SUPERIOR COURT OF JUSTICE - ONTARIO

2012 ONSC 1134

COURT FILE NO.: 2393/10
DATE: 2012/02/17

RE: 969625 ONTARIO LIMITED and GARY CONN (Plaintiffs) – and – GOLDSTONE RESOURCES INC. (Defendant)

BEFORE: JUSTICE W. U. TAUSENDFREUND

COUNSEL: Joyce Harris, agent for P.M. Ledroit, for the Plaintiffs

Joseph C. D’Angelo, for the Defendant

HEARD: February 15, 2012

E N D O R S E M E N T

[ 1 ] This is a motion by the defendant for summary judgment to dismiss the plaintiffs’ claim for wrongful dismissal. The defendant states that the ruling by Gorman J. of April 29, 2011 on a summary judgment motion brought by this defendant and others in a defamation action brought by this plaintiff, Gary Conn (“Conn”) raises principles of res judicata, issue estoppel and abuse of process in this action which, for those reasons, should be dismissed.

[ 2 ] At the start of this motion, and although not referenced in the motion record, counsel for both parties agreed as a preliminary matter, that this part of the motion should be limited to a question of whether the plaintiffs should be permitted to introduce and rely on two affidavits, one by Ian Schleihauf, sworn December 28, 2011 and the other by Conn, sworn January 17, 2012.

[ 3 ] The defendant’s position on that question is that these two affidavits address matters on which Justice Gorman had already ruled and that the same principles of issue estoppel, res judicata and abuse of process were a bar to the introduction of these affidavits.

[ 4 ] The plaintiffs advance the position that the issues of wrongful dismissal go beyond the ruling made by Justice Gorman and that these two affidavits are germaine to their position in opposing the defendant’s summary judgment motion for the dismissal of their action.

[ 5 ] Although I am reluctant to proceed in this “piece meal” fashion as counsel for both sides have urged me to do, I conclude that I will. I do so based in part on the urging of both counsel, but also as my ruling on that discreet issue may assist counsel in the resolution of the summary judgment motion.

[ 6 ] The plaintiffs, Conn and his management company, the corporate plaintiff (“969”) brought this action for damages based on alleged wrongful dismissal. Their statement of claim includes the following pleadings:

4. …Goldstone is a publicly traded exploration and development stage mining company…

5. On or about June 30, 2008, 969, Conn, and Ontex Resources Limited (“Ontex”) entered into a Management Consulting Agreement whereby Conn, through 969, was engaged by Ontex to act as its President and Chief Executive Officer or Chairman of the corporation for a five (5) year term, which could be renewed at the option of 969, for a successive five (5) year term.

6. 969 and Conn plead and rely upon each of the terms of the Management Consulting Agreement, including without limitation:

(b) Ontex could only terminate the Management Consulting Agreement upon specified acts of “cause,” namely:

(iv) the engaging by 969 or Conn in any criminal act of dishonesty resulting or intended to result directly or indirectly in personal gain of 969 or Conn at Ontex’s expense.

8. In or about December 2009, Ontex changed its name to Goldstone. Consequently, Goldstone is a successor corporation to Ontex and is bound by the terms of the Management Consulting Agreement…

9. Conn was President and Chief Executive Officer or Chairman of Ontex and later Goldstone from 1998 until the unlawful termination of his employment therewith on October 1, 2010…

10. On or about October 1, 2010 Goldstone dismissed Conn from acting as Chairman of Goldstone, in breach of the terms of the Management Consulting Agreement.

11. As a consequence of the breach of the Management Consulting Agreement, 969 and Conn have suffered damages…

[ 7 ] The statement of defence and counterclaim states in part:

29. In addition to the foregoing, Conn failed to perform his duties to the company by

(b) installing undisclosed cameras, equipped with microphones, in the living accommodations where geologists and mining staff spent their off hours at Goldstone’s six bedroom house in Beardmore which serves as an office and residence for the company’s mining staff, presumably for the purpose of secretly monitoring their private activities for his own amusement. By doing so, Conn invaded the employees’ privacy and committed a criminal act of dishonesty as contemplated by s. 4(b)(iv) of the Conn Agreement.

[ 8 ] Part of the plaintiffs’ reply and defence to counterclaim states:

12. With respect to the allegations contained in paragraph 29, Conn:

(b) denies that he installed undisclosed cameras equipped with microphones at the company’s premises in Beardmore and states that while he arranged for cameras to be professionally installed in the office and a meeting room… of the premises as well as around the perimeter of the building for the safety and security of company property and staff and monitored by a security company, such cameras were without operational microphones so far as Conn was aware. The property had been subject to numerous acts of burglary and vandalism and the purpose of the cameras was to deter crime and/or identify thieves and vandals. All of the invited guests of the premises were aware of the presence of the cameras. Conn absolutely denies that he secretly monitored private activities or conversations for his own amusement…

