The COVID-19 pandemic has forced many court proceedings online. While all parties, including their lawyers, remain bound by the same rules as in-person proceedings, there is always a risk for mischief in online activities.
In a recent Ontario decision, the court sanctioned a party who was found to have engaged in misconduct during a cross-examination conducted over Zoom.
Shareholder Dispute Leads to Court Application
The applicant and the respondent were each a 50% shareholder in a company they incorporated in 2019.
However, in July 2020, the applicant filed an application with the court seeking, among other things, an order compelling the respondent to sell his shares in the company and a declaration that the respondent’s actions had been conducted in a manner that was oppressive.
The cross-examination of the respondent was scheduled for November 12, 2020 in preparation for the application hearing.
Due to the COVID-19 pandemic, the cross-examination was conducted via Zoom.
Misconduct Alleged During Virtual Cross-Examination of Party
On the date of the cross-examination, the respondent, the respondent’s lawyer and an interpreter were present in the lawyer’s boardroom. Each was on a separate device so that each had a separate participant window for the Zoom attendance. The court reporter and the applicant’s lawyer attended from elsewhere on separate computers. The applicant also attended from a separate computer.
The respondent’s wife and son had gone with him to the examination, but the respondent stated to the applicant’s lawyer that they remained in the reception area at all times and were never in the room during the examination. The respondent’s lawyer also confirmed that only himself, the respondent and the interpreter were in the room.
However, after the examination was over, the applicant remained on the Zoom meeting and noticed that a microphone and video camera on one or more of the devices used for the examination in the respondent’s lawyer’s boardroom were still on. The applicant could hear the voices of the respondent’s wife and his son, which the applicant recognized because they had all previously worked together. The court reporter and the interpreter were still on the link, so the applicant continued to listen.
As he listened, the applicant became alarmed when he heard some exchanges between the respondent’s wife, son, and the interpreter, including the following comments:
- The interpreter said, “When he’s asked a question you confused him. You should have prepared him properly about what your answers were going to be.”
- The son said, “We got the papers out last night at 10:00 pm.”
- The interpreter said, “When you are sitting there doing ‘this’ it was hard for him.”
- The wife said: “No, no he still answered well and gave excellent answers.”
As such, it became clear to the applicant, from what the wife had been saying, that she had listened in on the examination. The applicant recorded the exchanges on his cell phone.
When the applicant’s lawyer confronted the respondent’s lawyer about this, the respondent’s lawyer denied it. However, later, the interpreter confirmed that the respondent’s family had been in the room during the examination.
As a result, the applicant filed a motion to strike out the evidence of the respondent on the basis of misconduct during his cross-examination and on the grounds of abuse of process.
Court Sanctions Respondent for Misconduct
After reviewing the evidence, the court concluded that there had been misconduct during the respondent’s cross-examination. It found that, while off screen, the respondent’s wife and son had been present in the room with him. It further found that the wife and son had made hand and facial gestures to assist the respondent during his examination.
In considering the risk of misconduct and mischief during virtual examinations, the court stated:
“The risk of mischief on a virtual examination is an area which has yet to be fully explored…
It is clear that the use of virtual examinations will continue by this Court and will become the norm for the foreseeable future. Even when the pandemic is behind us, the comfort level we have all gained with this form of technology is such that it is likely to continue to be a strong option for parties, particularly where a witness is out of country, out of province or has mobility or health issues.
Given the inevitable future of virtual examinations in the legal system, it is up to the judiciary, as its gatekeepers, to ensure that this tool is not abused nor seen to undermine our globally admired legal system.”
Ultimately, the court allowed the applicant’s motion, ordering the striking out of the respondent’s evidence during examination. While the court noted the severity of the remedy, it stated:
“The integrity of the fact-finding process must be maintained. This includes the fact-finding process on virtual cross-examinations. This mischief could only have happened on a virtual examination. In a face-to-face examination, examining counsel has control over who is and is not present at the examination….
I find that the Respondent’s misconduct in this matter amounts to an abuse of process of this Court and the affidavit in his Responding Record must be struck. The Court must send a strong message that interference in the fact-finding process by abusing or taking advantage of a virtual examination will not be tolerated. In a broader sense, this type of misconduct strikes at the very heart of the integrity of the fact-finding process such that general deterrence is also a factor.”
The court refrained from issuing any sanctions for the respondent’s lawyer, noting that the applicant had not sought such a remedy. It noted, however, that had the applicant sought to have the respondent’s lawyer removed, it would have given the request serious consideration. In closing, the court observed:
“In any event, I believe that it would be inappropriate for [the respondent’s lawyer] to continue as counsel in this matter, but make no order in that regard.”
As a result, the applicant’s motion was allowed and the respondent’s examination evidence was struck out.
When shareholders find themselves in conflict about key business decisions or management strategies, this can create a significant threat to the day-to-day operations and overall success of the company. The best practice to avoid such disagreements in the first place is to have an effective and comprehensive shareholder agreement in place.
The business law lawyers at Bader Law have been helping business owners and entrepreneurs in Mississauga and the surrounding areas mitigate their liability and potential risk for over a decade. We will review each client’s specific needs and work with them to design a shareholder agreement that contemplates and sets out strategies for managing a variety of potential issues. Our clients range from small family businesses to large operations with millions of dollars in annual revenue, giving us the experience to know how to effectively address the needs of any type of organization.
The business lawyers at Bader Law have been establishing trusted relationships with business owners and entrepreneurs in the Mississauga community for over a decade. We work with each client to develop an effective strategy focused on their specific needs and will create custom shareholder agreements designed to avoid conflict and mitigate risk. When conflicts do arise, we represent clients in a variety of issues and work to find effective and practical resolutions in every situation. To discuss your needs with a skilled lawyer, contact us online or at (289) 652-9092.