Citation and Parties
CITATION: Bennett v. Bennett Environmental, 2016 ONSC 3740 DIVISIONAL COURT FILE NO.: 158/16 DATE: 20160607
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: John Anthony Bennett, Respondent/Plaintiff AND: Bennett Environmental Inc., Moving Party/Defendant
BEFORE: L.A. Pattillo J.
COUNSEL: Nina Bombier, Brian Kolenda and Julia Brown, for the Respondent/Plaintiff Eliot Kolers and James S.F. Wilson, for the Moving Party/Defendant
HEARD: In Writing
ENDORSEMENT
Introduction
[1] Bennett Environmental Inc. (“BEI”) seeks leave to appeal from the order of Conway J. dated April 4, 2016 (the “Order”) dismissing BEI’s motion to set aside or stay the Order of McEwen J. dated December 3, 2014, which amended the Order of Wilton-Siegel J. dated December 29, 2013 (together the “Interim Payment Order”) that requires BEI to advance funds to the Respondent John Anthony Bennett (“Bennett”) for the defence of criminal charges arising from his role as a former officer and director of BEI.
Background
[2] Bennett is the founder and former CEO of BEI. He left BEI in 2005. In 2009, Bennett was indicted in New Jersey for major fraud and conspiracy to commit fraud against the United States government in the course of running BEI. In late 2014, after a lengthy legal battle in Canada, Bennett was extradited to the United States to stand trial. On March 16, 2016, after a two-month trial in New Jersey, a jury returned a verdict of guilty of the charges against Bennett.
[3] Although a verdict of guilty has been returned by the jury against Bennett, no conviction occurs in the United States (as under Canadian criminal law) until the court decides the evidence is sufficient to support the verdict and enters a judgment. In Bennett’s case, both during the trial and following the verdict, his lawyers brought motions for acquittal under Rule 29 of the Federal Rules of Criminal Procedure on the basis that the evidence was insufficient to support a conviction. The Rule 29 motions along with a motion for a new trial are to be heard on June 27, 2016.
[4] BEI obligation to reimburse Bennett’s legal fees arises from an indemnification provision in BEI’s by-laws. The Interim Payment Order requires BEI to reimburse Bennett’s legal fees in the United States criminal proceedings on an interim basis, within thirty days of the submission of invoices, subject to Bennett’s obligation to repay BEI if he did not act honestly and in good faith and with a view to its best interests.
The Motion Judge’s Decision
[5] In dismissing BEI’s motion, the motion judge rejected BEI’s argument that the jury verdict was sufficient evidence of mala fides to overcome the indemnification obligation. She concluded that it would completely undermine the purpose of the Interim Payment Order to set it aside on the basis of a jury verdict that itself may or may not be accepted by the court and may or may not result in an acquittal.
[6] In respect of the stay, the motion judge addressed the three criteria in RJR MacDonald v. Canada (Attorney General), [1994] 1 S.C.R. 311 and determined that BEI had not established that it would suffer irreparable harm and the balance of convenience favoured not interfering with the Interim Payment Order.
Test for Leave to Appeal
[7] The test for granting leave to appeal under rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.
[8] Under rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 7 O.R. (3d) 542 (Div. Ct.).
[9] Under rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co., [2003] O.J. No. 3442 (S.C.J.); Ash v. Lloyd’s Corp. (1992), 8 O.R. (3d) 282 (Gen. Div.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: Rankin v. McLeod, Young, Weir Ltd. (1986), 57 O.R. (2d) 569 (H.C.J.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.).
Analysis
[10] BEI submits that leave to appeal from the Order should be granted because:
The motion judge’s decision not to set aside the Interim Payment Order is in conflict with the authorities on the right to advances and the good faith precondition to advances, specifically Cytrynbaum v. Look Communications, 2013 ONCA 455 (C.A.).
The motion judge’s decision not to set aside the Interim Payment Order is in conflict with the law of evidence, specifically R. v. Jesse, 2012 SCC 21, [2012] 1 S.C.R. 716 which held that jury verdicts and verdicts rendered by judges alone are presumptively reliable.
The motion judge erred in dismissing BEI’s request for a stay, in respect of her determination of both irreparable harm and balance of convenience. Her decision concerning irreparable harm conflicts with existing case law and her decision on the balance of convenience raises “serious debate”.
[11] In my view, the motion judge’s decision does not conflict with Cytrybaum. In Blair v. Consolidated Enfield Corp., [1995] 4 S.C.R. 5, the Supreme Court affirmed that officers and directors are presumed to act in good faith and the burden on the company to disprove the presumption is a heavy one. Cytrybaum held that in order to rebut the presumption, even on an interim basis, there must be strong prima facie evidence of mala fides.
[12] The motion judge assessed the evidence before her on the motion and concluded that there was insufficient evidence of mala fides to set the Interim Payment Order aside “at this stage”.
[13] Nor am I of the view that the motion judge’s decision conflicts with Jesse. Jesse dealt with final judgments, whether by judge or jury, not an unentered verdict subject to outstanding motions to set it aside, as in this case.
[14] Finally, I do not consider the motion judge’s finding that BEI had not established it would suffer irreparable harm to conflict with existing case law or that her finding the balance of convenience favoured Bennett to be “open to serious debate.”
[15] BEI’s argument of irreparable harm was based on the risk that given the United States jury verdict, if it is required to continue paying advances to Bennett it may not be able to recover those monies. BEI relies on RJR MacDonald. But is clear from the Court’s discussion of irreparable harm that inability to pay damages does not automatically amount to irreparable harm “although it may be a relevant consideration.” (para. 64).
[16] In my view, the motion judge’s decision that BEI had not established irreparable harm is not in conflict with the case law. In considering irreparable harm, the motion judge noted that the risk that Bennett would not repay the funds did not constitute irreparable harm as it was a risk BEI bore from the moment it granted all of its officers and directors the right to advancement. That distinction separates the case from those where likelihood of failure to pay damages is a relevant consideration in respect of irreparable harm.
[17] Nor do I consider that the motion judge’s decision that the balance of convenience favoured Bennett is “open to serious debate.” The motion judge considered the factors on both sides and found, in the circumstances, that the impact of the stay at that juncture would be more harmful to Bennett than to BEI. In my view, on the facts before her, I do not consider her decision to be wrong.
Conclusion
[18] For the above reasons, therefore, BEI’s motion for leave to appeal is dismissed.
[19] Bennett is entitled to his costs on the motion. Bennett’s right to full indemnification for any costs incurred in securing his right to advancement, not subject to repayment, has been previously allowed in the Interim Payment Order. Accordingly, I see no reason why Bennett should not receive full indemnification on the same basis for this motion as well.
[20] Bennett has submitted a Costs Outline claiming full indemnity costs of $13,108.90. In my view, the costs as submitted are reasonable given the issues raised. Costs to Bennett on a full indemnity basis, fixed at $13,108.90 in total.
L. A. Pattillo J.
Date of Release: June 7, 2016