COURT FILE NO.: CV-11-437362
DATE: 20210531
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: May 17, 2021
RULINGS – The Rule in Browne v. DUNN and rule 53.08
DELIVERED ORALLY:
[1] On April 20, 2021, the seventeenth day of this trial, I made four rulings. Three of these rulings were in relation to a common objection made by the Defendants in regard to three fact witnesses called by the Plaintiffs, which I will refer to as the “Browne v. Dunn Ruling”. And I made a fourth ruling on an objection made by the Plaintiffs to a document that the Defendants sought to use in cross-examination of Mr. Andrew MacKay, which I will refer to as the “Rule 53.08 Ruling”. In regard to each of these rulings, I stated that my reasons for the rulings would follow. These are those reasons.
I. RULING – THE RULE IN BROWNE v. DUNN
[2] As part of their evidence in reply, the Plaintiffs called three witnesses who were current or former owners of Arctic Spas hot tubs: Mr. Kevin O’Mara; Mr. Brett Salvisburg; and Mr. Trevor Haelzle.
[3] Each of these witnesses testified about the service that they required to their Arctic Spas hot tubs. Each witness was taken to a spreadsheet that had been tendered into evidence during the examination of the Defendant Darcy Amendt and marked as Exhibit 88, said by Mr. Amendt to have been compiled by him and said to show that Arctic Spas Oakville Inc. (“ASOI”) submitted false warranty claims to Blue Falls Manufacturing Ltd. (“Blue Falls Ltd.”). Each witness was asked whether he had any information that would cause him to believe that there was anything false or improper about the warranty claims filed on his behalf as represented on Exhibit 88 (the “Impugned Question”).
[4] In each instance, the Defendants objected to the Impugned Question on the basis that it contravened the “Rule in Browne v. Dunn” because Mr. Amendt was not given an opportunity to state his position in regard to this evidence while under cross-examination. I found that ASOI had failed to put to Mr. Amendt the evidence on which he was now sought to be impeached, in breach of the “Rule in Browne v. Dunn”. However, I admitted the impeaching evidence, by allowing all three witnesses to answer the Impugned Question, granting to the objecting parties the right to recall Mr. Amendt, which they declined to do, and stating that I will assess the weight to be attributed to the evidence of these witnesses, or I may draw an adverse inference, on the totality of the evidence at trial. I granted to the objecting party the right to make further submissions on the weight I should place on this evidence or any adverse inference. In these Reasons, I will explain the basis for this Ruling.
A. Background – the Cross-Examination of Darcy Amendt
[5] The Defendant Darcy Amendt is the Chief Executive Officer of the Defendant Blue Falls Ltd. Mr. Amendt was examined in chief on April 6 and 7, 2021, and was cross-examined by the lawyer for the Plaintiffs on April 7, 8 and 9, 2021.
[6] Mr. Amendt testified about the steps that he took to determine whether ASOI had filed false warranty claims with Blue Falls. Mr. Amendt stated that “Inside Arctic” is an online system available to Blue Falls’ dealers, such as ASOI, for processing warranty claims. Mr. Amendt explained that a dealer could log into their dealer account in “Inside Arctic”, search for the serial number of the hot tub that required warranty repair and could enter the details and the service date and submit the claim for warranty processing. Mr. Amendt stated that, at his direction, Blue Falls compiled a list of warranty claims submitted by ASOI in the 5-year period from September 2006 to September 2011, consisting of some 14,000 warranty claims.
[7] Mr. Amendt testified that he needed data from ASOI to compare its records regarding the customer service calls that identified the warranty claims. He knew that ASOI used business record management software provided by Evosus Inc. Mr. Trevor Wasney, who has testified in this action in his capacity as a principal of ASOI, confirmed that ASOI’s service records were kept on its Evosus database, and that ASOI’s service technicians would log service calls into ASOI’s Evosus system. Mr. Amendt testified that he required production of ASOI’s Evosus records in order to analyse whether the warranty claims filed with Blue Falls through the “Inside Arctic” platform had corresponding service call entries in the ASOI Evosus records.
[8] Mr. Amendt testified that if an ASOI customer called for service, the required service detail would be uploaded into ASOI’s Evosus database, the ASOI technician would attend to the service call and enter notes into the Evosus database and if it resulted in a warranty claim, the warranty claim would be processed on-line in “Inside Arctic”.
