Beaulieu Canada Company v. Everbright Floorings Ltd., 2016 ONSC 4259

CITATION: Beaulieu Canada Company v. Everbright Floorings Ltd., 2016 ONSC 4259

DIVISIONAL COURT FILE NO.: 457/15 DATE: 20160627

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

Beaulieu Canada Company

Plaintiff/ Respondent

– and –

Everbright Floorings Ltd., Jack Wong aka Yuen Lik Wong, aka Chi Lun Wong

Defendants/ Appellants

Andrew Domenic Ruzza, for the Respondent

F. Scott Turton, for the Appellants

HEARD at Toronto: June 27, 2016

C. HORKINS J. (ORALLY)

[1] This is an appeal from the trial decision of Deputy Judge A. Ferranti. By way of background, Beaulieu Canada Company (“the respondent”) is a wholesaler of flooring products.

[2] The appellant Everbright Floorings Ltd. (“Everbright”) had purchased flooring products from the respondent for numerous years dating back to approximately 1983.

[3] In October 2009, the respondent faxed a credit application to Jack Wong, the owner of Everbright. It was filled out and faxed back to the respondent.

[4] There was no evidence to explain why the respondent sent the appellants the credit application. The evidence simply was that it was sent, completed by Jack Wong with the help of his son Jeffrey and then faxed back to the respondent.

[5] After receipt of the completed credit application, the respondent continued to sell flooring products to Everbright.

[6] Everbright ceased to operate in January 2013. At this point in time, Everbright owed money to the respondent. The debt was never paid. As a result, the respondent sued Everbright and Jack Wong.

[7] The basis for the claim against Jack Wong rested on the credit application and the respondent’s position that the credit application included a personal guarantee to the respondent from Jack Wong.

[8] The Deputy Judge found that the defendant Jack Wong was “liable under the guarantee clauses in the credit application” and granted judgment in favour of the respondent against Everbright and the defendant Jack Wong personally.

[9] Everbright and Jack Wong appeal this decision and raise three grounds of appeal. First, that trial fairness was compromised by the Deputy Judge’s excessive intervention in the examination and cross-examination of witnesses. If this ground of appeal succeeds, the appellants seek an order setting aside the judgment and an order directing that a new trial be held before a different judge.

[10] If the trial fairness ground fails, the appellants raise the following additional grounds of appeal, specifically that the Deputy Judge erred in law and/or made palpable and overriding errors of fact as follows:

(1) First, that it was an error of law to grant judgment in favour of Beaulieu Canada Company because the guarantee was given to Beaulieu Canada.

(2) The Deputy Judge erred in law because there was no consideration for the guarantee based on the facts as found.

(3) The Deputy Judge made a palpable and overriding error of fact when he found that Jack Wong signed the credit application on his own behalf in addition to signing for Everbright.

[11] I will deal first with the trial fairness issue.

Trial Fairness Issue

[12] The focus of this issue is on the examination and primarily cross-examination that the Deputy Judge conducted during the trial.

[13] The respondent acknowledges that the Deputy Judge conducted cross-examination of Jack Wong and his son Jeffrey Wong and in doing so, he crossed the line of permissible judicial intervention. However, it is the respondent’s position that this did not impact the end result of the trial. Specifically, the respondent says that there was no nexus between the judge’s conduct and the basis for his decision. For this reason, the respondent argues that the decision should not be set aside.

[14] The importance of trial fairness has been the subject of numerous decisions. The Ontario Court of Appeal summarized the law in Sargent v Plaza Ontario Marble and Tile Inc. [2005] O.J. No.5130 at para. 6 as follows:

In McFarlane v. Safadi, 2004 12644 (ON CA), [2004] O.J. No. 1763, at paras. 31 and 32, this court emphasized the fundamental principle that the hallmark of a fair trial is that the trial judge preside with the impartiality and neutrality between the parties. The court stated:

The judge must not cross the line and become a participant in the litigation. When he or she does so, his or her impartiality and neutrality are lost. It is at that moment that the trial ceases to be fair.”

See also Majcenic v. Natale, 1967 267 (ON CA), [1968] 1 O.R. 189 at 199 (C.A.) and R. v. R.D.S., 1997 324 (SCC), [1997] S.C.J. No. 84.

