Instructions Specific to This Exam

1. This examination contains four questions of unequal value, worth a total of 100 marks.

2. Suggested time allocations are provided for guidance only. Candidates remain responsible for managing their examination time.

3. Unless otherwise stated, assume that all proceedings are brought in the Ontario Superior Court of Justice and are governed by Ontario’s Rules of Civil Procedure.

4. You will be assessed primarily on your knowledge and application of the Rules of Civil Procedure, applicable statutes, assigned cases and other required Civil Procedure materials, together with your ability to identify the procedural problems raised by the facts and recommend appropriate procedural steps.

5. No marks are awarded for merely reproducing or summarizing the facts. Use the facts in applying the relevant procedural principles.

6. Each question is independent. Do not import facts from another question.

7. Where a procedural rule gives the court discretion, do not stop after identifying that discretion. Explain:

   • the considerations relevant to its exercise;

   • the competing interests of the parties;

   • proportionality;

   • prejudice;

   • efficiency; and

   • the practical consequence of the order sought.

8. In dealing with pleadings, distinguish:

   • material facts;

   • evidence;

   • conclusions of law;

   • particulars;

   • amendments;

   • counterclaims;

   • crossclaims; and

   • third-party claims.

9. Do not assume that every related claim must be placed into the same proceeding. Where joinder, consolidation or a hearing together is proposed, consider both procedural efficiency and possible prejudice or complication.

10. In discovery problems, distinguish:

• • disclosure from production;

  • relevance from admissibility at trial;

  • ordinary discovery obligations from non-party discovery;

  • solicitor-client privilege from litigation privilege;

  • the continuing obligation to correct documentary disclosure; and

  • the deemed undertaking restricting collateral use of discovery material.

11. Apply the proportionality principles contained in the Rules when assessing the proper scope of discovery. Electronic discovery should not become unlimited merely because large quantities of electronic material exist.

12. Where summary judgment is sought, apply Hryniak v. Mauldin and the current Rule 20 framework. Consider whether the court can make the necessary findings and fairly resolve the relevant issues without a conventional trial.

13. Where interlocutory injunctive relief is sought, apply the framework in RJR-MacDonald Inc. v. Canada (Attorney General) and consider the requirements imposed by Rule 40.

14. Distinguish between:

• • entitlement to judgment;

  • interim procedural relief;

  • settlement incentives;

  • and costs consequences.

15. Where an offer to settle is relevant, distinguish the automatic or presumptive costs consequences under Rule 49 from the court’s broader discretion to consider written settlement offers when determining costs.

16. Do not assume that satisfying one of the enumerated grounds for security for costs automatically determines the motion. Rule 56 remains discretionary and the court must make an order that is just in the circumstances.

17. Unless expressly required by the facts, do not address the substantive merits of the underlying contract, negligence, confidentiality or other private-law causes of action except to the extent necessary to analyze the procedural issue.

18. Full citations are unnecessary. The relevant case name, statute or Rule number is sufficient.

19. Write clear and organized answers in complete sentences.

QUESTION ONE

25 marks — suggested time: 45 minutes

FACTS

Everwyn Produce Terminal Inc. (“Everwyn”) operates a refrigerated distribution centre in southwestern Ontario.

The facility contains six temperature-controlled storage chambers used by grocery wholesalers.

The refrigeration system was installed three years ago by Bracken Mechanical Ltd. (“Bracken”).

The electronic control system was supplied by Novalume Controls Inc. (“Novalume”).

In February, the refrigeration system shut down for approximately 36 hours.

Everwyn alleges losses exceeding $4.2 million, including:

• spoiled produce;

• physical damage to refrigeration equipment;

• customer credits;

• emergency refrigeration expenses; and

• business interruption losses.

Everwyn commenced one action against Bracken and Novalume.

Paragraph 18 of the statement of claim provides:

“The Defendants negligently designed, manufactured, supplied, installed, tested, inspected, maintained and operated an unsafe refrigeration system and are jointly and severally liable to Everwyn in negligence, breach of contract, negligent misrepresentation, gross negligence and otherwise.”

No additional paragraphs identify:

• which defendant allegedly performed which act;

• what design defect existed;

• what representation was made;

• when any representation was made; or

• why either defendant allegedly knew the system was unsafe.

Another paragraph alleges that:

“Novalume fraudulently concealed defects in its control software from Everwyn.”

No particulars of the alleged fraud are given.

Everwyn has also reproduced within the pleading:

• 23 complete emails;

• four pages of temperature readings;

• excerpts from an engineering report; and

• photographs of damaged equipment.

