Paul D Bowilen v. Her Majesty the Queen, [1976] CTC 577, 76 DTC 6334

Smith, DJ:—This is a motion by the defendant for an order

(1) directing the Royal Bank of Canada to produce and allow the inspection by officers of the Defendant all ledgers, records, memoranda, correspondence, documents and other records in the possession of the Royal Bank of Canada with respect to Paul D Bowlen, the Plaintiff herein, Regent Tower Estates Limited, Hambeldon Estates Limited, Tico Estates SA and Bowlen Investments Ltd, wheresoever found including, without restricting the generality of the foregoing, the documents set out in Schedule A hereto which documents were sent, received, prepared or originated by the Royal Bank of Canada, its agents or servants in the course of carrying on its business.

(2) directing the preparation of certified copies of the said documents.

On the hearing of the motion counsel for the defendant stated that the defendant was not, at this time, seeking production of documents with respect to Tico Estates SA.

Schedule A to the motion contains a list of 319 documents.

The Statement of Claim in the action states that the Minister of National Revenue has reassessed the plaintiff in respect of each of his 1963 to 1970 taxation years, adding to his income as previously assessed substantial amounts for each year, totalling in all the sum of $2,406,814.92. It asks for a declaration that no portion of this sum is the plaintiff’s income and that no portion thereof should be included in his income.

The Statement of Defence states that the amounts added to the plaintiff’s income by the Notices of Reassessment were properly added thereto and asks that the action be dismissed.

The true nature, purpose and effect of three transactions, all of which took place on May 9, 1963, are very much in issue in the action. According to the Statement of Claim these were as follows:

1. On or about May 9, 1963 the plaintiff purchased from Regent Tower Estates Limited (hereinafter called Regent) demand debentures of that company in the total amount of $6,891,647.59 Canadian Funds and paid that sum to Regent by cheque.

2. On or about May 9, 1963, after completion of transaction number 1, Regent purchased a debenture of Hambeldon Estates Limited (hereinafter called Hambeldon) in the same amount and paid that sum to Hambeldon by cheque.

3. On or about May 9, 1963 Hambeldon purchased from the plaintiff securities consisting of shares, bonds and debentures having a total market value of the same amount, $6,891,647.59 and paid that sum to the plaintiff by cheque.

Both Regent and Hambeldon were incorporated under the Companies Act of the Bahama Islands.

The Statement of Defence says that the purpose of the plaintiff in causing these two companies to be incorporated was to have offshore companies available to him so that he would be able to give the “appearance” of legally diverting income and capital which was properly his personal income and capital to either or both of Regent and Hambeldon.

From the pleadings it seems clear that the plaintiff controlled Regent at all material times, its shares being held by Trust Corporation of Bahamas Limited in trust for his wife and children. The Statement of Defence states that at all material times the plaintiff owned substantially or otherwise controlled all the shares of Hambeldon. This is denied by the plaintiff.

The Statement of Defence then says that all three transactions of May 9, 1963 were shams or similar transactions and that none of the purchasers had at any material times sufficient funds to cover their respective cheques.

At the hearing of this motion it was stated by counsel for the defendant, and not denied, that all three of the foregoing transactions took place at the New York branch of the Royal Bank of Canada.

There can be no doubt that the Royal Bank has or has had in its possession documents relevant to the issues in this action. In fact, most, if not all, of the 319 documents listed in Schedule A to the Notice of Motion have been seen at the New York branch of the bank, by representatives of the defendant.

Counsel for the defendant submits that the availability of the said 319 documents and of other documents in the possession of the bank relating to the matters in issue in the action, for presentation to the Court at the trial, is vital to the defendant’s case. The question before me is whether the order asked for may properly be made and, if so, should it be limited in its application.

The jurisdiction of the Court to order a person resident in Canada to produce documents situated outside Canada for use in litigation in a Canadian court, though that person is not a party to the action, is well settled. The Royal Bank of Canada is a banking corporation created under the Bank Act, having its head office at the City of Montreal. It is domiciled in Canada. The fact that the documents whose production is asked for, or most of them, are situate at the bank’s branch in the City of New York, USA is no bar to the Court making an order of the kind sought (Robertson v St John City Railway Company (1892), Tru [NB] 476). Neither is the special relationship of a bank to its customers nor the fact that compliance with such an order may occasion inconvenience to the bank (Hannum v McRae et al (1898), 18 OAR 185).

