CITATION: The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al., 2014 ONSC 5831

St. Catharines Court File No.: 49278/07

DATE: 2014/10/07

ONTARIO

SUPERIOR COURT OF JUSTICE

Table of Contents

2014 ONSC 5831 (*)

2

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

2014 ONSC 5831 (*)

3

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

J.W. Quinn J.: –

I.INTRODUCTION

[1]Leave an untruthful man in the witness box long enough and he will reveal himself to the world. Here ends the lesson, but not the story.

[2]The story concerns the 2006 purchase and sale of a business – specifically, a hearing clinic. How difficult could that be? Two experienced multiple-clinic owners, each represented by a lawyer and with the almost-daily (sometimes hourly) assistance of chartered accountants, put together a transaction with more loose ends than a badly knit sweater.

[3]I have found it impossible to articulate a helpful overview of this trial. Sitting atop the evidence here is like scaling a very, very high mountain only to find that, when one reaches the summit, one is too far from everything to see anything. The best that I can do is say that the core of the case is the allegation that the individual defendants and their accountant knowingly made fraudulent misrepresentations and withheld information, such that the plaintiff overpaid for the hearing clinic. General damages are sought. It is further alleged that the defendants intentionally committed certain acts (said to be acts of bad faith and improper conduct bordering upon fraud) that impeded the transfer of assets,

2014 ONSC 5831 (*)

4

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

constituting breach of contract, and thereby caused the plaintiff to suffer specific financial losses.

[4]E-mails, hundreds of them, along with letters and other documents, proved to be the most reliable evidence. Without them, the truth would have been unattainable, leaving me at the mercy of witnesses and desperately self-interested litigants attempting to recall events today that took place in 2006. There are inherent evidentiary problems in asking witnesses to tell of such events. Sincerely believed memories that are innocently incorrect become more problematic for the court than do intentional lies.

[5]The trial began, quite unremarkably, on a sunny summer day in July of

2011. Storm clouds were not long in arriving and we never saw the sun again.

Counsel had estimated that the trial would take three weeks and so it was given a place on the docket with that in mind.1

[6]After four weeks, the first witness, Stefan Fridriksson (“Fridriksson”), was still testifying. Six additional days were needed to complete his evidence. In total, Fridriksson sub-let the witness box for 26 days. He entered the box as an articulate professional with impressive academic credentials, displaying what appeared to be a sound and comprehensive recollection of events. When he stepped down, after more than 14 days of withering cross-examination, he was noticeably dazed, his

credibility was reduced to existential confetti and he even appeared to be physically shorter than when the trial began. 2 The case for the plaintiff was leaking oil (at one point, I thought that I saw smoke) and everyone who was paying

attention realized that whatever damages were at issue in the trial would be swamped by the costs tsunami that was approaching.3

[7]After Fridriksson wobbled out of the witness box, the trial lasted another money-burning 46 days, for a total of 72 days, spread over three years (yes, three years).

[8]There were 125 exhibits at trial, which is not overly burdensome except when one considers that Exhibit No. 1 consists of nine volumes and 561 documents and Exhibit No. 90 is comprised of six volumes and 129 documents.

I asked for an estimate of the length of the trial. Mr. von Anrep, replied: “We tackled this problem a nu mber of t imes

and believe that we can do it within three weeks . . .” I interjected: “May I just say now that I do not think that you can . . . I am willing to take wagers from all counsel that you will not complete it in three weeks.”

2A variation, perhaps, of the Pinocchio effect.

3In hindsight, Fridriksson should have returned to court the next day with the corporate chequebook and ended the debacle.

2014 ONSC 5831 (*)

5

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[9]Closing argument was in writing: an eye-glazing, bum-numbing, disc- herniating total of 662 pages (single-spaced, medium-sized font and heavily footnoted). Then there were the answers to dozens of written questions that I forwarded to counsel in the course of preparing these Reasons. It was a superb effort.

[10]The trial was like a physical deformity that one, eventually, accepts as a

permanent condition. Yet, despite everything, I will recall the experience fondly because of the unrelenting civility of counsel4 and their unceasing mastery of the evidence, all under difficult circumstances.

[11]The legal issues arising in the trial include the following, in no particular order (I have inserted the paragraphs numbers in these Reasons where the issues are addressed):

▪Should adverse inferences be drawn because of the failure by both sides to call various persons as witnesses? Paragraphs [19], [779], [939], [1170]- [1179]

▪Is the court in a position to make findings as to the accepted billing and administrative practices of such entities as the Assistive Devices Program and the Workplace Safety & Insurance Board, without expert evidence? Paragraphs [830], [864], [1432]-[1434], [1438]

▪Should Terry Lewis, one of the individual defendants, be excused from attending court for health reasons? Paragraphs [14]-[19]

▪What flows from the fact that Terry Lewis was physically unable to be examined for discovery or to testify at trial? Paragraph [19]

▪What are the implications where an order is made excluding witnesses, pursuant to subrule 52.06(1) of the Rules of Civil Procedure, R.R.O 1990, Reg. 194, and an exempted witness does not testify first? Paragraphs [1131] and [1132]

▪Is it permitted for the partner or associate of counsel for the plaintiff to testify? Paragraphs [774]-[778]

▪What if counsel for the defendants decline their consent to that partner or associate testifying? Paragraph [777]

4Some counsel can fake civ ility for the first few days of a trial, but soon succumb to the strain of insincerity. The civility here was genuine.

2014 ONSC 5831 (*)

6

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

▪In the world of hearing clinics, what is a “referral”? Paragraphs [1187]- [1200]

▪In that same world, what is the distinction between “customer” and “patient”? Paragraph [1146]

▪What is the effect of an “entire agreement” clause in the Asset Purchase Agreement signed by the parties? Paragraphs [770]-[771]

▪The hearing clinic was operated from leased premises. Under the Asset Purchase Agreement, the defendants were to obtain the consent of the landlord to the assignment of the lease. The timing of both the execution of the Asset Purchase Agreement and the closing (not to mention the date of incorporation of the plaintiff) made it impossible for the defendants to provide the landlord with the 30-days notice required by the lease for its assignment. Because of the lateness of the notice, there were “extra costs” claimed by the landlord, which the plaintiff says should be the responsibility of the defendants. As between the plaintiff and the defendants, do the common law doctrines of impossibility, mistake and frustration apply? Paragraphs [1411]-[1413]

▪Does the Limitations Act, 2002, S.O. 2002, c. 24, apply in respect of amendments to the statement of claim made six years after the cause of action arose? Paragraphs [24] and [25].

▪Apart from the Limitation Act, 2002, should the plaintiff be granted leave to amend its statement of claim in mid-trial to allege an additional instance of fraudulent misrepresentation? Paragraphs [1267]-[1273]

▪Did the defendants, and their accountant, make fraudulent misrepresentations to the plaintiff? Paragraphs [1097]-[1296]

▪If a fraudulent misrepresentation is found to have been made, is reliance presumed? Paragraph [368]

▪Is there an onus on the plaintiff to investigate the truth of any representations? Paragraph [367]

▪Are allegations of fraudulent misrepresentation to be strictly construed? Paragraph [1227]

▪What does the court do with an allegation that a contractual provision, found to be vague and uncertain, has been breached? Paragraph [1341]

2014 ONSC 5831 (*)

7

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

▪Must punitive damages be pleaded to be awarded? Paragraph [1306] and [1307]

▪Is certain language in the statement of claim mere surplusage? Paragraph [1308]

▪What duty of disclosure arose from the fact that the defendants had reason to believe that a key former employee possessed a patient list? Paragraphs [1181]-[1185]

▪What are the implications of the plaintiff suing the key former employee in a separate action and obtaining a recovery in that action? Paragraph [1186]

▪Did the defendants have a legal obligation to advise the plaintiff why a business valuation for the hearing clinic was cancelled? Paragraph [472]

▪Are earlier drafts of the Asset Purchase Agreement relevant to interpreting the final draft? Paragraph [699]

▪What is the definition of “inventory”? Paragraph [1382]

▪Should certain language be inferred in the statement of claim? Paragraphs [1310]-[1312]

▪Is the substance of negotiations between the defendants and other prospective purchasers relevant in determining the substance of negotiations between the defendants and the plaintiff? Paragraph [287]

▪Did a fiduciary relationship exist in this case? If so, was there a breach of that duty? Paragraphs [1300]-[1304]

▪What was the obligation of the defendants regarding delivery of the keys to the hearing clinic on closing? Paragraphs [1321]-[1325]

▪Is an accountant (who was actively involved with the plaintiff in negotiating the purchase of the hearing clinic) testifying as an expert when giving evidence of the effect certain post-closing information would have had on his pre-contract advice to the plaintiff concerning the purchase price of the hearing clinic? Paragraphs [1133]-[1137]

Other than that, the case was straightforward.

2014 ONSC 5831 (*)

8

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

1.The parties

(a)defendants

[12]The corporate defendant owned The Hearing Clinic located in the City of Niagara Falls (“the Niagara Falls Clinic”) and carried on the type of business that the name implies. The individual defendants, Terry Lewis and Dee Lewis, are husband and wife and the officers, directors and shareholders of the corporate defendant. In 2006, the defendants owned three hearing clinics.

[13]Terry Lewis is an audiologist. Dee Lewis, who assists him in many aspects of the business of the clinics, has a PhD in library science.

[14]An unusual feature of this case is that Terry Lewis was unable to participate in examinations for discovery because of his health. At the time, the defendants obtained a report from Dr. Lawrence Baker and, with the consent of the plaintiff, Andris “Andy” Gunarsons, the accountant for the defendants, was examined for discovery in place of Terry Lewis.

[15]In addition, Mr. Lewis did not testify at trial.

[16]Dr. Baker, who has treated Terry Lewis since 1990, gave evidence and provided an up-dated and thorough medical report, dated July 15, 2012. I found him to be a sincere and credible witness. Dr. Baker described his decision to provide a report when asked to do so by Dee Lewis. He testified:

A.And I said, ‘Let me think about it,’ and I thought about it for about three weeks because I knew that it was a serious matter and I knew that I would probably be called on my report and I honestly felt that the request was both legitimate and appropriate, so I wrote it.

[17]Terry Lewis suffers from degenerative disc disease, diabetes mellitus (he is insulin dependent and prone to erratic glucose levels), hypertension and chronic pain syndrome (the result of his disc disease). He is on a medley of medications (at least nine), six of which are for pain control. Dr. Baker stated that stress “causes his levels of pain to be increased and this is associated with increased blood pressure readings.” He added: “Stress causes his blood sugar readings to become erratic, thus endangering his life. These erratic blood sugars are associated with mental confusion.”

[18]The conclusion reached by Dr. Baker was : “Mr. Lewis is not capable of providing testimony in the matters of the litigation.”

2014 ONSC 5831 (*)

9

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[19]I have not gone into detail with respect to the testimony of Dr. Baker because I was not given any reason to doubt the accuracy of his opinion (and counsel for the plaintiff have not suggested that Terry Lewis is otherwise than as described by Dr. Baker). In the circumstances, with the failure of Terry Lewis to testify at this trial having been explained, and with the evidence of Dr. Baker being uncontroverted as to the life-endangering risk were Mr. Lewis to testify, his absence is excused. In addition, it would not be appropriate for me to draw an adverse inference from his non-participation. His inability to participate in these proceedings does not have legal implications except to the extent of the inevitable evidentiary gaps that his absence creates.

(b)plaintiff

[20]The plaintiff purchased the Niagara Falls Clinic from the defendants and was incorporated specifically for that purpose. Fridriksson, an audiologist, operates the Niagara Falls Clinic.

[21]His wife, Carol Klassen, is the sole officer, director and shareholder of the plaintiff. Ms. Klassen has a few years of education in general arts and sciences at various universities and she completed a medical laboratory technology course at an institute in Saskatchewan. Despite her position with the plaintiff, there can be no doubt that Fridriksson is its directing mind. This was evident throughout the trial. For example, we have the following testimony from Ms. Klassen:

A. . . . like, I own the clinic . . . but that’s something arranged with our accountant. It seemed to make sense that I owned the clinic but, really, Stefan owns it.

[22]Consistent with her low corporate profile, Carol Klassen did not have firsthand involvement in the negotiations leading up to the purchase. She testified:

Q.Now, what involvement, if any, did you have in relation to the negotiations that took place between your husband and the Lewises pertaining to the purchase of the clinic in Niagara Falls?

A.I didn’t have any involvement other than hearing, overhearing conversations and I was Stefan’s sounding board for some of it but, mainly, he talked to Karl

Bowley [the accountant for the plaintiff].

Q.So, the information that you gathered during the negotiation process came mainly from where?

A.From Stefan.

2014 ONSC 5831 (*)

10

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[23]Ms. Klassen also did not display a keen interest in the technicalities of the purchase:

Q.Are you familiar with the timeline? Do you have your own independent recollection of the timeline in regards to the negotiations, the Letter of Intent, the Letter of Commitment and the Agreement of Purchase and Sale? Are you familiar with that, do you have your own recollection of that timeline?

A.Not really.

Q.No? You’re aware, though, that the Letter of Commitment was completed

on October 12, 2006? Do you, are you aware of that or you, don’t really know?

A.I’m, I don’t remember if, I, I don’t remember those things.

2.The ever-changing statement of claim

[24]The initial statement of claim, issued in 2007, alleged “breach of contract, negligence and breach of fiduciary duty.” In 2011, two months before trial, it was amended to allege “negligence and fraudulent misrepresentations” and particulars were ordered. In 2012, one year after the trial commenced, it was further amended

to include other particulars of fraudulent misrepresentation. Following both sets of amendments, additional examinations for discovery were conducted.5

[25]The defendants argued that the 2012 amendments were made beyond the two-year period following the completion of the purchase and sale and, therefore, were barred by virtue of the Limitations Act, 2002, S.O. 2002, c. 24. Section 4 provides:

4.Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim discovered.

Section 5(1)(a) identifies the point in time when a claim is discovered and s. 5(2) says:

5(2)A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on whic h the claim is based took place, unless the contrary is proved.

I think that counsel for the plaintiff correctly submit that the 2012 amendments merely particularized a claim already pled and, as such, are not objectionable. It is only amendments which set out a new cause of action, not found in the original

5The 2011 order was silent as to costs. For the 2012 mid -trial amendments, I awarded, against the plaintiff, costs thrown away fixed at $30,000.

2014 ONSC 5831 (*)

11

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

pleading, that are barred by an expired limitation period: see Ascent Inc. v. Fox 40 International Inc., [2009] O.J. No. 2964 (S.C.J.) at para. 3.

[26]The ever-changing statement of claim was a challenge for opposing counsel, but a challenge that they adeptly met.

3.Terry Lewis and Dee Lewis as defendants

[27]Although this was a business transaction between corporations, the plaintiff has drawn the individual defendants into the action by boldly pleading, in the statement of claim:

11.The defendants Terry Lewis and Dee Lewis have deliberately conducted the affairs of the defendant corporation in such a manner as to cause the plaintiff financial harm, such that it would be flagrantly unjust not to pierce the corporate veil and impose personal liability.

II.FRIDRIKSSON: HIS NATURE, CHARACTER AND CREDIBILITY

[28]Because of the central role played by Fridriksson in the evidence of the plaintiff, he deserves his own section of these Reasons and his credibility warrants early and thorough attention. He was the maypole around which the case for the plaintiff was conducted. Most of the alleged fraudulent misrepresentations are said to have been made orally by others to Fridriksson. Unfortunately for the plaintiff, Fridriksson spent most of the trial on the wrong side of unbelievable.

[29]Fridriksson was born in 1956. He opened his first hearing clinic in 1988. By 1998, he owned four clinics and, according to his testimony, he was “the largest single provider of hearing aids in the Province of Ontario.” In 1998, after selling his clinics, he and his wife and children moved to Puerto Vallarta, Mexico, where they “opened a charity clinic.” During this time, Carol Klassen studied Spanish and painting. In 2002, they returned to Canada and, in 2003, Fridriksson started a hearing clinic in Fort Erie. Three years later he opened a second hearing clinic, this one in St. Catharines.

[30]Determining credibility can be a challenge for a trial judge. We have no special powers in that realm and, wherever possible, avoid reliance upon darts, dice and Ouija boards. However, rarely, has a witness generously offered up so many reasons to be disbelieved. Fridriksson was an evidentiary gift who kept on giving. He ignored rule number one in the Litigants’ Credo: “Know thyself, because others soon will.” Enough of this preamble. Come with me now on a visit to the phantasmagorical world of Fridriksson. Pack lightly.

2014 ONSC 5831 (*)

12

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

1.Is there a Doctor in the house?

[31]The trial began with Fridriksson being addressed by his counsel as “Doctor” Fridriksson. I thought nothing of it, as he did have a doctorate in audiology. However, on Day 13 of the trial, I learned, from one of the exhibits, that, although a member of the College of Audiologists and Speech-Language Pathologists of Ontario (“CASLPO”) may list that degree after his or her name, a self-reference to

“Doctor” is prohibited. The exhibit states:

Some members of [CASLPO] have successfully completed the requirements of university doctoral-degree programs that permit them to use the word ‘Doctor’ or an abbreviation thereof. For example, some members have obtained a ‘Doctorate of Audiology’ . . . [This title describes] their academic ac hievements and is not a designator of professional competence . . . members with a ‘Doctorate of Audiology’ may describe themselves as, for example, ‘John Doe, Doctor of Audiology, Audiologist.’

This description sets out the member’s academic qualifications, without referring to themselves as ‘Dr. Doe,’ which is prohibited.

[32]More to the point, in correspondence and documents from CASLPO to Fridriksson, he is referred to as “Mister.” Consequently, on Day 14 of the trial, I instructed Mr. von Anrep, lead counsel for the plaintiff, to address this witness henceforth as “Mister.” Simply put, when your governing body refers to you as

“Mister,” you are “Mister” in my court.

[33]Such a little nicety is hardly determinative of anything in this case. Yet, it will be seen that allowing himself to be addressed repeatedly as “Doctor” is consistent with the nature and character of this man, as reflected in more serious credibility-based transgressions found in his evidence. Looking back, it was an evidentiary harbinger.

2.“Yes, I know, I’m guessing again”

[34]The witnesses in this case were being questioned about events that happened six to seven years earlier. Accuracy of recollection was on trial and Fridriksson admitted that he was guessing in some of his testimony.

[35]Fridriksson was cross-examined by Mr. Korosis (co-counsel for the defendants) on handwritten notes that he (Fridriksson) had prepared and provided to his counsel concerning a telephone conversation with Karl Bowley (the accountant for the plaintiff). The notes begin: “7 Sept. 07, 9:40 a.m. Discussion with Karl Bowley re: CBV [Certified Business Valuation] on Aug. 30.”

2014 ONSC 5831 (*)

13

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[36] The cross-examination included the following:

Q. . . . can you explain to me why you would send notes to [your counsel] that

say ‘Discussion with Karl Bowley re: CBV on August 30’?

A.Because I’m trying to clarify, I’m trying to clarify what this, what the, what the contents, or how this came about, the call here.

Q.Do you, do you know for certain?

A.No, I don’t know for certain.

Q.Okay. So you really don’t have an idea what these notes purport to be?

A.I’m, I’m guessing.

THE COURT: Did you just say you’re guessing?

A.I’m, yes, I know I’m guessing again.

THE COURT: Why do you do that?

A.I don’t know why I do that. I don’t know what these notes are. I don’t know why I guess.

THE COURT: How am I supposed to know when you’re guessing and when you’re telling the truth?

A.You’re right. I’m sorry. I sometimes do that . . . I don’t actually know what these notes are.

THE COURT: And if Mr. Korosis had not pressed you on the point we would never know that, would we?

A.No, you’re right. It was not intelligent of me, I’m sorry.

[37]Later that day (a mere six pages in the trial transcript thereafter), Fridriksson was cross-examined regarding other handwritten notes that he had made:

A.No, there’s a, a, I do understand what this is now, and I’m not guessing.

Q.Okay. Sorry, what, what do you understand?

A.What Tab 1 is, I know what Tab 1 [of Exhibit No. 26] is now.

Q.Okay, what is it?

A.It’s the lead up to [a conversation with Terry Lewis about the non-existence

of a certified business valuator report] . . . it’s the preparation for the call at Tab 18 [of Exhibit No. 1].

2014 ONSC 5831 (*)

14

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[38]Fridriksson embarked upon a rambling explanation of these handwritten notes (describing them as “recollected notes” of what happened “before the call” to the defendant, Terry Lewis, on September 7, 2006), in the course of which Mr. Korosis raised a number of inconsistencies. The cross-examination continued:

Q.So these are recollected notes . . . in preparation for your telephone call to Terry. Correct? Do I understand that correctly?

A.I think, I think they are recollected notes.

Q.I understand your evidence that they’re recollected notes. What I don’t understand is, are these recollected notes in respect of the call to Terry on September 7, 2006?

A.I, okay. I am not sure exactly. I am not sure.

Q.You’re not sure of what, that they’re recollected notes, that they’re from

September 7, 2006 . . . at 9:40 a.m., what are you not certain of?

A.Actually, I’m not sure of, actually I’m not sure what the notes are. That’s,

that’s what I’m not . . .

THE COURT: So, have you just taken me through another guess?

A.I’m sorry. Yes, I did. I did. I’m sorry, I’m guessing.

[39]Mr. Korosis continued:

Q.Sir . . . you’re here giving evidence in respect of the plaintiff’s claim and allegations pertaining to fraud committed by the defendants. Correct?

A.Yes.

Q.This is a serious issue, is it not?

A.It is very serious.

Q.And you are giving guesses for your evidence?

A.Yeah. I, I was giving guesses.

Q.So, just to clear up, with respect to Tab 1 of Exhibit Number 26, you have no idea what this document is all about do you?

A.I do not. You’re right.

[40]The following exchange also occurred in cross-examination by Mr. Korosis:

2014 ONSC 5831 (*)

15

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.I’ve told you when I guessed, I think. I’m guessing again. I, there may have been times when I guessed but I . . .

Q.And you would have guessed not just on cross-examination, you may have guessed during your evidence in-chief as well, sir, correct?

A.There’s a possibility that I guessed.

Q.Probability or possibility?

A.There is, well, because I know I guessed at some because I was, I was taken to task for it by, by His Honour. So I know I guessed at some.

Q.On, in your evidence in-chief?

A. . . . yes . . .

. . . . . .

Q.Now you were sworn at the outset to tell the truth, the whole truth and nothing but the truth, right?

A.Yes and I have guessed. I admit it and, and I was foolish to do so and I will endeavour not to guess again . . .

Q.Your have a problem with that though, don’t you?

A.Well, clearly I have. I have guessed when I shouldn’t have guessed.

[41] At the end of the day, I asked for clarification from Fridriksson:

THE COURT: . . . before we go, I need clarification on one point and I’m not certain that you answered this. Are the only guesses you’ve made in this trial those in which you were confronted and to which you admitted?

A.I cannot be certain of that. Sometimes I was asked to guess.6

[42]There is no reason for me to assume that Fridriksson was caught on every occasion that he guessed in his evidence. He is an incorrigible guesser, thereby contributing to his unreliability as a witness.

3.Gilding the academic lily

[43]On the first day of trial, Fridriksson tendered in evidence a document titled:

“Details of Career Up to St. Catharines.” It showed that, in 2002, he became a professor at Brock University, teaching in the Department of Communication Disorders and that, from 2004 to the present, he was an adjunct professor at the

2014 ONSC 5831 (*)

16

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

University of Toronto, Faculty of Medicine, teaching in the Speech Language Pathology Department. It turns out that neither position was accurately described. This academic embellishment surfaced in cross-examination.

(a)clinical instructor dressed up as an adjunct professor

[44]Having proclaimed under oath that, since 2004, he has been an adjunct professor at the University of Toronto, Faculty of Medicine, Fridriksson was confronted, in cross-examination:

Q.What I know to be true, sir, is that you are not an adjunct professor at the University of Toronto . . .

A.I was unaware that that was going to be a problem and I did n’t state it, it’s

not a status, it’s not a thing where you go, ‘Oh boy I’m an adjunct professor.’ It’s, it’s a, it’s a descriptor and I wasn’t doing it to do anything other than describe what I did. I wasn’t saying that, you know, like it’s something you’re, you’re going around and brag about that you’re a part-time unpaid professor or unpaid instructor. Why would somebody do that?7

Q.I don’t know, but you did it. You said you were an adjunct professor when you weren’t.

A.I didn’t brag about it. I just tried to use it as a descriptor.

[45]The truth is that Fridriksson (along with several hundred others) is an unpaid, part-time clinical instructor at the University of Toronto.

[46]Fridriksson tried to explain his evidence:

Q.Sir, you put it on a document that became an exhibit in a court proceeding where you swore to tell the truth.

A.The exhibit was prepared on the way to co urt that morning as we were driving to court because Malte [von Anrep, lead counsel for the plaintiff] asked for it that morning and we typed it into the laptop as fast as we could, drove to the office, printed it off. I know there are, there are minor errors on it . . .

[47]Mr. von Anrep rose to clarify:

. . . he’s mistaken. He said that I instructed him to prepare a document on the way to court. What he meant was on the way to discovery. That’s a document that was produced in 2008, not something [prepared] on the way to court.

THE COURT: So that exhibit has been in existence for four years?

2014 ONSC 5831 (*)

17

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

MR. VON ANREP: Yes.

[48] The cross-examination continued:

Q.But it wasn’t true and it’s not true.

A.Well, I didn’t intend it to be a statement of, I didn’t intend it to be, I didn’t intend to mislead anybody with it but unfortunately, you’re correct. You are correct .

. . I’m a part-time unpaid professor at the University of Toronto . . .

Q.Well, you’ve elevated your status from adjunct to professor . . .

[49]While acknowledging that the University of Toronto does not use the designation “adjunct professor,” counsel for the plaintiff take refuge in The Canadian Oxford Dictionary, which apparently defines “adjunct” as “an assistant, a subordinate person, especially one with a temporary appointment only.” Counsel argue that Fridriksson was “simply saying the same thing in a different way and it is not a lie designed to deceive.”

[50]I never viewed his evidence as a lie. I saw it as an attempt at academic ornamentation; a willingness to stretch the truth at the expense of accuracy.8

[51]In other cases and with other witnesses, this résumé-padding evidence might not be significant. However, here, it is consistent with the nature and character of Fridriksson and with his aversion to telling the whole truth.

(b)adjunct professor dressed up as a professor

[52]Fridriksson encountered a similar problem with his claim that, from 2002 to 2006, he was a professor at Brock University, in the Department of Communications Disorders:

A.I served as an adjunct there, which if you look up on, in the dictionary, I don’t know if you had a chance to look it up in a dictionary about it, if you look up in the dictionary an adjunct professor is a part-time unpaid lecturer.

Q.Sir, did you not say last week that you were not a professor at Brock University?

2014 ONSC 5831 (*)

18

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.I am not a professor at Brock University. I was an adjunct.

Q.But that’s not what was on Exhibit No. 3 that you proffered as evidence to the court of your credentials, correct?

A.That is correct.

[53]Once more, counsel for the plaintiff retreat to the same dictionary where

“professor” is defined as “a university teacher.” They argue : “A professor is someone hired to teach at a university” and “that is what Fridriksson did.”

[54]I will not brand someone a liar on a point such as this,9 but I detect the start of a trend.

4.Fridriksson plays Lieutenant Columbo with Inspector Clouseau results

[55]During an overnight adjournment of the trial, and while still in the midst of his cross-examination (and no doubt stinging from the attack over his academic qualifications), Fridriksson embarked on an investigation to rehabilitate his résumé and I became a spectator to a remarkable incident. In an attempt to extricate himself from the cross-examination of Mr. Korosis on the issue of his academic pedigree, Fridriksson accused Mr. Korosis of contacting two Brock University officials and labelling him a charlatan: [Underlining added]

A. . . . I know you were also told by, by people at Brock University that the difference, and I will quote one of, one of my friends, I know you talked to lots of people trying to get somebody at Brock University to, to label me as a charlatan, but you weren’t successful . . . You tried to get people at Brock University to label me as something more than they actually were . . . You phone called, you called, you called them on the telephone . . . A charlatan is a person who puts their credentials higher than they actually are and you, you talked to . . . a bunch of people at Brock . . .

