SLMsoft.com Inc. v. Ernst & Young Inc. in its Capacity as Trustee in the Estate of Rampart Securities Inc. Ernst & Young Inc. in its Capacity as Trustee in the Estate of Rampart Securities Inc. v. SLMsoft.com Inc. et al. [Indexed as: SLMsoft.com Inc. v. Rampart Securities (Trustee of)]
78 O.R. (3d) 521
[2005] O.J. No. 4847
Court File No. 231/05
Ontario Superior Court of Justice
Divisional Court,
Epstein J.
November 10, 2005
Appeals -- Fresh evidence -- Due diligence -- Due diligence requirement applying to period between release of reasons and time when presiding judge becomes functus officio -- Appellant having fresh evidence in hand after presiding judge's reasons were released and before order was issued and entered -- Due diligence aspect of test for admission of fresh evidence on appeal not met -- Evidence should generally not be admitted if by due diligence it could have been adduced before presiding judge was functus officio.
Appeals -- Fresh evidence -- Leave to appeal -- Section 134(4)(b) of Courts of Justice Act not permitting party seeking leave to appeal to adduce fresh evidence on application for leave to appeal -- Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134(4)(b).
Appeals -- Leave to appeal -- Applicant applying for leave to appeal order granting Mareva injunction -- Leave denied -- No conflicting decisions existing -- Exercise of discretion that leads to different result because of different circumstances not constituting "conflicting decision" for purposes of test for leave to appeal -- Case not raising issue of general importance or significant jurisprudential value.
An action was commenced against the defendant trustee in bankruptcy alleging, amongst other things, that certain guarantees the trustee held of related accounts of the bankrupt were altered after their execution. The trustee counterclaimed against various parties, including S Inc., alleging that they engaged in a conspiracy to strip value and capital from the bankrupt. The trustee obtained a Mareva injunction restraining S Inc. from dealing with any of its assets. The motion judge found that the trustee was almost certain to succeed at trial in establishing the elements of the conspiracy and that there was a real risk of S Inc. [page522] dissipating or disposing of its assets so as to defeat any attempt by the trustee to realize on any judgment it might obtain against S Inc. in the counterclaim. S Inc. brought an application for leave to appeal that order, and also brought a preliminary motion for leave to adduce new evidence on the leave application.
Held, the motion and application should be dismissed.
The court did not have jurisdiction to consider the motion for leave to adduce fresh evidence. Section 134(4)(b) of the Courts of Justice Act, as it is currently worded, does not allow a party to seek to adduce fresh evidence on an application for leave to appeal. Even if the court had jurisdiction to consider the motion, the test for the admission of fresh evidence was not met. Counsel for S Inc. had the fresh evidence in hand after the hearing of the Mareva injunction motion but several weeks before the motion judge released his reasons. Counsel did not immediately bring the fresh evidence to the motion judge's attention because he did not appreciate its importance, as he did not then know how the motion judge was going to rule or the basis for the ruling. However, five months elapsed between the release of the motion judge's reasons and the issuing and entering of the order. No explanation was given as to why the evidence was not brought to the motion judge's attention durin g that period, when counsel was fully aware of the reasoning behind the decision and the motion judge was not yet functus officio. Fresh evidence should generally not be admitted if, by due diligence, it could have been adduced before the presiding judge was functus officio.
The test for leave to appeal was not met. There were no decisions in conflict with the motion judge's decision. An exercise of discretion that leads to a different result because of different circumstances is not a "conflicting decision". Moreover, there is no confusion regarding the test for a Mareva injunction. There was no issue of general importance or significant jurisprudential value raised by this matter that would warrant appellate review. While the matter was clearly of considerable importance to the parties, it did not involve matters of public importance and matters relevant to the development of the law and the administration of justice.
APPLICATION for leave to appeal the judgment of Ground J., 2004 6329 (ON SC), [2004] O.J. No. 3290 (S.C.J.); MOTION for leave to adduce fresh evidence.
