ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-422868CP
DATE: 20120628
Proceeding Under the Class Proceedings Act, 1992
BETWEEN:
David Zwaniga and Jennifer Zwaniga Plaintiffs – and – JohnVince Foods Distribution L.P. and Revolution Food Technologies Inc. Defendants
Alan A. Farrer, for the Plaintiffs
Jill M. Knudsen, for the Defendants
HEARD: June 26, 2012
PERELL J.
A. INTRODUCTION
[ 1 ] This is a quite disturbing motion to admit into evidence an affidavit for a pending summary judgment motion in a proposed class action under the Class Proceedings Act, 1992 , S.O. 1992, c.6.
[ 2 ] The Plaintiffs, David and Jennifer Zwaniga, the responding parties to a motion for summary judgment, submit that the deponent for a late arriving affidavit provides relevant and influential new evidence that was not available until after the cross-examinations for the pending motion were completed and not until after the plaintiff and one of the defendants in a companion class action signed a Cooperation Agreement, under which they agreed to provide evidence.
[ 3 ] The Defendant, JohnVince Foods Distribution L.P. (“JohnVince”), which is moving for summary judgment, is the distributor of Planters®, a well-known brand of peanuts. The co-Defendant, Revolution Food Technologies Inc. (“Revolution Food”) is a distributor of vending machines, including a machine that dispenses Planters® peanuts.
[ 4 ] The Zwanigas allege that JohnVince and Revolution Food contravened the Arthur Wishart Act (Franchise Disclosure), 2000 , S.O. 2000, c.3. A fundamental aspect of the Zwanigas’s action is that JohnVince and Revolution Food had a partnership or joint venture. The Zwanigas also allege that JohnVince was a “franchisor’s associate” of Revolution Food.
[ 5 ] However, in their statements of defence, both defendants deny that they were joint ventures or partners, and JohnVince brings a motion for summary judgment, which was originally scheduled for May 15 and 16, 2012. JohnVince takes the position that there was no genuine issue for trial, that it was not a joint venturer, partner, or franchisor’s associate with Revolution Food.
[ 6 ] Revolution Food did not involve itself in JohnVince’s summary judgment motion and it brought no motion of its own.
[ 7 ] After the cross-examinations for JohnVince’s motion for summary judgment had been completed and after the principals of Revolution Food and the Zwanigas signed a Cooperation Agreement, the Zwanigas requested leave to deliver an affidavit from Roderick Knight, who is the President of Revolution Food. This request was opposed by JohnVince. I adjourned the pending summary judgment motion sine die and scheduled a motion to decide whether to grant leave. This is that motion.
[ 8 ] With misgivings and unease about several matters, which are discussed below, I grant the motion with costs payable in any event of the cause to JohnVince.
B. FACTUAL AND PROCEDURAL BACKGROUND
[ 9 ] JohnVince is a limited partnership carrying on business as a food manufacturer and distributor. It is the exclusive rights holder to distribute Planters products and to use its trademarks and logos.
[ 10 ] This action arises out of a distributorship program under which Revolution Food sold to the putative class members Revolution 650TM peanut vending machines that dispense Planters®/MD peanuts. The Zwanigas allege that class members were persuaded to purchase the machines based on material misrepresentations by JohnVince and Revolution Food. The Zwanigas also allege that JohnVince was a franchisor’s associate under the Arthur Wishart Act .
[ 11 ] On March 24, 2011, the Zwanigas commenced a proposed class action against JohnVince and Revolution Food.
[ 12 ] On July 5, 2011, there was a case conference to set a timetable for the action. As part of the timetable, I scheduled a motion for summary judgment by JohnVince, which had taken the position that there was no partnership or joint venture relationship between it and Revolution Food.
[ 13 ] At the end of August, the Zwanigas delivered an amended Statement of Claim to add a claim that JohnVince was a franchisor’s associate as that term is defined under the Arthur Wishart Act . The Zwanigas also delivered their motion material for the certification motion.