The statement of claim is 74 pages long.

Bracken delivers a defence stating:

“Any loss was caused or contributed to by Everwyn’s own operation and misuse of the refrigeration system.”

The defence does not explain what Everwyn allegedly did incorrectly.

Everwyn demands particulars.

Bracken responds:

“The evidence will come out at discovery.”

Bracken has now obtained a preliminary expert opinion suggesting that the refrigeration configuration specified by Rookwell Engineering Inc. (“Rookwell”), a non-party engineering consultant retained by Everwyn during construction, may have caused the shutdown.

Bracken’s original construction agreement also contains a clause under which Rookwell agreed to indemnify Bracken for certain losses resulting from errors in Rookwell’s design specifications.

Bracken wants to claim contribution or indemnity against Rookwell.

Bracken delivered its statement of defence 24 days ago.

No reply has been delivered.

Everwyn refuses to consent to a third-party claim.

It argues:

“Bracken missed the deadline. We should not have to delay our action because Bracken only now investigated its own defence.”

Documentary discoveries have not begun.

No trial date has been scheduled.

Novalume faces a different problem.

Its original defence denied responsibility but did not contain a crossclaim against Bracken.

Novalume now alleges that, if the control system malfunctioned, Bracken improperly connected several sensors during installation.

It wants contribution and indemnity from Bracken.

Two months after the pleadings closed, Everwyn also obtains a new laboratory analysis of the controller.

It now wishes to amend the statement of claim to plead that:

• a particular firmware defect existed when Novalume supplied the controller;

• Novalume had received three prior reports of the defect; and

• Novalume failed to disclose those reports.

The proposed amendment does not add a new party.

Finally, Saffron Market Group Ltd. (“Saffron”), one of Everwyn’s warehouse customers, has commenced a separate action arising from the same shutdown.

Saffron claims $900,000 for spoiled inventory.

It sues:

• Everwyn;

• Bracken; and

• Novalume.

Its action is presently at the pleadings stage.

Bracken asks that the two proceedings either be consolidated or heard together.

Saffron objects.

It says its case includes a separate contractual dispute with Everwyn that has nothing to do with the engineering issues and argues that combining the proceedings will unnecessarily complicate its relatively straightforward claim.

QUESTION

Advise Everwyn, Bracken and Novalume concerning the procedural issues raised by the existing pleadings, Bracken’s proposed claim against Rookwell, Novalume’s proposed claim against Bracken, Everwyn’s proposed amendment and the relationship between Everwyn’s action and Saffron’s separate proceeding.

25 MARKS

QUESTION TWO

30 marks — suggested time: 54 minutes

FACTS

Quarrylight Health Systems Inc. (“Quarrylight”) develops scheduling and records-management software for private medical clinics.

It sues Elmspire Data Services Ltd. (“Elmspire”) for $11 million after a large data-migration project allegedly corrupted several years of business records.

Elmspire denies that its migration caused the loss.

It says Quarrylight’s own database contained pre-existing defects.

The pleadings are closed.

Counsel agreed to a written discovery plan providing for searches of:

• five identified email custodians;

• four years of email;

• specified project folders;

• relevant internal messaging channels; and

• 22 agreed search terms.

After reviewing the first production, Quarrylight becomes convinced that Elmspire employees discussed database problems long before the migration.

It now demands:

“all emails, messages, documents, backups and electronically stored information concerning Quarrylight or database integrity in the possession, control or power of Elmspire from 2015 to present.”

Elmspire estimates that complying literally would require review of approximately 9.4 million electronic records at a cost exceeding $1.1 million.

Quarrylight says the amount claimed justifies the expense.

Elmspire proposes instead to:

• add three custodians;

• add eight search terms;

• search one additional year; and

• use technology-assisted review to identify potentially relevant material.

A separate dispute concerns several categories of documents.

Document A

In 2019, three years before any dispute arose, Elmspire commissioned an operational review from Kestrel Ridge Consulting.

The review examined:

• data-security weaknesses;

• backup failures;

• staffing;

• software architecture; and

• commercial risk.

No lawyer was involved.

Elmspire’s chief operating officer now says the report is:

“privileged because it discusses legal-risk issues.”

Document B

One week after Quarrylight sent Elmspire a formal demand letter threatening litigation, Elmspire’s outside litigation counsel retained a forensic technology firm.

The engagement letter states that the firm was retained:

“to assist counsel in investigating Quarrylight’s allegations, advising Elmspire and preparing for anticipated litigation.”

