Yue v. Vong
[2012] O.J. No. 4094
2012 ONSC 1033
Court File No. CV-10-410198
Ontario Superior Court of Justice
Master D.E. Short
Heard: February 10, 2012.
Judgment: August 31, 2012.
Case Summary:
Civil litigation — Civil evidence — Documentary evidence — Admissibility — Documentary evidence — Motion by the plaintiffs for leave to rely on the transcripts and documentation obtained on the cross-examinations of the defendants in the plaintiff's pending motion for leave to file a certificate of pending litigation allowed — Plaintiffs sued defendants for fraudulent conveyance in action commenced under simplified rules — Given the nature of the relief sought, the use of the subject transcripts on the main motion should be allowed to achieve the most expeditious and least expensive determination of this matter.
Motion by the plaintiffs for leave to rely on the transcripts and documentation obtained on the cross-examinations of the defendants in the plaintiff's pending motion for leave to file a certificate of pending litigation. The plaintiffs commenced the present action for fraudulent conveyance in 2010 under the simplified rules. The defendant Vong was the current and sole director and officer of the defendant Henderson Group. The plaintiffs alleged that they provided $87,700 to the defendants by depositing this amount in a Henderson Group bank account. These funds were not returned. Henderson Group then purchased a property but transferred its interest in the property to Realty Inc. The plaintiffs alleged that the transfer to Realty Inc. constituted a fraudulent conveyance and sought to register a lis pendens against the property. The defendants were cross-examined on their affidavits filed in opposition to the lis pendens motion, despite the fact that cross-examination was prohibited in proceedings under the simplified rules. The plaintiffs now wanted to rely on the transcripts from the cross-examinations in their motion for a lis pendens.
HELD: Motion allowed.
A lis pendens was a statutory right, where the nature of the subject-matter established an importance beyond that of a normal simplified procedure matter. Given the nature of the relief sought, the use of the subject transcripts on the main motion should be allowed to permit the use of the transcripts assisted in achieving the most expeditious and least expensive determination of this civil proceeding on its merits.
Statutes, Regulations and Rules Cited:
Courts of Justice Act, R.S.O. 1990, c. C.43, s. 103(1), s. 103(4), s. 103(5), s. 103(6)
Rules of Civil Procedure, Rule 1.04, Rule 2.01, Rule 2.02, Rule 2.03, Rule 42, Rule 76.01, Rule 76.04, Rule 76.04(2)
Counsel:
Conor Wyche, for the plaintiffs (moving parties).
Paul Dollak, for Jardine Henderson Realty Inc.
Michael Vong, in person.
Reasons for Decision:
Fresh Steps
"The "fresh step" rule is one that has been part of the rules of practice and procedure in Canada and the United Kingdom for many years. There is a great deal of jurisprudence on what constitutes a fresh step but the rule is based on the view that if a party pleads over to a pleading this implies a waiver of an irregularity that might otherwise have been attacked."
Bowman, A.C.J.T.C.
I. Overview
This action was commenced in September of 2010 as a simplified rules matter. Over the next year a number of procedural motions were scheduled before, and on some occasions heard by, at least nine different Masters of this court.
2 One of those proceedings was a Rule 42 motion seeking a Certificate of Pending Litigation which was brought before Master Sproat in March of 2011. That motion was adjourned on terms which included a direction that "further affidavit material from the plaintiff shall be delivered by April 15, 2011." The order also provided for any further responding materials for the proposed defendant to be filed a timely basis.
3 Following delivery of those materials cross examinations were held. A motion dealing with refusals undertakings supported by a lengthy form 37 CD charts was scheduled and adjourned to permit a long motion date to be assigned. Ultimately that motion came on before me in December of 2011.
4 At the outset of the hearing of that motion I raised an issue which had not previously been considered by either counsel. My question was whether, since the simplified rule provisions clearly do not permit any cross examinations, can refusals on such cross examinations properly be the subject matter of a motion at all?
5 In order to permit the parties to consider their positions , I adjourned the matter to my list early in the new year so that the following preliminary issues could be addressed:
6 Prior to these issues being argued the Plaintiffs withdrew their undertakings motion. Their factum indicated that this was done, "as the court likely lacks jurisdiction to make an order for productions on a cross-examination under simplified rules."
