Gallagher Holdings Ltd. v. Unison Resources Inc., 2017 NSSC 248

SUPREME COURT OF Nova Scotia Citation: Gallagher Holdings Ltd. v. Unison Resources Inc., 2017 NSSC 248 Date: 20170427 Docket: Hfx No. 451310 Registry: Halifax Between: Gallagher Holdings Limited, a body corporate, Aldamad Investments Limited, a body corporate, Andrew Armstrong , James Williams, Michael Williams, Bruce Barteaux, Bonnie Barteaux, Michael Lund and Blaise Wilson Applicants v.

Unison Resources Incorporated, an extra-provincial corporation, UWGC Limited, a federal body corporate, Stephen Patterson, and Genevieve Paquin Respondents Judge: The Honourable Justice Timothy Gabriel Heard: April 27, 2017 Oral Decision: April 27, 2017 Written Release: September 20, 2017 Counsel: John Keith and Caitlin Regan-Coutreau, for the Applicants Christopher I. Robinson, for the Respondents The Court: (Orally) [ 1 ] I am going to render my decision now with respect to the large number of motions brought by each of the parties today.

They all arise within the context of an Amended Notice of Application in Court pursuant to Civil Procedure Rule 5.03 filed by the Applicants, Gallagher Holdings Limited, Aldamad Investments Limited and some other named parties. I will refer to them collectively as either “the Applicants” or simply “Gallagher” by way of shorthand. [ 2 ] The Respondents are Unison Resources Inc., UWGC Limited, Stephen Patterson and Genevieve Paquin. They will be referred to as “the Respondents” unless it is necessary to distinguish a particular Respondent individually.

The Application in Court itself is presently scheduled to be heard over the course of five days commencing June 22, 2017, but I will have more to say on that later. Relief Sought [ 3 ] The Applicants have brought motions seeking: A. an Order to strike the affidavits of Genevieve Paquin and Boyd Soussana, each dated December 16, 2016, pursuant to Civil Procedure Rule (“CPR”) 39.04 or, an Order requiring the affiants to disclose the original copies of these affidavits in native format together with all available metadata to determine or to show when these affidavits were last edited and printed.

B. an Order directing the Respondents to comply with outstanding discovery undertakings given on February 24, 2017; namely: i. copies of 2013 to 2014 Income Tax returns of Ms. Paquin, and the 2013, 2014 and 2015 returns of Boyd Soussana; ii. a copy of the Minute Book of International Oil Sands and Shale Technology Inc. (“IOSST”); iii. copies of phone records and cell and land phone line records with respect to any calls between Mr.

Patterson and anyone at Twin Butte Enterprises (hereinafter referred to as “Twin Butte” or “TBE”) between August 1, 2013 and June 30, 2014; Miscellaneous Disclosure iv. the date upon which the bookkeeper, Mary Bond, was engaged to provide some accounting services for the Respondents (for Unison and Stephen Patterson);

v. copy of a cheque in the amount of $105,024.24 and all records that confirm the deposit from an account of Stephen Patterson intoan account belonging to Unison, and information related thereto; vi. and a complete accounting (with supporting documents) in relation to the $100,000 transferred from Unison to UWCG and theidentity of who withdrew it from Unison’s account and, if via cheque, who received the money and to whom the cheque was written.

C. an Order compelling answers with respect to certain questions posed or in relation to which production was sought duringdiscovery examinations by the Respondents. [4] The Respondents have filed their own motions.

They seek: A. an Order requiring the Applicants to respond to a Demand for Particulars pursuant to CPR 19; B. an Order permitting Unison to file a supplementary affidavit of Stephen Patterson and to file (late) an affidavit of Mary Bondcontaining and/or dealing with Unison’s income tax returns for 2013, 2014, 2015, and Unison’s financial statements 2013, 2014, 2015,Unison’s general ledger accounts which supplied the data which enabled these financial statements to be generated; C. an Order to compel evidence from a non-party (Global Maxfin and Cyril Muise) with respect to certain information relating todiscussions or communications that they have had with the Applicants in relation to their investment in the Respondent Unison; D. an Order to compel Answers to Interrogatories; and E. a joint motion in relation to the re-examination of one of the Respondents, and the method of doing so.

Reply – Application to Withdraw [5] In an interesting twist, after the filing of the above motions (together with associated affidavits and briefs) the Respondentshave filed a reply. In that reply, they advise that they will now, at the outset of this hearing, move to withdraw the affidavits that are thesubject of the Applicants’ Motion to Strike, namely, the affidavits of Genevieve Paquin and Brad Sousanna, each dated December 16,2016. Since this directly relates to Gallagher’s first motion, I will deal with the two at once. The other motions will be consideredsequentially. A.

Motion by Applicants to Strike/Motion by Respondents to Withdraw – Affidavits of Genevieve Paquin and Brad Sousanna [6] As noted, Civil Procedure Rule 39.04 governs applications to strike all or any portion of these affidavits. It reads as follows: 39.04(1) A judge may strike an affidavit containing information that is not admissible evidence or evidence that is not appropriate to theaffidavit.

(2) A judge must strike a part of an affidavit containing either of the following: (

a) Information that is not admissible, such as an irrelevant statement or submission or plea; (

b) Information that may be admissible but for which grounds of admission have not been provided in the affidavit such as hearsayadmissible on a motion but is not supported by evidence of the source of belief and the truth of the information.

(3) If the parts of the affidavit to be struck cannot readily be separated from the rest or if striking the parts leaves it difficult tounderstand, a judge may strike the whole affidavit. A judge who orders that the whole of an affidavit to be struck may direct aProthonotary to remove the affidavit from the court file, maintain it for the record in a sealed envelope kept separate from the file.

(4) A judge who strikes part or whole of an affidavit must consider ordering the party who filed the affidavit to indemnify the other partyfrom the expense of the motion to strike and any adjournment caused by it. [7] The Applicants’ brief outlines some concerns with respect to the creation and the execution of the documents in question. They argue at para. 13 thereof that there seems to have been no discernable attempt to ensure the truthfulness of the affidavits of Ms.Paquin and Mr. Sousanna before they were filed by the Respondents with the Court.

For example, they point to the jurat whichrepresents that the affidavits were sworn before a lawyer in Halifax on December 16, 2016 (the same date they were filed) but say thatthis is misleading. They allege that the documents were actually signed in Montreal rather than in Halifax on that date (because ofdiscovery evidence which places the deponents at that locale on that date). There is also an allegation that at least one deponent, theRespondent Ms.