90207 Canada Ltd. v. Maple Leaf Village Ltd., [1981] O.J. No. 2200, 24 C.P.C. 152 (H.C.J.); Dion v. CIBC World Markets Inc., [2002] O.J. No. 5512 (S.C.J.); Gudaitis v. Abacus Systems Inc., 1992 819 (BC CA), [1992] B.C.J. No. 251, 65 B.C.LR. (2d) 1, 41 C.P.R. (3d) 37, 3 C.P.C. (3d) 1 (C.A.); I.F. Propco Holdings (Ontario) 36 Ltd. v. 1228851 Ontario Ltd., [2002] O.J. No. 1667 (Div. Ct.); Lafleur v. Fraser, [2000] O.J. No. 3647 (S.C.J.); Malvern Garden Centre and Landscaping Ltd. v. Gullo, [1996] O.J. No. 2958 (C.A.); Robinson v. Ontario (Securities Commission), [1994] O.J. No. 4185, 3 C.C.L.S. 192 (C.A.), consd R. v. Palmer, 1979 8 (SCC), [1980] 1 S.C.R. 759, 106 D.L.R. (3d) 212, 30 N.R. 181, 50 C.C.C. (2d) 193, 14 C.R. (3d) 22 (sub nom. Palmer and Palmer v. R.), apld Other cases referred to 663309 Ontario Inc. v. Bauman, 2000 22640 (ON SC), [2000] O.J. No. 2674, 190 D.L.R. (4th) 491 (S.C.J.); 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 S.C.R. 983, [2001] S.C.J. No. 61, 55 O.R. (3d) 782n, 204 D.L.R. (4th) 542, 274 N.R. 366, 2002 C.L.L.C. 210-013, 2001 SCC 59, 17 B.L.R. (3d) 1, 11 C.C.E.L. (3d) 1, 8 C.C.L.T. (3d) 60, 12 C.P.C. (5th) 1, supp. reasons [2000] S.C.C.A. No. 141, 10 C.C.L.T. (3d) 292; Aetna Financial Services Ltd. v. Feigelman, 1985 55 (SCC), [1985] 1 S.C.R. 2, [1985] S.C.J. No. 1, 32 Man. R. (2d) 241, 15 D.L.R. (4th) 161, 56 N.R. 241, [1985] 2 W.W.R. 97, 29 B.L.R. 5, 55 C.B.R. (N.S.) 1, 4 C.P.R. (3d) 145; [page523] Byers (Litigation Guardian of) v. Pentex Print Master Industries Inc. (2003), 2003 42272 (ON CA), 62 O.R. (3d) 647, [2003] O.J. No. 6, 28 C.P.C. (5th) 258 (C.A.), supp. reasons [2003] O.J. No. 2588 (C.A.); Children's Aid Society of the Niagara Region v. DeGuire, 2005 11187 (ON SCDC), [2005] O.J. No. 1373, 15 R.F.L. (6th) 117 (Div. Ct.); Chitel v. Rothbart (1982), 1982 1956 (ON CA), 39 O.R. (2d) 513, 141 D.L.R. (3d) 268, 69 C.P.R. (2d) 62, 30 C.P.C. 205 (C.A.); Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 7405 (ON SC), 7 O.R. (3d) 542, [1992] O.J. No. 652, 6 C.P.C. (3d) 271 (Div. Ct.); Culbert v. Agosti, [1993] B.C.J. No. 2238, 20 C.P.C. (3d) 349 (S.C.); Duracell v. Konjevic, [1998] O.J. No. 4265 (Gen. Div.); Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110, [1988] O.J. No. 525, 30 O.A.C. 53, 28 C.P.C. (2d) 294 (H.C.J.); MacMillan Bloedel Ltd. v. Mullin, 1985 592 (BC CA), [1985] B.C.J. No. 2077, 66 B.C.L.R. 258 (C.A.); Minnema v. Archer Daniels Midland Co., [2000] O.J. No. 1685, 47 C.P.C. (4th) 344 (S.C.J.); SLMsoft.com Inc. v. Rampart Securities Inc. (Trustee of), 2004 6329 (ON SC), [2004] O.J. No. 3290, 4 C.B.R. (5th) 105 (S.C.J.); United States of America v. Yemec (2003), 2003 23436 (ON SC), 67 O.R. (3d) 394, [2003] O.J. No. 3863, 233 D.L.R. (4th) 169 (S.C.J.); Way v. Deslauriers, [2005] O.J. No. 3245 (S.C.J.) Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134 Rules and regulations referred to Court of Appeal Rules, B.C. Reg. 297/2001, Rule 31 Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 62.02(4), 63.02 [as am.] Rules of Practice and Procedure, R.R.O. 1980, Reg. 540, Rule 499 Authorities referred to Sharpe, R.J., Injunctions and Specific Performance, looseleaf (Aurora, Ont.: Canada Law Book Inc., 2004)
Kenneth Prehogan and Paul D. Guy, for defendants by counterclaim (moving party). M.J. Dermer and Craig Hill, for plaintiff by counterclaim (respondent).
[1] EPSTEIN J.:-- On August 9, 2004, Justice Ground granted a Mareva injunction that restrained a securities brokerage firm, St. James Securities Ltd., from dealing with any of its assets. St. James is seeking leave to appeal that order to the Divisional Court. The motion is accompanied by St. James' preliminary motion for leave to adduce new evidence on the leave application. Therefore, the issues before me involve not only the application of the tests for leave to appeal to the Divisional Court set out in rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 but also whether I have jurisdiction pursuant to s. 134(4)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 ("CJA") to entertain a motion to adduce fresh evidence and, if so, whether the [page524] proposed new evidence should be admitted for the purpose of determining the leave application.
I Background
[2] On October 24, 2001, Ernst & Young Inc. was appointed Trustee in Bankruptcy of the estate of Rampart Securities Inc. Following Rampart's bankruptcy, SLMsoft.com commenced proceedings against the Trustee alleging, amongst other things, that certain guarantees the Trustee held of related accounts at Rampart were altered after their execution. The Trustee defended the action and counterclaimed against various parties including SLM, John Illidge, David Cathcart and Patricia McLean.
[3] In January 2004, the Trustee sought leave to add St. James as a defendant to the counterclaim. St. James is a wholly-owned subsidiary of St. James Holdings Inc. ("St. James Holdings"), an Ontario corporation that was incorporated for the sole purpose of acting as the only shareholder of St. James.
[4] At all material times the directors of St. James Holdings and St. James were Illidge, Roderick DeCourcy-Ireland and Edward Ing. McLean was a consultant with St. James between September and November 1999.
[5] In October 1999, the shareholders of St. James Holdings voted in favour of winding down St. James. In November 1999, St. James and Northern Securities Inc. reached an agreement under which Northern would, amongst other things, accept the transfer from St. James of its customer accounts. By letter dated November 9, 1999, Northern and St. James authorized CT Securities, the carrying broker for all accounts at St. James, to transfer all of the accounts residing under St. James to Northern, effective November 15, 1999.
