Docket: CACV2309 Dawgs Canada Distribution Ltd. (formerly known as Dawgs World Distribution Ltd.), Double Diamond Distribution Ltd. v. Steven Mann, 2013 SKCA 69

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2013 SKCA 69 Date: 2013-06-26 Between: Docket: CACV2309 Dawgs Canada Distribution Ltd. (formerly known as Dawgs World Distribution Ltd.), Double Diamond Distribution Ltd. and Steven Mann (Defendants) Appellants - and - Lee Smith (Plaintiff) Respondent - and – Angie Friesen, 101086342 Saskatchewan Ltd., Barrie Mann, MAM Marketing Inc. and Top Dawg Management Inc. (Defendants) Non-Parties Coram: Jackson, Caldwell and Herauf JJ.A. Counsel: Bruce Wirth for the appellants Andrew Mason for the respondent Appeal: From: 2012 SKQB 305 Heard: January 29, 2013

Disposition: Appeal Dismissed Written Reasons: June 26, 2013 By: The Honourable Mr. Justice Caldwell In Concurrence: The Honourable Madam Justice Jackson The Honourable Mr. Justice Herauf Caldwell J.A. [ 1 ] The appellants appeal from the order of the chambers judge requiring the corporate appellants to produce their financial statements for 2005 and following years (see: 2012 SKQB 305 ). The appellants allege the production order was made contrary to the principle of res judicata or was otherwise made in error.

However, having considered the submissions of the parties, I would dismiss this appeal. [ 2 ] As background, the respondent asserts he is entitled to become a shareholder of the appellant Double Diamond Distribution Ltd., which carries on business under the name Dawgs Clogs . He says he is an oppressed shareholder within the meaning of s. 234 of The Business Corporations Act , R.S.S. 1978, c. B-10. He seeks an accounting from the appellants for monies and benefits received by them, or any persons who are related to or do not deal at arm’s length with them, from Dawgs Clogs and its affiliates and associates.

He also seeks an order directing the appellants or their officers to attend at an examination under oath to answer questions related to the assets, liabilities, revenue, expenses and business activities of Dawgs Clogs and its affiliates and associates, as well as additional relief in the nature of an order that the appellants produce bank records and minute books. [ 3 ] Prior to conducting examinations for discovery, the respondent brought an application for interim relief under s. 234 of The Business Corporations Act seeking production of the financial statements and minute books of the corporate appellants.

The appellants opposed this on a number of grounds, including that the respondent’s application was premature because he was attempting, by means of the application, to obtain a shareholder benefit before any court had ruled on whether he was a shareholder. The chambers judge hearing the application agreed with this and said (see: 2008 SKQB 219 , 317 Sask. R. 51): [22] ... [H]ere, unless and until Smith can demonstrate his entitlement to shares in the corporation, his application for the information sought is in my opinion premature.

The alleged conduct of the defendants is not oppressive unless and until it is determined that Smith is entitled to be a shareholder of the Dawgs Clogs’ venture. The application for interim relief pursuant to the BCA is therefore dismissed. [ 4 ] The respondent had also then applied on an interlocutory basis for injunctive relief requiring the appellants to produce their financial statements. And, in that respect, the chambers judge had this to say: [31] In my opinion, if Smith is successful in his action, shares in the company can be issued to him at the time he proves his entitlement to them.

There is no suggestion that the venture is being run improperly or that its assets are in any way in jeopardy. Furthermore, even if successful, Smith’s remedy may be in the nature of damages, which is often the remedy given to a minority shareholder such as it appears Smith would be in, given the circumstances of this case. If he is found to be entitled to shares, an order for an accounting and determination as to value of the shares could be made at that time.

The fact that Smith may want or need information so as to be in a position to assess the possibility of a settlement at the mandatory mediation stage of his action is not the type of irreparable harm that gives rise to the interim injunctive relief sought. . . . [37] It is my opinion that the balance of convenience in this case favours the defendants. In the affidavit material filed, there is no suggestion that the defendants are acting other than in the ordinary course of business, nor that there is a proposed disposal of assets.

