Curley v. Taafe

Ontario Reports

Court of Appeal for Ontario

Lauwers, Pardu and Nordheimer JJ.A.

May 7, 2019

146 O.R. (3d) 575 | 2019 ONCA 368

Case Summary

Civil procedure — Trial — Witnesses — Rule in Browne v. Dunn

Defendant lawyer complaining to police when plaintiff paralegal failed to return client files to her. Police laying criminal charges against plaintiff which were ultimately withdrawn. Plaintiff suing for damages for malicious prosecution. Trial judge erring in relying on rule in Browne v. Dunn to discount letter written by plaintiff in which she admitted that she had files in her possession. Rule not applying as plaintiff was cross-examined on letter and offered no explanation for parts of letter that were later used by defendant's lawyer to cast doubt on her credibility.

Contracts — Damages — Mitigation

Plaintiff paralegal referring clients to defendant lawyer and performing work on those files herself pursuant to contract between parties. Defendant terminating agreement. Defendant complaining to police when plaintiff refused to return client files. Criminal charges laid against plaintiff. Trial judge finding that defendant wrongfully terminated contract. Trial judge erring by taking judicial notice of effect of criminal charges on paralegal's practice and upon plaintiff's ability to mitigate her damages.

Torts — Malicious prosecution

Defendant lawyer complaining to police when plaintiff paralegal failed to return client files to her. Police laying criminal charges against plaintiff which were ultimately withdrawn. Plaintiff suing for damages for malicious prosecution. Trial judge erring in finding that defendant had initiated criminal prosecution in absence of any evidence from police about effect of defendant's complaint on their investigation.

Facts

The defendant, a lawyer, had a referral contract with the plaintiff, an unlicensed paralegal, pursuant to which the plaintiff referred clients to the defendant and did paralegal work on those files. The defendant terminated the agreement after receiving complaints from clients and discovering that the plaintiff was unlicensed and asked the plaintiff to return client files in her possession. When the plaintiff failed to do so, the defendant reported the matter to the police. Criminal charges were laid against the plaintiff but were ultimately withdrawn. The plaintiff sued the defendant for damages for malicious prosecution and breach of contract. The action was allowed. The defendant appealed.

Held

The appeal should be allowed.

The trial judge committed a palpable and overriding error in finding that the defendant had initiated the criminal proceedings. No evidence was adduced at trial from the police about the effect of the defendant's complaint on their investigation, and the available evidence suggested that the police exercised independent discretion and judgment over their investigation.

The trial judge erred in relying on the rule in Browne v. Dunn to discount a letter written by the plaintiff in which she admitted that she had the client files in her possession. The rule did not apply as the plaintiff was cross-examined on the letter and offered no explanation for the portions of the letter that were later used by the defendant's trial counsel to cast doubt on her credibility.

Apart from the plaintiff's own statements about her tarnished reputation, there was no evidence that the charges had any effect on her ability to work or refer files to other lawyers. The trial judge erred in taking judicial notice of the effect of criminal charges on a paralegal's practice and on the plaintiff's ability to mitigate her damages for breach of contract. The defendant had established that the plaintiff failed to mitigate her damages.

Cases Considered

Browne v. Dunn, [1893] J.C.J. No. 5, 6 R. 67 (P.C.); Pate Estate v. Galway-Cavendish and Harvey (Township) (2013), 117 O.R. (3d) 481, [2013] O.J. No. 5017, 2013 ONCA 669, 312 O.A.C. 244, 368 D.L.R. (4th) 193, [2014] CLLC para. 210-010, 12 C.C.E.L. (4th) 83, 6 C.C.L.T. (4th) 37, 16 M.P.L.R. (5th) 179; R. v. Dexter, [2013] O.J. No. 5686, 2013 ONCA 744, 313 O.A.C. 266, 54 M.V.R. (6th) 175, considered.