7 That issue now being moot, the Motion then proceeded on the narrow issue of whether the transcripts and documentation obtained on to the cross-examinations are admissible for any purpose on the main motion, and if so, to what extent.
II. Nature of Action
8 This is in essence a fraudulent conveyance action. Judgment for $92,000.00 was previously obtained against the defendants Michael Vong and Jardine Henderson Group Inc. by the plaintiffs
9 They now are seeking to set aside the conveyance of a property from Jardine Henderson Group Inc. ("Group Inc.") to Jardine Henderson Realty Inc. ("Realty Inc."); made on April 8, 2008 (a point in time after the Plaintiffs provided funds to Group Inc.).
10 The Plaintiffs have brought a motion for leave to obtain a Certificate of Pending Litigation (the "CPL motion").
11 The Plaintiffs brought a motion for undertakings and refusals made at cross-examinations of Susan Chiu and Michael Vong (who swore affidavits relied upon by Realty Inc. in the CPL Motion). While they no longer seek further answers, in the somewhat unique circumstances of this case, they do seek to utilize the existing transcript evidence on the argument of the CPL motion.
III. Rule 76 and applicable Time Limit on Argument
12 The relevant opening portions of Rule 76 read:
76.01 (2) The rules that apply to an action apply to an action that is proceeding under this Rule, unless this Rule provides otherwise.
13 In particular for some time, the rule had specifically provided that there is to be no discovery, cross-examination on an affidavit or examination of a witness. The present rule reads:
76.04 (1) The following are not permitted in an action under this Rule:
14 However as of January of 2010 the rule was amended to permit a degree of Oral Discovery:
76.04(2) Despite rule 31.05.1 (time limit on discovery), no party shall, in conducting oral examinations for discovery in relation to an action proceeding under this Rule, exceed a total of two hours of examination, regardless of the number of parties or other persons to be examined.
15 A practice direction for civil applications, motions and other matters in the Toronto region was issued on January 1, 2010 and amended as of January 30, 2012. That Practice Direction dealt specifically with simplified procedure discovery motions. In particular, the applicable section of the Practice Direction reads in part:
[21] Motions concerning issues arising from examinations in Simplified Procedure actions will be scheduled for a maximum of 30 minutes in total. All parties are expected to complete oral argument of the motion within the time scheduled, subject to leave from the presiding master in exceptional cases.
16 As this was a novel issue and the Practice Direction allowed for granting of leave by me, I determined that there would be no 30 minute limitation on this motion. However, I make no determination as to whether the time for the main CPL motion ought to be extended, leaving that determination to the discretion of the Master hearing the CPL motion.
17 Thus only the question of the ability to make use of the transcripts remains to be resolved.
IV. First Principles
18 Before turning to the cases I have considered I look to the guidance set out in the early items in the Rules (my emphasis throughout).
19 The "General Principle" is found in Rule 1.04:
1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
Proportionality
20 Guidance as to the appropriate response to non-compliance with the Rules is found in Rule 2:
Effect of Non-compliance
2.01 (1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court,
21 Rule 2.03 gives the broadest power to dispense with compliance:
2.03 The court may, only where and as necessary in the interest of justice, dispense with compliance with any rule at any time.
22 Is this such a time?
V. Attacking Irregularity
23 Rule 2.02 addresses this matter:
A motion to attack a proceeding or a step, document or order in a proceeding for irregularity shall not be made, except with leave of the court,
24 Here the rule is clear and both counsel might well be held in a normal case to reasonably ought to have known of the prohibition on cross examinations.
25 Practically however the case does not have all the hallmarks of a typical simplified rules case. The relief sought in my mind skews the approach and requires a further analysis of the facts in this case.
VI. Factual background
26 The defendant Michael Vong is the current and sole director and officer of the defendant Jardine Henderson Group Inc. On February 5, 2007, Jardine Henderson Group Inc. ("Group Inc.) entered into an agreement of purchase and sale for the properties listed in the Amended Statement of Claim and municipally known as suites 703 and 704 Duncan Mill Road, Toronto, Ontario (the "properties"). The buyer was listed as Jardine Henderson Realty Inc. in trust for a company to be incorporated.
