Court of Appeal for Ontario

Citation: 2017 ONCA 663

Date: August 22, 2017

Docket: C62906 & C62909

Judges: Weiler, van Rensburg and Huscroft, JJ.A.

Parties

Between

Business Development Bank of Canada Applicant (Respondent)

and

Cavalon Inc., 2365222 Ontario Limited, Autometric Autobody Inc., 2145009 Ontario Inc. and Robert Francis Bortolon, also known as Robert Bortolon Respondents (Appellant)

and

Robyrt Regan Non-Party (Appellant)

Counsel

Doug LaFramboise, for the appellant Robert Francis Bortolon

Alfred J. Esterbauer, for the appellant Robyrt Regan

Benjamin Frydenberg, for the respondent

Heard: June 8, 2017

On appeal from: the judgment of Justice Douglas K. Gray of the Superior Court of Justice, dated November 7, 2016 with reasons reported at 2016 ONSC 4084 and 2016 ONSC 6825.

Decision

Weiler J.A.:

A. Overview

[1] In these two interrelated appeals, Robert Bortolon, a principal of Cavalon Inc., 2365222 Ontario Ltd. ("236"), 2145009 Ontario Inc. ("214"), and Autometric Autobody Inc., (collectively, the "Bortolon companies"), and Bortolon's former lawyer, Robyrt Regan, appeal from findings of civil contempt and the custodial portions of their penalties, namely, 90 days imprisonment.

[2] For the reasons that follow, I would dismiss the appeals from the findings of contempt. In relation to the penalty, I would uphold the imposition of a custodial sentence but would reduce the sentence to 45 days imprisonment for each of Bortolon and Regan.

B. Facts

(1) Background

[3] Business Development Bank of Canada ("BDC") loaned Cavalon $100,000 which was secured by a General Security Agreement ("GSA").

[4] Cavalon defaulted on its loan and did not make any repayments on the principal. In April 2010, BDC commenced an action for judgment in the amount of the indebtedness, which it obtained in December 2011.

[5] A fire occurred at Cavalon's premises in November 2013. The insurer valued the assets lost in the fire at approximately $98,000. 236 asserted it owned the assets and was therefore entitled to the insurance proceeds. It submitted the proceeds were not subject to the GSA between Cavalon and BDC.

[6] Because of this dispute between BDC and 236 as to entitlement to the insurance proceeds, the insurer paid the amount into court (the "insurance fund").

[7] BDC contended that Bortolon shifted assets from Cavalon to his other companies, and ultimately to 236, for the purpose of circumventing BDC's judgment and security against Cavalon. In May 2014, BDC brought an application seeking judgment against 236 and the other Bortolon companies pursuant to the oppression provisions of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16. It also sought payment of the insurance fund out of court.

[8] Regan acted as counsel for Bortolon and some of his companies, but not 236, from late 2007 until mid February 2013. The solicitor-client relationship ultimately ended and a dispute arose between Bortolon and Regan over unpaid legal fees, as well as over Regan's antique Cadillac, which Bortolon had possession of and refused to return.

(2) Le May Order

[9] BDC brought a motion seeking a declaration that Bortolon and his companies had waived solicitor-client privilege with respect to their relationship with Regan, an order directing Regan to attend to be examined, and an order directing Regan to produce documents it had requested in a letter dated January 29, 2015. The documents related to Regan's solicitor-client relationship with Bortolon and his companies and were relevant to BDC's oppression claim.

[10] BDC obtained an order dated March 11, 2015 from Le May J., granting this relief on consent (the "Le May Order").

(3) Regan letter

[11] On March 16, 2015 Regan and BDC confirmed that Regan's examination would proceed on May 5, 2015 and Regan would provide BDC access to the records in his possession by March 31, 2015. That same day, Regan sent a letter to Bortolon's lawyer, Doug LaFramboise (the "Regan letter"), which read in part:

Without intending to be mischievous, I feel obliged to give you fair warning that there are a number of factual inconsistencies between the statements deposed to in Mr. Bortolon's affidavit … and the information contained in the various original documents in my possession. The nature of these inconsistencies is likely to be highly prejudicial to your clients. It is also equally likely that these same inconsistencies will come to the attention of BDC's counsel upon their review of the documents which they are entitled to see … It goes without saying that if your clients were to settle their outstanding account with me and complete the terms of the settlement [return the Cadillac] … then your clients would have a right to the return of their file materials (which amount to approximately 18 file boxes, more or less) in priority to the demands for their production by BDC.

[12] On March 27, 2015 Regan informed BDC's counsel that he was not in possession of any of Bortolon's files, and that he only retained documents pertaining to the now settled litigation between himself and Bortolon and an earlier complaint made by Bortolon to the Law Society of Upper Canada.

[13] On May 1, 2015 BDC received five boxes of Regan's files from Bortolon. The documents in the five boxes were only of marginal relevance to the matters at issue in BDC's proceeding against Bortolon and his companies.

[14] On June 4, 2015 Regan produced approximately four boxes of documents for inspection at his office. The Regan letter was among the documents included in the four boxes.

