IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

National Bank Financial Ltd. v. LePoidevin,

 

2018 BCSC 1175

Date: 20180713

Docket: S1611854

Registry: Vancouver

Between:

National Bank Financial Ltd.

Plaintiff

And

David LePoidevin, Marc Rinfret, Fletcher Hemmons, Susanna Kam, Lynn Yeo, Alysha To, Aren Hoffman, Myra Rehman, Nicolette Lim, Ayushi Minhas, Agnes Francisco, Teresa LePoidevin, Jennfer An and Canaccord Genuity Corp.

Defendants

 

Before: The Honourable Mr. Justice Voith

 

Reasons for Judgment

Counsel for the Plaintiff:

O. Ahmed

K. Rose

Counsel for the Defendants:

D. Crawford

J. Forman

Place and Date of Hearing:

Vancouver, B.C.

June 25-26, 2018

Place and Date of Judgment:

Vancouver, B.C.

July 13, 2018


 

[1]             The thirteen individual defendants (collectively the “Individual Defendants”), other than Mr. LePoidevin, seek to prevent the Plaintiff, National Bank Financial Ltd. (“NBF”) from conducting an examination for discovery of each of them. Alternatively, they seek, in their Notice of Application, to limit the examination for discovery of any of the Individual Defendants, other than Mr. LePoidevin, to two hours.

Background

[2]             The nature of the present action, as revealed by the pleadings, is straightforward. NBF is a full-service brokerage firm and investment dealer. The defendant Canaccord Genuity Corp. is also a full-service brokerage firm and investment dealer. Each of the Individual Defendants was formerly employed by NBF and each is alleged to have been a member, of what was known at NBF, as the LePoidevin Group.

[3]             The Amended Notice of Civil Claim alleges that the LePoidevin Group managed in excess of 2,000 clients, that the Group held in excess of $1.13 billion under management (para. 25) and that the Group generated in excess of $8.1 million in revenue for the Vancouver office of NBF in the year ending September 2016 (para. 26).

[4]             It is alleged that each of the Individual Defendants resigned from NBF on October 7, 2016 (para. 44) and that each of them commenced employment at the offices of Canaccord Genuity on that day, “if not sooner” (para. 48).

[5]             The Amended Notice of Civil Claim advances various causes of action including breach of the employment agreements that the Individual Defendants had with the Plaintiff, breach of confidence, conversion of NBF’s property, unjust enrichment and conspiracy to injure. A separate claim, based on a breach of fiduciary obligation, is advanced against Mr. LePoidevin.

[6]             It is relevant, in relation to issues of “proportionality”, that the NBF pleadings allege i) that Canaccord agreed to pay Mr. LePoidevin almost $14.5 million, in the form of a no interest forgivable loan, “if he successfully caused Clients to transfer their accounts from NBF to Canaccord” (para. 50) and ii) that by the end of the third week after the Individual Defendants had resigned from NBF the Plaintiff had received transfer requests “for a total of 4270 accounts relating to Clients covering aggregate assets under management of $790 million” (para. 82(d)).

[7]             Many of the material facts relied on by the Plaintiff are denied by the Defendants in their Second Amended Response to Civil Claim.

[8]             The trial of this action has been set for six weeks commencing on March 25, 2019. I have been assigned to case manage the action.

Issue 1: Restricting the Rights of NBF to Conduct Examinations for Discovery of the Individual Defendants

a)    The Position of the Parties

[9]             The respective positions of the parties can be expressed succinctly. Counsel for the Individual Defendants argues that a review of the Amended Notice of Civil Claim reveals that the Individual Defendants had a “commonality of interest” and that that consideration, having regard to the relevant authorities, supports the primary relief that they seek. They also argue that separate examinations of the Individual Defendants would not achieve the objects of proportionality or of a speedy and inexpensive determination on the merits: Rules 1-3(1) and (2) of the Supreme Court Civil Rules, B.C. Reg. 168/2009.