[9] Mr. Amendt testified that he compared the ASOI customer service records extracted from its Evosus database - compiled into the “Evosus Custom Report” - and matched them with a warranty claim in Blue Falls’ Inside Arctic system, sorted by serial number for the hot tub, customer name, address and date of service. Mr. Amendt stated that he did so to see whether the description of the service call on Evosus matched the description of the warranty claim submitted on-line in Inside Arctic. Mr. Amendt swore that he identified some 3,800 warranty claims said to have been made by ASOI for Onzen salt-water systems, water jets and motherboards that were “unexplained”, meaning that, according to Mr. Amendt, there was a warranty claim made on Inside Arctic but there was no corresponding or matching record in the Evosus database recording that the service technician actually attended to that service. Mr. Amendt’s analysis was set out in an Excel spreadsheet that was converted to pdf and marked as Exhibit 88. It is titled “Revised Reconciled Warranty Spreadsheet”. Mr. Amendt swore that he prepared this document and contended that it supported a claim for false warranty claims totalling $500,070.50.
[10] ASOI’s lawyer cross-examined Mr. Amendt on the process that he used to compile the Revised Reconciled Warranty Spreadsheet, and obtained the admission that Mr. Amendt had the ability to contact the customers identified in the Spreadsheet to verify whether the warranty service was actually completed but that he did not do so. ASOI also cross-examined Mr. Amendt that he did not provide a copy of the Spreadsheet to any of ASOI’s service technicians to obtain their information regarding whether the warranty claims were proper.
[11] ASOI’s lawyer did not put to Mr. Amendt that some customers would be called by ASOI to testify and were expected to say that they had no information that there was anything false or improper about the warranty claims filed on their behalf in the manner recorded by Mr. Amendt on the Revised Reconciled Warranty Spreadsheet.
B. The Rule in Browne v. Dunn
[12] The Rule in Browne v. Dunn (1893), 1893 CanLII 65 (FOREP), 6 R. 67 (H.L.), adopted in Canada in Peters v. Perras (1909), 1909 CanLII 178 (SCC), 42 S.C.R. 244, is a rule of trial fairness. In R. v. Quansah, 2015 ONCA 237, 125 O.R. (3d) 81, at paras. 77-78, the Court of Appeal explained that its objective is to provide the witness with an opportunity to explain evidence that the cross-examiner intends to use later in the trial to contradict the witness on an essential matter: see also, R. v. Vorobiov, 2018 ONCA 448, at para. 42. In Quansah, at para. 75, the Court of Appeal explained the Rule as follows:
In Browne v. Dunn, Lord Herschell, L.C., explained that if a party intended to impeach a witness called by an opposite party, the party who seeks to impeach must give the witness an opportunity, while the witness is in the witness box, to provide any explanation the witness may have for the contradictory evidence.
[13] The Court of Appeal stated that the purpose of the Rule is to provide fairness to the witness whose credibility is attacked, fairness to the party whose witness is impeached and fairness to the trier of fact who “would be deprived of information that might show the credibility impeachment to be unfounded and thus compromise the accuracy of the verdict”: Quansah, at para. 77.
[14] At the same time, “the rule in Browne v. Dunn is not a fixed rule”: Quansah, at para. 80. The Court of Appeal explained that not “every scrap of evidence” needs to be put to the witness; the cross-examiner “need not descend into the muck of minutiae to demonstrate compliance with the rule”: Quansah, at paras. 81, 86. Rather, the Court of Appeal explained the application of the principle as follows, Quansah, at para. 81, citing R. v. Giroux (2006), 2006 CanLII 10736 (ON CA), 207 C.C.C. (3d) 512 (Ont. C.A.), at para. 46; R. v. McNeill (2000), 2000 CanLII 4897 (ON CA), 144 C.C.C. (3d) 551 (Ont. C.A.), at para. 45:
The cross-examination should confront the witness with matters of substance on which the party seeks to impeach the witness’s credibility and on which the witness has not had an opportunity of giving an explanation because there has been no suggestion whatever that the witness’s story is not accepted.
[15] When the Rule in Browne v. Dunn is contravened, the trial judge may exercise her or his discretion to allow for the admission of the evidence as against an appropriate remedy: Quansah, at paras. 117-120. The scope of permissible remedies or sanctions include the provision of leave to re-call the witness whose testimony is impeached, drawing an adverse inference or taking the omission into account when assessing the credibility of the witness who was not confronted with the impeaching evidence: Palmer v. The Queen, 1979 CanLII 8 (SCC), [1980] 1 S.C.R. 759, at p. 781; Hurd v. Hewitt (1994), 1994 CanLII 874 (ON CA), 20 O.R. (3d) 639 (C.A.).