[15] During Regan's examination, he admitted he had sent the Regan letter to Bortolon's counsel, was aware of the requirement of the Le May Order to produce documents to BDC by March 31, 2015 and said he released approximately 18 boxes of documents to Bortolon without making copies of them. When asked why the documents were returned to Bortolon rather than made available for inspection by BDC's counsel, as required by the Le May Order, Regan said Bortolon "had a higher right to the material".

(4) Motion for contempt

[16] BDC brought a motion for contempt. In response, Regan swore an affidavit he had condensed the files in his possession to 14 boxes and had delivered all of those boxes to Bortolon on March 25, 2015. However, Bortolon's affidavit filed on the contempt motion stated he only received five boxes of documents, which he immediately sent to BDC's lawyers.

C. Judgment below

(1) Contempt findings

[17] The elements of contempt, which must be established beyond a reasonable doubt, are the following: (a) the order alleged to have been breached must state clearly and unequivocally what should and should not be done; (b) the party alleged to have breached the order must have had actual knowledge of it; and (c) the party allegedly in breach must have intentionally done the act that the order prohibits or intentionally failed to do the act that the order compels: see Carey v. Laiken, 2015 SCC 17, [2015] 2 S.C.R. 79, at paras. 32-35.

[18] The motion judge held the first and second elements of contempt had been made out. The Le May Order required the documents in question be inspected at Regan's office, and the documents had to be in Regan's possession and not at Bortolon's premises for that to take place. Further, Regan had knowledge of the Le May Order, as he was in court when it was made and he referred to the Order in the Regan letter. Bortolon, as a party, had actual knowledge of the Le May Order.

[19] With respect to the third element of contempt, the motion judge held that Regan transmitted relevant documents to Bortolon that ought to have been available for inspection by BDC. The motion judge found that Bortolon and Regan made a deal whereby Regan would ship relevant "highly prejudicial" documents to Bortolon, rather than make them available for inspection by BDC, in exchange for Bortolon settling his dispute with Regan. The motion judge found that Regan shipped 14 boxes of documents to Bortolon and Bortolon subsequently shipped only five boxes of material to BDC. Electronic copies of some records Regan subsequently produced did not include any highly prejudicial documents.

[20] Accordingly, the motion judge found both Bortolon and Regan in contempt of the Le May Order.

(2) Penalty

[21] A separate penalty hearing took place three months later.

[22] BDC did not seek a penalty of incarceration against the contemnors. Rather, BDC sought an order striking Bortolon and his companies' responding material and, in effect, default judgment, in relation to its oppression application.

[23] The motion judge noted the positions of the contemnors, who each submitted that if the court was disposed to impose a penalty, a non-custodial penalty would be appropriate. Counsel for Bortolon acknowledged that in the circumstances, he could not contend that the finding of contempt ought not to have been made. He submitted, however, that Regan had instigated the impropriety, and Bortolon only ever received five boxes of material. Counsel for Regan similarly acknowledged that the issue of contempt could not be revisited. Regan apologized for writing the Regan letter, but took the position that he did not intentionally violate the Le May Order.

[24] The motion judge held the initial contempt findings could not be revisited because neither Bortolon nor Regan had purged their contempt and it was doubtful they could do so. No new facts or evidence had come to light at the penalty hearing and, having regard to Carey, at paras. 65-66, it was too late to revisit the findings.

[25] The motion judge next considered mitigating factors. There was no history of Bortolon or Regan having a criminal record, or a history of violating court orders. He noted an apology would ordinarily be a mitigating factor, but Bortolon had not apologized and Regan's was not a true apology but an explanation for his actions. The contempt had not been purged and it was doubtful it could be.

[26] The motion judge also considered the contemnors' conduct as an aggravating factor because it was an affront to the administration of justice and was carried out for personal advantage.

[27] The motion judge noted BDC would never be satisfied it could obtain a fair hearing of its application because of Bortolon and Regan's conduct. BDC's request that the responding material be struck and that it be granted default judgment was therefore an appropriate sanction.

[28] The motion judge did not accept the submission that 236 was an innocent bystander. He rejected the argument that simply because 236 was incorporated after Regan stopped representing Bortolon, any documents in Regan's possession would not be relevant to 236. Regan could well have had documents in his possession that would have shown a pattern of conduct on the part of Bortolon and his associates to engage in schemes to shuffle assets and make it difficult to know which company owned what.

[29] Ultimately, the motion judge held this was an appropriate case to strike the responding material and to grant default judgment.

[30] In the circumstances, deterrence and denunciation were primary factors. In view of the contemnors' very serious conduct, the motion judge held only a custodial penalty would suffice: "The message is not only that court orders must be obeyed, it is that if compliance or non-compliance with a court order is bartered for some perceived personal advantage the contemnor will face a very serious penalty indeed."

[31] Bortolon and Regan were each sentenced to 90 days imprisonment.

[32] The motion judge awarded costs of the proceedings against the respondents to the application in the sum of $20,000, costs for an additional motion in the sum of $4,000 payable by Bortolon, and costs of the contempt motion fixed at $75,000 payable severally in the amount of $37,500 by each of Bortolon and Regan.