[ 14 ] On September 28, 2011, the Zwanigas commenced a companion proposed class action against the directors of Revolution Food, who were alleged to be franchisor’s associates. The defendants included Edward Valleau, Devan Hawbolt, and Roderick Knight.
[ 15 ] I pause here to note that, although I was case managing the main action against JohnVince and Revolution Food, I was not made aware of the companion action until this motion now before the court was brought.
[ 16 ] On November 30, 2011, Revolution Food delivered its Statement of Defence. It denied that it and JohnVince were partners or joint venturers. It did not crossclaim against JohnVince. It did not deliver any material for either the certification motion or for the summary judgment motion.
[ 17 ] On December 2, 2011, JohnVince delivered its Statement of Defence and Crossclaim and its motion record in support of its summary judgment motion. Its position was that it was never Revolution Food’s partner or joint venturer; its only role was to grant to Revolution Food a licence to use the Planters™ trademarks and to supply product.
[ 18 ] On March 1, 2012, JohnVince’s deponents were cross-examined. The deponents maintained that, in approving promotional materials used in the distribution program, JohnVince’s only concern was the appearance of the logo and trademark. The deponents denied that JohnVince was a partner of Revolution Food.
[ 19 ] On March 5, 2012, the Zwanigas’s counsel, Darcy Merkur, contacted Michael Simaan, counsel for Revolution Food by letter and asked whether the Revolution Food defendants were aware of information that would contradict some of the information provided by JohnVince’s deponents at the cross-examinations. A meeting between Messrs Merkur and Simaan followed on March 12, 2012 and copies of the transcripts of the cross-examinations were provided to Mr. Simaan on March 21, 2012.
[ 20 ] On April 3, 2012, Mr. Merkur and Mr. Simaan met again. At this meeting, Mr. Simaan disclosed emails that had passed between Revolution Food and JohnVince.
[ 21 ] Mr. Merkur deposed that he understood that Revolution Food would not provide evidence until and unless the Zwanigas would make concessions in relation to the companion action against the Revolution Food principals.
[ 22 ] On May 1, 2012, the Zwanigas entered into a Cooperation Agreement with Edward Valleau, Devan Hawbolt, and Roderick Knight. For present purposes, the important terms of the Cooperation Agreement are as follows:
• Messrs. Valleau, Hawbolt, and Knight agree “to assist in confirming that [JohnVince] as a partner and/or franchisor’s associate by immediately filing an Affidavit confirming: (1) their true belief that [JohnVince] was a partner; (2) their true belief that [JohnVince] was sharing in the profits of the Revolution Program by profiting off nut and candy sales and through the advertising/marketing value; (3) the discussions and communications in relation to a revisitation (sic) of the profit sharing arrangement (re [JohnVince] profiting from the sale of machines …); (5) the extent that [JohnVince] reviewed and approved promotional materials … (8) other information that will assist in confirming [JohnVince’s] role as a partner in the Revolution Food Program; and (9) any other information that will assist in confirming [JohnVince’s] role as a franchisor’s associate and/or the control that JohnVince exercised over Revolution.
• Messrs. Valleau, Hawbolt, and Knight agree not to dispute any of the allegations in the Statement of Claim in the main action.
• Messrs. Valleau, Hawbolt, and Knight agree to consent to certification of the main action.
• The Zwanigas agree that if they succeeded in opposing JohnVince’s motion for summary judgment, then upon the resolution of the main action, they would dismiss the action against Messrs. Valleau, Hawbolt, and Knight on consent and without costs but subject to court approval.
• The Zwanigas agreed to pursue their claims against Revolution Food and JohnVince.
• The parties agreed to co-operate on liability issues by agreeing to provide evidence and argue that [JohnVince] is at law also responsible to the Zwanigas.