Other Cases Referred To

Chaudhry v. Khan, [2015] O.J. No. 1379, 2015 ONSC 1847 (S.C.J.); Correia v. Canac Kitchens, [2007] O.J. No. 143, 56 C.C.E.L. (3d) 209 (S.C.J.), reversed on other grounds (2008), 91 O.R. (3d) 353, [2008] O.J. No. 2497, 2008 ONCA 506, 294 D.L.R. (4th) 525, 240 O.A.C. 153, 67 C.C.E.L. (3d) 1, 58 C.C.L.T. (3d) 29, [2009] CLLC para. 210-001, [2008] I.L.R. para. G-2200 (C.A.); Curley v. Taafe, [2018] O.J. No. 3230, 2018 ONSC 3150, 47 C.C.E.L. (4th) 228 (S.C.J.); Kefeli v. Centennial College of Applied Arts & Technology, [2002] O.J. No. 3023, 23 C.P.C. (5th) 35 (C.A.); Nelles v. Ontario, [1989] 2 S.C.R. 170, [1989] S.C.J. No. 86, 60 D.L.R. (4th) 609, 98 N.R. 321, 35 O.A.C. 161, 41 Admin. L.R. 1, 49 C.C.L.T. 217, 37 C.P.C. (2d) 1, 71 C.R. (3d) 358, 42 C.R.R. 1; Pate Estate v. Galway-Cavendish and Harvey (Township), [2011] O.J. No. 3594, 2011 ONCA 329, 342 D.L.R. (4th) 632, 280 O.A.C. 230, [2011] CLLC para. 210-042, 86 C.C.L.T. (3d) 220, 93 C.C.E.L. (3d) 57 [Leave to appeal to S.C.C. refused [2011] S.C.C.A. No. 293]; Peters v. Perras (1909), 42 S.C.R. 244, [1909] S.C.J. No. 39, 13 Alta. L.R. 80; R. v. Find, [2001] 1 S.C.R. 863, [2001] S.C.J. No. 34, 2001 SCC 32, 199 D.L.R. (4th) 193, 269 N.R. 149, 146 O.A.C. 236, 154 C.C.C. (3d) 97, 42 C.R. (5th) 1, 82 C.R.R. (2d) 247; R. v. Lyttle, [2004] 1 S.C.R. 193, [2004] S.C.J. No. 8, 2004 SCC 5, 235 D.L.R. (4th) 244, 316 N.R. 52, 184 O.A.C. 1, 180 C.C.C. (3d) 476, 17 C.R. (6th) 1; R. v. McNeill (2000), 48 O.R. (3d) 212, [2000] O.J. No. 1357, 131 O.A.C. 346, 144 C.C.C. (3d) 551, 33 C.R. (5th) 390 (C.A.); R. v. Paris, [2000] O.J. No. 4687, 138 O.A.C. 287, 150 C.C.C. (3d) 162 (C.A.) [Leave to appeal to S.C.C. refused [2001] S.C.C.A. No. 124]; R. v. Werkman, [2007] A.J. No. 418, 2007 ABCA 130, 404 A.R. 378, 219 C.C.C. (3d) 406 (C.A.); Red Deer College v. Michaels, [1976] 2 S.C.R. 324, [1975] S.C.J. No. 81, 57 D.L.R. (3d) 386, 5 N.R. 99, [1975] 5 W.W.R. 575, 75 CLLC para. 14,280; Yan v. Nadarajah, [2017] O.J. No. 1187, 2017 ONCA 196, 82 R.P.R. (5th) 175 (C.A.).

Authorities Referred To

McCamus, John D., The Law of Contracts, 2nd ed. (Toronto: Irwin Law, 2012).

Appeal

APPEAL by the defendant from the judgment of M.L. Edwards J., [2018] O.J. No. 3230, 2018 ONSC 3150, 47 C.C.E.L. (4th) 228 (S.C.J.).

P. James Zibarras, for appellant.

Lubomir Poliacik, for respondent.

Judgment

The judgment of the court was delivered by PARDU J.A.:

[1] Introduction

[1] The appellant, Ms. Taafe, appeals from a judgment awarding damages for breach of contract and for malicious prosecution in favour of the respondent, Ms. Curley.