[10]         Counsel for NBF argues, in the main, that the Plaintiff has a right to examine the Individual Defendants under Rule 7-2(1) and that this Court has no discretion to deprive the Plaintiff of that right. For the reasons that follow, I generally agree with the position of the Plaintiff.

b)    Analysis

[11]         The issues raised on this aspect of the Individual Defendants’ application have, surprisingly, not yet been expressly addressed by a judge of this Court. In Kovacovic Consult Inc. v. Coastal Contacts Inc., 2015 BCSC 569, Master MacNaughton, after referring to a number of the authorities that counsel for the Individual Defendants relies on, said:

[11]         Rule 7-2 of the Supreme Court Civil Rules, B.C. Reg. 168/2009, is the rule which governs examinations for discovery. The relevant subrules provide:

(1)  Subject to subrule (2), each party of record to an action must

(a) make himself or herself available, or

(b) if any of subrules (5) to (10) apply, make a person referred to in that subrule available,

for examinations for discovery by the parties of record to the action who are adverse in interest to the party subject to examination.

(5)  Unless the court otherwise orders, if a party to be examined is not an individual,

(a) the examining party may examine one representative of the party to be examines,

(b) the party to be examined must nominate as its representative an individual, who is knowledgeable concerning the matters in question in the action, to be examined on behalf of that party, and

(c) the examining party may examine

(i) the representative nominated under paragraph (b), or

(ii) any other person the examining party considers appropriate and who is or has been a director, officer, employee, agent or external auditor of the party to be examined.

[21]         A review of these cases indicates that they all arose in the context of applications to examine a party who is not an individual under Rule 7-2(5) (or its predecessor). The wording in Rule 7-2(1) is mandatory and each party must make himself or herself available for examinations for discovery. The inclusion of the words “[u]nless the court otherwise orders” in subrule 7-2(5) confers discretion on the court to vary the default right in Rule 7-2(5), which is that if a party to be examined for discovery is not an individual, the examining party may only examine one representative of that party. Rule 7-2(1) does not include a similar discretion where the party to be examined is an individual.

[12]         More recently in Henni v. Food Network Canada Inc., 2018 BCSC 276 Master Muir, after referring to Kovacevic (at para. 5) concluded that Rule 7-2(1) “contains no discretion” (at para. 6) while Rule 7-2(5) does confer “a discretion with respect to parties other than individuals” (at para. 7). Master Muir further said:

[9]            If I am wrong and the court is exercising a discretion under Rule 7-2(1), it must be found other than within the bounds of Rule 7‑2(1), and that can only be, at least nobody has suggested any other possibility, an exercise of the inherent jurisdiction that judges of this Court have. As a master, I do not have that inherent jurisdiction and, in my view, I am bound by the rule.

[13]         The conclusions expressed in each of Kovacevic and Henni are further supported. In F.M. Irvine, McLachlan & Taylor, British Columbia Practice, 3rd ed., vol. 1 at p. 7-181, the author concludes: “Outside of the corporate context or representative proceedings … “commonality of interest” among parties does not modify the requirement in Rule 7-2(1) that “each party of record” make himself or herself available for examination”.

[14]         In Fraser, Horn & Griffin, Conduct of Civil Litigation in British Columbia, 2nd ed. the authors, at p. 18-9 state: “the Rules contemplated the examination for discovery of any party. However, the court has recognized the reality that individuals often use a variety of corporate entities to achieve corporate purposes and the court may limit rights of discovery where there is a commonality of interest among corporate parties. This applies equally to both plaintiffs and defendants” (underlining added).

[15]         I agree with the conclusions that are expressed in Kovacevic, in Henni and in the foregoing texts. Specifically, I do not consider that the language of Rule 7-2(1) confers any jurisdiction on the Court to limit the right of a party of record to conduct an examination for discovery of an individual or of individuals who are parties to the action and who are adverse in interest.

