Court of Appeal for Ontario

Date: 2019-05-02 Docket: C66238

Judges: Doherty, Paciocco and Zarnett JJ.A.

Between

2089322 Ontario Corporation Applicant (Respondent in Appeal)

and

Luc W. Des Roches, Nicole L. Des Roches and Rezmart Gas and Tobacco Respondents (Appellants in Appeal)

Counsel

Christopher J. Sparling, for the appellant, Luc W. Des Roches and Rezmart Gas and Tobacco

Warren S. Rapoport and Nicholas Macos, for the respondent

Heard: April 16, 2019

On Appeal

On appeal from the order of Justice Edward J. Koke of the Superior Court of Justice, dated October 9, 2018 with reasons reported at 2018 ONSC 5972.

Reasons for Decision

Background

[1] In 2006, the appellant, Luc Des Roches ("Mr. Des Roches"), and the respondent, 2089322 Ontario Corporation ("208 Ontario"), entered into an agreement which provided that Mr. Des Roches would operate a convenience store and gas bar ("Rezmart") on Wasauksing First Nation ("WFN"). 208 Ontario is wholly owned by Wasauksing Lands Inc. ("WLI"), a not-for-profit economic development corporation incorporated to promote the interests of WFN. 208 Ontario provided funding and oversight.

[2] The venture did not go well almost from the beginning. In August 2007, 208 Ontario brought an application for a determination of the parties' rights under the agreement. 208 Ontario alleged that Mr. Des Roches was operating Rezmart without regard to either his obligations under the agreement or 208 Ontario's rights under the agreement. That application remained before the courts for many years.

[3] Ultimately, in early 2018, 208 Ontario sought an order enforcing the terms of the agreement and an order finding Mr. Des Roches in civil contempt for breaching three prior court orders made in the course of the application. Those orders related to the preservation and production of documents relating to the business operation of Rezmart.[1]

The April 2018 Proceedings

[4] At the hearing in April 2018, the motion judge concluded that Mr. Des Roches was bound by the agreement with 208 Ontario in respect of the operation of Rezmart. The motion judge also found that Mr. Des Roches was in breach of several terms of that agreement and had been for many years. The motion judge made an order declaring that the agreement was enforceable against Mr. Des Roches. He placed 208 Ontario in complete control of the Rezmart business operation and the premises. The motion judge also ordered Mr. Des Roches to fully cooperate in the transfer of the business premises and assets to 208 Ontario.

[5] The motion judge further ordered:

This application is adjourned until October 1, 2018 at which time the parties are to appear before me for the continuation of the application and to discuss and determine the ultimate relief which should be granted by this court.

[6] The motion judge also addressed the contempt allegations in his reasons. He found that Mr. Des Roches was in contempt of prior orders and that his non-compliance of those orders was wilful and deliberate. The motion judge indicated that a short prison sentence would be appropriate. However, he declined to make any order in respect of the contempt and adjourned that matter to the October 1 date as well. The motion judge indicated that the adjournment of the sentencing on the contempt would give Mr. Des Roches a chance to "rectify his breach by demonstrating he is prepared to follow court orders."

[7] Mr. Des Roches was self-represented at the April proceedings.

[8] Neither party appealed the April order.

The October 1, 2018 Proceedings

[9] On the return of the motion, 208 Ontario sought an order winding up the affairs of Rezmart or an order allowing 208 Ontario to sell the assets of Rezmart. Mr. Des Roches, who was represented by counsel at this time, brought a preliminary motion asking the court to suspend its determination that the agreement was enforceable against Mr. Des Roches pending a forensic examination of the document that the motion judge had found to be the joint venture agreement (the February 3rd agreement) in the April proceeding. Mr. Des Roches proposed to have that document and two others examined by a forensic document examiner.

[10] The motion judge, following the approach taken by counsel for Mr. Des Roches, treated the motion as one brought under rule 59.06(2) for an order setting aside a prior order on the basis of fresh evidence showing that the order was obtained by fraud. In our view, this was a mischaracterization of the request. The order made in April concerning the enforceability of the agreement against Mr. Des Roches, when considered in the context of the rest of the order, applied pending the return of the motion in October. In our view, it was open to Mr. Des Roches to raise arguments pertaining to the enforceability of the agreement at the October proceeding.

[11] The motion judge declined to allow Mr. Des Roches to explore the legitimacy of the document, concluding that there was "no merit" to the suggestion that the agreement had been fraudulently altered and somehow signed without Mr. Des Roches' knowledge or consent. In coming to that conclusion, the motion judge relied on the following:

• The provenance of the document, dated February 3, 2006, had been established by the representations of counsel for 208 Ontario when he tendered the document in the April proceedings;

• Mr. Des Roches did not expressly challenge the bona fides of the February 3rd document in the April proceedings.

• Mr. Des Roches' suggestion that the agreement had been altered and his signature forged was inconsistent with the position he took in April. At that time, he claimed he acted under duress;

• Mr. Des Roches' conduct subsequent to February 2006 confirmed that he had acted in accordance with the terms and conditions of the agreement in many respects; and

• Mr. Des Roches' conduct, most notably his repeated contempts, raised serious concerns about his credibility and good faith.