[56]Mr. Korosis, who was rendered slack-jawed by this accusation,10 expressed his indignation (quite understandably). He then proceeded to carefully provide some important information to Fridriksson (who, it often will be seen, is prone to acting unencumbered by the nuisance of thinking), and put some questions to him. The matter continued for a few minutes, following which Fridriksson apologized:

Q.Well, I’m not looking for an apology. Are you recanting, are you saying it was not true or are you saying what you said was true, that you believed it and you’re simply apologizing?

9Yet, really, would you buy a used car from this man?

10Actually, for a few moments, everyone in the courtroom became a mouth -breather.

2014 ONSC 5831 (*)

19

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.I did believe it and I was wrong. I’m sorry.

Q.Do you now believe it?

A.No, I do not believe it now. I’m sorry.

Q.And on what basis did you believe it?

A. . . . I thought that you’d phoned them and made me look like a, a – it hurt my feelings – and that, that, and I’m sorry, I’m sorry. It was inappropriate for me to say that . . . I do withdraw it, and it was, it was wrong, I’m very sorry for that.

[57]Although Fridriksson professed to be sorry that he made what was demonstrated to be an utterly unfounded allegation against counsel, 11 I did not regret the incident. Why? The allegation revealed more layers to the true nature and character of Fridriksson: his quick temper; his penchant for jumping to conclusions without sufficient, or sometimes any, facts; and, his habit of imagining injustices.

[58]The Brock University issue was interesting in another respect which deserves at least brief attention. Fridriksson, in this trial, claimed to remember telephone conversations five to six years previously and, as well, he was one who purportedly made handwritten notes of important telephone calls. As I have said, while under cross-examination, he telephoned two Brock University personnel (Gabriella Doria, with Human Resources and one Professor Sivell). Fridriksson was asked when he made those calls. He said: “I think last week.” Questioned as to what was said, he answered: “I asked [Professor Sivell] what he, what he’d, asked him what he’d said to you.” Then, after I interjected seeking clarification, he changed his answer to: “No, just wait. No, he said he, I think he said he’d received an e-mail from you.” When questioned further regarding the contents of his conversation with Professor Sivell, Fridriksson stated:

A.I, I don’t remember exactly what I said. It was a short phone call and I didn’t, I don’t remember what was said . . . I’m not sure what I told him . . .

[59]Fridriksson placed the calls to Ms. Doria and Professor Sivell at their residences, from a desk in his house. He agreed that the calls were probably made on the day that the adjunct-professor issue arose.

[60]Fridriksson did not have notes of his conversations with Ms. Doria or with Professor Sivell:

2014 ONSC 5831 (*)

20

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.And you are someone that takes notes of very important calls, aren’t you?

A.Yes.

Q.Did you take a note of this very important call [to Professor Sivell]?

A.No.

Q.You’re in the middle of a trial, you’re in the witness stand . . . it would be the eleventh or twelfth day that you’re in the witness stand?

A.Yes.

Q.And it’s something that you’ve indicated is very important, right?

A.Yes. Yes.

Q.You didn’t think to make a note?

A.It was a short conversation.

[61]Having excused the lack of handwritten notes because “it was a short conversation” (“a minute or two” he thought), Mr. Korosis pointed out that there were other telephone calls in this trial, of a similar length, for which Fridriksson had made notes.

[62]When questioned further about the lack of handwritten notes of the calls, Fridriksson spun his wheel of excuses and selected another one:

A.I didn’t make a note because I didn’t have a pen.

[63]Even the time of the telephone calls was foggy to Fridriksson:

Q.So, do you know when roughly it would have been that you called [Ms.

Doria]?

A.No.

Q.Not a clue?

A.I don’t know exactly what time.

Q.Can you give me a range of times that you might have called her, like, between this hour and this hour?

A.In the evening.

Q.You don’t recall, sir, whether it was between five and six, or six and seven,

or five and seven, seven and eight, you don’t have any recollection of that?

2014 ONSC 5831 (*)

21

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.I don’t, I don’t recall.

Q.And that would be the same for the call you placed to [Professor] Sivell?

A.Yes.

Q.You don’t recall sir whether you made the calls before dinner or after

dinner?

A.It was, no I don’t recall . . . I don’t recall what night it was, actually.

[64]So, to summarize: Fridriksson could not provide any meaningful detail in respect of two telephone calls that he made about matters of such importance to him that, in the midst of his cross-examination, he donned his investigator’s hat and telephoned two Brock University personnel (with whom he was not acquainted), at their residences. Yet, he testified for days and days in this court about telephone calls that he made and received six and seven years previously.

5.Exaggerations and untruths

[65]At Tab 540 of Exhibit No. 1, there are three pages of undated handwritten notes made by Fridriksson. He was cross-examined on these notes in which he sets out sums of money he says are owed to the plaintiff by the defendants as “payment due for work done” by the plaintiff. When Fridriksson began to resile from his professed entitlement to the sums claimed, he was cross-examined by Mr. Korosis:

Q.Was the note made with the intention of being truthful?

A.It was made in anger and it’s, it’s, it’s inflated and exaggerated.

Q.So, your, four, when you say ‘four hours time chasing [hearing] aid,’ you picked that out of thin air?

A.Probably.

[66]He was cross-examined on whether all of his handwritten notes at Tab 540 were exaggerated:

A.Not every single thing in the note is exaggerated. Some of the things in it

are exaggerated . . . there are parts of this note that, mostly with the dollar figures, I, I wasn’t expecting to be paid this. I was just angry and so I was writing down, I was writing down extreme dollar figures here.

Q.You didn’t expect to be paid because they’re exaggerated, correct?

A.Because they’re, because they’re exaggerated, yes.

2014 ONSC 5831 (*)

22

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[67]When Fridriksson initially testified about Tab 540 he said that he was not expecting to be paid for any items, but he ended his evidence by saying that he was entitled to be paid for some items:

Q. . . . in the first instance, when we started talking about this document at Tab

540 of Volume 9 of Exhibit No. 1, you said that you weren’t expecting to get paid for any of this because it was exaggerated. Did you not say that?

A.I probably did.

Q.And now you’re saying something different?

A.I didn’t read the document carefully enough. I should have read it much more carefully. I’m looking at it more carefully now.12

[68]However much Fridriksson may wish to downplay the significance of the handwritten notes at Tab 540, he thought enough of them that they were transcribed for his counsel before examinations for discovery, they were part of the affidavit of documents of the plaintiff and they were tendered on behalf of the plaintiff as an exhibit at trial. That is a lot of effort to record and present evidence of amounts for which reimbursement is not sought.

[69]Later in his cross-examination, the following exchange occurred:

Q. . . . are there any other documents put before the court that are exaggerated or that contain exaggerations in them?

A.Yes.

Q.So, had I been asking you, had I known that was the case earlier on and I had been asking you every time that I asked you about a document, if I said, ‘Is there an exaggeration there?’ would you have told me?

A.Yes, I think so. If you would have asked the question I would have, I would have said ‘Yes.’

[70]Catch me if you can.

[71]This flurry of fiction at Tab 540, in addition to exaggerations, contains untruths. I will mention two of them. Firstly, Fridriksson stated in his notes that he was entitled to payment of $1,675 in respect of a hearing aid for the patient, Leslie Stamp (I will have occasion, later in these Reasons, to mention this patient again). However, in cross-examination, Fridriksson stated:

2014 ONSC 5831 (*)

23

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.Okay and I don’t expect to get paid for the hearing aid because the hearing aid ended up being free. Okay? So I don’t expect to get paid for that.

[72]Secondly, in these handwritten notes Fridriksson wrote that a patient named Malcolm Currie was dissatisfied with his hearing aid and, when it was returned, the supplier (Siemens Hearing Instruments) credited the Lewis’ account and not the account of the plaintiff. This was untrue, as seen in the following answer given in cross-examination:

A.Regarding Malcolm Currie, I don’t expect to get paid that money because

I’ve since seen that when I sent the hearing aid back to Siemens, Siemens put that money, the return money, into our account.13

[73]Without the cross-examination of Fridriksson, this information, and much, much more, would never have been revealed. Not a word that he writes or speaks can be accepted at face value.

6.“All the madness that’s in your head”

[74]Fridriksson was cross-examined by Mr. Korosis about his penchant for angry note-taking:

Q.You get all worked up in a frenzy, correct?

A.Yes, sometimes.

Q.And then you put to paper all the madness that’s in your head, correct?

A.Sometimes.

A.Yes.

[75]This angry temperament was visible throughout the documentary evidence.

7.Fridriksson and his selfie notes

[76]A unique evidentiary feature of this case is the presence of numerous handwritten notes made by Fridriksson (selfie notes?), allegedly memorializing telephone conversations that he had with Dee Lewis and Terry Lewis and with the two accountants. My initial impression was: “Goodness, gracious, this is an organized man whose fastidious attention to detail will make my task easier.”

13Siemens Hearing Instruments (usually referred to in the evidence as “Siemens”) was a supplier of hearing aids to the defendants and their three clinics.

2014 ONSC 5831 (*)

24

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

However, that impression faded as cross-examination revealed the self-serving fiction of the notes. There are so many instances of this fiction that it would be pointlessly redundant to deal with each one. Thus, I will select only a few representative examples.

[77]It cannot be overemphasized that these handwritten notes are the basis for the bulk of the allegations of fraudulent misrepresentation being made by the plaintiff. Their accuracy is crucial to the case for the plaintiff. It is the position of the defendants that most of the notes are pure fabrication, concocted long after the telephone calls occurred and that others simply are inaccurate, as they suffer from the exaggerations and other shortcomings prominently seen in all of the evidence from, or associated with, Fridriksson.

(a)September 7, 2006 – a telephone call that was over before it began

[78]Fridriksson produced two pages of handwritten notes purporting to be in respect of a call that he made on September 7, 2006 to Terry Lewis at his cellular telephone number. The notes contain 15 questions to be asked that Fridriksson maintains were prepared before the call and in consultation with his accountant “in response to the revelation by Andy Gunarsons that a Certified Business Valuation never existed” for the Niagara Falls Clinic. The notes show a start time for the telephone call of 10:20 a.m. and an end time of 9:51 a.m. Fridriksson was cross- examined on this curiosity and he replied:

A.I have no explanation. I’ve tried to think about how that could happen. Obviously I’ve looked at this note before and I have no explanation.

[79]He was questioned further:

Q.So you know that there was a discrepancy between the start time and the

end time?

A.Yes.

Q.Something didn’t match up?

A.Yes.

Q.For how long [did you know]?

A.For a long time. For years.

[80]Fridriksson was asked why he had not mentioned this discrepancy when he testified in-chief:

2014 ONSC 5831 (*)

25

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.And when you discussed this note in your evidence in-chief you didn’t think it important that you might want to bring it to the attention of the court?

A.It didn’t occur to me.

Q.But you’ve just said that you’ve known about this for years?

A.It, it did not occur to me during the evidence in-chief to bring that to the notice of the court.

[81]Had the matter ended there, it would not be worth mentioning. However, Fridriksson, as he did so often and unsuccessfully during the trial, conjured up an ill-thought-out explanation:

A.This could be wrong, I’m going to guess and I shouldn’t guess, but this could be a wrong clock somewhere.14 I don’t know.

THE COURT: Sir, I think you’ve learned so far in the trial that guessing doesn’t help the court.

A.Sorry

[82]This was Day 16 of the trial and Fridriksson was still infusing his testimony with wild, random and uninformed guesses.15

[83]There is a Bell Canada telephone record in evidence showing the September 7th call. It began at 10:18 a.m. and lasted nine minutes. I do not think that the agenda of 15 questions listed in the handwritten notes could have been discussed in such a brief period of time.

[84]Karl Bowley, the accountant for the plaintiff, was questioned in-chief about September 7, 2006 and the testimony of Fridriksson that he (Fridriksson) had prepared the 15 questions in consultation with him (Bowley). Bowley stated that, around this time, Fridriksson “was calling daily” but he does not remember the conversation that Fridriksson says led to the notes of September 7, 2006.

[85]At the conclusion of the handwritten notes (following “End Call 9:51”), there is an addendum that reads:

10:10 a.m. [St. Catharines]

14The start time was fairly accurate, based upon telephone records, which means that for the “wrong clock” explanation to work, it would be necessary for Fridriksson to have used a different clock when recording the end of the call than he used when he noted the start of the call. Does this make sense to anyone except Fridriksson?

15I point out that it is not the discrepancy in times that is important (anyone could make that mistake); rather, it is the willingness of Fridriksson to say whatever enters his head, as an exp lanation for the discrepancy, that attracts the attention of the court.

2014 ONSC 5831 (*)

26

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Call to Karl [Bowley] – related contents of call told him I would ask Andy [Gunarsons] such questions

Asked him to ask Andy if Donna [Bradley] has list

[86]Interestingly, later in the trial, the cross-examination of Fridriksson dealt with a telephone call to Karl Bowley at 9:40 a.m. on September 7, 2007 (the year is obviously an error) for which there are the ubiquitous handwritten notes. Fridriksson purported to have a eureka moment, declared that this call led to the above 10:10 a.m. call and then he launched into one of his more helium-infused explanations.

[87]Fridriksson testified that the 9:40 a.m. notes should have been included with the notes of the call at 10:20 a.m.:

A.This should have been part of this tab, but it said September 7, 2007 (sic), so I think what happened is the secretary – I don’t know, I’m – this is a guess. I think possibly what happened, that the secretary, and I don’t have probability or anything, that this . . .

THE COURT: Sir, excuse me. I’m not interested in your guesses.

A.I don’t know what happened. I do not know what happened with this piece of paper, but it got stuck away in a box . . .

[88]Fridriksson, thinking that he had solved the mystery of the three inconsistent times shown on the notes for September 7, 2006, pressed on:

A.Okay, so, and then we have down at the bottom of the page, that says on the typewritten version, it says, ‘10:10 St. Catharines.’ It’s actually ‘10:40 St. Catharines.’ It’s not 10:10.

MR. KOROSIS:What’s 10:40?

A.Down at the bottom of the second page. That’s the phone call to Karl to relate the contents of this phone conversation. And I know, I know I guessed yesterday. That was really stupid of me . . . yesterday I was complete ly finished and exhausted and I made a stupid decision to guess and I’m not, I’m not gonna guess. I know what this is. I understand what this document is.

[89]The assertion by Fridriksson that the time of 10:10 is actually 10:40 is nonsense. The handwriting clearly says 10:10 and the typed version also says 10:10.

[90]I think that Fridriksson concocted this three-part set of notes long after September 7, 2006 to bolster the allegations against the defendants and, while

2014 ONSC 5831 (*)

27

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

doing so, jumbled the times. Once again, it is not the error in times that is important; rather, it is the unabashed lengths to which Fridriksson goes to explain the error. If a lie is used to bolster an alleged truth, what does that do to the alleged truth?

(b)September 27, 2006 – two almost-identical notes for two different calls

[91]It is alleged by the plaintiff that, as part of the purchase and sale, the defendants were to mail 5,000 postcards to patients of the Niagara Falls Clinic. Fridriksson produced handwritten notes, two pages in length, dated September 27,

2006 and timed “12:02” (presumably p.m.). The notes are titled: “Phone Call to

AG [Andy Gunarsons, the accountant for the defendants] re: postcards.”

[92]Also produced was a different set of handwritten notes, also two pages in length and dated September 27, 2006, but timed “2:02 p.m.” These are headed: “Wed. Sept. 27 Call to Andy Gunarsons.”

[93]The two sets of notes are almost identical. I will give some side-by-side examples:

16Andy Gunarsons, when questioned about this, testified that he does not recall discussing these figures (3,000 and 5,000) with Fridriksson.

2014 ONSC 5831 (*)

28

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[94]The issue of the postcards took on surprising prominence in the trial. Fridriksson was cross-examined about the two telephone calls:

Q.On that day [September 27, 2006] it was so important to you that you made a call at 12:02?

A.Yes.

Q.And you made another one at 2:02?

A.That’s right.

. . . . . .

Q.Would you agree with me that your latest note production touches upon the same topic we reviewed yesterday, namely the mailing of the postcards?

A.Yes.

Q.Okay. Why would, why did you make two calls to Mr. Andy Gunarsons two hours apart about the same issue . . .?

A.Because this was a very acrimonious issue . . .

[95]Fridriksson could not explain the two sets of almost identical handwritten

notes:

Q.How do you end up with the same chronicling, same noting of two different conversations at two different times, but it’s identical?

A.I don’t know.

[96]After denying that these notes were “manufactured . . . for the purpose of supporting the plaintiff’s case and allegations of fraud,” Fridriksson stated , perplexingly:

A.I will tell you that this stuff was passed on to [counsel] as we were, for months, we were trying to arrange arbitration . . . This was never intended to come anywhere near a courtroom. This is simply for [counsel] so [he] can see what had happened. So there’s no possibility that this was put forth to substantiate fraud . . .

17Mr. Gunarsons disputed most of the contents of the September 27th notes. He specifically denied this particular statement from Fridriksson, saying: “I would not have tolerated this and hung up.”

2014 ONSC 5831 (*)

29

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[97]The landline and cellular telephone records of Fridriksson were entered as exhibits at trial and nowhere is there a reference to either the 12:02 p.m. call or the 2:02 p.m. call.

[98]I sought clarification from Fridriksson in respect of his handwritten notes for the 2:02 p.m. call and whether the call was to or from Andy Gunarsons:

THE COURT: My [bench] notes show back in July [of 2011 when Fridriksson was testifying in-chief] that you described this as a telephone call from Andy Gunarsons.

A.I think it was a telephone call from Andy Gunarsons. THE COURT: But your notes say ‘Call to Andy Gunarsons’?

A.I know it does. I know it does. I think it was a call from Andy Gunarsons

though.

THE COURT: So, your notes are being made years before your testimony?

A.Yes.

THE COURT: And you are saying your notes are inaccurate but your testimony is correct?

A.This could be a call from Andy Gunarsons or it could be a ca ll to Andy Gunarsons.

THE COURT: Yes, I can figure that out . . . But my point is, your notes were made years in advance of your testimony . . . years closer to the point in time when this [call] allegedly occurred . . . and I simply want to clarify that you are saying today that your testimony is more accurate than your notes?

A.I am saying that, I am saying that I can only use possibility . . . It is possible that I wrote down ‘Call to Andy Gunarsons’ because I was making a call to him earlier and that I was preparing to make notes at that point and then I simply made the notes. But I don’t, at this point, I don’t truly know. I can’t look back and say, ‘But I know I had this conversation with Andy Gunarsons.’

(c)September 28, 2006 – two telephone calls

[99]For September 28, 2006, Fridriksson produced handwritten notes of two telephone calls, one at 9:13 a.m. from Andy Gunarsons (the accountant representing the defendants) and the second, at 3:50 p.m., to Andy Gunarsons.

(i)9:13 a.m. telephone call from Andy Gunarsons

[100]Fridriksson testified that, while in his automobile, he received a call on his cellular telephone from Andy Gunarsons at 9:13 a.m., on September 28, 2006.

2014 ONSC 5831 (*)

30

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[101]As with the other handwritten notes tendered in evidence by Fridriksson, a typed version was prepared by his secretary about, he said, “six months or more later.” All of the typed versions of the handwritten notes bear the same product label which, in this instance, reads:

These are exact word for word copies of handwritten notes from phone calls between Terry Lewis’ accountant Andris [Andy] Gunarsons and Stefan Fridriksson. They are made in order to make it easier to read. All spelling mistakes and errors of grammar etc. have not been corrected.

[102]Despite this lofty promise, there are differences in the notes. They are not word for word. On the typed version, we see: “Written down at my office in Ft. Erie approx 9:45.” This phrase is not in the handwritten notes. Fridriksson was questioned about the discrepancy:

Q.So, are you then suggesting that what really happened was your secretary would have typed up the actual notes, word for word?

A.Yes.

Q.And you then would make additional entries on those typewritten notes?

A.On, I guess, on a rare occasion, I did.

[103]There are two problems with the addition of this particular information.

Firstly, after being taken through his telephone records for the morning of September 28th, Fridriksson was forced to agree that the notes had not been made in Fort Erie:

Q.You previously gave evidence that you made these notes in Fort Erie?

A.Yes. I did.

Q.You would agree with me that you couldn’t have made these notes in Fort

Erie?

A.You’re right.

[104]Secondly, the time of 9:45 a.m. is incorrect. The telephone records show that Fridriksson was in his automobile at that hour and so the notes could not have been “written down” at his office. Although Fridriksson would not admit to this inaccuracy, he conceded, in cross-examination, that it was a possibility and that he had guessed at the time when he inserted the information in the typed notes:

Q.The other thing that’s of interest to me on these notes is, you say that you made these notes in Fort Erie at approximately 9:45 a.m.

2014 ONSC 5831 (*)

31

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.Yes.

Q.Would you agree with me, sir, that you were in all likelihood still travelling and in your car at 9:45 a.m. that day?

A.I can’t be sure.

Q.You can’t be sure, but there’s a good probability of that?

A.There’s a possibility, yes . . . it is possible . . . you’re right, I shouldn’t have guessed. I guessed.

Q.Why the need to guess? If these are notes taken contemporaneously at the time that you say the call was, was made or soon thereafter, why guess?

A.It was a, a bad idea to guess. I admit that.

[105]Another problem is that the handwritten notes bear a time of 9:13 a.m., whereas the typed notes say 9:15 a.m. The time of 9:13 a.m. corresponds with the telephone records and I agree with the suggestion made by Mr. Korosis, in his cross-examination, that it was added to the notes by Fridriksson after he had received and reviewed those records. Fridriksson denied this suggestion.

[106]As well, the telephone records indicate that the call at 9:13 a.m. lasted no

longer than two minutes. It is improbable that this was sufficient time within which to discuss the matters in the handwritten notes,18 which I will now set out:

SF [Stefan Fridriksson] – I spoke to Mike Mann, our lawyer and told him what was going on.

I told him you had failed to deliver the things that you promised to deliver. Specifically:

a)[patient] list

b)access to Ginette

c)proof of schedule and bookings

d)proof of [numbers] of [patients]

e)mailing of the postcards

f)proof of # of [hearing aids] fit per month

You and Terry have made statements and represented things to Karl [Bowley, the accountant for the plaintiff] and I. You promised to pro vide us with documents to

2014 ONSC 5831 (*)

32

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

back up things you represented to be true. Instead you have made excuses and now you according to Karl you are claiming that to give these details would be a breach of the privacy act.

You promised full disclosure. Deliver it.

Andy once again promised we would have the details and Carol could meet Ginette but did not give a time or a date when this would happen.

[107]In his evidence, Andy Gunarsons stated that, although he had no recollection of this telephone call: (1) he never promised a patient list and does not have such a list; (2) as an accountant, he does not have access to the “schedule and bookings”;

(3)he does not have the information relating to the number of patients or the number of hearing aids fit per month and so he cannot promise what he does not have; and, (4) the Letter of Intent provided that the mailing of the postcards “was not to be done.” Therefore, Andy Gunarsons disputes the suggestion by Fridriksson that this telephone conversation occurred. I agree with Mr. Gunarsons.

[108]In addition, the telephone records indicate that the 9:13 a.m. call was to Burlington. Mr. Gunarsons testified that both his residence and office at that time were in Oakville. Fridriksson may have received a telephone call at 9:13 a.m., but it was not from Andy Gunarsons. For Fridriksson to be accurate, the telephone records should show the 9:13 a.m. call as outgoing from Oakville, which is not the case.

[109]Fridriksson was cross-examined on the purpose of the typed notes in this

trial:

Q.These are supposed to be the exact copies. You, you made these transcriptions for the sole purpose so that your notes could be read and understood. Correct?

A.Yes.

Q.And for the sole purpose that they could be relied upon in this legal proceeding. Correct?

A.That’s correct.

[110]And he was questioned on their reliability:

Q.But sir, I say to you that they are completely unreliable.

A.I agree that there are parts of it that are not exactly transcribed from the

back to the front and I will agree with you that I did modify this part here and wrote that in there and I can see that I was wrong when I wrote it in there, and this was

2014 ONSC 5831 (*)

33

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

transcribed months later and I wrote that down and it’s, if you, the accurate one is going to be the initial notes.

Q.But sir, that’s, that’s just a matter of convenience. Every time we call you on some issue or error, or discrepancy between your notes you give evidence saying you should trust this one, or you should trust that one. The reality is we can’t trust any of them. Is that correct?

A.That’s not correct.

[111]Another curious aspect of the 9:13 a.m. call is that, in his handwritten notes, Fridriksson, in addition to inserting the fact that the call was made on his cell phone, also wrote in his cell phone number. He was asked why:

Q.Why did you write your cell phone number on your handwritten notes?

A.I don’t know why.

Q.Was it important that you write it on there?

A.I guess so, I, I don’t know why I wrote it in there.

[112]It is probable that Fridriksson inserted the cell phone number when he was inventing these notes and attempting to have them match up with the telephone records. It was a clumsy attempt to create continuity.

[113]I find that the handwritten notes of the September 28th call, at 9:13 a.m., are of a self-serving, fictional conversation.

(ii)3:50 p.m. telephone call to Andy Gunarsons

[114]The second set of handwritten notes for September 28, 2006, relates to a telephone call that Fridriksson placed to Andy Gunarsons at 3:50 p.m., from the lobby of the W Hotel in Manhattan.

[115]For his trip to Manhattan, Fridriksson testified that he departed from the airport in Buffalo, New York:

Q.And you indicated you flew from Buffalo to LaGuardia?

A.That’s right.

[116]Yet, when Mr. Korosis took Fridriksson through his telephone records for that morning, in the course of reviewing other matters, it seemed that a Buffalo departure was improbable and Fridriksson became aware of that fact:

Q.You know what’s interesting about September 28, 2006?

2014 ONSC 5831 (*)

34

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.It’s when I left for New York.

Q.From Buffalo, right?

A.That’s right . . . I’m pretty sure we left from Buffalo.

Q.But it appears that your cell phone was travelling in the other direction at 10:56 a.m. Correct? [The telephone records showed a series of calls moving from Fort Erie to Toronto at about the time of departure.]

A.Yes.

A.Yes.

Q.So, if you’re in Toronto at 10:56 a.m. on the 28th day of September 2006, how much time do you think it would take you to go from Toronto all the way to Fort Erie, cross the border, and get to the Buffalo International Airport. How much time would it take you, sir?

A.We must have flown out of Toronto.

[117]Then we had this interesting exchange: [Underlining added]

A.Well, what it, what it does do is that it shows that I couldn’t have been possibly looking at phone records, doesn’t it, when I wrote the note.

Q.That, that doesn’t show that at all, it shows that when you looked at the phone records you didn’t cross-reference them very well with the other lies or, you know, misrepresentations you have made here.

A.Well, you’re suggesting that I, that I should be able to look at this phone record and write down stuff. Obviously, I must not have looked at the phone record otherwise I would have realized that this was wrong.

Q.No sir, what I’m suggesting to you is you weren’t tuned into it. You weren’t

bright enough to understand all the other issues around your telephone calls of that day.19 You made the notes . . . to push and advance your agenda. Is that correct?

A.That is not correct.

[118]I might as well set out the entire contents of these handwritten notes:20

SF [Stefan Fridriksson] – got your message from Karl [Bowley]

–what is this about 3000 postcards

19Bingo!

20Length and tedium already are lost causes in these Reasons.

2014 ONSC 5831 (*)

35

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

–Terry and you said 5000 before – one for each [patient]

AG [Andy Gunarsons]– he says it because he does not want to overwhelm you with the numbers of [patients] tried to say their (sic) Siemens cards and I don’t use Siemens21

SF – my concern is that he will send all 5000 postcards – not just 3000

Tell him to stop fooling around and send all 5000 at once, I do not care if they are Siemens postcards just send them as promised

[119]When Andy Gunarsons was questioned on this 3:50 p.m. call, he agreed that he had spoken to Karl Bowley about one postcard being sent for each patient. However, he disputes any mention of 5,000 and he challenges the truthfulness of the statement, “Tell him to stop fooling around and send all 5000 at once . . .”, as he would not have tolerated such a tone and he “would have hung up.”