[16]         Furthermore, I do not consider that this conclusion, save for a narrow range of exceptional circumstances, is broadened by the inherent jurisdiction that judges of this Court have. In F.M. Irvine, McLachlan & Taylor, British Columbia Practice, the author, at p. 1.2, states:

In order for a court to invoke inherent jurisdiction, there must be some extenuating circumstances which the procedural rules do not appear to contemplate. Where no extenuating circumstances exist, inherent jurisdiction is not ousted – there is simply not basis to employ the unusual power. A judge of the Supreme Court should not resort to inherent jurisdiction to grant orders where a party has failed to invoke procedural rules that were appropriate to their situation. Rather, inherent powers are drawn upon in an auxiliary way to assist or help in the exercise of the processes of the court: Buchan v. Moss Management Inc., [2010] B.C.J. No. 1732, 9 B.C.L.R. (5th) 276, 2010 BCCA 393. In Endean v. British Columbia, [2016] S.C.J. No. 42, 88 B.C.L.R. (5th) 1, 2016 SCC 42, at para. 24, the Supreme Court of Canada said “courts should first determine the scope of express grants of statutory powers before dipping into this important but murky pool of residual authority that forms their inherent jurisdiction”.

[17]         A review of Buchan, and of the authorities referred to in the preceding quote, makes clear that the Court’s inherent jurisdiction can be used, for example, to prevent abuses, or efforts to thwart the Court’s processes or in extenuating circumstances. It is, however, a power that is to be used sparingly. Furthermore, the inherent jurisdiction of the Court is not “a panacea for the parties or for the court”: Buchan at para. 29. Accordingly, absent a narrow range of circumstances, the court’s inherent jurisdiction should not be used by the court to adopt practices that are inconsistent with the Rules: see also Lines v. Gordon, 2009 BCCA 107 at paras. 23-25; Gichuru v. Smith, 2014 BCCA 414 at para. 98.

[18]         Quite apart from the express language of Rule 7-2(1) I do not consider that it would be appropriate to prevent the Plaintiff from examining the Individual Defendants for discovery. The Amended Notice of Civil Claim makes numerous specific allegations in relation to various specific Individual Defendants. Thus, by way of example, the Plaintiff alleges:

58. However, NBF is now aware that prior to their resignation, the defendants took at least the following steps to collect and remove NBF’s Confidential Information:

(a) In the months leading up to their resignation, certain of the individual defendants, (including at least Rinfret, Hoffman, and Lim), accessed NBF’s client management platforms and generated thousands of reports containing, inter alia, Client account and transaction information and Client contact details. Generating this volume of reports was inconsistent with these individual defendants’ prior pattern of use. These reports were save and/or printed by the individual defendants and removed from the Vancouver Branch.

(b) The night prior to his resignation, Rinfret emailed his NBF contact list (including at least 300 Client email addresses) to his personal email address; and

(c) In the period leading up to their resignation, certain of the individual defendants (including To, Rinfret, Hoffman, Yeo and Rehman) accessed the Vancouver Branch office at highly unusual, suspicious times, for the purpose of surreptitiously collecting and removing Confidential Information from the Vancouver Branch.

64. With the exception of March 2016 (when he generated 248 reports, likely for year-end purposes) and the first week of October 2016 (the week of his resignation from NBF), Hoffman generally did not generate any reports in Panagon. However, in the first week of October 2016, Hoffman generated 450 Panagon reports. Hoffman had no legitimate business purpose for generating such a significant number of Panagon reports in the first week of October 2016; he did so with the sole object of misappropriating Confidential Information from NBF.

65. Rinfret similarly generated an insignificant number of Panagon reports from September 2015 to August 2016. However, he generated 232 reports in September 2016 and 222 reports in the first week of October 2016. Rinfret had no legitimate business purpose for generating such a significant number of Panagon reports in September and the first week of October 2016; he did so with the sole object of misappropriating Confidential Information from NBF.