[2] The appellant alleges that the trial judge erred in three respects:

(1) By failing to recognize that in the absence of any evidence from police about the effect of the appellant's complaint to them upon their investigation, he could not conclude that the appellant initiated a criminal prosecution of the respondent, in light of the other evidence that showed that the police did in fact conduct an independent investigation of their own.

(2) By applying the rule in Browne v. Dunn, [1893] J.C.J. No. 5, 6 R. 67 (P.C.) to discount evidence supporting the appellant's position and undermining the respondent's position. The appellant submits that the application of the rule to a letter written by the respondent, which had the potential to significantly impact the trial judge's assessment of the parties' credibility, was flawed given that the appellant's trial counsel referred to the letter in her opening statement at trial and provided an opportunity for the respondent to explain the contents of the letter during cross-examination.

(3) By taking judicial notice of the effect of a criminal charge on a paralegal's practice, and upon the respondent's ability to mitigate her damages for breach of contract.

[3] I would give effect to each of these arguments, allow the appeal, set aside the judgment below and dismiss the action.

A. Factual Issues

[4] The appellant is a lawyer. She had a referral contract with the respondent, who was working as a paralegal, albeit unlicensed by the Law Society. The respondent promised to refer clients exclusively to the appellant for real estate and family law matters. The respondent would do paralegal type work on the files. An associated confidentiality agreement between the parties specifically provided that "confidential information" contained within the files was the property of the appellant. Any work done on any file that contained confidential information, including without limitation notes, financial information, or any text from which confidential information could implicitly be understood, was deemed to be confidential information. The file contents were to remain the sole property of the appellant, and the agreement provided that "confidential information (including any reproduction therefore) shall remain the sole property of taafe law and shall be returned to taafe law immediately upon request or immediately after the termination of the employee's employment, for any reason".

[5] Although the agreement was for a one-year term, the relationship fell apart earlier for widely divergent reasons given by each of the parties. The appellant testified that she terminated the relationship on January 15, 2013 because of complaints from clients, and after determining that the respondent was not a qualified law clerk or paralegal. The appellant also pointed to a letter, dated January 15, 2013, which she says confirms an in-person discussion in which she terminated the respondent. The respondent testified that she did not receive the aforementioned letter. The respondent testified that she knew by February 19, 2013 that the appellant had terminated the arrangement but took the position that the appellant had breached the contract between them by unilaterally terminating it.

[6] The appellant testified that she asked the respondent to return all of her client files to her home on January 15, 2013. She says the respondent did come to her home that day but did not leave the files. The respondent testified that she went to the appellant's home, on her own initiative, only to leave closed files there. According to her evidence, she did keep two files, the "M" file and the "S" file in her possession. The appellant also claimed to have sent a letter to the respondent on February 12, 2013, in which she alleged she would go to the police if she did not get her client files back. The respondent testified that she did not receive the February 12, 2013 letter.

[7] There was divergent evidence about what, if any, communications passed between the parties after January 15, 2013. As has already been mentioned, the appellant claimed to have sent letters to the respondent on January 15, 2013 and February 12, 2013. The respondent maintained that she did not receive these letters.

[8] The appellant testified that she was worried about retrieving her client files. She said she called the Law Society and that they advised her to contact the police. On February 27, 2013, the appellant wrote to the police to complain that the respondent had not returned her client files after the termination of their contractual arrangement. She related that the respondent had come to her home on January 15, 2013 but that no files were left. She related efforts to retrieve the files by e-mail communications. She also related that the respondent denied taking the files and said she had left them on the table in her kitchen. The appellant said she reviewed security camera footage that showed the respondent entering her home carrying orange folders used for her client files, and leaving the home, still carrying those files. The appellant asserted ownership of the files, and said she did not know why the respondent would not return the files, despite numerous attempts to obtain their return.

