Simon's Megalomaniacal Legal Resources

Evidence Case Dicta - Adverse Inferences (2)

. Amtim Capital Inc. v. Appliance Recycling Centers of America

In Amtim Capital Inc. v. Appliance Recycling Centers of America (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from a claim by a 'personal services corporation' (essentially an incorporated employee) who provided management and sales services to a Canadian subsidiary. The plaintiff lost their lawsuit for failing to meet their evidentiary onus, here when the defendant did not fully comply with their oral and documentary discovery duties and the plaintiff failed to pursue remedies to that non-compliance fully (ie. to the point required to obtain that necessary evidence).

The adage of the case is that, despite non-compliance with discovery duties by a defendant, the onus remains on the plaintiff to compel compliance to the point necessary to prove their case. A plaintiff cannot rely upon the defendant's non-compliance to support an 'adverse inference' such that the court will infer the necessary fact-findings:

[9] Amtim argues that the evidentiary shortfall was the result of ARCA’s failure to comply with its disclosure obligations under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, with the production order made by Braid J., and with its own undertaking given at discovery.

[10] The trial judge did not accept this argument. He noted, in context at para. 65, that Amtim had not utilised its right to access ARCA’s documents provided in the Governing Agreements. He explained, at para. 93:

Very soon after the dispute between the parties arose ARCA invited Amtim to review its records pursuant to the contractual provision permitting access, with or without an auditor of Amtim’s choosing. This invitation was never withdrawn prior to trial. Berta declined to avail himself of the right to review or audit ARCA’s records and there is no indication that he mandated or instructed either of Amtim’s experts to do so. Dowad was not limited to reviewing the documents listed at Appendix A to his report (including the “ARCA Binder”) but had the right of access, by virtue of the Governing Agreements, to all of ARCA’s records pertaining to the Canadian operations. He was simply not mandated by Amtim to do so.

[11] The trial judge added, at para 96:

Amtim was given full discovery all of the relevant documents including the “raw data” (in electronic format) which ARCA had relied upon in carrying out the calculations contained in the brief of documents produced to Berta in July 2010, as ordered by Braid, J. on March 6, 2018. Although ARCA’s former counsel Mr. McRae was unable to locate sworn copies of the first two of the four Affidavit of Documents which ARCA served, the evidence indicated that the actual documents listed in those draft Affidavits of Documents were produced by ARCA.

[12] The trial judge noted, at para. 97, that the appellant had failed to take the usual procedural steps:

Even if ARCA’s disclosure of documentation or information might be considered to have been deficient (which I am not persuaded was the case) Amtim’s remedy was to bring a motion to compel production (which it did, leading to the Order of Braid, J.) Since Amtim did not bring any further motion or motions for production, it must be taken to have accepted ARCA’s position that no further production was required, and no adverse inference can be drawn. (see Bawas Gas Bars Ltd. v Kiosses, [1998] O.J. No. 5450 (Gen. Div.), para. 38 and Wade v. Baxter, 2001 ABQB 812, para. 25).

[13] The trial judge added that “there was no indication at trial that, following the production by ARCA of the “raw data” as ordered by Braid, J. on March 6, 2018, Amtim took any steps to make enquiries of counsel for ARCA or to otherwise follow up in an effort to render the data production useful for Lewis’ purposes.”

....

[17] The appellant argues that it was open to the trial judge, and remains open to this court, to remedy the evidentiary shortfall by drawing an adverse inference that, if the documentary evidence had been properly provided, it would have established the appellant’s case.

[18] The trial judge described Amtim’s argument, at para. 87:

Amtim seeks to overcome the qualification of Dowad’s opinion by reliance upon the principle permitting adverse inferences to be drawn against ARCA in two respects, as set forth in Mr. Figliomeni’s closing written submissions, as follows:

(a) the court should draw an adverse inference against ARCA resulting from its failure to deliver on its promise to prove that the financial summaries contained at Exhibit 26 (labelled the “ARCA Binder”), which were relied on by all of the expert witnesses, are faithful to the underlying data; and

(b) the court should draw an adverse inference against ARCA for its failure to call any of the accountants or auditors that were allegedly involved in determining the nature and quantum and method of allocation of ARCA’s corporate overhead expenses to ARCA Canada.

[19] After instructing himself properly on the law relating to adverse inferences, the trial judge declined, at para. 94, to draw an adverse inference regarding the provision of the underlying data:

I am unable to accept Amtim’s submission that ARCA had an obligation to prove that the financial summaries contained in the ARCA Binder “are faithful to the underlying data” and that, in the absence of such proof, the court should draw an adverse inference that they are not. In my view this unjustifiably reverses the onus on Amtim to prove that the calculations were wrong.

[20] The trial judge also declined to draw an adverse inference from ARCA’s failure to call auditors or other personnel:

For the reasons set forth above, I am also unable to accept Amtim’s submission that the court should draw an adverse inference against ARCA for its failure to call the accountants or auditors involved in determining the allocation of ARCA’s corporate overhead expenses to ARCA Canada: para. 96.

[21] As a result, the trial judge dismissed the case. He declined to fix damages on the basis that Amtim, noted at para. 118, “has not proved sufficient facts upon which the damages can be estimated fairly and reasonably.” As already explained, it cannot be said that ARCA’s conduct prevented Amtim from proving its loss.

[22] The trial judge rejected Amtim’s claim to payment for three invoices on the basis that Amtim had failed to prove “that it actually performed the services that would entitle it to payment”: para. 126.

[23] We agree with the trial judge’s analysis and, on that basis, dismissed the appeal.

....

[25] As a practice note, this court does not condone inadequate document production under the Rules of Civil Procedure. However, the act of setting an action down for trial signals a party’s willingness to proceed on the record and the evidence that it has, and to forego other procedural remedies. The decision to set an action down has consequences. The appellant made the strategic decision to rest its case on the potential use of an adverse inference and must bear the consequences of its strategic choice.

. Kitmitto v. Ontario (Securities Commission)

In Kitmitto v. Ontario (Securities Commission) (Div Court, 2024) the Divisional Court considers (and dismissed) related appeals from two Capital Markets Tribunal (CMT) decisions, one respecting 'merits' and one respecting 'sanctions' [under Securities Act (SA), s.10(1)], here addressing SA 76 "which prohibits insider trading and tipping" ['Part XVIII - Continuous Disclosure ' ('Trading where undisclosed change' and 'Tipping')].

Here the court considers an 'adverse inference' argument, one that may be drawn against a party for failure to call witnesses:

[77] I have also concluded that the Tribunal majority did not err in failing to draw an adverse inference against OSC staff for not calling as witnesses other individuals with Aston Financial.

[78] There is no obligation on the prosecution to call a witness that it considers unnecessary to its case. In limited circumstances, a trier of fact may, in the exercise of its discretion, draw an adverse inference from the failure of a party to call a witness, but the inference “should only be drawn with the greatest of caution”; it is “the exception not the rule”: R. v. Lo, 2020 ONCA 622, 152 O.R. (3d) 609, at paras. 156, 162. It should be drawn only “where there is not a plausible reason for nonproduction, i.e., where it would be natural for the party to produce the evidence if the facts exposable by the witness had been favourable”: R. v Lapensee, 2009 ONCA 646, 99 O.R. (3d) 501, at para 42. An adverse inference should not be drawn where the evidence would be unimportant, cumulative or inferior to the evidence already available on the relevant point: Lapensee, at para. 43.