The present motion is brought under Rule 464 of the Federal Court Rules. Subsection (1) of this Rule reads:

Rule 464. (1) When a document is in the possession of a person not a party to the action and the production of such document at a trial might be compelled, the Court may, at the instance of any party, on notice to such person and to the other parties to the action, direct the production and inspection thereof, and may give directions respecting the preparation of a certified copy which may be used for all purposes in lieu of the original.

Ontario Rule 349, formerly 350, is in identical terms except that it has the words “opposite party” instead of “other parties to the action”, which difference has no significance for our purposes. In British Columbia and probably other provinces a Rule in very similar terms exists. There has been a good deal of controversy as to the true meaning and application of the Rule, which controversy has not yet been fully resolved. There has, however, been general judicial agreement that the Rule is not intended to authorize obtaining discovery from a stranger to the action nor engaging in a fishing expedition. Much of the controversy that has arisen is due to the fact that the distinction between what is and what is not a fishing expedition and likewise the distinction between what is and what is not seeking discovery from a stranger to the action seem to be affected by the facts and circumstances of each case. The result is, at least to my mind, that some of the decisions are difficult to reconcile.

The case of McCurdy v Oak Tire & Rubber Co Ltd (1918), 44 OLR 235, has frequently been cited and followed, as one that lays down the general rule. In it Middleton, J said:

I am clear that Rule 350 [now 349] was intended to simplify the procuring of evidence, and to avoid the taking of a witness who is the custodian of documents to a trial, and was not intended to be a means of obtaining discovery from strangers to an action.

A few years later, in Lang Shirt Co Ltd v London Life Insurance Company (1926), 31 OWN 285, the Master (Garrow) stated the matter more explicitly. He said [at p 286]:

The Rule applies not to discovery at all, but to the production and inspection for the purposes of the trial, including the making of certified copies, of documents shewn to be in the possession of a stranger to the action, the production of which might be compelled at the trial. Before any order can be made under it it must be made to appear that a stranger to the action has in his possession certain specific documents which the Court would in all probability admit at the trial as evidence in respect of some of the issues in the action.

Doig v Hemphill, [1942] OWN 391, is another case frequently cited as indicating limits to the production of documents under Ontario Rule 350. In that case the defendant had acted for the plaintiffs, and also for a number of other persons, as agent in dealings on the grain market. All purchases and sales were made through Parrish & Heim- becker Limited, brokers, and all of them were made in the defendant’s own name. The plaintiffs applied for an order that the brokers should produce for inspection their record of all orders for sales and purchases given by the plaintiffs during a specified period. The Master, F H Barlow, KC said, at page 392:

The dealings of the defendant with the brokers, Parrish & Heimbecker Limited were in his own name on behalf of the the plaintiffs and several other persons and it, therefore, follows that a production and inspection of the brokers’ books and even a certified copy thereof, will not be of any assistance to the plaintiffs at the trial without calling as a witness someone from the brokers’ office. It is clear that the purpose of this application is to obtain discovery from Parrish & Heimbecker Limited, a stranger to the action. This is contrary to the proper interpretation of Rule 350.

Twenty years later, in Weber v Czerevko, [1962] OWN 245, in the Ontario High Court of Justice, the Master (Kimber) gave a similar opinion. In that case a nurse’s aide claimed that she had been assaulted and injured by the defendant, who with others operated the small hospital where the plaintiff worked. The plaintiff had suffered from a nervous disorder prior to the occurrence complained of. The defendant applied for an order directing the St Catharines General Hospital and the Hotel Dieu Hospital to produce all of the medical records and history in any way pertaining to the treatment of the plaintiff. The Master referred to Doig v Hemphill, saying:

In the last mentioned case the master (Barlow) makes it clear that Rule 349 is not designed to give the right to discovery from a third person. That, in fact, is what the defendant is asking for in this case. The defendant does not know whether there are any records that would be of assistance to him, nor what those records will disclose if they in fact do exist. He will be embarking upon a fishing expedition to see If he may discover something which will be of assistance to him at the trial. In fact, what he is asking for is no different from asking for the right to examine a potential trial witness,

While It might have facilitated the administration of justice had this Rule been given a wider interpretation, the authorities are quite to the contrary and this application must be dismissed.

