that data for the SDAs was too limited for the expert to use such methodology, and it is further evidence as to why the records would have been required to enable the expert for the Plaintiffs to approach it in a different method. [ 31 ] The Defendants provided their expert with the SDAs for 1994 – 1997.

The Defendant’s Report contains a

section entitled 3.6 Comparison to other Sobeys stores, and refers to the pleadings: In paragraph 25 of the Amended Statement of Claim, the Plaintiffs claim that the Defendants failed to disclose to David Walsh that substantial trade deals, rebates and/or allowances were being provided to the Sobeys stores so as to further reduce the cost of product to the Sobeys stores, which trade deals, rebates and/or allowances were not being provided to the Walsh store(

s) so as to reduce their cost of product in a similar fashion. [ 32 ] The Defendants’ Report then summarizes the gross margin data for all Sobeys’ corporate stores that operated throughout 1994 in Newfoundland and Labrador. The Defendants own expert was referring to certain of the SDA records. [ 33 ] The evidence therefore supports the necessity of the Plaintiffs requiring the documents to dispose fairly of the issues in the proceeding. 3. Proportionality [ 34 ] There has to be some rational connection between what is sought and the issues at play, as per Donovan at paragraph 39.

The Plaintiffs’ request is not a “fishing expedition” and it is a very limited and specific request to what the Defendants knew Plaintiffs to have been actively seeking. It bears a rational connection between what is sought and the issues in play. [ 35 ] The request for these records was made as early as May 22, 2003.

A letter from Stephen Marshall, Q.C. who was then counsel for the Plaintiffs to Janet Henley-Andrews, Q.C., who was then counsel for the Defendants, states: In preparation for Discoveries, primarily of your witnesses we ask that you make available copies of the supplier contracts in force at the time (perhaps the last year) of Mr. Walsh’s association with your clients.

We are obviously interested in the discount and set-off provisions contained therein. [ 36 ] I find that Marshall, Q.C. was in no way restricting his request to TRA, but also seeking records of Sobeys and the SDAs that we now know to exist. [ 37 ] The List of Documents of the Plaintiffs filed on July 8, 2004, still very early in these proceedings, had a copy of the SDAs for 1996 and 1997, thus putting the Defendants on notice that this was a matter in issue for the Plaintiffs. [ 38 ] A letter dated May 18, 2007 from Peter Browne, Q.C., counsel at the time for the Plaintiffs, indicates: From our perspective, the Walshes’ case centers around the issue of the Defendants' alleged failure to pass on supplier rebates and

allowances to these stores and the direct impact this had on the Walshes’ decision to sell the companies which owned these stores, leading to the subsequent lost value occasioned thereby and the unconscionability of the share sale transaction.

In light of the above issues and in accordance with Rule 32.01, we are of the view that we are entitled to full and complete production of all documentation pertaining to the rebates and allowances received by the Defendants [which would include Sobeys] in connection with the goods and supplies purchased by the stores. [ 39 ] Further, the letter of Browne, Q.C. states: In order to assist you in compiling these documents promptly so as to expedite oral discovery, we ask you to provide us with a list of the documentation set forth in

Schedule “A” attached. [ 40 ] Now if there was any doubt as to what the Plaintiffs were looking for, all doubt should have been resolved by the

Schedule that Browne provided to counsel for the Defendants. I will refer to 1, 2 and 3 of the Schedule: 1. Details on an annual basis of all agreements with all suppliers (hereafter “Suppliers”) of goods and supplies purchased by the companies owned by the plaintiffs (hereafter the “Walshes’ stores”) for the two fiscal years preceding the sale of the Bay Bulls store to the end of the fiscal year of the sale of the Merrymeeting Road store) (hereafter the “target years”). [2] 2.

A statement of all rebates, allowances, discounts or any other monetary or in kind benefit of any type whatsoever (hereafter “rebates and allowances”), payable or made available to any of the defendants (hereafter “Sobeys”) by the Suppliers during or in respect of the target years. 3.

A statement of all lump sum payments payable or made available to Sobeys by the Suppliers in respect of a multi-year agreement extending over part or all of the target years (hereafter “LSPs”). [ 41 ] There was an issue about potential conflict of interest of Plaintiffs’ counsel, providing an explanation for some delay in the requested documents not being dealt with.

