[2000] 4 F.C. 211
T-32-99
The Royal Bank of Scotland plc. (Plaintiff)
v.
The Owners and all Others Interested in the Ship “Golden Trinity” and Golden Trinity Maritime Inc. (Defendants)
T-38-99
The Royal Bank of Scotland plc. (Plaintiff)
v.
The Owners and all Others Interested in the Ship “Kimisis III” and Madonna Navigation (Malta) Limited (Defendants)
T-119-99
The Royal Bank of Scotland plc. (Plaintiff)
v.
The Owners and all Others Interested in the Ship “Ypapadi” and Ypapadi Maritime Inc. (Defendants)
Indexed as: Royal Bank of Scotland plc. v. Golden Trinity (The) (T.D.)
Trial Division, Hargrave P.—Vancouver, May 24 and 29, 2000.
Practice — Affidavits — Scope of cross-examination on affidavits of claim in proceeding to determine priorities to ship sale proceeds — Extent of deponent’s duty to seek information in case of corporate affidavit — Extent of production of documents on which deponents of affidavits might be cross-examined.
Maritime law — Practice — Scope of cross-examination on affidavits of claim in proceeding to determine priorities to ship sale proceeds — Extent of deponent’s duty to seek information in case of corporate affidavit — Extent of production of documents on which deponents of affidavits might be cross-examined.
Tramp Oil & Marine Ltd. (Tramp Oil), a necessaries supplier claiming against ship sales proceeds, submitted that cross-examination on claim affidavits and production of documents ought to be broad; that the scope of cross-examination should go well beyond the four corners of the affidavit, in order to facilitate examination not only on the substance, propriety and priority of the claims of the Royal Bank of Scotland plc. (Bank of Scotland) under its mortgage security, but also the extent of any equities which might exist and which could cut the claims of the Bank of Scotland, making more of the proceeds available for Tramp Oil, which may have a lower priority than that of the Bank of Scotland. It also took the position that the deponents of the claim affidavits ought, when they are unable to answer a relevant question, to be required to inform themselves. The Bank of Scotland submitted that proper cross-examination on the claim affidavits ought to have not a speculative basis, but rather a factual basis founded on the affidavits and any properly available documents. As to documents, the Bank of Scotland submitted that this should be limited to documents which are exhibits to the affidavit. It also balked at having deponents inform themselves when they do not know the answer to a particular question.
It was noted that particular principles may be applicable to cross-examination upon affidavits on motions to determine priorities to ship sale proceeds, for such a summary proceeding, rather than a trial, is the dénouement of the action in which the ship has been arrested and sold. Another consideration was the summary nature of a priorities hearing and the need to keep the volume of paper and documentary production at a reasonable level.
There were two approaches to examination on an affidavit, one broad and one narrow, both supported by lines of cases. Both were considered. On examinations on claim affidavits when priorities are to be determined on a motion, the following principles apply.
First, cross-examination on affidavits must be limited to issues of fact found in the deponent’s affidavit and in other affidavits filed in the priority determination proceeding, in answers giving rise to collateral questions and in documents attached to affidavits or otherwise produced.
Second, there is, in the case of a corporate affidavit, sworn for use on a priorities determination motion, a duty on the deponent to seek information in order to deal with proper questions to which he or she does not know the answer. In a priorities hearing, the deponent of an affidavit of claim is not so much a witness as an agent for a corporate party or claimant. The necessity to seek information in order to deal with proper questions to which he or she does not know the answer should therefore be bound by the concept of legal relevance, that is relevance assisting in determining a remedy as described in Merck Frosst Canada Inc. v. Canada (Minister of Health) (1997), 80 C.P.R. (3d) 550 (F.C.T.D.) and by whether the inquiry would be unduly onerous.
Third, the production of documents in a situation involving cross-examination on an affidavit is governed by rule 87, paragraph 91(2)(c) and rule 94. It is fairly broad where there has been a request for production of specified documents in a rule 91(2) direction to attend. Under paragraph 91(2)(c), the documents must be relevant and in the possession, power or control of the person being cross-examined. Under subsection 94(2), the production of documents on a cross-examination is bound by the concept of relevance, the amount of material requested and whether it would be unduly onerous to require production.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Rules, 1998, SOR/98-106, rr. 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 223.