Furthermore, as there are allegations in the defendants’ material with some supporting emails which could be taken as indicating that Smith is attempting to establish a competing business in Sweden, the provision of financial and corporate records before a trial of the action to establish Smith’s entitlement to the information could prejudice the business interests of the defendants.

Accordingly, I find that the balance of convenience in this matter favours the defendants. [ 5 ] In sum, the respondent was denied the interim relief he had sought. [ 6 ] Then, during examinations for discovery, the respondent asked the proper officer of the appellant Double Diamond Distribution Ltd. questions pertaining to the financial statements of that corporation. The officer refused to answer on the ground that he was bound by a court order ( i.e. , the earlier denial of interim relief) not to disclose that information.

The respondent then asked if the officer would undertake to produce the financial statements in question. The officer refused stating he could not by reason of that same court order. [ 7 ] The respondent subsequently brought an application to compel the corporate appellants to produce their financial statements for the purposes of examination for discovery. At the hearing of that second application the appellants argued, among other things, that res judicata applied.

They also placed before the court affidavit evidence which set out a fear that the respondent would make improper use of financial information were it to be disclosed to him. In the result, the chambers judge found that res judicata did not apply and ruled that the financial statements had to be produced; but, he crafted his order in such a way as to address the potential for improper use of the information by the respondent. It is this production order which is the subject of the within appeal.

[8] The appellants appeal chiefly on the ground that, in as much as it requires production of the very same financial statements whichhad previously been denied the respondent, the production order is contrary to the principle of res judicata. More particularly, theappellants submit the judge erred: (

a) in finding that res judicata did not apply in the circumstances; (

b) in failing to consider that production of the financial statements would grant the respondent relief he is seeking in the wholeaction before he has proven his entitlement to that relief; (

c) in finding that the financial statements were relevant because the respondent does not need them to prove he is entitled tobecome a shareholder; and (

d) in ordering production of the Dawgs Canada Distribution Ltd. financial statements because they do not exist. Res Judicata [9] As to the res judicata argument, I would particularise the appellants’ objection to the production order as asserting that the orderwas made contrary to the doctrine of issue estoppel, which is an aspect of the principle of res judicata. In sum, however, I find that theprinciple does not apply here for two main reasons. First, the issue decided in the first application is distinct from that which was at issuein the second.

Second, the order made in the first application was not intended to be, nor was it, a final order. I will explain each of theseconclusions. [10] Before a court may find that the doctrine of issue estoppel applies, the party asserting its applicability must satisfy threepreconditions (see: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44; [2001] 2 S.C.R. 460, at para. 25, citing Angle v. Canada(Minister of National Revenue) – M.N.R., (SCC), [1975] 2 S.C.R. 248): (

a) that the same question or issue has already been decided in previous litigation; (

b) that the judicial decision that decided the issue first was a final decision; and (

c) that the parties, or their privies, were parties to that first judicial decision and to the proceedings in which estoppel is asserted. [11] Even if these three preconditions are met in a particular circumstance, a court retains a measure of discretion such that it maychoose to not apply the doctrine (Danyluk, at para. 33). [12] The first precondition for the application of issue estoppel is the requirement that the issue in the respondent’s first application be the same as in the second. In his seminal treatise, The Doctrine of Res Judicata in Canada, 3rd ed. (Toronto, Ont: Lexis Nexis, 2010), Dr.Donald J.

Lange succinctly states (at p. 304): “Issue estoppel applies to foil an attempt to relitigate the same question in another motionin the same proceeding.” In negative terms, if the issue or question currently before the court is different or distinguishable from thatwhich was previously before the court, the doctrine of issue estoppel does not apply.

With respect to interlocutory or interim matters, Dr.Lange maintains (at p. 308): Issue estoppel applies to interlocutory decisions which finally determine an issue in the absence of an appeal, material change incircumstances, or new evidence which has been previously suppressed or unavailable but the issue in the second motion must be theprecise issue adjudicated upon in the first motion”. [Emphasis added.] [13] The issue in play in the respondent’s second application is not the precise issue which was at play in his first and unsuccessfulapplication.