[15] I appreciate that given the nature of a Small Claims Court proceeding, the role of the trial judge is often, by necessity, more interventionist. The appeal court must look at the impugned interventions in the context of the proceedings as a whole to determine if the judge’s intervention rendered the trial unfair (see Auto Trim Shop v. Preston, [2005] O.J. No. 567 at para. 7).

[16] There are limits to a judge’s right to intervene, regardless of the court in which the trial takes place. In Lennox v. Arbor Memorial Service Inc. 2001 4868 (ON CA), [2001] O.J. No. 4725, the Ontario Court of Appeal stated the following at para. 13:

A trial judge is expected and entitled to take reasonable steps to ensure that the issues are clear, that the evidence is presented in an organized and efficient manner and that the trial runs smoothly and proceeds in a timely manner. Trial judges are also entitled to intervene in the trial where there is need for clarification. However, there is a point at which judicial “intervention becomes interference and is improper”. See Majcenic v. Natale (1967), 1967 267 (ON CA), 66 D.L.R. (2d) 50 at 64 (Ont. C.A.).

[17] In my view, the Deputy Judge unfortunately crossed the line of permissible intervention. He did this on several occasions when he questioned Jack Wong and his son Jeffrey Wong. In doing so, he became a participant in the trial and his questions were aimed at assisting the respondent. On too many occasions, the questions went beyond the need to seek clarification.

[18] The respondent argues that this intervention should not matter because the trial result did not necessarily depend on the answers to the impugned questions. Therefore he says that the trial was not unfair. With respect, the end cannot justify the means.

[19] As the court stated in MacFarlane “A judge must not cross the line when he or she does so his or her impartiality and neutrality are lost. It is at that moment that the trial ceases to be fair.”

[20] To appreciate the context of the Deputy Judge’s questioning, some background is necessary.

[21] Jack Wong testified through an interpreter. John Bianchi the sales representative for the appellant had dealt with Jack Wong over the years and he testified that Jack Wong speaks broken English. Mr. Wong’s son, Jeffrey Wong worked with his father in 2009. He testified that his father speaks Cantonese and can communicate with broken English but can only read very simple English. Jeffrey testified that he filled out the credit application for his father. In essence, he said that neither he nor his father understood that his father was giving the respondent a personal guarantee by signing the credit application.

[22] The credit application contained numerous blanks to be filled in. The son said that he simply wrote down what he was told to insert by his father. At the end of the credit application form, Jack Wong was required to sign for Everbright and he did so.

[23] Beneath the signing line, the document contained the following paragraph:

Furthermore the undersigned hereby engages his responsibility jointly and severally with the company for any and/or all amounts owing and/or that may become due to Beaulieu Canada as well as any costs that may be incurred for the collection of said account in capital, interests and costs and hereby renounces to all benefit of discussion, division and of subrogation. This surety ship shall not terminate as a result of the surety’s ceasing to exercise his functions.

[24] Beneath this paragraph, the document contained a signing line and this is where Jack Wong signed with his signature.

[25] The appellant’s cross-examination of Jeffrey was very brief and there was no re-examination. The Deputy Judge then embarked on an extensive series of questions that was clearly aimed at undermining the credibility of Jeffrey and his father. This is apparent from para. 41 of the Reasons as follows:

41. I find that Wong did not fail to read the guarantee clause before signing it, as he testified, and that his son did not fail to read it, or review it with his father, before his father signed it, as he testified. First, in being presented with a Credit Application for his newly formed corporation, Wong clearly understood that new credit terms were required in the circumstances, and that they would not necessarily be the same terms as previously applied to New World Carpets. Second, as a longtime businessman and, if his sales revenues for 2009 are any indication, a successful businessman, he must have been keen, on the balance of probabilities, to learn what new credit terms the Plaintiff was proposing in its pre-printed Credit Application. This is so especially because Wong had more wholesale suppliers than the Plaintiff alone, all of whom would have required credit agreements of their own, each with individualized credit terms.

[26] The cross-examination of Mr. Wong’s son runs over several pages and there are a few areas that I wish to concentrate on. These particular examples underscore the concern that I have with trial fairness. Jeffrey Wong had been examined by Ms. Leriche and the Deputy Judge embarked on a series of questions from page 33 to 34. After asking if there was “any reply?” and the answer was “no”, the Deputy Judge asked the following questions:

THE COURT: Okay. Is your father’s wife your mother?