D. Issues on appeal

Bortolon appeal (C62909)

[33] In relation to the contempt hearing, Bortolon contends that because the Le May Order was directed at Regan, he should not have been found liable in contempt. He also submits there were material conflicts in the evidence respecting the number of boxes that Regan delivered to him. In any event, 236 was the rightful claimant to the insurance fund, and the motion judge erred in ordering default judgment. Finally, Bortolon asserts an inability to purge his contempt.

[34] In relation to penalty, Bortolon submits the motion judge's sentence of 90 days incarceration is disproportionate to his actions.

Regan appeal (C62906)

[35] In relation to the contempt hearing, Regan submits the motion judge erred:

(a) in holding Regan in contempt by failing to apply the correct legal framework;

(b) in finding Regan had failed to comply with the Le May Order; and

(c) in finding Regan had failed to purge his contempt.

[36] In relation to penalty, Regan submits the motion judge erred in imposing a 90 day sentence.

E. Analysis

(1) Standard of review

[37] Questions of fact are subject to the standard of palpable and overriding error. Questions of law are subject to a correctness standard. Questions of mixed fact and law are subject to the same standard as questions of fact, unless the motion judge erred in principle with respect to the characterization of the standard or its application, in which case, the error will amount to an error of law: see Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8-10, 26-28.

(2) Contempt findings

Bortolon appeal (C62909)

(a) 236 is not entitled to the insurance fund

[38] Bortolon asserts that 236 is the rightful claimant to the insurance fund and he, Bortolon, is only a 33 percent shareholder. By way of ancillary relief on appeal, Bortolon has requested an order setting aside the default judgment BDC obtained against 236 as part of its remedy for contempt.

[39] 236 was a respondent to the contempt motion and was represented throughout the contempt proceeding by LaFramboise. The motion judge cited 236 in contempt and the penalty imposed was judgment for damages in an amount equivalent to Cavalon's indebtedness to BDC (ordered pursuant to the oppression provisions of the Ontario Business Corporations Act), an order for payment of the insurance fund out of court to BDC, and costs.

[40] 236 has not appealed any of the orders made against it. Bortolon, as a shareholder of 236, has no standing to seek relief on behalf of 236 for himself. Rather, he must bring a derivative action or the corporation must bring the action: see Hercules Management v. Ernst & Young, [1997] 2 S.C.R. 165, at para. 59, affirming the rule in Foss v. Harbottle (1843), 67 E.R. 189 (U.K.H.L.).

[41] There is no basis therefore to interfere with the motion judge's finding of contempt or the judgment granted to BDC as against 236.

(b) Bortolon was bound by the Le May Order

[42] Bortolon concedes that the first two elements for a finding of contempt – specificity as to what is to be done and actual knowledge of the order – are met. This concession is appropriate. The Le May Order specified that the documents required to be produced were those BDC had requested in its lawyer's letter to Regan dated January 29, 2015. Bortolon had actual knowledge of the Order because it was granted on consent and LaFramboise, Bortolon's lawyer, was present in court when Le May J. made the Order.

[43] In relation to the third element of contempt – that the party allegedly in breach must have intentionally failed to comply with the order – Bortolon submits only Regan, not he, is bound by the Le May Order. Therefore, Bortolon cannot be found in contempt even if he facilitated the violation of the Order by entering into the transaction proposed in the Regan letter. Bortolon has provided no authority in support of this submission.

[44] By contrast, BDC has put forward a number of authorities that establish a person may be found in contempt for aiding and abetting a contempt of court. Non-parties may also be found in contempt for knowingly acting in contravention of a court order: see Sycor Technologies Inc. v. Kiaer, 2015 ONSC 734, 70 C.P.C. (7th) 315; U.F.C.W., Locals 175 & 633 v. Rainy Lake Hotel, 143 L.A.C. (4th) 135; Canada Transport Co. v. Alsbury, [1953] 1 S.C.R. 516; Canada Metal Co. v. Canadian Broadcasting Corp. (No. 2), 11 O.R. (2d) 167; and Re Tilco Plastics Ltd. v. Skurjat et al., [1966] 2 O.R. 547.

[45] This ground of appeal is dismissed.

(c) There was no real conflict in the evidence and the motion judge did not err in holding Bortolon in contempt

[46] Bortolon submits there is a material conflict in the evidence as to whether he turned over all of the documents he received, and his contempt has not been proven beyond a reasonable doubt.

[47] As demonstrated below, it was open to the motion judge to accept the evidence he did and to find Bortolon in contempt.

[48] Bortolon's affidavit in response to the contempt motion states, at para. 7, "In March of 2015, I and Mr. Regan agreed to settle our outstanding account between ourselves." Bortolon makes no reference to the Regan letter of March 2015. In that letter, Regan effectively tied the resolution of the proceeding with BDC to the resolution of his dispute with Bortolon, by essentially telling Bortolon he would hand over highly prejudicial documents to BDC unless they reached an arrangement. That letter referenced 18 boxes of documents in Regan's possession that were subject to production under the Le May Order.

[49] Bortolon's affidavit further states, at para. 8, "Mr. Regan, through my business partner Gaspare Caruso arranged to have my boxes returned to me and the car … returned to Mr. Regan."