Paquin, was not even aware of what parts of her affidavit meant when she was questioned at discovery. [8] The Applicants, therefore, question when and where these affidavits were signed, and whether these were the documents thatwere actually signed, or were alterations made to them afterwards. Circumstantially, the Applicants point to the fact that the signature ofeach deponent, and the jurat, are the only things that appear on the final page of each affidavit. [9] There is no corresponding Civil Procedure Rule dealing with the Respondent’s Application to withdraw these affidavits.

Case law references are hard to come by. Counsel for the Respondents has referred me to the decision in MacNeil v. MacNeil, (NS CA), 1975, 14 N.S.R. (2d) 398, which was actually a contempt proceeding within the context of a matrimonial matter. I have also looked at Comet Products U.K. Ltd. v. Hawkex Plastics Ltd., [1971] 1 All E.R. 1191, (H.L.)which is referenced in MacNeil,supra. In that decision, Lord Denning said at p. 1144:

Those cases seem to show that in ordinary civil proceedings in Chancery, if an affidavit is filed and used before the court , the defendant, when he is threatened with cross-examination, cannot get out of it by saying that he will withdraw his affidavit. If he has filed an affidavit, and in addition has gone on to use it in the court, then he is liable to be cross-examined upon it if the court thinks it right to so order.

I would not say that the mere filing is sufficient, but I do say that when it is not only filed but used, the defendant does expose himself to a liability to be cross-examined if the judge so rules. [Emphasis Added] [ 10 ] In Comet, supra, the Court concluded that the affidavit had been used so it could not be withdrawn. The Court simply refused to allow cross-examination on it since Comet, too, was a contempt application (which is quasi-criminal in nature) and, had cross- examination been allowed, it might have offended the principle against self-incrimination on the main substance of the charges.

The inference, however, is that the affidavit could have been withdrawn if the circumstances were appropriate. [ 11 ] It is clear from Comet, supra, that the mere filing of an affidavit does not suffice to prevent subsequent withdrawal by the filing party. I also find some support for this in MacMaster v.

Fletcher , [1938] O.J. 63 , where Justice McTague, on an appeal of a Master’s order, opined at para. 5 to the effect that an Order permitting the withdrawal of an affidavit and dispensing with the need for the Plaintiffs to file a further affidavit was within the discretion of the Master and purely discretionary, and so it ought not to be interfered with. [ 12 ] Withdrawal of an affidavit by the party filing it is not permitted it if it has been “used”. But what constitutes use? Mere filing does not. However, in this case the filings were in response to an Application in Court brought by the Applicants.

As such, Civil Procedure Rule 5.13 contemplates a Motion for Directions, for the purpose, among other things, of setting dates for production of affidavits from intended witnesses and setting dates for the discovery of these witnesses. [ 13 ] In this matter, Justice Pickup’s Order for Directions was granted on June 22, 2016. Pursuant to that Order, the Respondents were to have their affidavits in by December 16, 2016. On January 5, 2017, all parties appeared before Justice Wright, who scheduled five days (commencing June 22, 2017) for the Application in Court to be heard.

He also therein gave specific directions for the necessary discovery examinations (after the affidavits had been filed). These were to be held February 21 to 24, 2017, and he prescribed the order in which the parties and their witnesses were to be examined. In accordance with this Order, the Respondents, Mr. Patterson and Ms. Paquin, were examined on February 23 and 24, 2017.

The discovery of Boyd Sousanna was completed on February 23, 2017. [ 14 ] It is clear that the affidavits (when filed) were intended to be relied upon in the sense that they were intended to provide the Respondents’ position to the Application and the factual basis for that position. It is also clear that these affidavits formed the basis of the discovery examinations of the Respondents and Mr. Sousanna which were held on February 23 and 24, 2017. Does this constellation of facts constitute “use” in a proceeding? [ 15 ] In Gill v. Gill

(2004) B.C.S.C. 518, Motions Master Brine reviewed a number of authorities and he concluded at para. 36: 36 In

summary, it appears that there is discretion in the court to order that affidavits filed in the court file may, upon application, be withdrawn. Among the factors to be considered by the court upon such an application are the following: 1. Was the affidavit filed by mistake? 2. Has the affidavit been used, in the sense of having been before the court, during the course of considering an application? 3. Is there a pending application before the court for which a party has indicated it intends to rely upon the affidavit? 4.

Is the application to withdraw the affidavit made as a strategic or tactical decision to deny the other party access to relevant information or the ability to cross-examine the deponent? 5. Would the other party be prejudiced in any way by the withdrawal of the affidavit? 6. Are there policy considerations which would militate against a withdrawal of the affidavit? 7. Would the administration of justice be adversely affected by the withdrawal of the affidavit? [Emphasis added] [ 16 ] These considerations are helpful but they are obviously not exhaustive.

While the affidavits have not been used in the sense of having been before the Court during the consideration of the subject application, the Application in Court itself is scheduled to start on June 22, 2017, less than two months from today. The Respondents have, until now, indicated that they intend to rely upon these affidavits when that application is heard. Moreover, discovery examinations have taken place on the basis of the contents of those affidavits.

The Respondents have not provided the Court with a reason as to why they now wish to withdraw these two affidavits, nor do they answer directly the Applicants’ allegations with respect to the circumstances that surrounded their creation. [ 17 ] Clearly, there is some prejudice to the Applicants if the withdrawal of these affidavits is permitted. If the Respondents intend to file others to replace them, this, in and of itself, would create a need for further discoveries of Mr. Soussana and Ms. Paquin.

Counsel for the Respondents has been somewhat equivocal as to whether these individuals intend to file replacement affidavits, so that is something to be considered. That said, further discoveries will likely be necessitated merely upon the basis of some of the other information to be provided as a result of some of the other decisions that I am going to make today, which I will get to in a moment, so I also consider that.