C. Analysis
[16] The Plaintiffs’ cross-examination of Mr. Amendt on the Revised Reconciled Warranty Spreadsheet probed the following: whether Mr. Amendt was the author of the Revised Reconciled Warranty Spreadsheet; whether Mr. Amendt had the ability to contact any of the customers represented by the 1,780 warranty claims that were said by Mr. Amendt to be “unexplained”, and whether he did so; and whether he made inquiries of any of the service technicians regarding Mr. Amendt’s conclusion that service had not been performed in relation to these 1,780 unexplained warranty claims.
[17] ASOI’s lawyer did not put to Mr. Amendt that ASOI intended to call three customers who were expected to testify that they had no information that there was anything false or improper about the warranty claims that were filed on their behalf. The Plaintiffs examined these three witnesses on the Revised Reconciled Warranty Spreadsheet as follows:
(a) Mr. O’Mara testified that the 5 entries listed on the Revised Reconciled Warranty Spreadsheet for him and his wife, Marianne Grnak, dated from March 27, 2009 to January 19, 2011, were warranty claims filed by ASOI on his behalf for services on his Arctic Spas hot tub;
(b) Mr. Salvisburg testified that the 2 entries listed on the Revised Reconciled Warranty Spreadsheet for him and his wife, Helen Murphy, dated September 13, 2009 and December 16, 2009, were warranty claims filed by ASOI on his behalf for services on his Arctic Spas hot tub;
(c) Mr. Haelzle testified that the entry listed on the Revised Reconciled Warranty Spreadsheet for him and his wife, Stephanie Haelzle, dated January 6, 2010, was a warranty claim filed by ASOI on his behalf for services on his Arctic Spas hot tub.
[18] When these witnesses were each asked whether they had any information that would lead them to believe that there was anything false or improper about any of these warranty claims, the lawyer for the Defendants objected on the basis of the Rule in Browne v. Dunn, contending that there had been a breach of trial fairness.
[19] In the course of submissions on the objection, the objecting counsel stated that there had been a breach of documentary disclosure on the part of the Plaintiffs referable to these witnesses. I did not see this. The Plaintiffs showed that the documents that they tendered to Mr. O’Mara had been produced to the Defendants with a bundle of some 500 pages of documentary disclosure on March 5, 2021. No documents were tendered in examination of Mr. Salvisburg or Mr. Haelzle, so this was not an issue for them. Although Messrs. O’Mara, Salvisburg, and Haelzle were not listed in the Trial Management Report to Trial Judge, completed by the parties with the pre-trial judge and provided to me under Rule 50.08(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, they were identified in the Plaintiffs’ opening submissions as witnesses who were expected to testify as to the accuracy of the warranty claims filed by ASOI on their behalf. The Plaintiffs had disclosed to the Defendants these witnesses and their potential role in the trial.
[20] The issue on this objection was not procedural unfairness resulting from disclosure obligations, which in my view was not established, but rather trial unfairness resulting from how Mr. Amendt was cross-examined. The evidence of these customer witnesses was simply not put to Mr. Amendt, either specifically or, in my view, even as a subject or topic. This stands in stark contrast to the cross-examination of Mr. Amendt on evidence expected to be adduced by the Plaintiffs from Mr. Andrew McKay on the question of Blue Falls’ intentions in fixing the Onzen system, which was specifically presented to Mr. Amendt, specifically affording him an opportunity to explain.
[21] The objecting Defendants submitted that the Plaintiffs did not afford Mr. Amendt an opportunity to rebut evidence from Messrs. O’Mara, Salvisburg, and Haelzle that they had no evidence that their warranty claims were false notwithstanding the absence of a matching service record. I agree. The Plaintiffs were not obligated to put to Mr. Amendt the entire detail of their evidence. However, I find that this was a matter of substance – that witnesses would contradict three of the warranty claims contained in the Revised Reconciled Warranty Spreadsheet. There was a suggestion in cross-examination that Mr. Amendt had failed to investigate the legitimacy of the warranty claims beyond his comparison of business records. While the inference was that had he done so, he would have seen that some were proper even though matching Evosus records were absent, this was not put to Mr. Amendt who was denied an opportunity to explain. Considering the entirety of the cross-examination on the Revised Reconciled Warranty Spreadsheet, and the role that this issue had in Mr. Amendt’s evidence on this document, I concluded that there had been a breach of the Rule in Browne v. Dunn.