[9] On March 2, 2013, an officer went to the respondent's home. The officer showed the respondent a list of seven files the appellant wanted. The respondent provided the officer with two files, the "M" and the "S" files. The officer showed the respondent the security camera images capturing her arrival and departure from the appellant's home. The officer did not lay any charges at this time.

[10] On April 30, 2013, the appellant forwarded to the police a letter sent to her by the respondent dated April 23, 2013. In that letter the respondent demands payment of an outstanding invoice, and describes at length, her side of the dispute with the appellant. Further, the respondent threatens the appellant with multiple courses of action she proposes to take. Notably, in the letter, she says the following:

Now Ms. Taafe, please do not take this as a threat but merely an outline of my intentions regarding this matter.

If I don't receive my payment in full as set out in my Invoice of March 2nd 2013 including interest, by May 1, 2013, I will proceed to package up any and all files/documents here in my office that relate to your clients and forward same detailing [sic] the matter at hand to the Law Society of Upper Canada.

Simply put, make the payment and I will consider all matters settle [sic] in full. Please do not send anyone to pick-up any documents or files unless they have certified funds payable to Trinity Legal Services in the full amount as set out in my invoice of March 2, 2013.

(Emphasis added)

[11] Following this apparent admission that the respondent still had possession of files belonging to the appellant, police charged her with theft under $5,000 and possession of stolen property under $5,000. Those charges were ultimately withdrawn.

[12] After these charges were laid, the appellant testified that she learned the respondent was altering her letterhead, and using it without her consent. On the other hand, the respondent testified that she had the appellant's authorization to use her letterhead, so that the appellant would not be bothered by real estate clients about work to be handled by the respondent as a paralegal. The appellant expressed concern she might be liable to phantom clients of whom she was unaware. According to her evidence she contacted the Law Society and on their advice spoke to the police. Charges of fraud under $5,000 and forgery were laid against the respondent, but these charges were also ultimately withdrawn by the Crown.

B. Trial Judge's Reasons

[13] The trial judge was scathing in his assessment of the appellant's credibility, and accepted the respondent's evidence. He found that the appellant did not terminate her business relationship with the respondent on January 15, 2013, but continued working with her, and that the respondent's possession of the client files and use of the letterhead in January and February 2013 was accordingly with the appellant's consent: Curley v. Taafe, [2018] O.J. No. 3230, 2018 ONSC 3150, 47 C.C.E.L. (4th) 228 (S.C.J.), at paras. 68, 72.

[14] The trial judge, at para. 67, cited the elements identified by Simmons J.A. in Pate Estate v. Galway-Cavendish and Harvey (Township), [2011] O.J. No. 3594, 2011 ONCA 329, 342 D.L.R. (4th) 632, at paras. 51-53, leave to appeal to S.C.C. refused [2011] S.C.C.A. No. 293 ("Pate I") relating to when a defendant in a malicious prosecution action can be said to have initiated a prosecution:

(1) Did the defendant knowingly withhold exculpatory information from the police?

(2) Did the conduct of the defendant undermine the independence of the police investigation?

(3) Did the defendant communicate to police in a manner that misled the officers into not conducting an independent investigation?

(4) Did the defendant undermine the independence of the decision-making process to lay charges and prosecute?

[15] The trial judge found that the appellant made misleading statements to police and withheld exculpatory evidence, specifically the video surveillance tape from which the still photos were extracted and turned over to the police. The misleading statements were the statements that the appellant ended the contractual relationship on January 15, 2013 and that the respondent was not authorized to use the appellant's letterhead at the relevant time. Based on the evidence before him, the trial judge found these statements to be untrue.

[16] Further, although no testimonial evidence was elicited from any police officer who swore the informations laying the charges, or from any investigating officer, the trial judge concluded that had police known of the true state of affairs, the first information would never have been laid. Pursuant to Browne v. Dunn, he refused to give any weight to the respondent's letter of April 23, 2013 in which she seemingly acknowledged possession of the appellant's files at a time when she conceded the contractual relationship was over. The trial judge reasoned that because the appellant's counsel did not cross-examine the respondent about the specific parts of her own letter in which she appeared to acknowledge possession of the appellant's files, he was only left to speculate as to what the respondent meant in the relevant extracts from her letter. He awarded general damages of $50,000 and punitive damages of $25,000 on the malicious prosecution claim.