[ 18 ] What is important to reiterate, however, is that the Applicants themselves have applied to strike the December 16, 2016 affidavits of Mr. Sousanna and Ms. Paquin. That relief, if granted, would result in the Applicants experiencing most of the same prejudicial aftereffects as those that they will experience if I were to grant the Respondents’ motion to withdraw them. Were it not for this fact, I would have denied the Respondents’ application to withdraw the affidavits in question. [ 19 ] Under these particular circumstances, however, I am going to permit the affidavits of Mr. Sousanna and Ms. Paquin dated December 16, 2016, to be withdrawn. Putting the most benign

interpretation upon it that I can, it would appear that the rush to comply with the filing dates precipitated some errors in and around the time that Ms. Paquin’s and Mr. Sousanna’s affidavits were prepared. It is indeed unfortunate that the Respondents did not act with greater dispatch to bring this to the attention of the Court until now, after the discoveries are long since completed, and after the Applicants have brought their Motion to Strike. [ 20 ] So, the documents will be returned to the Respondents upon application to the Prothonotary after this Order is taken out.

What then becomes of them? [ 21 ] The Respondents argue that the affidavits should be placed in a sealed envelope and thereby rendered inaccessible without a further unsealing Order. While the Applicants have not expressed views on this particular point, there is nonetheless some irony in the Respondents’ position. Had they simply agreed with the Applicants’ position to strike the affidavits, the relevant Rule expressly contemplates their placement in a sealed envelope.

As Civil Procedure Rule 39.04(4) says: A judge who orders that the whole of an affidavit be struck may direct the Prothonotary to remove the affidavit from the Court file and maintain it, for the record, in a sealed envelope kept separate from the file. [ 22 ] While still possessed of a discretion to do so, I am not prepared to consider sealing the withdrawn affidavits in this case, where discovery examinations upon the contents of those affidavits have already taken place.

Moreover, if the Respondents should chose to file replacement affidavits, and if the same should differ from the originals on relevant points, then the Applicant (and the Court) is entitled to hear from the deponent(

s) as to why this is so. [ 23 ] Collateral support for this approach may be found in Gill, supra, at para. 39, in which the Court states that it is of the view that the (withdrawn) affidavit “. . . may nonetheless be used for cross-examination at trial, for example, to impugn the credibility of the witness affiant”. The Court then goes on further (in para. 39) to say: 39 … I agree and would, perhaps, go further to conclude that if an affidavit were to be ordered withdrawn, it remains a document and subject to all the usual applicable rules with respect to documents.

It seems unlikely that privilege would attach to the contents due to its having been filed. It would also be subject to production pursuant to Rule 26. It would be available as a prior inconsistent statement for the purposes of cross-examining the deponent at trial. In short, the affidavit could, in my view, still be used by an opposing party as it could use any relevant document in the action . [Emphasis added] [ 24 ] In the event that the Respondents do determine that they wish to file what I will refer to as “replacement affidavits” (for want of a better expression), those of Ms. Paquin and Mr.

Soussana will be filed within 20 days. The Applicants shall have leave to conduct further discovery examination of these individuals upon receipt of these documents in the event that the Respondents elect to file same. Costs of these additional discoveries will be fixed by the Court following the hearing of the Application in Court and will be paid by the Respondents to the Applicants in any event of the cause should they take place. B. Undertakings/Refusals Applicable Law [ 25 ] It is convenient to next deal with the Applicants’ motions regarding all of the undertakings and refusals.

There are many prior decisions dealing with the discoverability of documents, relevance and the issues associated therewith. I begin with Civil Procedure Rule 14.08, which states: 14.08(1) Making full disclosure of relevant documents, electronic information, and other things is presumed to be necessary for justice in a proceeding.

(2) Making full disclosure of documents or electronic information includes taking all reasonable steps to become knowledgeable of what relevant documents or electronic information exist and are in the control of the party, and to preserve the documents and electronic information.

(3) A party who proposes that a judge modify an obligation to make disclosure must rebut the presumption for disclosure by establishing that the modification is necessary to make cost, burden, and delay proportionate to both of the following: (

a) the likely probative value of evidence that may be found or acquired if the obligation is not limited; (

b) the importance of the issues in the proceeding to the parties.

(4) The party who seeks to rebut the presumption must fully disclose the party’s knowledge of what evidence is likely to be found or acquired if the disclosure obligation is not limited.

(5) The presumption for disclosure applies, unless it is rebutted, on a motion under Rule 14.12, Rule 15.07 of Rule 15 – Disclosure of Documents, Rules 16.03 or 16.14 of Rule 16 – Disclosure of Electronic Information, Rule 17.05 of Rule 17 Disclosure of Other Things, or Rule 18.18 of Rule 18 – Discovery.

(6) In an application, a judge who determines whether a presumption has been rebutted must consider the nature of the application, whether it is chosen as a flexible alternative to an action, and its potential for a speedier determination of the issues in dispute, when assessing cost, burden and delay. [ 26 ] Rule 18.18(1) and (2) states: 18.18(1) A party may require a witness who is examined at a discovery to produce, or provide access to, a document, electronic information, or other thing referred to by the witness but not brought to, or accessible at, the discovery, unless one of the following applies: (

a) the document, information, or thing is not in the control of the witness; (

b) it is not relevant and it is not likely to lead to relevant evidence; (

c) it is privileged.

(2) A judge may order a witness who fails to comply with a requirement for production or access to make production or provide access, and the judge may order the witness to indemnify the party who seeks the order for the expense of obtaining the production or access. [ 27 ] Baird v. Barkhouse, 2013 NSSC 425 is at para. 21 , is representative of the case law on this point: 21. The presumption of full disclosure is fundamental. It ensures that fairness and justice is achieved.

The failure to disclose relevant documentation or, at the discovery stage, failure to disclose information which will likely lead to relevant evidence , is serious failure. A party is noncompliant at their peril. Noncompliance attracts consequences such as the exclusion of evidence at trial pursuant to Rule 51.03(1)(

b) and (c). The failure to take the reasonable steps to ensure proper disclosure can also result in cost consequences. These consequences underpin the importance of disclosure under our Rules. [ 28 ] Relevance is integrally related to the requirement of disclosure. Civil Procedure Rule 14.01 sets out the ground rules in that regard: 14.01

(1) In this Part, “relevant” and “relevancy” have the same meaning as at the trial of an action or on the hearing of an application and, for greater clarity, both of the following apply on a determination of relevancy under this Part: (

a) a judge who determines the relevancy of a document, electronic information, or other thing sought to be disclosed or produced must make the determination by assessing whether a judge presiding at trial or hearing of the proceeding would find the document, electronic information, or other thing relevant or irrelevant; (

b) a judge who determines the relevancy of information called for by a question asked in accordance with this

Part 5 must make the determination by assessing whether a judge presiding at the trial or hearing of the proceeding would find the information relevant or irrelevant.