We now turn to a more recent case which had a different result. McGilly v Cushing et al, [1964] 2 OR 544. This was an appeal by the defendant from an order of the Master refusing production by the plaintiff of medical records. The defendant asked leave to amend her application by asking in the alternative for an order under Rule 349 directing the production and inspection of the medical reports of the Toronto General Hospital upon the plaintiff in respect of her hospitalization and treatment for the injuries which were the subject matter of the action. Haines, J said, at the bottom of page 544 and continuing on pages 544-5:

It is apparent that the medical records contain important information that ought to be before the Court .. ., and that the production of this medical record might be compelled by either party at the trial through the simple expedient of a subpoena duces tecum.

The applicant submits that the medical record should be produced now and I am Inclined to agree. A properly compiled medical record is a team effort containing the reports of doctors, technicians, nurses and other members of the staff. When its production is obtained for the first time at the trial through the medium of a subpoena much of the important information cannot be admitted in evidence since its introduction offends the hearsay rule. A party desiring to introduce this evidence is then compelled either to ask for an adjournment which causes great loss of time of the Court, counsel and witnesses or to endeavour hastily to locate those who have made the reports and place them under subpoena. This results in great inconvenience to witnesses who are summoned peremptorily to appear on a few hours’ notice, and furthermore causes disruption to the work of the witness and those members of the community served by him. It seems to me that It is the duty of this Court so to direct the use of Its processes that there wil) be timely disclosure to the parties of material facts In the possession of persons not parties to the litigation and thereby an opportunity be afforded the parties to arrange for the attendance of witnesses with some regard to the other commitments of the witnesses. In this respect I take especial cognizance of the demands of the community on the medical and paramedical services.

On page 546 he said, in part:

An order will go directing the proper officers of the Toronto General Hospital to permit the applicant, or his solicitors, to inspect and receive information from the medical record of the plaintiff. . . .

In Markowitz v Toronto Transit Commission, [1965] 2 OR 215, Thompson, J agreed with Haines, J’s opinion in the McGilly case that previous inspection, ie, before trial, should be ordered for the purpose of facilitating proof at trial of the information therein contained.

Then in Kokan v Dales, [1970] 1 OR 465, Lacourciére, J agreed with both Haines, J’s and Thompson, J’s view. At page 468 he said:

It seems to me that Rule 349 by its terms is not restricted only to documents admissible at trial. . . .

The fact that some medical records are compellable at trial by subpoena but are not admissible at trial as being statements of opinion, diagnosis, impression, or of events which occurred outside of the hospital prior to admission, dictates that such medical records should be produced for inspection prior to trial so as. to facilitate proof of information therein contained at trial.

And at page 470 he said:

While the order [under Rule 349], if made, may indirectly be a discovery of documents in the hands of the third party, the application is not brought for the purposes of discovery, but rather to facilitate proof of information at trial, and therefore there is no more an element of discovery present in this case than was present in McGilly v Cushing and the many cases that followed it. Some documents and entries in the record might be quite irrelevant to the action and perhaps embarrassing to the plaintiff and even scandalous and as such cannot be used at trial. I agree with counsel, however, that it is impossible to determine if these qualities exist without first seeing the documents and records, and their admissibility will have to be determined by the trial judge.

Coderque v Mutual of Omaha Insurance Company, [1970] 1 OR 473, is another case in which production of medical documents and reports In the possession of a doctor was ordered on the application of the defendant. Keith, J said at page 477:

This is not a question of obtaining discovery from a third party. It is perfectly apparent, both from the affidavit of Mr Cornwall in his cross- examination on it that the defendant is well aware of the fact that Dr Will is in possession of documents, specifically electrocardiograph reports and others, that have most direct bearing on the very issue which Is between the parties in this case. This is no fishing expedition.

