ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 52918/11
DATE: 2014/12/02
BETWEEN:
CLELAND METAL PRODUCTS LTD.
Rachel Slingerland, for the Plaintiff (Respondent)
Plaintiff/Respondent
- and -
NEIL PROCTOR and 1540958 ONTARIO INC. o/a PREMIER FITNESS CLUBS
F. Scott Turton, for the Defendants (Appellants)
Defendants/Appellants
HEARD: September 26, 2014
The Honourable Madam Justice W.L. MacPherson
[1] This is an appeal by the defendants, Neil Proctor (“Proctor”) and 1540958 Ontario Inc. o/a Premier Fitness Clubs (“Premier”), from a Small Claims Court trial judgment by Deputy Judge D. Black (“the trial judge”) regarding payment of an outstanding debt.
[2] The trial was heard on March 23, 2011. At the conclusion of the trial, the trial judge gave oral reasons granting judgment in favour of the plaintiff, Cleland Metal Products Ltd. (“Cleland Metals”), for $23,222.74 plus pre-judgment interest and costs of $2,000.00 plus disbursements.
OVERVIEW
[3] Cleland Metals had supplied labour, materials and services to Premier at 366 Bunting Road, St. Catharines. Premier did not pay their outstanding account which was $47,715.13 as of July 7, 2006. An agreement was made between Premier and Cleland Metals whereby Premier would pay $10,000.00 followed by six monthly instalments in the amount of $6,285.86 each from August 1, 2006 to January 2007.
[4] As of July 12, 2006, Cleland Metals had only received the initial $10,000.00 payment from Premier resulting in an outstanding debt of $37,715.13. As a result, Proctor, signed a personal guarantee in the amount of $37,715.13 representing the balance owed by Premier. The personal guarantee was subject to Premier defaulting on its debt to Cleland Metals. Premier made some payments on its debt to Cleland Metals, but four of the six monthly payments were dishonoured.
[5] The main issue at trial was when the last payment had been made. Proctor acknowledged that default had occurred but took the position that this had occurred at the latest by January 2007. Cleland Metals took the position that the last payment occurred on April 22, 2008 when a bank draft in the amount of $1,920.67 was received. The date was significant as the claim by Cleland Metals was not commenced until April 22, 2010 and would be statute barred, but for the partial payment in April 2008.
[6] At trial, the trial judge accepted the evidence of Cleland Sr. and Cleland Jr. that Cleland Jr. had received a call on April 22, 2008 advising that a cheque was available. Cleland Sr. attended at the Premier location on Bunting Road on the same day and picked up an envelope. Inside the envelope was a bank draft, which Cleland Sr. immediately deposited in the bank. The trial judge accepted that a partial payment had been made by Premier on that date.
[7] In his reasons, the trial judge stated that he had concerns with regard to Proctor’s evidence. The first concern related to the payment made in July 2006 drawn on the account of an unrelated corporation instead of the defendant corporation’s bank account. The second concern related to Premier’s and Proctor’s banking procedures by way of an “agency agreement” with a second unrelated corporation, which the trial judge stated seemed to be designed to frustrate creditors of Premier and he was not satisfied by Proctor’s explanation as to why Premier’s banking arrangements were set up in this manner. Finally, he found that Proctor’s lack of knowledge regarding the identity of the officers and directors of the unrelated corporation with whom Premier had this arrangement, to be incredible. He found that Premier was engaging in conduct akin to a type of shell game in which the corporation stays one step ahead of its creditors by making partial payments from different sources, with no way of establishing the source of the funds.
[8] On the basis that a partial payment was made on April 22, 2008, the time limit did not expire until April 22, 2010, the date on which the claim was issued. As such, the claim was not statute barred and the trial judge granted judgment in favour of Cleland Metals for the full amount claimed.
ISSUES & RELIEF REQUESTED
[9] The appellants raised three issues in the Notice of Appeal and Factum:
(i) The deputy judge erred in holding that the debt sued upon was not statute barred by the limitation period;
(ii) Trial fairness was compromised by the deputy judge intervening excessively in the examination and cross-examination of witnesses;
(iii) In a trial where credibility was an issue, the deputy judge erred by cross-examining the defendant on his credibility and then making an adverse finding on credibility against the defendant.
[10] At the hearing of the Appeal, the appellants’ focus was on the latter two issues, submitting that if this court were to find that there were errors in the conduct of the trial such that trial fairness had been compromised, it was not necessary to consider whether the legal decision was correct, as once unfairness is established, a new trial should be ordered.
[11] The appellants request that the judgment be set aside and a new trial ordered to take place before a different Small Claims Court judge. They also request an order that there should be no costs of the first trial and that the appellant should receive costs of the appeal.
[12] The respondent in the appeal submits that trial fairness was not compromised by the trial judge’s interventions which were within acceptable limits of a Small Claims Court judge. The respondent requests that the appeal be dismissed with costs.
THE LAW
[13] The hallmark of a fair trial is that the trial judge preside with impartiality and neutrality between the parties. In Sargent v. Plaza Ontario Marble & Tile Inc. (Ont C.A.) citing McFarlane v. Safadi, 2004 12644 (ON CA), [2004] O.J. No. 1763 (Ont. C.A.) 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.