(2) A determination of relevancy or irrelevancy under this

Part is not binding at the trial of an action, or on the hearing of an application. [ 29 ] Justice LeBlanc had occasion to consider Civil Procedure Rule 14.01 in the Halifax-Dartmouth Bridge Commission v . Walter Construction,

(2009) NSSC 403. At para. 16 thereof, he expressed the view that: The object of the Rule is to make available information and documents that are likely to lead to relevant evidence at trial which I take to mean that the information will probably lead to relevant evidence at trial. The key feature of the current Rule is that the evidence has to be relevant to an issue at trial. It is important, however, to be mindful that at the Pretrial stage, the parties are still investigating the claim to determine either the strength of their case, or whether there is a basis to defend.

Consequently, at discovery, witnesses can be examined both as to relevant evidence and also for information that is likely to lead to relevant evidence. Similarly, witnesses could be examined on documents that are relevant, and also on documents that are likely to lead to relevant evidence. [ 30 ] In the present case, the Application in Court alleges misrepresentation, oppression and, alternatively, breach of a settlement agreement by the Respondents to repay 85% of the Applicants’ initial investment.

Succinctly put, the Applicants have alleged that the Respondents Unison and UWGC were “sham corporations” through which the directing minds and its majority shareholders would, among other things, make false representations, misuse corporate funds and severely mismanage corporate records, all for their personal benefit.

They allege further that this was oppressive and contrary to the reasonable expectation of the Applicant investors. [ 31 ] The Applicants continue at p. 3, para. 3 of their brief: By way of example, Patterson, Paquin, Unison and UWGC indiscriminately cycled corporate funds through various related bank accounts, primarily for their own personal benefit and with literally no oversight or supporting documentation.

This occurred at a time when Unison’s only source of revenues were monies which they could attract from investors, such as the Applicants. [ 32 ] They also allege that Patterson, Paquin, Unison and UWGC were assisted in their endeavors by Ms. Paquin’s husband, Boyd Soussana. Specifics i. Genevieve Paquin – 2013 and 2014 Income Tax Returns, Boyd Soussana 2013, 2014 and 2015 Income Tax Returns

[ 33 ] First, we deal with the discovery undertaking of Ms. Paquin with respect to provision of copies of her Income Tax Returns for 2013 and 2014. She has not yet produced them. The Applicants have alleged that between August 2013 and December 2015, Ms. Paquin and her spouse, Mr. Soussana, received approximately $145,000 in payments from the Respondent Unison. They allege that Unison wrote $45,000 in cheques to Ms. Paquin between August 2013 and December 2014. Ms. Paquin has deposed that she resigned as an Officer of Unison on November 1, 2013. Mr. Patterson and Mr.

Soussana (at discovery) indicated that the payments were made to Ms. Paquin so that she and Mr. Soussana could “income split” a salary from Unison. [ 34 ] The Applicants assert that these alleged types of arrangements do not conform with notional income tax splitting rules under the provisions of

Section 119.1 of the Income Tax Act. They point to the fact that there are no written agreements between Unison and Paquin. Hence, whether Ms. Paquin claimed any of the payments from Unison as income and, if so, how she characterized these monies is very relevant to the nature of the significant payments made to her by Unison. This is particularly so in these circumstances where Ms. Paquin has acknowledged never doing anything or knowing very much in particular about the company. [ 35 ] The Applicants seek similar relief with respect to undertakings made by Mr.

Soussana to provide copies of his income tax statements for 2013, 2014 and 2015. They repeat many of the same things that they have said in relation to Ms. Paquin, and they also refer to a payment in excess of $100,000 by Unison to Mr. Soussana between October, 2013 and December 2015. They refer to an assertion by the Respondent Mr. Patterson which purports to explain this payment. They argue that the only available document which might theoretically assist in better understanding the nature of the payments made to Mr. Soussana (and Ms.

Paquin, by extension) would be their income tax returns. [ 36 ] For their part, the Respondents acknowledge that the Respondent, Unison, wrote $45,000 in cheques to Ms. Paquin between August 2013 and December 2014, as well as the monies provided to Mr. Sousanna noted above. They argue, however, that how Ms. Paquin and/or Mr. Sousanna chose to characterize these funds (if at all) to the Canada Revenue Agency (CRA) has no relevance as to the actual nature of the payments.

Rather, it is what Unison says was the reasons for these payments that is relevant. [ 37 ] With respect, the Respondent’s position overlooks the fact that the total income declared by both Ms. Paquin and Mr. Soussana (if any) during the periods noted will provide evidence as to their total income claimed, to be contrasted with the lifestyle that they were leading.

What they told CRA about the derivation of their income or portions of it, while not determinative, is relevant particularly in the absence of any other means by which the nature of these payments can be investigated. [ 38 ] This is particularly so in light of the fact that Unison, at least up until now, has not filed anything with CRA itself.

This may be the Applicants’ only means by which to correlate what is being said in discovery with what is being told to Revenue Canada, and thereby either lead to the discovery of further evidence as to the true nature of the payments themselves or, at the very least, shed further light upon the credibility of the Respondent Ms. Paquin, and that of Mr.

Sousanna under these particular circumstances. [ 39 ] Moreover, if the true nature or source of the funds was not disclosed to CRA, or if the funds were not disclosed at all, it may tend to be supportive of an inference (which the Court may or may not draw) that Ms. Paquin and/or Mr. Soussana were conscious of a reason to want to keep the true source and/or reason for the payment hidden or at least obscure. [ 40 ] I direct that complete copies of the personal income tax returns of Ms. Paquin and Mr.

Soussana, together with all attachments, whether filed or not, for the years 2013, 2014 (for both parties) and, in Mr. Soussana’s case, also for 2015 are to be provided to the Applicants within 20 days. (ii) Minute Book of IOSST [ 41 ] With respect to the Applicants’ next request, it is in relation to an outstanding (earlier) agreement by Stephen Patterson to provide the Minute Book for the corporation bearing the acronym IOSST. He has not yet provided it.

