J. Q.B. A.D.1993 No. 2482 J.C. S. IN THE QUEEN'S BENCH JUDICIAL CENTRE OF SASKATOON BETWEEN: DELOITTE TOUCHE INC., as Liquidator of the estate and effects of Saskatchewan Trust Company and COOPERS LYBRAND and GERALD NOREN, EARL DOKKEN, MURRAY ACTON, KENNETH KICKHOFF, HARRY GEMMEL, N. E. (TED) GREENAWAY, R. JAMES TOMKINS, DAVID GRAYSON, FRANK KLASSEN and ALLAN FRASER THIRD PARTIES James S. Ehmann and for the plaintiff and Dianna K. Lee Beaty F. Beaubier and for the defendant Denise S. Smith FIAT GEATROS J. January 14, 1997 This fiat is in relation to the plaintiff's notice of motion initially returnable on October 24th last. was the chambers judge on the return date. Given the nature of the cause of action making it likely that more than the usual interlocutory relief would be sought from time to time by the parties, much of which seeking directions not properly the subject of chambers motion proper, offered the view that counsel should seek the designation of case-management judge in the action. Having been so named, it is in that capacity that heard the plaintiff's motion. The relief sought is as follows: 1. An Order directing Coopers & Lybrand ("C & "L") and ClarenceRoy Krake ("Krake") to respond to the undertakings given inthe examination for discovery of Krake held on June 3-7, 1996; 2. An Order that unless the answers to the undertakings areprovided by October 31, 1996, the Statement of Defence of C &L shall be struck, with costs, without further Order of theCourt; 3. An Order that Krake attend for the resumption of examination for discovery of him and answer questions that he refused to answer or took under advisement, any questions seeking his opinion on audit issues relevant to this action and questions that arise from the undertakings; 4. An Order that make immediate and full disclosure of documents requested by the Liquidator, which documents were not originally disclosed in the Statement as to Documents of and which documents were refused to be disclosed at the examination for discovery of Krake; 5. An Order for an immediate pre-trial conference; 6. For leave pursuant to Queen's Bench Rule 15 to further amendthe Amended Statement of Claim as indicated by the draftSecond Amended Statement of Claim attached hereto; 7. An Order that costs of this application be costs of the Liquidator in any event of the cause. Items 1 and 2 were resolved, item 1 being adjournedsine die as the undertakings are being complied with. Item 5becomes redundant. There is no basis for a pre-trialconference until the action is ready for trial. Leave toamend the statement of claim, item 6, has been granted. have concluded that given the relief have decided to grant there should be no order as to costs on this motion (item 7). There remains items and 4. now turn to the former. The kind of order sought by the plaintiff is in terms that Clarence Roy Krake, the partner of the defendant being examined, is required to answer certain questions outlined by the plaintiff and, ". any proper questions arising therefrom, and proper questions arising from further and better production of documents by Coopers Lybrand (as may be ordered) and any proper questions seeking Mr. Krake's opinions on audit issues arising in the context of Saskatchewan Trust Company records or files, whether or not such records or files were examined by Coopers Lybrand when it performed its audits of Saskatchewan Trust Company". What is raised is the propriety of questions designed to elicit the opinion of witness, Clarence Roy Krake, who happens to be an expert, on his examination-for-discovery as an officer of Coopers Lybrand. The defence put forward by Coopers Lybrand is founded upon its denial of negligence, maintaining that it performed the audits from 1983-86 in accordance with generally accepted auditing standards and the standard of care owed by reasonably competent auditor. It follows, as Davey J.A. stated in Shickele et al. v. Rousseau (1966), 1966 CanLII 646 (BC CA), 55 W.W.R. 568 (B.C.C.A.), at 570: With deference to the contrary judgments of judges of first instance, on principle it is difficult to see why party to an action that raises directly his professional or technical advice or conduct should not be required to give, on discovery, his expert opinion on matters directly connected with the issues raised, where that opinion would be admissible and relevant at the trial. It logically follows, in my view, that Krake's expert opinion may not be sought on matters not raised in the pleadings. As Davey J.A. aptly stated, at p. 570: The examination of party on discovery about his opinion on technical and professional matters presents some dangers, because those opinions in many cases will require an opportunity for reflection and study, which the witness will not have if the matters are not directly in issue, and lie on the periphery of the case, and so may not be foreseen. Where the matters are directly in issue, the witness ought not to be surprised at being asked for his opinion on them, and should be prepared to answer them. [My emphasis]. In Motaharian v. Reid (1989), 39 C.P.C. (2d) 141, (Ont. H.C.), Smith J. said, at p. 142: Hypothetical questions are not per se improper. They invariably seek an opinion, whether general or specific one. They should be permitted where the witness has expertise, when relevant to some issue in the case, provided they are not overly broad or vague. And adopt what Smith J. said later, at p. 143: [T]hat discovery should