[12] The motion judge dismissed the appellant's preliminary motion. He then went on to hold that 208 Ontario could either windup the business of Rezmart or sell it as it saw fit. The motion judge also ordered Mr. Des Roches to pay fines totalling $6,000 for his three prior contempts.

The Merits of the Appeal

[13] Mr. Des Roches appeals from the October order. The appeal focusses on the motion judge's dismissal of Mr. Des Roches' preliminary motion seeking an opportunity to challenge the bona fides of the February 3, 2006 agreement. Mr. Des Roches does not appeal the other aspects of the October order. Most notably, he does not challenge the penalties imposed as a consequence of the contempt findings. Nothing said in these reasons affects the enforceability of those penalties.

[14] We are satisfied that the appeal must be allowed. First, as indicated above, the motion judge mischaracterized the nature of the preliminary motion. The motion did not suggest that the April order was obtained by fraud. The motion was premised on the contention that Mr. Des Roches could question the bona fides of the document said to represent the agreement. The April proceeding had determined that issue, but only for the purpose of the operation of the business pending the October proceeding. Mr. Des Roches sought to pursue that issue by way of forensic examination of certain documents.

[15] The motion judge also made two material factual errors in considering Mr. Des Roches' motion. First, he indicated that Mr. Des Roches had advanced a duress defence in response to the February 3rd document at the April hearing. The motion judge indicated that a duress defence was entirely inconsistent with Mr. Des Roches' claim that the document was forged.

[16] Mr. Des Roches was not represented by counsel in the April proceeding. In the course of his dialogue with the motion judge, Mr. Des Roches did indicate that he felt at various times that he had little choice in the course of the negotiations. He did not, however, suggest that he signed any document under duress. In his discussions with the motion judge, Mr. Des Roches purported to have little or no recollection of the February 3rd document, how it came to be in the condition it was in at the time of the motion, or how he came to sign it. Mr. Des Roches' position in the April proceeding was essentially that he believed the negotiations were ongoing and that a finalized agreement had not been reached.

[17] The motion judge also wrongly relied on the fact that the February 3rd document had been produced in court by counsel for 208 Ontario, as affording support for the authenticity of the document. No one suggests that counsel for 208 Ontario had any reason to believe that the document was anything other than what it appeared to be, or that he was in anyway misleading the court about where the document came from. However, the issue was not what counsel for 208 Ontario believed or where counsel got the document. The issue was whether the document was genuine. The manner in which it came before the court did not assist in determining its genuineness. In fact, a stronger case for its genuineness could have been made had the document, as normally occurs, come before the court through a witness with firsthand knowledge of the document.

[18] Mr. Des Roches should have an opportunity to present his case for challenging the authenticity of the February 3rd document. At the same time, the manner in which Mr. Des Roches has conducted himself throughout these proceedings gives real cause to doubt the bona fides of any position he advances. Mr. Des Roches should have 30 days from the release of these reasons to bring a motion in the Superior Court seeking the order concerning the examination of the relevant documents. If no such motion is brought, 208 Ontario may move for whatever relief it deems appropriate in the application.

[19] To facilitate the bringing of the motion by Mr. Des Roches, but also to preserve the status quo as it relates to the business, we make the following order:

• paragraphs 1, 2, 3 and 4 of the October 9, 2018 order are set aside; and

• pending any further order of the Superior Court, paras. 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 of the April 27, 2018 order are reinstated.

[20] To be clear, it is our intention to emulate the April 27, 2018 order insofar as the control of the business and business premises are concerned. 208 Ontario shall have possession and control of the business premises and assets of Rezmart pending any further order of the Superior Court.

[21] One final point. The appellant has also raised the question of the enforceability of the agreement in light of the terms of s. 28 of the Indian Act, R.S.C. 1985, c. I.5. This argument was raised in Mr. Des Roches' affidavit filed prior to the April 2018 hearing. The argument was not addressed insofar as we can tell in the course of either the April or October hearing.

[22] Counsel for the appellant and 208 Ontario in this court made brief submissions on the effect of s. 28 of the Indian Act on the agreement. They disagree. As we are satisfied that the appeal must be allowed to the extent outlined above, we think it appropriate that Mr. Des Roches raise any issue concerning the impact of the Indian Act when he brings his motion in respect of the bona fides of the February 3rd agreement. Both parties will have a full opportunity at that time to put their positions forward.

Costs

[23] Although we have allowed the appeal, 208 Ontario should still have its costs on the motion as ordered by the application judge in para. 7 of the October 9, 2018 order. 208 Ontario had to bring the matter back before the application judge. Mr. Des Roches had not purged his contempts or cooperated in any way with 208 Ontario in respect of the concerns raised in the April proceedings. Mr. Des Roches' conduct precipitated the October proceedings.

[24] We make no order as to costs on the appeal.

[25] Any amount held as security for costs of the appeal should be paid to 208 Ontario to go towards the $6,000 costs awarded by the application judge.

"Doherty J.A."

"D.M. Paciocco J.A."

"B. Zarnett J.A."

Footnote

[1] The application was also brought against Nicole Des Roches, Mr. Des Roches' sister. The motion judge determined that she was not a party to the business arrangement between Mr. Des Roches and 208 Ontario and dismissed the application against her. There is no appeal from that part of the order and she is not a party to this appeal. Nothing said here affects the dismissal of the application as against her.