Catalyst Fund General Partner I Inc. v. Hollinger Inc.
[Indexed as: Catalyst Fund General Partner I Inc. v. Hollinger Inc.]
79 O.R. (3d) 70
[2005] O.J. No. 4666
Court of Appeal for Ontario,
Weiler, Blair and LaForme JJ.A.
November 1, 2005
Charter of Rights and Freedoms -- Self-incrimination -- Inspector being appointed under s. 229 of Canada Business Corporations Act to enquire into affairs of company -- Former officers and directors of company facing possible criminal charges in United States -- Directors not being entitled to constitutional exemption from obligation to answer [page71] inspector's questions under oath on basis that their answers might incriminate them in U.S. proceedings -- Directors not being entitled to stay of Canadian proceedings pending outcome of U.S. criminal proceedings -- Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 229 -- Canadian Charter of Rights and Freedoms, ss. 7, 13.
An Inspector appointed under s. 229 of the Canada Business Corporations Act to enquire into the affairs of H Inc. sought to examine the appellants under oath. The appellants, who were former senior officers and directors of H Inc., were facing possible criminal charges in the United States, and alleged that their right to remain silent under ss. 7 and 13 of the Canadian Charter of Rights and Freedoms would be infringed by this examination as the Fifth Amendment to the U.S. Constitution would not protect them from having their answers used in U.S. criminal proceedings. They appealed an order compelling them to submit to questioning.
Held, the appeal should be dismissed.
The appellants were not entitled to a constitutional exemption from answering any questions. They were only entitled to a constitutional exemption if their evidence would be used against them in a criminal prosecution in Canada. A constitutional exemption was not appropriate as the purpose of the inquiry being conducted under the CBCA was fact-finding only and not prosecutorial. It would be inappropriate to stay the order compelling the appellants to submit to questioning until the extent of the proceedings in the U.S. was clear. The protection afforded by the Charter is witness-specific and fact-specific. The balancing of potential prejudice to a particular appellant against the necessity of obtaining the evidence had to be considered in context. The application judge had indicated that he was prepared to rule on whether the appellants should be compelled to answer specific questions. This was the appropriate context in which to consider the appellants' rights.
APPEAL from an order of Campbell J., 2005 18864 (ON SC), [2005] O.J. No. 2191, 255 D.L.R. (4th) 233 (S.C.J.) compelling the appellants to submit to questioning by an Inspector appointed under Canada Business Corporations Act, R.S.C. 1985, c. C-44.
Statutes referred to Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 229 Canadian Charter of Rights and Freedoms, ss. 7, 13 U.S. Const., amend. v
Counsel
Edward L. Greenspan, Q.C., for appellant, Lord Conrad Black. Donald H. Jack, Bradley Miller and Gillian T. Hnatiw, for appellant, John A. Boultbee. Michael Code, for appellant, F. David Radler. David C. Moore and Kenneth G.G. Jones, for respondent, Catalyst Fund General Partner I Inc. W.A. Kelly, Q.C., for respondent, Hollinger Inc. Peter H. Griffin and Monique Jilesen, for respondent Ernst & Young Inc., Inspector. [page72]
Reasons for Decision
1BY THE COURT:-- The issue in this appeal is whether an Inspector appointed under s. 229 [See Note 1 at the end of the document] of the Canada Business Corporations Act[copyright] R.S.C. 1985, c. C-44 (the "CBCA") to enquire into the affairs of Hollinger Inc. [See Note 2 at the end of the document] should be prevented from examining the appellants under oath as part of the inspection process. The appellants are former senior officers and directors of Hollinger Inc., a Canadian public corporation. They allege that their right to remain silent, under ss. 7 and 13 of the Canadian Charter of Rights and Freedoms, will be infringed.
2Prior to the hearing of this appeal, two of the appellants filed an application seeking to admit fresh evidence. Portions of the fresh evidence are non-controversial and are admitted on consent. Paragraphs 13 to 19 of the affidavit of the litigation expert from the United States are contested on the basis that they amount to argument rather than evidence. We agree, and we decline to admit them.
3The appellants submit that the order of Campbell J. will violate their rights to be free from self-incrimination under ss. 7 and 13 of the Charter because they fear the answers they give in response to the investigation under the CBCA may be used against them as a result of an ongoing criminal investigation into [page73] their conduct in the United States. The relief sought by the appellants is a declaration that Campbell J.'s order compelling them to submit to questioning is premature because the inspector has not exhausted other sources of information. The appellants also request that the order to compel them to answer questions should be set aside and dismissed or, in the alternative, stayed pending the outcome of criminal proceedings in the United States.
4In both Canada and the United States, the right to protection from self-incrimination is an important right that is safeguarded. The difference between how that right is protected in Canada and in the United States lies at the heart of this appeal. In Canada, a person has the right not to have any incriminating evidence that the person was compelled to give in one proceeding used against him or her in another proceeding except in a prosecution for perjury or for the giving of contradictory evidence. Thus, in Canada, a witness cannot refuse to answer a question on the grounds of self- incrimination, but receives full evidentiary immunity in return. In the United States, a witness can claim the protection of the Fifth Amendment and refuse to answer an incriminating question. Once the answer is given, however, there is no protection.
