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Claim Struck Due to Breach of Deemed Undertaking Rule

By Brian Sunohara

The court’s decision in Sciucca v. Yoon, 2020 ONSC 6539, cautions against using information obtained from discoveries to commence a new action, even if the new action is related to an existing action.

The matter involves a failed real estate transaction. Through documentary discovery and oral discovery, the plaintiffs learned of the potential involvement of four additional individuals. The plaintiffs then commenced a new claim that named these four individuals, along with the defendants in the existing action.

Justice Davies held that the plaintiffs breached the deemed undertaking rule in rule 30.1.01 of the Rules of Civil Procedure. Justice Davies noted that the deemed undertaking rule protects the privacy of parties who are compelled by law to produce documents and disclose private information. It also promotes the integrity of the discovery process by ensuring parties will provide full and frank disclosure.

Justice Davies said that it would frustrate the purpose of rule 30.1.01 to permit parties or their counsel to use evidence obtained during discovery to launch new proceedings, regardless of whether the subject matter of the new claim is related to the earlier claim. 

Even if it is more efficient to file a new claim than seek to amend the old claim, Justice Davies stated that this does not provide a legitimate reason for breaching the deemed undertaking rule.

As a result of breaching the deemed undertaking rule, the plaintiffs’ new claim was struck. The plaintiffs were provided with an opportunity to deliver a fresh as amended statement of claim if some of the causes of action do not rely on information that is subject to the deemed undertaking rule.

The decision does not appear to consider rule 30.1.01(8), which provides that, if the court is satisfied that the interest of justice outweighs any prejudice that would result to a party who disclosed evidence, the court may order the deemed undertaking rule to not apply.

However, it is possible that the issue of prejudice was impliedly considered. The plaintiffs used the information obtained from the discoveries to advance allegations of fraud and conspiracy against all of the defendants in the new claim. Therefore, the defendants who disclosed the information may have been prejudiced.

Nevertheless, in many cases, a party will not be prejudiced if information from that party’s discovery is used for the purpose of commencing a separate action against another entity.

For example, consider a motor vehicle accident case where the plaintiff’s tire treads may be an issue but the plaintiff has not sued the garage that serviced her vehicle. If the defendant learns of the identity of the garage through documentary or oral discovery of the plaintiff and then commences a separate action against the garage for contribution and indemnity, the plaintiff would not be prejudiced.

Moreover, using the information from the discovery to commence a separate action would not be contrary to the purpose of the deemed undertaking rule.

Regardless, based on this decision, before commencing a separate action, a party who relies on information obtained through the discovery process should seek the consent of the disclosing party, even if the separate action is related to the existing action. The deemed undertaking rule does not apply when the person who disclosed the evidence consents. Absent consent, leave of the court is required.