[17] The trial judge also awarded $7,500 to the respondent for the appellant's wrongful termination of their contract, reflecting the continued earnings the respondent would have accumulated from her relationship with the appellant for the rest of the contractual term. It so happened that the respondent started work for a credit union on January 21, 2013. The record before this court suggests that the respondent had part-time earnings from that source in excess of her earnings as a paralegal pursuant to the contract. The trial judge noted, at para. 76, that the respondent also received an $85,000 settlement from the credit union as compensation for her termination from that position in June 2013.

[18] There was no evidence of any attempts by the respondent to replace her earnings with the appellant by referring client files to other lawyers and doing the same kind of work. The trial judge rejected the argument that there was insufficient evidence of reasonable efforts to mitigate her damages by taking judicial notice of the effects of criminal charges, at para. 77:

The suggestion that the Plaintiff could mitigate her damages by referring other real estate transactions to other lawyers in Durham, has to be viewed in the context that the Plaintiff was also having to deal with the criminal charges laid in the first information. The court can take judicial notice of the fact that anyone having to deal with the criminal justice system for the first time, would find that experience a difficult one that might otherwise impact on one's ability to work. In my view, an appropriate award with respect to the Plaintiff's claim for breach of contract is an amount of $7,500.

C. Analysis

(1) Malicious Prosecution: Initiation of the Prosecution

[19] There are four necessary elements which a plaintiff must prove in an action for the intentional tort of malicious prosecution:

(1) the proceedings must have been initiated by the defendant;

(2) the proceedings must have terminated in favour of the plaintiff;

(3) the plaintiff must show that the proceedings were instituted without reasonable and probable cause; and

(4) the defendant was actuated by malice.

See Nelles v. Ontario, [1989] 2 S.C.R. 170, [1989] S.C.J. No. 86, at pp. 192-93 S.C.R.

[20] The bar for a successful malicious prosecution action is deliberately set high, to avoid unduly chilling the willingness of individuals to seek recourse from the police. As Low J. observed in Correia v. Canac Kitchens, [2007] O.J. No. 143, 56 C.C.E.L. (3d) 209 (S.C.J.), at para. 75, reversed on other grounds (2008), 91 O.R. (3d) 353, [2008] O.J. No. 2497, 2008 ONCA 506:

It is often observed that the bar is set very high in a claim of malicious prosecution and that a plaintiff has a very difficult burden to meet to make out the claim. It is in the public interest that this be the case because criminal prosecutions are brought not for the benefit of the prosecutor nor for the benefit of the complainant but rather for the common welfare of society. Second, because the standard of proof is very high in a criminal prosecution, there will be many prosecutions brought that do not succeed not because the charge is unfounded but because the standard of proof has not been met. That the threshold for success is high in an action of malicious prosecution therefore balances the public interest in bringing to justice persons who may have broken the law against the private interest of persons who have been wrongfully prosecuted without reasonable grounds and for oblique or improper motives.

[21] As indicated in Nelles, the first element that a plaintiff in an action for malicious prosecution must establish is initiation of the proceedings by the defendant. Simmons J.A. elaborated on the nature of the conduct required to amount to initiation of a prosecution by a private citizen in Kefeli v. Centennial College of Applied Arts & Technology, [2002] O.J. No. 3023, 23 C.P.C. (5th) 35 (C.A.) (in Chambers), at para. 24:

. . . [A] claim for malicious prosecution requires that the defendant must have initiated the prosecution or set it in motion, and that, ordinarily, the court will view the police officer who laid the charge as being the person who set the prosecution in motion. However, he also submits, correctly, that the complainant may be treated as the prosecutor in exceptional circumstances, including the following:

-- the complainant desired and intended that the plaintiff be prosecuted;

-- the facts were so peculiarly within the complainant's knowledge that it was virtually impossible for the professional prosecutor to exercise any independent discretion or judgment; and

-- the complainant procured the institution of proceedings by the professional prosecutor, either by furnishing information which he knew to be false, or by withholding information which he knew to be true, or both.