[ 23 ] The Cooperation Agreement was immediately disclosed to JohnVince and later to the court as a part of the motion before the Court.
[ 24 ] On May 7, 2012, there was a case conference to discuss the Zwanigas’s request to deliver Mr. Knight’s affidavit for use on the summary judgment motion. I ruled that there had to be a motion to decide whether to grant that request.
[ 25 ] The motion now before the court was promptly brought, and it was supported by the affidavits of Mr. Merkur and Mr. Knight. Mr. Knight swore his affidavit on May 7, 2012. His affidavit included the emails that had been disclosed at the April 3, 2012 meeting. Mr. Knight deposes that JohnVince had an active and controlling role in the distribution program and was more than just a supplier of product.
[ 26 ] On June 13, 2012, Mr. Knight and Mr. Merkur were cross-examined.
[ 27 ] The Zwanigas submit that Mr, Knight’s evidence reveals that JohnVince is more than a mere supplier of peanuts. They say that his affidavit contains crucial and necessary evidence so that the court will have a “full appreciation” of the facts fundamental to the summary judgment motion. They submit that the court should admit the evidence for the purpose of the summary judgment motion.
[ 28 ] JohnVince opposes the admission of the evidence. It appears that JohnVince is not concerned about the admission of Mr. Knight’s evidence as such; rather, it opposes to the admission of the evidence as a matter of due process and procedural fairness. It submits that there is no Knight evidence that is new or that contradicts the evidence previously given. It says that Mr. Knight’s evidence is neither credible nor corroborative of the plaintiffs’ claim that Revolution Food and JohnVince were partners. Indeed, it submits that Mr. Knight made numerous admissions that run completely contrary to the Zwanigas’s allegations about Revolution Food’s relationship with JohnVince.
[ 29 ] Thus, it would appear that JohnVince’s case would not be prejudiced by the admission of Mr. Knight’s evidence but JohnVince submits that admitting the evidence would contravene the Rules of Civil Procedure , would not be procedurally fair, and is an abuse of process.
C. DISCUSSION
[ 30 ] Before addressing the merits of this motion, there are several somewhat disturbing aspects of this motion that must be briefly addressed.
[ 31 ] As noted above, the Zwanigas promptly disclosed the Cooperation Agreement. This is mandatory. The Cooperation Agreement is similar to a Mary Carter agreement or a Pierringer Agreement that affects the adversarial orientation of the lawsuit and such agreements are not privileged and must immediately be disclosed to the opponents and the court. See Moore v. Bertuzzi 2012 ONSC 3248 .
[ 32 ] However, in the case at bar, in my opinion, disclosure by itself was not sufficient because this Cooperation Agreement cannot become operative without court approval. I say this because the action against Messrs. Valleau, Hawbolt, and Knight was a proposed class action and s. 29 (2) of the Class Proceedings Act, 1992 stipulates that a settlement of a class proceeding is not binding unless approved by the court.
[ 33 ] The court has not approved the Cooperation Agreement in the case at bar and would not do so without a fairness hearing. It is disturbing that approval was not sought, but I am going to ignore this complication, because, as I will discuss below, there were means to obtain Mr. Knight’s evidence independent of the Cooperation Agreement.
[ 34 ] It is also disturbing that the court was not told about the companion class action and the court had to find out about it in a serpentine way. However, once again, I am going to ignore this factor, because I do not see why knowing about it later rather than sooner should make a difference for the purposes of this motion.
[ 35 ] The language of the Cooperation Agreement is also disturbing. But for the fact that the evidence shows that the nature of the evidence was determined before the negotiation of the Cooperation Agreement and because I have no reason to doubt the honest intentions of the Zwanigas, the language of the Cooperation Agreement leaves an impression that the Zwanigas were purchasing tailored evidence.