JEFFREY WONG: She’s my stepmother.

THE COURT: Who is Ronald Mac?

JEFFREY WONG: The accountant.

THE COURT: That is not who you were referring to when you said secretary?

JEFFREY WONG: Oh no, it’s Ronald Mac, the accountant.

THE COURT: Say again?

JEFFREY WONG: Ronald Mac is the accountant.

THE COURT: How did you know that when you filled this out, Exhibit one?

JEFFREY WONG: I asked my dad who the accountant, he said Ronald Mac, so I put Ronald Mac.

THE COURT: And, on page one of Exhibit one…

JEFFREY WONG: I don’t have it.

THE COURT: You wrote in that 70% of Everbright’s business was broadloom; who gave you that information?

JEFFREY WONG: My dad.

THE COURT: And, his anticipated purchases from Beaulieu, that information came from your father too?

JEFFREY WONG: Yes.

THE COURT: He was the one that actually told you, I expect to buy $8,000 worth of carpet on a weekly basis?

JEFFREY WONG: I don’t have it with me, can I see?

THE COURT: Ms. Leriche? You see, this is the problem when you only come to Court with one copy?

MS. LERICHE: I know.

THE COURT: You are supposed to come with copies for everyone, so everyone can follow.

MS. LERICHE: I understand, Your Honour.

THE COURT: Madam Clerk, do you want to make three copies. That is the central document on which you are relying, and you don’t come with copies.

THE COURT: Okay, do you want to give the copies to the witness, to Ms. Leriche, and Mr. Turton. All right, look at the bottom of page one at Exhibit one, where future purchases are estimated to be $8,000 a week, or $32,000 a month, or $384,000 a year; who gave you that specific information?

JEFFREY WONG: My dad.

THE COURT: And, who did consult with, or what did he consult with in giving you that information?

JEFFREY WONG: I don’t know.

THE COURT: Wasn’t he with you when you filled this out?

JEFFREY WONG: Yes, so he just – yeah, he told me and I just wrote it down.

THE COURT: And, he didn’t consult with anyone before giving you these numbers?

JEFFREY WONG: I don’t know if he did or not.

THE COURT: Well, did he leave your presence to make a phone call?

JEFFREY WONG: No.

THE COURT: Did he leave your presence to speak to anyone else?

JEFFREY WONG: No.

THE COURT: Including his secretary.

JEFFREY WONG: No.

THE COURT: Including his accountant.

JEFFREY WONG: No.

THE COURT: He had these on the top of his head.

JEFFREY WONG: Yes.

THE COURT: And, the same thing with the proportions of sales between broadloom and commercial, same thing?

JEFFREY WONG: Same.

THE COURT: And, on the second page, did your father give you these trade references?

JEFFREY WONG: Yes.

THE COURT: And, were you an employee of your father’s company at the time?

JEFFREY WONG: yes.

THE COURT: And, your sole job was to do measuring jobs?

JEFFREY WONG: Measuring jobs.

THE COURT: Were you an officer or director of the company?

JEFFREY WONG: No.

THE COURT: You said you didn’t read this document, how were you able to fill it out without reading it?

JEFFREY WONG: No, I didn’t read the fine print of the document, I just read the basic stuff like the name, address. In the front, and then where his…

THE COURT: In the front, what do you mean?

JEFFREY WONG: The first page.

THE COURT: What about the second page, what part of it did you read there?

JEFFREY WONG: Just the date, the name of the person, the name of the company, and then the references. I just pretty much filled in the blanks.

THE COURT: What were you doing otherwise in 2009, were you a student?

JEFFREY WONG: No, I was also working at my mom’s broker, financial analysis, financial advisor.

THE COURT: Your mom is a broker?

JEFFREY WONG: Financial broker.

THE COURT: What is she, a mortgage broker.

JEFFREY WONG: Financial broker; insurance, mutual funds.

THE COURT: She’s an investment broker.

JEFFREY WONG: Yeah.

THE COURT: Is she affiliated, was she affiliated with this company?

JEFFREY WONG: No.

THE COURT: What education do you have?

