Court File and Parties

COURT FILE NO.: CV-11-437362

DATE: 20210427

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2287913 ONTARIO INC., TREBAR HOLDING INC., 2234406 ONTARIO INC. and ARCTIC SPAS OAKVILLE INC. Plaintiffs/ Defendants by Counterclaim

AND:

ERSP INTERNATIONAL ENTERPRISES LTD., BREAK THROUGH ENTERPRISES LTD., KELLNER CONSULTING LTD., LIQUID LOGIC LTD., ECHO SOLUTIONS INCORPORATED, PARADISE BAY SPA & TUB WAREHOUSE INC., SPA LOGIC INC., BLUE FALLS MANUFACTURING LTD., ARCTIC SPAS INC., JOHN KIERSTEAD, DARCY AMENDT, DENNIS KELLNER and BRENT MACKLIN Defendants/ Plaintiffs by Counterclaim

BEFORE: A.A. SANFILIPPO J.

COUNSEL: Joseph Figliomeni, for the Plaintiffs/ Defendants by Counterclaim Leslie Dizgun and Allyson M. Fischer, lawyers for the Defendants/ Plaintiffs by Counterclaim

RULING ISSUED: April 12, 2021

RULING – EVIDENCE BY AFFIDAVIT – RULE 53.02

DELIVERED ORALLY:

[1] On April 9, 2021, the eighth day of trial in this action, the Defendants/Plaintiffs by Counterclaim requested a ruling that they could tender the evidence of a representative of Evosus Inc., a business software company, by affidavit evidence under Rule 53.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. After hearing submissions from all counsel, I denied the Defendants’ request under Rule 53.02, on the basis of reasons to follow. These are the reasons for this ruling.

A. The Evosus Custom Report

[2] The Defendants referred me to the Order of Case Management Master McGraw dated November 27, 2017 to provide context regarding the origin of a custom report prepared by Evosus. This Order arose from a motion brought by the Defendants/Plaintiffs by Counterclaim on September 29, 2017 to compel the Plaintiffs/Defendants by Counterclaim to answer refusals arising from the examination for discovery of Mr. Wasney.

[3] In his Endorsement (2287913 Ontario Inc. v. ERSP International Enterprises Ltd., 2017 ONSC 7085, at para. 3), Master McGraw referred to the Reasons that he rendered earlier on June 6, 2017, in regard to a two-day motion that he heard on May 25 and 29, 2017, where the Plaintiffs sought answers to undertakings and questions refused: 2287913 Ontario Inc. v. ERSP International Enterprises Ltd., 2017 ONSC 3499. One of the areas addressed was documentary production pertaining to the Defendants’ claim that the Plaintiff, Arctic Spa Oakville Inc. (“ASOI”) had filed false warranty claims from the Defendant Blue Falls Manufacturing Ltd. (“Blue Falls”) in relation to products supplied by Blue Falls and sold by ASOI. ASOI submitted that its service logs were recorded on its information management system, supplied by Evosus, and included daily tasks reports from the ASOI service technicians. Mr. Trevor Wasney, who has testified in this action in his capacity as a principal of ASOI, confirmed that ASOI’s service records are kept on its Evosus database. To direct the most proportionate, efficient and least expensive way to complete documentary production in relation to the false warranty claim issue, Master McGraw ordered, at 2017 ONSC 3499, para. 47, that the Defendants isolate for the Plaintiffs 18 warranty claims which the Defendants allege and/or believe are inaccurate and/or false and that the Plaintiffs “shall then produce to the Defendants all service call documentation from Evosus and otherwise which is relevant to these 18 warranty claims”.

[4] The Master set out this background to the motion that he heard on September 29, 2017, being the Defendants’ motion for answers to undertakings and refusals arising from the examination for discovery of Mr. Wasney, which included 6 questions said to be related to the Defendants’ allegation that ASOI submitted false warranty claims. In Reasons released on November 27, 2017, Master McGraw stated that this issue “has resulted in the largest number of productions with the potential for tens if not hundreds of thousands more” and that the challenge was not relevance, but proportionality: 2287913 Ontario Inc. v. ERSP International Enterprises Ltd., 2017 ONSC 7085, at para. 40. The Defendants relied on the following conclusion stated by Master McGraw at paras. 54-55 of his November 27, 2017 Endorsement:

In my view, a reasonable, relevant and proportionate production order in the circumstances is for the Plaintiffs to produce the following for the period September 2006 until the Termination Date:

(i) a report summarizing tasks/instructions given to ASOI's technicians from its dispatchers (including Customer Note History, Service Order and Daily Schedules) only for the replacement of the Onzen system, jets and motherboards and technicians' notes following completion of work;

(ii) reports summarizing jets, motherboards and Genesis systems all purchased from suppliers other than Blue Falls (Blue Falls should have in its possession or control documentation with respect to jets, motherboards and Onzen and Genesis systems which it sold to ASOI).