[ 36 ] However, beyond submitting that the circumstances of the Cooperation Agreement made Mr. Knight’s evidence incredible, unreliable, and not worthy of belief (an argument that I anticipate that I will hear again), JohnVince accepted that cooperation agreements may be a proper way to settle litigation and to obtain the cooperation of a settling defendant. Since the Cooperation Agreement was promptly disclosed and not otherwise challenged, I will ignore my concerns about the impressions left by the language of this particular Cooperation Agreement.
[ 37 ] Putting these various concerns aside, I can turn to the merits of the motion before the court and I will begin the discussion by observing that the Zwanigas mischaracterized their motion as a motion for the delivery of new evidence after the court had heard evidence and argument and before the entry of the judgment. See: Jackson v. Vaughan (City), [2009] O.J. No. 145 (S.C.J.) ; 671122 Ontario Ltd. v. Sagaz Industries Canada Inc ., 2001 SCC 59 , [2001] 2 S.C.R. 983.
[ 38 ] However, this motion is actually about rule 39.03 (2), which require that on a motion, all the parties must submit their evidence before any cross-examinations of opposing parties proceed and then the rule provides that a party may not deliver a subsequent affidavit without leave of the court. Rule 39.03 (2) states:
39.03 (2) A party who has cross-examined on an affidavit delivered by an adverse party shall not subsequently deliver an affidavit for use at the hearing or conduct an examination under rule 39.03 without leave or consent, and the court shall grant leave, on such terms as are just, where it is satisfied that the party ought to be permitted to respond to any matter raised on the cross-examination with evidence in the form of an affidavit or a transcript of an examination conducted under rule 39.03.
[ 39 ] I discuss this rule in P.M. Perell and J.W. Morden, The Law of Civil Procedure in Ontario (Markham: LexisNexis, 2010) at p. 561 as follows:
In determining whether to grant leave for an additional affidavit or another examination and upon what terms, if any, the court will consider whether the matter raised on the cross-examination was relevant to the litigation, whether the affidavit sought to be filed is responsive to the matter, and whether allowing the delivery of the affidavit would operate unfairly against the adverse party : Nolan v. Canada (Attorney General) ( 1997 ), 38 O.R. (3d) 722 (Gen. Div.) ; Bloorview Childrens Hospital Foundation v. Bloorview MacMillan Centre , [2001] O.J. No. 1701 (S.C.J.) . On a motion for leave to file a further affidavit, a party should explain why the evidence could not have been included as part of its pre-cross-examination evidence : Brock Home Improvement Products Inc. v. Corcoran (2002), 58 O.R. (3d) 722 (S.C.J.) , but in Nolan v. Canada (Attorney General ( 1997 ), 38 O.R. (3d) 722 (Gen. Div.) , Quinn J. rejected the proposition that leave could only be granted to introduce evidence to respond to a matter that had been ra i sed for the first time during the cross-examination. In First Capital Realty Inc. v. Centrecorp Management Services Ltd. , the Divisional Court adopted this point and also stated that “a flexible, contextual approach is to be taken in assessing the criteria relevant to rule 39.02(2), having regard to the overriding principle outlined in Rule 1.04 of the Rules of Civil Procedure that the rules are to be interpreted liberally to ensure a just, timely resolution of the dispute : ” [2009] O.J. No. 4492 at para. 4 (Div. Ct.) ; Knowles (c.o.b. Special Events Marketing) v. Arctic Glacier Inc., 2011 ONSC 682 at paras. 52-54 (S.C.J.) . The Divisional Court held that all the criteria should be weighed and no one criterion was determinative.
[ 40 ] The Zwanigas argue that the circumstances of the case at bar satisfy the test for the admission of fresh evidence after a hearing. They submit that the evidence sought to be admitted is relevant to a fundamental issue in the litigation (the nature of the relationship between JohnVince and Revolution Food (and whether JohnVince was a partner, joint venture, or franchisor’s associate), the evidence might influence the outcome, and the evidence could not have been obtained until after the cross-examinations and the securing of the Cooperation Agreement.
