COMMERCIAL LIST FILE NO.: 04-CL-5284
DIVISIONAL COURT FILE NO.: 87/04
SUPERIOR COURT OF JUSTICE - ONTARIO
(Divisional Court)
RE: RONALD COOK, MARY ANN COOK, TIFFANY COOK, FOUR DIRECTIONS PETROLEUM (FIRST NATION) INC. and FOUR DIRECTIONS GROUP INC.
Plaintiffs
(Moving Parties)
- and -
RONALD OVENDEN, PETER COLEMAN, BRADLEY BURDON, JIM BUJOUVES, RAYMOND KARBONI, STEPHEN PEPPER, JEFFREY LIPTON, MILTON CHAMBERS, NEW SOLUTIONS CAPITAL INC., NEW SOLUTIONS FINANCIAL CORPORATION, NEW SOLUTIONS FINANCIAL (II) CORPORATION, NEW SOLUTIONS FINANCIAL (III) CORPORATION, NEW SOLUTIONS FINANCIAL (IV) CORPORATION, NEW SOLUTIONS FINANCIAL (VII) CORPORATION, NEW SOLUTIONS FINANCIAL SR&ED CORPORATION, NEW SOLUTIONS FINANCIAL GROUP, 1302563 ONTARIO LIMITED, ADO HOLDINGS INC., THE PROVIDER GROUP INC., FELDSTEIN & ASSOCIATES LLP, and CHAMBERS & D’ALIMONTE
Defendants
(Responding Parties)
BEFORE: Mr. Justice D. Rutherford
COUNSEL: Evert Van Woudenberg & James R.G. Cook, for the appellants
Peter J. Cavanagh, for the respondents, Ovenden, Pepper, Lipton, New Solutions and Ado Holdings Inc.
Paul J. Green, for the respondent, Milton Chambers
David A. MacKenzie, for the respondent, Bradley Burdon
Douglas D. Langley, for the respondent, Feldstein & Associates LLP
HEARD: March 8, 2004
E N D O R S E M E N T
1The plaintiffs seek leave to appeal to the Divisional Court from the orders of E. Macdonald J. on February 17, 2004, setting aside the order of Jarvis J. and on February 18, 2004, refusing to stay her order pending this motion in Divisional Court.
2On January 21, 2004, Jarvis J. made an ex parte order on application by the plaintiffs, to recover and take control of documents and records, including electronic information pertaining to the plaintiffs’ business. The nature of the order was a blend of authority from Rule 24 of the Rules of Civil Procedure, provisions of the Canada Business Corporations Act and from the judgment in Anton Pillar KG v. Manufacturing Processes Ltd. et al., [1976] 1 All E.R. 779.
3The plaintiffs’ business involves buying gasoline wholesale and selling it through retail dealers on Akwesasne Reserve #59 on Cornwall Island. The defendants all had business relationships with the plaintiffs and their business, principally involving serving and financing of the operation.
4Pursuant to the order of Jarvis J., a large amount of documentation was taken from four separate locations. The order was extended on consent by Lane J. and after the respondents assembled and filed responding materials, a further extension request and a motion by the respondents to set aside the order came on before E. Macdonald J. on February 16, 2004. She set aside the order and required that all documents seized and any copies made be returned to the defendants. This has not yet been done. E. Macdonald J. also refused to stay her order as requested by the plaintiffs on February 18, 2004.
5For the plaintiffs, Mr. Van Woudenberg argued that the reasons for setting aside the order indicate that the prime concern Madam Justice Macdonald had was that the plaintiff Ron Cook had not disclosed the non-exigible status of his assets by virtue of s. 89(1) of the Indian Act. Paragraph [10] of her endorsement begins:
“I now turn to a most unsettling aspect of the non-disclosure by Mr. Cook whose undertaking as to damages was put before Jarvis J. It is reflected in paragraph 34 of his order. The importance of such undertakings is summarized at Paragraphs 36 and 37 of Mr. Cavanagh’s factum. Mr. Cook is a status Indian. He did not disclose that his undertaking is unenforceable pursuant to s. 89(1) of the Indian Act, R.S.C. 1985, c. 1-5.
89(1) Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian.”
She concluded that it was a significant failure to disclose “…that his undertaking [to abide by the Court’s finding as to damages] is unenforceable”. She went on to say:
“Mr. Cook knew that his undertaking could have no effect because he is a status Indian. This is akin to trickery.”
6Mr. Van Woudenberg pointed to authorities in which Indian litigants had not even been required to give such an undertaking before being granted injunctive relief and authorities that suggest that the Court is not to evaluate the efficacy of such an undertaking. This, he argued, showed that there are authorities in conflict with Justice Macdonald’s ruling.