(Citations and footnote omitted)

[22] Here, there was no testimonial evidence adduced at trial from the officers who investigated the appellant's complaint or who laid the charges as to the effect of the appellant's complaints on their investigation.

[23] Rather, the available evidence suggests that the police exercised independent discretion over their investigation. The first written complaint by the appellant, dated February 27, 2013, laid out the appellant's position and made note of the respondent's competing version of the events. Police visited the respondent on March 2, 2013, and after listening to what she had to say and collecting two files from her, elected not to lay charges. The police decided to lay charges only after reviewing the respondent's letter of April 23, 2013, describing a litany of complaints she had against the appellant, and after speaking to her about the missing files. The police exercised their discretion, firstly not to lay charges, and later, after hearing both sides and drawing their own factual inferences, to lay the charges. This is not a case where it was impossible for the police to exercise any independent discretion or judgment. As is evidenced by the aforementioned sequence of investigatory events, they in fact exercised that very judgment.

[24] The trial judge's finding, that the only reason these proceedings were initiated by the police was as a result of the misleading information supplied by the appellant, cannot stand. As has been explored, the evidence regarding the sequence of investigatory events and the absence of any evidence from the police as to the effect of the appellant's complaint on their investigation leads to the conclusion that the police exercised independent discretion and judgment over the investigation. The trial judge committed a palpable and overriding error in concluding that the appellant initiated the prosecution.

[25] The decision of Pate Estate v. Galway-Cavendish and Harvey (Township) (2013), 117 O.R. (3d) 481, [2013] O.J. No. 5017, 2013 ONCA 669 ("Pate II"), stands in contrast to the case at bar on this point. In Pate II, the complainant was a former police officer who went to great lengths to manage his contacts with police and to encourage them to lay charges while discouraging as unnecessary any additional investigation. However in Pate II, the police trusted the complainant because he was a former police officer and testified that if they had the exculpatory information withheld by the complainant, they would not have charged the plaintiff. In upholding the trial judge's conclusion that the township was liable for malicious prosecution, this court reasoned that the "element of initiation can be satisfied if the defendant knowingly withheld exculpatory information from the police that the police could not be expected to find in all the circumstances:" at para. 51.

[26] In the case at bar there was no police testimony to speak to the effect of the appellant's complaints on their investigation; there was no police testimony to proffer a view on whether they would have still charged the respondent had the appellant disclosed the surveillance camera video footage. Furthermore, while the prosecution would not have been initiated but for the appellant's complaint to the police, "the evidence shows that the decision to initiate the prosecution was nonetheless within the discretion of, and exercised, by the police in this case": Chaudhry v. Khan, [2015] O.J. No. 1379, 2015 ONSC 1847 (S.C.J.), at para. 18. As such, the element of initiation has not been satisfied and the respondent's malicious prosecution claim must fail. Given the trial judge's error on the initiation element, it is not necessary to address the appellant's arguments pertaining to the other elements of the malicious prosecution test.

(2) The Browne v. Dunn Error

[27] The rule in Browne v. Dunn creates an obligation to give a witness, called by the opposite side, an opportunity to explain evidence which the cross-examiner intends to later use to impeach the testimony or credibility of the witness. This rule was expressly adopted in Canada in Peters v. Perras (1909), 42 S.C.R. 244, [1909] S.C.J. No. 39.

[28] Here, the respondent's letter of April 23, 2013 amounts to an admission that she retained files belonging to the appellant at a time when she knew their contractual relationship was over. This letter had the potential to significantly affect the trial judge's assessment of the relative credibility of the parties, however the trial judge discounted the effect of that letter, in accordance with the rule in Browne v. Dunn, at para. 44:

As a matter of fairness and in accordance with the rule in Browne v. Dunn, the Plaintiff [respondent] should have been given an opportunity to respond to the suggestion now being made by Mr. Zibarras, that the aforesaid extract from Exhibit 23 [the letter dated April 23, 2013] confirms that the Plaintiff [respondent] wrongfully had withheld files belonging to the Defendant [appellant].

