King et al. v. Drabinsky et al. [Indexed as: King v. Drabinsky]
91 O.R. (3d) 616
Court of Appeal for Ontario,
Lang, Watt and Epstein JJ.A.
July 28, 2008
Conflict of laws -- Foreign judgments -- Enforcement -- Appellants facing criminal charges in U.S. and Canada and class action in U.S. arising out of alleged misrepresentations -- Appellants not testifying in U.S. civil proceeding and judgment granted against them -- Appellants not denied full opportunity to defend civil proceeding because outstanding Canadian criminal charges precluded them from testifying in civil proceeding -- Any evidence given in civil proceeding would likely be excluded in Canadian criminal proceedings either under Charter or under trial judge's residual common-law discretion to exclude evidence in order to ensure fair trial -- Recognition of U.S. civil judgment not contrary to Canadian notions of fundamental justice.
The appellants faced criminal charges in the U.S. and Canada and a class action in the U.S. arising out of alleged misrepresentations regarding their company's financial situation. At their depositions in the civil action, the appellants claimed the protection of the Fifth Amendment to the U.S. Constitution and declined to answer any questions on the basis that their answers would be incriminatory. In granting summary judgment for the respondents in the civil action, the U.S. motion judge declined to draw an adverse inference against the appellants for their failure to provide direct evidence. The respondents applied successfully for recognition of the U.S. judgment in Ontario. The appellants appealed, arguing that recognition should not be granted because they were denied the opportunity to defend the U.S. action. Specifically, they argued that they were effectively precluded from giving evidence in the civil proceeding because any evidence they gave could have been used against them in the Canadian criminal proceedings.
Held, the appeal should be dismissed.
It would have been open to the appellants to argue in the Canadian criminal proceedings that any incriminatory statements made in the U.S. civil proceeding should be excluded from evidence either under the Canadian Charter of Rights and Freedoms or under the trial judge's residual common-law discretion to exclude evidence in order to ensure a fair trial. A witness in any foreign proceeding would be protected against self-incrimination under s. 13 of the Charter to the extent the foreign proceeding would constitute "proceedings" under Canadian law. Extraterritorial application of the Charter was not an issue, as whether a statement is "incriminatory" is to be determined not at the time when the statement was made, but at the time of its attempted introduction at a Canadian criminal trial. The trial judge in the Canadian criminal proceedings would also have a discretion to exclude the appellants' statements under ss. 7 and 11(d) of the Charter or under the common law on the basis that their admission would render the trial unfair.
The principles of order and fairness that drive the rules of comity and the recognition of foreign judgments applied in this case. Since the appellants chose to do business and file a registration statement with the U.S. authorities, it was hardly unfair or disorderly to recognize the resulting civil judgment arising from their misrepresentations in that statement. That was particularly so when [page617] any adverse effect of any consequences regarding the potential for self-incrimination could be resolved in the criminal trial. It would be contrary to the principles of order and fairness if individuals such as the appellants could avoid civil liability for their misdeeds simply because they also faced criminal charges in both jurisdictions.
APPEAL from a judgment of Siegel J., [2007] O.J. No. 2901, 159 A.C.W.S. (3d) 369 (S.C.J.), recognizing a U.S. civil judgment.