[50] Regan's affidavit of November 25, 2015 states that the material was condensed into 14 boxes. On March 25, 2015 those boxes were given to Steve Sweet, a tow truck operator, whom Regan had hired to recover the Cadillac. Sweet advised Regan that once the Cadillac had been placed on the tow truck hoist, he handed the 14 boxes over to an individual who appeared to be in care and control of Bortolon's business premises. Attached to Regan's affidavit is a copy of the picture Sweet sent to him on March 26, 2015 showing Regan's Cadillac on the hoist.

[51] Caruso is a shareholder of 236 and he swore an affidavit in response to the motion. Caruso's affidavit offers no evidence on the chain of custody of the documents, although Bortolon identified him as the person involved.

[52] Bortolon's affidavit states, at para. 9, that he received five boxes from Regan. His affidavit is lacking in detail that could have been provided by Caruso.

[53] Bortolon further swears, at para. 11, "Upon receipt of the boxes, I immediately sent the boxes to the offices of Chaitons Law Firm." Chaitons are the lawyers for BDC. This paragraph is patently false. Regan's evidence is that the handover took place on March 25, 2015. BDC's counsel, Sam Rappos, confirms Regan's evidence. He states that on March 27, 2015 Regan informed him that he was not in possession of any of Bortolon's files. The affidavit of Rappos further states the five boxes were not dropped off until May 1, 2015 and Bortolon's counsel, LaFramboise, confirms the boxes came from Bortolon. Bortolon had possession of the documents for five weeks. Bortolon has not contradicted any of this evidence.

[54] Thus, in his affidavit, Bortolon lied about returning the boxes immediately and tried to conceal the fact he had the boxes for five weeks. The affidavit also contains the bald, self-serving statement, at para. 10, "I knew exactly what documents Mr. Regan had in his possession and this was exactly the documents that were returned to me."

[55] In the circumstances, it was open to the motion judge to disbelieve Bortolon's evidence. Further, he was entitled to find, on the evidence he accepted, that Bortolon's contempt had been proven beyond a reasonable doubt.

[56] Bortolon further submits he is being punished for Regan's negligence in not keeping copies of the relevant documents.

[57] Nowhere in his evidence does Bortolon state he assumed Regan had copies of the documents. Further, the suggestion that Bortolon thought Regan kept copies of the documents and would turn them over to BDC's lawyers defies common sense. If Bortolon thought that Regan would provide copies of the documents to BDC's lawyers then there would be no incentive for him to pay Regan and to return the Cadillac. Bortolon suddenly agreeing to pay Regan and to return his car only makes sense if he thought BDC would not receive the documents in the boxes.

[58] The motion judge was entitled to find, as he did, that highly relevant documents to BDC's lawsuit disappeared from the boxes Regan sent to Bortolon, due to Bortolon's actions. As a result, BDC would be unable to obtain a fair hearing. No palpable and overriding error has been shown in relation to this finding.

[59] Bortolon also asserts he had no chance to purge his contempt. This is incorrect. He had three months between the contempt and penalty hearings to do so. In any event, the ability to purge contempt is relevant to penalty, but not to liability: see College of Optometrists (Ontario) v. SHS Optical Ltd., 2008 ONCA 685, 93 O.R. (3d) 139, at para. 79.

[60] The finding of contempt in relation to Bortolon is affirmed.

Regan appeal (C62906)

(a) The motion judge did not err in applying the legal framework; he did not err in finding Regan had failed to comply with the Le May Order and failed to purge his contempt

[61] The motion judge stated that in the absence of any request for viva voce testimony, he assumed the parties were content that the matter be determined on the basis of the record as it was. Regan submits, however, the fact that BDC chose not to cross-examine him on his affidavit should not operate to his detriment. Regan submits a moving party in a contempt proceeding should be obliged to cross-examine the alleged contemnor on his or her evidence if there is an intention to contradict it.

[62] Regan's overall position is that BDC failed to prove beyond a reasonable doubt that Regan was in contempt of the Le May Order. In support of his position, Regan submits the motion judge erred by basing his findings on BDC's statements of belief and speculative assumptions, and by failing to give any weight to Regan's evidence that he had complied with the terms of the Le May Order. Further, there was no direct evidence that Regan withheld or failed to provide BDC with access to relevant documents he had in his possession. In fact, Regan retained copies of the documents that he believed were subject to the Le May Order and provided BDC's counsel access to those documents. Regan submits the motion judge engaged in forbidden reasoning by accepting BDC's evidence and rejecting his evidence in a conclusory manner.

[63] The short answer to these submissions is that the weight to be attached to evidence is a matter for the motion judge. Cross-examination is not the only way in which disbelief of a witness's evidence may arise. Regan's evidence was internally inconsistent and the motion judge was entitled to rely on these internal contradictions to reject it. The inferences the motion judge drew from the evidence were open to him and his findings are grounded in the evidence. He committed no palpable and overriding error.

[64] Central to Regan's submissions is his affidavit of May 31, 2016 which states, at para. 6, "I do not and never did have any materials which are directly relevant to the matters subject of this application (the dispute over the insurance proceeds)." The motion judge was entitled to reject this evidence for the reasons given below.

[65] First, the Le May Order was clear. It required Regan to produce for inspection the documents that BDC requested in its lawyer's letter dated January 29, 2015. Regan reviewed the draft Order, consented to it, and was present in court when it was made. In Regan's responding material before Le May J., he never suggested he did not have the documents BDC had requested.