be expansive in nature rather than restrictive. The approach which that principle commands must be based on candor, openness and cooperation within the realistic confines of the adversarial system. Discovery is not trial. Perfection, of course, will elude use here, as in all other areas of human activity. But counsel should bend all efforts to make the system work with minimum waste of money and of valuable time. So it is that hypothetical questions can be asked of an expert within the limits heretofore alluded to. See Hercules Management Ltd. v. Clarkson, Gordon (1993), 13 C.P.C. (3d) 141 (Man. Q.B.). It is in the context of the principles heretofore alluded to that an answer be found to the question posed by Coopers Lybrand: Is Mr. Krake required to answer questions on discovery about his opinion on audit issues arising in the context of Saskatchewan Trust Company records or files, whether or not such records or files were examined by Coopers Lybrand when it performed its audits of Saskatchewan Trust Company? It is quite plain, in my view, that the questions alluded to in the plaintiff's brief and during the argument, that Mr. Krake refused to answer or took under advisement, are to be answered. It is of no moment that the inquiries concerned records or files that Coopers Lybrand may not have examined when it performed its audits of Saskatchewan Trust Company, so long as the questions broadly touch on the matters in issue. As the plaintiff has pointed out, it has alleged that Coopers Lybrand failed to discover series of fraudulent or irregular mortgage and consumer loans, failed to use and comply with generally accepted audit standards, failed to test sufficient samples to check internal controls at Saskatchewan Trust Company, failed to review properly selected samples of mortgage files and failed to make reasonably adequate loss provisions. As well, hypothetical questions seeking opinion evidence having to do with generally accepted audit standards, for example, are to be allowed as they are within the ambit of the allegations made and the issues raised in the pleadings. In such context there is relevance to such questions. As in the context of discovery of documents, questions are allowed seeking answers to enable party to advance his own case or destroy that of his adversary, or may fairly lead to form of enquiry which may have either of these consequences. Reference here in particular is made to Comico Ltd. v. Phillips Cables Limited, 1987 CanLII 200 (SK CA), [1987] (Sask. C.A.) and Steier v. University Hospital Board, [1988] W.W.R. 303 (Sask. C.A.). As Smith J. stated in Motaharian, supra, ". discovery should be expansive in nature rather than restrictive". Admissibility and weight are matters to be dealt with later in the action, at trial. In the result, grant an order essentially in the terms offered by the plaintiff, as follows: Upon the continuation of the examination fordiscovery of Clarence Roy Krake, he shall answer theparticular questions that he heretofore has refused to answer,any proper questions arising therefrom, any proper questionsarising from further and better production of documents byCoopers & Lybrand as hereinafter ordered and any properquestions seeking Mr. Krake's opinions on audit issues arisingin the context of Saskatchewan Trust Company records or files,whether or not such records or files were examined by Coopers& Lybrand when it performed its audits of Saskatchewan TrustCompany. The questions to be "proper" need only be "broadly" relevant to the issues raised in the pleadings in the sense that they are in some way connected to the issues, and the allegations made. On that basis Mr. Krake may be asked hypothetical questions by way of seeking his opinion consequent upon his professional experience. For the most part this would be where his, and Coopers Lybrand's, conduct is in issue. There remains the matter of the discovery of documents. Coopers Lybrand points out that this litigation involves voluminous documents, hundreds of thousands, many of which are 100 pages in length. Be that as it may, document production is to be focused on what the plaintiff is alleging. No claim of privilege is made by either party. As matter of quality control on national level, Coopers Lybrand was required to maintain particular files for the audit of each client. It is common ground that such files were the permanent file, current file, tax file, financial statement file and correspondence file. It is conceded that such files were kept for each of the 1983-89 year audits. Production of the financial statement file is not sought. It is agreed that it is not in dispute. Only part of the other files have been disclosed. The basis for Coopers Lybrand's refusal to disclose the balance of those files is relevance. Surely, suggest, if those files were kept by Coopers Lybrand for Saskatchewan Trust Company's audits, they are clearly relevant. Coopers Lybrand's audits in general relating to Saskatchewan Trust Company are now in issue. In keeping with the principle that "discovery should be expansive in nature rather than restrictive", the files alluded to, as well as audit working patterns related to investments made by Saskatchewan Trust Company and the requisite part of the document referred to as "matters for attention of partners as at December 31, 1985," must be produced, and it is so ordered. In the end it may well be that parts of the documents to be produced will be of minimal use, even of no