Cases referred to R. v. Dubois, 1985 CanLII 10 (SCC), [1985] 2 S.C.R. 350, [1985] S.C.J. No. 69, 23 D.L.R. (4th) 503, 62 N.R. 50, [1986] 1 W.W.R. 193, 41 Alta. L.R. (2d) 97, 66 A.R. 202, 22 C.C.C. (3d) 513, 48 C.R. (3d) 193, 18 C.R.R. 1, 15 W.C.B. 345; R. v. Hape, [2007] 2 S.C.R. 292, [2007] S.C.J. No. 26, 2007 SCC 26, 280 D.L.R. (4th) 385, 363 N.R. 1, J.E. 2007-1140, 227 O.A.C. 191, 220 C.C.C. (3d) 161, 47 C.R. (6th) 96, 160 C.R.R. (2d) 1, 73 W.C.B. (2d) 528, EYB 2007-120452; R. v. Harrer, 1995 CanLII 70 (SCC), [1995] 3 S.C.R. 562, [1995] S.C.J. No. 81, 128 D.L.R. (4th) 98, 186 N.R. 329, J.E. 95-1941, 64 B.C.A.C. 161, 101 C.C.C. (3d) 193, 42 C.R. (4th) 269, 32 C.R.R. (2d) 273, 28 W.C.B. (2d) 272; R. v. Henry, [2005] 3 S.C.R. 609, [2005] S.C.J. No. 76, 2005 SCC 76, 260 D.L.R. (4th) 411, 342 N.R. 259, [2006] 4 W.W.R. 605, J.E. 2006-62, 376 A.R. 1, 219 B.C.A.C. 1, 49 B.C.L.R. (4th) 1, 202 C.C.C. (3d) 449, 33 C.R. (6th) 215, 136 C.R.R. (2d) 121, 67 W.C.B. (2d) 809, EYB 2005-98899; United States of America v. Levy, [2003] O.J. No. 56 (C.A.), affg [2002] O.J. No. 2298, 1 C.P.C. (6th) 386 (S.C.J.); United States of America v. Shull, [2004] B.C.J. No. 528, 2004 BCSC 64, 61 W.C.B. (2d) 114, consd Other cases referred to Baxter v. Palmigiano, 425 U.S. 308, 96 S. Ct. 1551, 47 L. Ed. 2d 810 (1976); Beals v. Saldanha, [2003] 3 S.C.R. 416, [2003] S.C.J. No. 77, 2003 SCC 72, 234 D.L.R. (4th) 1, 314 N.R. 209, J.E. 2004-127, 182 O.A.C. 201, 39 B.L.R. (3d) 1, 39 C.P.C. (5th) 1, 113 C.R.R. (2d) 189, 127 A.C.W.S. (3d) 648; Morguard Investments Ltd. v. De Savoye, 1990 CanLII 29 (SCC), [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, 76 D.L.R. (4th) 256, 122 N.R. 81, [1991] 2 W.W.R. 217, J.E. 91-123, 52 B.C.L.R. (2d) 160, 46 C.P.C. (2d) 1, 15 R.P.R. (2d) 1, 24 A.C.W.S. (3d) 478; R. v. Feeney, 1997 CanLII 342 (SCC), [1997] 2 S.C.R. 13, [1997] S.C.J. No. 49, 146 D.L.R. (4th) 609, 212 N.R. 83, [1997] 6 W.W.R. 634, J.E. 97-1133, 91 B.C.A.C. 1, 115 C.C.C. (3d) 129, 7 C.R. (5th) 101, 44 C.R.R. (2d) 1, 34 W.C.B. (2d) 266; R. v. Hebert, 1990 CanLII 118 (SCC), [1990] 2 S.C.R. 151, [1990] S.C.J. No. 64, 110 N.R. 1, [1990] 5 W.W.R. 1, J.E. 90-990, 47 B.C.L.R. (2d) 1, 57 C.C.C. (3d) 1, 77 C.R. (3d) 145, 49 C.R.R. 114, 10 W.C.B. (2d) 435; R. v. Mohan, 1994 CanLII 80 (SCC), [1994] 2 S.C.R. 9, [1994] S.C.J. No. 36, 114 D.L.R. (4th) 419, 166 N.R. 245, J.E. 94-778, 71 O.A.C. 241, 89 C.C.C. (3d) 402, 29 C.R. (4th) 243, 23 W.C.B. (2d) 385; R. v. Noël, [2002] 3 S.C.R. 433, [2002] S.C.J. No. 68, 2002 SCC 67, 218 D.L.R. (4th) 385, 295 N.R. 1, J.E. 2002-2001, 168 C.C.C. (3d) 193, 5 C.R. (6th) 1, 99 C.R.R. (2d) 1, 55 W.C.B. (2d) 25; R. v. Potvin, 1989 CanLII 130 (SCC), [1989] 1 S.C.R. 525, [1989] S.C.J. No. 24, 93 N.R. 42, J.E. 89-521, 21 Q.A.C. 258, 47 C.C.C. (3d) 289, 68 C.R. (3d) 193, 42 C.R.R. 44, 7 W.C.B. (2d) 41; R. v. Stillman, 1997 CanLII 384 (SCC), [1997] 1 S.C.R. 607, [1997] S.C.J. No. 34, 144 D.L.R. (4th) 193, 209 N.R. 81, J.E. 97-704, 185 N.B.R. (2d) 1, 113 C.C.C. (3d) 321, 5 C.R. (5th) 1, 42 C.R.R. (2d) 189, 33 W.C.B. (2d) 490; R. v. Stratton (1978), 1978 CanLII 1644 (ON CA), 21 O.R. (2d) 258, [1978] O.J. No. 3536, 90 D.L.R. (3d) 420, 42 C.C.C. (2d) 449, 3 C.R. (3d) 289, 2 W.C.B. 445 (C.A.); Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), 1990 CanLII 135 (SCC), [1990] 1 S.C.R. 425, [1990] S.C.J. No. 23, 67 D.L.R. (4th) 161, 106 N.R. 161, J.E. 90-575, 39 O.A.C. 161, 54 C.C.C. (3d) 417, 29 C.P.R. (3d) 97, 76 C.R. (3d) 129, 47 C.R.R. 1, 10 W.C.B. (2d) 7 Statutes referred to Canada Evidence Act, R.S.O. 1970, c. E-10, s. 12 Canadian Charter of Rights and Freedoms, ss. 7, 11, (c), (d), 13, 24(1) Criminal Code, R.S.C. 1985, c. C-46, Part IV, s. 118 [page618] Treaties and conventions referred to Extradition Treaty between Canada and the United States of America, Can. T.S. 1976 No. 3, art. 4(1)(i)
L. David Roebuck, David Stratas and Sandra Barton, for appellant Garth Drabinsky. No one appearing for appellant Myron Gottlieb. George S. Glezos and Jasmine T. Akbarali, for respondents.