In my view, this strikes the appropriate balance between the Defendants' rights to discover these issues, the Plaintiffs rights to be free of onerous and disproportionate discovery and the principles enunciated in Rule 1.04.

[5] Master McGraw’s finding that the Plaintiffs produce a custom report was then set out in paragraph 5 of his issued Order of November 27, 2017 (the “November 2017 Order”) directing that this custom report be delivered within 60 days of his Order.

[6] The Defendants referred me to Master McGraw’s Case Management Endorsement of April 20, 2018, where the Master recorded that the parties stated that Evosus might not be able to generate the custom report, but that both parties agreed to contact Evosus to seek Evosus’ input into the production of the report. Master McGraw wrote that if Evosus was unable to produce the custom report, the parties were directed to “explore other options”: Case Management Order of April 20, 2018, at para. 5.

[7] Mr. Wasney and Mr. Amendt, who testified as a principal of Blue Falls, explained the purpose for the information from ASOI’s Evosus records. Mr. Wasney testified that ASOI’s service technicians would log service calls into ASOI’s Evosus system. Mr. Wasney explained that if the service was determined to be in the nature of a warranty claim, it would be logged into Blue Falls’ “Inside Arctic” system. Mr. Amendt testified that he required production of ASOI’s Evosus records in order to coordinate between the ASOI recorded service calls and any corresponding warranty claim with Blue Falls. Both Mr. Wasney and Mr. Amendt identified a letter, dated July 24, 2018, sent by the Plaintiffs’ counsel to Evosus Inc. on July 24, 2018, with a copy to the Defendants’ lawyers, stating as follows:

“On November 27, 2017, Master M. McGraw ordered that a summary report of certain information be disclosed by the Plaintiffs. He ordered as follows:

“The Plaintiffs shall produce for the period September 2006 to September 26, 2011 a report summarizing tasks / instructions given to ASOl's technicians from its dispatchers (including Customer Note History, Service Order and Daily Schedules) only for the replacement of the Onzen system, jets and motherboards and technicians' notes following completion of work”.

We understand from communications by the Plaintiffs and the Defendants with Evosus that Evosus is able to create a custom-made Excel spread sheet which will contain the information ordered by Master McGraw above.

We are writing on behalf of all the parties to jointly instruct you to please commence extraction of the data and preparation of the report as soon as possible in light of the time constraints imposed by the court.”

[8] Mr. Wasney identified an email from Mr. Brandon Hoek of Evosus, dated September 13, 2018, sent to the lawyers for the Plaintiffs and the lawyers for the Defendants, bearing title: “Re: 2287913 Ontario Inc. v. ERSP International Enterprises Ltd, et al. – Custom Report”. The email purports to attach a custom report, titled “courtorder.xls”. I will refer to this document as the “Evosus Custom Report”. Mr. Amendt testified that he relied on the Evosus Custom Report in compiling Blue Falls’ false warranty claim, by comparing its recording of ASOI’s service calls with the corresponding warranty claims made by ASOI through Blue Falls’ “Inside Arctic” program.

[9] The Defendants sought to tender an affidavit from a representative of Evosus annexing the Evosus Custom Report, on the basis of Rule 53.02. The Defendants contended that the Evosus Custom Report was conceptualized, directed and created in the case management process, with oversight and direction by Master McGraw. The Defendants rely, as well, on the Plaintiffs’ confirmation, on July 3, 2019, that “the Plaintiffs do not have any information that the Evosus Report is incomplete”.

[10] The Plaintiffs objected to Evosus providing evidence by way of affidavit, without cross-examination, on the basis that the evidence was controversial requiring cross-examination.

B. Rule 53.02

[11] Rule 53.02 provides as follows:

Before or at the trial of an action, the court may make an order allowing the evidence of a witness or proof of a particular fact or document to be given by affidavit, unless an adverse party reasonably requires the attendance of the deponent at trial for cross-examination.

