CITATION: Steeves v. Doyle Salewski Inc., 2016 ONSC 2223
COURT FILE NO.: 15-65688
DATE: 2016/03/31
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: CHRISTOPHER STEEVES and JEREMY STEEVES
Applicants
AND
DOYLE SALEWSKI INC., RICHARD JUHASZ, JAMES HUNT, GRAHAM T. ROSE, DENISE ROSE, CHRISTOPHER ROSE, AL MAYHEW and ADELE MAYHEW
Respondents
AND
JANET ARSENAULT, JOSEE BOUCHARD, RICHARD MARTIN, VINCENT CARRIER, PAUL LALONDE, MONIQUE LALONDE, TANYA CONTANT, HEATHER BORQUZ, BARBARA KENNEDY, RONALD LEDUC, 2044475 ONTARIO INC., MARK MCKENNA, JUDY MCKENNA, SUSAN MCKILLIP, JOHN MCKILLIP, 1531425 ONTARIO INC., JOE MESSA, ERNEST TOSTE, JEREMY MITCHELL, WILLIAM MYLES, CAMILLE GERARD RUEL, LE-THU NGUYEN, CLAUDIA NICHOLSON, ARMEN PATEL, LORNE SCOTT, OKSANA STRELBITSKI, IBRAHIM MANSOUR, VINKO SURLA, UMAR CHAUDREY and PAUL ST. LAURENT
Proposed Intervenors
BEFORE: Justice Stanley Kershman
COUNSEL: Alyssa Tomkins and Érik Labelle Eastaugh, Counsel, for Proposed Intervenors
Jason Dutrizac, Counsel for Respondents – Receiver
Winston Fogarty, Counsel for Respondents – Unsecured Note Holders
HEARD IN OTTAWA: February 29, 2016
ENDORSEMENT
Introduction
[1] This motion is brought by the Proposed Intervenors[^1] seeking leave to intervene in the application (“Application”) brought by Christopher Steeves and Jeremy Steeves in relation to an arbitration award made by the Honourable Justice Cunningham (Ret.) dated August 11, 2015 and a subsequent Costs Decision dated November 23, 2015.
Factual Background
[2] This arbitration arose out of the receiverships and subsequent bankruptcies of Golden Oaks Enterprises Inc. (“Golden Oaks”) and Jean-Claude Lacasse (“Lacasse”).
[3] The arbitration and the process were agreed upon by the Applicants and Doyle Salewski Inc. (“DSI”, the “Receiver” or the “Trustee”) in its capacity as Receiver and Manager and Trustee in Bankruptcy of Golden Oaks and Lacasse together with the Applicants in the receivership proceedings bearing Court File No. 13-58192 (the “Receivership Proceedings”) and pursuant to the Minutes of Settlement dated July 29, 2014 (the “Minutes”).
[4] Paragraph 1 of the Minutes reads as follows:
- The parties hereby agree that any and or all issues and disputes as between them shall be referred to a private binding arbitration before the Honourable Mr. Justice Cunningham in accordance with the provisions of the Arbitrations Act (Ontario), appealable only by judicial review, the expense of the arbitration shall be borne by the Receiver.
[5] Christopher and Jeremy Steeves, the Trustee and the Unsecured Note Holders took part in a court-sanctioned Dispute Resolution Protocol established in the Receivership Proceedings which led to participation in a voluntary non-binding mediation. As a result of the mediation, the parties entered into the Minutes whereby they agreed to a private, binding arbitration appealable by judicial review.
[6] The arbitration lasted thirteen (13) days, spanning several months and ending with closing written submissions in May 2015.
[7] In July 2015, the Receiver and Trustee commenced proceedings against the Proposed Intervenors, among others.
[8] On August 11, 2015, the arbitrator released his Decision (“Decision”).