The judgment of the court was delivered by
LANG J.A.: -- Overview
[1] The appellants, Garth Drabinsky and Myron Gottlieb, [See Note 1 below] appeal from the judgment of the application judge, Siegel J., which recognized as enforceable a U.S. civil judgment against them in the amount of US$36,617,696. The judgment was obtained by the respondents, Dorian King and Diane King, representative plaintiffs in a U.S. class action proceeding. The appellants argued that the Ontario courts should decline to recognize the U.S. judgment on the basis that they were denied a full opportunity to defend the proceedings. That denial, they argued, arose because outstanding criminal charges effectively precluded them from testifying in the U.S. civil proceeding. The application judge rejected the appellants' argument and recognized the U.S. judgment. For the reasons that follow, I would dismiss the appeal. Background
[2] The respondents were investors in Livent Inc. ("Livent"), an Ontario corporation that operated in both Canada and the U.S. The appellants were officers and directors of Livent. The respondents commenced a U.S. class action against the appellants in 1998 in New York State. The action alleged misrepresentations regarding Livent's financial situation were contained in a 1997 registration statement, which the appellants signed and filed with the U.S. Securities and Exchange Commission in support of a distribution of unsecured notes. In 1998, Livent released restated financial results, [page619] which reduced its net income by US$85,100,000. Consequently, Livent became insolvent and the unsecured notes worthless.
[3] In addition to the respondents' lawsuit and other civil suits, the appellants were charged criminally with fraud in the U.S. in 1999. In 2002, they were charged with similar offences in Canada. Once the Canadian charges were laid, the appellants could no longer be extradited to face the U.S. criminal charges. This was because art. 4(1)(i) of the Extradition Treaty between Canada and the United States of America, Can. T.S. 1976 No. 3, provides that extradition will not be granted by the "requested state" when the accused is being "proceeded against . . . for the offense for which his extradition is requested". Consequently, the U.S. has never pursued the appellants' extradition and the appellants have demonstrated their intention not to return to the U.S. to face the charges in that country. The appellants did not seek a stay of the U.S. civil action because, according to their U.S. counsel, a stay would have been refused since it would have effectively amounted to an outright dismissal of the class proceeding in light of the appellants' intention not to face the U.S. charges.
[4] At their depositions, which were conducted in Canada and subsequently filed in the U.S. proceeding, the appellants claimed the protection accorded to them under the Fifth Amendment of the U.S. Constitution and declined to answer any questions on the grounds that their answers would be incriminatory.
[5] In the face of a summary judgment motion brought by the respondents in 2004, the appellants asserted a defence of due diligence. That defence required the appellants to establish that they had, after reasonable investigation, reasonable grounds to believe, and did believe, that the information in the registration statement was true. Rather than filing their own affidavits on the motion, the appellants relied on documentary evidence, legal submissions and the affidavit of a senior Livent executive. The affidavit was found by the U.S. motion judge to be deficient in a number of respects, including its failure to provide direct evidence of the appellants' alleged due diligence and the affiant's lack of personal knowledge of the due diligence process. Apart from those deficiencies, the U.S. motion judge noted that, in any event, "blind reliance on others does not substitute for the due diligence that defendants must demonstrate". In granting summary judgment to the respondents, the U.S. motion judge specifically declined to draw an adverse inference against the appellants for their failure to provide direct evidence, although it was within his discretion to do so once the appellants relied on their U.S. right to silence. [page620]
[6] The appellants appealed the judgment and the appeal court conducted a hearing de novo. The appeal was unsuccessful. The appellants later moved to vary the judgment on the basis of fresh evidence about due diligence that they said arose from witnesses who testified at the Canadian preliminary inquiry on the criminal charges. The appellants were unsuccessful on that motion as well as on their further appeal. Thereafter, the respondents brought their successful application for recognition of the U.S. judgment in Ontario.
The application judge's reasons
[7] In careful reasons, the application judge considered the principles governing the recognition of foreign judgments. He concluded that the appellants had failed to establish the defences they argued against recognition; specifically, the fraud defence, the natural justice defence and the "new" defence. The appellants do not appeal the rejection of the fraud defence.