[29] The appellant's trial counsel referred to the respondent's letter in her opening statement. Later during the trial, after the respondent re-read her own letter to refresh her memory, appellant's counsel cross-examined her on the letter. The respondent admitted writing the letter and delivering it to the appellant. During cross-examination, the respondent did not explain her statements in the letter about packaging "up any and all files/documents here in my office that relate to your clients" and refusing to give them to the appellant unless the conditions stipulated by her were met. Further, the respondent also did not explain such statements during re-examination when her own counsel had the opportunity to deal with issues raised in cross-examination.

[30] In the appellant's direct examination, after the respondent's case was complete, the appellant testified about receiving the letter and forwarding it to police. At that time the respondent's trial counsel did not object to that evidence on the basis that the letter had not been put to the respondent in cross-examination. The respondent's trial counsel raised the Browne v. Dunn issue for the first time in closing submissions.

[31] Trial judges do have discretion as to the remedy to be afforded for a breach of the rule in Browne v. Dunn, if a breach has occurred. The effect that a court should give to a breach of the rule depends on a number of factors and the circumstances of the case: R. v. Dexter, [2013] O.J. No. 5686, 2013 ONCA 744, 313 O.A.C. 266, at para. 20; R. v. Lyttle, [2004] 1 S.C.R. 193, [2004] S.C.J. No. 8, 2004 SCC 5, at para. 65; R. v. Werkman, [2007] A.J. No. 418, 2007 ABCA 130, 404 A.R. 378, at para. 9. In Dexter, this court delineated two permissive options to rectify a breach of the rule. First, the trial judge can take into account the breach of the rule when assessing a witness' credibility and deciding the weight to attach to that witness's evidence: Dexter, at para. 21; Werkman, at para. 9; R. v. Paris, [2000] O.J. No. 4687, 138 O.A.C. 287 (C.A.), at para. 22, leave to appeal to S.C.C. refused [2001] S.C.C.A. No. 124. Second, the trial judge can also allow counsel to recall the witness whose evidence was impeached without notice: Dexter, at para. 21; R. v. McNeill (2000), 48 O.R. (3d) 212, [2000] O.J. No. 1357 (C.A.), at paras. 47-49.

[32] Although such discretion rests with trial judges, here the rule was not engaged, as occurred in Yan v. Nadarajah, [2017] O.J. No. 1187, 2017 ONCA 196, 82 R.P.R. (5th) 175, at paras. 15-16:

We agree with the motion judge that the appellants seem to have misunderstood the rule in Browne v. Dunn. The application of that rule is generally restricted to situations where a party cross-examining a witness called by the opposite side is planning on adducing contradictory evidence to impeach the witness's credibility. The cross-examiner must "put" the contradictory evidence to the witness to allow the witness to provide an explanation for it: R. v. Quansah, 2015 ONCA 237, 125 O.R. (3d) 81, at paras. 75-76, leave to appeal to S.C.C. refused, [2016] S.C.C.A. No. 203. The rule reflects fairness to the witness whose credibility is attacked and to the party whose witness is impeached. It "prevents the 'ambush' of a witness by not giving him an opportunity to state his position with respect to later evidence which contradicts him on an essential matter": R. v. Verney (1993), 87 C.C.C. (3d) 363 (Ont. C.A.), at p. 376, cited in R. v. M.B., 2009 ONCA 524, 68 C.R. (6th) 55, at para. 73.

In the present case, there was no element of the kind of unfairness or surprise that the rule in Browne v. Dunn protects against. The contradictory evidence used to impeach the appellants came in the form of the appellants' own affidavits. Moreover, at the beginning of the cross-examination the appellants were asked whether there was anything in their affidavits that was incorrect or needed to be changed. They declined to make any changes or corrections. In the circumstances, there was no violation of the rule in Browne v. Dunn.