[12] The Defendants relied on Cormack Animal Clinic Ltd. v. Potter (2009), 2009 CanLII 713 (ON SC), 306 D.L.R. (4th) 548, where D.L. Corbett J. thoughtfully and comprehensively surveyed the reported cases that have applied Rule 53.02 or its predecessor. Justice Corbett held that Rule 53.02 is intended to permit uncontentious facts to be proven by affidavit to save court time. I agree with and adopt Justice Corbett’s findings in para. 27:

In my view, Rule 53.02(1) is not designed to address the principled exception to the hearsay rule. Rather, it is designed to enable the court to achieve efficiencies in the trial process. Where a certain point must be proved, but is not contentious, valuable court time should not be occupied by receiving this evidence orally. It should be done by way of affidavit. Rule 53.02(1) permits this. And this reading is consonant with the decision of Pennell J. in Lumbreras-Ximenes, and with the reasoning, if not the result, in Leclerc. I so conclude based on my reading of the phrase “reasonably requires the attendance of the deponent at trial for cross-examination”.

[13] Consideration of the cases referred to by Corbett J. is instructive. In Lumbreras-Ximenes v. Allstate Ins. Co. (1975), 1975 CanLII 463 (ON SC), 11 O.R. (2d) 639 (H.C.J.), decided under former Rule 268, Pennell J. held that the purpose of the predecessor to Rule 53.02 was to facilitate the trial of an action “where the witness cannot be reasonably produced and the facts sought to be proved, although not facts admitted by the parties, are facts which require only verification rather than explanation”. In Leclerc et al. v. St-Louis (1984), 1984 CanLII 2053 (ON SC), 47 O.R. (2d) 584, at para. 5, the Divisional Court expressly agreed with the statement of principles in Lumbreras-Ximenes.

C. Analysis

[14] The Plaintiffs do not contest the authenticity of the Evosus Custom Report. I know of no basis by which they could. ASOI ran its business operations using the Evosus business record management platform; collaborated in directing Evosus in the development of the Evosus Custom Report; formulated, together with the Defendants, the custom parameters for the Excel spreadsheet preparation; provided Evosus with access to the data; and joined in instructing Evosus to “commence extraction of the data and preparation of the report as soon as possible”. And all this took place as a proportionate and efficient alternative to the production by the Plaintiffs of voluminous records, in accordance with Master McGraw’s order.

[15] The Plaintiffs do not object to the Defendants tendering the direct testimony of the Evosus representative by affidavit. However, the Plaintiffs submitted that they reasonably require cross-examination of the evidence expected to be provided by ASOI’s record keeping service provider on the custom report completed at ASOI’s direction, using ASOI’s records pursuant to the Court order.

[16] The Defendants submitted that the Plaintiffs do not reasonably require a cross-examination of the Evosus Representative and that nothing in the Evosus Custom Report is contentious. The Plaintiffs submitted that the Evosus Custom Report is contentious and submitted, based on Mr. Amendt’s evidence, that the Evosus Custom Report is important to the Defendants’ claim that ASOI made false warranty claims.

[17] Apart from evidence regarding the background to the assignment provided by the parties jointly to Evosus, the Defendants did not provide any evidentiary foundation on which a determination could be made that the Evosus evidence is non-contentious and that thereby no cross-examination was reasonably required. I would have declined the relief sought by the Defendants under Rule 53.02 on these grounds alone.

[18] But there are other considerations. The Defendants stated throughout that a representative from Evosus is available to testify and therefore to be cross-examined. This trial is being conducted virtually, meaning that the Evosus representative can testify from his or her home jurisdiction, indeed home office, without travel, by video connection. The only issue is how the Evosus representative will give evidence for this trial: in writing or viva voce in the virtual courtroom. The Defendants would have had to establish that the evidence was entirely uncontentious and unworthy of cross-examination to meet the requirements of Rule 53.02 and, given the importance of the evidence, the Defendants would, in my view, have needed to present a proper evidentiary record on which such findings could be made.

[19] And last, but importantly, I see no trial efficiency in the Defendants’ desired relief under Rule 53.02. Considerable trial time has been spent in the Defendants’ submissions to admit the Evosus Custom Report first without a witness, and then through an affiant when, throughout, the best evidence: the oral testimony of the Evosus representative, has been available.

[20] The purpose of Rule 53.02 is to permit uncontentious facts to be proven by way of affidavit to save court time. The Defendants did not satisfy me that these criteria were met in this case, and I thereby deny the Defendants’ requested order under Rule 53.02.

Sanfilippo J.

Date: April 27, 2021