[8] The application judge provided five reasons for denying the appellants' natural justice and "new" defences. In doing so, he noted, at para. 40, that the common theme of his reasons was that "any constraint on the [appellants'] ability to defend themselves in the New York Action resulted from their decision not to defend the American criminal proceedings". The application judge observed that, while the approach to protection against self-incrimination differs in the U.S. from the approach in Canada, the decision in United States of America v. Levy, [2002] O.J. No. 2298, 1 C.P.C. (6th) 386 (S.C.J.), affd [2003] O.J. No. 56 (C.A.) had determined that the difference did not constitute a valid objection to the recognition of the judgment. He saw no reason to distinguish Levy from the facts of this case. Issues
[9] On appeal, while the appellants' factum challenges the application judge's rejection of both their natural justice and "new" category defences, appellants' counsel opened oral argument by saying there was really only one issue: whether the appellants had been denied the opportunity to defend the U.S. action. On this issue, the appellants focus not on the U.S. criminal proceedings as they did below, but rather on the Canadian criminal charges. They argue on appeal that they were effectively precluded from giving evidence in the U.S. civil proceeding because any evidence they gave could have been used against them in the Canadian criminal proceedings. This was the case, they say, because the Canadian Charter of Rights and Freedoms [page621] does not apply extraterritorially, and thus would not have protected their U.S. evidence from incriminating them in Canada. Analysis
[10] Foreign judgments are generally recognized on the basis of the rules of comity. La Forest J. described comity in Morguard Investments Ltd. v. De Savoye, 1990 CanLII 29 (SCC), [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, at p. 1096 S.C.R,. as "grounded in the need in modern times to facilitate the flow of wealth, skills and people across state lines in a fair and orderly manner", a principle of particular importance in times of increasing transnational commerce. In extending comity to international commerce, Major J. in Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416, [2003] S.C.J. No. 77 adapted the "real and substantial connection" test for the recognition of foreign judgments. There is no question that the test was met in this case both because the registration statement named New York as the appropriate jurisdiction and because the appellants attorned to the jurisdiction by participating extensively in that proceeding.
[11] Beals also established the available defences of fraud, public policy or lack of natural justice. The list of available defences is not closed. Major J., writing for the majority, recognized, at para. 42, that "[u]nusual situations may arise that might require the creation of a new defence". However, he also cautioned, at paras. 41 and 42, that the defences, including any new defences, should be applied narrowly.
[12] Thus, in addition to their natural justice defence, the appellants argue for a new or fourth defence, which they characterize as the loss of a meaningful opportunity to be heard. They say this defence arises from the unusual facts of this case, including the outstanding criminal charges in combination with the U.S. civil litigation. In both their natural justice and fourth defence arguments, the appellants argue that they would have lost their Charter protection against self-incrimination had they testified in the U.S. proceedings. In those circumstances, it would be "contrary to Canadian notions of fundamental justice" (Beals, para. 59) to recognize the resulting judgment.
[13] Since the basis for the appellants' argument rests on the different jurisdictions' approaches to self-incrimination, I begin with Arbour J.'s description, at paras. 21-22, in R. v. Noël, 2002 SCC 67, [2002] 3 S.C.R. 433, [2002] S.C.J. No. 68, 168 C.C.C. (3d) 193:
In the United States, a different arrangement is in place: faced with the prospect of self-incrimination, the witness can claim the Fifth Amendment, and refuse to provide the incriminating answer. The state then has to dispense with his evidence altogether. . . . [page622]
Under the regime of the Canada Evidence Act, and now also under the Charter, a different bargain is struck. When a witness provides evidence in any proceeding, whether voluntarily or under legal compulsion, he or she cannot refuse to answer a question that may tend to incriminate the witness, but is offered protection against the subsequent use of that evidence.
[14] Thus, under the Fifth Amendment, a defendant who is facing both civil litigation and criminal charges in the U.S. has the option either to waive his or her right to silence and to testify in the civil proceeding or to refuse to testify and run the risk of an adverse inference. In Canada, the testimony of a person who chooses to testify in a civil proceeding cannot be used as part of the prosecution's case against that person as an accused in any later criminal proceeding. However, any evidence that same person voluntarily gives in the civil proceeding may be used to cross-examine that person on a prior inconsistent statement should he or she testify as an accused at the subsequent criminal trial. See R. v. Henry, 2005 SCC 76, [2005] 3 S.C.R. 609, [2005] S.C.J. No. 76, 202 C.C.C. (3d) 449.
