Eastern Platinum Limited v. Cameron

2019 BCSC 1515 Eastern Platinum Limited v. Cameron

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Eastern Platinum Limited v. Cameron, 2019 BCSC 1515 Date: 20190909 Docket: S186503 Registry: Vancouver Between: Eastern Platinum Limited, Eastplats Acquisition Co. Ltd. Eastern Platinum Holdings Limited Plaintiffs And Gregory MacFarlane Cameron, David Cohen, Horng Dih Lee, Robert Gayton, Gordon Keep, J. Merfyn Roberts, and Ian Rozier Defendants Before: Master Elwood (In Chambers) Reasons for Judgment Counsel for the Plaintiffs: T.M. Cohen, QC Counsel for the Defendant, G. Cameron: R. Cooper, QC Counsel for the Defendants, D. Cohen, H. Lee, R. Gayton, G. Keep, M. Roberts and I. Rozier: H.R. Anderson, A. Way Place and Date of Hearing: Vancouver, B.C. July 15, 2019 Place and Date of Judgment: Vancouver, B.C. September 9, 2019 Table of Contents I. INTRODUCTION. 3 II. BACKGROUND. 3 III. POSITIONS OF THE PARTIES. 5 IV. ANALYSIS. 7 A. Document Production. 7 B. Affidavit of Documents. 13 IV. CONCLUSION. 15 I. INTRODUCTION [1] This is an application by the plaintiffs in a complex commercial dispute for production of documents and an affidavit by the defendants verifying their lists of documents. [2] The defendants have, for the most part, agreed to produce documents in their possession or control in many of the categories sought by the plaintiffs. They oppose production of three categories of documents, and seek to confine their

production within a defined time period, on the basis that the application as framed is overbroad and seeks irrelevant documents. Further, the defendants say, an affidavit of documents is unnecessary and unwarranted. II. BACKGROUND [3] The plaintiffs are Eastern Platinum Limited ("EPL") and two subsidiaries. EPL is a public company with mining interests in South Africa. [4] The defendants are former directors or senior management of EPL. David Cohen was a director and the chief executive officer and chairman of EPL from 2005 to July 5, 2016. Horng Lee was the chief financial officer from 2007 to July 5, 2016. Ian Rozier was the chief operating officer and president of EPL, and a director from 2007 to July 5, 2016. Robert Gayton, Gordon Keep, Merfyn Roberts and Gregory Cameron were outside directors of EPL until July 5, 2016. [5] Messrs. Cohen, Lee, Gayton, Keep, Roberts and Rozier are represented by one set of counsel. I will refer to them as the "Cohen Defendants". Mr. Cameron is separately represented. [6] This case arises out of events leading up to the 2016 annual general meeting of EPL. The plaintiffs allege that, knowing they were going to be replaced at the AGM, the defendants caused the company to enter into a series of improvident transactions. The circumstances are complicated, but may be summarized as follows. Under South African law, mining operations are required

to partner with historically disadvantaged black South Africans. EPL satisfies this obligation through qualifying black economic empowerment partners on its projects. The plaintiffs allege the defendants caused EPL or its subsidiaries to enter into agreements to transfer approximately USD$13 million for no consideration and with no valid business purpose to two South African companies that did not qualify, under the guise of an arms-length transaction to buy out certain black economic empowerment partners. [7] The plaintiffs allege that, on July 4, 2016, the eve of the AGM, the defendants authorized a transfer of funds to an escrow agent. On July 5, the shareholders of EPL replaced the defendants as directors and removed them from management. On July 6, the plaintiffs allege that a member of EPL's former management team instructed the escrow agent to release the funds without the consent or approval of the new board. [8] Shortly following these events, counsel for EPL wrote to each of the defendants asking them to retain and return any devices, hardware or data belonging to the company. [9] In a notice of civil claim filed on June 6, 2018, the plaintiffs claim damages and an accounting and disgorgement of profits from the defendants. The plaintiffs allege breach of fiduciary duty, negligence, intentional interference with economic interests, conspiracy and unjust