CASES JUDICIALLY CONSIDERED
APPLIED:
Merck Frosst Canada Inc. v. Canada (Minister of Health) (1998), 80 C.P.R. (3d) 550 (F.C.T.D.); affd (2000), 249 N.R. 15 (F.C.A.); Merck & Co. v. Apotex Inc. (1996), 67 C.P.R. (3d) 147; 110 F.T.R. 155 (F.C.T.D.).
CONSIDERED:
Bland v. National Capital Commission (1989), 29 F.T.R. 232 (F.C.T.D.); Swing Paints Ltd. v. Minwax Company, Inc., [1984] 2 F.C. 521 (1984), 79 C.P.R. (2d) 59 (T.D.); Thomson v. Thomson and Elliot, [1948] O.W.N. 137 (Ont. H.C.); Laflamme Fourrures (Trois-Rivières) Inc. et al. v. Laflamme Fourrures Inc. (1986), 8 C.P.R. (3d) 315; 3 F.T.R. 48 (F.C.T.D.); Bank of Scotland v. Nel (The), [1998] F.C.J. No. 1499 (T.D.) (QL); Bally-Midway Mfg. Co. v. M.J.Z. Electronics Ltd. et al. (1984), 75 C.P.R. (2d) 160 (F.C.T.D.); Sierra Club of Canada v. Canada (Minister of Finance) et al. (1999), 163 F.T.R. 109 (F.C.T.D.); Stella-Jones Inc. v. Hawknet Ltd., [2000] F.C.J. No. 94 (T.D.) (QL).
ORDER concerning affidavits of claim in a proceeding to determine priorities to ship sale proceeds. Applicable principles.
APPEARANCES:
Peter G. Bernard for plaintiff.
R. Glenn Morgan for claimant Tramp Oil & Marine Ltd.
SOLICITORS OF RECORD:
Campney & Murphy, Vancouver, for plaintiff.
Davis & Co., Vancouver, for claimant Tramp Oil & Marine Ltd.
The following are the reasons for order rendered in English by
[1] Hargrave P: These reasons deal in general terms with the scope of cross-examination on affidavits of claim in a proceeding to determine priorities to ship sale proceeds. Also at issue is the extent of production of documents on which the deponents of the affidavits might be cross-examined.
SUBMISSIONS
[2] Counsel for Tramp Oil & Marine Ltd. (Tramp Oil), a necessaries supplier which claims against the ship sales proceeds, submits that cross-examination on claim affidavits and production of documents ought to be broad. Tramp Oil submits that the scope of cross-examination should go well beyond the four corners of the affidavit, in order to facilitate examination not only on the substance, propriety and priority of the claims of the Royal Bank of Scotland plc. (Bank of Scotland) under its mortgage security, but also the extent of any equities which might exist and which could cut the claims of the Bank of Scotland, making more of the proceeds available for Tramp Oil which may have a lower priority than that of the Bank of Scotland. Further, Tramp Oil takes the position that the deponents of the claim affidavits ought, when they are unable to answer a relevant question, to be required to inform themselves.
[3] Counsel for the Bank of Scotland submits that proper cross-examination on the claim affidavits ought to have not a speculative basis, but rather a factual basis founded on the affidavits and any properly available documents. As to documents, the Bank of Scotland submits that this should be limited to documents which are exhibits to the affidavit. The Bank of Scotland has also, to date, produced relevant documents referred to in exhibits to the affidavits: that is proper for there are a number of interlocking security documents. The Bank of Scotland, while putting what it believes to be diligent effort into having its deponents reasonably well informed about events which took place over a number of years, so they might properly swear the claim affidavits, balks at having deponents inform themselves when they do not know the answer to a particular question.
CONSIDERATION
[4] Tramp Oil and the Bank of Scotland each rely upon what appear to be two separate lines of cases, or at least different readings of the case law. Here I would note that what might appear to be contrary case law may well, at least to some degree, be merely situation specific case law, or reflect differences between procedure in judicial review and procedure in an action. To that end I have also kept in mind that there may be particular principles applicable to cross-examination on affidavits on motions to determine priorities to ship sale proceeds, for such a summary proceeding, rather than a trial, is the dénouement of the action in which the ship has been arrested and sold. A final consideration which I have kept in mind arises out of the hopefully summary nature of a priorities hearing. In recent years cross-examination of lien and mortgage claimants often seems to have a life of its own. The volume of paper generated and documentary production required has from time to time gone beyond what is reasonable.
