Gomommy Software.com Inc. v. Blackmont Capital Inc. et al., 2014 ONSC 2478

• Judge: Perell, J.
• Court: Superior Court of Justice of Ontario (Canada)
• Case Date: April 15, 2014
• Jurisdiction: Ontario
• Citations: 2014 ONSC 2478;(2014), 319 O.A.C. 204 (DC)

Gomommy v. Blackmont Capital (2014), 319 O.A.C. 204 (DC)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. MY.019

Gomommy Software.com Inc. (plaintiff) v. Blackmont Capital Inc., Paul Litman and David Foster (defendants)

(298/13; 2014 ONSC 2478)

Indexed As: Gomommy Software.com Inc. v. Blackmont Capital Inc. et al.

Court of Ontario

Superior Court of Justice

Divisional Court

Perell, J.

April 22, 2014.

Summary:

Gomommy Software.com Inc. commenced an action against Blackmont Capital Inc. (an investment broker and securities dealer) and two of Blackmont's employees, alleging negligence, breach of fiduciary duty, and breach of the rules governing registered investment dealers. The defendants asserted that all transactions undertaken in Gomommy's trading account were made upon instructions by Alan Benlolo, who was Gomommy's authorized representative and an experienced investor. A central issue in the litigation was Benlolo's role and relationship with Gomommy and the defendants. Benlolo refused to answer questions during his examination for discovery. The defendants therefore moved to dismiss Gomommy's claim pursuant to rule 34.15. A Master granted the motion. Gomommy appealed.

The Ontario Divisional Court, per Perell, J., allowed the appeal.

Practice - Topic 4182

Discovery - Examination - General - Objections to questions - Remedies for refusal to answer (incl. dismissal of action) - Gomommy Software.com Inc. commenced an action against Blackmont Capital Inc. (an investment broker and securities dealer) and two of Blackmont's employees, alleging negligence, breach of fiduciary duty, and breach of the rules governing registered investment dealers - Sharon Benlolo was the president and owner of Gomommy - The defendants asserted that all transactions undertaken in Gomommy's trading account were made upon instructions by Sharon's husband, Alan Benlolo, who was Gomommy's authorized representative and an experienced investor - A central issue in the litigation was Alan's role and relationship with Gomommy and the defendants - Alan refused to answer questions during his examination for discovery - The defendants therefore moved to dismiss Gomommy's claim pursuant to rule 34.15 - A Master granted the motion, finding that the defendants had been prejudiced by a denial of their discovery rights - The Ontario Divisional Court, per Perell, J., allowed Gomommy's appeal - The Master's decision was based on an overriding and palpable error of fact and an incorrect application of the law about when a dismissal order could be made under rule 34.15 - It was an error of fact and law to conclude that Gomommy's breaches could not be sanctioned by a corrective order - The defendants' assertions of prejudice did not establish objective prejudice and certainly no prejudice that could not be remedied by ordering a restart of Alan's examination with the backup of an examination for discovery of Sharon - A corrective order would permit the case to be fairly tried on its merits while maintaining the integrity of the civil litigation procedure.

Practice - Topic 4182

Discovery - Examination - General - Objections to questions - Remedies for refusal to answer (incl. dismissal of action) - The Ontario Divisional Court, per Perell, J., stated that "Although rule 34.15(1) provides as a possible sanction for misconduct at an examination, the dismissal of the proceeding, this sanction is regarded as draconian, and it is reserved for the most extreme cases where the delinquent party has been contumacious or has deliberately flouted the law and the other party can demonstrate that their ability to prosecute or defend the claim would be prejudiced by the delinquent party being ordered to reattend to be examined. ... Although under Rule 34.15, the court has the power to dismiss a plaintiff's claim, before doing so the court must balance the prejudice to the plaintiff if his action were dismissed with the prejudice to the defendant if the action were to proceed. ... In general, courts are disinclined to dismiss an action or strike out a defence for failure to comply with the rules of court, and while courts are empowered to do so and do from time to time dismiss claims or strike defences, judges much prefer to decide actions on their merits." - See paragraphs 50 to 52.

Cases Noticed:

Starland Contracting Inc. v. 1581518 Ontario Ltd. et al. (2009), 252 O.A.C. 19 (Div. Ct.), refd to. [para. 2, footnote 1].

Zeitoun et al. v. Economical Insurance Group (2009), 236 O.A.C. 76; 91 O.R.(3d) 131 (Div. Ct.), affd. (2009), 257 O.A.C. 29; 96 O.R.(3d) 639; 2009 ONCA 415, refd to. [para. 43, footnote 2].

Bank of Nova Scotia v. Liberty Mutual Insurance Co. et al. (2003), 178 O.A.C. 254; 67 O.R.(3d) 699 (Div. Ct.), refd to. [para. 45, footnote 4].

Marleen Investments Ltd. v. McBride (1979), 23 O.R.(2d) 125 (H.C.), refd to. [para. 45, footnote 4].

Woodheath Developments Ltd. v. Goldman (2003), 175 O.A.C. 259; 66 O.R.(3d) 731 (Div. Ct.), refd to. [para. 45, footnote 4].

Fotwe v. Citadel General Assurance Co. (2005), 195 O.A.C. 390 (Div. Ct.), refd to. [para. 45, footnote 4].

Anlagen Und Treuhand Contor GmbH v. International Chemalloy Corp., [1982] O.J. No. 86 (C.A.), refd to. [para. 50, footnote 5].

Chatterjee v. Westinghouse Canada Inc., [1994] O.J. No. 532 (Gen. Div.), refd to. [para. 50, footnote 5].

Myotec v. Royal Bank of Canada et al., [2006] O.T.C. Uned. 190; 79 O.R.(3d) 335 (Sup. Ct. Master), refd to. [para. 50, footnote 5].

Interhaven Development Corp. v. Slovak Village Non-Profit Housing Inc. et al. (1997), 47 O.T.C. 102 (Gen. Div. Master), refd to. [para. 50, footnote 5].

Mader v. Hunter et al. (2004), 183 O.A.C. 294 (C.A.), refd to. [para. 51, footnote 6].

Gurrieri v. Perkins, [2010] O.T.C. Uned. 2174; 2010 ONSC 2174 (Master), refd to. [para. 51, footnote 6].

Broniek-Harren et al. v. Osborne, [2008] O.T.C. Uned. 862 (Sup. Ct.), refd to. [para. 52, footnote 9].

Jack v. Gowling, Strathy and Henderson et al., [2011] O.A.C. Uned. 661; 2010 ONCA 736, refd to. [para. 58, footnote 10].

Cardoso v. Cardoso et al. (1998), 57 O.T.C. 109 (Gen. Div.), refd to. [para. 62, footnote 12].

Statutes Noticed:

Rules of Civil Procedure (Ont.), rule 34.15 [para. 46].

Counsel:

Michael R. Kestenberg, for the plaintiff/appellant;

Nigel Campbell and Doug McLeod, for the defendants/respondents.

This appeal was heard on April 15, 2014, before Perell, J., of the Ontario Divisional Court, who released the following reasons for decision on April 22, 2014.