[66] Second, BDC's position was that Bortolon shifted assets between his companies and pledged the same assets as were pledged to BDC to the Toronto Dominion Bank ("TD") as security for a loan. One of the categories of documents ordered to be produced in the Le May Order was any and all dealings between Cavalon and 214, another of Bortolon's companies. Regan was asked to produce the demand letter from TD to 214 and the loan agreement. These documents were central to BDC's case. On June 5, 2015 BDC examined Regan as follows:

Q. Would you have a copy of the demand from TD Bank?

A. Not anymore.

Q. That would have been returned as part of the documents of Mr. Bortolon?

A. Correct.

Q. In investigating or dealing with that matter, would you have obtained a copy of the loan agreement from Mr. Bortolon?

A. Either that or from the Bank's counsel.

Q. And you don't have possession of that anymore?

A. No.

Q. That would have gone back to Mr. Bortolon recently?

A. It would have.

[67] The above questions and answers are but one example that Regan's assertion in his affidavit that BDC did not prove he possessed any relevant documents is factually incorrect. Regan's examination reveals he delivered relevant documents to Bortolon that he ought to have produced pursuant to the Le May Order.

[68] Third, Regan's submission contradicts his own letter to Bortolon dated March 2015, which stated he had 18 boxes of documents that were "highly prejudicial" and would otherwise be produced to BDC. For the reasons already given in relation to the Bortolon appeal, the fact that Bortolon claimed he only received five boxes from Regan does not raise a material conflict in the evidence. Regardless of how many boxes Regan delivered to Bortolon, the uncontradicted evidence is BDC only received five boxes of marginally relevant materials. The Regan letter and Regan's own examination indicate more documents should have been produced.

[69] The motion judge was entitled to rely on the statements Regan made in his March 2015 letter, and in his examination, in rejecting Regan's bald statement in his affidavit.

[70] Regan also asserts he retained electronic copies of all relevant documents. But, Regan did not mention he had any electronic copies of the documents in his possession in his letter to BDC of March 27, 2015. The letter simply said he was no longer in possession of the files relating to Bortolon or his companies.

[71] During his examination on June 5, 2015 Regan's evidence was he released 18 boxes of documentation to Bortolon without making copies. He justified this on the basis that Bortolon had "a higher right to the material". Although Regan submits he meant he had not retained paper copies and that he made electronic copies, this too is contradicted by his own evidence. While being questioned in relation to the role of 214, Regan was asked about his electronic record keeping practices. He was specifically asked whether he had a policy of "scanning incoming documents or documents that a client provided [to him] for litigation purposes." He stated, "Not at that point in time." He then explained that his electronic record keeping practice only expanded when he left his sole practice and joined another law firm. That happened after his retainer with Bortolon and his various companies had been terminated.

[72] The motion judge did not make any palpable and overriding errors in his findings of fact.

[73] Based on his findings, the three elements of the test for contempt were made out beyond a reasonable doubt, and the motion judge did not err in holding Regan in contempt. Regan's appeal with respect to the finding of contempt is dismissed.

(3) Penalty

[74] At the penalty phase of a contempt hearing courts have a wide discretion. Rule 60.11(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that the court may make such order as is just, including that the judge may order the contemnor:

(a) be imprisoned for such period and on such terms as are just;

(b) be imprisoned if the person fails to comply with a term of the order;

(c) pay a fine;

(d) do or refrain from doing an act;

(e) pay such costs as are just; and

(f) comply with any other order that the judge considers necessary, and may grant leave to issue a writ of sequestration under rule 60.09 against the person's property.

[75] The penalty imposed here consisted of striking the response to the application proceedings resulting in default judgment in favour of BDC, an order for the payment out of court to BDC of the insurance fund, and custodial sentences of 90 days each for Bortolon and Regan. They were each also required to pay significant costs of the motion, on a substantial indemnity scale. The motion judge concluded, at para. 43, "only a custodial penalty" would suffice in this case. That aspect of the penalty is appealed to this court.

(a) Purpose and guiding principles in sentencing for civil contempt

[76] A deliberate breach of a court order may constitute either a civil or a criminal contempt. A criminal contempt requires, in addition to a deliberate violation of a court order, an element of public defiance calculated to lessen societal respect for the courts: see U.N.A. v. Alberta (Attorney General), [1992] 1 S.C.R. 901, at para. 21. The choice of penalty for contempt must recognize the important distinction between civil and criminal contempt.

[77] It is well recognized that the purpose of a sentence for criminal contempt is primarily punishment, whereas the purpose of a sentence for civil contempt is primarily about coercion, designed to protect and enforce the rights of a private party: see Korea Data Systems Co. v. Chiang, 2009 ONCA 3, 93 O.R. (3d) 483, at para. 11.

[78] However, while gaining compliance with the court's orders is the primary aim of sentencing in civil contempt proceedings, courts have also recognized that acts of civil contempt, like criminal contempt, undermine the authority of the courts and diminish respect for the law: see Mercedes-Benz Financial v. Kovacevic, 308 D.L.R. (4th) 562, at para. 11; Niagara Regional Police Services Board v. Curran, 57 O.R. (3d) 631, at para. 35; Sussex Group Ltd. v. 3933938 Canada Inc., [2003] O.T.C. 664, at para. 12.