[120]Near the end of his cross-examination, in respect of the 3:50 p.m. call, Fridriksson was asked:

Q But you expect us to rely on these notes in this proceeding, correct?

A.Yes.

Q.And you expect us to rely on your other notes of telephone calls in this proceeding, correct?

A.Yes.

Q.And in this proceeding the plaintiff is alleging misrepresentation and fraud,

correct?

A.Yes.

Q.Well, I ask you sir, are you not misrepresenting things here by way of your notes? Yes or no?

A.There are things that are not accurate there, you’re correct.

Q.So you are misrepresenting things by way of your notes?

A.Yes.

(d)October 4, 2006 – 3:10 p.m. and 11:06 p.m. telephone calls to Karl Bowley

21As I mentioned some t ime ago, Siemens was a supplier of hearing aids for the defendants and their three

clinics.

2014 ONSC 5831 (*)

36

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[121]Two other sets of handwritten notes tendered by Fridriksson were of telephone calls that he says he made to his accountant, Karl Bowley, on October 4, 2006 at 3:10 p.m. and at 11:06 p.m., respectively. The handwriting for the 3:10 p.m. call and the typed version of the 11:06 p.m. call state that the calls and the

notes were made in St. Catharines. Fridriksson was cross-examined on these notes and, at the conclusion thereof, I was confused and sought clarification from him:22

THE COURT: And the [3:10 p.m.] call was made by you in St. Catharines?

A.No, it was not.

THE COURT: Even though ‘St. Catharines’ appears there?

A.Yes.

THE COURT: We are to ignore that?

A.Yes.

THE COURT: And we are to ignore that because?

A.Because it’s not correct.

THE COURT: When did you insert ‘St. Catharines’ there?

A.I do not know.

THE COURT: But it would be earlier than today.

A.It would be earlier than today.

THE COURT: And whatever you had in your mind ‘earlier than today,’ your memory today is more accurate than it was then?

A.No, obviously not.

[122]The handwritten notes of the 11:06 p.m. telephone call also erroneously show that they were made in St. Catharines. Fridriksson testified that they were made when he was in New York.

[123]As for the contents of the two telephone calls, the one at 3:10 p.m. includes the following:

Asked Karl [Bowley] to put a request to Andy [Gunarsons] in writing because he seems to be refusing to return my phone calls or messages left on his answering

22Usually, I wait until after re-examination to seek clarification fro m a witness. However, in this case, re - examination could be weeks later and the point would be forgotten in the fog of time.

2014 ONSC 5831 (*)

37

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

machine [In his testimony, Mr. Gunarsons disagrees that he was refusing to return the telephone calls.]

Remind him that he promised Carol [Klassen] unfettered access – his words – to the books, schedules, the files, the billings etc. etc. etc. . . . Said Carol could go to the [Niagara Falls] Clinic this Friday and spend the day.

[124]In his evidence, Mr. Gunarsons denied ever making such statements. His instructions from the defendants were that there was to be no access to the Niagara Falls Clinic until there was money in hand. I accept his evidence as the more probable.

[125]The handwritten notes for the 11:06 p.m. telephone call, state:

KB [Karl Bowley] met with Andy [Gunarsons] – good discussion – will be able to examine this more closely over next several days but the [numbers] look good.

SF [Stefan Fridriksson] – when should we consult

KB – next week I think

SF – when can Carol go to [Niagara Falls] to complete due diligence re [number of patients], [number of hearing] aids, schedule etc.

[126]In his cross-examination, Karl Bowley stated that he did not specifically recall this conversation.

(e)November 10, 2006 – two notes for the same telephone call

[127]On November 10, 2006 (the day following the completion of the purchase and sale), Fridriksson (along with his wife, Carol Klassen) attended the Niagara Falls Clinic and met with Ginette Galati, the receptionist. While there, Fridriksson says that he had a telephone conversation with Terry Lewis at 12:32 p.m. during which he made handwritten notes. In fact, he produced two sets of notes for that conversation, explaining that he misplaced the first set and “recreated” the second set (following which he found the first set). I will set out both for comparison:

2014 ONSC 5831 (*)

38

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[128]His testimony regarding this telephone call and the two sets of handwritten notes is problematic in several respects.

(i)Who placed the call?

[129]At first, Fridriksson said that this was a telephone call to Terry Lewis:

Q.Okay, and this is a telephone call from you to Terry Lewis . . .?

A.That’s correct.

[130]But, he said otherwise later:

A. . . . Ginette, Carol and I were standing beside one another when he phoned, when Terry phoned us.

[131]And even later:

Q.Okay, but you got a call, you got a call?

A.Yes. No. I think I called him.

[132]And still later:

Q.And you called Terry . . .?

A.I think I, either I called Terry or Terry called me, but I think it’s I called

Terry.

[133]Why he would not be certain as to who called whom is puzzling, as both sets of handwritten notes bear the heading, “Call to Terry Lewis”:

Q.Well, your notes say ‘Call to Terry Lewis’?

A.Well then, it’s I called him.

2014 ONSC 5831 (*)

39

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[134]However, there are other peculiarities regarding the November 10th telephone call.

(ii)Notes misplaced and recreated

[135]Fridriksson was cross-examined on the misplaced notes and their recreation:

A.That’s correct.

A.Yes.

Q.The [second set] are the recreated notes?

A.That’s correct . . . the notes that I made afterwards because I couldn’t find

[the first set].

[136]Fridriksson testified that the second set of notes was made 10-15 minutes after the first set:

Q. . . . do you recall when you wrote or recreated the second set of notes from that phone call?

A.About fifteen minutes later.

Q.Fifteen minutes later. So you had a telephone call at 12:32 [p.m.], you took notes contemporaneously while you were on the call?

A.Yes.

Q.You misplaced those notes?

A.Yes.

Q.And fifteen minutes later you decide to . . .

A.Ten to 15 minutes later.

[137]To appreciate the likelihood that the first set of notes would be misplaced and recreated within such a short period of time, some additional information is helpful. Fridriksson testified that, when he made the telephone call, he was at the front counter or desk in the reception area of the Niagara Falls Clinic. He says that his wife and Ginette Galati “were right beside me”. He made the first set of notes on his “own lined paper pad” and explained, “I must have ripped them off because they weren’t on the [pad], because I couldn’t find them”:

2014 ONSC 5831 (*)

40

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.So after you left the counter [following the telephone call] the three of you collectively walked to the back office?

A.Yes.

Q.And you went to the back office for what purpose?

A.To find the things that Terry said were in there.

Q.Okay and you spent between 10 and 15 minutes following the completion of the call in the back office?

A.Yes.

Q.And were Ginette and [your wife] with you at that time?

A.Yes.

Q.The whole time?

A.I believe so. The whole time, yes.

Q.Okay. So there’s three of you milling around the back office looking for the things Terry mentioned to you during the phone call and that you took notes of, correct?

A.Yes. Yes.

[138]Consequently, while looking for the items that, 10-15 minutes earlier, Terry Lewis allegedly said were in the back office, Fridriksson maintains that he misplaced his first set of handwritten notes. He was asked about his efforts to find these notes:

Q.Did you make any effort the day, the time that you misplaced the notes to actually look in the back office to see where they might have been?

A.I looked all over for them.

Q.And you couldn’t find them that day?

A.Couldn’t find them that day.

A.Yes.

Q.You decided to recreate the notes?

A.That’s right.

2014 ONSC 5831 (*)

41

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.And how did you do that?

A.I asked Carol and Ginette, ‘Do you remember what he said?’ . . . What was, what I had written on the notes . . . I [had] read them the notes and I asked them, ‘Do you remember what he said?’

Q.Okay. So you’re saying now that, okay, when did you read the notes to

them?

A.After the phone call.

Q.The original set of notes?

A.Yes . . . I said, he said this, he said that this stuff was in the back office.

Q.Okay and then you all went to the back office?

A.Went to the back office and looked for the stuff.

[139]It may be useful to know that the back office is “three paces” from the reception area where this telephone call occurred and the soon-to-be-misplaced notes were made:

Q.So this, it’s a room that’s eight feet by 12 feet according to what you said earlier, roughly?

A.Approximately.

Q.It’s three paces behind the front reception area?

A.Yes.

Q.And the notes of this call which you conveyed the information of the call to Ginette and Carol, got misplaced in this little, tiny area?

A.There’s, it’s a messy room. It’s filled with junk.

Q.And no more than 15 minutes later you decided, ‘I’m not going to bother looking for these notes, I’m just going to recreate them’?

A.I looked for the notes, I couldn’t find them and so I recreated them.

[140]Fridriksson testified that “three or four days later,” the first set of notes was found “on the shelf in the back office.”

[141]What a story.23

(iii)Attempt to distinguish recreated notes by use of the past tense

2014 ONSC 5831 (*)

42

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[142]Fridriksson was questioned about the apparent lack of any indentifying feature of the second set of notes to mark them as a recreation. He explained that the recreated notes were written in the past tense:

Q.Sir, you agree with me that there’s no notation on the recreated notes that

they are in fact recreated notes?

A.You’re right. That’s correct, but it’s written in past tense, so it shows it is recreated.

Q.So, you’re telling me that within 15 minutes of taking the original notes, you couldn’t find them . . . you decide to recreate the notes, you consciously turned your mind to write the notes in the past tense to show that they’re recreated? Is that what your evidence is?

A.My evidence is that I wrote it as, as it was past tense.

[143]Mr. Korosis took Fridriksson through the second or recreated set of

handwritten notes looking for the past tense. Fridriksson was asked about each line of the notes:24

A.No, it’s not. You’re right.

A.No, it’s not.

A.No, it isn’t. You’re right.

Q.So were you lying to us when you said it was past tense?

A.I wasn’t lying to you I just made a mistake.25

[144] Mr. Korosis continued with his line-by-line dining:

A.It’s not past tense. I made a mistake.

24I do not know who enjoyed this cross -examination more, Mr. Korosis or me . The only thing missing was popcorn.

25This testimony is representative of a pattern seen throughout the evidence of Fridriksson. After giving an answer that may or may not be true, he attempts to justify the answer with an exp lanation that is demonstrably false, thereby removing all doubt that the initial answer is untrue. At all material times, Fridriksson’s feet were a perfect fit for his mouth.

2014 ONSC 5831 (*)

43

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.That’s not past tense. Once again, I made a mistake.

A.It’s not. 26

[145]I do not recall that either Carol Klassen or Ginette Galati was questioned on the issue of the misplaced and recreated handwritten notes, leaving Fridriksson’s silly saga uncorroborated.

(f)“There are inaccuracies, I have no explanation”

[146]The handwritten notes are the foundation for the allegations of fraudulent misrepresentation. Fridriksson was cross-examined on the inaccuracies in his handwritten notes and the suggestion was put to him that the “errors and inconsistencies and inaccuracies . . . are attributable to . . . manufacturing the notes after the fact”:

Q.Sir, I say to you that the great bulk of your notes, if not all of them, were manufactured after you reviewed the phone records and then you started looking at the e-mails putting together a story that would suit your purposes?

A.That is not true.

Q.So what is the explanation of all these inaccuracies in your notes?

A.There are inaccuracies, I have no explanation.

Q.Well, what is your explanation, sir, for all these additional notes after the

fact, after you say you took the notes?

A.I was trying to straighten it out so that when I passed it to [my counsel] he would understand the notes.

(g)other handwritten notes of telephone calls

[147]There were numerous other handwritten notes of telephone calls tendered in evidence by Fridriksson. However, most suffer from the same shortcomings (or variations thereof) that I have chronicled above. I do not see the benefit in my continuing with this line of analysis. I must move on before the passage of time has its way with me. If I have not made my point, there is no point to be made.

26The “past tense” testimony is one of a milky way of answers in this trial where Fridriksson offered explanations that were untrue and, in many instances, preposterously so.

2014 ONSC 5831 (*)

44

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[148]On February 11, 2009, Fridriksson was the subject of a disciplinary hearing before CASLPO in which there was a finding of misconduct against him surrounding an advertisement that he had placed in a newspaper. He was cross- examined on the matter in this trial. When he attempted to explain away the misconduct, he was confronted with an agreed statement of facts that had been tendered at the disciplinary hearing (a proceeding wherein he was represented by a lawyer) and which arguably refuted his testimony before me. Throughout this phase of the trial, Fridriksson was noticeably defens ive and agitated. Then the following exchange took place:

Q.And try to tell the truth, it really would help us here. Excuse me, sir, did you

just mouth an expletive to me?

A.No.

Q.I think you did.

A.I did not.

THE COURT: What did you see?

MR. KOROSIS:He mouthed ‘fuck off.’

A.I did not.

Q.You looked at me, you shook your head and you mouthed it.

A.I did not.

[149]Everyone else in the courtroom was busy writing at that moment and did not witness the incident. Mr. Korosis added: “I’m an officer of the court and I’m not about to lie to the court.”

[150]I declined to hold an expletive voir dire, as the outcome would only assuage my curiosity and not affect the result in this trial. Although I am unable to say whether Fridriksson mouthed the expletive alleged, doing so would not be inconsistent with his nature and character. The incident has the same DNA found at various points in his evidence. Fridriksson cannot help himself. He suffers from an utter lack of impulse control.

9.Evasiveness/stubbornness

[151]Fridriksson frequently jousted with Mr. Korosis in cross-examination. For example, the premises upon which the Niagara Falls Clinic carried on business

2014 ONSC 5831 (*)

45

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(6800 Morrison Street, Niagara Falls) were leased. This was the case when the business was run there by the defendants and it was so after the purchase by the plaintiff. The plaintiff was incorporated for the purpose of purchasing the Niagara Falls Clinic and the plaintiff was the tenant. The sole officer, director and shareholder of the plaintiff was, and is, Carol Klassen. All of this is known and acknowledged by everyone. However, Fridriksson had this exchange with Mr. Korosis:

Q.But you’re not the tenant though, sir, are you?

A.My wife and I are.

Q.No, you’re not the tenant. Are you telling me, you’re telling me right now that you are the tenant of those premises? You and your wife personally?

A.We are the owners of the clinic, or my wife is the owner of that clinic.

Q.But when you say ‘We are,’ you’re an owner of that clinic?

A.My, my, my wife is sorry.

Q.You’re not an owner, you’re not a shareholder of the, of the corporation,

right?

A.That’s right.

Q.And you’re not a tenant, right, right?

A.We are a tenant.

Q.Sir, why do you need to be so cute with your answers?

A.I’m not trying to be cute.

Q.Then are you out and out lying?

A.No.

Q.You are not a tenant, yes or no?

A.We are the people who occupy the suite.

[152]He was stubbornly unwilling to concede such a simple uncontroverted fact.

Such “cuteness” in his evidence is something else for which the court must be on guard.

2014 ONSC 5831 (*)

46

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

10.The Fridriksson Formula

[153]When it was suggested to Fridriksson that the Niagara Falls Clinic performed financially as expected after the change in ownership and that he got what he paid for, he insisted that the good performance was due to his efforts.

Fridriksson testified that his “great management brought [the Niagara Falls Clinic] from doom” and that he spent $300,000 on advertising for that clinic between the purchase in 2006 and 2011 (the year the trial commenced). He was cross- examined:

Q.So, if we look at the financial statements for the [Niagara Falls Clinic] we’re going to see that $300,000 in advertising was spent?

A.Yes.

[154]Upon examining the financial statements, the advertising for the Niagara Falls Clinic proved to be $102,843, not $300,000. When confronted with this discrepancy, Fridriksson explained that his accountant, Karl Bowley, “distributed the advertising amounts throughout the companies” (Fridriksson owns a total of three hearing clinics) and described the matter as “an accounting issue.” The explanation was put to Karl Bowley, in cross-examination:

Q.[Fridriksson’s] evidence was that there was more money spent in Niagara

Falls and that you moved things around to even it through the companies . . . You’ve got the financial statements in front of you, do you agree with that statement?

A.I certainly don’t recall moving around advertising . . . expenditures.

[155]This testimony by Fridriksson followed the formula of so much of his evidence: he begins with a kernel of truth (that he had advertising expenses for the Niagara Falls Clinic); then he exaggerates that truth (here, by approximately 300%); he rationalizes the exaggeration to fit his view of reality (that his efforts saved the Niagara Falls Clinic from financial doom); and, finally, when caught in his lie, he concocts an explanation that shifts the blame to others (in this instance, his accountant, Karl Bowley).

11.Fridriksson the Fabricator

[156]Fridriksson wrote to Heather Winger, a WSIB adjudicator, on March 4, 2009, explaining that he had purchased the Niagara Falls Clinic and accusing the defendants of improper billings. The letter includes the following passage: [Underlining added]

2014 ONSC 5831 (*)

47

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

. . . This point is of interest to me, because the extra billing for those hearing aid s influenced the net income of the Clinic I purchased. The purchase price of the Clinic was based on a multiple of that net income. If these billings were inappropriate, the purchase price of the Clinic would therefore be inflated by the amount of those extra billings. We have chosen to take this matter to court because, along with a number of other irregularities, this extra billing has significantly inflated the valuation of this Clinic . . .

[157]The underlined sentence contradicts the position taken by the plaintiff in this court that the purchase price of the Niagara Falls Clinic was based on the number of patients. Fridriksson was cross-examined on the point:

Q.Okay and everything you write in [the letter] you truly believe is true and correct, right? You wouldn’t put something on paper that wouldn’t be true and correct, would you?

A.I know there’s something in here that’s not correct.

Q.What is that?

A.The purchase of the Clinic was based on a multiple of an income.

Q.That’s not correct?

A.That’s not correct . . . that was never true or correct.

[158]It is more than “not correct”; it is a plain, unadorned lie.

12.Conclusion

[159]What can we safely conclude from all of this? Fridriksson is quick- tempered, bombastic, self-aggrandizing, quick-tempered, vindictive, precipitous, quick-tempered, prone to exaggeration, reckless with the truth, impulsive and, finally, did I mention that he was quick-tempered?

[160]However, for present purposes, what is important to observe is that he is an utterly unreliable historian.27

[161]Now comes the drudgery. One should not be in close proximity to sharp objects while reading what follows.

III.EVIDENCE ANALYSIS (up to signing of Asset Purchase Agreement)

[162]It is time to review some of the evidence. I have found that the most reliable evidence consists of the authenticated paper trail: letters, e-mails and other

2014 ONSC 5831 (*)

48

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

documents. It is against such evidence (and the absence of such evidence) that I have frequently measured the probable truth of the oral testimony.

[163]My look at the evidence will be in monthly timeframes, simply as a matter of faux organizational convenience. Also, I have divided the evidence into three parts: (1) up to the date that the Asset Purchase Agreement was signed (October 30, 2006); (2) from after signing until the closing or completion of the purchase and sale (November 9, 2006); and, (3) thereafter.

1.March 2006

(a)March 31st

(i)e-mail from Terry Lewis to Michael Moore

[164]At 4:03 p.m., on March 31, 2006, Terry Lewis sent an e-mail to Michael Moore, a representative of ListenUp! Canada, a prospective purchaser of the three hearing clinics owned by the defendants:

It was a pleasure meeting with you . . . I was impressed by your presentation and believe that we can work together. I had hoped that by this week-end we could have the formula that we discussed, so that we can better estimate your valuation of our clinics, and then proceed further in our negotiations . . .

2.April 2006

(a)April 3rd

(i)e-mail from Michael Moore to Terry Lewis

[165] At 2:30 p.m., on April 3, 2006, Michael Moore e-mailed Terry Lewis:

I have attached a document that should be of help in getting the process started. It outlines possible methods for valuation . . .

[166]The document attached was titled “ListenUP! Canada, Acquisition Valuation & Process.” It included this passage:

If you wish to make an estimate [of the value] prior to providing us with confidential information, you may use the following [benchmark] – Multiple of Cash Flow: [ListenUP! Canada] is prepared to pay between 5 and 7 times sustainable cash flow at a minimum for your business. Sustainable cash flow is defined as EBITDA, less annual capital expenditures required to carry on the business.

(“EBITDA,” an acronym that was often mentioned in the trial, stands for – “earnings before interest, taxes, depreciation and amortization.”)

2014 ONSC 5831 (*)

49

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[167]The document went on to say that a “much more favorable valuation” would result with the provision of “some very basic information on a confidential basis,” consisting of, in part:

▪Most recent annual unit volume of hearing aids sold and number of clients who purchased hearing aids . . .

▪Annual occupancy costs and details of your lease(s) . . .

▪Number of full and part-time hearing healthcare professionals on staff and who will

be prepared to continue working in the business.

(This reflects some of the same information that the plaintiff was seeking from Terry Lewis in their negotiations.)

[168] The document described the process to be followed:

The process whereby we would reach agreement on purchase terms and conditions is typically as follows: Seller and [ListenUP! Canada] negotiate a purchase and sale price and structure, subject only to final due diligence and confirmation of volumetric information provided by Seller . . .

(b)April 6th

(i)e-mail from Gordon Lownds to Terry Lewis

[169]At 9:35 a.m., on April 6th, Gordon Lownds (another representative of ListenUp! Canada) forwarded a confidentiality agreement to Terry Lewis on behalf of Michael Moore.

(ii)Donna Bradley resigns from the Niagara Falls Clinic

[170]On or about April 6, 2006, Donna Bradley submitted a letter of resignation to the defendants. She was a hearing instrument practitioner/specialist and had been a long-time, trusted and key employee at the Niagara Falls Clinic, where she was able to perform most duties under the supervision of an audiologist, except prescribe hearing aids.

[171]The plaintiff contends that, when she resigned, Donna Bradley took a list of patients of the Niagara Falls Clinic. It is further alleged by the plaintiff that the Lewises and Andy Gunarsons, their accountant, represented that “Donna Bradley did not have a patient list and was not contacting patients of the Niagara Falls Clinic to lure them away to her new clinic.”

2014 ONSC 5831 (*)

50

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[172]Linda Fraser, a receptionist with clerical and other minor functions in the maintenance of the office at the Niagara Falls Clinic, resigned her employment along with Donna Bradley.

[173]Following the departure of Donna Bradley and Linda Fraser, the defendants rehired Ginette Galati as the receptionist for the Niagara Falls Clinic. Ms. Galati had been fired by Donna Bradley at some earlier time.

[174]Dee Lewis testified, in-chief, that James Naumovich (the lawyer representing the defendants on the sale) had written to Donna Bradley and Linda Fraser “before they left, saying that they were to return any materials that they had that belonged to the [Niagara Falls] Clinic.” A copy of this letter was not produced in evidence (and I expect that it would have been very easy to do so). In its absence, I am not prepared to make any finding as to its contents.

(c)April 14th

(i)e-mail from Terry Lewis to Andy Gunarsons

[175]At 3:55 p.m., on April 14th, Terry Lewis sent an e-mail to Andy Gunarsons, enclosing the Acquisition Valuation & Process document from ListenUP! Canada and stating:

We are giving them 2005 and 2004, because the numbers for 2005 are slightly lower than they would have been for the 4t h quarter due to my being disabled and not working during that time.

[176]Due to his poor health, Terry Lewis (in or around September of 2005) ceased attending at the Niagara Falls Clinic to perform audiological services.

(d)April 17th

(i)e-mail from Terry Lewis to Andy Gunarsons

[177]At 4:11 p.m., on April 17th, Terry Lewis forwarded to Andy Gunarsons the confidentiality agreement that had been received from ListenUP! Canada.

(e)April 20th

(i)e-mail form Dee Lewis to Andy Gunarsons

[178]On April 20th, at 4:04 p.m., Dee Lewis sent an e-mail to Andy Gunarsons: [Underlining added]

2014 ONSC 5831 (*)

51

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

So, Gordon [Lownds] and Mike [Moore, both of ListenUp! Canada] are giving us an offer on Monday afternoon. Donna [Bradley] talked the receptionist [Linda Fraser] at the [Niagara Falls] office into quitting as well. Good thing. We were going to dismiss her because we knew she would let Donna in any time she wanted . . . The staff from Eglinton are going to fill in . . . The interesting thing is Donna is being so vicious she has lost all credibility. It will be much easier to convince Mike that the sun does not rise and set on Donna, and that she is, in fact, someone he wants to avoid . . .

[179]Dee Lewis was not asked to explain why she described Donna Bradley as “vicious.” Nevertheless, it seems that Michael Moore attached importance to the departure of Ms. Bradley.

[180]In or about the spring of 2006, there were at least six parties who showed an interest in purchasing one or all of the three hearing clinics owned by the defendants. Negotiations with these parties reached various stages but, ultimately, no firm agreement was reached with anyone. What is clear, however, is that the Lewises were interested in selling their clinics.

[181]One might wonder why I am spending time canvassing attempts by others to purchase the Niagara Falls Clinic from the defendants. It is because the plaintiff argues that inferences should be drawn from those dealings to guide the court in concluding what the defendants and their accountant probably did or said in their negotiations with Fridriksson and Karl Bowley (the accountant for the plaintiff).

(ii)e-mail from Terry Lewis to Andy Gunarsons

[182] At 6:33 p.m., on April 20th, Terry Lewis e-mailed Andy Gunarsons:

I haven’t decided how vindictive, if at all, I want to be to the woman [Donna Bradley] who is making things so difficult for us at our Niagara Falls office. I recall that she had a mortgage with the Royal Bank and that I had to supply a letter to confirm her employment . . . Do I have an obligation to notify her bank that she is no longer employed?

. . . We had an appointment with our lawyer, Jim Naumovich, yesterday to have him write a letter on our behalf, accepting Donna’s resignation and instructing her on the confidentiality of the patient information. He also cautioned her that if the information was used we would prosecute her . . .

[183]It would seem that this e-mail was written before Donna Bradley obtained her new employment and before she was telephoning patients of the Niagara Falls Clinic. Consequently, the caution regarding prosecution seems slightly harsh (unless, perhaps, the Lewises knew or suspected that Ms. Bradley possessed a patient list).

2014 ONSC 5831 (*)

52

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[184]The e-mail refers to giving instructions to Mr. Naumovich to write to Donna Bradley. This is the second letter that the defendants contend was sent to Ms. Bradley. Like the first one, it was not produced in evidence although it would have been very easy to do so. I am not prepared to reach any conclusions about the contents of that letter.

[185]Dee Lewis was cross-examined on this e-mail, however, it was not helpful to me as she was not its author.

(f)April 24th

[186]On April 24th, Gordon Lownds of ListenUP! Canada met with the Lewises at their home in Toronto.

(g)April 25th

(i)locks changed

[187]On April 25th, Accu-Lock and Security attended at the Niagara Falls Clinic.

According to the invoice rendered at the time, the attendance was “for service call and labour to rekey locks at Units 1 and 2” and twelve keys were supplied to the defendants. The installation of the new locks was thought to be necessary because Donna Bradley and Linda Fraser had ended their employment with the defendants.

[188]This invoice will become relevant when, after closing, the plaintiff alleges that the defendants did not turn over all of the keys to the Niagara Falls Clinic.

(ii)security system reprogrammed

[189]Also on April 25th, Brian Vernall, of Security & Alarms, made a service call to the Niagara Falls Clinic. His invoice reads: “Service call to reprogram user codes following staff changes.” It seems obvious that the “staff changes” were the departures of the two employees, Donna Bradley and Linda Fraser.

(h)April 29th

(i)e-mail from Terry Lewis to Jaffer Sunderji

[190]At 10:16 a.m., on April 29th, Terry Lewis sent an e-mail to Jaffer Sunderji, proprietor of Canada Hearing Centre, another interested prospective purchaser of the Niagara Falls Clinic:

Here is the agreement. I don’t understand why you would base your valuation on the gross sales. A business which has gross sales of 1 million that produces a profit of

2014 ONSC 5831 (*)

53

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

$400,000 is certainly worth more than one that has the same gross sales and produces a profit of $200,000. A multiple of the earnings makes more sense. We can discuss that further.

(ii)e-mail from Jaffer Sunderji to Terry Lewis

[191] At 2:05 p.m., on April 29th, Jaffer Sunderji e-mailed Terry Lewis:

You are correct. In general, one would normally base one’s valuation on EBITDA not sales. A multiple of sales is a short cut to carrying out a full-blown due diligence.

