NATIONAL BANK OF CANADA v SUNTERRA FOOD CORPORATION

This decision addressed whether witnesses cross-examined on Affidavits and others examined pursuant to Rule 6.8 should be compelled to answer objected-to questions, provide taken-under-advisement-but-declined and refused undertakings and undergo further examinations on such answers and undertakings.

The case arose from a dispute between Sunterra Food Corporation (“Sunterra”) and Compeer Financial PCA (“Compeer”) regarding procedural steps and orders leading up to applications set in December for determining the nature and quantum of each creditor’s claim in Sunterra’s CCAA proceedings (the “December Applications”).

Pursuant to Procedural Orders, Sunterra cross-examined two Compeer affiants, with various questions objected to and undertaking requests either refused or taken under advisement and later declined. Sunterra also examined Compeer’s President and Chief Risk Officer pursuant to Rule 6.8, with neither providing an Affidavit; however, these examinations also included various objected-to questions and refused or later declined undertakings. As such, Sunterra applied for an Order to compel, seeking the requested information and to open the door to follow up examinations, as well as an Order to strike three Compeer Affidavits which were late according to the Procedural Orders. Compeer opposed, arguing that the Procedural Orders prevented any further procedural steps, including compelling answers or follow-up examinations.

Justice Lema analyzed the Procedural Orders, including its recent amendment, and determined that Sunterra with full knowledge of outstanding objections and refused undertakings, agreed to the amended Procedural Order, affectively waiving any right to seek a compel order in relation to the examinations of the affiants. Lema J. found that the Order was intended to provide finality and certainty in the lead up to the December Applications and did not contemplate further examinations or undertakings.

The Court applied the same analysis to the Rule 6.8 witness examinations, determining that Sunterra elected to proceed under the procedural mechanics of Rule 6.8 without preserving any right to compel answers or undertakings. The Parties were divided on whether undertakings could be requested of Rule 6.8 witnesses, as the Rule is silent on the point. Compeer claimed it could not, citing caselaw that held undertakings could not be sought of Rule 6.8 witnesses. Lema J. agreed with Compeer, finding that Compeer and Sunterra agreed to the procedural mechanics (the technical rules) of Rule 6.8 for the examinations, including its associated Rules 6.16-6.20.

Sunterra did not point to any caselaw holding that Rule 6.8 witnesses were susceptible to undertaking requests nor any evidence that it had obliged either Rule 6.8 witness to bring any records to the appointment for questing as it could have done pursuant to Rule 6.16(1)(b), which the Court theorized could have made for more fruitful examinations. Further, Sunterra did not invoke Rule 6.16(3) for this Application which governs the resolution of disputes over mechanical aspects of Rule 6.8 examinations, including “any related matters”. Justice Lema concluded that the amended Procedural Order expressly adverted undertakings, signalling that none could be pursued passed the date already set for undertaking responses which had passed.

The Court acknowledged fairness considerations that were raised by both Parties but emphasized the importance of adhering to agreed-upon procedural frameworks. Justice Lema also determined, consistent with the above conclusions on the Procedural Orders, that the Compeer Affidavits ought to be struck because they were too late and not otherwise contemplated by the Procedural Orders. The Court held the Parties to the litigation plan they agreed to, struck the late-filed Affidavits and dismissed the compel-related relief.