[15] Levy is the seminal decision regarding the impact of the different approaches on the recognition of a U.S. judgment in Ontario. In that case, the Canadian defendants argued that their Fifth Amendment right to silence precluded them from testifying in the U.S. summary judgment motion. The U.S. court in Levy drew an adverse inference from the defendants' failure to testify. Such an adverse inference is available in the U.S. system: Baxter v. Palmigiano, 425 U.S. 308, 96 S. Ct. 1551 (1976). The defendants argued that this violated their Canadian constitutional right to silence and rendered recognition of the U.S. judgment against them in Canada offensive to our concepts of public policy and natural justice. I note parenthetically that the U.S. court in this case, given the weight of the evidence, found it unnecessary to, and accordingly did not, draw an adverse inference against the appellants, which made their argument regarding the U.S. charges even weaker than the defence raised in Levy.
[16] In any event, on a summary judgment motion in Levy, Campbell J. concluded, at para. 30, that the defendants' argument "overlooks the basic difference regarding incrimination in civil as opposed to criminal proceedings, both in Canada and the United States". Because the principle operates with the same result in both Canada and the U.S., an accused is protected against self-incrimination in a criminal trial. After considering the impact of the different approaches to self-incrimination for a civil proceeding, Campbell J. concluded, at para. 49:
The fact that the exercise of the privilege operates with some difference in civil actions in each country does not make a different application of the [page623] privilege in a United States court from the Ontario process in any way a bar for recognition here of a United States judgment based on the valid exercise of the privilege in the United States.
[17] Campbell J. observed that the defendants in Levy were permitted to raise a full defence to the civil action. The fact that they chose to invoke the Fifth Amendment, and that the privilege operates differently in the two jurisdictions, could not amount to a denial of natural justice. This court dismissed the appeal in one paragraph agreeing with Campbell J. on the "general merits" of his disposition.
[18] Regarding both their natural justice and meaningful opportunity defences, the appellants attempt to distinguish Levy on two bases. First, they argue that since the appellants were criminally charged in Canada, they did not have a meaningful choice to defend the U.S. proceedings. Charter protection was not available to them, the appellants say, because the Charter does not apply extraterritorially; any evidence they gave in the U.S. could be used against them in the Canadian criminal proceeding. Second, they argue that the extent of their self-incrimination would have exceeded the parameters found acceptable in Levy because, in this case, it would have been necessary for the appellants to give detailed evidence about their due diligence. Such detail would have provided the Canadian prosecution with a virtual discovery of the defence position that would have otherwise been unavailable, resulting in derivative evidence, and would have caused unfair prejudice. For the reasons that follow, I do not accept either argument.
Charter application
[19] For the proposition that their U.S. evidence would have been admissible in the Canadian criminal proceeding, the appellants rely on the cases of R. v. Harrer, 1995 CanLII 70 (SCC), [1995] 3 S.C.R. 562, [1995] S.C.J. No. 81, 101 C.C.C. (3d) 193 and United States of America v. Shull, [2004] B.C.J. No. 528, 2004 BCSC 64, which held, in the circumstances of those cases, that the Charter did not apply extraterritorially.
[20] Harrer considered statements the appellant had made to police in the United States during an investigation in that country. The appellant argued that those statements ought to have been excluded from her subsequent Canadian criminal trial because, when the focus of their investigation shifted, the U.S. police failed to give her the second right-to-counsel warning that is required in Canada. The appellant's argument in Harrer, that this U.S. failure to comply with Canadian law rendered her statements inadmissible in Canada, was rejected by the Supreme Court of Canada. Writing for the majority, La Forest J. held that the Charter had no [page624] direct application to the interrogation in the U.S. because the U.S. authorities were not acting on behalf of any Canadian government. Rather, the Charter was only triggered when Canadian police began proceedings on the appellant's return to Canada. In any event, the court concluded that the admission of the new evidence would not result in an unfair trial in the circumstances of that case, although it recognized the prospect of exclusion in another case.
[21] The appellant also relies on Shull. In that case, the U.S. sought to extradite individuals in Canada charged with securities fraud in the U.S. On their extradition hearing, the accused sought to exclude their U.S. depositions relying on their s. 13 Charter protection against self-incrimination. The extradition judge reasoned that exclusion of the U.S. statements at the hearing in Canada for their extradition to the U.S. would result in an impermissible extraterritorial application of the Charter. Since the evidence in an extradition hearing is not tendered to prove guilt, but only to determine whether there is sufficient evidence to extradite, it would be wrong to preclude U.S. authorities from relying on evidence "gathered in conformity with its own procedures that would be admissible in its own jurisdiction" (para. 36).
