Court File and Parties

COURT FILE NO.: CV-21-664251-0000 DATE: 20220412 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: The Corporation of the Township of King AND: 11547372 Canada Inc., Franklin Urgiles, and Franklin Haulage Excavating Inc.

BEFORE: J.T. Akbarali J.

COUNSEL: J. Longo and P. Miehls, for the Applicant Charles Baker, for the Respondents

HEARD: April 11, 2022

Endorsement

Overview

[1] This motion addresses the question of the proper penalty for the respondents’ contempt of court. The applicant urges me to fine the respondents $150,000, and to order full indemnity costs payable to the applicant in the amount of $184,847. The respondents acknowledge the finding of contempt that has been made against them. On this motion, they argue that a fine of $75,000 and costs of $125,000 are appropriate.

Brief Background

[2] On December 7, 2021, I issued an endorsement in which I found the respondents to be in contempt of a consent order signed by Vella J. dated June 30, 2021. The order prohibited the respondents from dumpling fill and engaging in site alteration without a permit, or acting in contravention of the applicable zoning by-law, at a property known as 15325 Highway 27, in Schomberg, Ontario.

[3] I held that the elements of contempt of court were made out. I made the following findings:

a. The evidence “overwhelmingly establishe[d] that the respondents engaged in intentional acts that were prohibited by the order, and intentionally failed to perform acts that the order compels.”

b. The respondents’ evidence was not credible.

c. The applicant had proven, beyond a reasonable doubt, that the respondents were acting in bad faith. In particular, I noted the following evidence:

i. Before the consent order, the applicant issued (i) a stop work order; (ii) a remediation order; and (iii) a zoning notice, all of which the respondents ignored. The respondents then acted, and failed to act, in breach of the consent order.

ii. Evidence produced by the respondents indicates that they have previously dumped fill without a permit, indicating that their actions on the property in question is not a result of misunderstanding or mistake, but a deliberate course of conduct.

iii. In response to a complaint from the applicant about the non-removal of the trucks from the property, on July 26, 2021, at about 5 pm, the respondents’ counsel’s office sent applicant’s counsel a photograph of the property without any trucks and indicated that the respondents were in compliance with the order. In fact, as demonstrated by photographs taken around 7 pm that same day, there remained trucks on the property, as well as a bucket for machinery, and the photographs were taken in such a way as to hide the trucks and bucket from view. On cross-examination, Mr. Urgiles was asked whether he tried to deceive the applicant, by making it appear there were no trucks on the property when in fact, the respondents were not in compliance with the order. He answered, “correct.”

[4] Having found the respondents in contempt, I adjourned the hearing to the second stage of the process – the penalty hearing. I set out a timetable within which each party could file an updating affidavit and supplementary factums.

[5] The parties next attended before me on February 4, 2022. The applicant had filed an updating affidavit which established that, following my finding that the respondents were in contempt, the respondents continued to breach Vella J.’s order. There is evidence in the record that the respondents breached the order three times in December 2021.

[6] At that time, the respondents attended with new counsel who had just been retained. The respondents had filed an updating affidavit, but it included no evidence from the respondents, but rather from a third-party environmental consultant. The respondents had not filed a factum.

[7] Counsel sought an adjournment to file a factum and prepare for the penalty hearing properly. He also sought leave to file further affidavit evidence, a request to which the applicant objected. In the end, I granted an adjournment to February 22, 2022, and provided a timetable for the respondents to file a factum, and for the applicant to file a reply factum, if necessary. I did not grant leave to file additional evidence.

[8] On February 22, 2022, the parties attended before me again. At that time, the respondents’ counsel produced case law from the Court of Appeal stressing the importance of the judge in the penalty phase of a contempt hearing having evidence of the financial circumstances of the contemnor in order to fashion a fit sentence. Counsel argued that the evidence was not before me due to ineffective assistance of former counsel. In view of this law, I granted an adjournment to permit the filing of evidence “on the subject of his financial circumstances.” I set out a timetable that included a direction that the respondents’ representative would be cross-examined on his affidavit during the afternoon of March 15, 2022. This was a date agreed to by counsel and by the respondent, Franklin Urgiles, who was at the hearing.