66. Collectively, LePoidevin, Rinfret, Hemmons, Kam, Yeo, To, Rehman, Lim, and Minhas generated 10,896 reports in Croesus in only four days in the first week of October 2016. This is wholly inconsistent with their prior use of Croesus. In comparison, in the 12 preceding months (excluding March 2016, because that is when reports are typically generated in large numbers for year-end purposes), the LePoidevin Group averaged only 2518 reports per month. Therefore, in the four days prior to their en masse resignation, these individual defendants generated approximately five times the average monthly total of Croesus reports generated by the LePoidevin Group in the preceding 12 months (excluding March 2016).

69. On October, 2016 at approximately 10:30 pm, the night before he tendered his without-notice resignation, Rinfret sent an email from his NBF account to his personal Gmail account.

70. Attached to this email was a Microsoft Word file containing approximately 1900 email addresses which came from his NBF contact list. Of the 1900 email addresses in the Microsoft Word file, at least 300 of the email addresses related to the Clients.

73. In the period leading up to their resignation, many of the individual defendants, including To, Rinfret, Hoffman, Yeo and Rehman, accessed the Vancouver Branch at highly unusual, suspicious times, for the purpose of surreptitiously collecting and removing Confidential Information from the Vancouver Branch.

74. To date, NBF had determined that To attended the Vancouver Branch in the three successive weekend before the LePoidevin Group’s resignation (September 17 – 18, September 24 – 25, and October 1 – 2, 2016) in the middle of the night.

(all underlining present in the Amended Notice of Civil Claim.)

[19]         The Plaintiff should be able to conduct a separate examination for discovery in respect of the allegations that are made as against the individuals who one identified in the paragraphs of the Amended Notice of Civil Claim as well as in respect of such further matters that may arise through document disclosure. There is no principled or practical reason that the Plaintiff’s rights of discovery should be curtailed by having Mr. LePoidevin inform himself about what various Individual Defendants either did or did not do.

[20]         Similar considerations pertain in relation to the causes of action that NBF advances. Thus, for example, NBF alleges that the Individual Defendants engaged in an unlawful conspiracy (at para. 28 of the Amended Notice of Civil Claim). That cause of action requires, as one of its constituent elements, that NBF establish, as against each of the Individual Defendants, that the particular individual defendant, made an agreement to engage in unlawful conduct: see P. Osborne, The Law of Torts, 3rd ed., Irwin Law at p. 310-311, Fridman, The Law of Torts in Canada, 2nd ed., Carswell at p. 764-765. Once again, both as a matter of principle and practice, I consider it appropriate that NBF be able to examine the Individual Defendants in relation to these issues directly.

[21]         Finally, I do not consider that Rule 1-3, which advances the laudable objects of proportionality and efficiency, alters the conclusions that I have reached. Proportionality is, at least in part, a function of the specific action in issue. The action advanced by NBF it is, on its face, a relatively complex claim for relatively significant damages. I also question whether what the Individual Defendants propose, that being to have Mr. LePoidevin inform himself about the circumstances of each of the Individual Defendants in relation to each cause of action advanced, is either realistic or efficient.

[22]         Accordingly, I am satisfied that NBF should be entitled to conduct an examination for discovery of each of the Individual Defendants.

Issue 2: The Length of the Examinations for Discovery

[23]         At some point during counsel for NBF’s submissions, I expressed the concern that seven hours of discovery, for each of the 13 Individual Defendants, for a total of more than 90 hours, seemed excessive regardless of the number of issues that were advanced in the pleadings or the apparent magnitude of the Plaintiff’s claim. The following day counsel returned proposing that the following Defendants, with the following titles, be examined for the following periods of time:

PROPOSED TIMES FOR EXAMINATION FOR DISCOVERY

 

Defendant

Title at NBF

Time Estimate

1.

David LePoidevin

Senior Vice President and Portfolio Manager

7 hours

2.

Marc Rinfret

Investment Advisor

7 hours

3.

Fletcher Hemmons

Investment Advisor

4 hours

4.