[6] Approximately five weeks after the transfer took place, Northern attempted to disavow its responsibility for some of the accounts it had accepted. St. James denied responsibility for any of its former customer accounts. On January 6, 2000, the Investment Dealers Association of Canada (the "IDA") confirmed that effective November 16, 1999, all of St. James' customer accounts became accounts of Northern.
[7] In November 1999, Illidge joined Rampart's parent corporation, Rampart Mercantile Inc.
[8] In December 1999, Cathcart and McLean joined Rampart. The Trustee's amended counterclaim alleges that St. James, Illidge, Cathcart and McLean, amongst others, engaged in a conspiracy to strip value and capital from Rampart. [page525]
[9] In August 2002, McLean became the sole officer and director of St. James and St. James Holdings.
[10] Both St. James and McLean have defended the Trustee's counterclaim. They deny, amongst other things, that they conspired with anyone to cause damage to Rampart. McLean has also counterclaimed against Rampart for various relief.
[11] St. James' only assets are TSX shares, which as of January 2004, had an estimated value of $6.5 million. Pursuant to a Memorandum of Agreement, dated July 26, 2002, St. James intends to dispose of these assets and allocate the proceeds amongst its creditors and shareholders.
[12] It was against this background that the Trustee brought a motion for a Mareva injunction restraining St. James from dealing with its assets. In his reasons granting the Order from which St. James now seeks leave to appeal, Justice Ground held:
... I find that the Trustee has met the two prongs of the test for the issuance of a Mareva injunction in that I have found that the Trustee is almost certain to succeed at trial in establishing the elements of the conspiracy by the Co- Conspirators as pleaded and that there is a real risk of St. James Securities dissipating or disposing of its assets so as to defeat any attempt by the Trustee to realize on any judgment it may obtain against St. James Securities in the Counterclaim in the within action.
(SLMsoft.com Inc. v. Rampart Securities Inc. (Trustee of), 2004 6329 (ON SC), [2004] O.J. No. 3290, 4 C.B.R. (5th) 105 (S.C.J.), at para. 24)
II Issues
[13] There are two issues before me:
(a) Should St. James be granted leave to rely upon fresh evidence?
(b) Should St. James be granted leave to appeal the Order?
(a) Should St. James Securities be granted leave to rely upon fresh evidence?
[14] St. James seeks leave to rely upon a letter to McLean from the IDA (the "IDA letter") in support of this motion, and, if leave is granted, on the appeal. The letter advises McLean that the IDA has completed its investigation into the operations and adequacy of the books and records of St. James, as well as the supervisory and procedural controls at Rampart, and that: "[h]aving reviewed the findings of the investigation, Enforcement staff determined that disciplinary proceedings would not be initiated against [McLean] in this case. As a result, we are closing our file in this matter." [page526]
[15] I must first consider the court's jurisdiction to grant leave to adduce fresh evidence on a leave application.
(i) Interpretation of [s. 134(4)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c43/latest/rso-1990-c-c43.html)(b) of the [CJA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-c43/latest/rso-1990-c-c43.html)
[16] Section 134(4)(b) of the CJA states: "Unless otherwise provided, a court to which an appeal is taken may, in a proper case, ... receive further evidence by affidavit ... to enable the court to determine the appeal."
[17] The Trustee argues that I have no jurisdiction to consider the motion. St. James' motion is not an appeal; it is a motion seeking leave to appeal. Counsel for the Trustee submits that the wording of s. 134(4)(b) of the CJA makes it clear that the provision has no application to a motion for leave to appeal. The Trustee also relies on authorities such as 90207 Canada Ltd. v. Maple Leaf Village Ltd., [1981] O.J. No. 2200, 24 C.P.C. 152 (H.C.J.), at para. 5 ("Maple Leaf"); Minnema v. Archer Daniels Midland Co., [2000] O.J. No. 1685, 47 C.P.C. (4th) 344 (S.C.J.) ("Minnema"); and Lafleur v. Fraser, [2000] O.J. No. 3647 (S.C.J.) ("Lafleur") in support of the proposition that on a leave application, the court has no jurisdiction to grant leave to adduce fresh evidence.
[18] The applicant's position is that a purposive reading of s. 134(4)(b) of the CJA leads to the conclusion that the provision should be interpreted with sufficient flexibility so as to permit motions for leave to adduce fresh evidence not only on appeals but on applications for leave to appeal, as well. Counsel for St. James further argues that Maple Leaf is distinguishable and has been misinterpreted in subsequent decisions dealing with this issue.
[19] For the following reasons, I am of the view that s. 134(4)(b) of the CJA, as it is currently worded, does not allow a party to seek leave to adduce fresh evidence on an application for leave to appeal. I come to this conclusion reluctantly as there are compelling policy reasons why the court should, in appropriate circumstances, be entitled to consider fresh evidence for the purpose of deciding whether leave to appeal ought to be granted.
[20] I start with a review of the jurisprudence on this issue.
[21] The first case to comment on the application of the provision that preceded s. 134(4)(b) of the CJA on applications for leave to appeal is Maple Leaf. This case involved an application for leave to appeal from a decision of Justice Catzman (as he then was) under Rule 499 [Rules of Practice and Procedure, R.R.O. 1980, Reg. 540] (the predecessor of the current rule 62.02). Justice Catzman had exercised his discretion by refusing to continue [page527] until trial an ex parte injunction restraining the defendant from interfering with the plaintiff in the operation of its restaurant [See Note 1 at the end of the document]. Justice Catzman felt that the plaintiff's financial condition was less than adequate to ensure that damages could be paid.