[9] The respondents filed an affidavit from Mr. Urgiles in which he deposes to his financial circumstances, and offers an apology to the court. Unfortunately, he did not attend for the cross-examination I had ordered; counsel for the applicant obtained a certificate of non-attendance. The respondents’ counsel offers an explanation to do with daylight savings time, which is disputed by the applicant, and on which there is no evidence, only submissions.

[10] The penalty hearing finally proceeded on the merits on April 11, 2022.

The Principles that Govern the Penalty Phase of a Civil Contempt Hearing

[11] Under r. 60.11(5), of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a court that has made a finding of contempt may make such order as is just, and where, as here, a finding of contempt is made, the judge may order that the contemnor be imprisoned, pay a fine, do or refrain from doing an act, pay such costs as are just, and comply with any other order that the judge considers necessary.

[12] The purpose of a penalty for civil contempt is to enforce compliance with court orders and ensure societal respect for the courts: Boily v. Carleton Condominium Corp 145, 2014 ONCA 572, (2014) 2014 ONCA 574, 121 O.R. (3d) 670, at para. 79. The Court of Appeal has also recognized punishment as a secondary purpose of sentencing in civil contempt cases: Business Development Bank of Canada v. Cavalon Inc., 2017 ONCA 663, at para. 81.

[13] In Boily, at para. 90, the Court of Appeal identified principles to guide the court in fashioning a fit sentence for civil contempt:

a. The proportionality of the sentence to the wrongdoing;

b. The presence of mitigating factors;

c. The presence of aggravating factors;

d. Deterrence and denunciation;

e. The similarity of sentences in like circumstances; and

f. The reasonableness of a fine or incarceration.

[14] I consider each of these in turn.

Proportionality

[15] When considering the proportionality of the sentence for civil contempt, the court concerns itself with the gravity of the offence and the degree of responsibility of the offender. In this context, the offence is the breach of a court order. The contemnor’s conduct that led to the order in question is not a factor: Chiang (Re), 2009 ONCA 2, at para. 86.

[16] In my view, the penalty imposed in this case must recognize the respondents’ high degree of blameworthiness. They entered into a consent order with legal advice, and then promptly ignored it. Even after I found the respondents to be in contempt, they continued to breach the order.

[17] In the first phase of this motion, I concluded that the respondents were acting in bad faith. They profited by continuing to illegally dump fill on the property in question. They displayed disrespect for the orders of the court. An owner of a neighbouring property reported taking a photo of the respondents’ breach of the order on December 24, 2021, at a time when Mr. Urgiles was present. She indicated that Mr. Urgiles asked if she was taking a picture, and when she said yes, he said “take a picture of me,” followed by “I take a picture of you now.” The breaches of the order are not the result of a misunderstanding, but are deliberate and taunting breaches of Vella J.’s order, which occurred even after Mr. Urgiles had been found in contempt.

Mitigating Factors

[18] Mitigating factors may justify a lighter sentence. In Keenan v. Keenan, 2015 ONSC 574, at para. 14, the court identified the following mitigating factors: i) attempts to purge the contempt; (ii) genuine signs of remorse; (iii) apologetic behaviour; (iv) efforts to mitigate damages on other parties; (v) medical conditions; (vi) first convictions of contempt; (vii) admissions of contempt; and (viii) willingness to comply with, or to consent to, orders of the court. In Devathasan v. Ablacksingh, 2018 ONSC 7557, at para. 24, the court added to this list (i) the existence of separate sanctions for the same factual circumstances; and (ii) there are dependents who rely on the contemnor.

[19] Not all of these are relevant in this case. With respect to the mitigating factors raised in this motion, I note the following:

a. The respondents appear to have ceased breaching the order by the end of December 2021. I do not place significant weight on this factor for two reasons. First, the respondents were warned by Diamond J. on October 20, 2021, at the first return date of this motion (which was adjourned at the respondents’ request to permit cross-examinations) to stop their conduct, but they continued. Second, they continued even after I found them to be in contempt. Third, the record reveals that they intentionally tried to make it look like they were complying with the order when they knew they were not. I cannot conclude that, without the spectre of the sentencing phase of this motion, the respondents would not resume their conduct, especially given their past history with illegal dumping. Moreover, their purging of the contempt came far too late to warrant much credit.