The Applicants argue that they were invited to invest in the corporate Respondent, Unison, based upon representations as to Unison’s ability to access a proprietary new technology which involves the repurposing of formerly exhausted or defunct oil wells. They point to the fact that Mr. Patterson acknowledged (at para. 33 of his affidavit) that another company (IOSST Limited), actually holds the rights to the AEP (“AEP” is the acronym which has been used to describe this technology). [ 42 ] At para. 34 of his affidavit, Mr.

Patterson indicates that any agreements with Twin Butte (another company with whom the Respondents, through Mr. Patterson, were dealing) to gain access to the AEP technology were actually executed by IOSST and not Unison. The Applicants argue that Mr.

Patterson has represented that the Respondent Unison (of whom he is the principal) owns a majority interest in IOSST and this allegation is indeed made in para. 32 of his affidavit. [ 43 ] Whether Unison actually holds shares in IOSST is alleged to be material to whether that Respondent ever had the ability or right to gain access to the AEP technology held by IOSST and/or whether the Respondents ever had the ability or right to hold themselves out as being able to access that technology, and thereby entice investment in Unison. Mr. Patterson has confirmed that he is also a Director of IOSST.

The Respondents, for their part, now argue that it ought not to be necessary to produce the entire corporate Minute Book of IOSST in order to determine the extent of Unison’s stake in IOSST. [ 44 ] As I see it, and for the present, evidence tending to show the relationship between Unison and IOSST is clearly relevant to the issue of whether Unison ever had the ability to represent to others, such as the Applicants, that it had the right to use the AEP technology, the rights to which it now says were actually held by IOSST at all relevant times.

During the course of oral submissions, counsel for the Respondents indicated a willingness to disclose not only the IOSST shareholders’ ledger, but also any Shareholders’ Agreements that are in existence. I direct that the Respondent shall produce a copy of the IOSST Shareholders’ Register, and also a copy of any existing Shareholders’ Agreement(s). These documents shall be certified to be a true copy of same by the Secretary of IOSST and attached as exhibits to an affidavit to be sworn by the Secretary, and they shall be provided to the Applicants within 20 days.

In the event that there are any further applications that the Applicants wish to make after receipt of disclosure of these documents which would tend to suggest that other portions of the Minute Book are relevant or material, those applications may be brought in due course.

(iii) Stephen Patterson – Records of Cell Phone and Landline Calls Between Himself and Twin Butte (August 2013 to June 2014) [ 45 ] The Applicants’ next request concerns the unfulfilled undertaking of Stephen Patterson to provide records for cell phone and landline calls made by himself to anyone at Twin Butte for the time period August, 2013 to June, 2014. Mr. Patterson has disclosed (on February 15, 2017) some records of phone calls between himself, Mr. Soussana, and various employees at Twin Butte, including the latter’s (former) President, Bruce Hall. He has also disclosed an email from Mr.

Soussana to Bruce Hall of Twin Butte on November 8, 2013, which states inter alia that he and Mr. Soussana are “becoming increasingly concerned” as Mr. Hall had not gotten back in touch with them in response to their emails and phone calls. [ 46 ] The Respondents have disclosed no communications with Mr. Hall or anyone else at Twin Butte between September 16, 2013 and November 8, 2013. This was the specific period of time during which Mr.

Patterson was allegedly making representations to the Applicants soliciting investment in Unison. [ 47 ] The Respondents now object to the production of these records, essentially because (they argue) that they cannot lead to anything that is relevant.

In any event, they deny that there were any calls, at all, to anyone at Twin Butte from September 16 to November 8, 2013. [ 48 ] Dealing first, then, with respect to the September 16, 2013 to November 8, 2013 period, which is only a portion of the time span in which the Applicants are interested, it seems to me that the Respondents are being asked to prove a negative. The Respondents say that there were no phone calls. How that impacts upon whatever collateral representations Mr.

Patterson and/or the other Respondents were making or allegedly making to the Applicants over that particular (almost) two month period will be for determination when the Application is heard in Court. For now, Mr.

Patterson has taken the position through his counsel that there were in fact no calls made from his cell phone and/or landline to anyone atTwin Butte and, therefore, he has nothing to produce up to November 8, 2013. [ 49 ] Evidence of phone contact after that date, however, must exist, or the Respondents would have gone on to say that there was no contact with anyone at Twin Butte after November 8, 2013, and for the balance of the period in which the Applicants are interested.

Instead, the Respondents argue that evidence of such calls is irrelevant. [ 50 ] The Respondents’ position overlooks the fact that misrepresentation of various types is being alleged against them. Phone logs will indicate when calls were made to Twin Butte (“TBE”) by Mr. Patterson and their length. They may also lead to the disclosure (at further discovery or via demand for answers) as to the identities of those at Twin Butte (“TBE”) with whom these conversations were held and what was discussed. They will be relevant to the efforts that Mr.

Patterson (whether as representative of IOSST or Unison or any of the Respondents) actually made to ascertain the true state of affairs at the time, and, in particular, what was happening with respect to the acquisition by Unison of the very technology in which the Respondents had asked the Applicants to invest.

This can be juxtaposed with what, if anything (during that period), he told the Applicants, among other things, in relation to the investment that was being sought of them. [ 51 ] Finally, disclosure of the names of the person or persons at TBE with whom the conversations were had will provide the Applicants with names of people whose evidence, if necessary, may be obtained. [ 52 ] If the Respondents should take the position that there were in fact no other contacts made after November 8, 2013, (as they have with respect to the period of time from August 2013 to November 8, 2013), then this must be provided in affidavit form by someone with the relevant knowledge on behalf of the Respondents.

If there has been such contact (from November 8, 2013 up to the end of June, 2014), the Respondents will provide all phone records in their possession (including cell phone records) for the period noted within 20 days. (iv) Miscellaneous Compliance with Requests At Discovery (Mary Bond and re: cheques $105,024.24, $100,00 and $39,500) [ 53 ] The Applicants also seek compliance with the further undertakings and/or refusals of Stephen Patterson, at his discovery, which dealt with “the date Mary Bond was engaged to do accounting work”, to provide “a copy of the cheque for $105,024.24 and if it was not a cheque, provide a copy of the record that confirms the deposit”, as well as provision of the “the original electronic copy of the promissory note and the metadata associated with it”. [ 54 ] The Applicants similarly seek relief with respect to questions refused at discoveries by Mr.