(iii)e-mail from Jaffer Sunderji to Terry Lewis

[192] At 2:33 p.m., Jaffer Sunderji sent another e-mail to Terry Lewis:

Thank you for sending me the confidentiality agreement . . . I am not sure I can sign it in its present form. Please allow me some time to think about it.

[193]Confidentiality was crucial to the defendants in their dealings with all prospective purchasers, including the plaintiff. The defendants were reluctant to release sensitive business information to any interested purchasers prior to execution of a confidentiality agreement.

3.May 2006

(a)May 7th

(i)e-mail from Terry Lewis to Jaffer Sunderji

[194]At 9:19 a.m., on May 7, 2006, Terry Lewis forwarded an e-mail to Jaffer Sunderji:

Thank you for sending back the confidentiality agreement with your additions. I don’t think that I can sign it in its present form . . . After further discussions with my lawyer and accountant we have decided that it would be better for both parties to sell the ‘assets’ of [the Niagara Falls Clinic], rather than break it off into a new company and sell the shares . . .

(ii)e-mail from Jaffer Sunderji to Terry Lewis

[195]Later that day, at 4:53 p.m., Jaffer Sunderji sent an e-mail to Terry Lewis in which he set about to “explain my position” in respect of the confidentiality agreement.

2014 ONSC 5831 (*)

54

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(b)May 9th

(i)e-mail from Jaffer Sunderji to Terry Lewis

[196] At 3:25 p.m., on May 9th, Jaffer Sunderji e-mailed Terry Lewis:

Thanks for your e- mail. I can see your point of view and agree if I was the seller I would want the same guarantee of confidentiality . . . Have you already prepared materials for prospective buyers? . . .

(ii)e-mail from Dee Lewis to Andy Gunarsons

[197]Dee Lewis sent an e-mail to Andy Gunarsons at 11:42 p.m., on May 9, 2006: [Underlining added]

. . . Jaffer, who is interested in buying the whole thing, but will settle for [Niagara Falls] first, has finally agreed to a confidentiality agreement that is clear and has no hidden games . . .

So now we really need to prepare a financial statement for [Niagara Falls] alone, and I will need some help with that since I have never done one before. Up to this point, the financial statements have included all the clinics . . . I can get this info pretty easily by pulling together two [QuickBooks] files and the Quicken cheque book. What information do you need? . . . There is usually a $30K charge for examination of the financials for any prospective buyer, but I am not sure we are in a strong enough position to demand that . . .

[198]Andy Gunarsons was retained in May of 2006 to be the accountant for the defendants and for their three hearing clinics (the previous accountant was fired by the defendants). He was engaged to do the financial statements for 2005 and to assist in the sale of the Niagara Falls Clinic. He testified that he was not instructed to prepare, and did not prepare, separate financial statements for the Niagara Falls Clinic. The existence of such financial statements was the cause of much dispute in the trial.

[199]Based upon the underlined portion of the above e-mail, it seems that, at this point, Dee Lewis intended to prepare financial statements for the Niagara Falls Clinic using two computer programs.

2014 ONSC 5831 (*)

55

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(c)May 10th

(i)e-mail from Gordon Lownds to Terry Lewis

[200]At 4:10 p.m., on May 10th, Gordon Lownds sent an e-mail to Terry Lewis pointing out that he had not heard from the Lewises since the April 24th meeting. The e-mail said: [Underlining added]

. . . I just wanted to send a quick note to confirm our continued interest in putting together a compelling and competitive offer on the table . . . it would be useful to know, sooner rather than later, if you are interested in continuing the dialogue and process. If not, we have other alternatives that we are interested in pursuing, particularly for the Niagara market . . . Please advise as soon as possible . . . and provide some financial data with which we can work as a starting point . . .

[201]In his testimony, Andy Gunarsons agreed that the reference to “some financial data” was a request for financial statements.

(ii)e-mail from Dee Lewis to Andy Gunarsons

[202]At 6:50 p.m., Dee Lewis forwarded the 4:10 p.m. e-mail to Andy Gunarsons, stating: “Is he threatening us? What a jerk.” This was one of many instances of

mistrust exhibited by Dee Lewis in this trial (and not the last time she called someone a “jerk”).28

(d)May 11th

(i)e-mail from Terry Lewis to Andy Gunarsons

[203]At 2:18 p.m., on May 11th, Terry Lewis e-mailed Andy Gunarsons: [Underlining added]

We have the company which holds the lease in Niagara Falls. Could we sell that company, as shares, then assign all of the assets of [Niagara Falls] to it? Most of what we are selling is the good-will and patient list, the actual physical equipment is negligible? I assume that if we sell shares, we will be charged only capital gains; whereas if we sell assets, we will be charged full tax . . .

(“Goodwill” and “patient list” are terms frequently mentioned in this trial, with the plaintiff contending that it received too little of both.)

[204]On behalf of the plaintiff, it is argued that “the production of a patient list is obviously an important aspect of determining the value of the goodwill and that in

2014 ONSC 5831 (*)

56

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

itself is corroborative of Fridriksson’s evidence that it was requested on many occasions.” I am not prepared to make that connection in the circumstances of this case.

(e)May 15th

(i)e-mail from Terry Lewis to Jaffer Sunderji

[205] On May 15th, at 3:42 p.m., Terry Lewis e-mailed Jaffer Sunderji:

Here is the final version [of the confidentiality agreement] . . . The only substantive change was the time period . . . Please fax it back . . . and I will sign, scan it and send it back. Then we can begin completing this negotiation.

(ii)e-mail from Jaffer Sunderji to Terry Lewis

[206] At 6:32 p.m., on May 15th, Jaffer Sunderji sent an e-mail to Terry Lewis:

. . . We first made contact with you some time last year and have a serious interest in acquiring well-established profitable clinics such as yours . . .

I regret to say that our preliminary discussions with you and the redrafted confidentiality agreement lead us to believe that the probability of successfully negotiating a transaction with you is very small . . . considering your price expectations and confidentiality agreement . . .

(iii)e-mail from Dee Lewis to Jaffer Sunderji

[207]At 10:46 p.m., on May 15th, Dee Lewis sent a cutting e-mail to Jaffer Sunderji:

. . . [certain factors] make it pretty clear that your intentions were to eat up time we could be using to sell the [Niagara Falls Clinic] to someone who is actually interested. It would also appear from your anger at not being able to use information we give you now in a year’s time makes it appear you were after information only, with intentions to use it to your advantage as soon as possible. I also doubt that any deal between us can be completed, as I do not think completion is your intention . . .

[208]This e-mail shows a high level of mistrust by Dee Lewis, a characteristic that surfaced time after time in her dealings with the plaintiff and that was confirmed in her testimony. She was cross-examined:

Q.So would it be fair to say that you didn’t trust any prospective purchaser?

A.Well, we were in a very vulnerable position and people are going to press

the advantage that they have . . . we had to worry about what we could give them and what was safe for us.

2014 ONSC 5831 (*)

57

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

THE COURT: So, is your answer ‘yes’?

Q.Basically, I guess. We didn’t trust every, anybody. We had mistrust.

(f)May 23rd

(i)e-mail from Terry Lewis to Bob Liew

[209]At 5:46 p.m., on May 23rd, Terry Lewis sent an e-mail to Bob Liew, Chief Financial Officer of Island Hearing,29 another prospective purchaser:

Attached is the confidentiality agreement, with two small changes as recommended by my lawyer.

[210]The confidentiality agreement (which was entered into on May 18, 2006) was signed by Terry Lewis, Marke Hambley (President and CEO of Island Hearing) and Bob Liew.

(g)May 30th

(i)e-mail from Michael Moore to Terry Lewis and Dee Lewis

[211]At 1:20 p.m., on May 30, 2006, Michael Moore, of ListenUp! Canada, sent an e-mail to Terry Lewis and Dee Lewis: [Underlining added]

Thanks for spending some time on the phone last night. I think the best way to do this . . . (since we already have some information on the clinic in Niagara Falls) is to send us whatever information you are comfortable sending and what price you want for the office. If you can do that, we can strengthen our offer.

[212]It is not known what “some information” means.

(ii)e-mail from Dee Lewis to Michael Moore

[213] At 4:32 p.m., Dee Lewis e-mailed Michael Moore: [Underlining added]

Our accountant says we give no more info than we have without a Letter of Intent to buy at a particular multiple. You already have enough info to make that decision . . .

Try to bring Donna back at your own peril. We have nothing to say on that matter . . .

[214]Dee Lewis was cross-examined about what she meant by “bring Donna back at your own peril”:

29Island Hearing is a co mpany affiliated with, and so metimes referred to in the evidence as, Island Acoustics Inc., and also connected to Island Hearing Services and National Hearing Serv ices. For convenience, I will simp ly refer to all of these entities as “Island Hearing.” Nothing turns on any distinctions amongst them. Island Hearing is also a wholly owned subsidiary of Phonak Canada Ltd.

2014 ONSC 5831 (*)

58

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.She had proved to be a bit untrustworthy in walking off like that and leaving the place dark, not informing patients. It was a cruel act and Terry [Lewis] had been very upset by that.

Q.Yes.

A.No, of course not.

[215]Based upon the 4:32 p.m. e-mail, a measure of the importance of Donna Bradley, in the eyes of Michael Moore, is that he was thinking of having her return to the Niagara Falls Clinic in the event his company was the successful purchaser.

(h)May 31st

(i)Letter of Intent from ListenUP! Canada

[216]On May 31, 2006, ListenUP! Canada forwarded a Letter of Intent to the Lewises. It provided:

The purchase price shall be equal to 6 times sustainable EBITDA . . . The onus to provide the detailed operating and pro-forma financial statements and to prove their validity based upon actual activity levels, revenues and expenses sha ll rest with the [Niagara Falls Clinic] and shall be substantiated by [it’s] chartered accountant . . .

[217]In cross-examination, Andy Gunarsons agreed that an express condition precedent to ListenUp! Canada proceeding further was the preparation or provision of separate financial statements for the Niagara Falls Clinic. He testified that he

“never prepared them.” There is no evidence that anyone prepared such statements.

Relying upon the e-mail at 11:42 p.m., on May 9th, the plaintiff argues that Dee Lewis prepared the financial statements herself. If she did prepare something (and

there is no evidence that she did) it was not sufficient for ListenUp! Canada because the May 31st Letter of Intent was seeking “financial statements” that were “substantiated” by the accountant for the Niagara Falls Clinic.

(i)end of May

[218]According to the testimony of Ginette Galati, the receptionist at the Niagara Falls Clinic when it was purchased by the plaintiff, in late May and early June of 2006, “a lot of the patients that we were calling had already been called by Donna [Bradley] also.”

2014 ONSC 5831 (*)

59

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[219]Ms. Galati stated that, as she was telephoning patients to remind them of their eligibility for new hearing aids and to book appointments, Donna Bradley was doing likewise:

A.I realized that [Donna Bradley and Linda Fraser] must have also had a list because they were calling the same patients that I was calling . . . I think I called like

25 to 30 people and I’m getting the same thing, that Donna had called and she told them that they had moved.

[220]The state of her knowledge on this matter was outlined in an e-mail that she sent to Fridriksson on April 11, 2008, at 3:07 p.m.:

Around the end of May and the beginning of June 2006, there were a few people calling [the Niagara Falls Clinic] and telling us that Donna [Bradley] had called them. I then told Sarah Peverley (the audiologist) and Mumtaz Andani (the hearing specialist) that there was a list which Lind a [Fraser] worked on while I was still here when Donna and Linda were both here. I was a receptionist at the time and Linda was going to look after WSIB patient files . . . When I told Sarah and Mumtaz they in turn told Terry and Dee Lewis . . .

Also, I personally had a conversation with Dee and told Dee that Linda had made a list that included patients’ names, date of birth and their eligibility for new aids and that it was now nowhere to be found . . . I saw Linda with a list, which was written on a standard 8½ by 11 inch note pad, white paper with b lue lines . . . written in pencil . . . more than say, three or four [pages in length] . . .

[221]I have no reason to doubt the accuracy of this e-mail.

[222]The evidence contains many references to the Workplace Safety and Insurance Board patients. As I understand it, WSIB patients are the mother-lode in the world of hearing clinics. They are the most lucrative of all hearing-clinic

patients because the WSIB will pay for the most expensive hearing aid and for annual assessments.30 A WSIB patient, therefore, is more of an annuity for a hearing clinic than a patient. (One witness described a WSIB patient as being

“worth twice the normal patient.”) The next most valuable hearing-clinic patient is a General Motors employee.

2014 ONSC 5831 (*)

60

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

4.June 2006

(a)June 1st

(i)e-mail from Terry Lewis to Andy Gunarsons

[223]At 10:08 a.m., on June 1, 2006, Terry Lewis sent an e-mail to Andy Gunarsons;

We just received [at 9:04 a.m.] the Letter of Intent from Listen Up. It looks like they have come to their senses about the valuation.

(ii)e-mail from Dee Lewis to James Naumovich

[224] At 10:29 a.m., on June 1st, Dee Lewis sent an e-mail to James Naumovich (the lawyer representing the defendants on the sale of the Niagara Falls Clinic):

. . . I sent the e- mail to Michael at ListenUp! and here is his reply. I am concerned about the true integrity of Gordon Lownds and do not like the way the sustainable earnings condition is phrased . . . This still is just a fishing expedition. What do you think? We are, of course, anxious to sell, but not if Gordon is going to be . . . a pain in the patootee.

[225]More mistrust.

[226]The e-mail continues: [Underlining added]

What if we give him a flat price that is well below the figure he will get according to his formula, and that is that. Business is actually good . . . and no one is missing Donna much. In fact, she had not bothered to learn to set the new hearing aids, so they all have to be refit. And she was not entering billings to third parties if that would take her past 4:30. You know, the old I won’t work with anyone else and I will only do what I have time to do form of passive theft. No wonder she resigned.

[227]Arguably, this e-mail is some evidence that the defendants did not think that Donna Bradley was causing financial harm to the Niagara Falls Clinic.

(iii)e-mail from Dee Lewis to Andy Gunarsons

[228]At 10:33 a.m., on June 1st, Dee Lewis forwarded the 10:29 a.m. e-mail to Andy Gunarsons.

2014 ONSC 5831 (*)

61

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(iv)e-mail from Andy Gunarsons to James Naumovich

[229]At 5:12 p.m., on June 1st, Andy Gunarsons e-mailed James Naumovich about the Letter of Intent from ListenUP! Canada, saying that he found it to be “wholly inadequate for a plethora of reasons,” which he proceeded to list.

(b)June 6th

(i)e-mail from Dee Lewis to Andy Gunarsons

[230] On June 6th, at 7:03 p.m., Dee Lewis e-mailed Andy Gunarsons:

Well, here’s another thing Louis [her former accountant], not Louis my dog who is smarter, although lies like a dog as well, did to us. We got a demand from RevCan or whatever they call themselves these days for back CPP payments (over $8,000K) . . .

[231]The e-mail went on to refer to her former accountant as “Louis the liar.” So it is not just prospective purchasers whom she mistrusts.

(c)June 8th

(i)e-mail from Terry Lewis to Michael Moore

[232]At 4:22 p.m., on June 8th, Terry Lewis e-mailed Michael Moore of ListenUp! Canada:

I am following up Dee’s e-mail from a few days ago. Are you going to send a modified Letter of Intent so that we may proceed? We need something that sets out . .

. and that offers a multiple of earnings as the basis for valuation. The Niagara Falls office has produced earnings that are a high percentage of gross sales for several years . . .

(ii)e-mail from Michael Moore to Terry Lewis

[233] At 4:56 p.m., Michael Moore replied to Terry Lewis:

On Tuesday May 30t h, Dee wrote me an e- mail saying we would get nothing more until there was a Letter of Intent. On June 1 st , I sent the Letter of Intent. On Friday, June 2nd, I received a telephone call from someone claiming to be your accountant. He said that a revised Letter of Intent would be sent back . . . the multiple is listed in the requested Letter of Intent at 6X sustainable EBITDA.

(iii)e-mail from Terry Lewis to Michael Moore

[234] At 6:56 p.m., Terry Lewis e-mailed Michael Moore:

2014 ONSC 5831 (*)

62

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

. . . There are some terms of your Letter of Intent that are problematic . . . I would be satisfied with a 6x multiple of the earnings. Our gross sales and gross earnings data would demonstrate that we have achieved the same high level for the past four or five years. The term in question is ‘sustainable’ . . . I think that my accountant’s plan was to send back a revised Letter of Intent that . . . would provide for mutually agreed upon financial information that would be disclosed and limit our liability for future performance . . .

(d)June 14th

(i)Donna Bradley signs employment contract with competitor

[235]On June 14th, Donna Bradley signed an employment contract with Ellesmere Hearing Centre Ltd, carrying on business in Niagara Falls as Canada Hearing Centre, a competitor of the Niagara Falls Clinic and owned by Jaffer Sunderji. Her

position was that of hearing instrument practitioner/specialist. Her start date was July 14th.

5.July 2006

(a)July 12th

(i)one lock and five keys supplied

[236]An invoice from Accu-Lock and Security shows that, on July 12, 2006, there was a service call to the Niagara Falls Clinic “to supply and install 1 multi-lock . . .

with 5 keys.” (The issue of keys will surface many pages from now.) I do not know the reason for this installation.

(b)July 13th

(i)telephone call from Fridriksson to Terry Lewis

[237]July 13, 2006 is the date of the first of eight sets of handwritten notes which Fridriksson says he made in respect of eight telephone conversations with Terry Lewis.

[238]Although telephone records indicate that there was a 14-minute telephone call from Fridriksson to Terry Lewis on July 13th, commencing at 11:36 a.m., on the basis of what I said earlier I have no confidence in the reliability of these, and all other, such notes of which Fridriksson is the author, except where credible corroboration exists.

2014 ONSC 5831 (*)

63

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[239]I will also mention six points to bear in mind in respect of each set of handwritten notes tendered on behalf of Fridriksson in this trial concerning alleged telephone conversations with Terry Lewis : (1) The plaintiff argues that I should accept the accuracy and truthfulness of the notes absent “direct evidence by the defendants to contradict” their accuracy and truthfulness. Such an argument might apply if we were dealing with an inherently truthful witness, but it is not applicable to Fridriksson; (2) Merely because Fridriksson may have mentioned to someone else a piece of information that he allegedly learned in a telephone conversation, does not make the information true. In other words, Fridriksson cannot create facts simply by stating them to someone; (3) Many of the handwritten notes relate to dates and times when telephone conversations actually took place. However, that is not very helpful as such information is readily available in telephone records. What is important is the content of the call, not the fact that there was a call; (4) Just because the contents of the handwritten notes concern topics that were being canvassed in e-mails and letters at the time, does not render the contents accurate;

(5)Occasionally, Dee Lewis testified that she was present with Terry Lewis during some of the conversations and she purported to confirm or deny what was said by her husband. I saw no evidence in this trial that Dee Lewis possesses the type of memory that would allow her, unaided by a written record, to support or deny what she heard someone say many years previously; (6) Unless I expressly say so in these Reasons, I do not accept the handwritten notes of Fridriksson as accurate and truthful.

[240]Counsel for the plaintiff made a valiant effort to salvage the handwritten notes of Fridriksson by embarking on a call-by-call multi-page written analysis.

However, when it was over, I was still left with a sow’s ear and no silk purse.

[241]Returning to this 11:36 a.m. telephone call, Fridriksson was cross-examined on how a 14-minute conversation could produce only one page of handwritten notes. We were treated to a classic Fridrikssonion performance:

Q.And I note, from a 14- minute call, and there are no more than a page of

notes?

A.That’s right.

Q.What else did you talk about, sir?

A.I don’t know. I can’t remember.

[242]A sensible response, I should think. But then, with the ink still drying from that answer, Fridriksson added:

2014 ONSC 5831 (*)

64

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.I do remember. We talked about what he’s been doing, you know, stuff like that. We talked about, you know, kind of what he’s done since, I hadn’t seen him since Saskatchewan [21 years previously]. So I talked to him about what’s been happening since Saskatchewan, stuff like that. And then we got into this part [the handwritten notes].

[243]However, the telephone records show that Fridriksson telephoned Terry Lewis twice the day before (a five-minute call and a one-minute call). One would have thought that any reminiscing would have occurred at that time. When confronted with this evidentiary dilemma, Fridriksson said, regarding the five- minute telephone call:

A.I may have been leaving a message, but I don’t know . . . I hadn’t spoken to

him for 21 years, so it might’ve been a five-minute message.

[244]Then he added:

A.But probably not, it’s a pretty long message, maybe I spoke to him.

[245]Finally, he said:

A.I don’t remember.31

[246]The handwritten notes indicate that Fridriksson asked Terry Lewis why he wanted to sell the Niagara Falls Clinic and the answer recorded by Fridriksson was

– “hurt neck, can’t do drive.”

[247]The notes also say:

▪[Audiologist] and [Dispenser] go 1 – 2 to 3 days per week

▪Biggest clinic in [Niagara Falls] gets many referrals from [Drs.] Caetano and Makerewich [ENT specialists]

▪ENTs WSIB referrals

[248]The notes further record that “about ¾” of the income of the Niagara Falls Clinic came from the WSIB patients.

[249]All of this becomes relevant later.

2014 ONSC 5831 (*)

65

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(c)July 18th

(i)e-mail from Dee Lewis to Andy Gunarsons

[250] At 2:52 p.m., on July 18th, Dee Lewis e-mailed Andy Gunarsons. She begins by describing the situation in respect of the Niagara Falls Clinic:

. . . On the good side, we hired a dispenser for Eglinton . . . Niagara, on the other hand, is a very worrisome subject. It looks as if we will be lucky to get $1M for [the Niagara Falls Clinic]. The know- nothings who think they are high rollers and know high finance are looking only at gross sales . . . Phonak 32 now will only pay 75% of gross sales period, to an audiologist in St. Catharines who is desperate to buy but has no money . . . And, of course, no one is helping us find a dispenser, either – waiting for us to get really desperate . . .

Sarah [Peverley], our audiologist, would prefer to work and live in Niagara, but we need her up here part-time, and she would still need at least a part-time dispenser to help her. She wants to buy, but . . . she does not have the means . . . So Julie is our best bet. She will be living in San Diego, but will fly up here for 10 days or so a month, so Sarah could come up here two days a week and the two of them could cover Niagara quite well.

[251] This second paragraph of the e-mail ends on an optimistic note:

Plus, I think she and I can form an alliance that will enable us both to continue to prosper no matter what happens with Terry . . .

[252]The e-mail addresses the health of Terry Lewis and his limited ability to

work:

We really need time to work Eglinton. The good news is that Terry’s doctor has found a pain dose that keeps the pain at a sort of manageable level, while leaving him alert and able to work. They have changed their minds about his condition and feel that, barring any incident, he may be stabilized for now. They were certain that it would be a cascading event, but he has improved a little, so that is very good news. He’s not happy because now he needs to go in to work two afternoons a week. The patients are coming back now that he has been spotted in the office. Right now, Scarborough is not really worth what we are asking. Plus, it won’t hurt us to make a little more money. Terry was going to have to help out even if we sold.

32“Phonak” appears many times in the evidence. One never knows (and the good news is that it does not matter) whether the reference is to “Phonak Canada Ltd.” or “Phonak Hearing Systems.” Both are subsidiaries of a company called “Sonova.” “Phonak Hearing Systems” is the overall brand name for the div isions of Sonova that sell Phonak hearing aids worldwide. “Phonak Canada Ltd.” is the wholes ale distributor for Sonova in Canada. “Phonak Canada Ltd.” and “Unit ron Hearing Ltd.,” a co mpany wh ich will be ment ioned later, are sister co mpanies. “Phonak Canada Ltd.” is the co mpany that provided the loan that allowed the p laintiff to purchase the Niag ara Falls Clin ic. I will use “Phonak” for all of the Phonak entities.

2014 ONSC 5831 (*)

66

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

So this is our situation now. I need to get financials together for Julie and Island [Hearing] is still interested – at least Island pays based on earnings and the multiple goes up for more profitable businesses. Hopefully not for 2 to 3. So we need to sit down with you and Bruce [a financial advisor to the Lewises] as soon as possible because Julie is here until the middle of next week . . .

[253]The reference to “financials” means financial statements and Andy Gunarsons testified that he did not prepare financial statements for the Niagara Falls Clinic.

[254]Counsel for the plaintiff submit, with some merit, that this e-mail “portrays a much different view of Dee Lewis at this time” than is argued by the d efendants and contradicts the suggestion that “Dee Lewis was paranoid given the caregiver role she was playing to Terry Lewis.”

(d)July 20th

(i)telephone call from Fridriksson to Terry Lewis

[255]On this date, at 9:40 a.m., Fridriksson made the second telephone call to Terry Lewis for which he tendered a set of handwritten notes:

Where is confidentiality agreement – is getting a better agreement drawn up by a lawyer – Accountant? Didn’t like the one he had.

Still interested in selling. Anyone else talking to him – says there are 4 other interested parties. Bullshit! Should send a new confidentiality agreement tonight by e-mail.

[256]When questioned about his “Bullshit!” note, Fridriksson stated:

A.It’s a common kind of thing that people say when they’re selling something, like if somebody’s selling their house they always say, ‘Well, we’ve got all these other people that are interested,’ so, you know, but I thought that was probably not true.

[257]As so often happens with Fridriksson, he jumps to a conclusion without supporting facts. The truth is that, in or about this timeframe, there were as many as six parties interested in purchasing the Niagara Falls Clinic.

(e)July 21st

[258] July 21, 2006, was a busy day.

2014 ONSC 5831 (*)

67

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(i)Canada Hearing Centre welcomes Donna Bradley and Linda Fraser

[259]Canada Hearing Centre commenced an extensive advertising campaign in the Niagara Falls Review, a local newspaper, welcoming its two new employees – Donna Bradley and Linda Fraser.

(ii)e-mail from Terry Lewis to Marke Hambley

[260]At 9:29 a.m., on July 21st, Terry Lewis e-mailed Marke Hambley of Island Hearing:

We are also still very interested. I have been trying to get a reply to a request for your valuation formula . . . I am reluctant to ask my accountant to prepare the financial information that you want if your range of valuation would not be as much as we would find acceptable . . .

(iii)e-mail from Marke Hambley to Terry Lewis

[261]At 11:18 a.m., on July 21st, Marke Hambley sent an e-mail to Terry Lewis saying:

. . . We continue to be keenly interested . . . please call me . . . if you are still interested in including Island Hearing in the sale of the clinic.

[262]Dee Lewis explained: “With Marke Hambley we always discussed the entire business” (meaning the three hearing clinics owned by the defendants). However, the subject line in this e-mail reads: “Re: Purchase of Niagara Falls Clinic”; and, “clinic”, the last word in the e-mail, is singular, not plural.

(iv)e-mail from Terry Lewis to Marke Hambley

[263]At 2:56 p.m., on July 21st, Terry Lewis sent a lengthy e-mail to Marke Hambley in which he began by discussing the departure of Donna Bradley, the frequency with which the audiologist was on site at the Niagara Falls Clinic and staffing matters: [Underlining added]

It is true that we lost our full-time dispenser [Donna Bradley] in the Niagara Falls Clinic. However, she was not the one who made the clinic so profitable, as we have seen since she left. Our staff from one of our Toronto offices has been servicing Niagara Falls on a part-time basis, two or three days per week, even with an audiologist one week and a dispenser the next, since the end of April. Our sales have recovered and we have found that our former dispenser was not as valuable as she thought that she was. The volume of sales was not her doing . . . but the result of my ability and that of one of our other audiologists from our Toronto offices. We are both capable of testing many many patients and of selling a lot of hearing aids in one

2014 ONSC 5831 (*)

68

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

day. We operated the Niagara Falls office on the model of having a full- time dispenser, with audiologist services one day per week for 21 years . . .

[264]This e-mail seems to downplay the importance of Donna Bradley in the operation of the Niagara Falls Clinic. However, contrary evidence exists. For example, Dee Lewis, in testifying that sales for the Niagara Falls Clinic were higher than normal in 2003, explained:

A. . . . really, Donna, Donna was, Donna wanted to break a million in sales and

so she was working really hard to get people in. It was her own little goal, we didn’t know about it, she wanted to, to do that . . . it cut a little into the next year.