[9] In the Decision, the arbitrator made the following findings of fact regarding the business of Golden Oaks:
- Golden Oaks was never a profitable enterprise (para. 15 of the Decision)
- The only way Golden Oaks could succeed was for Lacasse to give promissory notes to “investors” at rather staggering and ever increasing interest rates (para. 15 of the Decision)
- Whether it began legitimately or not, Golden Oaks very quickly became a “Ponzi” scheme continuing to operate so long as Lacasse was able to “borrow” money on the strength of promissory notes (para. 14 of the Decision)
- During 2012 and 2013 the principal enterprise of Golden Oaks was the selling of promissory notes and between March 1, 2012 and February 28, 2013, 96% of the cash generated by Golden Oaks was from “investors” (para. 15 of the Decision)
[10] The above findings of fact have not been appealed by the Applicants.
[11] The Court has not been provided with a copy of the Decision for this motion. Therefore, the aforesaid findings of fact are based on the Receiver’s written submissions in its factum. The Court notes that none of the findings of fact were disputed by the Proposed Intervenors at the hearing of the motion.
[12] On September 10, 2015, the Applicants served and filed a Notice of Application for an order setting aside the arbitration decision with a hearing date of January 14, 2016. The grounds relied upon to set aside the Decision are as follows:
(a) The arbitrator failed to consider the issue of set-off and as a result, the arbitration was not conducted in accordance with the arbitration agreement and went beyond the scope of the agreement because the parties did not agree to conduct an arbitration that addressed only some of the issues; and
(b) The Applicants were not treated equally and fairly.
[13] On November 23, 2015 the arbitrator delivered the Costs Decision and ordered the Applicants to pay costs to the Respondents of $200,000 inclusive of HST and disbursements.
[14] The January 14, 2016 hearing of the Application was adjourned due to lack of time to hear it.
Issue
[15] Should the Proposed Intervenors be granted leave to intervene in the Application in accordance with Rule 13.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
The Law
[16] Rule 13.01 of the Rules of Civil Procedure states:
13.01 (1) A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,
(a) an interest in the subject matter of the proceeding;
(b) that the person may be adversely affected by a judgment in the proceeding; or
(c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding.
(2) On the motion, the court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding and the court may add the person as a party to the proceeding and may make such order as is just.
Proposed Intervenors’ Position
[17] The Proposed Intervenors argue that they meet the test for intervention under Rule 13.01. They argue that there are two key factors that justify their request to be granted standing as parties:
(i) First, they are parties to pending cases arising in whole or in part out of the same set of facts that give rise to the Steeves arbitration. All of the claims brought against the Proposed Intervenors by the Trustee rest on allegations pertaining to the Golden Oaks scheme. Many of the claims against the Proposed Intervenors are identical or closely similar to those made against the Applicants and rest on identical or overlapping allegations regarding the Golden Oaks scheme;
(ii) Second, the vast majority of the claims against Proposed Intervenors are brought in Small Claims Court. The decision of this Court in the present application will therefore be binding on those proceedings as relates to questions of law.
[18] The Proposed Intervenors rely on the Court of Appeal’s decision in R. v. Roks, 2010 ONCA 182, 275 O.A.C. 146 [Roks] which applied the test from Peel (Regional Municipality) v Great Atlantic & Pacific Co. of Canada Ltd. 1990 CanLII 6886 (ON CA), 74 O.R. (2d) 164 (Ont. C.A.) [Peel].
[19] The Proposed Intervenors argue that if permitted to intervene they intend to support the Application taking the following positions:
(a) The arbitrator erred in not applying the doctrine of set-off when determining the quantum of the interest payments or the commissions which must be repaid by the Applicants, especially given the Applicants’ claims were for debts;
(b) The arbitrator erred in law in ordering that all interest payments received pursuant to a loan agreement stipulating a usurious interest rate be repaid. They rely on the case of Transport North American Express Inc. v. New Solutions Financial Corp, 2004 SCC 7, [2004] 1 S.C.R. 249 at para 4;
(c) The arbitrator erred in law in ordering the commissions paid contrary to the Securities Act, R.S.O. 1990, c. S.5 and the Real Estate and Business Brokers Act, 2002, S.O. 2002 c. 30. Sched. C, be repaid. They argue that the mere breach of a statute does not give rise to claim for civil liability. They rely on the case of The Queen (Can.) v. Saskatchewan Wheat Pool, 1983 CanLII 21 (SCC), [1983] 1 S.C.R. 205 at pp. 222-225.