b. The respondents have apologized in the affidavit they filed after I granted them an indulgence on February 22, 2022. By that time, the respondents had had ample opportunity to offer an apology but had not. Given the respondents’ bad faith conduct, their attempt to hide their breaches of the order, their ongoing breaches of the order even after being warned, and even after being found in contempt, and the taunting manner in which the neighbour reported Mr. Urgiles reacted to her taking a photo (which was unaddressed by Mr. Urgiles in his affidavit filed subsequently), I conclude that the apology is not sincere. Put another way, the respondents have not acted remorsefully, despite what they have said.

c. The respondents argue that they have reached terms of a consent order with the applicant on the underlying application, which include the payment of costs and the obligation to remediate the property. They point to this as an effort to mitigate the effect of their contempt on others. But the respondents did not have much choice. Their breaches of the order were clear. I am unaware of any credible defence to the underlying application and none was raised. Justice Vella’s consent order, and the order which is intended to be taken out in this application reflect, in my view, a practical assessment of the respondents’ chances on the application rather than any genuine remorse or desire to make amends.

d. As far as I am aware, my order finding the respondents in contempt is the first time they have been found in contempt. However, given that they continued to breach the order thereafter, and subsequently did not attend for the cross-examination I ordered, I place little weight on this factor.

e. The respondents did not admit their contempt at the first phase of the hearing. Rather, they offered up explanations for the evidence of their breaches that were far-fetched, and I found them to be not credible. They have now admitted their contempt.

f. The respondents now indicate a willingness to comply with the orders of the court. I am advised that the respondents are making payments under a costs order as an example of compliance.

g. The respondents will face additional consequences of their contempt in the form of remediation costs. The respondents state they may be at risk of prosecution and fines. The latter point is speculative and not made out in the evidence.

h. Mr. Urgiles has given evidence of his child and spousal support obligations.

Aggravating Factors

[20] Aggravating factors include: (i) a deliberate course of conduct over a lengthy period of time; (ii) numerous breaches of court orders; (iii) repeated acts of contempt; (iv) benefitting financially from contempt; (v) demonstrating disrespect for the court, including by lying to the court, offering an insincere apology and giving only the appearance of complying with orders; (vi) if the breach occurred with full knowledge and understanding of the contemnor rather than by mistake or misunderstanding; (vii) rejecting the authority of the court; (viii) public safety concerns: (ix) living a life of relative luxury in the face of orders restricting the use of assets; (x) failing to seek legal advice until learning of the pending contempt motion; (xi) a finding of contempt of fresh orders while a contempt motion is pending: Devathasan, at para. 28.

[21] In this case, there are aggravating factors present, including:

a. As I found in the first phase of this contempt hearing, the respondents repeatedly and deliberately breached the consent order of Vella J. Those breaches occurred over a lengthy period of time of about six months.

b. There is evidence in the record to support a conclusion that by illegally dumping fill on the property, the respondents were able to avoid the costs of properly disposing of the fill. I thus conclude that the breaches of the court order were designed to lower the respondents’ expenses, and increase revenue and profit.

c. The respondents’ conduct has been disrespectful to the court. The respondents offered up unbelievable explanations for their behaviour, attempted to make it look like they were complying with the order when they were not, and continued to breach Vella J.’s order after they were warned by Diamond J., and even after I had found them in contempt. Mr. Urgiles’ taunting of the neighbour is a further illustration of the respondents’ disrespect for the court’s order.

d. There is no question that the breaches of Vella J.’s order were knowing and intentional. There is no mistaken understanding that explains the respondents’ behaviour.

Deterrence and Denunciation

[22] Deterrence includes both general and specific deterrence: Niagara Regional Police Services Board v. Curran, 2002 CarswellOnt 137 (Sup. Ct.), at para. 35.

[23] In my view, given the extreme disrespect showed by the respondents for the orders of this court, and the apparent economic motive for ignoring the terms of the ordered they consented to, specific deterrence is relevant in this case. To the extent this case deters other would-be contemnors from breaching court orders, general deterrence is, of course, promoted, but most important is deterring the respondents from future breaches of court orders.

[24] I also find that the sentence in this case must be fit to denunciate the conduct of the respondents, which has been flagrant and deliberate.