[265] The e-mail at 2:56 p.m. went on to discuss the WSIB patients:

There are many WSIB patients in the Niagara office. Although it takes a long time to be paid under the new Program of Care. . . it is possible to make a lot of money on WSIB fittings and billing during and after the POC [Program of Care] year. The WSIB hearing aid sales seem to be concentrated more in one year out of a three year cycle, and that year is this year.

[266]The e-mail describes how the defendants have “two offices in Scarborough .

. . one in the medical office building attached to the Scarborough General Hospital and the other in a shopping centre on Eglinton Avenue.” It also states that each of the three clinics has “great potential” and is “far from working at full capacity” and each generates “a higher percentage of profit compared to gross sales.”

[267]I pause here to mention that, at several points in her cross-examination, Dee Lewis seemed to be suggesting that her husband, Terry Lewis, did not know what he was talking about in some of his e-mails on matters such as the number of the WSIB patients. For example:

Q.So, are you saying he’s confused when he writes some e- mails to Andy

[Gunarsons] but he’s not confused when he makes statements to [Fridriksson] during these negotiations?

A.No. That’s why he was not allowed to give figures because he would, he

was not allowed to give figures and I didn’t give them to him because he, he was just told that he was not to do that.

Q.When you say he was not allowed, who forbid him to say those things?

A.Well, I did, ‘not allowed’ is my term. I did not give him that information because he didn’t, he wouldn’t remember and he didn’t have it in front of him because I didn’t, I never put it in front of him and I never gave it to him . . .

2014 ONSC 5831 (*)

69

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[268]I do not accept the evidence and the suggestion that I should, effectively, discount the accuracy of the e-mails from Terry Lewis to others. If this were so, I would have expected testimony from Andy Gunarsons that he was cautioned by Dee Lewis not to rely upon information received from Terry Lewis.

[269]The plaintiff argues that “it is reasonable to conclude that [Terry Lewis] made the same and/or similar representations to the plaintiff during their negotiations” as are found in the 2:56 p.m. e-mail to Marke Hambley of Island Hearing. This argument might be sufficient for me to take a point that has been proved by the plaintiff to a high possibility and bump it up to a probability. However, I did not see many high possibilities in this case.

(v)e-mail from Marke Hambley to Terry Lewis

[270] At 3:43 p.m., on July 21st, Marke Hambley replied by e-mail to Terry Lewis:

. . . our purchase formula is based on a multiple of earnings and we pay up to five times earnings depending on the potential of the clinic. I understand that the Niagara Falls Clinic is very profitable and could have the potential of the higher multiple of earnings. Bob tells me that there is some issue regarding the loss of a dispenser [Donna Bradley] . . . We would need some assurances that the goodwill of the clinic remains intact with the new dispenser. I am happy to provide you with a Letter of Intent once we have the financial information of your clinic to value . . .

[271]The subject line of this e-mail reads: “Re: Purchase of Niagara Falls Clinic.”

Again, contrary to the testimony of Dee Lewis, it seems clear that Marke Hambley is speaking of the Niagara Falls Clinic, not the three clinics combined. Also, we see that Island Hearing has not been given financial statements for the Niagara Falls Clinic and that there is a concern regarding Donna Bradley.

[272]Andy Gunarsons was cross-examined:

Q.Is this not again a specific request by a prospective purchaser for the financial statements of the [Niagara Falls] Clinic?

A.It is a usual request.

Q.All right, and yet you say you were never asked by the Lewises to prepare

such statements?

A.I have no recollection now, you know, from memory as to what was actually done. I’d have to actually refer to, to the documents. At that moment in time nothing had been prepared.

2014 ONSC 5831 (*)

70

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(vi)e-mail from Terry Lewis to Andy Gunarsons

[273] At 8:28 p.m., on July 21st, Terry Lewis sent an e-mail to Andy Gunarsons:

Here is the multiple-statement that I have been trying to get from these guys before disclosing information. They sent an e-mail some time ago that I forwarded to you with their lengthy list of things that they wanted. What do you think about telling them we are having the business professionally evaluated and that they should be happy with that?

[274]I assume that “they” is Island Hearing. Again, the subject line reads: “Re: Purchase of Niagara Falls Clinic.” I do not know whether the reference to “having the business professionally evaluated” means the Niagara Falls Clinic or the business of the corporate defendant (which would include all three clinics).

(vii)e-mail from Terry Lewis to Andy Gunarsons

[275]At 8:37 p.m., Terry Lewis sent another e-mail to Andy Gunarsons. It included the following:

Here is my reply to their e- mail with an offer to let them [Island Hearing] buy the whole business . . . We have operated with a dispenser in Niagara Falls and one day per week, sometimes one day every other week, of audiology services for 21 years.

[276]The reference to how often an audiologist was in attendance at the Niagara Falls Clinic will become relevant later.

[277]The plaintiff correctly submits that this e-mail contradicts the representation by Terry Lewis to Marke Hambley, in the 2:56 p.m. e-mail, with respect to how often an audiologist was present at the Niagara Falls Clinic.

(f)July 23rd

(i)e-mail from Fridriksson to Terry Lewis

[278] At 10:52 a.m., on July 23rd, Fridriksson e-mailed Terry Lewis:

My accountant [Karl Bowley] was wondering if the CBE (sic) could factor in the changes in Niagara Falls over the past weeks and months. Specifically the new relationship/clinic set up by the ENTs [Dr. Makerewich and Dr. Caetano] in association with ListenUP! and the addition of Canad a Hearing [the clinic opened by Jaffer Sunderji]. He also wanted to know if you knew where your old dispenser [Donna Bradley] settled and if it was with one of your competitors and how the CBE (sic) felt this would impact the future of the clinic . . .

2014 ONSC 5831 (*)

71

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[279]This e-mail establishes that Fridriksson was aware of the following: (1) a

pending business valuation by a Certified Business Valuator; (2) the “new relationship” between the ENTs in Niagara Falls and ListenUp! Canada;33 (3) the market entry of Canada Hearing; and, (4) the fact that Donna Bradley may be employed with a competitor hearing clinic in Niagara Falls. More importantly, Fridriksson was aware that these matters could have an impact on the value of the Niagara Falls Clinic.

[280]Andy Gunarsons was cross-examined on the 10:52 a.m. e-mail:

Q. . . . were you aware that Mr. Lewis had proposed providing Fridriksson with a business valuation?

A.No.

Q.And do you know whether you received a copy of this e-mail that Mr. Lewis received from Fridriksson?

A.To the best of my knowledge, no.

(ii)e-mail from Terry Lewis to Fridriksson

[281]In an untimed e-mail, on July 23rd, Terry Lewis replied to the 10:52 a.m. e-

mail:

. . . My accountant had sent me a better non-disclosure agreement than the one we had used in the past . . . We are having our business evaluated by a Certified Business Valuator next week . . . He has suggested doing this for use with other interested parties, and it should be helpful to you. It is much better than trying to analyze raw data yourself.

[282]Andy Gunarsons testified, in cross-examination, that “he” in line three is a reference to Trevor Hood. (I will come to him later. He is the Certified Business Valuator who was retained by the defendants.) Mr. Gunarsons stated that he did recommend, however, that the defendants obtain a business valuation.

(iii)e-mail from Marke Hambley to Terry Lewis

[283]At 6:30 p.m., on July 23rd, Marke Hambley e-mailed Terry Lewis: [Underlining added]

Thank you for clarifying the Niagara Falls dispensing circumstances and the impact on the performance of the clinic . . .

33As for hearing aid referrals fro m Dr. Makerewich and Dr. Caetano, Frid riksson testified that Terry Lewis had told him, in August of 2006, that “he got nothing but a trickle.”

2014 ONSC 5831 (*)

72

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Yes, we are interested in the Scarborough clinics as part of the purchase and will need the financials over the last 4 to 5 years on all clinics you are offering for sale. I appreciate your concern about the amount of financial information that we have requested. Unfortunately, we cannot short circuit this process as the financial information we have requested will be critical in accurately valuing your clinics . . .

If you are happy with my suggestion of the two accounting representatives working directly with one another, we should be able to obtain the financial information we require to value your clinics quickly and send a Letter of Intent (offer) . . .

[284]Although the subject line reads, “Purchase of Niagara Falls Clinic,” this e- mail obviously speaks of all three clinics owned by the defendants. Perhaps one cannot always deduce the true subject of an e-mail from the wording of the subject line. Also, this e-mail suggests that financial statements for the Niagara Falls Clinic had not been provided to Mr. Hambley.

[285]Andy Gunarsons was cross-examined on the 6:30 p.m. e-mail:

Q.I take it, it’s clear from this e-mail that the negotiations cannot proceed further without financial information pertaining to the Niagara Falls Clinic?

A.Yes.

Q.Yes, and there is a suggestion that the accountants deal with one another directly to exchange this information and you’re the accountant that’s being re ferred to on behalf of the Lewises?

A.Yes.

Q.And did you in fact have contact with the accountant for Island Hearing?

A.I don’t recall. I think all, virtually all the conversation was directly with Mr.

Hambley.

Q.And how did – then did you respond to his request for financial information

on the Niagara Falls Clinic?

A.Uh, Niagara Falls Clinic, he never asked – to the best of my recollection he never asked me any information on the Niagara Falls Clinic. Mr. Hambley asked me for information on all the clinics.

[286]This testimony does not make sense. All of the earlier e-mails to and from Mr. Hambley refer to the purchase of the Niagara Falls Clinic, not the three clinics owned by the defendants (for example, see the e-mails from Marke Hambley to Terry Lewis on July 21, 2006 at 11:18 a.m. and 3:43 p.m.). However, the cross- examination continued and provided an explanation:

2014 ONSC 5831 (*)

73

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.So, notwithstanding the wording of this e-mail, your evidence is he did n’t ask for specific separate information for the Niagara Falls Clinic?

A.Yes . . . there were no separate financials for the Niagara Falls Clinic. Mr. Hambley was made aware of the fact that there were only financial, you know, financial statements for all the clinics . . . I don’t recall any separate break-out [for the Niagara Falls Clinic] . . . I don’t recall [Mr. Hambley] ever asking me specific information on Niagara Falls after we informed him that there are no separate financials for Niagara Falls . . .

[287]I repeat what I said earlier, that I am spending time reviewing the attempts by others to purchase the Niagara Falls Clinic because the plaintiff submits that inferences may be drawn that shed light on the negotiations between the plaintiff and the defendants. I disagree with the submission but am committed to the process. There was no aspect of the negotiations between the plaintiff and the defendants requiring me to look to other negotiations for similarities or patterns.

(g)July 24th

(i)e-mail from Terry Lewis to Andy Gunarsons

[288]At 1:32 p.m., on July 24th, Terry Lewis sent an e-mail to Andy Gunarsons regarding the “Purchase of Niagara Falls Clinic”:

Here is a reply from Marke Hambley [referring to the e- mail of July 23, 2006 at 6:30 p.m.] . . . We need to send him the information that he requested so that he can move along with his Letter of Intent and, I would assume, set a multiple number as well . . .

(ii)e-mail from Terry Lewis to Marke Hambley

[289] At 7:33 p.m., on July 24th, Terry Lewis e-mailed Marke Hambley:

. . . We met with our accountant today. He will be contacting Bob [Liew] and sending information as quickly as possible. He will confirm that we would like to move this along as quickly as possible.

(h)July 25th

(i)e-mail from Marke Hambley to Terry Lewis

[290] At 10:43 a.m., on July 25th, Marke Hambley e-mailed Terry Lewis:

. . . I will alert Bob that the accounting information that we requested will be arriving from your accountants shortly. Please rest assured that we will respond . . . with a valuation of the clinics within days of receiving your accounting information . . .

2014 ONSC 5831 (*)

74

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[291]This e-mail makes it clear that Island Hearing is interested in all three clinics.

(ii)e-mail from Terry Lewis to Andy Gunarsons

[292] At 11:13 a.m., on July 25th, Terry Lewis e-mailed Andy Gunarsons:

Another positive response from Marke Hambley at Island Hearing.

(i)July 26th

(i)e-mail from Terry Lewis to Fridriksson regarding valuation

[293] In an untimed e-mail to Fridriksson on July 26, 2006, Terry Lewis wrote:

Sorry to be taking so long. My accountant had sent me a better non-disclosure agreement than the one we had used in the past and it is taking more time than I anticipated to modify it for our needs . . .

We are having our business evaluated by a Certified Business Valuator next week . . .

He [Trevor Hood] has suggested doing this for use with other interested parties and it should be helpful for you. It is much better than trying to analyze raw data yourself.

[294]Consequently, Fridriksson was aware that others were interested in purchasing one or more of the hearing clinics owned by the defendants (as I have mentioned, they owned two clinics in Scarborough, along with the Niagara Falls Clinic).

(ii)e-mail from Fridriksson to Terry Lewis

[295]At 3:58 p.m., on July 26th, Fridriksson e-mailed Terry Lewis (in what is probably a reply to the above untimed e-mail):

I will be in BC to visit my mother for the next week . . . I will be back and ready to meet with my accountant after the long weekend (Aug. 7) Could you please also let me know as soon as you can if the other party has made a final decision that they will purchase your clinic so I can move forward with my plans.

(iii)letter outlining terms of valuation engagement

[296]SB Partners Corporate Finance Ltd. prepared a letter, dated July 26, 2006, outlining “the terms in connection with the valuation engagement for 866073 Ontario Limited” for which “an independent valuation report” was to be prepared for “three business units of [866073 Ontario Limited] as at June 30, 2006,” including, importantly, the Niagara Falls Clinic as a separate business unit. The

2014 ONSC 5831 (*)

75

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

principal of SB Partners Corporate Finance Ltd. carrying out the valuation was Trevor Hood.

[297]The issue of a separate valuation for the Niagara Falls Clinic, and whether it was ever prepared, repeatedly popped up during the trial.

[298]Dee Lewis testified that the information required by Trevor Hood was provided to him through Andy Gunarsons.

[299]It was the evidence of Andy Gunarsons that a separate valuation for the Niagara Falls Clinic was intended for a certain potential purchaser. However, those negotiations fell through and the separate valuation was never done.

(j)sometime in July

(i)Fridriksson shows Maria Perez clinics in Niagara Falls

[300]Maria Perez, a witness in the trial, is an audiologist who responded to an online advertisement placed by Fridriksson seeking to hire an audiologist for his hearing clinics. She met him in July of 2006. He interviewed her at a restaurant in Cobourg, Ontario. After the interview, she (and her husband) “followed him back to the Niagara Region.” Ms. Perez understood that Fridriksson “was in the process of acquiring a third hearing clinic, I believe in Niagara Falls” to add to his existing clinics in Fort Erie and St. Catharines. She was asked:

Q.Did [Fridriksson] indicate to you which clinic he was looking at in Niagara

Falls?

A.He did show us a couple of sites when we came down.

Q.And were they already existing, operating clinics?

A.I believe so . . .

[301]Based upon this testimony, it would appear that Fridriksson was generally interested in acquiring or opening a hearing clinic in the City of Niagara Falls, even if it was not the one owned by the defendants.

[302]Ms. Perez was hired by Fridriksson in October of 2006 and worked for him until 2009, primarily in the Niagara Falls Clinic and the hearing clinic in Fort Erie.

2014 ONSC 5831 (*)

76

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

6.August 2006

(a)August 15th

(i)telephone call from Fridriksson to Terry Lewis

[303]At 12:24 p.m., on August 15, 2006, Fridriksson made his third set of handwritten notes of a telephone conversation with Terry Lewis:

SF – Can you tell me when you are going to send the confidentiality agreement? TL – Still working on it.

SF – How is the CBE (sic) report doing?

TL – It will be ready in a week or two.

SF – Will it be available to me immediately when it is out?

TL – Yes.

(b)August 22nd

(i)e-mail from Andy Gunarsons to Marke Hambley

[304]At 3:24 p.m., on August 22nd, Andy Gunarsons sent an e-mail to Marke Hambley of Island Hearing:

As discussed on the phone today and pursuant to (i) your company letter dated June 7, 2006 [from Bob Liew] requesting financial information (ii) the Confidentiality Agreement you have signed with Terry and Dee Lewis, and (iii) with the Lewis’ approval to permit me to do so: here is the draft 2005 unaudited [financial statement] and unaudited Executive Management Summary of the 2001-2005 financial statement information for the last five years . . .

The 2005 draft unaudited financial statement in PDF is attached. The actual PDFs of the 1999-2004 financial statements prepared (pre-2005 were prepared by another firm of CAs) will be sent under separate e-mail cover . . .

[305]The financial statements showed that profit for the three clinics owned by the defendants, in the period 2001-2005, ranged from $477,588 to $604,379.

(c)August 23rd

(i)e-mail from Marke Hambley to Andy Gunarsons

[306] At 1:29 p.m., on August 23rd, Marke Hambley e-mailed Andy Gunarsons:

2014 ONSC 5831 (*)

77

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Thank you for the financial information . . . Please be assured that we will keep this information in strict confidence. Once we receive the balance of the information . . .

we will value the acquisition and we will respond in short order with a [Letter of Intent] . . .

[307]Thus, Island Hearing had all of the pertinent financial information regarding the three hearing clinics owned by the defendants.

(d)August 24th

(i)telephone call from Fridriksson to Terry Lewis

[308]At 12:10 p.m., on August 24th, Fridriksson made a telephone call to Terry Lewis for which he tendered his fourth set of handwritten notes:

SF [Stefan Fridriksson] – Where is the confidentiality agreement?

TL [Terry Lewis] – It is coming tonight by e-mail.

SF – Do you still want to sell the clinic? – Yes.

SF – Have you heard Makerewich and Caetano are opening a ListenUp! franchise in Niagara Falls?

TL – I don’t get that many referrals from Makerewich and Caetano – you need not worry about Makerewich.

SF – What happened to your old dispenser [Donna Bradley]? Luc Durand from Siemens told me she is working in Niagara Falls somewhere.

TL – I do not know where she is working.

TL – I will send you the confidentiality agreement tonight.

SF – Any indication when the CBE (sic) report will be ready?

TL – Should be ready in a week or two, just finishing.

SF – Can you send it to me ASAP – I want to see it.

SF – When can we look at the clinic etc.

TL – Once the confidentiality agreement is signed.

2014 ONSC 5831 (*)

78

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(e)August 25th

(i)e-mail from Terry Lewis to Fridriksson

[309]On August 25th, at 3:56 p.m., Terry Lewis sent an e-mail to Fridriksson forwarding the confidentiality agreement and referring to the forthcoming release of “preliminary information”:

Here is the agreement, finally. Please sign and send it back by e-mail . . .

Once I have the signed agreement I will sign it as well, scan it and send it back to you by e-mail. I will also give you some preliminary information regarding earnings and our expectations of pricing. You can decide if you want to proceed then. I think that you will like the figures.

(ii)confidentiality agreement

[310]On August 25th, Fridriksson and the defendants entered into a confidentiality agreement, the purpose of which is described in the preamble to the agreement:

[The parties] intend to explore possible business arrangements involving [866073 Ontario Limited] and Stefan Fridriksson and any affiliates of the company or companies of either party (the ‘Potential Agreements’).

Exploration of the Potential Agreements will necessitate disclosure of certain financial and other Proprietary Information (as defined below) of each party to the other party.

Use of such Proprietary Information by the party receiving such information for purposes other than evaluation of the Potential Agreements would be seriously detrimental to the party furnishing such information.

[311] The confidentiality agreement contained this clause:

Section 8 No Party Communications Each party agrees not to hold any discussions regarding the other party or any of its affiliates with any suppliers, customers and or any other person with whom the other party or any of its subsidiaries have a relationship regarding confidential information d isclosed pursuant to the matters covered in this agreement or regarding the existence of negotiations or any proposed relationship between the parties.

2014 ONSC 5831 (*)

79

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[312]Dee Lewis, as part of her inherent mistrust of everyone and everything,

interprets section 8 as not preventing the plaintiff or Fridriksson from disclosing patient information.34

[313]Neither Karl Bowley nor Andy Gunarsons was involved with the preparation or execution of this confidentiality agreement.

(f)August 28th

(i)e-mail from Terry Lewis to Fridriksson

[314]By e-mail dated August 28, 2006, at 4:19 p.m., Terry Lewis advised Fridriksson:

I have attached the signed copy of the confidentiality agreement. Thank you for sending it back this morning.

Our Niagara Falls C linic has been generating $300,000 to $350,000 in earnings each year, for several years. We would expect a multiple of at least 5.

Is that amount within your budget?

[315]The defendants properly argue that this e-mail is important because it shows that the purchase price for the Niagara Falls Clinic is being negotiated based upon a multiple of earnings (contrary to later assertions by Fridriksson).

[316]The numbers given by Andy Gunarsons to Marke Hambley on August 22nd (of which Terry Lewis would have been aware), were in the range of $477,588 to $604,379 for all three clinics. Therefore, if Terry Lewis is correct when he gives the earnings range for the Niagara Falls Clinic as $300,000-$350,000, this would mean that it was responsible for 49.6%-73.2% of the earnings of the three clinics owned by the defendants, depending on what year is used.

(ii)e-mail from Fridriksson to Terry Lewis asking to see valuation report

[317]On August 28, 2006, at 10:03 p.m., Fridriksson sent an e-mail to Terry Lewis:

Thanks for the signed agreement. My accountant [Karl Bowley] would like to look at the report from the CBE (sic) [should read CBV – Certified Business Valuator] when it is completed. He suggests that we do not talk about price until we have an idea of

34In fairness to Dee Lewis, section 8 is horribly worded and provides questionable protection. If one parses section 8 to uncover the key words, it reads: “Each party agrees not to hold any discussions . . . with . . . any person with whom the other party . . . [has] a relationship regarding confidential in formation disclosed pursuant to the matters covered in this agreement . . .”

2014 ONSC 5831 (*)

80

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

valuation and defined numbers. If you have decided to go without the CBE (sic) could you please let me know so I can discuss other options.

[318]At this point, Fridriksson must be taken to have acknowledged some uncertainty as to whether there will be a report from a CBV for the Niagara Falls

Clinic and, in that event, it appears he has a Plan “B.”

(g)August 29th

(i)e-mail from Fridriksson to Terry Lewis

[319]Fridriksson sent the following e-mail to Terry Lewis on August 29, 2006, at 11:33 a.m.:

I spoke to my accountant today. We discussed the initial numbers you have given and he suggested it would be more appropriate to pay somewhere around 3 times earnings. He however would like to view the results from the Certified Business Valuator and have discussions with him/her to attempt to arrive at a number that is better suited to both our needs.

[320]Andy Gunarsons testified that the three-times-earnings multiple was first raised by Fridriksson.

[321]The defendants correctly contend that this e-mail further establishes the fact that the purchase price is being negotiated based upon a multiple of earnings and

not upon other considerations (such as the number of patients or the number of WSIB patients, as Fridriksson now insists).35

[322]It is obvious that, at this point, Fridriksson was hoping to see a valuation report for the Niagara Falls Clinic.

(ii)e-mail from Fridriksson to Terry Lewis

[323]At 3:07 p.m., on August 29th, Fridriksson e-mailed Terry Lewis: [Underlining added]

. . . My accountant’s concern is how long it will take from this income level to pay back the initial purchase price . . . Using a 3 times multiple he arrived at a 5 to 6 year payback time which he says is still on the outside of normal but thought the ear nings justified the gamble. He is still concerned with the climate changes within the Niagara Falls market and the issue that one of the large competitors has now entered

35This contention also is consistent with a letter written by Fridriksson to WSIB on March 4, 2009 (which I will co me to many pages later in these Reasons) wherein he stated: “. . . the purchase price of the [Niagara Falls] Clinic was based on a multiple of . . . net income.”

2014 ONSC 5831 (*)

81

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

into partnership with what may have been one of your main referral sources. He felt that discussing this before the report from the CBV was premature . . .

[324]The reference to “one of the large competitors” probably means ListenUp! Canada and “one of your main referral sources” probably means Dr. Makerewich. The “partnership” would be the “new relationship” mentioned in the e-mail from Fridriksson on July 23, 2006, at 10:52 a.m. Thus, Fridriksson is attuned to some of the market realities facing the Niagara Falls Clinic.

(iii)e-mail from Andy Gunarsons to Terry Lewis

[325]At 3:29 p.m., on August 29th, Andy Gunarsons sent an e-mail to Terry Lewis: [Upper case in original, Underlining added]

Stefan’s 3x earnings multiple is strictly a ‘wet finger in the wind’ and ‘you pick `em’ imputed multiple by his own admission: he eagerly wants to see what Trevor [Hood] says because he doesn’t know . . .

Stefan doesn’t get any info sourced from Trevor unless you WANT him to have it: he has no rights to it unless you give it to him. Obviously if Trevor’s [numbers] are favourable, you MIGHT consider it . . . maybe. If Trevor’s numbers are not helpful to you, he doesn’t get it – period. Let him get his own CBV . . .

[326]This e-mail suggests that Fridriksson had been told he could see the CBV report. However, it also shows the clear intention of the defendants not to make the

CBV report available to Fridriksson if the “numbers are not helpful.” In the end, a separate valuation for the Niagara Falls Clinic was cancelled.

[327]Dee Lewis denied the suggestion that she and her husband cancelled the

Niagara Falls CBV because “the figures were not rosy.”

[328]The CBV report ultimately was received by the defendants, but it dealt with all three of their hearing clinics as one enterprise.

(iv)e-mail from Fridriksson to Terry Lewis

[329]At 4:34 p.m., on August 29th, Fridriksson sent an e-mail to Terry Lewis in which he stated that his accountant, Karl Bowley, was concerned that a five-times multiple would “require a payback time of 9 years” and that a “3 times multiple. . .

is still outside of normal, but [he] thought the earnings justified the gamble.” The e-mail continued:

. . . He is still concerned with the climate changes within the Niagara Falls market and the issue that one of the large competitors has now entered into partnership with

2014 ONSC 5831 (*)

82

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

what may have been one of your main referral sources. 36 He felt that discussing this before the report from the CBV was premature. Is it better for you and I to discuss this or is it better for the CBV and my accountant to arrive at a fair number? I feel it is better for both of us to rely on a number that reflects careful professional considerations. That was the way I sold my 5 clinics. I had my accountant talk directly with the purchasers’ CA and for them to come up with a figure . . . If you have decided to go with a different buyer, I appreciate you have to go with the one who is going to give you the best offer . . .

[330]It is apparent, from this e-mail (which, by the way, is one of a small handful of communications that portrays Fridriksson as calm and rational) that Fridriksson is still expecting to see a CBV report for the Niagara Falls Clinic. The e-mail further shows that Fridriksson is aware of “the climate changes within the Niagara Falls market.”

(h)August 30th

(i)telephone call from Fridriksson to Terry Lewis

[331]On August 30th, at 12:44 p.m., Fridriksson made his fifth telephone call to Terry Lewis for which he says he has handwritten notes:

When can we look at CBV report – Still not ready.

Can you let my accountant talk to your accountant? – I will talk to him and get phone number.

Expressed concern again that Makerewich is in cahoots with ListenUp! and what that would do to business – Don’t worry not that many people from Makerewich.

Where is old dispenser – called Donna – don’t know where she is – I heard she is working for Canada Hearing and that they have opened in Niagara Falls.

TL – don’t worry about her no one liked her anyway.

[332]Except for the reference to Donna Bradley, this telephone call is a curious rehash of the 4:34 p.m. e-mail on August 29th.

(ii)e-mail from Terry Lewis to Fridriksson

[333] At 2:34 p.m., on August 30th, Terry Lewis e-mailed Fridriksson:

I failed to inform you that the sale would be a sale of assets, not shares . . . Dr. Makerewich has not been a source of any but a small trickle of referrals, no more than 4 hearing aids a month.

2014 ONSC 5831 (*)

83

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[334]In cross-examination, Dee Lewis pointed out that Dr. Makerewich was one of only two ENT specialists in Niagara Falls. Consequently, the fact that a patient of Dr. Makerewich became a patient of the Niagara Falls Clinic does not necessarily mean that the patient was a referral.