Keith, J did not, however, agree with the argument of defendant’s counsel that a whole new line of authority had developed with the case of McGilly v Cushing. He said:

■I do not agree. In my opinion Haines, J in the McGilly case, above referred to, did not depart from the principles laid down in the original case of McCurdy v Oak Tire Co from which this controversy stems and, indeed, Thompson, J in the Markowitz case expressly found that there was no deviation in principle.

There is one further case I wish to refer to, namely Rhoades v Occidental Life Insurance Company of California (1973), 3 WWR 625. This was a decision of the British Columbia Court of Appeal. Like the Coderque case it was a claim under a life insurance policy. The defendant insurance company pleaded that the insured died by suicide, within two years of the issue of the policy, and, further, that the policy had been rendered void or voidable by misrepresentation or failure to disclose suicidal tendencies. The defendant applied under O 31, R 20A (MR 362A) of the Rules of the Supreme Court of British Columbia for the production, inspection and copying of all documents in the possession of Dr James E Miles and University of British Columbia Health Sciences Hospital relevant to the death of the insured, including documents outlining her medical history and all notes, records and tests related to her mental or physical health.

McFarlane, JA (in whose judgment Robertson, JA concurred) referred to Ontario cases, eg, McCurdy v Oak Tire and Doig v Hemphill (supra) as holding that the comparable Ontario Rule was intended merely to simplify the procuring of evidence for presentation at trial and was not intended to be used for the purpose of compelling discovery by a person not a party to the action. He stated that in Doig v Hemphill, Barlow, Master, had quoted from Lindley, LJ in Elder v Carter (1890), 25 QBD 194 at 198, and had said: “This is clearly applicable to our Rule 350.”

McFarlane, JA then pointed out that the English Rule under which Elder v Carter was decided dealt only with production of documents and not with their inspection as did BC Rule O 31, R 20A. Further the English Rule was directed to enforcing the attendance of a person, while the BC Rule was directed to production and inspection. The BC Rule in effect before 1970 had been identical with the English Rule under which Elder v Carter was decided. The learned Judge of Appeal could not accept the idea that the introduction of the new BC Rule, O 31, R 20A in 1970 left matters virtually unchanged. For these reasons he said the reasoning based on Elder v Carter was not applicable in British Columbia.

McFarlane, JA then quoted Middleton, J’s short statement in McCurdy v Oak Tire about the intended effect of Ontario Rule 350 (supra), and noted that Middleton, J’s statement gave no apparent effect to the word “inspection”. He concluded by saying he did not feel he “should apply McCurdy v Oak Tire here”, and noted that later decisions in the Ontario courts had given a less restricted meaning to Rule 350 than had been given in that case.

McFarlane, JA at page 628 agreed that the Rule should not

be used for the mere purpose of obtaining discovery from a person not a party. This would be a “fishing expedition”, ie, an attempt to discover whether or not that person is in possession of a document, the production of which might be compellable at trial and if so, the nature of the document. The reason why a fishing expedition is not permissible is that the Rule envisages an application being made with respect to a particular document and an order for the production and inspection of that document. It must therefore be shown to the court or judge that such a document is in the possession of a person who is not a party to the action before an order can be made for the production of the document by him. I do not, however, think that the description of the document sought must be so specific that it could be picked out from among any number of other documents.

In the case before him he thought the description of the documents in the Notice of Motion launching the application was sufficient.

Branca, JA, the third judge sitting on the appeal, wrote a separate judgment, agreeing in the result.

In my opinion, after a careful study of all the cases referred to above, and of others cited to me, the limitations contained in Middleton, J’s statement in McCurdy v Oak Tire & Rubber Co (supra) of the purpose of Rule 350 has been broadened to some extent by the recent decisions mentioned and others to a similar effect. This broadened purpose first appeared in McGilly v Cushing. Its application in particular circumstances has been explained in cases subsequent to it.