[14] Given the nature of small claims court proceedings, appellate courts have recognized that the role of trial judges in small claims court is often, by necessity, interventionist. A trial judge is expected and entitled to take reasonable steps to ensure that the issues are clear, that 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 a need for clarification. However, there is a point at which judicial intervention becomes interference and improper. An appellate court must therefore look at the impugned interventions of the trial judge in the context of the overall nature of Small Claims Court proceedings when determining if the interventions rendered the trial unfair or created a reasonable apprehension of bias. (Garry v Pohlmann 2001 Carswell BC 1893; Majcenic v. Natale (1967) 1967 267 (ON CA), 66 D.L.R. (2d) 50 (Ont. C.A.)
ANALYSIS
[15] From a thorough review of the entire transcript of the trial, there is little doubt that the trial judge intervened a great deal throughout the course of the hearing. However, it is not the number of interventions but the nature of the interventions that must be considered in the context of the trial proceedings as a whole.
[16] At trial, Cleland Metals was represented by counsel. Two witnesses were called, William Cleland Sr. and William Cleland Jr.
[17] Proctor represented himself and the corporate defendant, Premier. Proctor was the only witness who testified.
[18] Many of the interventions by the trial judge were entirely appropriate so as to provide general guidance to one party; to draw out testimony from a witness; to clarify the evidence and the position being taken; and to assist witnesses in entering exhibits. Those are all permissible reasons for intervening in the trial proceeding.
[19] Although the appellant objected to the trial judge having intervened to ask Mr. Cleland Sr. about the date on which the telephone call was received and the bank draft was picked up, there was nothing improper in doing so. The date that this occurred was a critical point as it related to the limitation defence and the trial judge was entitled to seek clarification on this issue.
[20] Other than that intervention, there were minimal interventions by the trial judge in the presentation of the case for Cleland Metal.
[21] In contrast, the trial judge intervened extensively in the defendant’s examination in-chief. While Proctor was encouraged to “tell [his] story”, almost immediately he was interrupted by the trial judge cross-examining the defendant at length first as to his position with Premier, the banking and cheque signing practices and the involvement of John Cardillo, another shareholder of the corporation.
[22] Although the defendant is then asked to “continue with [his] story”, after two more sentences, the trial judge once again intervenes and engages the defendant in a debate about the law of guarantees and mitigation. Certainly if this had been counsel cross-examining the defendant, the trial judge would have properly discouraged such argumentative communication in the course of the evidence being given. It would be a stretch to accept, as the respondent argues, that the judge was simply assisting the defendant in presenting his case and clarifying his position.
[23] If that had been the extent of the intervention by the trial judge, such conduct may not have crossed the line. However, the involvement of the trial judge continued to the point that when cross-examining Proctor about the possibility that the bank draft came from Mr. Cardillo, he prefaces it with a comment that “…this Mr. Cardillo is kind of a shadowy figure, sort of, in the operations here.” This occurs before all of the evidence is in and one is left with a very clear and negative bias on the part of the trial judge.
[24] During cross-examination of Proctor by counsel for Cleland Metal, the area of Premier’s current (in 2011) banking practices begins to be explored. Instead of objecting to the line of questioning as it was not relevant to the issue to be decided by the trial judge (namely, whether a partial payment had been made by Premier in 2008), Proctor answers the questions put to him, only to be met by the trial judge commenting and asking, “It sounds like a scheme. Is it a scheme?” This is denied by Proctor and an explanation is given, and further cross-examination takes place. But shortly thereafter, the trial judge perhaps realizing that he had gone too far in characterizing the situation by that comment, allowed Proctor to provide clarification:
THE COURT: I interject and I had actually another question. I think I should be fair to you, sir. I’m the judge and I’m supposed to intervene to clarify and I threw in sort of a comment and counsel continued to cross, and I think I need to be, what I, to be fair. I’m just getting, I need information because obviously there may be an issue here of credibility, okay, so I need to understand. If you are operating an ongoing business and that ongoing business does not have a bank account and that ongoing business is not operating on just a cash basis and, in fact, there’s a different corporation that is facilitating, I think the word you used, the banking arrangements for the defendant corporation, I want to give you the opportunity to clarify for me why that arrangement is in place, and that was my original comment, it sounds like a scheme. And what I mean by that is it sounds like you’re trying to, trying to do something improper by that arrangement. So if you aren’t, can you explain to me why you would have a different corporation facilitating banking arrangements for your defendant corporation?
A. Yes, and it’s not a scheme.
THE COURT: Okay.
A. I don’t like that – to be honest with you I....
THE COURT: I think that’s why that word is used in quotation marks, so can you explain to me what, how, why that arrangement is in place?
[25] Proctor then explained that due to customers bouncing cheques, the credit record of the corporation and lawsuits against the corporation, he had been unable to open up a bank account in the name of the corporation as he did not have the $100,000.00 security required by the bank in order to open such an account.