[335]Whatever Terry Lewis told Fridriksson previously concerning referrals from Dr. Makerewich, this e-mail replaces all such earlier information and Fridriksson should have viewed it as such. The referrals from Dr. Makerewich were “but a small trickle.”

[336]Following the completion of the purchase and sale, Fridriksson said that he examined the records of the Niagara Falls Clinic and determined that 56% of the income in 2006 (the year of closing) “came from audiograms performed in Dr. Makerewich’s office.” The plaintiff argues that, if the “small-trickle” representation in the 2:34 p.m. e-mail from Terry Lewis were true:

. . . then Fridriksson would not be concerned about the recent partnership between Dr. Makerewich and ListenUp!, as the Niagara Falls Clinic was generating its income from sources other than referrals from Dr. Makerewich. When it turned out that Terry’s representation in this regard was false and that 56% of the income prior to closing came from such referrals, then Dr. Makerewich’s partnership with ListenUp! becomes a significant factor in reducing the value of the goodwill of the clinic.

[337]I am not prepared to accept as accurate any analysis of records carried out by Fridriksson.

[338]The 2:34 p.m. e-mail went on to provide some information about Ginette Galati (who was held in high regard by the Lewises and about whom much more will be said in later pages):

. . . The receptionist is Ginette Galati. I have known her for 20 years. She used to be the receptionist at The Old Stone Inn, where I stayed on Wednesday night before working on Thursday and Friday. We hired her away from there; and rehired her in April [she had been fired by Donna Bradley] . . . She is very good with the patients. On her own volition, she has started doing basic cleaning of hearing aids and trouble- shooting hearing aids and sending them out for repair. I promised her that if the business were to be sold that I would get the new owner to keep her employed . . .

She knows many of the patients and they like her.

(iii)e-mail from Terry Lewis to the Niagara Falls Clinic

[339]At 2:41 p.m., on August 30th, Terry Lewis sent an e-mail to someone at the Niagara Falls Clinic:

2014 ONSC 5831 (*)

84

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Attached is the complaint form for the Privacy Commissioner. Please make a few copies. Please ask Mrs. Smith to fill one out and send it to me. Please do the same with any other patients who report that she [Donna Bradley] has phoned them. She has violated the law by doing so.

[340]I gather that Mrs. Smith is a patient of the Niagara Falls Clinic who was solicited by Donna Bradley.

[341]This e-mail is unequivocal evidence that the defendants were aware that Donna Bradley was soliciting patients of the Niagara Falls Clinic.

(iv)telephone call from Fridriksson to Andy Gunarsons

[342]At approximately 3:00 p.m., on August 30th, Fridriksson made the first of approximately eleven telephone calls to Andy Gunarsons for which he tendered handwritten notes.

[343]My caveats regarding the handwritten notes pertaining to the telephone calls to Terry Lewis also generally apply to the calls to Andy Gunarsons: (1) The plaintiff argues that I should accept the accuracy and truthfulness of the handwritten notes absent “direct evidence by the defendants to contradict” their accuracy and truthfulness. Such an argument might apply if we were dealing with an inherently truthful witness, but it is not applicable in respect of Fridriksson; (2) Merely because Fridriksson may have mentioned a piece of information to someone else that he allegedly learned in a telephone conversation, does not make the information true. In other words, Fridriksson cannot create facts by simply stating them to someone; (3) Many of the handwritten notes relate to dates and times when telephone conversations actually took place. However, that is not very helpful as such information is readily available in telephone records. What is important is the content of the call, not the fact that there was a call; (4) Just because the contents of the handwritten notes concern topics that were being canvassed in e-mails and letters at the time, does not render the contents accurate;

(5)Testimony by Andy Gunarsons that he does not remember what was said in some of the telephone calls does not automatically mean that the version noted by Fridriksson is accurate. In other words, Fridriksson does not win the credibility contest by evidentiary default. Put another way, the fact that Andy Gunarsons does not recall a particular conversation or statement is not corroborative of the truth of the conversation or statement: it is not sufficient to rehabilitate the credibility of Fridriksson; (6) Unless I expressly say so in these Reasons, I do not accept the handwritten notes of Fridriksson as accurate and truthful. Without confirmation from Andy Gunarsons in his testimony that some aspect of the handwritten notes

2014 ONSC 5831 (*)

85

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

of the various telephone calls is accurate or absent other corroboration, the contrary may be assumed.

(v)e-mail from Fridriksson to Andy Gunarsons

[344]At 3:12 p.m., on August 30th, Fridriksson sent an e-mail to Andy Gunarsons authorizing the latter “to have direct contact [with him] in order to discuss and exchange information regarding the sale of [the Niagara Falls Clinic].” The e-mail also confirmed that Fridriksson had authorized his accountant, Karl Bowley, and his staff, “to discuss the matter.”

(vi)e-mail from Andy Gunarsons to Terry Lewis

[345]At 3:20 p.m., on August 30th, Andy Gunarsons forwarded an e-mail to Terry Lewis:

Two things that we need with [Fridriksson] and Karl Bowley:

Non-disclosure agreement (NDA) that binds the parties, accountants, lawyers and third parties; and a similar e- mail direction to Karl Bowley and to me that permits us to exchange information on your behalf, including by e-mail.

[346]Both of the accountants played pivotal roles in the negotiations surrounding the purchase and sale.

(vii)e-mail from Terry Lewis to Andy Gunarsons

[347] Terry Lewis responded to the above e-mail at 3:30 p.m.:

We already have a non-disclosure agreement with [Fridriksson]. Please see attached. Why not just add his lawyer’s name wherever it would be appropriate?

(viii)e-mail from Karl Bowley to Fridriksson

[348]At 3:34 p.m., on August 30th, Karl Bowley sent an e-mail to Fridriksson, saying:

Just spoke to Andy [Gunarsons] – he is getting things together – should be available to me by Tuesday. There is no report done by a CBV [Certified Business Valuator].

[349]This e-mail is significant because it establishes that Fridriksson was informed by his own accountant that (whatever the reason) there was no separate valuation being prepared for the Niagara Falls Clinic. This is the earliest evidence from which we may deduce that the separate valuation for the Niagara Falls Clinic had been cancelled.

2014 ONSC 5831 (*)

86

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[350]The engagement letter by which Trevor Hood was to prepare valuations for

“three business units” (that is to say, the three hearing clinics owned by the defendants) is dated July 26, 2006. Sometime between July 26th and August 30th, the decision was made to cancel the valuation for the Niagara Falls Clinic.

[351]Andy Gunarsons testified, in-chief:

A.The Lewises had engaged a CBV [Certified Business Valuator] to do a valuation of all the clinics and, initially, before Fridriksson was ever involved, there was contemplation of getting the [Niagara Falls Clinic] valued as a separate item for

a previous purchaser that was stillborn and it was never done . . . and so at August

30th the only CBV report in process at the time was for all three clinics in total and it was still a work in process on the 30t h of August, 2006.

[352]This is the only evidence as to why the separate valuation for the Niagara Falls Clinic was cancelled. Opposed to this evidence is the speculative submission on behalf of the plaintiff that the valuation was cancelled because “the figures were not rosy.”

(i)August 31st

(i)e-mail from Fridriksson to Andy Gunarsons

[353]At 9:59 a.m., on August 31, 2006, Fridriksson e-mailed Andy Gunarsons, seeking a great deal of information:

There are a couple of things I would like you to send. I do not know if Karl already asked for them.

The number of hearing aids fit in the [Niagara Falls Clinic] in June 2003, July 2003 and August 2003; June 2004, July 2004 and August 2004; June 2005, July 2005 and August 2005; and June 2006, July 2006 and August 2006.

The total number of hearing aids fit in 2003, 2004 and 2005.

How much money was WSIB and DVA [Department of Veterans’ Affairs] money compared to other payors [in other words, what proportion of the revenue of the Niagara Falls Clinic was attributable to WSIB and DVA patients].

The number of employees and the status of their employment today.

The state of the lease on the building . . .

. . . How the arrangement for use of name in the Niagara peninsula will be handled.

I think that is it for now . . .

2014 ONSC 5831 (*)

87

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[354]Andy Gunarsons, who agreed in his evidence that the above “is reasonable information for a purchaser to know,” forwarded this e-mail to Terry Lewis at 10:14 a.m.

(ii)e-mail from Terry Lewis to Andy Gunarsons

[355]At 11:52 a.m., on August 31st, Terry Lewis replied by e-mail. The opening sentence reads:

Dee is not available yet, so the numbers and the sales information will have to wait for her,37 unless you already have it in the information that we were preparing for Island [Hearing, another interested purchaser].

[356]Does “the information we are preparing for Island [Hearing]” mean or include financial statements for the Niagara Falls Clinic? In his evidence, Andy

Gunarsons stated that he did not have this information and “never had it.”

[357]The e-mail continued:

I can respond to the questions after the WSIB and DVA money.

1)The number of employees is one – Ginette Galati, receptionist. She is employed full-time. She is a very valuable employee . . . She should be retained . . . It is possible that [Fridriksson] could have one of our audiologists continue to come down to [Niagara Falls] one day per week to do testing and [hearing aid] prescriptions, as we have operated for 20 years . . .

[358]This e-mail (which suggests that an audiologist attended the Niagara Falls Clinic only one day per week for 20 years) also provided some general information regarding the lease under which the Niagara Falls Clinic occupied its premises.

(iii)e-mail from Dee Lewis to Andy Gunarsons

[359]At 12:58 p.m., on August 31st, Dee Lewis sent this e-mail to Andy Gunarsons in response to the 9:59 a.m. e-mail from Fridriksson to Andy Gunarsons which had been forwarded to Terry Lewis:

Please understand, [Fridriksson] is going to open in [Niagara Falls] on his own anyway, with or without buying us out. We will not share this information with him [Dee Lewis testified that she was referring to the number of hearing aids] because he

37It seems that there are gaps in the knowledge that Terry Lewis has about the Niagara Falls Clin ic. Th is e - mail would be consistent with the evidence of Dee Lewis who indicated that her husband did not have all of the informat ion in respect of the business of that clinic. However, the e -mail also shows that he knows what he does not know. Thus, I do not accept the evidence of Dee Lewis that her husband sometimes passed on information with which he was unknowledgeable.

2014 ONSC 5831 (*)

88

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

could use it against us just as Gordon [Lounds, president of Listen Up! Canada] did. The breakdowns will be supplied only upon receipt of a binding offer – can be a range of multiples – and a significant, non-refundable payment. He has already agreed to a multiple of 4x. His accountant ought to know that we will not supply proprietary information on spec. Terry says he has had sufficient discussion with [Fridriksson] over the phone yesterday. Here we go again [Andy Gunarsons testified that he did not know what this meant].

[360]This e-mail reflects more mistrust of Fridriksson. It continues, and mentions Donna Bradley:

And Donna [Bradley, who had recently quit her employment with the defendants at the Niagara Falls Clinic] is calling patients and Jim [Naumovich, the lawyer representing the defendants on the sale] has not returned our calls. Swell.

[361]Thus, as of this date, Andy Gunarsons is aware that Donna Bradley is contacting patients.

(iv)telephone call from Fridriksson to Andy Gunarsons

[362]On August 31st, at 3:20 p.m., Fridriksson made the second telephone call to Andy Gunarsons for which he tendered handwritten notes.

(v)“I had questions about their honesty”

[363]It is interesting to learn that, as early as August 30th and 31st, Fridriksson questioned the honesty of Terry Lewis and Andy Gunarsons . He was cross- examined:

Q.Sir, you didn’t believe either Terry or Andy as early as August 30t h and 31st

of 2006. [These dates precede the Letter of Intent which was signed by Fridriksson on September 21, 2006.]

A.I had questions about their honesty.

[364]And then Fridriksson made an admission of great significance in this case:

Q.And the fact is, even if they’re lying to you, you didn’t believe what they were saying, it didn’t matter. You were going to do your, your own assessment of whether this [the purchase] was something that you were going to proceed on, right?

A.That’s right.

[365]Fridriksson also testified:

2014 ONSC 5831 (*)

89

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A. . . . when you’re doing due diligence you don’t rely on, on the man’s words, you rely on due diligence and the due diligence was going to prove what really the clinic had.

[366]If Fridriksson thought that Terry Lewis and Andy Gunarsons were not honest and if he, as a result, was going to do his own assessment of the viability of the purchase, how, I ask, is he able to suggest that he was misled by anything said or represented to him by those individuals?

[367]In some cases, it has been held that there is no onus “upon the plaintiff to investigate independently the truth of the representations, as prima facie the plaintiff is entitled to rely upon them”: see Opron Construction Co. v. Alberta, [1994] A.J. No. 224 (Q.B.) at para. 557. This is not such a case. Fridriksson said as much.

[368]Customarily, if a statement, on its face, is such that it would induce a person to enter into a contract, the inference is that the plaintiff acted on the inducement,

“unless it is shown that [the plaintiff] avowedly did not rely on the statement”: see

Opron Construction Co., supra, at para. 559, citing Armison v. Smith (1887), 41

Ch. 348 (C.A.) at p. 369. At bar, we have the “avowedly” exception.

7.September 2006

(a)September 3rd

(i)e-mail from Terry Lewis to Andy Gunarsons

[369]At 12:26 a.m., on September 3, 2006, Terry Lewis sent an e-mail to Andy Gunarsons. It began by addressing the need to complete the transaction soon and the matter of Thanksgiving advertising:

We need to have a close (sic) before [Fridriksson] goes on vacation. If we wait until Oct. 8, we will miss the opportunity to get advertising out before Thanksgiving, and so will he. That is a crucial time, because families get together and if advertising is in their hands, the families will encourage the old folks to do something about their hearing problem38 . . . So we must close before Oct. 1. I will send the envelopes to [Niagara Falls] and we can have Ginette working on stuffing them with hearing aid brochures and an announcement that [Fridriksson] is taking over, so that he can mail them as soon as he has ownership.

2014 ONSC 5831 (*)

90

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[370]This is the first of several e-mails, from both sides, indicating that everyone is foolishly in a rush that, in the end, exacted a huge price, in dollars, time and reputation.

[371]The e-mail mentions “brochures and an announcement.” The evidence subsequently speaks of “postcards,” “fliers,” “newsletter” and “letter of introduction,” without much attention to their meaning.

[372]The e-mail then dealt with Donna Bradley:

A second point is the pursuit of Donna for contacting our patients. Jim Naumovich [the lawyer acting for the defendants on the sale of the Niagara Falls Clinic] recommended that we contact the Niagara police and file a complaint with them, contact him after Labour day, and he would refer us to a litigation attorney to pursue the matter. I wonder if the lawyer who works with your firm is able to help us with this matter . . . If your lawyer is not terribly expensive, it would be very convenient and would get this underway as soon as possible to help block the efforts of Donna to do us harm.

[373]This passage indicates that Terry Lewis is attaching importance to the issue of Donna Bradley. The “harm” of which he speaks would have to be the solicitation of patients of the Niagara Falls Clinic. Andy Gunarsons was cross- examined on the e-mail and whether it reflected “an important matter”:

A.Yes, it is a point of concern.

Q.And pretty serious if their lawyer recommends that they go to the police and

file a complaint?

A.Yes.

Q.Now did you at any time disclose to Bowley or Fridriksson that the Lewises were aware that Donna was attempting to do their business harm?

A.I don’t recall passing this information on, to the best of my knowledge. I don’t recall, no.

[374] And the e-mail referred to a box of envelopes:

I have a box of envelopes with the Niagara Falls letterhead that we had planned to use to get out some advertising but there is no sense in our doing that with [Fridriksson] taking over. He could be ready to send it out as soon as the sale closes.

[375]Andy Gunarsons testified that, by this date, Fridriksson had been advised

that there was no valuation report for the Niagara Falls Clinic. (In fact, Fridriksson was so informed in the 3:34 p.m. e-mail, on August 30th, from Karl Bowley.)

2014 ONSC 5831 (*)

91

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(b)September 6th

(i)e-mail from Terry Lewis to the Information and Privacy Commissioner

[376]On September 6th, at 3:19 p.m., Terry Lewis forwarded an e-mail to the Office of the Information and Privacy Commissioner regarding the conduct of Donna Bradley and Linda Fraser who were soliciting the patients of the Niagara Falls Clinic. It reads, in part:

I am an audiologist. I have three offices, two in Toronto and one in Niagara Falls . . .

At the end of April 2006, both the receptionist and the hearing instrument dispenser [at the Niagara Falls Clinic] resigned on very short notice and basically walked off the job. Recently they have opened up a new office with a competitor in Niagara Falls and have begun phoning my patients to solicit their business. Most of the patients are elderly and have become very upset and confused when contacted by my former employees.

[377]The e-mail went on to say that Donna Bradley and Linda Fraser must be using a patient list:

The only source of the patients’ names that they could be using would have been copies of lists of patients’ names that they would have copied from our QuickBooks files or lists of names that they would have printed out or copied manually from my office’s computer files . . .

Can these two former employees continue to contact my patients? What can I do to protect my patients’ privacy? Can an employee take patient information from my files?

[378]The fact that this e-mail was sent is an indication of the seriousness with which the Lewises viewed the issue of Donna Bradley.

[379]On behalf of the plaintiff, it is submitted that whether Donna Bradley actually had a patient list is not relevant. Instead, what is relevant is the fact that Terry Lewis believed that she had a list and he did not disclose this fact to the plaintiff. There is merit to this submission.

[380]It was the testimony of Dee Lewis that the only knowledge she and her husband had about the solicitation of patients was based upon information received from Ginette Galati. Further, she testified that they first learned that Donna Bradley was employed by a competitor from an advertisement seen in July of 2006 in the Niagara Falls Review, a local newspaper.

[381]Andy Gunarsons became aware of this e-mail “sometime in September” in a conversation with Terry Lewis and, although he does not recall “the actual details

2014 ONSC 5831 (*)

92

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

being discussed,” he knew that Terry Lewis thought that Donna Bradley was soliciting patients from a list. He was asked whether he passed this information on to Fridriksson or to Karl Bowley:

A.No, I left it to the Lewises to discuss this with their lawyer.

[382]As a final comment on the September 6th e-mail, it seems to indicate that any list of patients for the Niagara Falls Clinic would be found in QuickBooks or in other computer files.

(c)September 7th

(i)telephone call from Fridriksson to Terry Lewis

[383]At 10:20 a.m., on September 7th, Fridriksson telephoned Terry Lewis for which, he says, he made his sixth set of handwritten notes. There is no dispute that the call took place; it is the accuracy of the notes that are in issue.

[384]The handwritten notes consist of 15 questions and answers. Fridriksson claims that the questions were written before he placed his telephone call and that the answers were inserted when given. Fridriksson seems to have precisely guessed the answers because each one snugly fits its allotted space. Quite a feat.

[385]The notes begin with gross and net income figures which, in accordance with the evidence at trial, seem to be reasonably accurate:

[386]The notes contain the following references to the rate of hearing aid sales:

3.How many hearing aids per month? 50 no change since 2001.

4.Has there been any changes in the average number of hearing aids per month over the past 5 years? No change always about 50.

[387]There is a reference to staffing at the Niagara Falls Clinic:

6.How many days per week is there someone in the clinic : 1 – 3 days per week, 1 audiologist, 1 dispenser come from Toronto. Before Terry did it all, can’t now because of neck.

[388]The plaintiff argues that this information is consistent with that which was contained in the e-mails at 2:56 p.m. and 8:37 p.m., on July 21st. I agree.

2014 ONSC 5831 (*)

93

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[389]The handwritten notes also mention the number of patients:

7.How many patients are regular patients in this clinic? Approx 5,000.

[390]The notes mention the rate of growth:

8.How has this number changed since 2000? Steady growth.

This seems to be the only reference, in any pre-closing document, to “steady growth.” The plaintiff says that this note is consistent with the 2:56 p.m. e-mail on July 21st. I disagree.

[391]And the notes refer to WSIB patients:

10.How many of the patients are WSIB? 1/10 but generate ½ to ¾ of the

income.

The reference to 1/10 is the origin of the later allegation by Fridriksson that there were 500 WSIB patients (that is, 1/10 of 5,000 “regular” patients).

[392]The handwritten notes go on to mention ListenUp! Canada:

11.How has ListenUp! affected you, do you still get WSIB referrals – just opened but don’t get that many from ENTs.

[393]The notes also speak of Donna Bradley:

14.What happened to Donna? – She quit because she has a sore foot. Did she have a list of your patients? – No. Did you know she is working in [Niagara Falls]? – Yes (told me before that he did not know where she was).

[394]The mention of “sore foot” brings to mind the testimony of Ginette Galati who was being questioned, in-chief, about telephone calls from patients asking for Donna Bradley:

A. . . . people like they would call and ask where Donna was and I said that she was sick and a lot of them did not want to come back until Donna came back.

Q.Explain to me why you told those patients that Donna was sick?

A.Well, we didn’t want to scare anybody off . . .

Q.Who’s ‘we.’?

A.That was Terry and Dee. Basically it was Dee who said that, just to let the people know that Donna was sick and just to try and make appointments. We didn’t want to lose any patients.

2014 ONSC 5831 (*)

94

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.And were you told anything specifically as to what you were to say about her sickness?

A.I think it was that she had a sore leg and she was in a wheelchair and she couldn’t get around?

Q.And who gave you those instructions?

A.That was from Dee.

[395]Of course, neither sickness nor sore leg or foot was the truthful explanation as to why Donna Bradley was no longer employed at the Niagara Falls Clinic.

[396]These handwritten notes of September 7, 2006 are the first reference to the figure of 5,000 as the number of patients. Counsel for the defendants point out that this is the only time that Terry Lewis is alleged (as reported by Fridriksson) to have made such a representation. The 5,000 figure does not appear in any e -mail or other communications (or in the Asset Purchase Agreement).

[397]In what must be regarded as a very significant piece of testimony, Karl Bowley stated that he does not recall ever being told by anyone that the Niagara Falls Clinic had 5,000 patients. If Terry Lewis or Andy Gunarsons had told Fridriksson that the Niagara Falls Clinic had 5,000 patients, it is impossible (not merely improbable) that Fridriksson would not have mentioned this figure in one of his many e-mails and telephone conversations with Karl Bowley.

[398]The handwritten notes also say:

13.How many employees in [Niagara Falls] office:

1[audiologist] 1 – 2 days per week

1[dispenser] 1 – 2 days per week

1secretary [Ginette] 5 days/wk – 60 years old

(d)September 8th

(i)e-mail from Terry Lewis to Andy Gunarsons

[399]On September 8th, 2006, at 8:09 a.m., Terry Lewis sent an e-mail to Andy Gunarsons. It began by addressing the Letter of Intent and an earlier completion date for the purchase and sale:

I talked with [Fridriksson] on the phone on Thursday, yesterday. He is waiting for a Letter of Intent draft from you. So that gives us the opportunity to present him with a

2014 ONSC 5831 (*)

95

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

binding letter, so that we don’t have to worry. He said that he has hired an audiologist who is just graduating from Boston U [Maria Perez] and who will start Oct.1. Thus, he is agreeable to an earlier close, 39 before he goes on vacation . . . So, if you will be so kind as to send him a binding Letter of Intent to buy the Clinic at a multiple of 4x earnings, the ‘x’ to be determined in discussions between you and his accountant. He will sign it and get it back to us quickly.

[400] The e-mail touched on Donna Bradley:

We discussed his concerns over Donna, and he is less worried about that now.

The “concerns” are not identified. Did they include whether she had a patient list? How could Fridriksson have been “less worried” when Dee and Terry Lewis continue to be worried themselves, as can be seen by the e-mails that I have

mentioned (August 31st at 12:58 p.m., September 3rd at 12:26 a.m. and September 6th at 3:19 p.m.).

[401] The e-mail spoke of advertising:

I told him that the best thing that he could do is get some advertising out in the form of direct mail to the patients early enough so that they have it in their hands in time for Thanksgiving . . . I told him that we had 2500 envelopes ready for a mailing that we had planned to do, and that he is welcome to them.

[402](Throughout this trial, Fridriksson repeatedly testified that it had been represented to him that the Niagara Falls Clinic had 5,000 patients. If this were so, why would the defendants have only 2,500 envelopes for the mailing that they had planned? It is probable that the defendants would mail to all of their non-deceased patients, meaning that it should have been apparent to Fridriksson that the patient base for the Niagara Falls Clinic was closer to 2,500 than to 5,000.)

[403]Presumably, the 2,500 envelopes are the ones referred to in the e-mail from Terry Lewis to Andy Gunarsons at 12:26 a.m., on September 3rd.

[404]Dee Lewis testified regarding the 2,500 envelopes:

A. . . . we would have mailed to anybody we’d ever seen that we didn’t know was deceased.

[405]And the e-mail mentioned the request by Fridriksson that Carol Klassen be permitted to attend at the Niagara Falls Clinic:

He also would like his wife to be able to visit the office and to get acquainted with the accounting software. That would give her access to our patients’ names etc. and

2014 ONSC 5831 (*)

96

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

would only be acceptable after we have money in hands. Unless you think that he would be unable to back out of the deal. Even so, once he has our patient names, he could do a lot of damage . . .

If we have a Letter of Intent, with a closing date near the end of the month, a few days before he goes on vacation, there will be time for his wife to get started on learning QuickBooks.

[406]It is obvious that the Lewises were very concerned, and understandably so, about permitting access to the Niagara Falls Clinic and about the premature release of any sensitive business information.

[407]Finally, the e-mail spoke of a willingness to allow the defendants’ audiologist and dispenser to help out:

We would also be willing for Sarah [Peverley] and Mumtaz [Andani], our audiologist and dispenser who have been working in [the Niagara Falls Clinic] to go down a few more times after he has taken possession to help get his audiologist used to our system and to aid in the transition with patients.

(ii)e-mail from Andy Gunarsons to Terry Lewis and Dee Lewis

[408]At 9:05 a.m., on September 8th, Andy Gunarsons sent an e-mail to Terry

Lewis and Dee Lewis which seems to repeat or pass on the request for information made by Fridriksson in his 9:59 a.m. e-mail of August 31st. It begins, “Here is the additional info they want . . .” and goes on to set out eight requests:

1.The number of hearing aids fit in the [Niagara Falls Clinic] in June 2003, July 2003 and August 2003; June 2004, July 2004 and August 2004; June 2005, July 2005 and August 2005; and June 2006, July 2006 and August 2006.

2.The total number of hearing aids fit in 2003, 2004 and 2005.

3.How much money was WSIB and DVA money compared to other payors.

4.The number of employees and the status of their employment today.

5. The state of the lease on the building . . .

. . . . . .

8. . . . How the arrangement for use of name in the Niagara peninsula will be handled.

[409] The 9:05 a.m. e-mail continues:

Karl Bowley (his accountant) suggested that a Letter of Intent now appears ‘premature’: a contradiction to [Fridriksson]. I will call Karl today and have a chat on the matter – keep you posted on that one.

2014 ONSC 5831 (*)

97

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

MY RECOMMENDATIONS:

▪#4, #5 and #8 are easy to answer, the rest require a bit of thought and a lot of caution before any info release. Right now there is zero binding on [Fridriksson] to stop him from gleaning proprietary info and walking away.

▪Let’s talk over this info list, the [Letter of Intent] and the other info release relayed to you with Trevor Hood on Monday at 1:00 p.m. as agreed with Dee yesterday . . .

(iii)e-mail to Terry Lewis from the Information and Privacy Commissioner

[410]On September 8th, at 10:36 a.m., Karen Hale, from the Office of the Information and Privacy Commissioner, replied to Terry Lewis by e-mail and pointed out possible breaches of the Personal Health Information Protection Act, 2004, S.O. 2004, c. 3 and stated:

. . . ss. 12(2) . . . places an obligation on you as a [health information] custodian to notify your patients where information is ‘accessed by unauthorized persons.’ . . .

you may want to contact our tribunal department to report these possible breaches of PHIP Act and work out how to go about the notification process . . .

[411] The e-mail concluded:

You may also wish to discuss the possibility of a complaint under PHIP Act against your former employees for contravening PHIP Act bearing in mind this may be quite a complex situation as a custodian is technically responsible for the acts of its agents.