Patterson. These related to the provision of information with respect to two cheques: April 19 and 24, 2013, totalling $39,500, the identity of the person(

s) to whom those cheques were written, and the name of the individual who withdrew the money on April 24, 2013. The Applicants also seek an accounting (with supporting documents) with respect to the $100,000 transferred from Unison to UWGC, and a complete accounting (with supporting documentation) of who withdrew the money from UWGC’s bank account. With respect to each such withdrawal, the Applicants want to know who withdrew the money, and who was the beneficiary of that withdrawal. If it was a cheque, who received the money specified in the cheque, and to whom the cheque was written.

For each withdrawal the Applicants want to know who received the money and request copies of supporting documentation. [ 55 ] As to almost all of the above, the Respondents have merely replied that they are “sourcing” either the information or document(

s) requested and that “all will be provided”. The exception is with respect to the promissory note and associated metadata. The Respondent says that the note was created on a computer which Mr. Patterson no longer has. Therefore, the information sought by the Applicants is no longer available. [ 56 ] I will begin by observing that it is difficult to know what the Respondents mean when they say that they are “sourcing” these requests. If they mean that they are “looking into” these requests, it is difficult to know why the process has taken so long.

I direct that the Respondent, Stephen Patterson, will provide the information and true copies of the documents that I have just indicated, with the exception of the computer and metadata. He will also formally provide the corporate position with respect to the promissory note and related metadata. All of this disclosure will be provided in a properly sworn affidavit, both in his personal capacity and in his capacity as

officer of the corporate Respondents. This documentation is relevant; it has been relevant for quite a while and it should be produced. [ 57 ] As to this business about the computer, the affidavit shall contain particulars about what happened to the computer that has rendered it unavailable, and when it happened. If it was given to somebody else, who has it now? If it was destroyed, how and why was it destroyed?

All of the information pertinent to the fate of that computer and the information or documents being “sourced” by the Respondents (noted above) shall be disclosed in the manner in which I have just indicated, on or by May 29, 2017. C. Stephen Patterson – Personal Income Tax Returns [ 58 ] Next we deal with the Applicants’ request for relief with respect to the undertaking of Stephen Patterson, concerning disclosure of his personal income tax returns. The basis of the Applicants’ request is that they have alleged that between September 2013 and December 2015 Mr.

Patterson received approximately $439,500 from Unison. It is also alleged that he has provided discovery evidence which is to the effect that he paid himself no less than $9,000 per month in compensation and expenses, and that the payments would have come in the form of cash transfers. [ 59 ] The Applicants point to the absence of any written employment contracts or agreements between Mr. Patterson and Unison, and the fact that Mr.

Patterson, as the directing mind of Unison, would in fact have been literally making arrangements with himself, perhaps “switching hats” as he is making the arrangements, but nonetheless the payments would have been made to him by a company of which he was the directing mind. [ 60 ] To belabour the obvious, this material is relevant for exactly the same reasons as those that I earlier indicated in relation to Mr. Soussana and Ms. Paquin. It is, if anything, even more pertinent in Mr. Patterson’s case. Neither Ms. Paquin or Mr.

Soussana appear to have had the same role with respect to Unison, or at least to the same extent as Mr. Patterson. He, by his own admission, was the controlling mind of not only Unison, but the Respondent UWGC also. He was also involved in some other corporate entities that have been mentioned earlier in these reasons. If he caused Unison to make payments, then he would be the one characterizing these payments to himself. He would also be the one (in his personal capacity) who characterized the nature of these payments to CRA.

If there is a difference as to how these payments are characterized between Unison to Mr. Patterson and then from Mr. Patterson to CRA, that could again supply some basis or some circumstantial evidence which might (or might not) be capable of sustaining an inference that Mr. Patterson was aware of reasons why the source or the characterization of these payments ought to be obscured. [ 61 ] All of this, coupled with the fact that Unison has never (to date) created T-4s or any of the other documentation required by CRA either for Mr.

Patterson’s personal situation, or on its own behalf, means that this corporate Respondent has never even prepared the documentation that is required of it by law in order to properly document its activities. The income tax returns, if and when filed by Mr. Patterson, would be the only potential way in which this evidence could be tested. Mr. Patterson has represented that he has not filed his income tax returns. If he has done so, copies are to be disclosed together with all attachments, and they will be disclosed for the years 2013, 2014 and 2015, within 20 days.

If he has not, he shall disclose to the Applicants all of the information that would be required of him had he properly filed these returns, within 20 days. Respondents’ Motions: A. Demand for Particulars [ 62 ] The Respondents have made a motion to compel an answer to a demand for particulars.

Briefly put, the background is that the Applicants have alleged, in their “Further Amended Notice of Application”, that the offering memorandum under which the Respondent solicited shares from the Applicants, and pursuant to which the Applicants invested their money, did not qualify for a prospectus exemption, and yet the Respondents did not prepare a prospectus as the law requires. The Respondents argue that the Application does not contain any particulars as to how or why it is alleged that the offering memorandum did not qualify for an exemption, “just the bald allegation it didn’t qualify for an exemption”.

Their demand for further particulars of the Applicants’ allegations has gone unanswered. [ 63 ] As I read the most recent iteration of the Application (the amended Notice of Application in Court dated February 22, 2017), I note that from paras. 9 to 12, the applicants allege that s. 58 of the Securities Act prohibits any person or company from distributing securities on their company’s own account unless they first file both a preliminary prospectus, and a prospectus. [ 64 ] The amended notice goes on to say at para. 10 that National Instrument 45-106 nonetheless allows persons or companies to issue offering memoranda without filing a prospectus in certain limited circumstances.

The Applicants then go on, in paras. 11 and 12, to allege that the Respondents did not qualify for such an exemption. [ 65 ] As I mentioned to counsel during the course of legal argument, it appears to me that this is simply an assertion by the Applicants, after having set out the relevant legislation, to the effect that the Respondent Unison did not qualify (according to that legislation) for an exemption from filing a prospectus.

The Respondents have taken the position that they do, in fact, fall under the auspices of National Instrument 45.106, and they have stated the basis of the exemption to which they feel they were entitled. [ 66 ] With respect, this is a legal argument to be sorted out when the Application in Court is heard.

It does not provide a basis upon which the Applicants should be required to write what would amount to a legal brief (at this time) detailing why they feel that the Respondents do not qualify for the exemption, any more than it is for the Respondent Unison to write a brief telling me why it feels that it did qualify. This is one thing among many that will be determined when the Application in Court is heard. The Court will hear submissions and will conclude (among other things) whether or not the company was within the exceptions set forth in National Instrument 45.106.