enrichment. [10] In a detailed response to civil claim, the Cohen Defendants allege legitimate business purposes for the impugned transactions. In simplified terms, the defendants say that the two South African companies in question are international lenders which financed the minority shareholder interests of EPL's black economic empowerment partners, and that the transactions in issue were entered into by the company with independent legal advice and for the purpose of ensuring that EPL complied with South African law. [11] Mr. Cameron filed a separate response adopting the facts pleaded in the response of the Cohen Defendants. [12] On the same day they filed their responses to civil claim, the defendants filed counterclaims to enforce indemnity agreements with EPL. [13] EPL has brought a separate action against Mr. Lee and Sterling West Management Ltd., a company that provided EPL with e-mail, computer and other office management services until July 5, 2016, when Sterling terminated the service agreement. EPL alleges that Mr. Lee and Sterling retained property belonging to EPL, including documents and e-mails. [14] On January 17 and 24, 2019, the Cohen Defendants delivered their initial lists of documents in this action. Some time after these lists were produced, counsel received a very large number of documents from Mr. Lee, made up of two batches of documents: documents

that Mr. Lee backed up on his personal computer; and an Outlook backup file which included Mr. Lee's corporate e-mails, but also a large volume of personal e-mails. On April 16, 2019, counsel for the Cohen Defendants advised plaintiffs' counsel of the receipt of these documents and that a review for relevance would take some time. [15] On May 31, 2019, the plaintiffs demanded that the defendants produce an amended list of documents, setting out 11 categories of documents the plaintiff said should have been disclosed under Rule 7-1(1) or, in the alternative, ought to be disclosed under Rule 7-1(11), along with the asserted bases for relevance. [16] On June 12, 2019, the Cohen Defendants delivered a further list of documents and a detailed response to the plaintiffs' demands. On July 9, the Cohen Defendants delivered another further list of documents. III. POSITIONS OF THE PARTIES [17] The plaintiffs submit that the defendants' document production is deficient for the following reasons: a) While the Cohen Defendants acknowledge that most of the categories of documents sought by the plaintiffs are producible, there are gaps in the production and no confirmation that all of the relevant documents have been produced. By way of example, the plaintiffs identify a number of e-mails in the existing lists of documents to or from defendants who have not produced their own copies of those

e-mails. b) With the exception of Mr. Lee, the plaintiffs say, defence counsel left it to the defendants themselves to search their e-mails, with no affidavit evidence from the defendants of the steps they took to locate relevant documents. By way of example, the plaintiffs note that Mr. Rozier used a Gmail address for at least some corporate matters. c) The plaintiffs say the Cohen Defendants were unreasonably slow to produce the large volume of documents in Mr. Lee's possession, and have yet to produce any e-mails from Mr. Lee's Sterling.com e-mail address. d) The Cohen Defendants have restricted their production to time periods ending on July 6, 2016, whereas they should be required to search for relevant documents to the end of July 2016. e) The Cohen Defendants have refused to produce telephone records, travel documents or personal calendars. [18] Given the gaps in the production, and what the plaintiffs describe as a casual and dilatory approach to document production, the plaintiffs submit that the Cohen Defendants should be required to provide an affidavit of documents. [19] The Cohen Defendants respond that there is no merit in the allegation that their document production has been inadequate or dilatory: this is a complex case; they have produced a large number of documents; document production is an on-going process for both sides; and the examples given by the