JEFFREY WONG: A Bachelors Business Management.

THE COURT: Where did you get that?

JEFFREY WONG: Ryerson.

THE COURT: Did you complete the program?

JEFFREY WONG: No.

THE COURT: How many years did you apply yourself?

JEFFREY WONG: Four.

THE COURT: You did four years and didn’t get a degree?

JEFFREY WONG: No.

THE COURT: Were you in a habit of not reading documents you expected your father to sign, in 2009?

JEFFREY WONG: Yeah, I was just following my dad’s instructions to fill it out, so I just filled it out. I didn’t read any of the stuff.

THE COURT: And, that was your habit? Not to read documents?

JEFFREY WONG: Well, if I trust the person giving it to me, I don’t normally read it.

THE COURT: Who gave you this document?

JEFFREY WONG: My dad.

THE COURT: Did he read the document?

JEFFREY WONG: I don’t know if he did.

THE COURT: Did he tell you what it was?

JEFFREY WONG: Just a credit application.

THE COURT: What did he understand by that?

JEFFREY WONG: I don’t know.

THE COURT: You were saying his reading is limited to reading from an English menu?

JEFFREY WONG: Yeah, because even like newspapers, he read Chinese new – I never see him read English stuff.

THE COURT: Did you live with him in 2009?

JEFFREY WONG: No, I didn’t.

THE COURT: So, how often did you see him read?

JEFFREY WONG: English or Chinese?

THE COURT: You said you saw him reading the Chinese newspapers.

JEFFREY WONG: Chinese Newspapers.

THE COURT: How often…

JEFFREY WONG: Every day.

THE COURT: …did you see him read those?

JEFFREY WONG: Well, when I see him at work in the morning he’ll read it in the mornings, Chinese newspaper.

THE COURT: Did you work five days a week?

JEFFREY WONG: Yes.

THE COURT: Do you understand the meaning of the word ‘suretyship’?

JEFFREY WONG: Suretyship, no.

THE COURT: What was the program you were in at Ryerson?

JEFFREY WONG: Business management.

THE COURT: And you never heard the word ‘suretyship’ come up?

JEFFREY WONG: No.

THE COURT: Even in your reading?

JEFFREY WONG: No.

THE COURT: And, you have no idea what it means?

JEFFREY WONG: I have no idea what it means.

THE COURT: How about engages his responsibility with the company for all amounts owing; do you know what that means?

JEFFREY WONG: Which part is that one?

THE COURT: Second last paragraph on page two. First line, engages his responsibility with the company for all amounts owing. Do you know what that means today?

JEFFREY WONG: I believe so.

THE COURT: What does that mean?

JEFFREY WONG: That it says he’s responsible jointly for the any owings.

THE COURT: Personally, is he responsible personally? Is that what you understand it to mean?

JEFFREY WONG: Well, it doesn’t say personal, so no.

THE COURT: Who’s jointly, then? If it only applies to the company, who is it joint with?

JEFFREY WONG: From my understanding he’s like, he’s not joint with anybody. Like the Everbright is the company, right?

THE COURT: Right.

JEFFREY WONG: Yeah.

THE COURT: So, there wouldn’t be any point to using the word ‘jointly’ if it only applied to Everbright.

JEFFREY WONG: Yeah.

THE COURT: And, you gave your father no explanation of the text of this document?

JEFFREY WONG: No, I didn’t.

THE COURT: Looks like the third page is just a copy of the second.”

[27] When Mr. Jack Wong testified, he said that he wasn’t asked to sign a personal guarantee. He admits that he signed a credit application and he thought he was applying for credit. He explained that he speaks mostly in Chinese at work and he can only read simple English. He relied on staff to deal with customers and suppliers.

[28] The Deputy Judge cross-examined Mr. Wong about this evidence through pages 49-51. At this point of the transcript, Mr. Wong has already explained in answer to a question that he relied on staff (whom he calls ‘girls’) in his office to assist him. Ms. Leriche was questioning Mr. Wong when the Deputy Judge intervened:

Q. What were the terms of payment you had with the other suppliers?

A. It was also over 30 days.

Q. Who negotiated the terms of payment with the suppliers?

A. The salesmen.

Q. The salesmen. Did you ever…

THE COURT: I thought you said the girls did.