Respondents’ Position
[20] The Respondents oppose the motion and argue that Rule 13.01(1)(a) does not apply because the Proposed Intervenors do not have “an interest in the subject matter of the proceeding” but rather have an interest in the outcome of the proceeding. The Respondents argue that the Proposed Intervenors are concerned with the ramifications, if any, that the Decision will have with respect to each of their cases.
[21] The Respondents argue that in relation to Rule 13.01(1)(b), the Proposed Intervenors will not be “adversely affected by a judgment in the proceeding” because the Proposed Intervenors acknowledge in their materials that the Decision has “no effects on the rights or obligations of the Proposed Intervenors or the claims brought against them by DSI” and the Proposed Intervenors “are not bound by the [Decisions] in any way”. Those claims, to be addressed at trials, are separate and involve fresh facts and evidence in the case of each Proposed Intervenor.
[22] The Respondents acknowledge that in relation to Rule 13.01(1)(a), there are some underlying “facts in common”, such as: the Applicants and the Proposed Intervenors invested in a Ponzi scheme. At the same time, the Respondents argue that the majority of the Proposed Intervenors do not have many of the findings of fact in common with the Applicants, as set out in para. 43 of the Respondents’ factum.
[23] The Respondents argue that the questions posed by the Applicants and the Proposed Intervenors are different. While they both address set-off, the analysis is quite different. The arbitration was meant to be binding on the parties subject to judicial review (s. 46 of the Arbitration Act, 1991, S.O. 1991. c. 17) only. The issues raised by the Proposed Intervenors add to the inquiry and are merely an attempt to have a hearing on the same issues that are the subject matter of their summary judgment motions scheduled to proceed later this year.
[24] The Respondents argue that the Proposed Intervenors will have every occasion to put forward the issues of importance to them before the trier of fact, who will consider their issues independently and fairly on new facts and evidence that pertain to each of them unfettered by the Decision. Accordingly, it is improper for these issues to be raised in the within Application and it may constitute an abuse of process.
[25] The Respondents argue that if there are questions of law or fact in common (which is denied), this court must consider the likelihood of the Proposed Interveners being able to make a useful contribution to the resolution of the Application without causing injustice to the immediate parties.
Analysis
[26] The leading case in this area says that while an Intervenor should not introduce new issues to the litigation, an Intervenor should, nevertheless, do more than just echo the position of a party. In Peel the Court set out at page 167 that:
In determining whether an application for intervention should be granted, in the end, in my opinion, the matters to be considered are the nature of the case, the issues which arise and the likelihood of the Applicant being able to make a useful contribution to the resolution of the appeal without causing injustice to the immediate parties.
[27] Though in Peel the Court ultimately granted leave to intervene as a friend of the Court under Rule 13.02, the considerations that it sets out have guided courts in leave to intervene decisions under Rule 13.01, and it has been cited as an authority by both parties in this case.
[28] In Halpern v. Toronto (City) Clerk (2000), 2000 CanLII 29029 (ON SCDC), 51 O.R. (3d) 742 (Div. Ct.), the Divisional Court applied this test to an application under Rule 13.01 and noted at paragraph 18 that:
[i]n considering whether the added party would make a useful contribution to the proceeding, it is not a useful contribution if the intervenor simply proposes to repeat the issues put forward by the main parties, although some overlap may be permissible.