[79] The Supreme Court of Canada noted in Vidéotron Ltée. v. Industries Microlec produits électriques Inc., [1992] 2 S.C.R. 1065, at para. 16, that the public law aspects of contempt of court have moved it somewhat beyond the realm of private law, and the public law aspects of contempt of court should be reflected in the sanctions which are imposed. The court stated, at para. 14:

The penalty for contempt of court, even when it is used to enforce a purely private order, still involves an element of "public law", in a sense, because respect for the role and authority of the courts, one of the foundations of the rule of law, is always at issue. In United Nurses of Alberta v. Alberta (Attorney General), [1992] 1 S.C.R. 901, McLachlin J. established a direct connection between contempt of court and the rule of law, at p. 931:

The rule of law is at the heart of our society; without it there can be neither peace, nor order nor good government. The rule of law is directly dependent on the ability of the courts to enforce their process and maintain their dignity and respect. To maintain their process and respect, courts since the 12th century have exercised the power to punish for contempt of court.

[80] Epstein J.A. noted in Boily v. Carleton Condominium Corp. 145, 2014 ONCA 574, 121 O.R. (3d) 670, at para. 79:

The purpose of a penalty for civil contempt is to enforce compliance with a court order and to ensure societal respect for the courts. [Citation Omitted.] The remedy for civil contempt is designed not only to enforce the rights of a private party … but also to enforce the efficacy of the process of the court itself.

[81] Because civil contempt engages issues of public law and the need to condemn acts which undermine the authority and dignity of the court, punishment has been recognized as a secondary purpose for sentencing in such cases. Watt J.A. stated in College of Optometrists (Ontario), at para. 106: "The underlying purpose of contempt orders is to compel obedience and punish disobedience." The Alberta Court of Appeal similarly noted, in Builders Energy Services Ltd. v. Paddock, 2009 ABCA 153, 457 A.R. 266, at para. 13, that "[t]he purpose of contempt proceedings is twofold: to ensure compliance with court orders and to punish the contemnor." As well, decisions of the Superior Court of Justice have recognized the dual purpose of sentencing in civil contempt. In 2363523 Ontario Inc. v. Nowack, 2016 ONSC 2518, aff'd 2016 ONCA 951, 135 O.R. (3d) 538, at paras. 68-72, Dunphy J. stated:

There are two primary purposes to be served in sentencing, and I must have regard to both in this case. First – and usually primarily, the objective of sentencing is to coerce the contemnor to comply with the orders in question.

A second objective of sentencing is punishment. Punishment serves to denounce conduct that requires denouncing and thereby deter the contemnor specifically and others more generally who might contemplate breaches of court orders at will. If a party has disagreements or issues with an order that has been made, it must nevertheless be complied with unless validly stayed or reversed on appeal in accordance with the rules. There is no self-help after an order has been issued.

See also Law Society of Upper Canada v. Fingold, 2016 ONSC 5684, at paras. 38-43.

(b) Imposing a jail sentence in cases of civil contempt

[82] In civil cases, incarceration is rare. Ordinarily, a finding of contempt, together with a fine or some other order in relation to the litigation, is sufficient to gain compliance and restore the authority of the court. In Chiang, this court observed, at para. 90:

Custodial sentences for civil contempt are rare. Lengthy custodial sentence are even rarer. Canadian courts have tended to punish contempt of court leniently. Ordinarily the mere conviction for contempt together with a modest fine suffices to obtain compliance and to protect the court's authority. Ordinarily incarceration is a sanction of last resort. [Citation omitted.]

[83] With respect to the observation that Canadian courts have tended to punish contempt of court leniently, Brown J. (as he then was) stated in Mercedes-Benz Financial, at para. 10:

I suspect this observation was based on the commentary contained in the document published in May, 2001 by the Canadian Judicial Council entitled, "Some Guidelines on the Use of Contempt Powers", where, at page 40, the following statements are found:

In Canada punishment for contempt has been quite moderate, reflecting the courts' usual view that a conviction for contempt and a modest fine is usually sufficient to assert the courts' authority, to protect their dignity or to ensure compliance. Often these sentences are imposed after the contemnor has apologized and purged his or her contempt which substantially mitigates any punishment that might otherwise be imposed.

[84] I would add that, in cases of serious breaches of court orders, the Canadian Judicial Council recognized that jail was an appropriate sanction. At page 39 the Council stated:

If the contempt has not been purged and the contempt is a serious one, or if there has been a deliberate disobedience of a court order accompanied by violence or other flagrant misconduct then imprisonment or heavy fines become more likely, but care must be taken to ensure that the disposition of the proceedings does not appear to be bullying or vengeful. [Citation omitted.]

Imprisonment should be imposed only in cases of serious deliberate disobedience, violence or wilful interference with the course of justice. Repeated breaches of a restraining order would justify imprisonment, as would a single breach of an order if the breach were a serious one. [Emphasis added.]