Albeit that the nature of relief sought is very similar in each application, the bases upon which the respondent sought suchrelief are unrelated. In this respect, although not directly on point, I have taken note of the decision in Penzie v. Pfeifer, 2011 SKQB 1,369 Sask. R. 59, where the court ruled that res judicata did not prevent a defendant from applying a second time to strike a statement ofclaim as failing to disclose a cause of action.

The court distinguished between the two applications, both of which had been made underRule 173 of The Queen’s Bench Rules, on several grounds not relevant here; but, notably, the court also found that while bothapplications had been made pursuant to Rule 173(a), the second had been made pursuant to Rules 173(

c) and (

e) in addition and “thusthose claims could not be res judicata.” In other words, the court implicitly held that res judicata did not apply because the issues in thetwo applications were different even though the relief sought was the same and, in fact, had been sought under different subsections ofthe same Rule. [14] When I examine the circumstances of this matter on that basis, I conclude that issue estoppel is inapplicable.

I say this because theissue in the first application was whether financial and other information the respondent sought ought to be disclosed pursuant to apreliminary motion for interim relief under s. 234 of The Business Corporations Act. And, there, by reason of the legislation, thechambers judge had to determine whether the respondent was entitled both as a “complainant” and in the circumstances to the reliefwhich he sought. In the result, the judge held that the respondent’s application was premature because he could not sufficiently establishthat he was a shareholder.

However, the issue in the respondent’s second application to the court was whether financial statements had tobe disclosed pursuant to The Queen’s Bench Rules for the purposes of discovery. The second application therefore called for the court tomake a determination based on an entirely different test than the first: the broad relevance test. Under this test, other than establishing hisstatus as plaintiff in a civil proceeding against the appellants, no issue arises as to the respondent’s personal entitlement to obtainproduction of the financial statements as part of the discovery process.

Provided he can establish that the financial statements are broadlyrelevant to his claim against the appellants (more on this later), the respondent is entitled by the procedural rules of discovery to view andask questions about the financial statements. In this sense, his entitlement to discover the appellants on the documents in question has butan indirect tie to his status as a shareholder (or not) of the appellants. In other words, the issues were not precisely the same. [15] Put another way, the respondent’s initial application was for a substantive interim remedy under s. 234 of The Business

Corporations Act, which called upon the chambers judge to consider whether the respondent could establish a sufficient relationship andsufficient oppressive conduct such as would entitle him to interlocutory injunctive relief to require production of financial statements andminute books. The issue arising in the second application was whether the financial statements were broadly relevant to the respondent’sclaim such that they ought to be produced on a procedural basis for the purposes of discovery.

In this respect, the issue in the laterapplication was and is conceptually and analytically distinct from that which arose in the initial application.

Albeit the distinction is oneof process and form, in that it contrasts an interim remedy against a procedural entitlement, in my opinion this still serves to confirm thatthe respondent’s second application involved an issue sufficiently distinguishable from that arising in his initial application to render thedoctrine of issue estoppel inapplicable. [16] I turn now to consider the second precondition to the application of the doctrine of issue estoppel: that the initial order must befinal in nature.

Issue estoppel applies to interlocutory decisions which finally determine an issue in the absence of an appeal, materialchange in circumstances, or new evidence which has been previously suppressed or unavailable (see Lange at p. 308). In R. v. Duhamel(1982), 1981 ABCA 295 , 33 A.R. 271 (C.A.), aff’d (SCC), [1984] 2 S.C.R. 555, Moir J.A. stated at p. 277: From this arises the related issue as to whether or not interlocutory matters can found an issue estoppel. It seems in principle they can doso but only for a limited purpose. By its very definition, an interlocutory issue is not a final judgment.

However, a decision on theinterlocutory question may be final and conclusive for the purpose of the proceedings in which it is adjudicated. Outside of thoseproceedings, however, it cannot bind the parties because it was not a final determination of any issue essential to the verdict [or finaljudgment]. [17] With respect to interim relief motions, Dr.