A letter dated September 27, 2007 from counsel for the Defendants, Maureen Ryan, Q.C., to counsel for the Plaintiffs, takes the position the issue had to be resolved. [ 42 ] A letter dated December 3, 2007 from Ryan, Q.C. to Browne, Q.C. indicates what the Defendants were prepared to provide. It states: (

a) a

summary of the type of documents that we have located and are willing to produce; (

b) a list of the documents which are requested but do not exist in our client's possession; and (

c) a

summary of the type of documents that we have located.

This is early in the litigation, October 2007. [ 43 ] On November 13, 2007, Browne, Q.C. writes to Ryan, Q.C. indicating, “... the following is not intended to be an exclusive request for production, nor should it be construed as such.” His correspondence points out, “we are interested in receiving the following documents” and speaks to “Suppliers Sales Arrangement Books (“S.S.A.’s”) for the time period in question.” Counsel for the Plaintiffs, and I accept this, takes the position what was being sought, although different terminology, is really the SDAs. [ 44 ] A further letter from Ryan, Q.C. dated April 20, 2009 states, “With reference to the years from 1993 to 1997 (the “Target Years”), our client agrees to disclose the following ...” The reference is to TRA information and never making any agreement to disclose the SDAs.

In complete fairness to Ryan, Q.C. she did not know in 2009 that those documents existed. [ 45 ] The Defendants argue it is not proportional to require the Defendants to expend further time and resources on the request for these documents. The reality is all but one fiscal year of the records sought are already in the possession of Defence counsel, and those records were located as early as 2012 in the office of Sharpe. There was an obligation on the Defendants to produce the documents when it came to their knowledge back in 2012.

The evidence of Vokey establishes the SDAs came to the attention of key individuals for Sobeys, including Sharpe, as the Director of Finance, and senior in-house Corporate Counsel for Sobeys. Rule 32.09 speaks to the continuing obligation to disclose newly discovered documents.

The Defendants ignored or violated their obligations imposed by Rule 32. [ 46 ] My order as to costs will deal with this unacceptable litigation conduct. [ 47 ] By the manner in which the previous fiscal years is accounted for in the 1994 SDA, the target year requested for 1993 should presumably include the records from May 1991 up to April 1992. Mr. Dale, counsel for the Defendant, to his credit, did not try to avoid the ability of the Court to require further evidence and actually brought it to my attention.

Rule 32.03(1) allows the Court to order a party to make Affidavit evidence indicating whether documents are in a party's possession, custody or control, and if not in the party's custody, possession or power, when the documents were parted with, or what has become of the documents. Such an order can set a time within which the Affidavit is to be filed and served. [ 48 ] Without hearing directly from Sharpe, I am not satisfied solely upon the evidence of Vokey, that the SDA the covering fiscal year May 1991 to April 1992 is unable to be located and produced.

That is why in the overview and order of this decision I am requiring Sharpe, through her counsel, to file an Affidavit with this Court. COSTS [ 49 ] I will deal with costs in a separate hearing on September 23, 2019. I direct counsel to consider Rule 55.14 for the hearing on

costs. Rule 55.14(1)(

b) stipulates: 55.14.

(1) Where any thing is done or an omission is made, improperly or unnecessarily, by or on behalf of a party, the Court may order … (

b) the party to pay the costs of any other party occasioned by the act or omission; … [ 50 ] Plaintiffs' counsel shall file with the Court by September 13, 2019, a Bill of Costs for one counsel on Column 5 basis, for one full day and one half day for preparation and attendance on the Amended Application for production.

I further order, if Plaintiffs' counsel intends, as submitted in submissions, to seek solicitor - client costs, to file an Affidavit of the appropriate person in counsel's accounting department, detailing time incurred by one counsel only in preparation and attendance for the Application on production. [ 51 ] Counsel for the parties shall file any authorities for the costs hearing, and in particular, with reference to that Rule 55.14(1)(

b) with the Court by September 13, 2019. _____________________________ Glen L.C. Noel Justice