(Citations in original)

[33] There was no unfairness or surprise associated with the appellant's reliance on the respondent's own letter at trial. The respondent was cross-examined on the letter and offered no explanation as to the portions of the letter that were later used by the appellant's trial counsel to cast doubt on her credibility. As such, the trial judge erred in relying on Browne v. Dunn to discount this evidence, which is highly relevant to credibility.

(3) Judicial Notice and Mitigation of Damages

[34] The respondent had access to a stream of clients related to real estate transactions. After the termination of her contract with the appellant, the respondent had up to six other lawyers available to whom she could refer files. The trial judge took judicial notice of the effect the criminal charges had upon her ability to work as a paralegal at para. 77 of his reasons, as noted in para. 18, above.

[35] Apart from the respondent's own statements regarding her tarnished reputation, there was no evidence that the charges had any effect on her ability to work or refer files to other lawyers. At trial, the respondent failed to produce any witnesses to support her claim that she could not secure new paralegal business due to her damaged reputation. No one asked the trial judge to take judicial notice of any such effect, nor did the trial judge advise counsel that he was considering taking judicial notice.

[36] R. v. Find, [2001] 1 S.C.R. 863, [2001] S.C.J. No. 34, 2001 SCC 32, at para. 48, sets out limits for resorting to judicial notice:

Judicial notice dispenses with the need for proof of facts that are clearly uncontroversial or beyond reasonable dispute. Facts judicially noticed are not proved by evidence under oath. Nor are they tested by cross-examination. Therefore, the threshold for judicial notice is strict: a court may properly take judicial notice of facts that are either: (1) so notorious or generally accepted as not to be the subject of debate among reasonable persons; or (2) capable of immediate and accurate demonstration by resort to readily accessible sources of indisputable accuracy[.]

(Citations omitted)

[37] The trial judge erred in relying on judicial notice to conclude that the respondent had reasonably mitigated her damages on the basis that anyone who has to deal with the criminal justice system for the first time would find their ability to work impacted.

[38] It is a basic tenet of contract law that a victim of a breach cannot recover losses that could have been avoided by taking reasonable steps post-breach; this principle against avoidable loss applies in all contractual settings: John D. McCamus, The Law of Contracts, 2nd ed. (Toronto: Irwin Law, 2012), at p. 926. The burden of establishing that the plaintiff failed to take reasonable steps to mitigate damages is on the defendant: McCamus, at p. 928; Red Deer College v. Michaels, [1976] 2 S.C.R. 324, [1975] S.C.J. No. 81, at p. 331 S.C.R.

[39] Here, the appellant has satisfied that burden and established that the respondent failed to mitigate her damages. This conclusion is based on the evidence that the respondent could have offered her referral and paralegal services to other lawyers she was in contact with, in combination with the lack of evidence of reasonable steps on the respondent's part to mitigate her damages. The damage award cannot stand and must be set aside. This is quite apart from the difficulty of awarding damages for loss of paralegal income when the respondent was not licensed by the Law Society to provide legal services.

D. Conclusion

[40] I need not address other arguments of error advanced by the appellant as the foregoing is sufficient to dispose of the appeal. In the result, the appeal is allowed, the judgment of June 13, 2018 is set aside and the action is dismissed, with costs of the appeal to the appellant in the agreed sum of $15,000, inclusive of disbursements and taxes. The parties agree that in this event, the costs of the trial should be reversed in favour of the appellant. Accordingly, there will be a costs award in favour of the appellant for the trial in the sum of $75,000.

Appeal allowed.

Notes

1 Lauwers J.A. continued to analyze the other three factors that Simmons J.A. identified in Pate I relating to when a defendant in a malicious prosecution action can be said to have initiated a prosecution (whether the conduct of the defendant undermined the independence of the police investigation; whether the defendant communicated to police in a manner that misled the officers into not conducting an independent investigation; and whether the defendant undermined the independence of the decision making process to lay charges and prosecute).

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