[22] The plaintiff moved before Justice Steele for leave to adduce fresh evidence for the purposes of the leave application. The proposed fresh evidence apparently demonstrated that since the decision, the plaintiff had taken actions that improved its financial position.
[23] At para. 5 in Maple Leaf, Justice Steele said that on the application for leave to appeal "[n]o new evidence that was or could have been brought before Justice Catzman should be considered because to do otherwise would be to re-hear the application before him. Also, to consider evidence of facts that occurred after the decision would not be to review the decision but would be to hear an entirely different application."
[24] Judges of this court have interpreted Maple Leaf in the manner urged upon me by counsel for the Trustee, that on a motion for leave to appeal, the court has no jurisdiction to entertain a motion for leave to adduce fresh evidence.
[25] For example, in Minnema, supra, Justice A. Campbell refused a request to introduce fresh evidence on a motion for leave to appeal to the Divisional Court. The appeal in that case was against an order that Newmarket was the appropriate venue for motions in the action. Citing Maple Leaf, Justice A. Campbell stated [at p. 355 C.P.C.]: "There is no basis to permit them to introduce fresh evidence on this motion for leave to appeal."
[26] Similarly, in Lafleur, supra, Justice Valin applied Justice Steele's reasoning in an application for leave to appeal from a judge's refusal to direct the plaintiff to attend a medical examination, and to grant leave to amend the statement of claim. The applicant sought to deliver additional psychological documents that were not available when the motions appealed from had been heard. Justice Valin refused to consider any application for new evidence on the motion for leave to appeal, stating that he should only review the evidence that was before the judge who refused to grant the motions appealed from. Justice Valin appears to have simply cited Maple Leaf directly at para. 2: "No new evidence should be considered because to do otherwise [page528] would result in re-hearing the original motion. That was the conclusion reached by Steele J."
[27] Without analyzing the reasoning in Maple Leaf, both Justice A. Campbell and Justice Valin relied upon Justice Steele's decision as authority that s. 134(4)(b) of the CJA does not apply to leave applications. However, a close reading of the reasons demonstrates that Justice Steele's decision was clearly influenced by nature of the evidence that was being proposed, namely, the fact that the proposed evidence related to what the plaintiff had done in response to Justice Catzman's concerns. To admit such evidence for the purpose of determining whether leave to appeal should be granted would clearly have distorted the process: in the circumstances, it would have given rise to an entirely new hearing. Furthermore, Justice Steele specifically provided that his ruling was without prejudice to any new application that the plaintiff might bring for an interim injunction upon such new evidence as it deemed appropriate.
[28] Given the particular circumstances under which Maple Leaf was decided, I am not satisfied that Justice Steele necessarily intended to say that courts have no jurisdiction to consider motions for leave to adduce fresh evidence on an application for leave to appeal. In fact, other cases have implicity suggested that s. 134(4)(b) of the CJA should not be so interpreted.
[29] In Malvern Garden Centre and Landscaping Ltd. v. Gullo, [1996] O.J. No. 2958 (C.A.) ("Malvern"), Justice Catzman heard a motion for leave to appeal to the Court of Appeal. In denying the motion, Catzman J.A. stated at para. 2 that "the existing evidence does not warrant the granting of leave and the suggested fresh evidence does not meet the requirement of due diligence in order to justify its admission". It is true that Catzman J.A. did not explore the question of jurisdiction, but his words perhaps suggest that if the proposed fresh evidence had met the due diligence requirement, it may have been admitted on the application for leave to appeal.
[30] In I.F. Propco Holdings (Ontario) 36 Ltd. v. 1228851 Ontario Ltd., [2002] O.J. No. 1667 (Div. Ct.) ("Propco"), Justice Dunnet considered an application for leave to appeal from an order of a judge appointing a receiver. The lower court refused to grant a request for adjournment. Justice Dunnet described Steele J.'s ruling in Maple Leaf as "well-settled" yet went on to consider the fresh evidence that had been proffered. See also Children's Aid Society of the Niagara Region v. DeGuire, 2005 11187 (ON SCDC), [2005] O.J. No. 1373, 15 R.F.L. (6th) 117 (Div. Ct.) where Lofchik J., on the consent of the parties, considered fresh evidence on the application for leave to appeal. [page529]
[31] How this issue is treated in other provinces and specifically how the decision in Maple Leaf is interpreted is of some interest. The British Columbia Court of Appeal has applied Maple Leaf to arrive at the conclusion that more flexibility should be granted in the case of a motion to adduce fresh evidence in an application for leave to appeal from an interlocutory order than from a final order [See Note 2 at the end of the document].
[32] In Gudaitis v. Abacus Systems Inc., 1992 819 (BC CA), [1992] B.C.J. No. 251, 65 B.C.L.R. (2d) 1 (C.A.), the court considered Maple Leaf in concluding that a judge hearing an application for leave to appeal may consider evidence not adduced in the court below. The court went further and held [at p. 6 B.C.L.R.] that the "usual prerequisites for the introduction of fresh evidence should not be applied as strictly as generally applied in respect of an appeal from a final judgment". See also MacMillan Bloedel Ltd. v. Mullin, 1985 592 (BC CA), [1985] B.C.J. No. 2077, 66 B.C.L.R. 258 (C.A.) ("MacMillan").