[ 41 ] Apart from the fact that this motion is actually about rule 39.03 (2), I disagree with this argument for the admission of the evidence. The evidence disclosed by Mr. Knight was available before the cross-examinations and could have been forthcoming without any Cooperation Agreement. Mr. Knight could have been summoned as a witness and the evidence of correspondence and email between JohnVince and Revolution Food would have been forthcoming had obviously appropriate questions been asked during the cross-examinations of the JohnVince deponents. There is much to the submission of JohnVince that it is simply not procedurally fair in an adversarial system to permit the Zwanigas a chance to better their case after mishandling it.
[ 42 ] I also disagree with the Zwanigas ironical and bizarre argument based on the recent summary judgment decision of the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch , 2011 ONCA 764 , [2011] O.J. No. 5431 (C.A.).
[ 43 ] In the Combined Air case, the Court of Appeal discussed the test for summary judgment and the Court articulated what is now often described as the full appreciation test. Under this test for determining when there is a genuine issue requiring a trial, the motions judge ask him or herself whether the full appreciation of the evidence and the issues required to make dispositive findings can be achieved by way of a summary judgment, or can this full appreciation only be achieved by way of a trial? The Zwanigas submitted that JohnVince’s motion for a summary judgment needed the evidence of Mr. Knight for the motions judge to achieve the full appreciation of the evidence necessary to grant a summary judgment.
[ 44 ] This is a bizarre and ironical argument because on the motion for summary judgment, the Zwanigas, as the responding parties, will undoubtedly argue that a full appreciation can only be achieved at trial. I do not see how Combined Air is pertinent to the question of whether leave to deliver an additional affidavit should be granted under rule 39.03 (2).
[ 45 ] Put shortly, I am not convinced that the Zwanigas have made out a case for the admission of Mr. Knight’s evidence, exhibits, and the transcript of his cross-examination. I also agree with JohnVince’s argument that it would be procedurally unfair in an adversarial system to allow the Zwanigas to fix their tactical and strategic missteps.
[ 46 ] Yet this all said, I shall grant the Zwanigas’s motion. The reason is that JohnVince only objects to the admission of Mr. Knight’s evidence as a principled objection based on the formalities rather than the substance of the adversarial system. It is not prejudiced by the admission of the evidence and, indeed, its position is that Mr. Knight’s evidence is more helpful than harmful.
[ 47 ] At this juncture, I do not know whether JohnVince is right or wrong in its belief that Mr. Knight’s evidence will not harm its prospects of obtaining a summary judgment. What I do know is that if JohnVince is correct and it is successful in having the action dismissed, then it is preferable and in the interests of justice that the Zwanigas not have a ground of appeal based on Mr. Knight’s evidence having been precluded when JohnVince did not argue that they were prejudiced by the admission of the evidence.
[ 48 ] In my opinion, there must be something more than standing on principle to deny the Zwanigas and the putative class members the opportunity to put what they think is their best evidentiary foot forward for the summary judgment motion.
D. CONCLUSION
[ 49 ] Therefore, I grant the Zwanigas’s motion with costs payable to JohnVince in any event of the cause. I will fix those costs, if the parties cannot agree. JohnVince may make written submissions within two weeks of the release of these Reasons for Decision followed by the Zwanigas’s submissions within a further two weeks.
[ 50 ] The parties should make arrangements to reschedule the summary judgment motion.
PERELL J.
Released: June 28, 2012
COURT FILE NO.: CV-11-422868CP
DATE: 20120628
ONTARIO SUPERIOR COURT OF JUSTICE Proceedings under the Class Proceedings Act, 1992
BETWEEN:
David Zwaniga and Jennifer Zwaniga Plaintiffs – and – JohnVince Foods Distribution L.P. and Revolution Food Technologies Inc. Defendants
REASONS FOR JUDGMENT
PERELL J.
Released: June 28, 2012