[22] In my view, neither of these cases assists the appellants. The decisions reflect fundamentally different situations than the one presented in this case. Neither Harrer nor Shull dealt with testimony given in a foreign jurisdiction in a judicial proceeding. Rather, they dealt with the application of the Charter in the criminal context in relation to incriminatory statements taken by criminal or quasi-criminal enforcement authorities. The question in those cases was whether the Charter reached extraterritorially to the time the statements were taken in the U.S. That is a very different question from the one at issue in this case.
[23] Instead, the question in this case is whether any incriminatory statements the appellants would have made in the foreign proceeding would have been admissible under the Charter at their subsequent Canadian criminal trial. In my view, as I will explain, it would have been open to the appellants to argue in their Canadian criminal proceeding that any incriminatory statements made in the U.S. civil proceeding should be excluded from evidence either under the Charter or under the trial judge's residual common-law discretion to exclude evidence in order to ensure a fair trial. (a) Application of s. 13 of the Charter
[24] Section 13 of the Charter provides:
- A witness who testifies in any proceedings has the right not to have any incriminating evidence so given used to incriminate that witness in any [page625] other proceedings, except in a prosecution for perjury or for the giving of contradictory evidence.
[25] The application of this section raises two issues in this case: first, whether "proceedings" where a witness testifies could include the U.S. proceedings and, second, when the determination is made that the evidence is "incriminating".
[26] First, in regard to "proceedings", s. 13 would likely protect the appellants, in the context of this criminal proceeding, by protecting any incriminatory statements made in the U.S. civil proceeding from being used in the Canadian criminal proceeding. I say this because s. 13 refers broadly to "any proceedings". Assuming that the appellants' affidavit and deposition evidence would be considered evidence in the U.S. proceeding, [See Note 2 below] s. 13 may be construed to extend its protection to that evidence. I find support for this position in R. v. Stratton (1978), 1978 CanLII 1644 (ON CA), 21 O.R. (2d) 258, [1978] O.J. No. 3536, 42 C.C.C. (2d) 449 (C.A.), which considered s. 12 of the Canada Evidence Act, R.S.O. 1970, c. E-10. Section 12 provides that a witness may be asked whether he (or she) has been "convicted of any offence". In Stratton, Martin J.A. interpreted this provision to mean that a witness may be asked about foreign convictions, provided that the foreign offence "would constitute a conviction under Canadian law". Applying this reasoning to s. 13 of the Charter, a witness in any foreign proceeding would be protected against self-incrimination to the extent the foreign proceeding would constitute "proceedings" under Canadian law.
[27] Second, the time for the determination of whether a statement is "incriminatory" is not at the time when the statement was made. Rather, the relevant time for the application of the Charter is at the time of the attempted introduction of the statements at the Canadian criminal trial. This was established by the Supreme Court of Canada in R. v. Dubois, 1985 CanLII 10 (SCC), [1985] 2 S.C.R. 350, [1985] S.C.J. No. 69, 22 C.C.C. (3d) 513, which specifically considered the Charter's s. 13 protection against self-incrimination. The sole issue in that case was whether s. 13 prevented the Crown from adducing testimony given by the appellant in his first trial at his second trial on a charge of second degree murder.
[28] In considering whether the evidence from the first trial was "incriminating" in the second trial, Lamer J., for the [page626] majority, concluded, at pp. 363-64 S.C.R., p. 536 C.C.C., that "s. 13 does not require that the incriminating character of the evidence be evaluated in the first proceedings as well as in the second"; rather, "whether evidence is incriminating or not can only be properly assessed at the time it is being used in the subsequent proceedings, at the time when the Crown seeks to make use of the evidence".
[29] Lamer J. wrote, at pp. 359-60 S.C.R., p. 533 C.C.C.: "As s. 13 guarantees the right of a person against self- incrimination, rather than the rights of a witness giving testimony, it inures to an individual only at the moment an attempt is made to use previous testimony to incriminate its author." He confirmed at p. 361 S.C.R., p. 534 C.C.C., that the "focus of the right is on the second proceedings, the time at which the previous testimony is sought to be used, rather than the time at which it is given".
[30] It follows from this that the applicability of the protection depends on whether the evidence would be incriminating at the time it is sought to be adduced at the criminal trial, not whether it was incriminatory at the time of the summary judgment motion.
[31] On the basis of Dubois, it would be open to the appellants to argue that the evidence they gave in the U.S. civil proceeding would constitute "incriminating evidence", if and when tendered as part of the Crown's case, and thus, should be excluded pursuant to s. 13 in the Canadian criminal proceeding. See also R. v. Henry, supra.
[32] The appellants distinguish Dubois and Henry on the basis that they concerned domestic proceedings only and argue that Charter protection would not be available in Canada for evidence given in the U.S.