[33] This interpretation of Maple Leaf has returned to influence the Ontario courts. In Dion v. CIBC World Markets Inc., [2002] O.J. No. 5512 (S.C.J.) ("Dion"), Somers J., on a motion appealing from the decision of a master ordering a payment into court, applied the British Columbia courts' interpretation of Maple Leaf as allowing for a flexible and contextual approach to applications to adduce fresh evidence. Justice Somers was faced with the question of "whether or not on this appeal fresh evidence should be introduced when it is clear that it could have been before the Master in the original hearing" (at para. 6). Justice Somers cited MacMillan, supra, and the case of Culbert v. Agosti, [1993] B.C.J. No. 2238, 20 C.P.C. (3d) 349 (S.C.) where the court stated that "[a]fter a consideration of all of the circumstances of this case, I must conclude that it is in the interests of justice to admit the fresh evidence" (at p. 352 C.P.C.). Just ice Somers noted that the plaintiff had sought an adjournment, which the master had refused and which otherwise might have allowed for the evidence to be admitted during the [page530] motion, similar to Justice Dunnet's considerations in Propco, supra. Justice Somers' conclusion was that more leniency should be granted where an interlocutory order is at issue on the appeal: "I am of the view that it is in the interests of justice to admit the fresh evidence" (at para. 10).
[34] While some of these cases deal with fresh evidence on appeals, as opposed to applications for leave to appeal, the same objective appeared to inform both types of hearings, namely, the interests of justice.
[35] This takes me to the decision of Carthy J.A., in chambers, in Robinson v. Ontario (Securities Commission), [1994] O.J. No. 4185, 3 C.C.L.S. 192 (C.A.) ("Robinson"). Justice Carthy was considering a motion for a stay of an order that dismissed an application to stay a hearing of the Ontario Securities Commission. The motion was brought pursuant to rule 63.02 and s. 134(2) of the CJA [See Note 3 at the end of the document]. Carthy J.A. held that the court had no jurisdiction to provide the relief sought. What is relevant for the purposes of the instant analysis is that Carthy J.A. considered the phrase "a court to which an appeal is taken" in s. 134 and compared it to the wording in rule 63.02(2), which was "by ... a judge of the court to which a motion for leave to appeal may be or has been made". After a lengthy analysis, Carthy J.A. interpreted "a court to which an appeal is taken" under s. 134(2) as limiting the power to grant a stay to appeals where leave has been granted. Furthermore, Justice C arthy considered policy reasons for broadening this meaning but concluded that "jurisdiction is jurisdiction" and refused to interpret the phrase differently (at para. 10). He also stated that "in other subsections of s. 134 the words 'an appeal is taken' are used in a context contemplating a fully formulated appeal" (at para. 6) (emphasis added).
[36] This decision clearly holds that s. 134(4) must be interpreted as having no application to motions for leave to appeal. Such an interpretation closes the door to St. James' application for leave to adduce the IDA letter into evidence for the purpose of arguing the leave application. [page531]
[37] I mentioned earlier that, in my opinion, there are policy reasons why a party ought to be entitled to seek leave to adduce fresh evidence on an application for leave to appeal. Allowing a court, in appropriate circumstances, to consider potentially relevant and important evidence in the course of an appeal but not in order to determine if the matter should go to appeal defies common sense and cannot be in keeping with the objective of securing the ends of justice.
[38] While courts must strive to protect the integrity of the process and finality is an important part of that integrity, the overarching objective must always be to secure a just result on the merits. It is for this reason that the Rules and the provisions of the CJA provide for considerable flexibility within the litigation process. Examples of this flexibility include allowing amendments to be made at any stage, allowing the court to reconsider decisions up to the time the judgment is signed, allowing mistakes in orders and judgments to be corrected and allowing new evidence to be considered on a review of a decision. However, in the face of the clear wording of s. 134(4) of the CJA and the decision in Robinson, any addition to this list and specifically any change to allow for motions for leave to adduce fresh evidence for the purpose of seeking leave to appeal, is for the Rules Committee and/or the legislature.
[39] Accordingly, I dismiss the motion for leave to adduce fresh evidence on the application for leave to appeal on the basis of lack of jurisdiction.
[40] Notwithstanding my conclusion that St. James is not entitled to seek leave to adduce the IDA letter into evidence for the purposes of the leave application, I will proceed to examine the merits of the motion. In the circumstances here, St. James is, in any event, unable to satisfy the tests set out in R. v. Palmer, 1979 8 (SCC), [1980] 1 S.C.R. 759, 106 D.L.R. (3d) 212, at p. 775 S.C.R. ("Palmer").
(ii) The Palmer test
[41] The parties agree that the test I should use to determine whether to admit fresh evidence is found in Palmer. The test is as follows:
(1) The evidence should generally not be admitted if, by due diligence, it could have been adduced at the trial provided that this general principle will not be applied as strictly in a criminal case as in civil cases ...;
(2) The evidence must be relevant in the sense that it bears upon a decision or potentially decisive issue in the trial [or motion]; [page532]
(3) The evidence must be credible in the sense that it is reasonably capable of belief; and
(4) It must be such that if believed it could reasonably, when taken with the other evidence adduced at [the trial or motion], be expected to have affected the result.
[42] St. James submits that all of these requirements are met in this case.