Broad Approach to Examination on an Affidavit
[5] Tramp Oil, in support of a broader approach to cross-examination, refers to various authorities, including Bland v. National Capital Commission (1989), 29 F.T.R. 232 (F.C.T.D.), a decision in which Mr. Justice Martin cites a number of the standard authorities, a survey going back some 50 years, many of those authorities being included in a lengthy passage from Swing Paints Ltd. v. Minwax Company, Inc., [1984] 2 F.C. 521 (T.D.), at pages 529-531.
[6] The principles I take from this line of cases, being a little circumspect about cases predating February 1992, when judicial review could be by way of an action, thus perhaps blurring the line between examination for discovery and cross-examination on affidavits, are that:
1. Cross-examination on an affidavit is not an examination for discovery (Swing Paints Ltd. v. Minwax Company (supra), at page 529).
2. Cross-examination may extend beyond the four corners of the affidavit, including to the determination of the issue in respect of which the affidavit was filed (Thomson v. Thomson and Elliott, [1948] O.W.N. 137 (Ont. H.C.)).
3. Cross-examination extends to collateral questions which arise from answers (Swing Paints Ltd. v. Minwax (supra), at page 531).
4. A deponent who does not know the answer to a cross-examination question, although he need not inform himself so extensively as in preparation for examination for discovery, may not rest upon the fact that he does not know the answer to a question (Bland (supra), at page 235) however, Mr. Justice Martin, in Bland, acknowledges a contrary position set out by Mr. Justice Walsh in Laflamme Fourrures (Trois-Rivières) Inc. et al. v. Laflamme Fourrures Inc. (1986), 8 C.P.R. (3d) 315 (F.C.T.D.), at page 318.
Still dealing with the duty to inform, Mr. Justice Nadon in Merck & Co. v. Apotex Inc. (1996), 67 C.P.R. (3d) 147 (F.C.T.D.), at page 149 sets out the view that “a deponent has a duty to inform himself on matters in issue which are within his knowledge or means of knowledge.”
[7] I dealt with the scope of cross-examination on affidavits of claim in Bank of Scotland v. Nel (The), [1998] F.C.J. No. 1499 (T.D.) (QL) there concluding that [at paragraph 6] “cross-examination is not confined by the four corners of an affidavit, but includes any matter relevant to the determination of the issue in respect to which the affidavit is filed”. I also pointed out [at paragraph 6] that “there is a duty on a deponent to become informed of matters and issues that are within his or her knowledge or means of knowledge”. I referred to Bally-Midway Mfg. Co. v. M.J.Z. Electronics Ltd. et al. (1984), 75 C.P.R. (2d) 160 (F.C.T.D.) for the propositions that the deponent of an affidavit may be required to produce documents, on cross-examination, which are in addition to those referred to in an affidavit, but with the limitations that “cross-examination upon an affidavit ought not to be as free ranging as an examination for discovery and cannot be used in order to obtain all the information and all the documents which might be useful at a full trial” [at paragraph 7]. I concluded [at paragraph 8] that the nature of the proceeding mandated slightly fuller production of documents, or of a series of documents, than might usually be the case, but that I was not prepared to vest a summary procedure with full documentary discovery as if it were a trial:
Counsel acknowledges some limitation on production pursuant to cross-examination, as compared with examination for discovery, but also points out that the issue of priorities is sometimes dealt with in a trial setting as opposed to being dealt with by motion and that this should influence production of documents, requiring all claimants to make full and frank disclosure. I have, to some degree, kept this in mind, both on this present motion and on past motions in this matter, requiring slightly fuller production of individual documents or a series of documents than would normally be the case. But I am not prepared to vest a summary procedure with full discovery of documents, as though it were a proceeding leading to a trial, particularly where the request is not for individual items, or for groups of individual items, but rather for complete files: a fishing expedition, on cross-examination on an affidavit, is not proper.
This was a conclusion that I reached when dealing with the very issue at stake here, however given the opposing views of counsel and particularly Mr. Justice Hugessen’s decision in Merck Frosst Canada Inc. v. Canada (Minister of Health) (1997), 80 C.P.R. (3d) 550 (F.C.T.D.), upheld by the Court of Appeal (2000), 249 N.R. 15, the area may require some further consideration.
[8] More generally, as to production of documents, I pointed out in Sierra Club of Canada v. Canada (Minister of Finance) et al. (1999), 163 F.T.R. 109 (F.C.T.D.), that production of documents, in the course of cross-examination on an affidavit, is fairly broad. By way of explanation, rule 87 [of the Federal Court Rules, 1998, SOR/98-106] defines an examination as including a cross-examination on an affidavit, in the context of rules 88 through 100. Paragraph 91(2)(c) provides that in the case of cross-examination on an affidavit the direction to attend may require the person being examined to produce at the examination “all documents and other material in that person’s possession, power or control that are relevant to the application or motion”. Subsection 94(1) puts a positive duty upon a person being examined to bring material to the examination, subject to relief, under subsection 94(2), where the Court is of the opinion that the material is irrelevant or that the task would be unduly onerous.