[33] The decision in R. v. Hape, 2007 SCC 26, [2007] 2 S.C.R. 292, [2007] S.C.J. No. 26, 220 C.C.C. (3d) 161 is helpful on this issue. The court in Hape considered the extraterritorial application of the Charter to searches conducted by Canadian officers in the Turks and Caicos relying on that jurisdiction's requirements for a legal search. LeBel J., writing for the majority, held that the Charter did not apply to the searches. Yet he also observed, at para. 96: "there is no impediment to extraterritorial adjudicative jurisdiction pursuant to which evidence gathered abroad may be excluded from a Canadian trial, as this jurisdiction simply attaches domestic consequences to foreign events". This important observation applies to this case. LeBel J. made it clear, referring to Harrer, that the rights of an accused in Canada are still respected at the trial stage. As he said, at para. 100: "Where the Crown seeks at trial to adduce evidence gathered [page627] abroad, the Charter provisions governing trial processes in Canada ensure that the appropriate balance is struck and that due consideration is shown for the rights of an accused being investigated abroad."
[34] Thus, I take two things from Hape. First, Hape supports the reasoning in Dubois, that when considering the protection provided by s. 13 of the Charter, the "timing" of the Charter application is concerned with the moment when the incriminating evidence is to be adduced at the criminal trial. Second, the Charter can have "extraterritorial adjudicative jurisdiction", particularly where the application of that jurisdiction results in purely domestic consequences and does not interfere with the jurisdiction of the foreign country. This supports my view that the term "any proceedings" under s. 13 of the Charter is not necessarily restricted to a proceeding that occurs in Canada; a court will have the jurisdiction to consider "any proceedings" in the context in which they occurred. (b) The exclusion of unfair evidence
[35] However, even if s. 13 protection were not available, it may well inform the appellants' other potential avenues of recourse. Section 7 provides that: "Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice." This has been interpreted to afford rights against self-incrimination and rights to a fair trial, thereby supplementing the protections under ss. 11(c), 11(d) and 13 of the Charter. See R. v. Hebert, 1990 CanLII 118 (SCC), [1990] 2 S.C.R. 151, [1990] S.C.J. No. 64, 57 C.C.C. (3d) 1, at p. 36 C.C.C. (re: right to silence under ss. 11(c) and 13 of the Charter) and Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), 1990 CanLII 135 (SCC), [1990] 1 S.C.R. 425, [1990] S.C.J. No. 23, 54 C.C.C. (3d) 417, at pp. 560-61 S.C.R., p. 518 C.C.C. (re: right to a fair trial under s. 11(d) of the Charter).
[36] Section 11 provides that: "Any person charged with an offence has the right . . . (c) not to be compelled to be a witness in proceedings against that person in respect of the offence; (d) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal . . . ." As LeBel J. observed in Hape, at para. 100, "[s]ections 7 and 11(d) provide that everyone tried in Canada enjoys the same rights to a fair trial and . . . [to] the principles of fundamental justice".
[37] Harrer raised an issue regarding whether the principles of fundamental justice and the right to a fair trial permit [page628] exclusion of evidence obtained outside Canada. While La Forest J. concluded that the admission of the impugned evidence would not result in an unfair trial in that case, he noted that, if he had come to a contrary conclusion, the evidence could have been excluded under ss. 11(d) or 7. He wrote, at para. 21:
I should add that, had the circumstances been such that the admission of the evidence would lead to an unfair trial, I would have . . .[rejected] the evidence on the basis of the trial judge's duty, now constitutionalized by the enshrinement of a fair trial in the Charter, to exercise properly his or her judicial discretion to exclude evidence that would result in an unfair trial.
[38] The minority, led by McLachlin J., recognized the same discretion, at para. 42, but grounded it in the common law or under s. 24(1):
In addition to the common law exclusionary power, the Charter guarantees the right to a fair trial (s. 11(d)) and provides new remedies for breaches of the legal rights accorded to an accused person. Evidence obtained in breach of the Charter may only be excluded under s. 24(2): R. v. Therens, 1985 CanLII 29 (SCC), [1985] 1 S.C.R. 613 . . . . Evidence not obtained in breach of the Charter but the admission of which may undermine the right to a fair trial may be excluded under s. 24(1), which provides for "such remedy as the court considers appropriate and just in the circumstances" for Charter breaches.
In describing a "fair trial", McLachlin J. said, at para. 45:
At base, a fair trial is a trial that appears fair, both from the perspective of the accused and the perspective of the community . . . . A fair trial is one which satisfies the public interest in getting at the truth, while preserving basic procedural fairness to the accused.
[39] Whether grounded under the majority's view of the accused's right to a fair trial under ss. 11(d) or 7 or under the minority's reliance on the common law or s. 24(1), the court in Harrer agreed that evidence, even when not obtained in breach of the Charter, may be excluded by the trial judge in the interests of a fair trial. Accordingly, it would be open to the appellants, if appropriate, to have the evidence excluded from the Canadian criminal trial on these bases.