[43] First, St. James argues that the evidence could not have been adduced prior to or on the return of the motion because the IDA letter was not written until after the motion was argued. The motion was heard between April and June 2004; the letter is dated July 8, 2004. I will return to this question below.
[44] Second, St. James states that the evidence is relevant in that it bears upon a decisive issue raised on the motion -- namely, the merits of the fraud allegations against McLean.
[45] Third, St. James argues that the evidence is credible and reasonably capable of belief. The IDA's conclusion that it would not take any disciplinary action against McLean was the product of a four-year investigation into St. James and Rampart. The results of a four-year investigation by an independent expert body meet the credibility threshold for admissible evidence.
[46] Fourth, if believed, the evidence could reasonably be expected to have affected the result. St. James notes that the "risk of dissipation of assets" requirement is a prerequisite for the issuance of a Mareva injunction. Justice Ground's conclusion that this requirement had been met was made largely because of the fact that McLean, a person who could not be trusted, controlled St. James.
[47] The hearing before me gave rise to considerable debate about a critical part of the first step in the Palmer test, namely, the meaning of "could have been adduced at trial" or the "due diligence" requirement.
[48] St. James argues that I must determine whether the proposed new evidence could have been brought to the motion judge's attention prior to the end of the hearing of the motion. The Trustee submits that to meet the first part of the Palmer test, the party seeking leave to adduce fresh evidence must demonstrate that the proposed evidence could not have been brought to the attention of the presiding judge before he was functus officio.
[49] In this case, the resolution of how the first step in the Palmer test should be interpreted is of considerable importance. The record is clear that counsel for St. James had the IDA letter in hand several weeks before Justice Ground [page533] released his reasons. When asked why the letter was not immediately brought to the learned motion judge's attention, counsel for St. James responded that at that stage the lawyer for St. James, who received the communication, did not appreciate its importance as he did not then know how Justice Ground was going to rule or the basis of the ruling. Specifically, the lawyer for St. James who received the IDA letter did not appreciate, before receiving and reviewing the decision granting the Mareva, the importance Justice Ground would attach to McLean's conduct and therefore to the content of the IDA letter.
[50] However, the factual background to the timing issue in terms of due diligence does not end with the release of the reasons in August. For reasons not known to me, Justice Ground's order was not issued and entered for another five months. No explanation was provided in response to my question as to why the IDA letter was not brought to Justice Ground's attention in the intervening period between the time when counsel was fully aware of the decision and the reasoning behind it and the time when Justice Ground became functus officio when the order was taken out.
[51] What is the significance of the time period after the end of the hearing in terms of the first part of the Palmer test? St. James says, none. Counsel for St. James relies on the wording contained in the Palmer decision itself as well as the myriad of decisions in which the Palmer test has been applied, wording that suggests that the examination of the due diligence requirement focuses on whether the proposed new evidence could have been discovered before the end of the hearing of the trial or motion.
[52] Moreover, St. James submits that to accept the Trustee's argument would put an unworkable burden on counsel during the interval between the close of argument and the taking out of the order or judgment. During this period counsel would remain constantly obligated to monitor the situation and bring any new development to the attention of the presiding judge in the event that it may be relevant to his or her ultimate decision and reasoning.
[53] I disagree with St. James' position with respect to the cut off point for the due diligence test. In my view, the only sensible way to interpret the first part of the Palmer test is that it requires that the evidence should generally not be admitted if, by due diligence, it could have been adduced before the presiding judge was functus officio. [page534]
[54] It is well established that the trial judge's jurisdiction over a matter ends only upon the entry of judgment. In Byers (Litigation Guardian of) v. Pentex Print Master Industries Inc. (2003), 2003 42272 (ON CA), 62 O.R. (3d) 647, [2003] O.J. No. 6 (C.A.) ("Byers"), Borins J.A., writing for the court, reiterated the principle that a court is not functus officio until an order is issued and entered. He then observed that the court possesses the power to alter, modify or amend its judgment, or to rectify its own mistake, following the release of its decision and before it has been signed as the formal judgment of court and entered. In other words, before the decision is entered, the court may reconsider matters properly encompassed in its decision on the merits.
[55] Policy reasons support interpreting the due diligence aspect of the Palmer test so as to require parties who come into possession of evidence, which they believe to be potentially relevant to the determination of a matter before the court, to bring it to the court's attention at the earliest possible time. First, the hearing judge is in the best position to weigh the factors set out in Palmer in order to exercise the discretion as to whether to allow the evidence to be presented. (See: 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, [2001] 2 S.C.R. 983, [2001] S.C.J. No. 61.) Secondly, to endorse the argument counsel for St. James advances would be to endorse a practice that would allow counsel to 'sit on' evidence potentially valuable to the determination of the issues while the hearing judge has the matter under reserve. Such a practice would allow counsel to then bring the evidence forward only if necessary, having regard to the result and the reasoning behind the result. This, at the very least, runs contrary to the objective of efficient use of judicial resources. Third, such an interpretation is consistent with the "diligence" requirement that is integral to the Palmer test.
[56] In my view, the only reasonable way to interpret the first part of the Palmer test is that it requires an examination of whether the proposed evidence could have, with due diligence, been adduced prior to the time at which the presiding judge was functus officio -- in this case prior to January 18, 2005, when the order was issued and entered.