Wong: Because I was being asked, so I will pass it on to the girls and the girls dealt with them.

THE COURT: So, who negotiated with the suppliers, then, the girls or the salesmen?

WONG: The salesperson. I was given the forms to fill out, and then the salesman gave me the forms and then they will bring back. And then, anything is just involving English then the girls would deal with them.

THE COURT: Who are the girls?

WONG: Chinese.

THE COURT: Who are they? Are they sales people, are they clerical people in the office?

WONG: They were responsible for placing orders, and also dealing with the customers, showing them the carpets.

THE COURT: Is that who you mean when you say salesmen?

WONG: Yes. They represent me and then to show the customer the colours and everything regarding our products.

THE COURT: How many girls did you have in 2009?

WONG: Two.

THE COURT: Did they speak English?

WONG: Yes.

THE COURT: Did they read English?

WONG: Yes.

THE COURT: How many salesmen did you have?

WONG: I myself. And then later on I, because of I have medical condition so I ask my son to help me with the measurement.

THE COURT: So, you only had one salesman and that was yourself in 2009?

WONG: Yes.

THE COURT: Okay, hold on. Did you understand my question?

WONG: I answered quickly.

THE COURT: You did, yes, that is why I am asking. So, you answered yes, did you understand the question I asked you?

WONG: No, I’m not sure.

THE COURT: You answered yes but now you are not sure? Listen, Mr. Wong, I asked you were you the only salesman in 2009, and before that question was translated you answered yes. Did you understand the question you were answering?

WONG: No.

THE COURT: Are you in the habit of answering yes to questions you do not understand?

WONG: Occasionally, sometimes when I only listen to half of the question then I start in talking.

[29] Later, the Deputy Judge cross-examined Mr. Wong about whether his own company had agreements with customers and if so, whether they were written in English. The Deputy Judge repeatedly interrupted the course of questioning. I start on page 53 of the transcript. Ms. Leriche was questioning Mr. Wong:

Q. Okay. And when you were dealing with English customers, did they sign a contract?

A. There were no contracts. Once we agreed with the prices and then we just talk about the date for installation.

Q. And the payment…

THE COURT: One second.

MS. LERICHE: Oh, sorry.

THE COURT: You mean, there were no written contacts.

WONG: I have a note for my own reference, written in English. Sorry, written in Chinese.

THE COURT: So, the answer is no, you did not have a written contract with your customers?

WONG: We have agreement. For instance, there is the address and what kind, the materials do we use, and the colour of the material. So, the address, colour, the product, and the price.

THE COURT: So, there was a written contract with the customers, then.

WONG: This is what I’ve told you, a so called contract.

THE COURT: It was in writing with your customers.

WONG: Yes, all written down.

THE COURT: Was it on a pre-printed form?

WONG: Yes, because there was like a – with the company’s name, it was blank, so it was filled out with the colour, the product, and also the price.

THE COURT: Customer’s name and address?

WONG: Yes.

THE COURT: And, did you also sign a contract?

WONG: No, it was just based on trust.

THE COURT: Did the customer sign the contract?

WONG: No.

THE COURT: Did you keep a copy of these contracts?

WONG: I have a copy.

THE COURT: Do you have a copy today? Do have an example?

WONG: No.

THE COURT: Was the pre-printed form in Chinese?

WONG: It’s Chinese.

THE COURT: Did you have any that were in English?

WONG: None in English. It was only this blank area saying, listed out the price and also SHT [sic] is simple. And also the total amount. The GST.

THE COURT: I asked him if he had any English contracts.

WONG: It was only the name of the product, and also the measurement, and then the price. Sometimes we don’t even need invoices, we just based on trust, then we will do the installation.

THE COURT: Did you have any English pre-printed form contracts, or not?

WONG: None in English.

THE COURT: Okay, go ahead.

MS. LERICHE: Q. You mentioned that the two girls were doing most of the translation for you, how long had they been working for you?

A. The turnover is quite high, some of them work for a year, some of them just a couple of months. Once they find a better job they will just leave.

THE COURT: I am just curious, at its height how much sales did you do?

WONG: Most is two, the height is two, two salesperson. But most of the time it’s only one.

THE COURT: No, I was not asking about salesmen, I was asking about sales.

