Wednesday, April 9, 2014

Small Claims Court - Written Statements and the Right to Cross-Examine

There is a recent case out of the Hamilton Small Claims Court, Birch Paving & Excavating Co., Inc. v. Clark, which is an interesting decision for a number of reasons, but most so for a couple of procedural matters.

Until recently, very few Small Claims Court decisions were reported publicly, with the result that there hasn't been a large base of precedents to deal with routine procedural issues.

The facts were fairly typical:  In 2009, Birch was hired to repave a driveway, did the job, and didn't get paid.  So he sued.  What made it less-than-straightforward was that it wasn't entirely clear who hired him.  There was no written contract or purchase order, which isn't unheard of (I still insist it's a bad idea, but I've had contractor clients tell me "If I had to get every customer instruction signed in writing, I'd spend all my time doing paperwork, and none of it doing actual work").

He dealt primarily with an individual named John Clark, who worked for Premier Fitness and reported to Cardillo.  (For background, Cardillo was the founder of Premier Fitness, which had a fairly lengthy history of getting sued by creditors, as well as hefty fines from the Ministry of Labour for failing to pay employees on time, fraud investigations, and a rather condemning piece from CBC's Marketplace.  It eventually went into receivership in 2012.)

The driveway itself was on a residential property owned by Cardillo's wife, which was behind a Premier Fitness club.  (Looking at Google's Street View, the driveway appears to go in behind the house, and also appears to be shared with the neighbouring house, which Cardillo owned.)

Birch was aware that Clark was getting instructions from someone else, but never asked whom.  A cheque - which was subsequently dishonoured - was received from Cardillo's corporation.  So the difficult question was:  Who gets sued?  Birch went after Clark and Cardillo's wife.

As further procedural background, the action started as a construction lien action in the Superior Court, but was pushed by the pre-trial judge into Small Claims Court because of its low value - a decision that doesn't really surprise me, but nonetheless seems questionable in light of the fact that it deprived the plaintiff of substantive statutory remedies.

Procedural Issues

Both defendants used one lawyer - the same lawyer who represented Cardillo and Premier Fitness in litigation by other creditors.  None of the defendants showed up at court, which is irregular, but their lawyer was able to present their defence nonetheless.  He wanted to present the case by way of written statements.  This is permissible within the Rules of the Small Claims Court, subject to certain conditions, and it makes sense - the Small Claims Court is designed to be expeditious and cost-effective, and getting in evidence by written statement without necessarily requiring witnesses to take the stand...makes sense in many cases.

Therefore, it's very common for parties to introduce written statements from third-party witnesses.  There are a number of good tactical reasons to do so, and I've periodically used them myself.  But I've routinely seen them from opposing parties, and they very often do not comply with the Rules.  Among other things, the statement has to come with the name, telephone number, and address for service of the witness.  Therefore, opposing counsel is able to contact the witness and serve a Summons, so as to be able to cross-examine the witness on the contents of the statement.  The opportunity to cross-examine, testing the accuracy and thoroughness of evidence, rather than accepting it at its face, is a fairly critical element of procedural fairness.

So I've had scenarios where details weren't provided regarding witnesses, or where service could not be effected at the address provided.  (In such cases, I write to the other party and put them on notice that, if they don't produce the witness at trial, I will object to admission of the statement into evidence.)

The defence wanted to use four witness statements - one from each defendant, one from Cardillo, and one from a law clerk.  Cardillo and the law clerk were there to be cross-examined, so their evidence was admitted.