The resulting report analyzes the corrupted database and identifies several vulnerabilities in Elmspire’s migration process.

Elmspire claims litigation privilege.

Document C

Elmspire’s general counsel sent the CEO an email entitled:

LEGAL ADVICE — Quarrylight Claim

The email explains:

• the contractual risk;

• potential defences;

• exposure to damages; and

• counsel’s recommendation concerning settlement strategy.

Quarrylight demands production because the email was copied to Elmspire’s chief financial officer.

Elmspire also discovers another problem.

Three months after serving its affidavit of documents, an information-technology employee restores an archived server.

The archive contains approximately 4,000 previously unknown internal messages concerning the Quarrylight project.

Some assist Elmspire.

Others appear damaging.

Elmspire’s litigation counsel proposes:

“We can wait until Quarrylight specifically asks whether anything else has been found.”

Quarrylight also wants server-access logs held by Nimbus Vault Inc. (“Nimbus”), an unrelated cloud-storage provider.

Elmspire once had access to the logs but says that its account has expired and it can no longer obtain them.

Nimbus refuses voluntary production.

The logs would show which party accessed and modified several disputed data files during the migration.

Quarrylight proposes a motion requiring Nimbus to produce them.

At oral discovery, Quarrylight has already examined Elmspire’s representative for seven hours.

It wants another four hours because the restored archive has generated new issues.

Elmspire refuses consent.

Finally, Quarrylight discovered through Elmspire’s production that another clinic network had experienced similar migration problems.

Quarrylight’s president wants to:

1. give the discovered documents to counsel acting for that clinic in a separate proceeding;

2. send them to an industry regulator; and

3. post selected documents publicly to pressure Elmspire into settlement.

One particular document, however, was later attached by Elmspire itself as an exhibit to an affidavit filed on a contested discovery motion.

QUESTION

Advise Quarrylight and Elmspire concerning the appropriate scope of discovery, the privilege claims, the newly restored archive, the proposed production from Nimbus, the request for additional oral discovery time and Quarrylight’s proposed use of information obtained through discovery.

30 MARKS

QUESTION THREE

25 marks — suggested time: 45 minutes

FACTS

Vireo Transit Analytics Inc. (“Vireo”) develops software used by municipal transit agencies to predict passenger demand and set service schedules.

Its most valuable commercial asset is a database containing:

• historical bid prices;

• municipal purchasing patterns;

• route-level cost assumptions;

• proprietary demand forecasts; and

• internal pricing formulas.

Eamon Trevelyan worked for Vireo for six years.

He left in April and immediately joined Stonemere Mobility Corp. (“Stonemere”), one of Vireo’s principal competitors.

Vireo alleges that Eamon copied confidential information before leaving.

Computer records show that:

• an external storage device was connected to Eamon’s workstation at 11:42 p.m. on his final Friday;

• approximately 22,000 files were accessed during the next 19 minutes;

• the records do not conclusively establish that files were actually transferred; and

• Eamon deleted his local downloads folder the following morning.

Eamon says he connected the external drive to copy:

“personal photographs and tax records”

stored on his work computer.

He denies taking Vireo information.

Two weeks after Eamon joined Stonemere, Stonemere submitted a bid for a municipal transit contract.

Its pricing was within 0.7% of the confidential internal price Vireo had planned to submit.

A Stonemere executive says the similarity was coincidental because:

“everyone in this industry understands municipal operating costs.”

Three former Vireo clients have also received sales presentations from Stonemere.

One client states in an affidavit that the presentation contained:

“a chart that looked extremely similar to a Vireo forecasting chart.”

Stonemere says the chart is based entirely on publicly available ridership information.

A major municipal tender closes in 12 days.

Vireo intends to bid.

It believes Stonemere will use the allegedly copied information.

Vireo commences an action and immediately seeks an interlocutory injunction prohibiting Eamon and Stonemere, pending trial, from:

• using or disclosing any confidential Vireo information; and

• using any Vireo documents or data in preparing the upcoming municipal bid.

Vireo does not seek to prevent Eamon from working for Stonemere generally.

It initially proposes bringing the motion without notice, arguing that:

“If Stonemere knows we are coming, it could use or destroy the information before the court acts.”

There is no direct evidence that Stonemere has threatened to destroy evidence.

A motion on notice could be heard in approximately six days.