Lange broadly states (at p. 308): “A motion granting interim relief until trial is not finalfor the purpose of issue estoppel.” The corollary to this rather sweeping statement is that an order refusing interim relief would also notbe final for the purposes of issue estoppel. Fortunately, the circumstances here are more precise because as noted earlier, the chambersjudge clearly saw the respondent’s initial application as being “premature”, as it had occurred before its proper time.

To my way ofthinking, this suggests the chambers judge well-understood the on-going and evolving nature of the litigation in this matter and that itwas likely to be back before the Court at some future point when the circumstances had matured sufficiently to consider properly anapplication in the nature of that brought by the respondent.

As such, I find that the initial order denying the respondent relief was notfinal and, therefore, that the doctrine of issue estoppel is defeated here as well. [18] Of course, the third precondition is clearly satisfied in that there can be no dispute that the parties were party to each of theapplications in question. [19] On the whole of it then, I find that the chambers judge did not err by concluding that the principle of res judicata, under itsdoctrine of issue estoppel, has no application to the matter at hand.

Nature of the Relief Sought [20] The appellants alternatively submit the chambers judge who heard the second application erred by ordering the production of thefinancial statements in question because, in doing so, he provided the respondent with the very relief the respondent is seeking in hisclaim, only prior to the respondent proving he has a legal entitlement to that relief. [21] The prayer for relief in the respondent’s statement of claim seeks an accounting from the appellants, but it also seeks an orderdirecting the appellants to attend an examination under oath and answer all questions relating to the assets, liabilities, revenues, expensesand business activities of Dawgs Clogs.

The production order, in that it orders the appellants to produce their financial statements for thepurposes of discovery, will effectively provide the respondent with information relating to the assets, liabilities, revenues, expenses and,perhaps, business activities of Dawgs Clogs. Furthermore, although speculative, I easily agree with the appellants’ contention that,having received production of the financial statements, the respondent will undoubtedly want to examine the proper officers of thecorporate appellants about the details of the general financial information disclosed therein.

In that respect, the relief the respondentobtained through the production order certainly seems the same in nature and quality as that which he seeks, in part, as final relief in hisstatement of claim. I would turn, then, to examine whether, as the appellants assert, this fact ought to bar the respondent from receivingsuch relief on an interim basis. [22] The appellants say there is ample authority for their assertion. First, they refer to Big Sky Satellite Ltd. v. Forsberg, (Sask.

Q.B.), where a plaintiff had sued, among other things, to restrain its former employee from soliciting its customers and foran accounting of profits for doing so. The plaintiff sought this same relief on an interim basis, but the court dismissed the application foran interim accounting on the grounds that if the plaintiff were successful at trial then the relief could be granted at that time and thatsuch relief granted on an interim basis would be “tantamount to a kind of final order as opposed to an interlocutory one”.

Given that therespondent cannot “unsee” the financial statements once they have been disclosed to him, the production order here would seem to bethe kind of final order described in Big Sky Satellite Ltd. v. Forsberg. Nevertheless, while I accept that there may be circumstances inwhich a party may be barred from obtaining on an interim basis the relief it seeks on a final basis, I cannot accept that it is a hard-and-fast rule as it seems to fly in the face of the general availability of interim injunctive relief.

And, that seems to be the appellants’understanding as well because the respondent further submits that in appropriate circumstances the courts have severed liability anddamages proceedings to avoid granting on an interim basis the relief which a party seeks on a final basis. On its face, the bifurcation orseverance of liability from damages seems more practical and is, therefore, a more persuasive position from which to begin.

As such, Iturn now to examine it more carefully. [23] I would start by accepting the appellants’ statement that the disclosure of financial information to the respondent is of significantimportance and concern to them.

And, for the purposes of this analysis, I will assume, without deciding, that the appellants havesufficient reason to be concerned that the respondent might misuse any financial information about the Dawgs Clogs business which hemay receive through the discovery process. [24] Given that context, the appellants assert that the respondent is not entitled to an order for the production of financial statementsunless and until he has proven his entitlement to become a shareholder of a corporate appellant. This may seem the same argument as

was addressed under issue estoppel, but it is not. In support of this assertion, the appellants refer to Prairie Irrigation Development Ltd. v.Derdall et al. (1984), (SK KB), 35 Sask. R. 1 (Q.B.), and Meldrum v. Intercontinental Packers Ltd., [1989] S.J. No.471 (Q.B.), where courts declined to order the production of documents which were not required to establish the claims against thedefendants.