[40] The appellants take issue with the high threshold they argue is necessary to obtain a s. 7 or s. 11(d) exclusion. They point to the description by McLachlin J. in Harrer as arising when the admission of the proffered evidence would "be so grossly unfair as to repudiate the values" of our system (para. 51). This threshold was adopted in Hape, at para. 111. In the result, on a Charter challenge, an accused would be required to establish a Charter breach and the exclusion of the evidence as grossly unfair on a balance of probabilities. However, separate from the Charter, a trial judge has a residual common-law discretion to exclude evidence, a [page629] discretion that is not restricted to, albeit most often invoked in, situations where the prejudicial effect of the evidence would outweigh its probative value. See R. v. Mohan, 1994 CanLII 80 (SCC), [1994] 2 S.C.R. 9, [1994] S.C.J. No. 36. The discretion also extends to situations where the admission of the evidence would result in an unfair trial. See R. v. Potvin, 1989 CanLII 130 (SCC), [1989] 1 S.C.R. 525, [1989] S.C.J. No. 24. Accordingly, an accused is not constrained by the high exclusionary threshold established by Hape. In those circumstances, whether the hypothetical evidence actually compromised trial fairness would be for the trial judge in the Canadian criminal proceedings to determine on a full record.
The "fourth" category
[41] The appellants argue that a fourth category or defence should be added to the categories accepted in Beals on the basis of a denial of a meaningful opportunity to defend. In my view, as aptly identified by the application judge, the considerations raised by the appellants under the proposed new category are the same considerations as under the rubric of the natural justice defence. I would not give effect to the appellants' arguments on this issue.
Derivative evidence
[42] The appellants also argue that they would have been required to give significantly detailed evidence to assert their due diligence defence in the civil proceeding, from which the Crown could have obtained incriminatory derivative evidence for use in the criminal proceeding. However, I cannot accept that this changes the result. Apart from the fact that any evidence led by the appellants likely would be exculpatory at their criminal trial, the appellants could move in the criminal proceeding to exclude any derivative evidence that was incriminating. See R. v. Feeney, 1997 CanLII 342 (SCC), [1997] 2 S.C.R. 13, [1997] S.C.J. No. 49; R. v. Stillman, 1997 CanLII 384 (SCC), [1997] 1 S.C.R. 607, [1997] S.C.J. No. 34. In addition, the same potential would arise whether the appellants gave their civil evidence in Canada or in the U.S. In either case, the admissibility of both the direct and any derivative evidence and whether it would have compromised trial fairness or fundamental justice would be considered by the trial judge in the Canadian criminal proceeding.
Comity
[43] I conclude by adopting the reasoning of the application judge regarding the implications on the principle of comity, at para. 67: [page630]
Finally, I have also considered briefly the policy issues presented by this proceeding, which the respondents characterize, in accordance with the principles articulated in Beals at para. 40, as the balance between order, being the importance of international comity in the context of international cross-border transactions, and fairness to Canadian citizens. Given the satisfaction of the standards of fairness required in Beals in this proceeding, the policy of comity compels enforcement of the New York Judgment. The respondents participated in a transaction to their financial benefit that was conducted in the capital markets of the United States. It is not unreasonable to be subject to criminal and civil proceedings in the United States if a material misrepresentation in the Registration Statement causes loss to investors. On its own, I think this is a very strong public policy element in favour of enforcing the New York Judgment.
[44] The principles of order and fairness that drive the rules of comity and the recognition of foreign judgments apply in this case. Since the appellants chose to do business and file a registration statement with the U.S. authorities, it is hardly unfair or disorderly to recognize the resulting civil judgment arising from their misrepresentations in this statement. This is particularly so when any adverse effect of any consequences regarding the potential for self-incrimination can be resolved in the criminal trial. It cannot be that individuals such as the appellants can avoid civil liability for their misdeeds simply because they also face criminal charges in both jurisdictions. Such a result would be contrary to the principles of order and fairness. Conclusion
[45] For these reasons, I cannot agree with the appellants' arguments regarding their defences of a denial of natural justice or a meaningful opportunity to defend. I would dismiss the appeal. The respondents are entitled to their costs fixed in the agreed-upon amount of $50,000, inclusive of disbursements and Goods and Services Tax.
Appeal dismissed.
Notes
Note 1: Counsel for Mr. Drabinsky indicated that Mr. Gottlieb, who was unrepresented on the appeal, adopted counsels' submissions as his own.
Note 2: In domestic proceedings, a person who filed an affidavit would be a "witness", and the affidavit "evidence", under s. 118 of the Criminal Code, R.S.C. 1985, c.-46 for the purpose of Part IV of the Code.