Cardillo's wife was not present, and the plaintiff's lawyer objected because her 'address for service' with her statement was in Barbados.  The Small Claims Court does not provide any authority for summonsing somebody from outside of Canada.  The Deputy Judge didn't consider this to be a problem, for three reasons:
  • The plaintiff had not even taken the step of obtaining a Summons to Witness to serve upon Ms. Cardillo.  (On its own, this would be a highly dubious proposition.  Why should a plaintiff incur the time and expense of obtaining a Summons when there is no mechanism for serving it?  Nonetheless, the Deputy Judge has sent a message to go through the motions.)
  • Because the witness in question was a party, the plaintiff could have served a Summons on the lawyer of record.  (This is probably not correct.  A Summons is required to be served "personally" - in other Rules, it specifies that alternatives to personal service are not acceptable...that qualifier is not present in the Small Claims Court rules, but even if it were, service on a lawyer requires the lawyer to accept service in order to be effective.)
  • Cardillo's wife's evidence was not contradicted by any aspect of the plaintiff's evidence, and reiterated "what we already knew" from Birch's own evidence.  (I'm not sure what to make of this:  Not being 'contradicted' doesn't excuse the absence of an opportunity to cross-examine.  Especially given the issues here, if her evidence is to the effect of "I never knew about or permitted the re-paving", then that state of negative knowledge obviously isn't something that Birch could contradict, but it shouldn't be accepted as fact.  If her evidence wasn't merely uncontradicted, but corroborated by the plaintiff's evidence, then it doesn't matter whether or not it's admitted.)
Clark, however, was another story:  The defence lawyer admitted that he had lost track of Clark and couldn't get in contact with him.  This lack of contact completely abrogated the right to cross-examine, so the statement wasn't admitted.  (There's a bigger problem here, since Clark was a party:  The defence lawyer had represented to the court that the non-presence of the parties wasn't a problem because he had "clear instructions" on the defence he was to present.  Then he later admitted that he had lost contact with one of the clients he was there to represent.  The Deputy Judge highlighted this as a possible Professional Responsibility issue, with possible costs consequences.  Let's see if there's a reported follow-up.)

Liability of Clark

Cardillo's evidence was that he had authorized Clark to enter into the contract, and Clark did so on his behalf - this is an admission he made with impunity at this point, since the limitations period has run its course.

The Deputy Judge found Clark to be personally liable, concluding that the contract existed as between Birch and Clark.  Birch was aware that Clark was reporting to somebody else, but didn't know whom, and was given Clark's name and Clark's cell phone number (I'd be careful how much to read into that, frankly, but in light of the fact that Clark never advised of the identity of his employer, it makes a certain amount of sense to hold him responsible for the contract he entered into).

Liability of Cardillo's Wife

Cardillo's wife, the homeowner, never entered into a contract with Birch.  That's true - no contract claim can be made against her personally.  There's no 'privity', as we call it.  The claim against her was made on equitable grounds, on the basis of unjust enrichment - that she was enriched, to Birch's corresponding detriment, with no juridical reason.

The Deputy Judge rejected the unjust enrichment claim, comparing it to a scenario where a contractor works on the wrong property by mistake:  "the law would be unlikely to enforce any claim for the work as there was no connection to the owner", and the mistake amounts to a 'juridical reason' for the enrichment.  That's probably true, but that's really not the situation here.  The absence of privity of contract cannot, in and of itself, create a juridical basis for an otherwise-unjust enrichment.  That's kind of the point of unjust enrichment - it fills in the gaps of contract law.  And to say that there's "no connection" to the owner is untrue - Clark was employed by a corporation which was owned by the homeowner's husband.  Under those circumstances, it is reasonable to presume the work was sought in order to enhance the use of the property by, if not the owner herself, others whom the owner permitted to use the property.

If Cardillo's wife gave evidence to the effect that she didn't want the work done, and that her husband had overstepped by contracting for the work to be done, then you'd end up in a situation more akin to a tenant who has the floors replaced without the landlord's permission:  Is the landlord unjustly enriched by the work?  It's a much more nuanced question.

Additional Comments

This case is worth only a modest amount, and there are a lot of irregularities in it - it's been nearly five years, and there's no doubt that the parties have all spent too much money on it already.  But, given that the plaintiff is left with a judgment against an individual who they may or may not be able to find, I wonder if we might see an appeal of both the procedural and substantive conclusions.

Nonetheless, this is an illustration of how challenging Small Claims Court really is:  This case dealt with some very nuanced and complex issues of procedure and law, and I'm not altogether convinced that the conclusion was right.

I have handled employment-related and commercial litigation claims at the Small Claims Court (among others), with very positive results, and am well-acquainted with its process.  If any readers require assistance with Small Claims Court issues, I would encourage you to contact me for information regarding my rates and services.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

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