In each case, the court’s concern, at least on an interim basis, seems to have been that improper use would be, or could be,made of the disclosed information and, given the risk, the court was reluctant to exercise its discretion to compel production from thedefendant without the defendant’s liability to the plaintiff having been more firmly established. In each of these cases the court wascareful to grant the plaintiff leave to make a further application for production if, following examinations for discovery, it appeared thedocuments would be required to prove the plaintiff’s case.

On the basis of these authorities, it seems that a court may decline to orderproduction of commercially sensitive information where there is risk of misuse and the documents in question relate only to the issue ofdamages. [25] The authorities cited by the appellants similarly suggest that, on the same theory, courts have bifurcated proceedings to sever thedetermination of liability from an assessment of damages and to thereby avoid ordering the production of sensitive or confidentialbusiness information on an interim basis. For example, in Wahpeton Canvas Co. v.

Inland Plastics Ltd., (SK KB),[1991] 5 W.W.R. 107 (Q.B.), the plaintiff sued for patent and trade-mark infringement and sought an accounting of profits and damages.The plaintiff made an interim demand for broad-based production and disclosure of all financial information relating to the defendant’soperations. The defendant refused because the parties were competitors. The court found that the claim involved a two-stage process offirst determining whether there had been an infringement and, if so, then assessing the plaintiff’s loss by an accounting of profits.

Thecourt therefore put off the production of broad disclosure of all financial records until infringement had been established or unless theplaintiff could demonstrate, after discoveries, that it should have further production. It is noteworthy, however, that the court thereordered production of documents related to royalties earned by the defendant, with the defendant’s concession that they wereproduceable. The appellants also cite Singh v. Singh (1927), 39 B.C.R. 485 (B.C.C.A.), and Rutkowski v. Manchur et al., (MB CA), [1949] 1 W.W.R. 805 (Man.

C.A.), both of which dealt with claims of partnership and an accounting of profits whereproduction of financial information which was unrelated to the establishment of the plaintiff’s partnership interest was deferred until theclaim of partnership had been established. [26] To counter the appellants’ assertion, the respondent points to 101043147 Saskatchewan Ltd. v. Colliers McClocklin Real EstateCorp., 2006 SKQB 321, 286 Sask. R. 258, where the defendants had unsuccessfully objected to production on the bases that (

i) thedocuments in question were not relevant to the issues of liability and damages, (ii) the documents could become relevant only if anaccounting were ordered, and (iii) therefore, production should be deferred until (ii) had occurred. In opposition to the productionapplication, the defendants had referred the court to Wahpeton Canvas Co. v. Inland Plastics Ltd. among other cases. Nevertheless, inresolving the issue, the court said: [16] On the subject of relevancy it is argued that the documents are not relevant until after an accounting has been ordered.

The firstanswer to this submission is that once the documents are relevant to the issue of liability and damages respecting the issue of breach offiduciary duty, that ends the matter. … [17] The second answer is that I do not believe the law restricts production of documents until after an accounting is ordered. Inarguing that it does, counsel referred me to Chieftain Industrial Contractors & Consultants Ltd. v. Man-Ore Industrial Contractors Ltd.(1990), (SK KB), 81 Sask. R. 223 (Sask. Q.B.); Wahpeton Canvas Co. v. Inland Plastics Ltd. (1991), (SK KB), 91 Sask. R. 147 (Sask. Q.B.) and R.V. Holding Co. v.

Martin’s Vegetable Sales

(1982) Ltd. (1998), (SK KB), 175 Sask. R. 148 (Sask. Q.B.). [18] In each of the cited cases the court refused to order production of documents until an accounting has been ordered. However, I donot believe the court intended to create an absolute rule that all actions for an accounting had to undergo bifurcation. Such would bringabout an inefficient use of court time and render pre-trial settlement conferences totally ineffective. Rather, I read the cases as holdingthat in their particular circumstances the production of documents would await the determination of whether an accounting would beordered.