Similarity of Sentences

[25] With respect to the fine sought, the parties have each given me cases that reflect a broad range of fines. In Boily for example, a fine of $100,000 was reduced to $7,500 on appeal. On the other end of the spectrum, in The Corporation of the Town of Caledon v. Darzi Holdings Ltd. et al., unreported, Myers J. assessed a $1 million fine for the defendant’s misuse of land. In that case, the defendant had treated its convictions of provincial offences and related fine as a license fee, breached an order of Schabas J. for over two years, and profited from running its business in breach of the law for four years, and in breach of Schabas J.’s order for two years. The defendant’s business was economically very successful. Justice Myers ordered the fine while expressing reservations as to the adequacy of the quantum as a tool to induce compliance with the order.

[26] From these other cases, I conclude that when determining a fit fine, the court should consider the economic circumstances of the contemnor, and the amount of fine that will have enough of an impact on the contemnor to induce future compliance with the court’s orders.

[27] With respect to the applicant’s request for costs, on a civil contempt motion, costs are generally awarded on a substantial or full indemnity scale: Bickram v. Bickram, 2015 ONSC 705, at para. 71. In my view, this approach is eminently sensible. A contempt motion has been brought about through no fault of the moving party. Especially in a case such as this one, where the contempt is long-standing, knowing, and deliberate, there is no reason why full indemnity costs ought not to be awarded, tempered by the principle that costs must always be fair and reasonable.

[28] I note that the applicant also relies on section 10.10 of its Site Alteration By-Law 2021-039 which allows it to recover its costs of remedying any violation of the by-law. This by-law provides an alternate theory under which the applicant claims full indemnity costs. I agree that the by-law supports an award of full indemnity costs. But even if there were no by-law, I would find that full indemnity costs are justified in this case due to the respondents’ conduct.

Reasonableness of a Fine or Incarceration

[29] In considering the reasonableness of a fine, the contemnor’s ability to pay is important. Fines must be imposed in meaningful amounts so as to be a punishment, not a nuisance: West Lincoln (Township) v. Chan, 2002 CarswellOnt 1885, (2001) 13 C.P.C. (5th), at para. 40; Curran, at para. 36.

[30] The respondents led evidence about their ability to pay in the affidavit that was to be the subject of a cross-examination I ordered, and in respect of which the certificate of non-attendance was obtained. On this basis, the applicant asks me to exclude the affidavit.

[31] The respondents’ counsel indicates that the non-attendance was inadvertent, due to a mistake in the time resulting from daylight savings, and that efforts to reschedule the cross-examination went unanswered.

[32] I decline to exclude the affidavit. However, in the circumstances, I can place no weight on it. The evidence raises more questions than it provides answers. While Mr. Urgiles deposes that his income is in the range of $25,000 per year, he has been ordered to pay $3,500 in without prejudice monthly support, plus he is responsible for s. 7 expenses including tuition.

[33] Mr. Urgiles’ net family property statement dated 2019 from his family proceeding is in the record. It does not disclose certain companies that the record before me indicates exist and are related to Mr. Urgiles. Although the net family property statement shows his NFP to be zero, the value of Franklin Haulage Excavating Inc. is “TBD”. It appears that an expert report was to be prepared detailing Mr. Urgiles’ 2016 to 2018 income for support purposes and a valuation company was retained to give a verbal opinion as to the value of Franklin Haulage Inc. and Mr. Urgiles’ income. I have no idea if these reports and analyses were completed but if they were, that information would have been helpful in terms of assessing the veracity of Mr. Urgiles’ evidence about his income and assets. The evidence is silent on the point.

[34] While Mr. Urgiles claims to have an income around $25,000, there is evidence in the record to show he has been on four trips in less than a year, including one to Ecuador which took place over the period of time when his cross-examination was to occur.

[35] The corporate financial statements in the record also raise questions. The property at issue in this case was purchased for $2.3 million, of which $900,000 was equity, and the rest was funded by a mortgage. However, the balance sheet shows the value of this fixed asset at $1.4M, which appears to artificially lower the value of the property.

[36] There is also evidence suggesting that a truck has been purchased by a non-party company related to Mr. Urgiles. There is no explanation of how this purchase was funded in the record.

[37] In these circumstances, I am not persuaded by Mr. Urgiles’ evidence that the respondents are impecunious. He has a history of not being honest with this court. He did not attend for cross-examination on his affidavit. There are inconsistencies in the evidence about his financial means, some of which includes evidence that suggests he has assets with which to pay for things like his travel, and support obligations. Moreover, the respondents’ breaches of orders were in furtherance of their economic gain, by avoiding the fees they would have incurred to properly dispose of the fill.