[22] In terms of a remedy or sanction, the Plaintiffs, relying on Hurd, submitted that the Defendants could recall Mr. Amendt so that he could respond to the evidence provided by Messrs. O’Mara, Salvisburg, and Haelzle, or the Court could consider an adverse inference or the Court could consider the weight to be attributed to this evidence, with consideration that the evidence was not put to Mr. Amendt. After consideration of these possible remedies, the Defendants submitted that if the Court allowed for the admission of the evidence of Messrs. O’Mara, Salvisburg, and Haelzle on the Impugned Question, the Defendants did not consider that it was necessary to recall Mr. Amendt, but rather they would be content to proceed on the basis that they be allowed an opportunity to speak to an adverse inference and to the weight that the Court ought to attribute to this evidence.
D. Conclusion
[23] The combined evidence of Messrs. O’Mara, Salvisburg, and Haelzle regarding the Revised Reconciled Warranty Spreadsheet impacts a total of 8 entries out of the 1,780 entries in that Exhibit. Considering the scope of the evidence, the nature of the evidence and the context in which it was provided, I exercised my discretion to allow the evidence of these witnesses on the Impugned Question, granting to the objecting Defendants the right to recall Mr. Amendt, which they declined to do, and reserving to them the right to make further submissions on the use to which I may put this evidence, including the drawing of an adverse inference. I will assess the weight to be attributed to this evidence, and I may draw an adverse inference upon consideration of the totality of evidence and upon hearing any further submissions on this evidence.
II. RULING – RULE 53.08
[24] The Plaintiffs called Mr. Andrew MacKay to give evidence. Mr. MacKay worked for ASOI commencing in November 2008, initially as a service technician. Over the course of some ten years, he moved into a sales position and then into operations management. He testified to the process used by ASOI for responding to its customers’ service calls, including warranty claims.
[25] Mr. MacKay testified that he was never directed by Mr. Trevor Wasney to file false warranty claims with Blue Falls, and never filed a false warranty claim.
A. Background to Ruling
[26] The Defendants cross-examined Mr. MacKay on invoices that he submitted to ASOI for service calls that he made on their behalf. One such set of invoices pertained to service calls made by Mr. McKay in the period from November 30, 2008 to December 4, 2009 and was marked as Exhibit 198. One of the service calls recorded on these invoices was a December 4, 2009 service call to customers Angela & Dave Penn who, according to the invoice, had called to report that the pumps on their hot tub were not working, with the possibility that the pump mounts or bearings might require repair or replacement. Mr. MacKay was questioned on the “Tech Comment” that he wrote in relation to this service call: “Mount broken. Make something up.”
[27] The Defendants cross-examined Mr. MacKay on his note that he would “make something up”. Mr. MacKay testified that this meant that he would improvise in his repair to find a way to secure the mount using the tools and parts that he had available. The Defendants put to Mr. MacKay that he submitted this repair as a warranty claim, designated warranty claim #152908, and wrote, as the “Brief Description”, that the customer’s hot tub had a “water fall internal leak/ broken valve”.
[28] The Defendants sought to put to Mr. MacKay a record produced from Blue Fall’s “Inside Arctic” system for this claim, being warranty claim #152908, dated December 15, 2009. The Plaintiffs objected to the Defendants use of this document, which I will refer to as the “Objected Warranty #152908 Record”. The basis for the Plaintiffs’ objection was that the Defendants had not produced the Objected Warranty #152908 Record in this action.
[29] The Plaintiffs submitted that they produced Mr. MacKay’s invoices, including those marked as Exhibit 198, on March 5, 2021. They contended that the Defendants were on notice that Mr. MacKay would testify on the service calls that he conducted, including warranty claim #152908. The Plaintiffs submitted that the Objected Warranty #152908 Record was within the Defendants’ possession, power and control as a document stored on the “Inside Arctic” system, and that if the Defendants intended to rely on it at trial they had an obligation to produce the document in advance of trial. Additionally, the Plaintiffs submitted that the Objected Warranty #152908 Record was not proven at trial, as it is a Blue Falls document that was not presented through any Blue Falls witness or any notice under the Evidence Act, R.S.O. 1990, c. E.23.
[30] The Defendants conceded that they did not produce the Objected Warranty #152908 Record as part of their pre-trial documentary production. Indeed, not until Mr. MacKay’s examination at trial. The Defendants stated that the service provided by Mr. MacKay for Angela & Dave Penn was not one of the 4,000 false warranty claims compiled by Blue Falls in February 2021 for which Blue Falls sought damages, at that time, in its counterclaim. Rather, the Defendants sought to rely on the Objected Claim #152908 Warranty Record solely to impeach Mr. MacKay’s credibility.
B. Applicable Rules
[31] Rule 30.08 provides as follows:
30.08 (1) Where a party fails to disclose a document in an affidavit of documents or a supplementary affidavit, or fails to produce a document for inspection in compliance with these rules, an order of the court or an undertaking,
(a) if the document is favourable to the party’s case, the party may not use the document at the trial, except with leave of the trial judge; or
(b) if the document is not favourable to the party’s case, the court may make such order as is just.