Vireo says damages will be impossible to calculate accurately because once its confidential pricing methodology is exposed:

• competitors may use it repeatedly;

• Vireo may never know which future contracts were affected; and

• confidentiality itself cannot later be restored.

Stonemere responds that an injunction would disrupt its tender work and stigmatize it publicly as a company using stolen information.

Vireo is prepared to provide the usual undertaking concerning damages.

Five months later, assume that the interlocutory dispute has passed and discoveries are substantially complete.

Vireo moves for summary judgment on liability.

Its evidence includes:

• the computer-access records;

• the municipal pricing similarity;

• the client affidavit;

• and an admission from Eamon that he took one Vireo spreadsheet home during his employment several years earlier, although he says he later deleted it.

Stonemere files:

• affidavits denying receipt of confidential information;

• source files said to show independent development of its pricing model;

• and an expert report stating that similar pricing can be produced from public data.

Vireo’s expert reaches the opposite conclusion and says some features of Stonemere’s model are:

“extremely unlikely to have arisen independently.”

Each expert attacks the methodology of the other.

Eamon has also given discovery evidence that differs in several respects from his affidavit about what he was doing on his final night.

Vireo argues:

“A full trial is unnecessary. The judge can weigh the evidence, decide credibility and draw the obvious inference.”

Stonemere responds:

“The whole case turns on whether you believe Eamon and which expert is right. That is what trials are for.”

QUESTION

Advise Vireo and Stonemere concerning Vireo’s request for immediate interlocutory relief and its later summary judgment motion. Address the procedural tests, relevant powers of the court, competing arguments and appropriate form of relief.

25 MARKS

QUESTION FOUR

20 marks — suggested time: 36 minutes

FACTS

Karsen Biomedical Ltd. (“Karsen”) is incorporated and headquartered in British Columbia.

It has no office, land, bank account or other significant property in Ontario.

Karsen commences an Ontario action against Oaktide Distribution Inc. (“Oaktide”), an Ontario corporation.

It claims $900,000 in unpaid commissions allegedly owing under a medical-device distribution agreement.

Oaktide denies liability.

Karsen’s documentary case includes:

• the written distribution agreement;

• monthly commission statements prepared by Oaktide;

• emails discussing payment;

• and a spreadsheet apparently prepared by Oaktide’s chief financial officer showing approximately $640,000 in accrued commissions.

Oaktide alleges that Karsen breached several contractual obligations and is therefore entitled to no further commission.

Karsen has few assets of its own.

Its most recent financial statements show:

• $72,000 in cash;

• no significant fixed assets;

• and approximately $1.9 million in liabilities.

Its parent corporation, however, has a $4 million operating credit facility and has so far paid all of Karsen’s litigation expenses.

The parent has not agreed formally to satisfy any future costs order.

Ten months after delivering its defence—and only six weeks before trial—Oaktide moves for security for costs.

It argues that:

• Karsen is a corporate plaintiff;

• Karsen has insufficient assets in Ontario to satisfy a substantial costs award; and

• Oaktide should not be required to defend an expensive trial without security.

Karsen responds that:

• the motion comes very late;

• its claim has substantial merit;

• the parent will continue funding the litigation; and

• an order requiring immediate payment of $300,000 as security would force Karsen to abandon the action.

However, evidence shows that the parent paid a $185,000 expert invoice for Karsen only three weeks earlier.

Settlement negotiations have also occurred.

Two months before trial, Karsen’s lawyer sent an ordinary email stating:

“Our client would resolve the action today for $475,000 plus its reasonable legal costs.”

The email was not served as a formal Rule 49 offer.

Oaktide rejected it.

Twenty-one days before trial, Oaktide serves a formal Rule 49 offer offering:

$525,000 plus Karsen’s partial indemnity costs to the date of the offer.

The offer remains open until trial.

Karsen rejects it.

The action proceeds to judgment.

Assume that:

• Karsen receives judgment for $500,000;

• the figure is less favourable to Karsen than Oaktide’s $525,000 offer for Rule 49 comparison purposes;

• there is no dispute about the validity or timing of Oaktide’s formal offer; and

• the court must now determine costs.

During the litigation:

• Oaktide refused three reasonable requests to admit documents that it later admitted at trial;

• Karsen pursued a damages theory worth approximately $200,000 that it abandoned on the second day of trial; and

• both parties incurred significantly greater legal costs than they originally estimated.

QUESTION

Advise Karsen and Oaktide concerning Oaktide’s motion for security for costs and the likely costs consequences following judgment, including the significance of both parties’ settlement communications and their litigation conduct.

20 MARKS