[ 9 ] On January 13, 2011 Conn started an action against Goldstone and others for damages based on alleged defamation and libel which is alleged to have been carried out by publishing at least part of the above noted statement of defence and counterclaim. A relevant part of these pleadings is:

11. On or about November 1, 2010 the defendants defamed and libeled Conn by publishing the following statement:

Conn … installed “undisclosed cameras, equipped with microphones, in the living accommodations where geologists and mining staff spent their off hours at Goldstone’s six bedroom house in Beardmore which serves as an office and residence for the company’s mining staff, presumably for the purpose of secretly monitoring their private activities for his own amusement. By doing so, Conn invaded the employees’ privacy and committed a criminal act of dishonesty. (the “libelous statement”)

[ 10 ] The defendants in the defamation action brought a summary judgment motion before Justice Gorman on April 29, 2011. Relevant to the within reasons are these excerpts from Justice Gorman’s endorsement:

3. By way of brief overview, the facts are as follows: Mr. Conn was the president of … Goldstone. He was terminated on October 1, 2010. Prior to his termination, and in the course of his employment, Mr. Conn ordered the installation of cameras inside a house owned by Goldstone. The house serves as both a management office, and lodging for various employees. The cameras were surreptitiously installed, without the knowledge of the employees. Following his termination from Goldstone, Mr. Conn commenced an action for wrongful termination. Goldstone defended the action, and claimed that it was justified in terminating his employment for a number of reasons including that he participated in:

Installing undisclosed cameras, equipped with microphones, in the living accommodations where geologists and mining staff spent their off hours at Goldstone’s six bedroom house in Beardmore which serves as an office and residence for the company’s mining staff, presumably for the purpose of secretly monitoring their private activities for his own amusement. By doing so, Conn invaded the employees’ privacy and committed a criminal act of dishonesty.

...Mr. Conn commenced the present action alleging defamation, as a result of the posting of the Statement of Defence.

4. The Applicants seek an order for summary judgment based on their position that the allegations contained in their Statement of Defence are true, therefore there is no genuine issue for trial.

5. There is no issue in this case that Mr. Conn ordered the installation of the cameras in the home used by Goldstone and its employees. There also appears to be no issue that the installation and the interception of the communication (i.e. audio and visual) was done without the knowledge of the employees or visitors to the house. What appears to be the sole issue in the pleadings is the assertion that Mr. Conn did this “for his own amusement”.

6. Counsel for the Respondent asserts that “for his own amusement” can only be taken to mean that Mr. Conn had installed the covert cameras so as “to secretly watch their private activities for his own amusement as would a ‘peeping tom’ or voyeur.”

7. The Concise Oxford English Dictionary defines “amusement” as 1. The state or experience of finding something funny. 2. The provision or enjoyment of entertainment.

8. In my view, the purpose for which Mr. Conn installed the cameras is immaterial to the central issue. The cameras were installed to intercept private communication. This is an offence pursuant to s. 184(1) of the Criminal Code of Canada . Mr. Conn readily admits that he caused the cameras to be installed for the purpose of intercepting the communication of the employees. The affidavits of Ms. Lesperance and Mr. Robert provide uncontradicted evidence that this was done without the employees’ knowledge or consent. Accordingly, there is no issue for trial, as truth is a complete defence to an action for defamation.

9. Accordingly, the motion for summary judgment is granted, and the action is dismissed.

[ 11 ] Conn appealed from the judgment of Justice Gorman. The Ontario Court of Appeal dismissed the appeal on November 18, 2011. Part of the court’s reasons are:

[3] …the motion judge noted that the sole issue in the pleadings that was not admitted was the assertion that the appellant installed the surveillance equipment “for his own amusement” and the implication that this was done for his personal gratification as a “peeping tom” or “voyeur”.

[4] The motion judge held that the purpose for which the appellant installed the cameras was immaterial because as we interpret her reasons, the sting of the defamation was that the appellant unlawfully and without legal justification intercepted the private communications of these employees.

[6] …the appeal is dismissed.

[ 12 ] Conn had decided not to file any evidence in connection with the above noted summary judgment motion before Justice Gorman. He now seeks to introduce two affidavits on this summary judgment motion, a request which the defendant opposes. One affidavit is by Ian Schleihauf who installed the cameras in question. He states that his company “IRS” was retained by Goldstone Resources to install security cameras at the Beardmore mine site and that the placement of the cameras was intended to address areas which had previously been breached by robbers and/or vandals. He states further:

3. IRS was then retained by Goldstone to install a camera system and security system in its office in Beardmore. I suggested that Goldstone install overt cameras outside the building to deter criminal activity and install covert cameras at two points in the building by which intruders who might gain access to the building could be identified without being alerted to the presence of the cameras… This advice was accepted by Gary Conn of Goldstone.

4. …The interior cameras came equipped with microphones but they were not hooked up for audio and therefore would neither record nor transmit sound.