5Here, we have a situation where a Canadian court has made an order pursuant to a Canadian statute that would result in the examination of the appellants in Canada. The appellants are, however, concerned that their answers will be used to incriminate them in proceedings in the United States.
6The appellants' first submission is that the order of Campbell J. permitting a notice of examination to be served on them is premature in light of his initial order authorizing an examination of documentary evidence and evidence from other sources. The appellants submit that they can be examined only after the Inspector has exhausted all other sources of information. This submission can be dealt with summarily. The step-by-step [page74] approach of Campbell J.'s earlier order recognized that the appellants were contemplating the motion now under appeal, but enabled the Inspector to go forward in the interim. Properly construed, the order did not require the Inspector to exhaust all other sources before having recourse to the best source of evidence, namely, the appellants, who were the directing minds of Hollinger Inc. In addition, the Inspector has now indicated that the records of Hollinger Inc. are in disarray, that current management lacks knowledge about a number of matters, and that the only way in which the Inspector can do a thorough report is to examine the appellants. We would dismiss the first ground of appeal.
7The next issue is whether the appellants are entitled to a constitutional exemption from answering any questions. They are not. They are only entitled to a constitutional exemption if their evidence would be used against them in a criminal prosecution here. A constitutional exemption is not appropriate in the circumstances of this case as the purpose of the inquiry being conducted under the Canada Business Corporations Act is fact-finding only and not prosecutorial.
8Further, in oral argument before us, Mr. Greenspan, counsel for Lord Black, candidly acknowledged that at least some of the questions the Inspector wished to ask would not be a violation of the appellants' rights against self- incrimination in the United States. We therefore decline to set aside the order of Campbell J.
9We turn now to the question of whether the order of Campbell J. should be stayed until the extent of the proceedings in the United States is clear. There are at present no outstanding criminal charges against Lord Black or Mr. Boultbee. Subsequent to the hearing of this appeal, Mr. Radler has pled guilty to the charges that were outstanding against him. The appellants seek protection in a factual vacuum and boldly assert that no measures imposed by any judge or taken by the Minister of Justice could protect them once they have been compelled to answer questions in Canada.
10Campbell J. set up a procedure specifically to deal with the anticipated conflict in how Canada and the United States approach protection from self-incrimination, however. That procedure is designed to enable the parties to make submissions as a result of which the court will craft a protective mechanism tailored to the situation. The parties have yet to engage this process. As a result, no one knows yet what protective mechanism will be crafted. We cannot decide that Charter rights will be infringed in a vacuum or engage in speculation. The particular Order that is before us under appeal does not as yet lead us to conclude that the appellants' Charter rights will be violated. [page75]
11Further, while there is an overlap between the criminal investigation in the United States and the investigation in Canada being conducted by the Inspector under the CBCA insofar as non-compete payments to the appellants respecting both Hollinger Inc. (the Canadian Company) and Hollinger International (the U.S. Company) are concerned, in other areas there is no overlap. For example, the management fees paid by Hollinger Inc. to the appellants do not appear to be the subject of any proceedings in the United States at this time.
12The protection under the Charter is witness-specific and fact-specific. The balancing of potential prejudice to a particular appellant against the necessity of obtaining the evidence must be undertaken in context. For example, by his plea of guilty in the United States, Mr. Radler may be in a different position in some respects than the other two appellants and may not need protection from the use that can be made of his answers at least in respect of the matters to which he has already pled guilty. Campbell J. indicated that he was prepared to rule on whether the appellants should be compelled to answer specific questions and we regard that as the appropriate context in which to consider the appellants' rights. Also, like Campbell J., we are not persuaded that Canada is completely powerless to protect those under its jurisdiction.
13Having regard to the contextual approach proposed by Campbell J., we would decline to order a stay of his order.
14Accordingly, the appeal is dismissed. Having regard to the submissions we have received, we would make no order as to costs.
Appeal dismissed.
Notes
Note 1: 229(1) A security holder or the Director may apply, ex parte or on such notice as the court may require, to a court having jurisdiction in the place where the corporation has its registered office for an order directing an investigation to be made of the corporation and any of its affiliated corporations.
(2) If, on an application under subsection (1), it appears to the court that
(a) the business of the corporation or any of its affiliates is or has been carried on with intent to defraud any person,
(b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted, or the powers of the directors are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of a security holder,
(c) the corporation or any of its affiliates was formed for a fraudulent or unlawful purpose or is to be dissolved for a faudulent or unlawful purpose, or
(d) persons concerned with the formation, business or affairs of the corporation or any of its affiliates have in connection therewith acted fraudulently or dihonestly,
the court may order an investigation to be made of the corporation and any of its affiliated corporations.
Note 2: The reasons for the appointment of an Inspector are contained in the endorsement of Campbell J. dated September 3, 2004 reported at [2004] O.J. No. 3644, 133 A.C.W.S. (3d) 643 (S.C.J.) with Reasons for Decision dated September 15, 2004, reported at 2004 66299 (ON SC), [2004] O.J. No. 3886, 48 B.L.R. (3d) 194 (S.C.J.).