The Fine

[38] Taking into account the factors above, I am of the view that a $110,000 fine is appropriate in these circumstances. It is proportionate to the respondents’ blatant, deliberate and repeated disrespect of this court’s orders, and the aggravating factors that exist. I conclude that the respondents, having themselves proposed a $75,000 fine, and having failed to establish that they are of scant means, have the ability to pay this fine. A fine of this amount is not a licence to continue operating as the respondents have in the past, but should accomplish the objectives of deterrence and denunciation.

[39] In finding that this amount is appropriate, I have taken into consideration the costs that I award in this motion, which I address below.

[40] The applicant argues that the fine ought to be payable to it, and relies on Zhong v. Wu, 2021 ONSC 5873, at para. 70, where, without analysis, the court ordered a contemnor to pay a fine of $35,000 to the plaintiff in that case as general damages arising from his deliberate breach of the injunction. Counsel argues it may be appropriate for a fine to be paid to a party where the contemnor’s actions have caused damage to that party. The applicant argues its interests have been injured by the respondents’ conduct in altering the land, potentially requiring the applicant to remediate it.

[41] The question of whether a fine can be payable to a party was addressed by the Court of Appeal in SNC-Lavalin Profac Inc. v. Sankar, 2009 ONCA 97. At paras. 13-17, Laskin J.A. held that contempt of court is an offence against the authority of the court and the administration of justice. It does not have the function of a civil action in tort or for breach of contract. Moreover, s. 143(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides that it is the Attorney General, and not a party to the litigation, who may enforce a fine for contempt of court. Laskin J.A. concluded that the Provincial Treasurer should be the recipient of a fine imposed for civil contempt.

[42] I thus conclude that the respondents shall be liable to pay to the Provincial Treasurer, jointly and severally, a fine in the amount of $110,000, to be paid within eight months of the date of these reasons.

Costs

[43] As I have already indicated, costs on a full indemnity scale are appropriate in this case. These proceedings were made necessary by the respondents’ conduct, and they were prolonged by the respondents’ repeated requests for adjournments. There are 78 documents related to this contempt motion on CaseLines, 57 of which were filed by the applicant, which had to continually update its materials with each adjournment.

[44] However, an award of full indemnity costs does not mean that the applicant is entitled to reimbursement for every penny it spent. The court must still assess the costs to determine the quantum.

[45] The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 46 O.R. (3d) 330, at para. 22. In a case such as this one, where the respondents have demonstrated their ungovernability, indemnification and behaviour modification are the most important goals of a costs award.

[46] Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The court exercises its discretion taking into account the factors enumerated in r. 57.01 of the Rules of Civil Procedure, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants’ Council for the Province of Ontario, 71 O.R. (3d) 291, at paras. 4 and 38. A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.

[47] The applicant’s full indemnity costs outline in respect of this motion amounts to $182,847.02. The applicant advises that it has in fact incurred costs above this amount, but it has reduced its claimed costs for purposes of this motion.

[48] The costs outline discloses that counsel’s hourly rates have been discounted in this matter. The rates are reasonable in the circumstances.

[49] The applicant’s costs outline does not claim costs for more than one timekeeper at the attendances. The steps in preparing the motion reflect several timekeepers, and it appears that work has been delegated to the least expensive timekeeper.

[50] Overall, the time spent on this matter is high, even taking into account the complexity and the number of attendances, and the importance of this issue to the applicant.

[51] In the circumstances, I conclude that it is fair and reasonable for the respondents to pay to the applicant, jointly and severally, its full indemnity costs, all-inclusive, in the amount of $140,000. I grant the respondents four months from the date of these reasons to pay this amount.

Conclusion

[52] In summary, I order the following sentence for the respondents’ contempt:

a. By December 12, 2022, the respondents shall pay a fine to the Provincial Treasurer in the amount of $110,000, for which they are jointly and severally liable.

b. By August 12, 2022, the respondents shall pay the applicant its full-indemnity all-inclusive costs of $140,000, for which they are jointly and severally liable.

J.T. Akbarali J. Date: April 12, 2022