2004 CarswellOnt 3423

Society of Lloyd's v. Smith

Society of Lloyd's and Nicholas Smith Attorney in Fact in Canada for Lloyd'sUnderwriters, Plaintiffs and Ian Stuart Smith, also known as Ian Stuart, alsoknown as Ian Stewart, also known as Ian Smith, also known as John Harris, alsoknown as John Harrington, Surplus Lines Inc., Heritage International Inc., KRLEnterprises Inc. and KRL Enterprises Ltd., Defendants

Ontario Master

Master Dash

August 5, 2004

Judgment: August 5, 2004

Docket: 04-CV-2674736CM1

Counsel: Eric Golden, for Plaintiffs

David Rose, for Defendants, Ian Stuart and Heritage International Inc.

Subject: Civil Practice and Procedure

Civil practice and procedure.

Master Dash:

1     The remaining issue in the interim injunction is to produce details of risks allegedly bound by the Defendant Stuart and to deliver up policies and the documentation in connection therewith. The Plaintiff has filed evidence on that motion that the Defendant has done such acts and that such policies were placed. Stuart has not filed his own affidavit. His criminal Solicitor's affidavit outlines other criminal and regulatory proceedings against Stuart but does not deny that Stuart wrote such policies nor does he deny (or admit) the existence of such policies. In fact, Stuart's lawyer in this proceeding Mr. Rose wrote to Mr. Wilson and confirmed that these Defendants do not "oppose the factual part of the injunction". Undoubtedly Stuart would have relevant evidence to give on the subject matter of the injunction ie, what he did and what documents exist, such as to satisfy the prima facie test in Transamerica Life v. Canada Life, (1995), 46 C.P.C. (3d) 110. In my view, however, the motion must fail as an abuse of process as set out in Canada Metal Co. v. Heap, (1975), 7 O.R. (2d) 185 (C.A.). The plaintiffs evidence as to the existence of the policies and the acts done by Stuart is not contradicted and as such Stuart's testimony on a Rule 39.03 examination is unnecessary for purposes of the injunction motion as the factual allegations are not contested. The documents in the possession of Stuart must be identified in a sworn affidavit of documents and copies produced subject to valid claims for privilege. If the Plaintiff believes documents are missing, or improper privilege is claimed, its solution may cross-examine Stuart on his affidavit of documents either as of right as part of an examination for discovery under rule 31.06(1(c), or by leave under rule 30.06(a). The plaintiff can examine Stuart as to acts done by him as alleged in the Statement of Claim at an examination for discovery. Of even greater concern is the fact that testimony elicited or documents produced at a rule 39.03 examination are not protected by the deemed undertaking rule, and could conceivably be shared with the US Department of Justice Department and various regulatory agencies investigating Stuart and in fact Mr. Wertzer, a Lloyds employee states in his affidavit sworn April 16, 2004 that he has been communicating with such agencies. On the other hand if the evidence elicited in an examination for discovery or documents produced in an affidavit of documents they would be protected from unauthorized disclosure or use under the deemed undertaking rule as they constitute protected evidence under rule 30.1.01(1)(a)(i) and (ii).

2     I am satisfied, on balance, that the rule 39.03 examination is being used as stated at p. 192 of Canada Metal (supra) for an ulterior motive under the guise of ostensibly eliciting relevant evidence, or at a minimum, Rule 39.03 is being used in such a way as to be in itself an abuse. Even in the absence of an ulterior purpose, the Rule 39.03 Examination should not be used "to conduct a general discovery" (Payne v. Ontario Human Rights Commission, [2000] OJ. No. 2987 (C.A.)] or to "authorize what amounts to a fishing expedition" [Elfe Juvenile Products v. Bern, [1994] O.J. No. 2840 (Div. Ct.)]. In my view the R. 39.03 examination, while ostensibly to elicit evidence for the injunction motion, is in reality, a premature discovery, and conceivably, an attempt to circumvent Rule 30.1. The affidavit of documents is not yet due since for reasons not explained by Mr. Golden, certain defendants have yet to be noted in default, and further Defendant has today been added See rules 30.03(1) and 25.05(b). Nonetheless the primary parties have pleaded and it would be within my case management powers under Rule 77.11(e), 77.13(3)(d), and 5(a) to order Affidavits of Documents at this stage. Mr. Rose agrees that the defendants would be prepared to comply with an order for delivery of affidavits of documents prior to the injunction Motion, (which would then be adjourned if necessary if the affidavit is alleged to be incomplete). In my view however the obligation must be mutual, and Mr. Golden is unsure whether given the volume of documents the Plaintiffs affidavit could be ready in time. If the Plaintiff makes such determination I would be prepared to set a deadline for delivery of affidavits of documents of all parties on record by August 27, 2004 by way of in writing motion or in writing case conference request.

Appendix

(1) John Harris is aded as a party defendant to this action.

(2) Plaintiff has leave to amend the statement of claim in the form of the attached draft Amended Statement of Claim.

(3) This action is exempted from mandatory mediation pursuant to rule 24.1.05.

(4) The motion to counsel the defendant Ian Stuart to a rule 39.03 examination is dismissed for reasons set out herein.

(5) The plaintiff shall pay to the defendants Ian Stuart and Heritage International Inc. their costs of this motion within 30 days and in any event of the cause of the injunction of the action fixed in the sum of $1000,00.