7It was also argued on behalf of the plaintiffs that Justice Macdonald had decided the issue on the basis of speculation, suggesting that in seeking the order the plaintiffs were trying to force the defendants to re-negotiate their security. “If this proves to be true”, she wrote, “the obtaining of this Order is a flagrant abuse of the extraordinary remedy that is the essence of an Anton Pillar Order”.
8I must say I am somewhat surprised by the degree of “unsettlement” Justice Macdonald expressed over the effect of s. 89(1) of the Indian Act. Mr. Cook’s affidavit opened with his assertion that he was a status Indian and that the business was centred on the Akwesasne Reserve. I would certainly not conclude that Justice Jarvis was unaware of the provisions of s. 89 of the Indian Act. Many lawyers and judges are aware of the protection granted to status Indians and their reserve assets and businesses against both taxation and the reach of civil legal enforcement processes. I am not at all sure that it was up to Mr. Cook to plead the provisions of the Indian Act in order to make reasonable disclosure as to the efficacy of his damages undertaking. It must not be forgotten that even with his Indian status, one cannot simply assume that his undertaking was of no value. To liken his failure to bring this hardly unknown section of statute to Justice Jarvis’ attention as “akin to trickery” is not at all fair in my view and if the case turned on this I think I would be inclined to grant leave to appeal.
9To focus on this issue as the key to the decision is, however, to miss the true focus of Justice Macdonald’s decision. In paragraph [9] she says:
“…there was material non-disclosure of certain key circumstances which, if disclosed would likely not result in the Order of Jarvis J.”
In paragraph [12], she added that in contrast to Mr. Van Woudenberg’s submission that the plaintiffs’ evidence put before Justice Jarvis was factually accurate, “I would say that it was factually misleading. It did not portray the complete picture, which had to be well known to Mr. Cook who owns 78% of the shares of Four Directions. Important information was omitted. Had it been included, it would probably have altered the result.”
10The affidavit evidence of the plaintiffs portrays a picture of misappropriation, fraud, forgery, corporate mismanagement, fiduciary breaches and so on. It suggests that the plaintiffs are taking such a fleecing that it is not surprising that a most extraordinary remedy was granted to them.
11In response, however, the defendants filed multiple affidavits and considerable documentation explaining their business and financial roles and relationships with the plaintiffs, making sense of the financing arrangements and the contractual documents being used, and negating the suggestion of dishonest dealings that the original materials portrayed.
12The plaintiffs filed nothing in reply. When Ronald Cook was served with a notice of an appointment to be cross-examined on his affidavit, he did not appear. Mr. Van Woudenberg attempted to explain this on the basis that all counsel appeared content to proceed before Madam Justice Macdonald without cross-examinations, an approach to this preliminary type of extraordinary remedy which may in fact be supportable, but the fact remains that Macdonald J. was faced with a considerable answer by the defendants to a most sinister accusation by a plaintiff, and the plaintiff left the answer to speak for itself.
13I am not persuaded that, apart from her reference to the trickery in failing to draw s. 89 of the Indian Act to Justice Jarvis’ attention, Justice Macdonald’s decision to set aside the order is of doubtful correctness. I think the picture as portrayed with the information provided by the defendants’ evidence is so different from that presented originally, ex parte, that she was probably right in suggesting that there was such material non-disclosure apart from s. 89 that on the full picture, the order would never have been granted.
14It follows that the plaintiffs have not met the onus under either branch of Rule 62.02 of the Rules of Civil Procedure to justify a grant of leave to appeal to the Divisional Court and the motion must be dismissed.
15I need not deal with whether I have jurisdiction to consider staying Justice Macdonald’s order setting aside the order. Counsel for the plaintiffs asked me to enter such a stay if I granted leave to appeal. Counsel for the various defendants argued that in light of Justice Macdonald’s refusal to grant a stay, the matter was res judicata and for me to be asked to reconsider it was tantamount to judge-shopping. While I don’t agree with either of those submissions, having refused leave to appeal, there is no basis on which to contemplate staying her order.
16If counsel cannot agree on an appropriate order for costs, I will assess them on the basis of brief written submissions from the parties after they have exchanged them. Perhaps the defendants should first provide their submissions to the plaintiffs within 15 days and the plaintiffs will provide theirs within the following 15 days. I would have everything within about 30 days and will convey my rulings to all counsel in writing. I suggest the submissions be sent to me directly at the Court House in Ottawa.
17Order accordingly.
RUTHERFORD J.
DATE: 20040311