[32] There was no question that the Defendants breached Rule 30.08 in not producing the Objected Warranty #152908 Record. They failed to disclose a document that they then sought to rely on at trial as favourable to their case. The Defendants sought leave to use this document at trial, in accordance with Rule 53.08, which provides as follows:
53.08 (1) If evidence is admissible only with leave of the trial judge under a provision listed in subrule (2), leave shall be granted on such terms as are just and with an adjournment if necessary, unless to do so will cause prejudice to the opposite party or will cause undue delay in the conduct of the trial.
(2) Subrule (1) applies with respect to the following provisions:
- Subrule 30.08(1) (failure to disclose document).
[33] The Plaintiffs submitted that they would sustain prejudice if the Defendants were permitted to use the Objected Warranty #152908 Record because they have not had an opportunity to conduct discovery on it, and were not able to consider the use of the document in their cross-examination of the Defendants’ witnesses, particularly Mr. Amendt. The Plaintiffs contended that if the Defendants were allowed to use the document at trial, they would require that Mr. Amendt be recalled to be examined on the document, and that they be afforded an adjournment to consider the impact of the document.
[34] The Defendants submitted that the sole purpose of the Objected Warranty #152908 Record was to impugn the credibility of Mr. MacKay and that it does not form part of their counterclaim against the Plaintiffs. They maintained that in such circumstances, there would be no prejudice to the Plaintiffs in the use of the document in cross-examination of Mr. MacKay. They stated that an adjournment and the recall of Mr. Amendt would unduly delay the trial which was, at the time of this objection, in the afternoon of the last day scheduled for the tendering of evidence.
C. Analysis
[35] The parties did not disagree on the applicable legal principles. Rule 53.08 is mandatory, and requires that the trial judge shall grant leave on such terms that are just, unless there will be prejudice to the other party or whether to do so would cause undue delay in the conduct of the trial: Glass v. 618717 Ontario, 2011 ONSC 2926, at para. 12. In consideration of the issue of prejudice, the Defendants relied on the finding in Homes of Distinction (2002) Inc. v. Adili, 2019 ONSC 7588, at para. 9, that “the prejudice to the opposing party in admitting the disputed evidence must be weighed against the prejudice to the proffering party in excluding it”, applying Rolley v. MacDonnell, 2018 ONSC 163, at para. 29.
[36] The objecting Plaintiffs relied on Iannarella v. Corbett, 2015 ONCA 110, 124 O.R. (3d) 523, where the Court of Appeal emphasized, in para. 33, that “[t]he Rules are designed to require full disclosure of information in order to ‘to prevent surprise and trial by ambush’”. In the context of a party’s failure to deliver an affidavit of documents and failure to disclose a surveillance report, the Court of Appeal held, at para. 83, that the trial judge ought to have refused the admission of the non-disclosed document, even solely for the purpose of impeachment.
[37] Having considered these principles, I did not accept the Plaintiffs’ objection that the Defendants’ breach in documentary disclosure ought to result in exclusion of the Objected Warranty #152908 Record. Unlike in Iannarella, the Defendants have produced an affidavit of documents, and the nature of this single document does not rise to the level of the undisclosed surveillance report that was not produced in Iannarella. However, I accept the Plaintiffs’ submission that they were entitled to have this document in advance of trial and would have then been in a position to consider its use in the examination of the principals of the Defendant corporations, focusing principally on Mr. Amendt.
[38] I am satisfied that the Defendants have established a basis for leave to use the Objected Warranty #152908 Record in cross-examination of Mr. MacKay, on terms that will afford the Plaintiffs an opportunity to examine Mr. Amendt on the document. In accordance with Rule 53.08(1), I concluded that no prejudice would result from the use of this document in the cross-examination of Mr. MacKay that could not be addressed by recalling Mr. Amendt for the sole purpose of cross-examination by the Plaintiffs on this document.
D. Conclusion
[39] On the basis of Rule 53.08 (1) and (2)(1.), I granted leave to the Defendants to use the Objected Warranty #152908 Record in their cross-examination of Mr. MacKay on the term that if they should do so, the Defendants will recall Mr. Amendt for the purpose of cross-examination on this document, alone.
[40] After I rendered this ruling on April 20, 2021, the Defendants declined to make use of the Objected Warranty #152908 Record. Accordingly, the Defendants were not required to recall Mr. Amendt.
A.A. Sanfilippo J.
Date: May 31, 2021