1104318 BC Ltd. v. Dr. Paul Wittenberg, Inc.

2023 BCSC 1541 1104318 BC Ltd. v. Dr. Paul Wittenberg, Inc.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: 1104318 BC Ltd. v. Dr. Paul Wittenberg, Inc., 2023 BCSC 1541 Date: 20230607 Docket: S1912324 Registry: Vancouver Between: 1104318 BC Ltd. Plaintiff And Dr. Paul Wittenberg, Inc. and Dr. Paul Wittenberg Defendants Before: The Honourable Madam Justice Burke Oral Ruling Re Application to Reopen the Plaintiff's Case Counsel for the Plaintiff: J.J.R. Schachter P.A. Kressock S. Andison, Articled Student J. Ovsenek, Articled Student K. Jalivand, Articled Student Counsel for the Defendants: G.E.H. Cadman, K.C. L. Morris Place and Date of Trial/Hearing: Vancouver, B.C. March 20-24 & 27-31,2023 April 4-6, 2023 May 29-31, 2023 June 1-2 and 6-7, 2023 Place and Date of Judgment: Vancouver, B.C. June 7, 2023 [1] THE COURT: I will now deliver my ruling with respect to a matter that arose yesterday. [2] As I have noted in a previous oral ruling, this matter involves the purchase and sale of a dental practice pursuant to an asset purchase agreement dated September 11, 2017, for $870,000. The action centres on the plaintiff's allegations that the defendants seriously misrepresented the value of the dental practice and, in particular, falsely represented that the dental practice was legitimately capable of generating billings of approximately $700,000 per year. [3] The plaintiff has sued in both tort and breach of contract, seeking the return of

the purchase price for the dental practice of $870,000 and consequential damages. They maintain that the defendants made fraudulent misrepresentations which the plaintiff relied on in purchasing the defendants' business and, if that had been known, the plaintiff would not have purchased the business. [4] The plaintiff has indicated there are a number of issues to be decided in this trial, including whether the defendants fraudulently or negligently misrepresented to the plaintiff the legitimate revenue‑generating capacity of the dental practice, and, in the alternative, whether the defendants are liable in breach of contract on the basis that the contractual representations made to the plaintiff in the purchase agreement were false. [5] The plaintiff now seeks to reopen its case to tender the evidence of Sabrina Lee, a receptionist who worked at Dr. Wittenberg's office between approximately February 2013 and August 2014. Ms. Lee is said to have knowledge relating to the alleged falsification of dental laboratory invoices by the defendants, and their submission to insurance companies for payment. [6] This is my oral ruling with respect to that matter. I retain jurisdiction to edit or add to the reasons in the final judgement in this matter, which I may well do, but the substance of the reasons will not change. These reasons will be abbreviated in view of the timing as it relates

to the trial. Legal Principles [7] The legal principles with respect to the reopening of a case have been well articulated in the jurisprudence. While there is some difference with respect to whether the second branch of the test is applicable when a judgement has yet to be rendered, the essence of the test is applicable in these circumstances. [8] A recent summary of these principles was set out in Cox v. Swartz Estate, 2022 BCSC 1494. The court in that case dealt with an application to reopen the plaintiff's case because the plaintiff had not tendered ay evidence concerning the defendant's liability before closing his case. [9] The court set out the legal framework in a helpful fashion. It said: [50] The court has a broad discretion to permit a party to reopen its case and tender evidence to prevent fundamental miscarriages of justice. The power is to be used sparingly and with care to prevent frauds and abuses of the courts process that might result: see Clayton v. British American Securities Ltd. (1934), [1934] 3 W.W.R. 257, [1935] 1 D.L.R. 432 at 440 (BCCA) [Clayton]; Graham v. Galaxie Signs Ltd., 2013 BCCA 266 at para. 33 (leave to appeal ref'd: 2014 CanLII 5831 (SCC)) [Galaxie Signs]. [51] The test for reopening of a trial to bring new evidence into the case is whether the applicant has shown on a balance of probabilities that (1) a miscarriage of justice would probably occur without reopening the trial, and (2) the new evidence would probably have changed the result of the trial: Grewal v. Grewal, 2016 BCCA 237 [Grewal] at para. 71; Galaxie Signs at para.

33. As noted in Cowichan Valley (Reginal District) v. Jeffries (1983), 46 B.C.L.R. 303, 1983 CanLII 484 (BCSC) [Cowichan Valley] at para. 13, for the purposes of the test, the evidence must indeed be fresh evidence: It must have come to the applicant's attention after trial, without being reasonably discoverable beforehand. [52] The farther a trial has proceeded and the more evidence that has been presented, the more stringently the test must be applied and the narrower the scope of the court's discretion to reopen the trial. Reopening may still occur after judgment has been granted, but greater scrutiny must be applied in such cases: Clayton at 440; Vander Ende v. Vander Ende, 2010 BCSC 597 at para. 84. [54] The "onus is on the applicant to demonstrate first, that a miscarriage of justice would probably occur unless the matter is reopened, and second, that the new evidence would probably change the result": AME at para. 9. [55] Miscarriages of justice do not result from simple unfairness perceived by a party that has failed to adduce evidence. This is a procedural issue usually and should be invoked where "the judicial procedure at issue [has not been] a judicial procedure at all": see Lin v. Tang, [1997] 9 W.W.R. 679, 1997 CanLII 2675 (BCCA) at paras. 61-64. Analysis [10] In coming to my conclusion on this matter, I have looked to the jurisprudence and reflected on the