To rule that the Applicants shall, in effect, make a legal argument on the issue, at this stage, is well beyond the scope of the motion which the Respondents have brought. I, therefore, deny it. B. Respondents’ Motion to File a Supplementary Affidavit of Stephen Patterson and Late File Another Affidavit [ 67 ] I shall next address the Respondents’ motions for leave to file a supplementary affidavit of Stephen Patterson, and to permit the late filing of an affidavit of Mary Bond, who will attach to her affidavit the documents which are alleged to contain Unison’s income tax

returns for the years 2013, 2014, 2015, Unison’s financial statements for those years, and the general ledger accounts containing the source entries from which the income tax returns and the financial statements were generated. [ 68 ] The Respondents say that the accountant, Ms. Bond’s, affidavit would purport to deal primarily with the methodology employed in putting the documents together, and perhaps also with the level of interaction between herself and Mr.

Patterson in terms of the extent to which she is reliant upon information provided by him to assist her in assembling everything. [ 69 ] There is a problem with this request, and throughout the course of counsels’ submissions on this issue, I used the term “ephemeral” to describe it. Perhaps a better term would have been “speculative”. This is because neither the Court, nor the Applicants, have been provided with drafts of the documentation which the Respondents are now seeking leave to file.

As I take the Respondents’ counsel’s submissions, the Respondents have some of the materials together but they are not complete. [ 70 ] The difficulty in which this places the Court is obvious. The factors which I must consider when I am deciding whether to allow the filing of affidavits outside of the

schedule previously set by the Court, or the filing of an altogether new affidavit, are contained under Civil Procedure Rule 5.15: 5.15(1) A party to an application may only file an affidavit within the deadlines under this Rule or set by a judge giving directions unless a judge hearing the Application permits an affidavit to be filed later.

(2) On a motion to file a later affidavit the judge must consider all of the following: (

a) the prejudice that would be caused to the party who offers the affidavit if the application proceeds without that affidavit; (

b) the prejudice that would be caused to the other parties by allowing the affidavit to be filed, including the prejudice of an adjournment if that would be a result. (

c) if an adjournment would result, the public interest in making the best use of court facilities, judge’s time and the time of court staff.

A judge who allows a late affidavit may order the party filing the affidavit to indemnify each other party for expenses resulting from the filing, including expenses resulting from any adjournment. [ 71 ] Whether I attempt to assess the prejudice that would result if the Respondent is required to proceed without the affidavits, or to consider this in tandem with the prejudice that would adhere to the Applicant if I were to permit them to be filed, both issues, in my view, highlight the same concern. How can I go about addressing these factors on the basis of documents that I do not have in front of me?

Clearly these factors presuppose that when an Application such as this is made, that drafts of the documents will be provided to the Court so that they may be scrutinized, and also so that opposing counsel can make pointed or targeted submissions with respect to them. If the Applicants were in possession of drafts of the documents, one possible result could be that they are still opposed, in whole or in part, to the Respondents’ motion.

Another possibility is that they might be prepared to agree to what the Respondents seek if the documents (as the Respondents have represented) actually supply some of the information that the Applicants have been seeking. But the Applicants cannot make this assessment in a vacuum, and the Court cannot do it either. [ 72 ] I will direct that the Respondents shall deliver drafts of the affidavits and all attachments (which attachments shall include a curriculum vitae of whomever prepares the financial statements and/or documents referenced by the Respondents in their submissions).

These shall be delivered to the Applicants, not to the Court, within 20 days. If the parties are able to agree at that time as to the filing of this material and the conditions appurtenant to such filing, then a Consent Order to that effect shall be forwarded within 10 days of the Applicants’ receipt of these materials. [ 73 ] If they cannot agree, counsel will provide brief submissions on the issue, together with a draft of the proposed affidavits with attachments within 15 days of the Applicants’ receipt of same, and then the issue can be decided. C.

Respondents’ Application to Compel Evidence from a Non-Party (Cyril Muise/Global Maxfin) [ 74 ] With respect to the Respondents’ Application to compel evidence from a non-party, according to Respondents’ counsels’ verbal submissions, Mr. Muise was served two days ago with notice of this Application. Mr. Robinson says that Global’s counsel called him from Ontario and indicated that he was aware of this Application and knew it was going ahead today.

This is, of course, different from acquiescence or agreement. [ 75 ] Even though we are operating within compressed timelines, two days’ notice, which is what the Respondents’ counsel indicates that Mr. Muise and Global received, is simply not sufficient to ensure that they have had a meaningful opportunity to ensure that their positions are adequately before this Court. Moreover, this motion seems to be somewhat premature in any event.

The Applicants have stated clearly, through their counsel, that all communications which they have had with either Global and/or Muise have been disclosed to the Respondents, and that there are no others. [ 76 ] Counsel for the Applicants shall inquire of Global and Muise as to whether these latter have any evidence of communications (other than those which the Applicants have disclosed) of any sort with one or more of the Applicants in relation to the subject areas with which we are dealing with today. They will do so within ten days.

The Applicants will then communicate with counsel for the Respondents in one of the following ways: i. neither Muise nor Global have had any communications of any sort with the Applicants other than what has been previously disclosed; ii. one or the other (or both) have had some communication, other than that previously disclosed on ( insert dates ) and enclosed herewith is the substance of those communications, when they occurred, and the materials that accompanied them; or iii. one or the other (or both) have had some additional communications that occurred on ( insert dates ) but we object to disclosing the

information, and state the basis of the objection. [77] In the event that option (iii) is chosen by the Applicants, the Respondents may determine whether they wish to bring a furtherApplication, upon adequate notice, to compel disclosure, in which case I would specify that such adequate notice would be provided toboth Global and Muise in order to ensure that their positions are properly available to the Court in relation to any Applications to compeldisclosure. D.

Respondents’ Motion to Compel Answers to Interrogatories [78] As to the Motion to Compel Answers to the Interrogatories, set out at Tab A of Gwen Watson’s affidavit, the principlesapplicable to such requests have been canvassed in the case law. Civil Procedure Rule 19 is headed “Interrogatories” in the most recentversion of the Rules. It allows a party to question another person in writing unless the question has been canvassed by the witness ondiscovery. The relevant provisions reads as follows: 19.01

(2) A party may demand answers in writing from any person; the person must provide the answers in accordance with the Rule. 19.02

(1) A party may deliver a demand for answers if the party is satisfied that obtaining the answers in that manner will promote thejust, speedy and inexpensive resolution of the proceeding. [79] A Demand for Answers may be served upon an individual party any time after the day pleadings close in an action.