Susanna Kam

Senior Investment Associate

4 hours

5.

Lynn Yeo

Senior Investment Associate

7 hours

6.

Alysha To

Investment Associate

4 hours

7.

Aren Hoffman

Investment Associate

4 hours

8.

Myra Rehman

Administrative Assistant

2 hours

9.

Nicollete Lim

Administrative Assistant

2 hours

10.

Ayushi Minhas

Administrative Assistant

2 hours

11.

Teresa LePoidevin

Cold Caller

2 hours

12.

Agnes Francisco

Cold Caller

2 hours

13.

Jennifer An

Marketing Agent

2 hours

Total:

 

 

49 hours

[24]         Counsel for the Defendants agreed with these proposals except in so far as they pertained to Mr. Rinfret, Mr. Hemmons, Ms. Kam and Ms. Yeo. He proposed that the examinations for discovery of Mr. Rinfret and Ms. Yeo be limited to four hours and that the examinations of Mr. Hemmons and Ms. Kam be limited to two hours. This proposal was subject to NBF being able to come back to court to apply for a longer examination for discovery of a specific defendant if that was necessary or if, for example, the specific defendant was not responsive or was unprepared.

[25]         Rule 7-2(2) provides:

Limitations

(2)Unless the court otherwise orders, the examinations for discovery, including all examinations under subrules (17), (22) and (24), conducted under this rule of a party of record, including any such examinations conducted of a person referred to in subrule (1) (b) who is examined in relation to that party of record, by any other party of record who is adverse in interest must not, in total, exceed in duration

(a) 7 hours, or

(b) any greater period to which the person to be examined consents.

[26]         Rule 7-3(3) provides a non-exhaustive list of considerations that are relevant to Rule 7-2(2) applications to “extend the examination for discovery period”.

[27]         Thus, the starting point is that, absent agreement, the examination for discovery of any party of record is not, in total, “to exceed” seven hours unless there exists some valid basis to do so. Rule 7-2(2) does not expressly address the circumstances in which the initial seven hour limit or ceiling in Rule 7-2(2)(a) may be excessive. Nevertheless the opening words of Rule 7-2(2) - “unless the court otherwise orders” - provide the Court the jurisdiction to either restrict or expand that seven hour period when it is appropriate to do so.

[28]         In this case it is apparent from the descriptions provided by NBF, and from the pleadings, that several of the Individual Defendants held more modest job descriptions and/or were less involved in the activities that are detailed in the pleadings. Having said this counsel for the Plaintiff is clearly much more familiar with the issues that have been raised and with the ensuing document production than the Court is.

[29]         Each of Mr. Rinfret, Mr. Hemmons, Ms. Kam and Ms. Yeo hold somewhat more senior positions than do several of the other Individual Defendants and each of them is alleged, to varying degrees, to have played a more active role in the events that give rise to this action. The Amended Notice of Civil Claim also indicates, to some degree, that specific information will lie with these particular defendants.

[30]          In such circumstances I do not consider that it would be appropriate to second-guess the measured assessment of counsel for NBF of what time estimate for the examination for discovery of a specific individual defendant is necessary. Furthermore, in such circumstances, absent some basis for concern, and no such objective basis exists in the record of this case, the Court should rely on the good faith of counsel and on the expectation that counsel will act with reasonable efficiency. That expectation is surely in the interest of all parties. Finally, I note that the total number of hours for the examinations for discovery of the Individual Defendants that is now being advanced by NBF is approximately half of what the Rules contemplate and half of what NBF initially sought.

[31]         Accordingly, I consider that NBF should conduct examinations for discoveries of the Individual Defendants in accordance with the schedule that I was provided and that I have captured in para. 23 of these Reasons for Judgement.

[32]         I consider that success on these applications was divided. NBF did not provide its revised time estimate for the examinations of the Individual Defendants until the application was well underway and until it was pressed to do so. Accordingly, each party is to bear their own costs of these applications.

“Voith J.”