Court of Appeal for Ontario

Date: 2019-04-09

Docket: C65202

Judges: Simmons, Juriansz and Miller JJ.A.

Between

Wolseley Canada Inc. Plaintiff (Respondent)

and

Neal Traffic Services Limited o/a National Traffic Services, Johannes Lokker and Marilyn Louise Lokker Defendants (Appellants)

Counsel

Neil M. Abramson and Robert Barbiero, for the appellants

Barry Yellin and Kayla Carr, for the respondent

Heard: April 4, 2019

On appeal from the orders of Justice R. John Harper of the Superior Court of Justice, dated June 26, 2017 and March 6, 2018.

Reasons for Decision

[1] The respondent brought an action claiming monies it had advanced to the appellants had not been properly disbursed, and that the appellants failed to have a proper accounting system to account for funds flowing in and flowing out.

[2] On April 21, 2017, Carpenter-Gunn J. made an interim order requiring the appellants to: 1) account for monies they had received from the respondent to pay third party freight carriers, by delivering a comprehensive spread sheet within 15 days and corroborating documents within 3 days of any request; 2) disclose all related documents to an accounting firm to be appointed by the respondent following receipt of a confidentiality/non-disclosure agreement; and 3) pay any unpaid accounts within 15 days.

[3] The respondent brought a successful motion to have the appellants found in contempt of paragraphs 1 and 2 of the order.

[4] In oral argument, the appellants did not contest the motion judge's June 26, 2017 finding that they were in contempt of paragraphs 1 and 2 of the April 21, 2017 order. Rather, they confined their submissions to asserting that the sentence imposed on March 6, 2018 was based on an erroneous finding they had not purged their contempt and, in any event, was disproportionate and therefore unfit.

[5] We accept the appellants' submission that the motion judge erred in dismissing their fresh evidence motion returned on the day set for the contempt sentencing. The motion judge refused to admit the affidavits the appellants tendered, taking the view they were splitting their case by seeking to introduce further evidence concerning their motion to vary the April 21, 2017 order and the respondent's sanctions motion.

[6] One of the grounds relied on in the appellants' notice of motion to admit fresh evidence was that they had purged their contempt. Whether the appellants had purged their contempt was relevant to, and was likely to impact, the issue of sentence. That question continued to be relevant until sentence was imposed. The fresh evidence addressed that relevant issue by addressing what had occurred since the previous attendance before the motion judge in November 2017. The appellants deposed that they had fully complied with the April 21, 2017 order by the time of the sentencing hearing in March, 2018. They deposed that as of early December 2017 (when they supplied corrected bank statements for 2017), they had supplied all requested documents to PriceWaterhouseCoopers ("PWC"), the accountants appointed by the respondent under the April 21, 2017 order, and had not received any further requests for documents.

[7] These asserted facts would have been before the motion judge had he not erred by striking portions of the appellants' affidavits that addressed these facts and by dismissing the fresh evidence motion.

[8] In concluding the appellants had not purged their contempt the motion judge relied on the appellant's failure to account for all money in and out, ostensibly supported by the affidavit of the respondent's accounting expert, Ms. Patel of PWC. The motion judge indicated that paragraph 31 of Ms. Patel's January 3, 2018 affidavit demonstrated that "PWC was not given all information as ordered."

[9] In our view, Ms. Patel's affidavit did not contradict the claim in the appellants' fresh evidence that they had done what was necessary to comply with paragraphs 1 and 2 of the April 21, 2017 order. At its highest, paragraph 31 of Ms. Patel's affidavit indicated that she did not know whether PWC had been given all the necessary information to comply with the April 21, 2017 order. As we read paragraph 31, Ms. Patel deposed she had not been able to fully reconcile all monies received by the appellants from the respondent with all third-party freight carrier accounts the appellants were required to pay with those funds. However, the inability to fully reconcile all monies received from the respondent and all payments made by the appellants to third party freight carriers does not in itself demonstrate that the appellants had not produced all the documents as required. The obligation to account in paragraphs 1 and 2 of the April 21, 2017 order, understood in the context of the action, is an obligation to produce documents. The inability to reconcile all the monies received and paid out may simply highlight an issue to be resolved at trial.

[10] Concerning the fitness of the sentence imposed, the appeal record discloses that the appellants made extensive efforts to comply with the April 21, 2017 order, commencing in early May 2017 after PWC provided the confidentiality/non-disclosure agreement required under the April 21, 2017 order. Having regard to these efforts, the extensive disclosure that was ordered, and the extent of the disclosure that was made, we conclude that the term of the sentencing order requiring that the appellants' pleadings be struck is disproportionate. The fact that the appellants' former counsel conceded that the appellants' pleading could be struck if the appellants failed to purge their contempt by July 15, 2017, while an important consideration, does not alter that conclusion. It remained for the motion judge to impose a fit sentence taking account of all the evidence that should have been before the court at the time of the sentencing hearing in March 2018.

[11] Further, we see no proper basis for imposing as a term of the sentencing order a requirement that the appellants pay PWC's costs. The April 21, 2017 order required the respondent to pay those costs. The issue of who is ultimately responsible for PWC's fees is a matter for the fixing of costs after trial.

[12] In the result, the appeal is allowed in part by setting aside the declaration that the appellants have not purged their contempt; by setting aside all orders relating to striking the appellants' pleadings; and by setting aside the order requiring the appellants to pay PWC's costs.

[13] The appellants may make brief written costs submissions within 10 days of the release of these reasons; the respondents may do the same within 10 days following receipt of the appellants' submissions.

Janet Simmons J.A.

R.G. Juriansz J.A.

B.W. Miller J.A.