actions of the parties as this matter has been pursued during trial. I note a number of factors are pertinent in answering this question. [11] First, as noted above, "the further a trial has proceeded and the more evidence that has been presented, the more stringently the test must be applied." [12] Second, the onus is on the applicant to demonstrate that a miscarriage would occur unless the matter is reopened. Miscarriages do not result form perceived unfairness by a party that has failed to adduce evidence. [13] Third, while there may be some debate as to whether the plaintiff is required to demonstrate that the new evidence would change the result, I will deal with that in my analysis. [14] As the plaintiff argues the question of the testimony of improper billings goes to the heart of the case and its allegations of fraud and misrepresentation, I must balance the factors as set out in the jurisprudence and, in particular, whether a miscarriage of justice would occur unless the matter is reopened. [15] The plaintiff says the evidence of Ms. Lee will only last 20 minutes and will go to the heart of the plaintiff's allegations against the defendants of serious wrongdoing. Ms. Lee's anticipated evidence is that she was specifically instructed by Dr. Wittenberg to change the amounts of third-party dental laboratory invoices and that this practice was permissible. She routinely

sent the suggested laboratory invoices to insurance companies for payment. The plaintiff says this evidence contradicts that of Dr. Wittenberg and Ms. Lazarus to the effect that the "sum total invoices" were created for that purpose only and were never intended to be provided to external parties. [16] As I indicated earlier, the further along the trial is, the stricter must be the application of the test. The heart of this case is the question of the billing practices, and a claim essentially for fraudulent accounting. In this case, the evidence the plaintiff seeks to produce, very late in the day, after the closure of the plaintiff's case which has lasted over 16.5 days, is essentially that the defendants specifically instructed Ms. Lee to make fraudulent and false misrepresentations with respect to the billings of the dental practice. [17] With respect to the question of due diligence in obtaining this evidence, the plaintiff says despite it interviewing Ms. Lee twice - once on September 29, 2022, and again on May 27, 2023, prior to the continuation of the trial on May 29, 2023, Ms. Lee indicated she could not recall much from the period in question and could not recall much relating to the laboratory invoices. As a result, counsel chose to call Ms. Taneka, the most recent receptionist in the practise, as part of its case and did not call Ms. Lee prior to closing its

case. [18] The plaintiff's counsel says it only became aware of the evidence this past weekend when it explored the possibiilty of rebuttal evidence. [19] This time, however, counsel for the plaintiff inquired as to whether Ms. Lee could testify to confirm the dates of her employment and, in particular, "that she did not prepare forgeries of any laboratory invoices or otherwise prepare invoices in the names of dental laboratories." [20] With respect to the question of a miscarriage of justice and prejudice to the defendants, the plaintiff says that any prejudice may be addressed by responsive evidence of the defendants, though that likely will not be different from what has already been the evidence adduced from Dr. Wittenberg and Ms. Lazarus to date. [21] As noted in Cox at para. 93, a miscarriage of justice will not easily be found. In considering this question, I note the failure of the plaintiff in obtaining this evidence in the months before the date of the commencement of trial, despite the fact that the plaintiff had the opportunity to ascertain details about this issue, is an important consideration. This issue with respect to lab invoices was specifically highlighted as early as March 10, 2023, as evident in a letter from counsel for the plaintiff and has been a central issue since. Indeed, both Dr. Wittenberg and Ms. Lazarus were extensively cross-examined on this

issue. [22] Throughout this trial, the plaintiff has sought to adduce new or belated evidence when that evidence should have been ready for the commencement of trial, especially in a case alleging fraud and misrepresentation. While the defendants have reluctantly acceded to new witnesses, at some point the prejudice that arises from such actions adversely impacts the defendants' ability to defend themselves. At some point the prejudice to the defendants outweighs the probative value of the evidence and creates a miscarriage of justice for the defendants. That time has arrived, and I conclude that to allow this evidence to be adduced would, in fact, more likely create a miscarriage of justice for the defendants--not the plaintiff. The plaintiff is still able to make its argument on the basis of the extensive evidence it has already submitted. [23] I further note with respect to the second branch of the test, if indeed the second branch of the test is applicable when a judgement has not been rendered, I am not persuaded that Ms. Lee's evidence would "probably change the result of the trial". The plaintiff now says that Ms. Lee's anticipated testimony would be direct evidence of fraudulent activity and, therefore, would impact on the probable result of the trial. [24] There is no doubt the plaintiff is prepared to argue that the court should draw inferences that the defendants

knowingly and fraudulently submitted forgeries of lab invoices to insurance companies based on the evidence to date. [25] Furthermore, a review of the affidavit material and the anticipated testimony raises the issue of the usefulness of Ms. Lee's testimony. Counsel repeatedly used the word fake or forgery with respect to the invoices in the most recent dealings with Ms. Lee. Indeed, Ms. Lee was asked if she "created the apparent forgeries of Space Maintainers and or Protec invoices" to the point that apparently, Ms. Lee is now concerned about self-incrimination and, ultimately, was referred to independent legal counsel who indicated Ms. Lee would claim the protection of the Evidence Act, R.S.B.C. 1996, c. 124, against self-incrimination. These conversations can well be said to have impacted the weight of the testimony of Ms. Lee who initially could not remember anything with respect to her employment 10 years ago, and in at least two conversations with counsel, and now is invoking the protection against self- incrimination. It would be very difficult to assess the veracity of such testimony in these circumstances and in this context. [26] Accordingly, I conclude Ms. Lee's evidence would not "probably change the result of trial" given these identified concerns and the plaintiff has failed to establish the second branch of the test is applicable in these circumstances. [27] I

have concluded the plaintiff has failed to establish a miscarriage of justice would occur without re-opening the trial and hearing Ms. Lee's evidence. As noted, I may well add these to these reasons, but because of the timing of this application and its impact on the trial, it is important to issue these reasons promptly. [28] In view of all the above, the plaintiff's application is dismissed. "Burke J."