A Demandfor Answers from an officer or employee of a corporate party other than a designated manager from a non-party may only be made afterthe party making the demand has finished discovery of parties. (CPR 19.04) [80] The interesting point that arises in this context was canvassed in an earlier decision of Justice Hood in Sable Offshore Energy v.Ameron International Corp., 2008 NSSC 53. Therein, she observes, at para. 3: The principles were settled by Justice Goodfellow in the Sherman v.

Dalhousie College and University, 1996 NSSC 11 , 1996Carswell NS 272, including the following: That Interrogatories are not a substitute for oral discovery; they are narrower in scope; they are to obtain admission of facts and afoundation for further examination.

He also pointed out that the fullest possible disclosure is the purpose of the Nova Scotia CivilProcedure Rules and that, in general, a second set of discoveries would not be allowed if the questions should have been in the first set. [81] Justice Hood goes on, at para. 4, to say: I was also referred to a Decision of Justice Gruchy in Southwest Shore Development v. Ocean Produce where he made comments that thesheer number of Interrogatories could lead to a determination that they were oppressive.

He also pointed out that they were to elicitbasic facts and were not to be a substitute for oral discovery and that they should not require significant study to respond. [82] The cases seem to turn on whether Interrogatories as a whole or individually are oppressive and whether they deal withfoundational facts; they should not require a lot of study to respond to them.

A tangential concern will be whether the sheer number ofquestions being posed in this fashion (although, individually not problematic) suffices to render them (cumulatively) oppressive. [83] In this particular case, much of the Applicants’ response is predicated on the timing of this request, and the fact that deadlineshave been exceeded. A timetable had been set for discoveries. The Respondents elected not to conduct discoveries of the Applicants’witnesses. Now they ask to have Answers to Interrogatories provided.

These Interrogatories were not even filed until after they were tohave concluded their discoveries. [84] That said, we are now in a “post June 22, 2017” world, in the sense that we will not be proceeding with the Application inCourt until January of 2018 (I will say more about the adjournment in a moment). Further discovery examinations of Mr. Patterson, andprobably Ms. Paquin and Mr.

Soussana, will be necessary as a result of the rulings that I have made earlier. [85] While this is not an excuse for doing something out of turn, in this context I am no longer concerned about violating the currentdeadlines because (as I will say in a moment) an adjournment of the June, 2017 hearing dates is now necessary. Another Motion forDirections will be required as a result of new timelines. I have looked at the questions being posed as a whole and they consist ofessentially the same questions being repeated to a number of the individual Applicants.

Having regard to the questions themselves, theyare not (either individually or cumulatively) oppressive, nor will it result in any procedural prejudice if the Applicants are required torespond to them. Indeed, for the most part, they are questions that can be answered with a “yes” or “no”. [86] Finally, the questions overall appear to be relevant, regardless of the fact that the evidence is being taken out of order from thatcontemplated when the earlier Motion for Directions was given by Justice Pickup.

There has not been any substantive objection on thebasis of relevance brought by the Applicants with respect to the questions that have been posed. As such, I direct that responses to theInterrogatories will be provided by each of the named Applicants within 20 days. Joint Application E. Re-examination of Stephen Patterson and Method of Doing So [87] The Applicants ask that they be permitted to re-examine Mr. Patterson for discovery. Under Civil Procedure Rule 18.1(4) theywould require leave in order to do so.

I noted earlier (in light of the Respondent, Paquin, and her husband, Soussana being permitted towithdraw their affidavits) that in the event that they filed any replacement affidavits upon which the Respondents intend to reply, thatthey must do so within 20 days. In such an event, the Applicants would be granted leave to re-examine these deponents at discovery. [88] So too, in light of the information to be provided by Mr. Patterson, as a result of the rulings that I have made today, (most, if

not all of which ought to have been provided long ago) it is vital that the Applicants have the opportunity to re-examine him. The Respondents argue that discoveries are expensive and that the Applicants ought to be directed to utilize Interrogatories (or a Demand for Answers) instead. [ 89 ] It is certainly true that in some circumstances Interrogatories may be less time consuming and less expensive to utilize. However, not all inquiries readily lend themselves to such a format.

This is particularly so when there are pointed questions that must be asked, and when the next question in a particular sequence is dependent upon the answer that is received in response to the previous one.

I repeat the point made in Sable Offshore Energy , supra, and the authorities cited by Justice Hood therein, which is to the effect that Interrogatories are to “…elicit basic facts and… not to be in substitute for oral discovery…”. [ 90 ] While it can certainly be (in some contexts) less time-consuming and less expensive to utilize a “Demand for Answers” under CPR 19, I am not prepared to restrict the Applicants’ mode of inquiry given the nature and potential complexity of some of the information that is to be provided.

Much of this information may lend itself much more to the spontaneity of the question and answer process at discovery than to the alternative proposed by the Respondents. I hereby grant leave to the Applicants to rediscover Mr. Patterson. [ 91 ] As to the costs of the re-examination of Mr. Patterson, I simply repeat what I said in relation to the potential for a second set of discoveries in relation to Ms. Paquin and Mr. Soussana.

It shall be for the presiding justice at the conclusion of the Application in Court to make the determination of the amount of costs that the Applicants shall receive if any of these people must be discovered for a second time. This concludes the final motion today. Adjournment [ 92 ] As I have said, it is obvious that the parties cannot be ready in time to proceed with the hearing dates in June. Counsel have advised that they are available for the alternative available dates, and these are January 2, 3, 4, 8 and 9, 2018. The Application will be adjourned to those dates.

Any throw-away costs that will accrue to the parties as a result of the adjournment that I have granted shall be dealt with by the justice hearing the Application in Court on the dates noted above. [ 93 ] The Applicants costs have been substantially successful in this Application and I award costs, payable forthwith, in the global amount of $2,000, inclusive of disbursements. [ 94 ] Within 30 days the parties shall apply for a date to set further directions in this matter in light of the new hearing dates. Counsel for the Applicants will prepare the Order. Gabriel, J.