plaintiff of documents missing from the defendants' lists of documents are not significant documents. [20] The Cohen Defendants submit that the material time period from the notice of civil claim is from November 2014 to July 6, 2016. According to the Cohen Defendants, nothing alleged in the notice of civil claim makes what they did after July 6, 2016 relevant. Specifically, there is no factual allegation that the defendants received a benefit from the impugned transactions after leaving the company. [21] Relevant telephone records, travel documents and personal calendars have been produced according to the Cohen Defendants, within the material time period, to the extent those documents are within their possession or control. [22] For his part, Mr. Cameron reports that he has produced all of the potentially relevant documents in his possession. Mr. Cameron was not part of the management of EPL. He was an outside director who was appointed as the representative of a major shareholder. Mr. Cameron provided all of his documents to plaintiffs' counsel when he left that shareholder at the end of 2016, before this action was commenced. Those documents were listed by the plaintiffs, and then listed back by Mr. Cameron. IV. ANALYSIS A. Document Production [23] Master Bouck helpfully summarized the principles governing document production under Rule 7-1 in Edwards v. Ganzer, 2012 BCSC

138: [41] I understand the principles outlined in these various decisions, together with the applicable Rules, to be as follows: a. The initial production obligation under Rule 7-1 (1) (a) (i) is limited to what is required to prove or disprove a material fact: Biehl v. Strang at para. 14; b. Rule 7-1(10) allows the opposing party to issue a written demand requiring the listing party to amend the original list and produce documents that should have been disclosed under Rule 7-1(1)(a)(i); c. In addition, Rule 7-1(11) allows the opposing party to issue a written demand requiring the listing party to amend the list and produce documents which ought to be disclosed under a test "close to" that set out in Compagnie Financiere et Commerciale du Pacifique v. Peruvian Guano Company (1882), 11 Q.B.D. 55 at 63, (the "Guano test"): Global Pacific at para. 9; d. The distinction between the two types of disclosure provided for under Rule 7-1 is stated in Global Pacific as follows: The question is whether a document can properly be said to contain information which may enable the party requiring the document either to advance his own case or damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, or if it may have either of those two consequences. Therefore, it is acknowledged that the initial disclosure under Rule 7-1(1) relates to a

materiality requirement, but that a party can apply to the court, as the defendant did here, for broader disclosure pursuant to Rule 7-1(14). para. 9 e. Both the demand by the requesting party and the response of the opposing party should be set out in writing addressing the terms and criteria used in Rule 7-1. Whether the demand and response provide sufficient particularity is a matter of the court's discretion; f. If an application is brought under Rule 7-1(13) for the listing or production of documents, the court may either order compliance with the demand, excuse full compliance, or order partial compliance: Rule 7-1(14); g. The objectives of the SCCR, including proportionality, may be taken into account by the court when exercising its discretion under Rule 7-1(14). The proportionality rule can be applied to either expand or restrict the required production of documents: Global Pacific citing Whitcombe v. Avec Insurance Managers Inc., 2011 BCSC 204. [24] In this case, the plaintiffs framed their demand for further production of documents under Rule 7-1(10) and, in the alternative, Rule 7-1(11). There is an important difference between the two grounds for a demand, as explained by Mr. Justice Kent in Imperial Parking Canada Corporation v. Anderson, 2014 BCSC 989: [23] Subsections 7-1(10) and (11) provide for the second tier of the new document discovery process. They allow

a party to demand the listing/production of additional documents or classes of documents beyond what has already been disclosed. But there is a major difference between the two subsections, namely, · a demand under Rule 7-1(10) is for additional documents that should have been disclosed under subrule (1) i.e. documents that are probative of a material fact or any other document to which the party intends to refer at trial, whereas · the additional documents that may be demanded under Rule 7-1(11) are for such additional documents within the listing party's "possession, power or control" and which "relate to any or all matters in question in the action" i.e. the Peruvian Guano discovery under the former rules with the addition of the word "power". [24] A demand for broader discovery of documents under Rule 7-1(11) must be accompanied by: · a written demand identifying additional documents or classes of documents with reasonable specificity, and · an indication of the reason why such additional documents or classes of documents should be disclosed in the case. [25] Rule 7-1(11) requires that a written demand for additional documents or classes of documents under the broader definition of relevancy identify them "with reasonable specificity". Where the demand is overly broad and vague, the "lack of specificity which characterizes [the] application is fatal to its success": Lit v.