relevance, in resolving the issues raised by the pleadings. However, at this stage it is not possible to identify the parts of which it can be said are not related to the matters in question in this action. Such will be resolved at trial, where issues of admissibility and weight will be dealt with. In my judgment,the disclosure and production made herein is justified underthe "broad relevance" test, and comports with the generalprinciple I have already alluded to, that a party is entitledto discovery of a document or record if it directly orindirectly enables him to advance his own case or destroy thatof his adversary, or may fairly lead to a form of inquirywhich may have either of these consequences. See Steier v. University Hospital Board, supra. The production of the documents in question will not hamper the search for truth. Indeed, it should help to isolate the areas of contention for trial purposes. The documents are to be properly described and identified in Coopers Lybrand's statement as to documents. This need not necessarily involve document by document listing of the plethora of documents that will be involved. leave it to the parties to arrive at the format to be used. Should they be unable to agree, they have, of course, leave to return for directions. appreciate that the kind of order have made will likely delay resumption of the examination-for-discovery of Mr. Krake set for January 20. However, it is essential that production be finally in place before any examination is begun, or continued. Finally, there is Coopers Lybrand's application for further and better description of documents. It says there is no substantial complaint concerning lack of production by the plaintiff of any of the files or documents requested. The question is whether the documents are properly described and identified so that Coopers Lybrand will not be subject to trial by ambush. appreciate that the documents are voluminous and that there are parts that may not be even "broadly" relevant to the plaintiff's claim, but here repeat the proposition that admissibility and weight is for the trial judge to assess. The order would make is that there should be sameness in the manner of identification and isolation of the documents in the discovery process undertaken by each party. say that in the context of the ruling have made in the plaintiff's motion desiring the parties to agree to the format to be used. Coopers Lybrand takes issue with two aspects of the plaintiff's disclosure. It says that, (1) the plaintiff has failed to disclose any documents relating to its calculation of damages being claimed, and any documents which have been disclosed by or to the plaintiff in three actions commenced by the plaintiff respecting Saskatchewan Trust Company which would be relevant to its damages claim against Coopers Lybrand and, (2) the plaintiff has failed to disclose documents in the plaintiff's possession or control relating to discussions or conversations with any of the Third Parties to this action. am satisfied that requisite "damage claim documents" have been provided. As regards "discussion or conversations with any of the Third Parties", the plaintiff says it is difficult to do so. That may be so, but memoranda of discussions in that area must be produced as they may not be either privileged or irrelevant as the plaintiff contends. They may turn out to be broadly relevant and so matter for the trial judge. On the question of privilege, such memoranda are privileged only if the dominant purpose for their creation at the time they came into being was for use in litigation. See Standard Machine Ltd. v. Royal Insurance Company of Canada, Sask. Q.B. No. 3513/95, J.C. Saskatoon, November 26, 1996, as yet unreported. Once produced, determination may be made prior to trial whether they are privileged under such principle. accordingly order that they be disclosed. There will be no order as to costs in respect of the applications in view of the divided success in considering both in tandem.
HELD: 1)The officer was to answer any proper questions seeking his opinion on audit issues arising in the context of the Trust Company's records or files. To be proper the questions need only be broadly relevant to the issues raised in the pleadings in the sense that they are in some way connected to the allegations made. Hypothetical questions seeking his opinion consequent upon his professional experience could be asked where his and C&amp;L's conduct were in issue. The officer's expert opinion could not be sought on matters not raised in the pleadings. 2)The disclosure and production of documents was justified under the broad relevance test. A party is entitled to discovery of a document if it directly or indirectly enables him to advance his own case or destroy that of his adversary or may fairly lead to a form of inquiry which may have either consequence. 3)The 'damage claim documents' had been provided. There should be a sameness in the manner and isolation of the documents in the discovery process undertaken by each party. Whether the memoranda of discussions with third parties were privileged or irrelevant was a matter for the trial judge. 4)The issue of compelling a response to undertakings had been resolved. 5)The request for an order for an immediate pre-trial conference was redundant as there was no basis for one until the action was ready for trial. 6)Leave to further amend the statement of claim pursuant to Rule 165 had been granted.