[85] More recently, Belobaba J. commented in Ceridian Canada Ltd. v. Azeezodeen, 2014 ONSC 4162, 69 C.P.C. (7th) 29, aff'd 2014 ONCA 656, 69 C.P.C. (7th) 40, at para. 24:

This court has imposed jail sentences ranging from five days to one year in cases of civil contempt. Each of the custodial cases have two things in common: one, the defendant's breach, like here, was knowing and deliberate; and two, the length of the jail term was a function of the continuing nature of the contempt discounted by the degree of remorse or apology on the part of the defendant…. In my view, where the breach of a court order is knowing and deliberate, continues over several days, and the only response from the defendant is defiance without remorse, a jail sentence is appropriate.

[86] Ordinarily, the period between a finding of contempt and the penalty hearing gives the contemnor an opportunity to purge his or her contempt. At the penalty hearing, if the contemnor has purged his or her contempt, as Belobaba J. noted, this is a significant mitigating factor with respect to the penalty imposed. Where, as here, the impossibility of purging the contempt is a situation of the contemnors' own making, it is not a mitigating factor: see Echostar Communications Corp. v. Rodgers, 2010 ONSC 2164, 97 C.P.C. (6th) 177, at para. 45.

[87] A wilful flagrant breach of a single court order that shows a callous disregard for the court's authority, or that causes significant prejudice to the other party may attract a jail sentence: see Mercedes-Benz Financial, at para. 35.

[88] While each case is fact specific, incarceration has been imposed in numerous cases for failure to produce documents or corporate records: see Sussex Group Ltd. v. Sylvester, 62 O.R. (3d) 123, at para. 85 (6 months); Nelson Barbados Group Ltd. v. Cox, 2010 ONSC 569, at para. 35 (3 months and a fine of $7500); Cellupica v. Di Giulio, 2011 ONSC 1715, 105 O.R. (3d) 687, at para. 49 (90 days); Sussex Group Ltd. v. 3933938 Canada Inc., [2003] O.T.C. 683, at para. 15 (2 months); Nowack, at para. 114 (1 month).

[89] As noted above, serious violations of court orders – even if only one order or one instance – can warrant a jail sentence. In determining whether a jail sentence is needed to adequately vindicate the due administration of justice, the context in which the contempt occurs is an important consideration: see Langston v. Landen, 2011 ONCA 242, at para. 1. Because incarceration is ordinarily a penalty of last resort, the court must also consider whether any other penalty short of incarceration would be a sufficient sanction for the gravity of the contempt, taking into consideration the sentencing principles applicable to civil contempt.

(c) Sentencing principles applicable to civil contempt

[90] The factors relevant to a determination of an appropriate sentence for civil contempt were set out by Epstein J.A. in Boily, at para. 90. The factors can be summarized as follows:

(a) Proportionality of the sentence to the wrongdoing – a sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender: see also Chiang, at para. 86; Mercedes-Benz Financial, at para. 12.

(b) Presence of aggravating and mitigating factors: see also Chiang, at paras. 50-51, 87-89; Sussex Group Ltd. v. Fangeat, [2003] O.T.C. 781, at para. 67.

(c) Deterrence and denunciation – the sentence should denounce unlawful conduct and promote a sense of responsibility in the contemnor, and deter the contemnor and others from defying court orders: see also Chiang, at para. 91; Fangeat, at para. 67.

(d) Similarity of sentence in like circumstances.

(e) Reasonableness of a fine or incarceration: see generally Chiang.

[91] Epstein J.A. concluded that specific and general deterrence are the most important sentencing objectives in civil contempt cases. Other courts have also noted the principles of deterrence to be the primary sentencing principle in cases of civil contempt. The British Columbia Court of Appeal endorsed a similar view in Majormaki Holdings Ltd. v. Wong, 2009 BCCA 349, 97 B.C.L.R. (4th) 64, at para. 28.

(d) The motion judge did not err in concluding that the appellants' conduct warranted a jail sentence in this case

[92] The motion judge's determination of the appropriate penalty is entitled to considerable deference. An appellate court should only intervene where there is an error in principle in arriving at the sentence, or the sentence is clearly unfit: see Boily, at para. 78.

[93] As the central aggravating factor, the motion judge noted the very serious nature of the contempt – a person governed by a court order bartered non-compliance with the order for some personal advantage. He found, at para. 50, that the evidence admits to only one conclusion; Regan made a deal whereby his claim against Bortolon would be satisfied in exchange for which the highly prejudicial documents in his possession would be given to Bortolon. Implicit in the arrangement was that this course of conduct would result in the prejudicial materials never being provided to BDC.

[94] Regan failed to seek advice from other counsel or obtain further directions from the court before instigating a course of action which permanently altered the ability of BDC to obtain a fair trial. He was motivated by personal financial gain and took actions which violated the court's Order, and his ethical and professional responsibilities as an officer of the court.

[95] As I have indicated, where the contemnors have adopted obstructionist tactics and flagrantly ignored a court order to produce documents as required by the court, jail sentences have been imposed. Imprisonment has also been held to be appropriate where "the refusal to comply with an Order frustrates the gathering of important information … with adverse consequences to the plaintiff": see Echostar, at para. 55. See also, Sylvester, at paras. 83, 95. In this case, Bortolon and Regan's actions frustrated BDC's right to obtain important information to prove its case.