Hare, 2012 BCSC 1918 at para. 68: [68] It is difficult for the court to adjudicate on a document production application where what is sought are 'all documents not yet produced' in broadly defined categories. [26] An order made pursuant to Rule 7-1(13) to comply with a demand made under Rule 7-1(10) requires the responding party to amend the list of documents to include documents or categories of documents that ought to have disclosed under 7-1(1), which is to say documents that could be used by a party "to prove or disprove a material fact". An order made pursuant to Rules 7-1(13) to comply with a demand made under Rule 7-1(11), or an order made pursuant to Rule 7-1(14), requires the responding party to produce documents or categories of documents that "relate to any or all matters in question in the action". [27] An application that relies on the initial definition of relevance in Rules 7-1(1) and (10) is governed by the pleadings. An application that relies on the broader definition of relevance in Rules 7-1(11) and (14) requires "some evidence of the existence and potential relevance of those additional documents": More Marine Ltd. v Shearwater, 2011 BCSC 166 at para.

8. An application under either definition is subject to the governing concept of proportionality: More Marine Ltd. at para. 9. [28] Mr. Justice Kent emphasized the importance of professional conduct and the ethical obligations of counsel in both stages of the document production process, in Imperial Parking Canada Corporation, at para. 25: [25] This "two-tiered" process of initial narrow discovery of documents followed by broader discovery of documents upon justifiable demand requires a rigorous assessment of the adequacy of any party's discovery of documents. Casual, pro-forma approaches should be avoided. Counsel have an ethical and professional duty to be diligent and to act with scrupulous integrity with respect to the pursuit and assessment of what documents must be produced and what documents need not be produced. [29] In this case, I accept the statement by counsel for the Cohen Defendants that all of the documents from within the time period counsel considers material that relate to one or more issues in the case have been, or will be, produced. I take this to mean that all of the documents in the possession or control of the Cohen Defendants from within this time period that could be used by either side to prove or disprove a material fact have been, or will be, listed in accordance with Rule 7-1(1). [30] I accept, as well, the statement of counsel for Mr. Cameron that

all of the documents in Mr. Cameron's possession or control that could be used to prove or disprove a material fact were provided to counsel for the plaintiffs before this action commenced. [31] Having said this, I think it is appropriate to make an order on the terms sought in paragraph 1(a) of the notice of application, requiring the defendants to comply with the plaintiffs' demand based on Rule 7-1(1). Subject to the date range in some of the categories, which is addressed below, I do not understand the defendants to be opposed to producing the documents sought in paragraph 1(a). As the production is on-going, an order on the terms sought in paragraph 1(a) will help to avoid future disputes. [32] I think it also is appropriate to make an order on the terms sought in paragraph 1(b) of the notice of application, requiring the defendants to search their personal e-mails for documents that should be listed under Rule 7-1(1). While I acknowledge that counsel have already asked the defendants to search their personal e-mails, given the reliance on the defendants to perform these searches, I think it is important that they fully understand and discharge their obligation. [33] However, I no not see a basis at this time for an order on the terms sought in paragraph 1(c) of the notice of application. [34] Paragraph 1(c) of the notice of application is based on the broader scope of

discovery under Rule 7-1(14). The document demands to date by counsel for the plaintiffs have been fairly general in nature, with reference to pleadings only. This is understandable in a case of this nature, and adequate for a demand under Rule 7-1(10). To gain access to the broader scope of document production under Rules 7-1(11) and (14), however, the plaintiffs will need to be more specific in their demands and, on an application to the court, provide at least some evidence of the existence and potential relevance of the additional documents they seek. The likely source of further specifics and supporting evidence is the examinations for discovery. [35] Turning back to the date range under paragraph 1(a), I do not agree with the Cohen Defendants that the material facts of this case are confined within the time period ending on July 6, 2016. [36] Although a secret benefit or kick-back is not expressly pleaded, the notice of civil claim does allege that the defendants caused EPL to enter into a series of transactions immediately prior to and following the 2016 AGM that were without consideration (para. 45), undertaken with the intent to injure EPL (para. 53), and unnecessary and without rational reason (para. 61). [37] In paragraph 66(r) in the legal basis section of the notice of civil claim, the plaintiffs allege that the defendants breached their fiduciary duty by failing

