This morning, at our weekly firm meeting, Ankita Abraham discussed the case of Falcon Lumber Limited v. 2480375 Ontario Inc. (GN Mouldings and Doors), 2020 ONCA 310, a decision addressing the fundamental obligation to disclose and produce relevant documents and the principles guiding the exercise of a court’s discretion to strike out a party’s claim or defence for breach of production obligations.
The claim arose out of a relatively straightforward and modest debt claim for the payment of $131,748.17 for goods sold and delivered. The Court of Appeal identified this case as a type of claim that “would expect a reasonably prompt disposition of the dispute on its merits.”
However, the case was complicated and delayed by the defendants for almost three years due to their failure to provide proper documentary disclosure and comply with production orders. Specifically, the motion judge found:
- there had been 30 dates for motions, cross-motions, and case conferences;
- on most court attendances the primary issue had been the defendants’ failure to provide complete productions;
- 22 orders or judicial endorsements had been made;
- 6 court production orders had been made against the defendants; and
- the defendants still had not made full and complete production of all relevant documents as of the date of the motion.
The motion judge found that the defendants had willfully disregarded court procedure and orders for three years, in the hope of avoiding an adjudication on the merits and prejudicing the plaintiff’s claim by failing to provide full disclosure of all the relevant information.
On the finding that the defendants’ actions were clearly contumelious, the motion judge struck the defendants’ statement of defence. The defendants appealed.
The Court of Appeal upheld the motion judge’s decision.
In doing so, the Court of Appeal emphasized that a party’s fundamental duty to disclose all relevant documents and produce those that are not privileged, as automatic, immediate, and ongoing, and should not require the need for court intervention.
Additionally, the Court highlighted the three requirements imposed by the Rules of Civil Procedure and the importance of the obligation to disclose:
- a party must disclose all relevant documents that are relevant to any matter in issue, whether or not the document helps or hurts the party’s case;
- the party’s lawyer must certify in the party’s affidavit of documents that the lawyer has indeed explained this obligation to disclose and produce all the relevant documents; and
- the obligation to disclose is an ongoing and continuing responsibility.
With respect to the principles guiding the striking out of pleadings for breach of production obligations, the Court of Appeal at paragraph 57, outlines the following to guide the exercise of a court’s discretion to strike out a party’s claim or defence pursuant to rule 30.08 of the Rules of Civil Procedure:
- The remedy to strike out a pleading is not restricted to “last resort” situations in the sense that it must be preceded by a party breaching a series of earlier orders that compelled better disclosure or production. However, courts usually want to ensure that a party has a rea;sonable opportunity to cure its non-compliance before striking out its pleading;
- The Court should consider a number of “common sense factors” including:
(a) whether the party’s failure is deliberate or inadvertent;
(b) whether the failure is clear and unequivocal;
(c) whether the defaulting party can provide a reasonable explanation for its default, coupled with a credible committed to cure the default quickly;
(d) whether the substance of the default is material or minimal;
(e) the extent to which the party remains in default at the time of the request to strike out its pleading; and
(f) the impact of the default on the ability of the court to do justice in the particular case.
- Although it may only play a limited rule, the Court may also look at the merits of a party’s claim or defence, as one would reasonably expect a party with a strong claim or defence to comply promptly with its disclosure and production obligations;
- In determining whether an order to strike out a pleading would constitute a proportional remedy in the circumstances, the Court should consider:
(a) the increased costs of litigating the action caused by the defaulting party, including the proportionality of those increased costs to the amount actually in dispute in the proceeding; and
(b) the increased delay in a final adjudication of the case on its merits, taking into account the simplicity (or complexity) of the claim and the amount of money in dispute.
The Court of Appeal additionally denied leave to appeal the motion judge’s costs order requiring the defendant’s lawyer to pay the plaintiff’s costs of the motion.