[ 13 ] The second affidavit which the plaintiffs seek to introduce is by Conn himself who states in part:

24. …management of Goldstone… authorized the installation of a camera system at the Beardmore mill because of repeated break-ins and vandalism.

25. I considered that cameras should be installed around the Beardmore office so that Goldstone and the police could identify and charge the individuals who were breaking into and/or vandalizing the office.

26. The installation of the cameras inside the house was at Schleihauf’s suggestion because, as he advised me, the outside cameras were not strong enough to show the detail of people’s faces necessary for identification and they could be disabled by thieves.

[ 14 ] The defendant’s position in opposing introduction of these two affidavits is summarized in para. 19 of its factum:

19. Goldstone’s position is that the affidavits are inadmissible on the basis that

a) they constitute an attempt to re-litigate a decided issue, and are thus barred by the res judicata doctrine of issue estoppel;

b) they could have been produced with “reasonable diligence” before Justice Gorman, and thus cannot justify what is essentially a collateral attack on the order on the ground of “facts arising or discovered after it was made”; and

c) they abuse the court’s process by re-litigating an issue in a manner that needlessly consumes the judicial system’s resources and fosters inconsistency.

[ 15 ] Essentially, the defendant’s position in opposing the introduction of these two affidavits is similar if not identical to the position it advances on its summary judgment motion to dismiss the plaintiffs’ claim. The defendant states that these two affidavits touch upon the very issue on which Justice Gorman ruled, namely that the cameras were installed to intercept private communication.

[ 16 ] The Supreme Court of Canada in Angle v. MNR, 1974 , [1975] 2 S.C.R. 248 at p. 254 defined the requirements of issue estoppel as:

1. That the same question has been decided;

2. That the judicial decision which is said to create the estoppel was final; and

3. That the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

[ 17 ] In a later decision, the Supreme Court of Canada in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44 , [2001] 2 S.C.R. 460 at para. 33 on the application of issue estoppel said:

Issue Estoppel: A two-step analysis

33. The rules governing issue estoppel should not be mechanically applied. The underlying purpose is to balance the public interest in the finality of litigation with the public interest in ensuring that justice is done on the facts of a particular case. …the first step is to determine whether the moving party has established the pre-conditions to the operation of issue estoppel set out by Dickson J. in Angle . If successful, the court must still determine whether, as a matter of discretion, issue estoppel ought to be applied.

[ 18 ] Res Judicata (“matters adjudged”) is a fundamental common-law doctrine. It bars any party from re-litigating a matter that a tribunal has already decided. The doctrine promotes finality in litigation: R. v. Mahalingan 2008 SCC 63 , 2008, S.C.C. 63 at paras. 106 and 108 .

[ 19 ] The defendant relies on the common-law doctrine of abuse of process as a bar to the admission of the plaintiffs’ affidavits. This doctrine engages the court’s inherent discretion to prevent the misuse of its procedure where the repute of the administration of justice hangs in the balance. The doctrine precludes re-litigation where it violates such principles as judicial economy, consistency, finality and the integrity of the administration of justice: Toronto v. C.U.P.E., Local 79 2003 SCC 63 , 2003, S.C.C. 63 at para. 37 .

[ 20 ] The defendant relies on s. 4(b)(iv) in Conn’s Management Consulting Agreement which states that the Agreement may be terminated by the defendant upon:

(iv) The engaging by the consultant or Conn of any criminal act of dishonesty resulting or intended to result directly or indirectly in personal gain of The Consultant or Conn at the Corporation’s expense.

[ 21 ] The defendant states that Justice Gorman has already addressed and based her decision on the entirety of this section. I disagree. My reading of the Gorman J. decision indicates that she made but one finding, namely that the cameras were installed to intercept private communication which she found to be an offence under s. 184(1) of the Criminal Code of Canada .

[ 22 ] For the defendant to succeed on this motion and likely on the full summary judgment motion, the defendant must establish that Justice Gorman in her ruling of April 29, 2011 found that:

(a) Conn engaged in a “criminal act of dishonesty”; and

(b) that this “criminal act of dishonesty” either resulted or intended to result directly or indirectly in “personal gain to either of these plaintiffs at the expense of the defendant”.

[ 23 ] As Justice Gorman addressed but one of the issues in s. 4(b)(iv) of the Management Consulting Agreement, I find that the principle of issue estoppel does not apply. Using my discretion as contemplated in Danyluk v. Ainsworth Technologies Inc. , supra, I conclude fairness dictates that the plaintiffs be entitled to put their best foot forward in defending this summary judgment motion to dismiss their action. The two affidavits in question address the very issues raised in s. 4(b)(iv) of the Management Consulting Agreement. The two affidavits are therefore in play on this summary judgment motion.

[ 24 ] Costs of this part of the motion are to be left to the judge hearing the summary judgment motion or, in the alternative, counsel may address me on that matter.

“ Justice W. U. Tausendfreund”

Justice W. U. Tausendfreund

DATE: February 17, 2012