27 The plaintiffs allege that On April 26, 2007, The Plaintiffs provided $87,700.00 to Group Inc. and Vong by depositing this amount in a Group Inc. bank account. These funds were not returned.
28 On May 22, 2007, the purchase of the properties by Group Inc. closed. However it appears that on April 8, 2008, Group Inc. transferred its interests in the properties to Jardine Henderson Realty Inc. ("Realty Inc.")
29 On January 8, 2009, Default judgment was obtained against Group Inc. and Vong, in the amount of $92,794.16.
VII. Rule 2.02 This CPL Motion and the undertakings Motion
30 On September 9, 2010, the Plaintiffs brought the within action seeking to set aside the April 8, 2008 transfer as a fraudulent conveyance Vong and Group Inc. have not defended this action, and have been noted in default. However, apparently Due to inadvertence, Realty Inc. was not named at the outset as a defendant in this Action.
31 The plaintiffs are bringing a motion to amend their Claim to add Realty Inc. as a named defendant.
32 Realty Inc. takes the position that there was no fraudulent conveyance, as the properties were purchased by Group Inc. in trust for Realty Inc.
33 The Plaintiffs have brought a motion for leave to register a Certificate of Pending Litigation against title to the properties (the "CPL Motion")
34 Realty Inc. resists this motion, and relies on statutory declarations of Vong and Chiu ostensibly sworn May 22, 2008, which are included in its motion materials responding to the CPL Motion.
35 Ultimately, on May 24, 2011, Vong and Chiu were cross-examined on their statutory declarations. Chiu was cross examined on an affidavit sworn November 4, 2010, in response to the CPL motion. Undertakings and refusals were given by both affiants.
36 No objection was taken when cross-examinations of the affiants were requested. The affiants Susan Chiu and Michael Vong, (who swore affidavits/statutory declarations being relied upon by Realty Inc.), and Stephen Doe (a Plaintiff), were cross-examined, and transcripts of their cross-examinations prepared and served. Undertakings were given and documents were produced by them further to those undertakings.
37 The resulting transcripts are the subject matter of the present motion.
VIII. Respondent's position
38 Watson and McGowan, Ontario Civil Practice 2012 correctly notes that the policy and purpose of this rule is to reduce the cost of litigation. By reducing the number of pre-trial procedures available in cases that claim modest amounts of money, the litigants are able to save legal costs, thereby making litigation more economical for the public.
39 The Respondent asserts that the transcripts ought not to be referred to on the main CPL motion. Relying upon my decision in Homebrook v. Seprotech Systems Inc., [2011] O.J. No. 2404 (infra) it is submitted that this court has been strict about enforcing this ban. Counsel asserts, "If cross-examinations are not permitted, they are not permitted."
40 Prior to 2010 the Rules did not permit conducting of any examinations for discovery in such matters. The Court was been strict in enforcing that portion of the rule even where both sides have agreed to conduct examinations for discovery in spite of the rule. [See Alcox v. Woolley, [1997] O.J. No. 2821; Mills v. MacFarlane, [2000] O.J. No. 2874; Leo v. Hamilton-Wentworth Roman Catholic Separate School Board, [2000] O.J. No. 1803; Transit Trailer Leasing Ltd. v. Robinson [2004] O.J. No. 1821.]
41 In Alcox and in Transit Trailer the court held that if, despite the rule, examinations are conducted, evidence from those examinations was not admissible. However in both those cases the matters were being "downsized".