Narrow Approach to Examination on an Affidavit
[9] Counsel for the Bank of Scotland refers to Merck Frosst (supra), a judicial review matter, in which Mr. Justice Hugessen, at page 555 began with a reference to some elementary principles:
It is well to start with some elementary principles. Cross-examination is not examination for discovery and differs from examination for discovery in several important respects. In particular:
a) the person examined is a witness not a party;
b) answers given are evidence not admissions;
c) absence of knowledge is an acceptable answer; the witness cannot be required to inform himself or herself;
d) production of documents can only be required on the same basis as for any other witness, i.e. if the witness has the custody or control of the document;
e) the rules of relevance are more limited.
[10] The principal issue in Merck Frosst was relevance. That is also an aspect in the present instance. Therefore it is useful to consider what Mr. Justice Hugessen had to say [at pages 555-556]:
For present purposes, I think it is useful to look at relevance as being of two sorts: formal relevance and legal relevance.
Formal relevance is determined by reference to the issues of fact which separate the parties. In an action those issues are defined by the pleadings, but in an application for judicial review, where there are no pleadings (the notice of motion itself being required to set out only the legal as opposed to the factual grounds for seeking review), the issues are defined by the affidavits which are filed by the parties. Thus, cross-examination of the deponents of an affidavit is limited to those facts sworn to by the deponent and the deponent of any other affidavits filed in the proceeding.
Over and above formal relevance, however, questions on cross-examination must also meet the requirement of legal relevance. Even when a fact has been sworn to in the proceeding, it does not have legal relevance unless its existence or non-existence can assist in determining whether or not the remedy sought can be granted.
In these passages there are several important principles. First, there is the matter of formal relevance based on issues of fact, defined by the pleadings in an action, but by the affidavits in judicial review, there being no pleadings as such. Second, this leads to the observation that cross-examination on an affidavit “is limited to those facts sworn to by the deponent and the deponent of any other affidavits filed in the proceeding.” Third, there is legal relevance, the test there being assistance in determining whether the remedy sought might be granted.
[11] Here I would make two observations. First, that a summary determination of priorities to ship sale proceeds by means of a motion in an action does not fall neatly into either category of formal relevance. This is because the pleadings on which a vessel sale is obtained are usually of marginal relevance, at best, in defining any issues relevant to priorities. Yet the affidavits may also fall short in defining the issues, particularly where a claimant, well aware of weaknesses in its claim, avoids all mention in its affidavit of what may be a basic but hidden problem, leaving the other opposed claimants to perhaps stumble upon the factual weakness if they are able to guess its nature and are allowed to cross-examine outside the deponent’s affidavit. Second, I believe that Mr. Justice Hugessen’s comments point to the proposition that cross-examination must have a factual basis, but that the factual basis may be gleaned not only from the affidavit of the deponent being examined, but also from “any other affidavits filed in the proceeding.”
[12] Mr. Justice Hugessen’s decision in Merck Frosst was upheld by the Court of Appeal in very brief reasons. The Court of Appeal seemed to agree on the analysis of relevance, or at least as to the conclusion drawn. However, even though the Court of Appeal did not comment on either the elementary principles or on Mr. Justice Hugessen’s analysis of relevance, one must give very substantial weight to what he had to say.
[13] Counsel for the Bank of Scotland also refers to Stella-Jones Inc. v. Hawknet Ltd., [2000] F.C.J. No. 94 (T.D.) (QL) a decision of Mr. Justice Blais in action T-1942-98. There Mr. Justice Blais takes an even more restrictive approach which seems to limit cross-examination to matters arising from the affidavit itself. Further, here relying upon a judicial review concept as a precedent, Mr. Justice Blais is of the view that documents not attached to an affidavit cannot be obtained for the purpose of cross-examination.