[57] The IDA letter was in the hands of St. James' lawyer in mid-July 2004. The reason advanced as to why it was not immediately brought to the attention of the motions judge is not acceptable for the reasons I have already expressed. In any event, there is no reason advanced as to why the letter was not brought to Justice Ground's attention while he still had jurisdiction over the case. [page535]
[58] St. James is therefore unable to meet the requirements of the first part of the Palmer test.
[59] While this finding alone is determinative of my decision not to allow the IDA letter into evidence for the purposes of the leave application, I would add that I do not believe that the proposed evidence would meet the requirements of the second or fourth parts of the test.
[60] This proposed evidence raises no new issues from those that were before Justice Ground on the motion. In the material filed in response to the motion for the Mareva injunction, St. James attempted to argue that Rampart, along with individuals who had been involved at Rampart (Illidge, Cathcart, Ing, Kasman, Monardo and Cole), were the subject of IDA disciplinary proceedings while the IDA made no charges against McLean.
[61] Regardless of the IDA's decision not to initiate disciplinary proceedings against McLean, Justice Ground made the following finding based on the extensive evidence that was before him (at para. 22):
More significantly, the fact that McLean is the sole director and officer of St. James Securities as of today gives the court little comfort. The evidence before this court clearly implicates McLean as an active participant in a number of peculiar and allegedly fraudulent transactions entered into as a part of the alleged conspiracy and which involved documents which were manifestly false, in several cases overstating the net worth of customers or the value of securities by hundreds of thousands of dollars. These transactions and documents have not been denied or convincingly explained by McLean in her affidavits filed with this court. It is also significant that the affidavits filed by McLean and statements made by McLean in the course of the IDA investigations, the Oppression Action and this action are, in many instances, not only unconvincing but inconsistent and appear to have been tailored to meet the particular occasion.
[62] Accordingly, I am not satisfied that the "fresh evidence" sought to be introduced would have affected the result of the Mareva motion. St. James had already made those very arguments. Moreover, there was evidence other than the IDA investigation that supported Justice Ground's finding that "[t]he evidence before this court clearly implicates McLean as an active participant in a number of peculiar and allegedly fraudulent transactions entered into as a part of the alleged conspiracy ...".
[63] As I have said, the court must balance the need to ascertain the truth upon full disclosure of all material facts with the need to preserve the integrity of the litigation and the need to prevent an abuse of its process. All three needs are directed at [page536] ensuring that justice is achieved. What has happened here is that, with the benefit of the judgment, St. James now wants the opportunity to improve upon the record.
[64] I have concluded that I have no jurisdiction to consider a motion for leave to adduce fresh evidence on an application for leave to appeal. In any event St. James is not able to meet the tests set out in Palmer.
(b) Should St. James be granted leave to appeal the order?
[65] The test for granting leave to appeal to the Divisional Court from an interlocutory order of a single judge of the Superior Court of Justice is set out in rule 62.02(4):
(a) Is there a conflicting decision by another judge or Court in Ontario or elsewhere on the matter involved in the proposed appeal and is it desirable that leave to appeal be granted; or
(b) Is there good reason to doubt the correctness of the Decision and does the proposed appeal involve matters of such importance that leave to appeal should be granted?
[66] In order to determine whether there are conflicting decisions, I must look to the principles that guided the exercise of Justice Ground's discretion. An exercise of discretion that leads to a different result because of different circumstances is not a "conflicting decision". See: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 7405 (ON SC), 7 O.R. (3d) 542, [1992] O.J. No. 652 (Div. Ct.), at p. 544 O.R., p. 3 (QL).
[67] Both the Supreme Court of Canada in Aetna Financial Services Ltd. v. Feigelman, 1985 55 (SCC), [1985] 1 S.C.R. 2, [1985] S.C.J. No. 1 ("Aetna"), and the Ontario Court of Appeal in Chitel v. Rothbart (1982), 1982 1956 (ON CA), 39 O.R. (2d) 513, 141 D.L.R. (3d) 268 (C.A.) ("Chitel"), have established that a plaintiff seeking a Mareva injunction must demonstrate "a strong prima facie case" on the merits, and "that the defendant is removing or there is a real risk that he is about to remove his assets from the jurisdiction to avoid the possibility of a judgment, or that the defendant is otherwise dissipating or disposing of his assets, in a manner clearly distinct from his usual or ordinary course of business or living, so as to render the possibility of future tracing of the assets remote, if not impossible in fact or in law" (Aetna, supra, at pp. 26-27 S.C.R.).
[68] St. James argues that the "conflicting decision" requirement is met as the test Justice Ground utilized differs from the test set out in Aetna and Chitel. [page537]
[69] St. James has not shown that there are grounds to grant leave under the first branch of the rule.
[70] At para. 14 of his reasons, Justice Ground expressly accepted the well-established test for a Mareva injunction.
[71] There are no decisions that conflict with Justice Ground's decision. It is irrelevant that a different judge may have exercised his or her discretion differently on those same facts to reach a different result.
[72] Moreover, there is no confusion regarding the test for a Mareva injunction. There is no issue of general importance or significant jurisprudential value raised by this matter that would warrant review by the Divisional Court. As in the case of Way v. Deslauriers, [2005] O.J. No. 3245 (S.C.J.), at para. 42, this case "involves the application of principles, not the establishment or clarification of principles".
[73] I now turn to the second aspect of the test for leave to appeal. This is the test upon which St. James relies most heavily.