42 In Alcox Quinn J. on a motion to transfer an action into a Rule 76 proceeding, addressed a situation where an unrepresented litigant had been examined for discovery but the other side had not:
"11 Unfortunately, the matter does not end there. A wrinkle remains. ... I am of the view that an examination for discovery is, potentially, an immensely valuable tool in a piece of litigation (and that value, although perhaps discounted, may exist even where the examination is conducted by a lay person). To now move this action under the umbrella of rule 76 would create the risk of prejudice to the defendant. ... [counsel] proposed, quite fairly, that perhaps the discoveries might be completed and then rule 76 invoked. The problem with such an approach is that one of the consequences of the simplified procedure is that examinations for discovery are prohibited.9 As I see it, they may not be held even on consent. To knowingly hold them as a precursor to the use of rule 76 is an abuse of that rule. Fairness to the defendant, and, of equal importance, the appearance of fairness, require that something be done to offset the potential for prejudice associated with the half-completed discoveries. Rule 76 is unhelpful in this regard. It appears not to fully recognize that prejudice might be occasioned by opting into its provisions. It does provide for remedying prejudice as to costs, but that is all. In the circumstances of this case, where the defendant is unrepresented by counsel, something more is required. To accomplish the "something more" I am obliged to resort to the inherent jurisdiction of the court to control its own process. I must turn back the clock, to the extent that is possible. Therefore, as remedially clumsy as it might appear, the examination for discovery of the defendant is rescinded for the purposes of this proceeding and any civil proceeding between the parties which involves the subject matter now being litigated. The transcript of the discovery which was filed with the court shall be sealed. The parties shall file any additional copies of the transcript in their possession and they similarly shall be sealed.
12 In making this order I am attempting (in addition to offsetting potential prejudice to the defendant) to discourage the abuse of rule 76. The simplified procedure will not achieve its purpose (of reducing the crippling costs of civil litigation) unless plaintiffs' lawyers meticulously analyze their case before issuance of the statement of claim and do so again immediately upon receipt of the statement of defence. To avoid this task until after examinations for discovery have been held largely defeats the purpose of the rule since such examinations comprise a substantial portion of the costs associated with getting a case to trial under the ordinary procedure. Unless the examination for discovery reveals to plaintiffs' counsel something which he or she could not reasonably have been expected to know or learn at the pleadings stage, then a price must be paid for amending down. ..."
43 Justice Cusinato in Transit Trailer addressed a similar transfer to Rule 76 and made these observations:
51 Such return to the simplified procedure or election at the pre-trial conference does not however of itself exempt the parties concerning compliance with the provisions of Rule 76 for an action, which falls within the simplified procedure. In fact it was recently appointed defence counsel at the opening of trial who objected to plaintiff counsel's request for leave to read into testimony the examination of the representative defendant, because this action fell within Rule 76.04. The court ruled on this objection in defence counsel's favour. As the court confirmed any examination conducted whether on consent while the defendants were un-represented or with counsel of record are excluded by this Rule.
44 In Homebrook v. Seprotech Systems Inc. [2011] O.J. No. 2404, I was required to address the interaction of Rule 20 and Rule 76 in the new situation where a two hour discovery was available to each party. The plaintiff moved for summary judgment in a wrongful dismissal action. The defendant wished to examine the plaintiff prior to the summary judgment motion being heard. The pertinent portion of my reasons reads:
[5] On a motion under Rule 20.04 the court must "weigh the evidence" and in the normal case parties can cross examine on materials filed which undoubtedly could assist in "evaluating the credibility of the deponent". Here Rule 76.04(1)2 prevents any cross examinations.
[6] In Trans-Canada Medical Management v. Varenbut, (5 C.P.C. (6th) 344) Rouleau, J, as he then was, held that in a non-simplified rules situation a discovery could still proceed in the face of a motion for Summary Judgment.
[7] Here, in my view, the "equality of arms" consideration of the concept of proportionality directs me to apply Rule 1.04(2) to establish, by analogy in this particular situation, a procedure whereby both parties are entitled to conduct an examination in the form of a discovery of up to two hours each, pursuant to Rule 76.04(2). Such examinations shall be held in accord with the Rules applicable to discoveries rather than cross-examinations (should they conflict) with the transcripts being available on the return of the judgment motion.
45 In Homebrook, I felt the summary judgment "trumped" the cross examination ban. In the matter before me now I turned to an examination of the ultimate interim remedy sought, the Certificate of Pending Litigation.
IX. Certificate of Pending Litigation
46 The Courts of Justice Act legislates the formalities required for the issuance and maintenance of a Certificate of Pending Litigation
103. (1) The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).
