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Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

SABOURIN AND SUN GROUP OF COMPANIES v. LAIKEN, 2013 ONCA 530

1. CASE SUMMARY 

Areas 0f Law: Mareva Injunction; Contempt; Principle of Finality

~Civil contempt does not require finding of deliberate intent~

Background: Peter Sabourin was a financial advisor involved in off-shore securities with his group of companies. In 2000, Sabourin sued one of his clients, Judith Laiken, for alleged deficiencies in her margin account. Laiken counter-claimed alleging fraud. During the course of litigation, Laiken obtained a very broadly worded ex parte Mareva order freezing the assets of Sabourin and other named defendants which included enjoining any others “with knowledge of this Order” to “prevent the sale, disposition, withdrawal, dissipation, sale, assignment, dealing with, transfer, conveyance, conversion, encumbrance or diminishment” of the assets, specifically including money held in “trust accounts”. Subsequently, the motion judge varied the order to allow for payment of legal fees, living and other routine expenses. A further continuation motion was argued later that year regarding payment of ordinary third party creditors. The decision was reserved and in the interim, Sabourin delivered a cheque for $500,000 to his solicitor, Peter Carey, which did not include any instructions. Carey testified that he had not expected the cheque and deposited it into his trust account. Four days after receiving the cheque, the decision continuing the Mareva order was released refusing a provision that would allow Sabourin to pay third party creditors. Sabourin subsequently instructed Carey to use the $500,000 to settle with the Bill Brown group of creditors, however Carey refused on the basis that to do so would violate the Mareva order. In a conference call with Brown and Carey, Sabourin disclosed that Carey held $500,000 of Sabourin’s money in his trust account that was intended for Brown but could not be released due to the Mareva order. Carey was unsuccessful in an attempt to settle with Laiken’s solicitors and, on Sabourin’s instructions, he returned the funds to Sabourin after deducting $60,000 for his past and future legal fees. Sabourin eventually went out of business and disappeared, taking all of his assets with him. In 2010, Laiken brought a motion for contempt against Carey for breach of the Mareva order. Carey responded with affidavit evidence but did not attend. The motion judge granted Laiken’s motion. She rejected Carey’s claim that the order was unclear and found that he had understood that the money in his trust account was subject to the Mareva order and that he had transferred funds from his trust account in violation of that order. She also rejected his defence that he was bound by solicitor-client privilege and had to release the funds so as to not improperly shelter them from creditors. The motion judge then directed the parties to appear before her again pursuant to Rule 60.11 and required Carey’s attendance at the hearing. At the hearing, Carey led further evidence including oral evidence and an affidavit by a highly respected member of the litigation bar. The motion judge interpreted a previous decision of the Court of Appeal in the proceedings and Rule 60.11 to allow her to reach a different conclusion, namely, that contempt had not been shown beyond a reasonable doubt and she no longer found Carey to have been in contempt.

Appellate Decision: As no new facts came to light after the initial contempt finding had been made, the principle of finality must be respected and Rule 60.11 did not permit the motion judge to revisit or reverse her initial finding of contempt. Before an appeal can be made, both phases of a contempt proceeding – the issue of contempt and then sanction – must first be completed. Having the benefit of the complete record, the Court of Appeal determined that the motion judge had erred in finding that Carey was not in contempt. Despite any alleged deficiencies in the Mareva order, the terms remained clear and subsequent variations had no effect on their clarity. Further, the evidence demonstrated that Carey knew the order was still binding on him after variations. The whole purpose of the Mareva order was to prevent Sabourin and others having knowledge of the order from dealing with his assets. It was implicit in the order that Sabourin was a “rogue bent on flouting the court’s process” and Carey, particularly as an officer of the court, was bound to act accordingly. As such, it was much more likely that the funds would have been available for execution had they remained in Carey’s trust account. Further, Carey’s solicitor-client privilege argument ignored the fact that Carey knew Sabourin had already disclosed to Brown that the money was in his trust account. Even though a contumacious intent was not found of Carey, nor was it required for civil contempt, a lack of such intent did aid in keeping his sanction lower to a penalty of paying Laiken’s costs on a partial indemnity basis.

2. COMMENT BY COUNSEL FOR THE APPELLANT JUDITH LAIKEN, Kevin Toyne

The Court of Appeal’s decision helpfully clarifies several areas of the law of contempt (with one exception), while at the same time sending an important message to the profession. The decision is also a reminder that civil contempt proceedings are unlike most civil motions and involve concepts foreign to the daily practice of most civil litigators.

Civil contempt hearings are typically bifurcated into two phases: the first dealing with whether or not the party is in contempt; and the second dealing with the appropriate remedy or sanction. The Court also has the discretion to set aside a finding of contempt if the contemnor complies with the order (which is easier to do when the order is mandatory as opposed to prohibitory). In this case, one of the issues that arose was whether or not the Court could set aside a finding of contempt on grounds other than compliance and, if so, how and when that power was to be exercised.

After being found in contempt, Carey’s unsuccessfully attempted to postpone the second phase of the hearing pending an appeal of the finding of contempt. He then brought a motion to set aside the finding of contempt to be heard at the same time as the second phase, and sought to introduce additional evidence in support of his motion. The grounds for the motion were effectively that the motions judge had erred in finding him in contempt.

The Court of Appeal confirmed that a party is generally not permitted to challenge or attack a finding of contempt except through the appeal process. This aspect of the decision appears to preclude the adoption of jurisprudence from the United Kingdom that recognizes the Court’s discretion to set aside a finding of contempt even if the contemnor has not – or cannot – comply with the order.

Those accused of contempt often believe that a lack of intent to breach the order (also known as contumacious intent) is a complete defence to the allegation leveled against them. The dominant strain in the jurisprudence for the past several decades has held that an intention to commit the act that breached the order is sufficient, and whether or not the contemnor intended to breach the order is a matter to be considered when determining the appropriate sanction. The Court of Appeal confirmed that contumacious intent is not required for a finding of contempt but that its absence is a mitigating factor during the second phase of the contempt hearing.

The Court of Appeal emphasized that court orders must be respected, even if those subject to the order believe that it was wrongly granted. Until an order is varied or set aside, it must be complied with and those accused of contempt cannot escape a finding of contempt on the grounds that the order should not have been granted (although the propriety of the order can be a factor considered by the Court when determining the appropriate remedy).

The important message to the profession is this: not only do we have a duty to ensure respect for court orders, we must also abide by them, and our erroneous interpretations of them will not save us or clients from being found in contempt. Carey was found to be in contempt notwithstanding the Court of Appeal’s findings that “[h]e did not desire or knowingly choose to disobey the order”. If a lawyer is representing a client subject to an extraordinary remedy like an Anton Piller or Mareva order, it is important to understand not only the client’s obligations under the order, but also the lawyer’s obligations. If a lawyer is unfamiliar with these types of orders, seeking advice from other members of the profession with more experience dealing with them is strongly recommended.

Finally, the Court of Appeal declined to address an important emerging issue in the law of civil contempt: whether the Court can award compensation as a remedy for civil contempt. The Court of Appeal was of the view that Laiken’s related negligence action was a more appropriate venue for her claim for compensation and that the appropriate sanction was to require Carey to pay Laiken’s costs. The Court did, however, imply that claims for compensation that do not involve a straightforward causation analysis may not be appropriate for the summary nature of civil contempt proceedings. As the jurisprudence recognizing compensation as a remedy becomes more widely known, it is inevitable that the Court of Appeal (or perhaps the Supreme Court) will address this issue in the near future.

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