[74] The test under rule 62.02(4)(b) is also conjunctive; it is insufficient to establish either that there is good reason to doubt the correctness of the decision or that the appeal raises matters of importance. Both of these requirements must be established in order for the court to grant leave to appeal. See: Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110, [1988] O.J. No. 525 (H.C.J.) ("Greslik") at pp. 112-13 O.R.
[75] Counsel for St. James submits that the law is clear. As set out by Justice Sharpe in his book, Injunctions and Specific Performance, the plaintiff is not relieved of the obligation to demonstrate a real risk of dissipation when the underlying claim is based on fraud: "Proof of a serious risk of removal or deposition of assets is required even where the action is based on fraud and it is shown that the defendant has committed a fraudulent act." [See Note 4 at the end of the document] See: 663309 Ontario Inc. v. Bauman, 2000 22640 (ON SC), [2000] O.J. No. 2674, 190 D.L.R. (4th) 491 (S.C.J.) and United States of America v. Yemec (2003), 2003 23436 (ON SC), 67 O.R. (3d) 394, [2003] O.J. No. 3863 (S.C.J.).
[76] St. James' position is that Justice Ground's decision is open to serious debate. While the motions judge did conclude that there was a risk that St. James would dispose of its assets so as to defeat the Trustee's claim, this finding was not based upon his acceptance of any cogent evidence. Instead, Justice Ground based his finding solely on the fact that St. James "is indirectly owned [page538] and controlled by persons who were active participants in the allegedly fraudulent transactions comprising the alleged conspiracy and ... directly controlled as of today by McLean" (at para. 23) and that the assets of St. James are liquid and are expected to be paid out to creditors and shareholders pursuant to the Memorandum of Agreement. St. James submits that this falls far short of demonstrating that St. James is about to remove its assets from the jurisdiction or dispose of its assets so as to render the possibility of future tracing remote.
[77] St. James' argument is really that the evidence supporting Justice Ground's finding was insufficient to demonstrate a real risk that St. James would dissipate or dispose of its assets so as to defeat any attempt by the Trustee to realize on any judgment it might obtain against St. James.
[78] The Trustee argues that the learned motions judge made extensive findings of fact that were supported by the substantial body of evidence placed before him and properly concluded that the tests for a Mareva injunction had been met.
[79] I do not consider it necessary to delve into this "substantial body of evidence" to analyze whether Justice Ground's finding that St. James intended to dispose of its assets to defeat the Trustee's claim is "open to serious debate", since St. James cannot satisfy the second prong of the test set out in rule 62.02(4)(b).
[80] This aspect of the test requires that the questions raised in the appeal involve matters of such importance that leave should be granted. Greslik, supra, has often been quoted as standing for the proposition that for the matter to be of importance, it must transcend the immediate interest of the parties and involve matters of public importance and matters relevant to the development of the law and the administration of justice. Where the issues are fact-driven, they do not raise issues of general public interest. See: Duracell v. Konjevic, [1998] O.J. No. 4265 (Gen. Div.), at para. 3.
[81] St. James argues that this case raises an issue of general importance as the Divisional Court should provide guidance as to the test to be applied in applications for a Mareva injunction when a prima facie case of fraud has been made out.
[82] I disagree. The law in this area is well-settled. The proposed appeal does not raise issues that constitute matters of public importance. The issues, as in most motions of this nature, are heavily fact-driven and are thus of importance only to the parties to this litigation. They are not questions of general application. [page539]
III Conclusion
[83] After a lengthy hearing, Justice Ground carefully considered the Trustee's motion for injunctive relief and rendered detailed reasons that involved an extensive examination of the substantial volume of evidence before him. Based on that evidence he found a strong prima facie case of fraud to which St. James takes no exception and a risk of dissipation of assets to defeat the Trustee's claim. What St. James is really saying is that the evidence was not capable of supporting this second finding. While this matter is clearly of considerable importance to the parties, it does not involve matters of public importance and matters relevant to the development of the law and the administration of justice.
[84] St. James has not persuaded me that the test set out in either branch of rule 62.02(4) has been met. The application for leave to appeal is therefore dismissed.
[85] If the parties are unable to resolve the issue of costs, they may make submissions to me in writing within 20 days of today's date.
Motion and application dismissed.
Notes
Note 1: Except for some minor differences, the wording of Rule 499 was essentially the same as the wording of the current rule 62.02.
Note 2: The relevant rule in British Columbia is admittedly different. In B.C.'s current Court of Appeal Rules, B.C. Reg. 297/2001, Rule 31(1) states: "With leave of the court or a justice, a party may adduce fresh evidence that was not before the court appealed from." Interestingly, Rule 31(2) states that a party applying for leave under this rule must ensure that "the notice of motion is made returnable on the date set for the hearing of the appeal, unless a justice otherwise orders". The predecessor to this rule [B.C. Reg. 303/82, Rule 24], which was the rule relied upon in the B.C. cases referred to, simply stated: "By leave of the court or a justice, evidence may be adduced, in the manner directed by the court or justice, that was not before the court appealed from."
Note 3: The wording of both of these provisions is now different. Rule 63.02(1)(b) now specifies that an order may be stayed "by an order of a judge of the court to which a motion for leave to appeal has been made or to which an appeal has been taken". Similarly, s. 134(2) of the CJA now specifies its application to both "a court to which a motion for leave to appeal is made or to which an appeal is taken". It appears that no such wording changes have altered the scope of s. 134(4)(b).
Note 4: Robert J. Sharpe, Injunctions and Specific Performance, looseleaf (Aurora, Ont.: Canada Law Book Inc., 2004).