(e)September 9th

(i)e-mail from Terry Lewis to Andy Gunarsons

[412]In an e-mail on September 9th, at 11:29 p.m., Terry Lewis responded to the 9:05 a.m. e-mail on September 8th, from Andy Gunarsons. He began by dealing with the issue surrounding the number of hearing aids sold by the Niagara Falls Clinic:

I think that I have a couple of solutions for the number of hearing aids issue that is a problem for our coming to a final agreement . . . Since we are reluctant to give actual figures (given our past experience), I suggest that we let [Fridriksson] supply Trevor with the number of aids that he sells in his other locations and the number of aids that he needs to sell overall in order to receive the discount [from his suppliers] that he needs and let Trevor tell him whether or not our sales added to [Fridriksson]’s numbers will be enough.

[413] The e-mail continued:

2014 ONSC 5831 (*)

98

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

His info request items #1 and #2 would then be met without our giving him actual numbers. His request #1 asks for sales numbers for months that I believe are lower than other months and do not reflect the usual sales averages, although I need to check our QuickBooks records to be sure . . .

[414]The e-mail ended by dealing with the subject of Carol Klassen being given the opportunity to attend at the Niagara Falls Clinic:

He also asked me on Thursday, on the phone, if his wife could go into the office and start getting trained on our QuickBooks system. I do n’t think that is possible until he has actually bought the office for two reasons. One is our security in case he is not actually going through with the purchase. And two, that we cannot allow access to the patient information if we are to remain in compliance with our obligations under the Ontario and Federal Patient Privacy Regulations. I would appreciate a response to him by you regarding that issue, with an opinion from your legal staff . . .

[415]This e-mail, like the one at 8:09 a.m. on September 8th, shows how concerned the Lewises were about Fridriksson prematurely obtaining information about the Niagara Falls Clinic.

(f)September 12th

(i)handwritten notes of telephone call from Fridriksson to Karl Bowley

[416]Fridriksson tendered handwritten notes of a telephone call to Karl Bowley at 8:45 a.m., on September 12th:

SF – Andres Sirois (Helix) 72 hearing aids per month - $1.2 million anything less is a fraction of that – Can’t pay 1.2 million for 50 hearing aids per month.

KB – Andy says 45 – 50 aids/month

SF – Calculate 45/72 x 1.2 - $750,000. We should offer $750,000.

KB – We will offer 5 X $150,000 for 5 years. Starting October 6 or at closing.

SF – Okay

[417]The notes appear to record a discussion in which Fridriksson is valuing the

Niagara Falls Clinic based upon the monthly sales of hearing aids. This method of

valuation is contrary to the e-mail from Terry Lewis to Fridriksson on August 28th, at 4:19 p.m. and the e-mails from Fridriksson to Terry Lewis on August 29th, at 11:33 a.m. and 4:34 p.m., wherein the purchase price was based upon earnings.

[418]Karl Bowley was not questioned on the September 12th telephone conversation. However, in cross-examination, Mr. Bowley generally was not

2014 ONSC 5831 (*)

99

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

pressed about particular alleged telephone conversations with Fridriksson because he testified, in-chief, that he could not remember the details of specific conversations. Mr. Bowley explained:

A.If there was a telephone conversation and there was something relevant, extremely important, I would send [Fridriksson] an e-mail . . .

[419]The explanation of Mr. Bowley is quite logical and accords with common sense. One can only wonder why Fridriksson did not follow the same approach in his dealings with Terry Lewis and Andy Gunarsons.

(ii)e-mail from Karl Bowley to Andy Gunarsons

[420]Karl Bowley sent an e-mail to Andy Gunarsons at 9:58 a.m., on September 12, 2006: [Underlining added]

Did you meet yesterday?

[Fridriksson] and I are running out of time. As you obviously know, due diligence takes time even in simple deals, and for many reasons we need this deal to move along quickly.40

Please advise when the basic numbers – i.e. # of hearing aid fits (etc. etc. – as per [Fridriksson]’s earlier e-mail) will be available.

[421]Mr. Gunarsons forwarded this e-mail to the Lewises at 5:43 p.m.

[422]Karl Bowley testified that his reference to “meet yesterday” was to a meeting between Andy Gunarsons and Dee and Terry Lewis.

[423]Mr. Bowley was cross-examined on what he meant by “many reasons”:

Q.Can you tell me what were these ‘many reasons’?

A.As I sit here today I don’t recall my thoughts back then what those reasons

were . . . I don’t recall specifically what I meant in this document . . .

This is the type of answer that I would expect from a witness being questioned on an e-mail sent seven years previously. I appreciate such candidness.

(iii)telephone call from Fridriksson to Andy Gunarsons

[424]Fridriksson tendered a set of handwritten notes for the third telephone conversation that he says he had with Andy Gunarsons, this one, at 2:20 p.m., on

2014 ONSC 5831 (*)

100

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

September 12th. These notes contain dozens of numbers, dollar figures and statements purportedly provided by Mr. Gunarsons on this occasion.

[425]Andy Gunarsons does not have an independent recollection of this telephone conversation, yet his testimony was helpful. Two dollar figures in the handwritten notes – being the annual gross income of the Niagara Falls Clinic ($900,000) and the annual net income ($300,000-$350,000) – were, he testified, consistent with what “had already been relayed to Fridriksson.” However, beyond that, Mr.

Gunarsons disagreed that he possessed, or would have possessed at that time, the information attributed to him. I will set out, in table format, the information in the handwritten notes and the testimony of Andy Gunarsons:

[426]These handwritten notes appear to be the first mention, in writing, of a request by Fridriksson to have access to the Niagara Falls Clinic. The notes also seem to be the first occasion on which Fridriksson says he was allegedly informed that the Niagara Falls Clinic had a room full of unrecalled files. Both the access-to- the-clinic issue and the matter of the unrecalled files are repeated many times in the period before closing.

[427]Andy Gunarsons was questioned further, in-chief, on the unrecalled files;

Q.Do you have any recollection of any reference in your e- mails to unrecalled

patients?

A.Definitely not.

[428]Karl Bowley was asked, in-chief:

2014 ONSC 5831 (*)

101

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.And did [Fridriksson] telephone you after this conversation with Andy [Gunarsons] and summarize his conversation with Andy with you?

A.I don’t recall the exact phone conversation.

[429]Mr. Bowley went on to say that Fridriksson “called me on a regular basis and all the topics that are in here, I do recall.”

(g)September 13th

(i)telephone call from Fridriksson to Terry Lewis

[430]At 9:12 a.m., on September 13th, Fridriksson made the seventh telephone call to Terry Lewis for which he maintains he has handwritten notes. The notes include the following:

▪ You told me that you sold 50 hearing aids per month – I need proof.

▪ You told me that the clinic has 5,000 patients – I need proof.

▪Terry [Lewis] says he has 5,000 Siemens postcards ready to be mailed to his

current patients . . . must be sent by Thanksgiving . . .

▪Terry still wants 5x net . . .

(ii)telephone call from Fridriksson to Andy Gunarsons

[431]At 10:28 a.m., on September 13th, Fridriksson made his fourth telephone call to Andy Gunarsons for which he alleges that he has handwritten notes. In this telephone call, Fridriksson contends that Mr. Gunarsons answered questions about the number of hearing aids sold monthly by the Niagara Falls Clinic (“45 – 50”), the number of WSIB patients and the percentage of the gross revenue of the Niagara Falls Clinic represented by WSIB patients (“more than half maybe 2/3 of the gross”). Andy Gunarsons was asked about these matters and he testified: “I don’t have that information.”

[432]As with the handwritten notes of the other telephone calls, Fridriksson is attributing to Andy Gunarsons information that the latter, I find, did not possess and could not provide.

(iii)telephone call from Fridriksson to Andy Gunarsons

[433]At 4:45 p.m., on September 13th, we have the fifth telephone call from Fridriksson to Andy Gunarsons for which the former tendered handwritten notes. Mr. Gunarsons denies that he made the statements attributed to him and I accept

2014 ONSC 5831 (*)

102

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

his denial. For example, one of the statements (a repetition of a theme first seen in the September 12th telephone call, at 2:20 p.m.), that “Carol [Klassen] will get to see the files . . .” and that she will have “full access,” is in direct contradiction to the instructions Andy Gunarsons received in the 8:09 a.m. e-mail from Terry Lewis on September 8th. It is highly improbable that Andy Gunarsons would be offering something that he lacked the authority to offer. The Lewises (in particular, Dee Lewis) are not the type of clients whose instructions or wishes one ignores.

[434] In this telephone call, Fridriksson alleges that Andy Gunarsons also stated:

This clinic is different. It has been in [Niagara Falls] for 22 years. It has thousands of satisfied patients who have been coming here for years. None of them have been recalled. It is a gold mine. All you have to do is start recalling those patients and you will be full five days a week. You could easily sell double the number of hearing aids. Like I said before, it is not going to be a prob lem getting enough patients, it is going to be a problem seeing them all. You don’t even need to advertise.

This information essentially repeats what Fridriksson recorded in his notes for the telephone conversation he says he had with Mr. Gunarsons on September 12th, at 2:20 p.m.

[435] The 4:45 p.m. notes also state:

You said the clinic sells 45 to 50 hearing aids per month . . .

[436] And they further state:

Donna [Bradley] is not a threat. She does not have a list.

[437]Andy Gunarsons, in his evidence, denied making these statements and I accept his denial.

(iv)“. . . I thought he was a bullshitter”

[438]Fridriksson admitted, in cross-examination, that, as of September 13, 2006,

“I thought [Andy Gunarsons] was a bullshitter.” He added: “But I knew he was a bullshitter in October, October the 11th or October the 10th.”

[439]Fridriksson agreed that “bullshitter” is “equivalent to liar.”

(h)September 14th

(i)Comparative Year-Over-Year Summary

2014 ONSC 5831 (*)

103

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[440]On September 14, 2006, at 1:09 p.m., a spreadsheet, titled “Comparative

Year-Over-Year Summary,” was prepared by Andy Gunarsons, he says, for Karl Bowley. He explained that these figures were “hard numbers . . . extracted from QuickBooks.” The Summary covered the years 2001 – 2006 (with 2006 being incomplete because it was the year of closing). I will come back to this important Summary later. For now, I will set out the total sales that it reflects:

[441]The plaintiff argues that the Comparative Year-Over-Year Summary is the only document disclosing the profitability of the Niagara Falls Clinic that was produced by the defendants prior to closing. I agree. It is further argued that the Summary was a deliberate attempt to substantiate the misrepresentation that the clinic had an annual profit between $300,000 and $350,000 for the years 2001- 2005. I disagree. I will deal further with the Summary later.

(i)September 15th

(i)e-mail from Andy Gunarsons to Dee Lewis

[442]At 8:22 a.m., on September 15th, Andy Gunarsons e-mailed Dee Lewis, with the subject line – “Niagara Falls Clinic data”:

I will send the [spreadsheet] info as a PDF to Karl [Bowley]: he needs it to prepare cash- flow projections for [Fridriksson] (it is an elementary early part of the due diligence) . . . they will have a [spreadsheet] synopsis of the profitable operation, they will have the pertinent rent and suggested payroll details . . . we have done all that we can . . .

[443]As I understand the matter, in this e-mail, Andy Gunarsons is forwarding to Dee Lewis the September 14th Comparative Year-Over-Year Summary for her input. She testified, in-chief:

Q. . . . what, if any, review did you undertake of [the Comparative Yea r-Over- Year Summary] before it was sent?

A.I discussed it with Andy before it was sent. I had questions . . . I felt that it underrepresented the net profit of the [Niagara Falls] C linic and it was, he told me it should be conservative, which was reasonable. I thought it was a little more than conservative . . .

Q.Now, why is it you felt that it underrepresented the net profit of the clinic?

2014 ONSC 5831 (*)

104

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.Because there were operating expenses in there that did not represent the operating expenses of the [Niagara Falls] Clinic . . . He had spread the operating expenses equally across the three clinics and the Niagara Falls location, the operating expenses were lower.

Q.Now, in what way were they lower?

A.Well, for example, the salaries [in the Niagara Falls Clinic] were only about $70,000 and the operating expenses are $200,000, are over $200,000 . . .

(ii)e-mail from Andy Gunarsons to Karl Bowley

[444]At 8:45 a.m., on September 15th, Andy Gunarsons e-mailed the Comparative Year-Over-Year Summary (presumably containing the changes suggested by Dee Lewis) to Karl Bowley, saying: [Upper case in original]

As discussed, here is the summary of the [Niagara Falls Clinic] attached as a PDF file. Sales to [Niagara Falls] are easily identified and sourced but because p urchases are done on an entity basis for all 3 clinics, cost allocations needed to be done with the following assumptions:

▪COGS [cost of goods sold] are reflected using yearly % rates from compiled [financial statements];

▪The operating costs below COGS have been split 1/3 to [Niagara Falls] from actual gross numbers adjusted for the items following;

▪Rent is actual [Niagara Falls] costs;

▪Advertising is actual [Niagara Falls] costs;

▪Overall, the [Niagara Falls] costs are closer to 25% instead of 1/3 share per Dee [Lewis], but in the absence of a detailed trail for now, I have used a more conservative 1/3 simple split (e.g. affected areas include telephone costs and payroll costs)

As discussed this confidential information DOES NOT go to third parties including, inter alia, Phonak or any other similar entities.

(j)September 17th

(i)attendance at Niagara Falls Clinic

[445]On September 17th, Fridriksson and Carol Klassen attended at the Niagara Falls Clinic, accompanied by the real estate agent who represented the defendants. In his evidence, Fridriksson gave the impression that he and his wife were rushed in their inspection of the premises:

2014 ONSC 5831 (*)

105

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.I had about 10 minutes to go around the clinic and then I was asked to leave.

Q.And why did you not have a more extensive look around?

A.Because I was in the file room and the real estate agent told me I couldn’t be in there and so I left.

[446]The realtor, Stephen Fletcher, tells a different, and more credible, story:

Q.What, if any, recollection do you have of any specific instructions as to what you were to do at the visit?

A.Just allow them in, in the premises.

. . . . . .

Q.So, after you entered the premises, unlocked the door, disengaged the security system, what did you do?

A.Just waited at the front door.

Q.Did you go anywhere beyond?

A.No.

. . . . . .

Q.What if any recollection do you have of whether or not, what they were doing on the visit?

A.I didn’t pay attention.

. . . . . .

Q.How was it that the visit came to an end? How did Mr. Fridriksson and Ms. Klassen end the visit or how did you end the visit?

A.They were fine, they just, just locked things up and it was over.

Q.So they had come back to the front?

A.Yeah, yes.

[447]This important exchange occurred in the questioning of the realtor:

Q.Do you have, what, if any, recollection do you have of you suggesting or demanding that Mr. Fridriksson and Ms. Klassen end their visit and leave?

A.I didn’t, it wasn’t my business to do that . . . I didn’t suggest that they leave.

Q.Okay.

A.I just waited.

2014 ONSC 5831 (*)

106

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[448]I find that Mr. Fletcher is a believable witness and I unhesitatingly accept his testimony.

[449]Carol Klassen was cross-examined regarding her role during this attendance at the Niagara Falls Clinic:

Q.And why is that you chose to go to the front of the clinic and stand at the reception area listening to his [the realtor’s] stories rather than assisting Mr.

Fridriksson in taking inventory?

A.Because the clinics are basically Stefan’s. I help to manage them but he’s

the audiologist, it’s his, it’s his work. I, I have assisted him but, you know, it’s all his call.

Q.So you didn’t have much interest in what he was doing there that day?

A.I was fine with whatever he decided. It, it wasn’t something that I felt I could give that much to, like the decision, he was just looking at it, it was . . .

Q.It was going to be ultimately his decision at the end of the day?

A.It was his decision and he was the one who was, who was knowled geable and knew what, what to look for.

(ii)inventory of the contents of the Niagara Falls Clinic

[450]Fridriksson prepared a two-page handwritten inventory of what he and Carol Klassen allege was located at the Niagara Falls Clinic on September 17th (for some

reason, the inventory is dated September 19th – Fridriksson says this is an error and the date should be September 17th). 41 There are 44 items on the handwritten inventory, each with a separate total (ranging from one to 47).

[451]This detailed inventory was compiled during the rushed, 10-minute attendance at the Niagara Falls Clinic; an impressive feat. At trial, Fridriksson was cross-examined on the matter:

Q.And sir, you would agree with me that your evidence here today, when you

say you were given 10 to 20 minutes, isn’t consistent with what you said at discovery, correct?

A.Well, it’s, it’s close, 10 to 20 minutes.

Q.It’s 10 minutes.

41It is now official: Fridriksson is incapable of authoring a fully accurate note. The dating error here is what happens when one composes a written record after the fact.

2014 ONSC 5831 (*)

107

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

A.It’s 10 minutes, you’re right . . . that’s what I said at discovery.

Q.It’s a pretty long list to make in 10 minutes, to go through 10 rooms plus common hallways and so on and so forth, right?

A.Yes.

Q.And your evidence is that this list was made at the time you were at the

clinic?

A.Yes.

[452]Why, during this September 17th attendance, did Fridriksson not notice the absence of “thousands of unrecalled patient files in the back,” which he says were an important part of his decision to purchase the Niagara Falls Clinic?

(k)September 18th

(i)telephone call from Fridriksson to Andy Gunarsons

[453]Fridriksson produced handwritten notes for the sixth telephone conversation

that he insists he had with Andy Gunarsons, this one at 4:45 p.m., on September 18th, in which Fridriksson is supposed to have asked whether Carol Klassen will

“have unfettered access to the patient schedule . . . and be able to look at all files” and it is alleged that Mr. Gunarsons answered, “Yes, she will have complete access after the Letter of Intent is signed.” This is the third telephone call in which

Fridriksson contends that the issue of access was raised.

[454]The notes also record:

Karl tells me you sent the spreadsheet [the Comparative Year-Over-Year Summary]

–we will need much more information than this before we want to commit to spending that kind of money. As I discussed with Terry we want verified [number of patients] and [number] of hearing aids [sold] per month.

[455]The notes further indicate: “Contrary to your assurances Donna’s advertising lots in Niagara Falls.” Mr. Gunarsons denied ever giving such assurances.

[456]The notes also have Andy Gunarsons saying: “Terry does not get that many [patients] from [Dr.] Makerewich.” It was the testimony of Mr. Gunarsons that how patients are referred to the Niagara Falls Clinic was not known to him and is

“not information relevant to an accountant.”

[457]In his testimony, Andy Gunarsons variously denied or did not recall the contents of this conversation.

2014 ONSC 5831 (*)

108

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[458]As I will point out more than once, the matters contained in these handwritten notes, like the other notes, are not mentioned in the Asset Purchase Agreement.

(l)September 19th

(i)e-mail from Trevor Hood to Andy Gunarsons

[459] At 8:51 a.m., on September 19th, Trevor Hood e-mailed Andy Gunarsons:

I was working on completing the draft valuation report . . . and thought it would be best if I received some written confirmation on the changes to the engagement from our original engagement letter dated July 26, 2006. I understand that the changes are to be as follows:

1.The separate and distinct valuations of the Niagara Falls location and the two Toronto locations are no longer required . . .

This means that, previous to September 19th, Trevor Hood had been given reason to think that a “separate and distinct” valuation for the Niagara Falls Clinic was “no longer required.”

(ii)e-mail from Andy Gunarsons to Trevor Hood

[460]At 10:20 a.m., on September 19th, Andy Gunarsons e-mailed Trevor Hood confirming that point number 1, in the 8:51 a.m. e-mail, was correct and adding:

Niagara Falls as a separate spin-off sale fell apart yesterday as the purchaser suddenly changed his mind (grrr). Hence additional SB negotiations/separate NF spin-off consulting work will be N/A . . . The overall valuation required for the . . .

reorganizing . . . of the holding company . . . is the keystone point.

[461]Trevor Hood is being told on September 19th not to proceed with the separate valuation for the Niagara Falls Clinic. However, based upon the e-mail from Karl Bowley to Fridriksson on August 30, 2006, at 3:34 p.m., Andy Gunarsons knew at least as early as that date that there would be no separate

valuation. Thus, it is unlikely that the cancellation was because the “sale fell apart yesterday” (as “yesterday” was September 18th).

[462]Who was the purchaser who “suddenly changed his mind”? Andy Gunarsons testified that, in or about September of 2006, there were two parties interested in purchasing the Niagara Falls Clinic, Island Hearing and “a lady [perhaps from the United States] that was considering buying down there so that she could be in the

Niagara Peninsula.” He was asked:

2014 ONSC 5831 (*)

109

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Q.And if there were people interested in purchasing just Niagara Falls [and not all three of the hearing clinics owned by the defendants], why was the instruct ion not to proceed with that valuation made?

A.‘Cause those two, Mr. Hambley [president and CEO of Island Hearing] wanted all three so it became a non-starter and the other lady dropped out.

[463]Yet, as of September of 2006, Fridriksson and the plaintiff were interested in the Niagara Falls Clinic. Was that interest insufficient to sustain the separate- valuation instructions?

[464]The plaintiff submits that Island Hearing is the purchaser who “suddenly changed his mind” and that it is reasonable to deduce that Andy Gunarsons had provided financial information to Island Hearing “which pro duced an unfavourable valuation,” causing Island Hearing to lose interest, and that the defendants then cancelled the separate valuation of the Niagara Falls Clinic “as they knew it would produce an unfavourable figure.” This submission is only speculation.

[465]It is further submitted by the plaintiff that “the preliminary valuation figures provided by Trevor Hood did not support the representation in writing that the clinic produced between $300,000 and $350,000 profit a year.” There is no evidence that “preliminary valuation figures” were ever produced by Trevor Hood.

[466]Was some work done by Trevor Hood towards valuing the Niagara Falls Clinic before the separate-valuation instructions were rescinded? What information was provided to him regarding the Niagara Falls Clinic? The plaintiff argues that

“an adverse inference should be drawn that the preliminary figures [for the Niagara

Falls Clinic] were not favourable to the defendants.” Based upon the e-mail from

Andy Gunarsons to Terry Lewis on August 29, 2006, at 3:29 p.m., it does not appear that, as of that date, the defendants knew “Trevor’s numbers” for the Niagara Falls Clinic. The e-mail reads: [Upper case in original]

. . . [Fridriksson] doesn’t get any info sourced from Trevor unless you WANT him to have it: he has no rights to it unless you give it to him. Obviously if Trevor’s [numbers] are favourable, you MIGHT consider it . . . maybe. If Trevor’s numbers are not helpful to you, he doesn’t get it – period. Let him get his own CBV . . .

[467]Something happened between the e-mail of August 29th, at 3:29 p.m., and the e-mail from Trevor Hood of September 19th.

[468]In cross-examination, Andy Gunarsons stated:

Q.So your evidence is that between July 26t h, which is the date of the engagement letter, and September 19t h, no work was done in relation – by Mr. Hood

2014 ONSC 5831 (*)

110

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

–in relation to obtaining separate financial working papers on the Niagara Falls Clinic?

A.Correct . . . I believe that Mr. Hood was on vacation virtually most, if not all of August, and, and he was endeavouring to do the three-clinic report. He had to do them in sequence and he was focused strictly on the three-clinic report. He hadn’t even contemplated starting Niagara Falls.

[469]This testimony is consistent with the fact that the final report from Mr. Hood was completed later the same day that he was told that a separate valuation was not needed for the Niagara Falls Clinic. In other words, it was the last of the three clinics “in sequence.”

[470]Nevertheless, with Trevor Hood not being called as a witness (he could have been summonsed by either side) to explain when he was first alerted to the fact that a separate valuation was no longer needed for the Niagara Falls Clinic, his understanding of why it was not needed, whether he had prepared preliminary valuation calculations and whether he was in a position to opine on the value of the Niagara Falls Clinic, it is logical to infer that the separate valuation was cancelled

because it would have produced a figure that, in the eyes of the defendants, was unattractively low. The e-mail of August 29th, at 3:29 p.m., makes it clear that if

“Trevor’s numbers” are unfavourable, they will not be provided to the plaintiff.

[471]To the extent that a separate valuation for the Niagara Falls Clinic was

promised to the plaintiff, Fridriksson learned that it would not be forthcoming on August 30th, at 3:34 p.m., long before the Letter of Intent or before any legal obligation could be said to have arisen. Fridriksson was in as good a position as this court to infer the reason for the cancellation.

[472]If the defendants were never legally obligated to provide a separate valuation for the Niagara Falls Clinic, there can be no legal obligation upon them to provide the reason for its cancellation.

[473]Furthermore, it was always open to the plaintiff to obtain its own valuation.

(iii) valuation of Trevor Hood

2014 ONSC 5831 (*)

111

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[474]At 4:52 p.m., on September 19th, Trevor Hood, the certified business

valuator with SB Partners Corporate Finance Ltd, e-mailed to Andy Gunarsons his final report valuing the three hearing clinics of the defendants at $3,500,000.42

[475]In his report, Mr. Hood states:

. . . in arriving at normalized maintainable after-tax operating cash flows . . .

management salaries and bonuses have been added back and the estimated compensation required to replace the roles of Terry and Dee Lewis has been deducted. The normalized compensation was based o n our discussions with Mr. and Mrs. Lewis.

[476]The “normalized management salaries and bonuses” are shown as $50,000. This amount was to represent payment to Dee Lewis as manager of the three

clinics and to Terry Lewis as audiologist of the three clinics, a figure which the plaintiff submits is unreasonably low.43

(m)September 20th

(i)telephone call from Fridriksson to Karl Bowley

[477]Fridriksson tendered handwritten notes of a telephone call with Karl Bowley at 9:35 (probably a.m.) on September 20th which include a request that Mr. Bowley

“ask Andy when Carol can view the books and talk to the secretary.”

[478]The testimony of Fridriksson regarding these notes was entirely confused and Karl Bowley was not questioned about the conversation.

(n)September 21st

(i)e-mail from Karl Bowley to Andy Gunarsons

[479]At 11:32 a.m., on September 21st, Karl Bowley sent an e-mail to Andy Gunarsons:

Further to our discussions: Info requested: Quick Books back up to verify sales volume. Further breakdown of operating costs. Suggested allocation of purchase price.

42It is interesting (almost amusing) to see that the report neither relied upon nor mentioned the number of patients, the mix of patients, the number of WSIB patients, the thousands of unrecalled patient files in the back or the level of hearing aid sales, all of which, in this trial, had whipped Fridriksson into a frothy frenzy.

43However, this is not helpful for my purposes because Trevor Hood did not testify and explain his report.

2014 ONSC 5831 (*)

112

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(ii)Letter of Intent

[480]On September 21st, Fridriksson and Carol Klassen signed a Letter of Intent (which had been prepared by Karl Bowley) regarding the purchase of the Niagara Falls Clinic. It was addressed to Terry Lewis and Andy Gunarsons and reads: [Upper case in original]

LETTER OF INTENT

This letter outlines my intent to purchase the assets of the Niagara Falls Hearing Clinic.

▪an asset purchase (equipment, leaseholds, goodwill)

▪ exclusive territory rights and non competition agreements

▪will close AS SOON AS POSSIBLE

▪Fridriksson lawyer will draft legal agreement

▪ the clinic fall mailing will be done ASAP

▪negotiations with any other parties will be discontinued

[481]The following words were added in handwriting:

▪a letter from Terry to all patients re sale

This addition was not initialled but Fridriksson testified that it was his handwriting.

[482]Fridriksson was questioned, in-chief, about the purchase price:

Q.At this point in time on September 21st , had the purchase price been determined or agreed upon?

A.The purchase price, we had agreed upon a million dollars.

[483]Karl Bowley was asked, in-chief: “Can you tell us how the million dollar purchase price was arrived at?” He answered:

A.When the discussion began between Mr. Gunarsons and myself at the same

time Stefan was speaking with Terry, etc., etc., various numbers were being thrown around, certain number of times profits . . . Our problem is we had no numbers. In

2014 ONSC 5831 (*)

113

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

the end, Mr. Gunarsons said one day, ‘A million dollars, cash, no holdbacks, that will make this deal happen’ . . . Stefan and myself we came to the decision that number . .