[96] In this case, disobedience of the Order was knowing and deliberate. While the contempt involved a single act, it was unlikely that the contempt could be purged. I would also agree with the motion judge's assessment of the apology provided by Regan at the sentencing hearing. Namely, that it was equivocal, and an attempt to explain his conduct; it was not a true apology. Bortolon offered no apology. Thus, an important mitigating factor is not present in this case.

[97] The motion judge properly observed that as far as he was aware, neither Bortolon nor Regan had a criminal record.

[98] Although BDC did not seek a penalty beyond having Cavalon's pleading struck and default judgment issued in its favour, the motion judge noted, at paras. 12-13, that BDC invited him to consider imposing a significant penalty. He further noted, at para. 20, Bortolon's counsel's submission "that a non-custodial penalty should be preferred." The parties were clearly aware that the motion judge was contemplating a serious penalty, including incarceration, and were given the opportunity to make submissions to persuade him that a non-custodial sentence was sufficient. It was left to the court to determine what, if any, penalty would be imposed.

[99] In coming to the conclusion that only a jail sentence would send the message that this type of conduct will not be tolerated, the motion judge acknowledged the exceptional nature of jail sentences for civil contempt, stating, at para. 26, that "sanctions for contempt are to be imposed sparingly". It is also implicit that the motion judge turned his mind to other available sanctions and rejected them when he stated, at para. 43, "In view of the very serious conduct of Mr. Bortolon and Mr. Regan, I consider that only a custodial penalty will suffice." While it would have been preferable if the motion judge had expressly addressed the question of why a fine would not suffice to meet the principles of sentencing, the context in which the contempt occurred supports the motion judge's conclusion that the egregious conduct of Bortolon and Regan not only interfered with BDC's ability to ever have a fair trial, but amounted to an affront to the administration of justice that justified a penalty of incarceration.

(e) The length of the sentence imposed was not proportionate

[100] At para. 38 of his decision, the motion judge cited six cases where custodial sentences were imposed which ranged from three months to 18 months. He did not provide any analysis of the cases, nor did he acknowledge relevant points of distinction between this case and the cases he cited which attracted significant periods of incarceration. As a result, there are two important considerations the motion judge did not address in determining the length of sentence:

1. All the cases cited by the motion judge involved numerous breaches or persistent obstructionist conduct by the contemnor. This case involved a single breach of a single court order. This is a significant point of distinction and impacts the proportionality assessment and what sentence adequately addresses the gravity of the contempt;

2. Given that BDC achieved the remedy it sought (default judgment) and the primary purpose of sentencing in civil contempt cases is to remedy the private rights of the litigants, the motion judge failed to recognize that this key purpose had been satisfied by ordering default judgment.

[101] These considerations were relevant to assessing a proportionate sentence for both Bortolon and Regan. Having regard to them, I would hold that the motion judge erred with respect to the proportionality of the sentence he imposed and would allow the appeal to the extent of reducing the sentence to 45 days for each contemnor.

[102] As a consequence of the contempt finding, the Law Society of Upper Canada levied an interim suspension of Regan's licence to practice law, effective December 29, 2016. This was a collateral consequence that the motion judge was unable to take into account because it occurred after he delivered his reasons on penalty. Ordinarily this consideration would be taken into account and could weigh in favour of a reduction in the sentence for Regan: see R. v. Pham, 2013 SCC 15, [2013] 1 S.C.R. 739, at para. 11. But, as he was the instigator of the offence, I would maintain the parity of the sentences. The three days in custody that Regan and Bortolon served following the imposition of the penalty and prior to their release pending appeal will, of course, be credited against their sentence.

F. Costs

[103] BDC was obliged to respond to the appeal respecting the motion judge's finding of contempt. My decision to reduce the length of the sentences for Bortolon and Regan should not affect BDC's entitlement to costs.

[104] Having regard to the motion judge's finding as to the seriousness of the conduct involved and its effect on the administration of justice, costs are payable on a substantial indemnity basis, and I so order: see College of Chiropractors of Ontario v. Dies, 2015 ONSC 2828, varied on other grounds, 2016 ONCA 2, at para. 21; Niagara Regional Police Services Board, at para. 49; and SNC-Lavalin Profac Inc. v. Sankar, 2009 ONCA 97, 94 O.R. (3d) 236, at para. 19.

[105] Accordingly, I would order the costs of the appeal to be paid on a substantial indemnity basis, and I would fix those costs in the amount of $27,500 inclusive of all applicable taxes and disbursements. As did the motion judge, I would hold that liability for those costs should be several, not joint. Thus, Bortolon is responsible for $13,750 in costs, as is Regan.

G. Disposition

[106] For the reasons given, I would dismiss the appeals as to the findings of contempt. I would allow the appeals with respect to penalty to the extent of setting aside the 90 day sentences of imprisonment imposed, substitute a sentence of 45 days for each of Bortolon and Regan, and credit them with the three days they have already served. I would fix costs of the appeal on a substantial indemnity basis in the amount of $27,500 all inclusive, and award those costs severally in the sum of $13,750 each, against Bortolon and Regan.

"K.M. Weiler J.A."

I agree K. van Rensburg J.A.

"I agree Grant Huscroft J.A."

Released: August 22, 2017