Comment on the Two Approaches
[14] The utility of the Hugessen and Blais analyses in Merck Frosst and in Stella-Jones, is a limitation of the scope of cross-examination and document production which is in keeping with the summary nature of the judicial review process. Hopefully such an approach keeps testimony and document production within manageable bounds. The difficulty with this approach is that such a narrow examination could well make a priorities determination hearing meaningless, for the hearing might not get beyond self-centred proofs of claims, leaving unexplored valid and relevant issues going to the propriety of claims, equities, priority and proper disposition of funds. Yet I am loath to accept, in its entirety, the broad view, espoused by Tramp Oil. The broad view has, in the context of priority determination, resulted in production of masses of documents, many fishing expeditions with usually only minimal benefit and much irrelevant cross-examination transcript.
CONCLUSIONS
[15] From all of this I have arrived at some conclusions applicable to examination on claim affidavits when priorities are to be determined on a motion. First, cross-examination on affidavits must have factual underpinnings. When priorities are determined by motion there are usually no pleadings which are useful to define the issues and to provide a basis for the cross-examination. The factual underpinnings must therefore be found elsewhere, specifically in the deponent’s affidavit and in other affidavits filed in the proceeding, in answers giving rise to collateral questions and in documents attached to affidavits or otherwise produced. This is consistent with Mr. Justice Nadon’s view of Bland (supra) as set out in Merck& Co. v. Apotex Inc. (supra), at page 148. I would not, in a priorities hearing setting, go so far as to give carte blanche to cross-examination on all matters which could, after a fishing expedition, be relevant to the determination of the issue in respect to which the affidavit was filed, for there must be some factual basis on which to found the cross-examination. This is consistent with Mr. Justice Hugessen’s seemingly narrower view in Merck Frosst (supra) for in that case no consideration was given to cross-examination on documents produced pursuant to rule 87, paragraph 91(2)(c) and rule 94.
[16] Second, in a priorities hearing the deponent of an affidavit of claim is not so much a witness as he or she is an agent for and swears an affidavit on behalf of a party or claimant. In effect the deponent swears an affidavit on which a corporate claimant founds its claim and has its claim tested by cross-examination. Thus Mr. Justice Hugessen’s bar in Merck Frosst, to the deponent informing himself or herself, based on the characterization of the deponent as witness, does not apply. Yet the duty to inform must in itself have reasonable bounds, stopping somewhat short of examination for discovery: this is a point made in a number of instances, including by Mr. Justice Nadon in Merck& Co. v. Apotex Inc. (supra), at page 149. Mr. Justice Nadon was able to resolve the problem by recognizing the compartmentalization of the Merck firm and thus required the witness to seek answers only in his own department, not in the firm as a whole. However, as I have pointed out, an affidavit of claim in a priority hearing setting is a corporate affidavit. I would therefore bound the necessity to inquire by the concept of legal relevance, that is relevance assisting in determining a remedy as described by Mr. Justice Hugessen in Merck Frosst and by whether the inquiry would be unduly onerous. The concepts of relevance and of unduly onerous inquiry lead to a conclusion as to production of documents on cross-examination.
[17] Third, the production of documents on a cross-examination is governed by rule 87, paragraph 91(2)(c) and rule 94. The limits set out in paragraph 91(2)(c) are that documents must be relevant and in the possession, power or control of the person being cross-examined. In the case of an upper echelon corporate deponent, this document production requirement may be fairly broad, however it does not go so far as discovery of documents as described in rule 223. Moreover, subsection 94(2) clearly bounds the production of documents on a cross-examination by the concepts of relevance, the amount of material requested and whether it would be unduly onerous to require production.
[18] In the present instance I would suggest that all concerned keep in mind that the Bank of Scotland has produced a vast number of documents. The production which has occurred may very well be butting up against the relief from production provisions in the Rules. Further, when invoking production of documents, by a direction to attend under subsection 91(2), there should be a clear and concise description of the required documents, not description by broad general category, in an effort both to make the task of selecting documents a precise one and to keep the volume of documents to a reasonable level.
SUMMARY
[19] To summarize, but not to limit my conclusions, which relate to summary determination of priorities on a motion, cross-examination on an affidavit should be limited to issues of fact found in the deponent’s affidavit, in other affidavits filed in the priority determination proceeding, to collateral questions arising out of answers and to documents exhibited to affidavits or otherwise produced.
[20] Second, there is, in the case of a corporate affidavit, sworn for use on a priorities determination motion, a duty on the deponent to seek information in order to deal with proper questions to which he or she does not know the answer.
[21] Third, production of documents, in a situation involving cross-examination on an affidavit, is fairly broad where there has been a request for production of specified documents in a subsection 91(2) direction to attend.
[22] I thank counsel for their thorough submissions.