It will be noted that in each case the documentation being sought was very extensive and dealt with specifics of the businessoperations of the respective defendants. It is otherwise here. [27] In the end, while I accept the appellants’ proposition, I find that the law on bifurcation of civil proceedings so as to curtail the riskof premature disclosure of sensitive information is as was set forth by Bayda C.J.S. in Don Funk Holding Ltd. v. Bouvier, (1989), (SK CA), 80 Sask. R. 234 (C.A. in Chambers).

In that case the plaintiff had sought production of the defendants’ businessrecords in a dispute over the payment of royalties under a franchise agreement. The defendants declined to hand over the documentsunless and until the court had ordered an accounting. Nevertheless, the Queen’s Bench chambers judge ordered production of thedocuments and the defendants sought leave to appeal therefrom. In denying leave Bayda C.J.S. said: [12] In my respectful view, the position of the defendants is entirely untenable.

On their face the documents are clearly relevant giventhe franchise agreement which is at the heart of the plaintiffs’ claim and in particular given the terms of that agreement quoted above.Relevancy is dependant, in the first place, upon the plaintiffs’ claim as disclosed in the statement of claim.

Where a statement of claim isframed in a way which makes the documents relevant, that relevance prevails unless and until it is displaced by a judge’s order declaringthat the documents are not relevant. … … [14] The complete answer to the defendants’ submissions in this respect may be found in a recent decision of this Court in PotashCorporation of Saskatchewan v. Allendale Mutual Insurance [(1989), (SK CA), 80 Sask. R. 184].

It is clear from thedecision that the defendants do not have an inherent right to a divided discovery and production of documents, divided examination-for-discovery and a severance for the purposes of trial in relation to the separate issues of entitlement to an accounting and to recovery of theamount owing pursuant to the accounting. The defendants were, of course, entitled to make an application for a division and severance ofthese issues. The presiding judge, applying the principles in Potash Corporation, would then have had to decide whether the

circumstances here call for such a division and severance. The defendants have not made such an application and no such order has beenmade. It follows that as the matter now stands, this case, in that respect, is no different from any other. [28] As in Don Funk Holding Ltd. v. Bouvier, the appellants here have not availed themselves of the opportunity to apply for a divisionand severance of the issues of liability and damages. As such, the chambers judge who heard the respondent’s second application wasnot called upon to decide whether the circumstances here call for such a division and severance.

It follows, then, that the discoveryprocess in this case is no different than that of any other civil case.

And, since the documents are “broadly relevant” to the claims madeby the respondent (see below), the appellants are required to disclose them under the rules of discovery. [29] Moreover, in as much as the production order exposes the appellants to the risk of misuse of the information disclosed, it wouldseem the chambers judge was alive to this and addressed any concerns he had about the potential for improper use of the financialstatements by restricting the respondent’s entitlement to use them and the information they contained.

It is not sufficient to say, as theappellants have here, that the respondent cannot be trusted to comply with the terms of the production order in this respect. There areremedies available to them if that should occur. [30] At the end of the day, I am not persuaded that the chambers judge erred in making the production order on any basis raised underthis ground of appeal. Broad Relevance Test [31] It is well known that the test for the disclosure and production of documents at the discovery stage is one of “broad relevance”(see: Cominco Ltd. v. Phillips Cables Ltd., (SK CA), [1987] 3 W.W.R. 562 (Sask.

C.A.), and Steier v. UniversityHospital Board, (SK CA), [1988] 4 W.W.R. 303 (Sask. C.A.)). In general terms a document will be broadly relevant ifthe information it contains touches upon the matters in question in the claim. In Cominco Ltd. v. Phillips Cables Ltd., this Court noted atpp. 566-67: As has been said time and again, the purpose of the Rule [Queens Bench Rule 222] is twofold: (

i) to allow the parties to ascertain if theplaintiff has a good cause of action, or the defendant such a defence as would render further litigation useless: Carney v. Carney (1913), (SK CA), 5 W.W.R. 849 (Sask. S. Ct.); and (ii) to enable the parties to secure from one another such admissions as willadvance one’s own cause or weaken that of one’s opponent: Collins v. Belgian Dry Cleaners, Dryers and Furriers Ltd. (1951-52), 4W.W.R. 341 (Sask. C.A.).