[26] In closing submissions, the trial judge did intervene with both parties, but it cannot be seen to have been a balanced intervention. In the case of Cleland Metals’ counsel, it was limited to the trial judge confirming his understanding of the law as it related to partial payments and the limitations defence. With regard to Proctor, the trial judge engaged in a debate throughout his closing submissions. When Proctor raised the issue of the two year delay and the fact of Cleland Metals waiting until the very last minute, the trial judge then interjected with a lengthy explanation as to his legal practice and office procedures.
[27] The trial judge then refers to the July 12, 2006 payment which was a certified cheque from a third corporation,
THE COURT: Well, why, I mean we’re beyond evidence now, but why would a $10,000 cheque be coming from, from, in this matter, from yet a third corporation?
MR. PROCTOR: Because I, because I didn’t have the money at the time in my company to fund the settlement agreement. I borrowed it.
THE COURT: Okay, well you see where it starts to look like a shell game.
MR. PROCTOR: Well, no, I....
THE COURT: I understand your position is I’m honest and forthright because I could have declared bankruptcy, which people use for evil purposes or scheme purposes, but I’m trying to be legitimate, so I take money from this shell and it’s not to stay ahead of creditors, is the term I use. You say just to pay your bills.
MR. PROCTOR: Exactly.
THE COURT: But it starts to look like a shell game to me from the documents, but.
[28] After hearing submissions from counsel for Cleland Metals and from Proctor, the trial judge took a break and then provided his oral reasons.
[29] In those reasons for judgment, the trial judge found that Proctor was not credible and stated his reasons for making this finding. The trial judge has a role in assessing credibility and in most instances deference should be accorded to the trial judge on such matters. However, it is significant that each of the grounds supporting the finding that Proctor was not credible were founded entirely on questions that the trial judge had asked and the evidence that he had elicited.
[30] It was apparent very early on in the trial and in the midst of Proctor’s evidence, that the trial judge had reached the conclusion that Proctor and Premier were engaged in a shell game in order to defeat creditors.
[31] The cornerstone of a fair and impartial trial is that the trial judge listens to all of the evidence before coming to a conclusion and rendering a judgment. It must be based on the evidence before him and not on his own experience in legal practice. Rather than an appearance of impartiality, a careful review of the entire transcript reveals that the trial judge did not exercise a balanced approach with both parties. This was clear not only in the number of interventions by the trial judge in the presentation of Proctor’s case, but also in the nature of his questions to Proctor and the tone of the comments made. Overall, the effect was that the end result was that the trial was unfair to Proctor.
[32] After considering the submissions made on the appeal and having reviewed the transcript of the proceedings, I conclude that the image of impartiality of the trial judge was impaired. Trial fairness was compromised and there must be a new trial.
ORDER
[33] For the reasons given above, the appeal is allowed, the trial judgment is set aside and a new trial is ordered to be held before a different deputy trial judge.
COSTS
[34] There are several cost claims being requested by the Appellants, Proctor and Premier.
[35] There was considerable delay in the appeal proceeding, some as a result of the Appellant having to wait for transcripts and to perfect the appeal, and some delay due to the Respondent not having prepared its documentation in a timely fashion. After several Court attendances, the Appellant did not attend Court, apparently as he was not notified to do so, with the result that the Appeal was dismissed as an abandoned appeal. As the Respondent would not consent to having the dismissal set aside, it was necessary for the Appellant to bring a motion, which was ultimately dealt with on consent. The Appellant claims $500.00 costs, but in the circumstances, no costs will be awarded.
[36] The appeal was to be heard on a fixed date of July 16, 2014. Counsel for the Appellants was double-booked and requested an adjournment, which was not consented to by the Respondent. A motion was brought and heard by Justice Reid on July 10, 2014. At that time, the adjournment was granted, with costs of the motion being reserved to the judge hearing the appeal. There was no prejudice or urgency and in fact an earlier date was available, but counsel for the Respondent was not available. In those circumstances, the adjournment should have been agreed to by the Respondent and the Appellants are entitled to costs of $500.00 all inclusive.
[37] The Appellants are also seeking costs of the appeal in the amount of $3,500.00 to $4,000.00. The Respondent submits that the costs should be no more than $2,500.00.
[38] The Appellants were successful on the appeal and are entitled to costs. Taking into consideration the hours expended and that there must be some proportionality as this is a Small Claims court matter which must necessarily be dealt with in the Superior Court, and having consideration for what a losing party would reasonably expect to pay in costs, I find that the appropriate amount of costs on the appeal to be $3,000.00 all inclusive.
[39] The Appellants are also requesting an order that there be no costs of the first trial. Rather than make such an order, given that there is to be another trial through no fault of the Respondent, the order being made is that payment of the costs of the first trial and payment of the costs of the appeal ($3,000.00) and the costs of the motion ($500.00) are left to the discretion of the judge hearing the new trial.
MacPherson J.
Released: December 2, 2014
COURT FILE NO.: 52918/11
DATE: 2014/12/02
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CLELAND METAL PRODUCTS LTD.
Plaintiff/Respondent
- and -
NEIL PROCTOR and 1540958 ONTARIO INC. o/a PREMIER FITNESS CLUBS
Defendants/Appellants
REASONS FOR JUDGMENT
MacPherson J.
Released: December 2, 2014