Liability where no reasonable claim
Recovery of damages
Order discharging certificate
47 In furtherance of those requirements Rule 42 provides in part as follows:
Claim for Certificate to be in Originating Process
Motion Without Notice
Order to be Served Forthwith
42.02 (1) An order discharging a certificate of pending litigation under subsection 103 (6) of the Courts of Justice Act may be obtained on motion to the court.
Factum
48 In 1984, in Toronto Board of Education Staff Credit Union Ltd. v. Skinner, 47 O.R. (2d) 70, 1984 CarswellOnt 419, 45 C.P.C. 55; Justice Potts dealt with an appeal in a situation where the plaintiff obtained a lis pendens by an ex parte motion supported by an affidavit. Certain of the defendants moved before a Judge of the High Court to vacate the lis pendens pursuant to s. 39 of the Judicature Act and also brought a motion before the Master for leave to cross-examine on the affidavit filed in support of the motion for a lis pendens. The Master granted leave to cross-examine and the plaintiff appealed.
49 Justice Potts carried out a detailed analysis of then current rules and the previous jurisprudence and concluded his reasons upholding the Master's decision in these terms:
... the proceeding under section 39 of the Judicature Act is analogous to the procedure under Rule 219 but with wider grounds for relief. I have no doubt that the court in hearing a motion under Section 39, will apply the same principles as in hearing a motion under Rule 219 and may set aside an order and vacate a certificate of lis pendens if it finds that there has not been proper disclosure upon the ex parte application. The distinction is that it may also proceed upon other grounds which would not be available under Rule 219. It is therefore necessary in the interests of justice that an applicant be permitted to attempt to show that there has been no disclosure and cross-examination upon the affidavit is a most useful tool in this respect.
50 I agree that a lis pendens, or now a Certificate of Pending Litigation is a statutory right, where the nature of the subject-matter establishes an importance beyond that of a normal simplified procedure matter.
X. Fresh Steps
51 Associate Chief Justice Bowman in Imperial Oil Ltd. v. Canada, 2003 TCC 46 addressed a provision of the Tax Court of Canada Rules which parallels the current Ontario Rule 2.02. There replies to notices of appeal were filed The replies also raised objections to the right of the appellants to object and to appeal in the manner in which they did. It was argued that those objections had been waived by virtue of taking a "fresh step". The learned Justice commented as follows:
19 Before I deal with the other matters raised in the motions, this is a convenient time to mention the matter of section 8 of the Tax Court of Canada Rules (General Procedure) which reads:
A motion to attack a proceeding or a step, document or direction in a proceeding for irregularity shall not be made,
20 The "fresh step" rule is one that has been part of the rules of practice and procedure in Canada and the United Kingdom for many years. There is a great deal of jurisprudence on what constitutes a fresh step but the rule is based on the view that if a party pleads over to a pleading this implies a waiver of an irregularity that might otherwise have been attacked. For two reasons I do not think that the fresh step rule precludes the respondent from bringing the motions. First, it is clear that by filing the replies to the notices of appeal the respondent is not waiving her objections to the filing of the notices of objection and appeal. The replies clearly state the Crown's objection. Second, a rather wide ranging attack on the appellants' right to appeal, including allegations that that this court has no jurisdiction, that the appeals are frivolous, vexatious and an abuse of process is hardly an attack on an irregularity.
XI. Disposition
52 Given the nature of the relief sought, in and of itself, I would be inclined to allow the use of the subject transcripts on the main CPL motion.
53 I am further encouraged of the correctness of this position based on my understanding of the rules and statutory provisions discussed above. Lastly the fact that both parties proceeded as if the right existed in any event, these fresh steps are such as to make it contrary to the goals of a resolution proportionate to the importance and complexity of the issues, and to the amount involved. I believe to permit the use of the transcripts assists in achieving the most expeditious and least expensive determination of this civil proceeding on its merits.
54 Upon reflection and given that both sides contributed to the tying of this Gordian knot, I think the best disposition is for the costs of both the now withdrawn refusals motion and this subsidiary motion, to be reserved to the judicial officer ultimately determining whether or not a Certificate of Pending Litigation ought to be issued in this case.
MASTER D.E. SHORT