to disclose a material interest in the buy-out agreement, the escrow agreement and the transfer of funds. In response to a demand by the Cohen Defendants for particulars of this allegation, the plaintiffs allege undisclosed prior relationships or dealings between the defendants and the two South African companies involved in the transactions. [38] Further, in paragraph 76 in the legal basis section of the notice of civil claim, the plaintiffs allege that the defendants have been enriched by the transfer of funds and other benefits received from the plaintiffs. [39] While these latter allegations are not, strictly speaking, allegations of fact in the factual basis section of the notice of civil claim, I do not think pleadings should be compartmentalized in this way when determining what the material facts are for the purposes of document disclosure. The material facts in this case include allegations that the impugned transactions were entered into for ulterior purposes and the defendants were unjustly enriched as a result. Documents that came into existence after the defendants left the company on July 6, 2016, may be relevant to the defendants' understanding of the transactions in issue, their relationship with the entities identified in the notice of civil claim and whether they stood to benefit in any way from the transactions. [40] To be clear, the scope of the defendants'

obligation to produce documents beyond July 6, 2016, is limited, at this stage, to Rule 7-1(1) and documents that could be used to prove or disprove the plaintiffs' allegations. Again, to gain access to the broader scope of document production under Rule 7-1(14), the plaintiffs will need to be more specific and provide at least some evidence of the existence and potential relevance of the additional documents they seek. [41] The same reasoning applies, in my view, to the defendants' telephone records, travel documents and personal calendars, to the extent those documents exist. Evidence of meetings or discussions with each other or with the entities referred to in the pleadings that occurred after July 6, 2016, may be relevant to the defendants' understanding of the transactions in issue and whether they stood to benefit in any way from those transactions. Documents of this nature that could be used to prove or disprove the plaintiffs' allegations must be listed under Rule 7-1(1) and produced to the plaintiffs. [42] The Cohen Defendants' choice of November 2014 as the starting point of the material date range also appears to be overly confining. The response to civil claim relies on discussions "in 2014" (para. 27) and a share purchase agreement concluded on November 7, 2014 (para. 28). Documents that could be used to prove or disprove the nature of the discussions in 2014 must

be listed under Rule 7-1(1) and produced to the plaintiffs. [43] The plaintiffs argued that documents predating 2014 must also be produced because the Cohen Defendants rely on a loan agreement concluded prior to 2014. This is not clear to me; I would not make an order at this time requiring production of documents predating 2014. B. Affidavit of Documents [44] Rule 7‑1(8) authorizes the court to order a party to swear an affidavit verifying a list of documents. The circumstances that may require an affidavit of documents were reviewed by Mr. Justice Schultes in Copithorne v. Benoit, 2010 BCSC 130: [11] A useful authority on this issue is the decision of Mr. Justice Legg (as he then was) in Foundation Co. of Canada Ltd. v. Burnaby (District), [1978] B.C.J. No. 557 (S.C.) at para. 7: When some documents which are significant to the defence or claim of one party, have, for whatever reason, been omitted from any list delivered under Rule 26(1), in the absence of any adequate explanation or reason for such omission, an order directing the delinquent party to deliver an affidavit verifying the list of discovered documents ought, in my view, to be made. [12] In addition to responding to the omission of significant documents, such an order may also be necessary when a party has shown a "dilatory and casual attitude to production of documents" giving the other party "reasonable cause to