It is true that ail the recent cases referred to above were cases in which the documents of which production was ordered were medical or hospital documents, records and reports, but I see no reason why the result should be different in other kinds of cases, provided the conditions are right. It is clear that the production sought need not be of one particular document only, but may be of all the documents in the possession of a person not a party to the action, provided they are sufficiently described as to indicate their relevance to the issues between the parties, more particularly to the applicant’s case. They must thus be documents of which it is likely that production would be compelled at the trial. This does not mean that they must be admissible as evidence at the trial, at which time their admissibility will be determined by the trial judge.

In the present case the defendant’s representatives have seen 319 of the documents of which her counsel is seeking production, inspection and preparation of certified copies at the New York branch of the Royal Bank of Canada. Counsel submits that he cannot prove these documents unless the application is granted. These 319 are specific documents which are sufficiently described by names and dates and in some cases by subject matter. Counsel is also seeking production, inspection and certified copies of all other documents in the possession of the Royal Bank of Canada with respect to the plaintiff Paul D Bowlen, Regent, Hambeldon and Bowlen Investments Ltd. In view of the purposes for which the defendant alleges Mr Bowlen had Regent and Hambeldon incorporated in the Bahamas, the relationship alleged to exist between the plaintiff and these two corporations, and particularly in view of the allegation that the three transactions, each involving a cheque for $6,891,647.59, all made on May 9, 1963 and involving the plaintiff and Regent and Hambeldon, were all carried out at the New York branch of the Royal Bank of Canada, it appears to be certain that the Royal Bank has in its possession a number of documents relevant to the defendant’s case. From what was said by counsel at the hearing it seems more than likely that some of such documents have not been seen by representatives of the defendant. I do not consider that asking for all documents in the possession of the bank is any more a fishing expedition than was asking for the production of all documents in the possession of the doctor or hospital in the medical cases. The purpose alleged to have led to the incorporation of Regent and Hambeldon and the relationship alleged to exist between the plaintiff and those companies indicates that almost every transaction between them or between him and one or both of them is highly likely to be relevant to the defendant’s case, as will the documents relating to all such transactions.

On this point I agree with the words of Lacouriére, J in Kokan v Dales (supra) at page 470 of the report, and hold them applicable to the present case. He said:

While the order [under Rule 349], if made, may indirectly be a discovery of documents in the hands of the third party, the application is not brought for the purposes of discovery, but rather to facilitate proof of information at trial, and therefore there is no more an element of discovery present in this case than was present in McGilly v Cushing and the many cases that followed it.

The application is granted. There will be an order directing the Royal Bank of Canada, through its proper officers, to arrange for the production to and permit the inspection by officers of the defendant of all ledgers, records, memoranda, correspondence, documents and other records in the possession of the Royal Bank of Canada with respect to Paul D Bowlen, the plaintiff herein, Regent Tower Estates Limited, Hambeldon Estates Limited and Bowlen Investments Ltd, wheresoever found, including, without restricting the generality of the foregoing, the documents, 319 in number, set out in Schedule A to the Notice of Motion herein, which documents were sent, received, prepared or originated by the Royal Bank of Canada, its agents or servants in the course of carrying on its business.

Since it seems that most if not all of the above described documents are located at the New York branch of the Royal Bank of Canada it will probably be convenient for all parties to have the production and inspection, at least of the documents located in New York, take place there. Unless the parties otherwise agree the production and inspection shall begin not later than three weeks from the date of delivery of this order to the plaintiff’s solicitors and the bank’s solicitors. The production and inspection shall be at the cost of the defendant. The plaintiff’s solicitors shall have the right to be present at the production, to inspect the documents and make copies thereof.

The order will further direct that the bank arrange that a copy be prepared for certifying of all documents indicated by the defendant’s officers. If the defendant and the bank agree, the copies may be prepared by the bank and certified by one of its proper officers, at the cost of the defendant. Otherwise the copies shall be prepared by or under the direction of the defendant’s officers and certified either by one of them or by one of the bank’s proper officers.

As between the defendant and the plaintiff the final allocation of the costs of the production, inspection, copying and certifying will be left for the decision of the trial judge. The costs of this motion will be costs in the cause.