In that way, neither will be taken by surprise at trial, or be required, beyond adducing the admissions, to proveundisputed facts. … As for the scope, generally, of discovery, reference may usefully be had to Czuy v. Mitchell, 1976 ALTASCAD 161 ,[1976] 6 W.W.R. 676 (Alta. C.A.). Haddad J.A., after extensive review of the authorities, including Mount Hope v. Findlay [ (SK KB), [1919] 1 W.W.R. 397 (Sask. K.B.)] and Harvie v C.P.R., (SK CA), [1928] 1 W.W.R. 187 (Sask.C.A.), said at 683: In my view then, it is the scope of the examination for discovery with which we are concerned in this appeal.

Wide latitude is permitted.The examination may be searching and exploratory. Questions on discovery are relevant so long as they touch “the matters in question”and fall within bounds that are reasonable.

If the questions asked are relevant to the matters in issue or can possibly affect the issuesbetween the parties – if they are questions which may be permitted on cross-examination – then they must be answered. [32] From the brief outline of the allegations in this matter and the nature of the relief sought, it is clear the financial statements inquestion are “broadly relevant” to the matters in question in the claim. The respondent claims breach of contract and damages. Heparticularly claims he is an oppressed shareholder who is entitled to an accounting.

The statements are broadly relevant to those claims inthat they may assist in ascertaining, among other things, past revenue, expenses and retained earnings of the Dawgs Clogs business aswell as the number and book value of issued shares in the corporation which carries on that business. On the other hand, they may alsolend evidentiary support for a defence to the respondent’s claims.

In either case, I have no doubt they touch upon matters in question inthe respondent’s claims against the appellants. [33] Nevertheless, the appellants submit that it would be extremely difficult or impossible to lead useful evidence at trial as to the valueof shares at any particular point in time before a court has had the opportunity to determine such issues as the number of shares to whichthe respondent may be entitled, the class of those shares, and the date on which he became entitled to them.

The appellants also say itwould be extremely difficult or impossible to lead useful evidence at trial regarding any other damages until the court has made adetermination as to the nature and scope of the damages to which the respondent is entitled. This is a non-starter. A difficulty in adducingrelevant evidence at trial, no matter how insurmountable, does not render the evidence irrelevant. [34] Accordingly, I am compelled to conclude that the financial statements in question are broadly relevant for the purposes ofdiscovery in the context of this litigation.

Non-Existent Financial Statements [35] Under this heading, the appellants contend that the “uncontroverted evidence” before the chambers judge in the second applicationwas that Dawgs Canada Distributions Ltd. has no financial statements. Therefore, in as much as the chambers judge made an order withwhich the appellant Dawgs Canada Distributions Ltd. cannot comply, the appellants submit the order ought to be set aside. [36] The respondent directly and laconically counters this submission by reference to the following testimony of the corporate

appellants’ proper officer in examination for discovery: 378 Q Okay. And when did you – could you provide me with any documents you have in your possession that treat a $35,000 or any amount from Lee Smith as a loan? A It’s on financial statements, which I’m not providing. 379 Q You haven’t produce [ sic ] any financial statements. A And I’m not going to. [ 37 ] It would seem, then, it was open to the chambers judge to conclude that the financial statements existed and also that they were relevant to the respondent’s claim. [ 38 ] In the result, I would dismiss the appellants’ appeal in its entirety.

The respondent shall have his costs in this appeal to be taxed. DATED at the City of Regina, in the Province of Saskatchewan, this 26 th day of June, A.D. 2013. “Caldwell J.A.” Caldwell J.A. I concur. “Jackson J.A.” Jackson J.A. I concur. “Caldwell J.A. for” Herauf J.A.