WONG: So, on average is about $400,000 to $500,000.

THE COURT: Per year?

WONG: Correct.

[30] Finally, at page 65 of the transcript, the Deputy Judge sought to clarify some evidence but this inquiry, once again, fell into cross-examination.

[31] The Deputy Judge questioned Mr. Wong about the purpose for the second signature starting at page 65:

“THE COURT: Give me a second. I need to clarify some factual issues that arise out of Exhibit one, which is the credit application, on which there has been a lot of evidence. So, look at Exhibit number one. You see on page number two that you signed twice; do you see that?

WONG: Yes.

THE COURT: Once before the personal guarantee, and once after. If it is true, as you said a few minutes ago, that you signed only on behalf of the company, why did you think it was necessary to sign a second time?

WONG: Because it was marked with the cross, so that’s what I signed.

THE COURT: Had there been previous credit applications with Beaulieu?

WONG: Well, yeah, there is some kind of document that I signed before the credit.

THE COURT: With Beaulieu?

WONG: Correct.

THE COURT: And, were they all in the same form?

WONG: Well, from my recollection I think there is only the part with the company guarantee, not with the personal part.

THE COURT: Did you also sign credit applications with your other suppliers?

WONG: No, I don’t think so, because I only get a very small amount of credit with other suppliers.

THE COURT: Did you realize that this Beaulieu credit application was different from the ones before, before you signed it?

WONG: I don’t think so, because it was just a couple of years before. So, after a couple of years - - I’m talking about three, four years afterwards, and then my salesperson came and talked to me, but it was never mentioned it is a personal guarantee.

THE COURT: Why did you not get one of the girls to translate this document?

WONG: Well, I was only simply told by the salesperson that, well it is a very simple thing so just sign it, and then I will send it back to my company and that will be fine. And also, even the girls, they may not be able to understand this kind of legal documents, even though their English is much better than mine.

THE COURT: Did any of the girls read this document, explain it to you before you signed it?

WONG: No. I called the company and then the salesman came and pick it up, and then that was brought back to the company. I don’t even know when he came and pick it up.

THE COURT: Did you try and read and try to understand this document before you signed it?

WONG: I wouldn’t understand, I didn’t read and I wouldn’t understand what is being written. Had I been told by the salesperson that is personal guarantee, I wouldn’t have signed it, because with the previous documents there was no clauses or terms saying the personal guarantee.

THE COURT: How did you know the credit terms you were agreeing to if you did not read it or understand it?

WONG: Because I was simply told by the salesperson that is a very simple document. As long as you sign it then I will just bring it back to the accounting department for approval to indicate that I’m still the one running the business.

THE COURT: Any questions arising from mine?

MS. LERICHE: No, Your Honour.

THE COURT: Mr. Turton?

MR. TURTON: No.”

[32] In summary, I find based on these excerpts from the transcript that the Deputy Judge crossed the line of permissible intervention at which point the trial ceased to be fair. Many of the questions were framed as cross-examination and focused on the credibility of Jack and Jeffrey Wong.

[33] Furthermore, the Deputy Judge embarked on areas of questioning that had not been explored by the appellant or the respondent.

[34] I conclude that since the trial ceased to be fair, the judgment of Deputy Judge Ferranti must be set aside. It is not necessary given this result to consider the alternative grounds of appeal.

[35] I make the following orders:

(1) The judgment of Deputy Judge A. Ferranti is set aside;

(2) I order that there shall be a new order before a different judge;

(3) The plaintiff shall pay the defendant its costs of this appeal fixed at $3,500 all inclusive.

___________________________ C. Horkins J.

Date of Reasons for Judgment: June 27, 2016

Date of Release: June 30, 2016

CITATION: Beaulieu Canada Company v. Everbright Floorings Ltd., 2016 ONSC 4259

DIVISIONAL COURT FILE NO.: 457/15

DATE: 20160627

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

Beaulieu Canada Company

Plaintiff Respondent

– and –

Everbright Floorings Ltd., Jack Wong aka Yuen Lik Wong, aka Chi Lun Wong

Defendants Appellants

ORAL REASONS FOR JUDGMENT

c. horkins J.

Date of Reasons for Judgment: June 27, 2016

Date of Release: June 30, 2016