suspect that either deliberately or by wilful indifference relevant documents may be hidden from them." Such an order tells the dilatory party in effect "no more missing documents." Those principles are drawn from Synergy Management Group Ltd. v. Walker Systems Corp., [1992] B.C.J. No. 2109 (S.C.). [13] On the other hand Mr. Justice Smith of this court has recognized in Centura Building Systems Ltd. v. Blackcomb Mountain Development Ltd. (2007), 74 B.C.L.R. (4d) 139 at para. 39 that a more nuanced application of Rule 26(3) may be appropriate in large scale cases. In large and complex cases like this one, document production tends to be a lengthy and ongoing process. The volume of documents involved is such that, no matter how diligent the original search, documents can be overlooked and come to light later in the process. Issues tend to develop and/or clarify as the case goes on, which may lead to altered views about what is or is not relevant. This case obviously involves thousands of documents covering a lengthy period. Thousands of documents have already been produced and more are apparently forthcoming. In the circumstances, I am not satisfied that, to this point, there has been inadequate or dilatory production sufficient to require an order for an affidavit verifying the lists of documents. (Emphasis added in Copithorne) [45] Generally, an affidavit will not be ordered

where there has been a genuine dispute about what is producible: Centura, at para. 38. [46] In the present case, there is no basis for me to conclude that the document production by the Cohen Defendants has been "clearly inadequate" or that the Cohen Defendants have displayed a "dilatory or casual approach" to document production. [47] The Cohen Defendants have produced 4,429 documents to date, consisting of nearly 38,000 pages. Most of these documents are from Mr. Lee's hard drive, the contents of which were only delivered to counsel in March or April of 2019. Mr. Lee's hard drive included a large volume of irrelevant material which need to be culled prior to production. Although Mr. Lee's delay in providing the backups he made of corporate documents and e-mails is troubling given the company's early demand that he return such materials, the time that it has taken defence counsel since these proceedings were commenced to obtain and review the contents is adequately explained in my view. [48] While the production by the defendants other than Mr. Lee has been limited, I do not view the paucity of documents produced so far as necessarily suspicious. The defendants who were in management say they were denied access to the company's servers and e-mails immediately following the 2016 AGM. The outside directors say they never had anything more than ordinary directors' packages. The

veracity of these statements may be tested by the plaintiffs in the examinations for discovery. [49] Likewise, I do not see the gaps in the defendants' production as necessarily suspicious. None of the missing e-mails identified by the plaintiffs appear to me to be significant or deliberate omissions. While there may be other missing e-mails, there is no basis for me to conclude that the gaps are the result of indifference on the part of the defendants to their obligations under the Rules. The defendants are required to search their personal e-mails. Their efforts to locate relevant documents from their various e-mail accounts may be explored with them on discovery. [50] In NMH Holdings Ltd. v. The Crestmark Developments Limited Partnership, 2012 BCSC 2215, Mr. Justice Voith ordered an affidavit of documents, without a finding of dilatory conduct, so as to provide the applicant with some degree of formal comfort without having to take up time at discovery to investigate its concerns. However, there were a number of unique factors that militated in favour of an affidavit in that case. First, the responses given to a number of document requests were unclear as to what had been produced and why. Second, the trial date had either been adjourned or changed twice, the new trial date was less than six months away and dates for examinations were difficult to obtain. Finding that an

affidavit was an efficient and pragmatic step in these circumstances, Mr. Justice Voith emphasized that his conclusions should not be considered to be a template for future applications in other cases (para. 56-60). [51] In this case, I find that the Cohen Defendants have been sufficiently clear in terms of what has been done and what has been produced. The trial is still a year away. I do not consider it unrealistic for the plaintiffs to examine the defendants on their document production as part of their discovery on the allegations in the notice of civil claim. Indeed, I see questions about document production to be closely aligned with the lines of questioning one would expect in a case of this nature. IV. CONCLUSION [52] There will be an order in the terms sought in paragraphs 1(a), 1(b), 2, 3 and 4 of the notice of application. The relief sought in paragraphs 1(c) and 5 is dismissed. [53] Success on this application was divided. Accordingly, the parties will bear their own costs of the application. "Master Elwood"