. is something we could work with . . .

[484]The position of the defendants is that the purchase price was arrived at as a multiple of three times earnings, on the basis that “the earnings of the clinic were always between $300,000 and $350,000 annually.”

[485] The theory of the plaintiff is that the earnings of the Niagara Falls Clinic:

. . . were obviously an important factor, however, there were many other factors that were also important which are all components included in evaluating the goodwill of the clinic, including the number of active patients the clinic had, the composition of those patients, what percentage were WSIB patients (which are recognized as the most lucrative patients), and what the source of these WSIB patients were.

[486]On my review of the evidence (beginning with the early e-mail of August 28, 2006, at 4:19 p.m., from Terry Lewis to Fridriksson), I find that the purchase price was negotiated based upon expected earnings.

[487]Andy Gunarsons agreed in his evidence that, as of the signing of the Letter of Intent, “the financial information given to Karl Bowley at that time was basically limited to [the Comparative Year-Over-Year Summary prepared on

September 14, 2006].”

(iii)telephone call from Fridriksson to Andy Gunarsons

[488]Fridriksson produced handwritten notes for a telephone call at 5:10 p.m., on September 21st, which he maintains was the seventh one that he placed to Andy Gunarsons.

[489]Like so many of these notes, Fridriksson attributes statements to Mr. Gunarsons for which the latter lacked the knowledge or the authority to make. As an example, Fridriksson alleges that he told Andy Gunarsons : “We need a time for

Carol to go to the [Niagara Falls] office.” Mr. Gunarsons repeatedly testified that he was in no position to authorize such an attendance. It was “not my call,” he said.

[490]According to the handwritten notes, Fridriksson said to Andy Gunarsons:

▪Terry told me there are 5,000 [patients] – prove it

▪Terry said he has lots of unrecalled patients and a room full of files

[491]It was the testimony of Andy Gunarsons that he had no knowledge of the number of patients or of the unrecalled files.

2014 ONSC 5831 (*)

114

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(iv)e-mail from Marke Hambley to Andy Gunarsons

[492]By e-mail on September 21st, at 6:23 p.m., Marke Hambley, of Island Hearing, sent an e-mail to Andy Gunarsons enclosing a 13-paragraph, four-page Letter of Intent for the purchase of the three clinics owned by the defendants for $2.5 million. (The CBV report of Trevor Hood had valued the three hearing clinics at $3.5 million.)

[493]The plaintiff argues that, as Marke Hambley had previously indicated Island Hearing would pay up to five times earnings (see his e-mail to Terry Lewis at 3:43 pm., on July 21, 2006), “it would appear that the purchase price of $2.5 million reflects an analysis of earnings for all three of the defendants’ clinics in the range of $500,000.” This is speculation. Marke Hambley did not testify and explain the basis for his $2.5 million offer.

[494]The plaintiff submits:

It is reasonable to conclude that Island Hearing received far more financial disclosure than that provided to Fridriksson and, as a result, came to the conclusion that all three clinics were worth only $2.5 million. As Niagara Falls produced less than one-third of the total sales of all three clinics, it stands to reason it would not produce EBITDA that reflects more than one-third of the EBITDA of all three clinics.

Again, more speculation.

(v)e-mail from Terry Lewis to Andy Gunarsons

[495]At 9:10 p.m., on September 21st, Terry Lewis sent an e-mail to Andy Gunarsons:

Thanks for the information. I have a strong objection to sending out advertising for [Fridriksson]. I agreed to supply him with the envelopes that we had printed for our planned mailing, but I did not propose to send the mailings out for him. That would be more than 2000 items and obviously a considerable investment in time and mailing costs . . .

[496]This e-mail is consistent with the one from Terry Lewis to Andy Gunarsons on September 8th, at 8:09 a.m.

[497]The e-mail continues:

Regardless, he agreed to pay 4 times earnings; and since he is not paying 4 times earnings, I do not intend to have my staff spend time stuffing envelopes for him; they will spend their time stuffing envelopes for our Scarborough clinics. How would I

2014 ONSC 5831 (*)

115

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

know what message to put in the mailing anyway? Does he want his car waxed as well?44

[498]With a purchase price of $1 million, the plaintiff, effectively, was paying a multiple of three times earnings.

(vi)fax letter from Andy Gunarsons to James Naumovich

[499]On September 21st, Andy Gunarsons forwarded the Letter of Intent to James Naumovich along with an explanatory covering letter saying:

The purchaser has asked that [the Niagara Falls Clinic]’s annual fall advertising mailings be done. Terry and Dee prefer that they not do it now and defer it to the purchaser for two reasons:

▪the proposed 2006 ad mailings involves hearing aid pamphlets from a supplier

[Siemens] that is not used by the purchaser: and contemporaneous with that,

▪Terry and Dee will likely be changing suppliers themselves that would be counterproductive to the current mailings.

The assignment of the Niagara Falls lease involves the related numbered company as transferor/vendor: details to follow . . . Terry needs to review the Letter of Intent attached . . .

[500]The plaintiff argues that “at some point between September 8, 2006 and

September 21, 2006, Terry Lewis changes his mind regarding his representation to

Fridriksson that the defendants will complete this mailing.” I disagree. I do not read the September 8th e-mail, at 8:09 a.m., as anything more than an offer of 2,500 envelopes to the plaintiff.

(o)September 22nd

(i)e-mail from Andy Gunarsons to Dee Lewis and Terry Lewis

[501]At 10:13 a.m., on September 22nd, Andy Gunarsons sent an e-mail to Dee and Terry Lewis enclosing the Letter of Intent from Island Hearing. The e-mail said:

[Letter of Intent] from Island Hearing rec’d today is very much on the ‘lean’ side: $2.5 million for all 3 clinics. I suggest that we shelve it for now and simply deal with [Fridriksson] on [Niagara Falls].

2014 ONSC 5831 (*)

116

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(ii)e-mail from Karl Bowley to Michael Mann

[502]At 2:57 p.m., on September 22nd, Karl Bowley e-mailed Michael Mann (the

lawyer representing the plaintiff on the purchase) providing “some details” on the purchase and sale. The “details” included the contents of the September 21st Letter of Intent from Fridriksson and Carol Klassen.

(p)September 25th

(i)e-mail from Fridriksson to Andy Gunarsons

[503]At 7:14 a.m., on Monday, September 25th, Fridriksson sent an e-mail to Andy Gunarsons:

I have not received any paperwork from Terry and Dee regarding the sale of the Niagara Falls Clinic. I leave Thursday morning at 7:00 a.m. for New York and do not return until late Thursday night the following week . . .

(ii)e-mail from Andy Gunarsons to the Lewises

[504]At 9:44 a.m., on September 25th, Andy Gunarsons e-mailed Dee and Terry Lewis:

Let’s get [James Naumovich]’s approval on the [Letter of Intent] and let’s reply to [Fridriksson] today by e-mail or fax if not already done so.

(iii)e-mail from Andy Gunarsons to Karl Bowley

[505] At 1:12 p.m., on September 25th, Andy Gunarsons e-mailed Karl Bowley:

I discussed this [the e-mail from Karl Bowley of September 21, 2006 at 11:32 a.m.] with Dee and Terry and she has valid privacy concerns under Federal laws. The Privacy Act and PIPEDA [Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5] precludes sending of any patient files electronically and also precludes sending of patient files to third parties without prior individual patient written approval.

The workaround would be that I allow you to review everything in my office – we can permit you to look at whatever you want and whatever you require – we just cannot let it go (for now).

[506]The understanding of privacy laws expressed by Mr. Gunarsons is incorrect. This can be seen in the e-mail from CASLPO later, on November 28th, at 3:47 p.m., where the provisions of s. 42(1) and (2) of the Personal Health Information Protection Act are set out.

2014 ONSC 5831 (*)

117

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[507]The Federal Personal Information Protection and Electronic Documents Act is not applicable to the sale of the Niagara Falls Clinic. The governing statute is the Ontario Personal Health Information Protection Act 2004, S.O. 2004, c. 3.

(iv)telephone call from Fridriksson to Andy Gunarsons

[508]Fridriksson tendered in evidence his eighth set of handwritten notes of a

telephone conversation that he says he had with Andy Gunarsons, this one at 1:30 p.m., on September 25th.

[509]Andy Gunarsons, in his testimony, denied the accuracy of the material contents of the notes and, in particular, this passage:

. . . you promised my wife unfettered access to the files, the patient list, the secretary and would be free to ask questions. You promised me this two weeks ago, you promised me this last week. Now it is ‘next week’ again. What is going on? What are you trying to hide?

[510]Mr. Gunarsons testified that had he been spoken to in this fashion, he would have found it “offensive and hung up.”

[511]These notes represent more fiction from Fridriksson.

[512]Fridriksson was cross-examined as to why all of the promises he alleges were made to him in telephone conversations were never set out in writing:

Q.If you felt that strongly about the things that you were being told, that they

are making excuses for things that they represented to you, why didn’t you demand that provision for these things be specifically set out in correspondence from Mr. Mann to Mr. Naumovich [the lawyers] or from Mr. Bowley to Mr. Gunarsons [the accountants] and so on and so forth?

A.Because they don’t answer our e-mails so we did it on phone conversations.

[513]It is humbling to think that Fridriksson believes I will accept such an

explanation because I have, in front of me, all of the e-mails in this trial, hundreds of them.45 There is no evidence that the Lewises and their accountant failed to answer e-mails. And, Karl Bowley, in his testimony, did not say anything about unanswered e-mails.

(v)e-mail from Karl Bowley to Andy Gunarsons

[514] At 2:05 p.m., on September 25th, Karl Bowley e-mailed Andy Gunarsons:

2014 ONSC 5831 (*)

118

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Spoke with my ‘privacy person.’ Not sure how what is in QuickBooks (i.e. names and addresses) meets the definition of patient files. And if so, could it not be covered off by my privacy policy and if warranted copies of each staff member confidentiality agreement?

I really don’t want to make the trip if I don’t have to.

(vi)e-mail from Andy Gunarsons to Karl Bowley

[515]At 4:21 p.m., on September 25th, Andy Gunarsons replied to Karl Bowley: [Upper case in original]

The detailed [QuickBooks] file is apparently THE full patient info list database and not just the sales file so it falls under Privacy. It is a VERY sensitive issue at the moment. On site is the way to go . . .

[516]From this e-mail we learn that QuickBooks contains “full patient” information.

(q)September 26th

(i)telephone call from Fridriksson to Karl Bowley

[517]Fridriksson produced handwritten notes of a telephone conversation he says he had with Karl Bowley on September 26th, at 8:30 (whether it is a.m. or p.m. is not indicated, but it is probably a.m.):46

[Fridriksson speaking] For the past month Andy has promised full disclosure and all I have got from him is bullshit! He has promised that Carol can go to the office, meet Ginette, see the number of files, check the bookings and every time its ‘next week.’ I am phoning a lawyer about this to see if there are privacy issues.

[518]In his testimony, Fridriksson stated that the lawyer he consulted was Michael Mann.

(ii)telephone call from Fridriksson to Karl Bowley

[519]Fridriksson produced handwritten notes for a telephone call to Karl Bowley at 9:30 a.m., on September 26th:

SF – Spoke to Andy Monday – called when Carol could meet Ginette – been two weeks now that he keeps promising next week . . . I am having difficulty trusting Andy. I am going to call a lawyer in my friends’ office and I’ll talk to you later.

46Bearing in mind the contents of the 9:30 a .m. e-mail below, it does not make sense to have sent the 8:30 e- mail, whether it is a.m. or p.m.

2014 ONSC 5831 (*)

119

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[520]Karl Bowley does not remember this telephone call. In particular, he does not recall “the concept of no trust with Andy.”

(iii)e-mail from Andy Gunarsons to Dee Lewis

[521] At 10:06 a.m., on September 26th, Andy e-mailed Dee Lewis:

Can you please burn on to a CD the 2000-2005 QuickBooks files for the Niagara Falls Clinic so I can pick it up later today? Karl Bowley and I will require them.

(iv)e-mail from Andy Gunarsons to Dee Lewis

[522] At 10:13 a.m., Andy Gunarsons sent another e-mail to Dee Lewis:

Ditto for 2006 [year to date].

[523]Andy Gunarsons gave this evidence in respect of the e-mails at 10:06 a.m. and 10:13 a.m.:

A. . . . Mr. Bowley . . . wanted to verify the sales volumes in the Niagara Falls Clinic to, to provide that to him I would actually need the QuickBooks files . . . So [these e- mails are] now a request for Mrs. Lewis to, to dig out the, the QuickBooks files and prepare them on disc . . . so that I can basically prepare the reports and Mr. Bowley can review them when he comes to my office [on October 4t h].

Q.Okay and what response, if any, did you receive from Mrs. Lewis?

A.Mrs. Lewis provided all of those within a day or two after, I don’t know the exact date.

(v)e-mail from Fridriksson to Andy Gunarsons

[524] At 12:49 p.m., on September 26th, Fridriksson e-mailed Andy Gunarsons:

Just a reminder about the mailing. In order to meet the Thanksgiving holiday time that mailing will need to go out this week.

[525]Thus, at this point, Fridriksson still was anticipating that the mailing would be done prior to the Thanksgiving holiday but the defendants, it will be seen, had no intention of doing so.

(vi)e-mail from Karl Bowley to Andy Gunarsons

[526]At 2:07 p.m., on September 26th, Karl Bowley sent an e-mail to Andy Gunarsons:

2014 ONSC 5831 (*)

120

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

Can you suggest possible times for me to attend at your office? Also – has Terry mailed out the ‘fall mailing’? This is critical to [Fridriksson]’s success.

[527]Based upon this e-mail, Mr. Bowley thought that the defendants were going to send out the fall mailing.

(vii)e-mail from Andy Gunarsons to Terry Lewis and Dee Lewis

[528]At 3:21 p.m., on September 26th, Andy Gunarsons forwarded the 12:49 p.m. e-mail (from Fridriksson) to the Lewises:

Comments on how to delicately respond.

[529]In other words, Mr. Gunarsons is asking how he is supposed to advise Fridriksson and Mr. Bowley that the defendants are not doing the fall mailing. I

observe that, at this point in the evidence, there is no clear indication what is contemplated by the words “fall mailing.” On September 26th, 27th and 28th, there are five e-mails that mention a “fall mailing.” Four of them do not say what is to be mailed; one refers to “brochures.” Other e-mails speak of “postcards.”

[530]I do not know why Andy Gunarsons would not have advised Karl Bowley previously that the defendants were not going to do a “fall mailing” (whatever that term means and, based upon evidence to come, the meaning does not matter).

(r)September 27th

(i)e-mail from Fridriksson to Andy Gunarsons

[531] At 8:22 a.m., on September 27th, Fridriksson e-mailed Andy Gunarsons:

Karl has mentioned that Terry has chosen to not send the ma iling. Based on experience the Fall mailing accounts for close to one-third to one- half of business in the last four months of a business year. As Terry well knows the Fall mailing is a very important part of any clinic’s survival . . . I do not care if the brochures are Siemens . . . Send out the mailing!!

[532]This e-mail (which had a noticeably demanding tone, bearing in mind that, at this point, there was no Letter of Commitment or purchase agreement) was forwarded by Andy Gunarsons to Dee Lewis and Terry Lewis at 2:15 p.m.

(ii)telephone calls from Fridriksson to Andy Gunarsons

[533]Fridriksson tendered handwritten notes of alleged telephone calls to Andy Gunarsons at 12:02 p.m. and at 2:02 p.m., on September 27th. Amongst other

2014 ONSC 5831 (*)

121

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

things, the notes say that Fridriksson instructed Terry Lewis to mail 5,000 postcards or brochures, not 3,000 as Mr. Lewis supposedly was suggesting.

[534]I dealt with these two telephone calls earlier when addressing the nature, character and credibility of Fridriksson, at paragraphs [91]-[98].

[535]The telephone records filed at trial do not show either call.

(iii)e-mail from Karl Bowley to Andy Gunarsons

[536] At 2:07 p.m., on September 27th, Karl Bowley e-mailed Andy Gunarsons:

Can you suggest possible times for me to attend at your office?

Also – has Terry mailed out the ‘Fall mailing’? This is critical to [Fridriksson]’s success.

[537]This e-mail was forwarded by Andy Gunarsons to Dee and Terry Lewis at 2:10 p.m.

(iv)e-mail from Karl Bowley to Andy Gunarsons

[538]At 3:01 p.m., on September 27th, Karl Bowley sent an e-mail to Andy Gunarsons: [Upper case in original]

Have you spoken to [Fridriksson] today? He is VERY CONCERNED re the ‘mailing.’

(v)e-mail from Andy Gunarsons to Karl Bowley

[539] At 5:14 p.m., on September 27th, Andy Gunarsons replied to Karl Bowley:

Yes, I spoke to him. I need to talk to you on the matter ASAP.

(vi)e-mail from Terry Lewis to Andy Gunarsons

[540] At 5:44 p.m., on September 27th, Terry Lewis e-mailed Andy Gunarsons:

Thank you so much for your help. Sorry that you missed a trip to Paris with your wife. Enclosed is a newsletter for [Fridriksson]. It has been updated a little. It worked well for us in our Scarborough offices when we sent it out. I will send a letter of introduction in a minute.

[541]I believe that this is the first reference to a “newsletter.” I understand that the newsletter is a different item from the brochures.

2014 ONSC 5831 (*)

122

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

[542]The parties are quite imprecise in their terminology. During the trial I heard of brochures, postcards, fliers, newsletters and a letter of introduction (with the first three, at least, being difficult to distinguish).

(vii)e-mail from Terry Lewis to Andy Gunarsons

[543]At 6:13 p.m., on September 27th, Terry Lewis sent an e-mail to Andy Gunarsons:

Here is a letter of introduction of [Fridriksson] to the patients of [the Niagara Falls] Clinic. It should be printed and mailed with the newsletter.

[544]The letter of introduction began: “As many of you know, I have been suffering with a severe neck injury for more than a year now, that has greatly limited my range of travel . . .” It continued: “I am pleased to introduce to you,

Stefan Fridriksson, AuD, Doctor of Audiology . . . I have known Stefan for more than 20 years . . . I have confidence in his devotion to providing excellent service .

. . Please come in to meet Stefan and his staff . . .”

(s)September 28th

[545] September 28th was a very busy day for the parties and their advisors.

(i)e-mail from Terry Lewis to Andy Gunarsons

[546] At 8:56 a.m., on September 28th, Terry Lewis sent a lengthy e-mail to Andy Gunarsons. It began by dealing with the fall mailing:

. . . We still have the problem that the brochures are at the Scarborough clinic. You may recall that when we first told [Fridriksson] that we had only Siemens brochures [Siemens being the main supplier of hearing aids for the defendants], he said that he did not want them; and, in fact, said that he did not want a mailing . . . Anyway, I have contacted Purolator and they can pick up the brochures this morning and drive them directly to [Niagara Falls] for delivery by 1:00. So if the printing is completed and delivered there by mid-day, we could have the envelopes stuffed quickly and ready to mail as soon as we see $1 million in James Naumovich’s trust account . . .

[547]The e-mail goes on to highlight, once again, the concern of the defendants in Fridriksson prematurely obtaining sensitive business information relating to the Niagara Falls Clinic:

We are still faced with the issue of not having anything from [Fridriksson] but his tantrums about the mailings going out . . . Dee is right – we must have a closed deal with money in hand before we do anything that could be very damaging to us if he

2014 ONSC 5831 (*)

123

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

backs out at the last moment. Jim Naumovich feels that the [Letter of Intent] that we have is binding . . .

[548] The e-mail then returns to the subject of the brochures:

What would you suggest? Should I go ahead and ship the brochures for delivery today, so that the envelopes can be prepared today and tomorrow, or should I send them by overnight delivery and have the envelopes stuffed tomorrow? . . . I do not want my [Niagara Falls] receptionist to know that a sale is imminent yet . . .

This has really put me in a difficult position. What if my [Niagara Falls] receptionist gets spooked and decides to quit now? What if the rest of the staff finds out that a sale is imminent . . . [Fridriksson]’s lack of planning and his thoughtless reactio n to the mailing delay is putting me in a position where I jeopardize my future with my staff if I have the mailing prepared now; and in a position where I endanger the sale if I do not.

[549]I gather that Terry Lewis was concerned about the timing of a pre-closing mailing because he did not want his staff to prematurely learn of the sale.

(ii)telephone call from Fridriksson to Andy Gunarsons

[550]The final set of handwritten notes produced by Fridriksson for a telephone call to Andy Gunarsons is for September 28th, at 9:13 a.m. I addressed this telephone call earlier in these Reasons, at paragraphs [99]-[113], when disparagingly discussing the nature, character and credibility of Fridriksson. These notes are more fiction.

[551]It was the evidence of Andy Gunarsons that he did not possess the information to have made the promises attributed to him in these notes. One item in the notes refers to Mr. Gunarsons having promised Fridriksson “the patient list.”

When questioned about this, in-chief, Mr. Gunarsons stated:

A. . . . I dispute that. I don’t have a patient list, I never promised, I don’t have that information.

[552]However, on September 26th, Mr. Gunarsons had asked Dee Lewis for a CD of the 2001-2005 (and 2006 year-to-date) files from QuickBooks which, he

testified, he received “within a day or two.” Andy Gunarsons was aware (as of his e-mail to Karl Bowley at 4:21 p.m. on September 25th) that the complete patient list was in QuickBooks.

[553]There are no further telephone calls between Fridriksson and Andy Gunarsons until October 16th.

2014 ONSC 5831 (*)

124

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(iii)e-mail from Terry Lewis to Andy Gunarsons

[554]At 9:51 a.m., on September 28th, Terry Lewis again e-mailed Andy Gunarsons. He began by dealing with the issue of receivables: [Upper case in original]

Dee reminded me that we must make Karl and [Fridriksson] aware that whatever receivables there are in [Niagara Falls] are OURS and we will collect them. We are NOT giving them up to [Fridriksson].

[555]In cross-examination, Andy Gunarsons defined “accounts receivable,” in general, as “something billed and to be collected later.” He agreed with the suggestion that, “even in laymen’s terms, a receivable is payment . . . to the person

who did the work.” He did not recall why the concern over receivables was being raised on September 28th.

[556]The e-mail went on to say:

Mickey [Tersigni], my bookkeeper, is in [Niagara Falls] today and tomorrow and has the envelopes. She will bring them back to be stuffed here or take care of that in [Niagara Falls] tomorrow with some temps; but we need to know what to do soon.

(iv)e-mail from Terry Lewis to Andy Gunarsons

[557] On September 28th, at 12:53 p.m., Terry Lewis e-mailed Andy Gunarsons:

Remember that earlier, when we told Karl to pass on to [Fridriksson] that the brochures were Siemens, we received the reply that he did not want us sending out Siemens brochures. So, when I had the staff take the envelopes to [Niagara Falls], they did not take the brochures, as we could use them in Scarborough, since [Fridriksson] did not want them at that time. Now, all I can do is try to get them to [Niagara Falls] early Friday . . .

Thus, we cannot finish stuffing the envelopes until Friday. So the earliest that they can be mailed, even if we get the cheque deposited into James Naumovich’s trust account would be late Friday or Monday . . .

I have attached another newsletter that probably looks better . . .

(v)e-mail from Karl Bowley to Fridriksson

[558]At 3:14 p.m., on September 28th, Karl Bowley e-mailed Fridriksson (who was vacationing in New York City):

Info relayed from Terry thru Andy [to Karl Bowley]

▪ Terry never promised to do mailing

2014 ONSC 5831 (*)

125

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

▪ Terry has never done one [a mailing] in [Niagara Falls]

▪ [Terry’s] idea was do one and include a ‘letter of introduction’ about you

▪ thus [Terry] thought it made sense to do one mailing not two

▪[Terry] thinks a 3000 piece mail-out is too big to do at once – i.e. if it is successful it brings too much business at once and if done now people may come before you are set up there

▪[Terry] can’t physically process it anyway until mid week next week

▪[Terry] will do it, once deal is ‘set’ and will add his letter of introduction/reference.

And would recommend doing in blocks of 750 or so.

▪[Terry’s] opinion that mid Oct will still be fine.

[Fridriksson] – your call – not what you wanted but there is some merit to his thoughts. I’m still planning to visit Andy’s office next week to review numbers etc.

[559]This e-mail does not refer to the fall mailing as involving 5,000 items and Fridriksson did not correct the 3,000 figure that is mentioned. If the Niagara Falls Clinic had 5,000 patients, as Fridriksson repeatedly asserted in this trial, why would the mailing be for 3,000?

[560]In his testimony, Andy Gunarsons referred to the figure of 3,000 as being “a rounded up 2,500 with a cushion.”

[561]In cross-examination, Karl Bowley agreed with the suggestion put to him that “there was never any reference or any mention to you by Mr. Gunarsons that there would be a mailing of anything more than 3,000 letters.”

(vi)handwritten notes of a telephone call from Fridriksson to Andy Gunarsons

[562]Fridriksson produced handwritten notes of a telephone call to Andy Gunarsons at 3:50 p.m., on September 28th, which appear to be the last notes of this kind. Mr. Gunarsons disputes the accuracy of some of the notes and does not recall the balance of the notes.

(vii)e-mail from Andy Gunarsons to Terry Lewis

[563] At 5:30 p.m., on September 28th, Andy Gunarsons e-mailed Terry Lewis:

As discussed today, there is no panic about the mailings. Regular mail will do quite nicely.

2014 ONSC 5831 (*)

126

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

(viii)e-mail from Fridriksson to Karl Bowley

[564]At 8:54 p.m., on September 28th, Fridriksson sent an e-mail to Karl Bowley. It dealt with the fall mailing:

While certainly Terry never said ‘I promise to do the mailing,’ he did say he was going to do a mailing before Thanksgiving . . .

[565]This is truly remarkable. All of the huffing and puffing by Fridriksson about the fall mailing, and now we learn that it was never promised by Terry Lewis. And, the evidence does not clearly indicate whether the fall mailing involves brochures or postcards or something else.

[566]The e-mail then complained about a number of matters: [Underlining added]

I want a clear statement about what Terry is and is not going to do. To this point we are dancing without a partner. Where is his Letter of Intent? What is he selling? How much is he going to do after the sale . . .

All of his words regarding this clinic need to be spelled out . . . what will happen to the products on the shelves, what about the audiological equipment, access to Carol PDQ to the present and future schedule, the promise in writing that he has ceased negotiation with other parties, full and unfettered disclosure of everything to do with this $1,000,000 purchase. If there is not substantial movement in the direction of co- operation before I am back i.e. clearly stated principles from the other party, I do not know where this can lead but failure . . .

[567]At this stage of the negotiations (September 28th), very little has been agreed upon (perhaps only the purchase price). If representations have been made to

Fridriksson, he is uncertain as to their nature and so he wants “a clear statement” and they “need to be spelled out.” So far, on the basis of Fridriksson’s own testimony, nothing actionable has occurred.

(ix)e-mail from Fridriksson to Karl Bowley

[568]At 9:02 p.m., on September 28, 2006, Fridriksson sent an e-mail to Karl Bowley. After asking him to read this e-mail “with the other one sent to you today” (presumably referring to the 8:54 p.m. e-mail), Fridriksson continued: [Underlining added]

One last point, if he did not intend to do the mailing, why print the cards and why tell me about it. Karl, despite all of this nonsense, you and I have put a lot of effort into this agreement. I do think it has great potential to be a good thing if all that we have heard so far is true. Go look at the books. Tell Andy what I assume Michael Mann conveyed to you today and see what his response is. Michael did say something

2014 ONSC 5831 (*)

127

The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al.

interesting. He said many deals falter at this point. I know I need to maintain a cool head and try not to let the small stuff get in the way of great possibilities . . .

[569]In cross-examination, Fridriksson denied that, by “small stuff,” he was referring to the fall mailing. However, this e-mail and earlier ones contradict his testimony. For example, the e-mail at 8:54 p.m. bore the subject line “Re: mailing” and this e-mail, at 9:02 p.m., was to be read with that one.

[570]I observe that, in the communications between Fridriksson and Karl Bowley on September 28th, there is no reference to Fridriksson requiring 5,000 mailings,