[29] Other cases have refused leave to intervene on the grounds that the proposed intervenor will not contribute to the litigation. For example, in Central 1 Credit Union v. UM Financial, 2011 ONSC 5612, the Court refused a motion for leave to intervene brought under Rule 13.01 on the basis that the intervenors’ submissions on the main point “would only duplicate evidence already placed into the record by the respondent” (at para. 28).
[30] The Court went on to note that while adding the proposed intervenor as a party would not result in delay, it would result in real costs “and I do not see MCC [the proposed intervenor] making any useful contribution to the hearing of the application which would justify the imposition of such costs on the parties” (at para. 29). This conclusion ties the notion of “contribution” or “echoing” to the statutory requirement that the intervention not prejudice the parties.
Rule 13.01 (1)(a) - “interest in the subject matter of the proceedings”
[31] The Court does not see how the Proposed Intervenors have any interest in the subject matter of the proceedings.
[32] “Proceedings” is defined under Rule 1.03 as “an action or application” – clearly, the Proposed Intervenors are not parties to the Application. While it is true that they may have an interest in the outcome or the result of the Application, they do not have any interest in the subject matter of the proceedings. Furthermore, the Proposed Intervenors are not parties to the arbitration proceeding and it was never contemplated that they would be parties to that proceeding.
[33] The Court agrees with the Trustee that the Proposed Intervenors are concerned with the ramifications, if any, that the Decision may have with respect to their respective cases.
[34] Therefore, since the Proposed Intervenors do not have an interest in the subject matter of the proceedings. Their argument under Rule 13.01 (1)(a) fails.
Rule 13.01(1)(b) - “adversely affected by the judgment in the proceedings”
[35] In order to satisfy this ground, the Proposed Intervenors must satisfy the Court that they “may be adversely affected by a judgment in the proceedings”.
[36] The Proposed Intervenors argue that part of their defence is to seek some form of set-off against any claims that may be made against them and that there is a substantial risk of inconsistency between a decision rendered by this Court in the present application and the decisions in their cases and it is therefore in the public interest to allow the intervention.
[37] The Court disagrees with this position. If the Proposed Intervenors seek a form of set-off with respect to their claims, they can specifically argue that issue in relation to their particular actions. Furthermore, they can argue that their particular situation is fact specific and are not the same as the fact situation in the Decision.
[38] The Proposed Intervenors can argue that the position taken by the Trustee that the Decision has a “precedential value” is incorrect; they can argue that it does not really have such a value and that when applied to the facts of their own particular cases that precedent should not be relied upon.
[39] While the Trustee may have included the Decision in various related Small Claims Court and/or Superior Court matters, the judge dealing with each individual case has the ability to determine whether the information contained in the Decision is applicable to that particular case. The judge will decide how much precedential value, if any, the Decision will have in relation to that case.
[40] Every Proposed Intervenor either in Small Claims Court or in Superior Court will have their day in court to argue the merits of their position based on their specific set of facts.
[41] In the Peel case, the Court of Appeal said, at page 4:
Although much has been written as to the proper matters to be considered in determining an whether an application for intervention should be granted, in the end, in my opinion, the matters to be considered are the nature of the case, the issues which arise and the likelihood of the applicant being able to make a useful contribution to the resolution of the appeal without causing injustice to the immediate parties.
[42] From the Court’s perspective, the proposed submissions of the Proposed Intervenors’ would not provide a useful contribution to the resolution of the appeal. It would provide a contribution, but the Court does not see how it will be useful. Furthermore, in the Courts’ view granting leave to the Proposed Intervenors will cause injustice if they are allowed to participate. The Court finds that their involvement in the proceedings will duplicate the Applicants’ position and will serve no useful purpose.
[43] The Proposed Intervenors, acknowledge that they intend to support the Application. They also argue that they are going to take the following positions:
(a) The arbitrator erred at law in ordering that all interest payments received pursuant to a loan agreement stipulating a usurious rate be repaid. The only proper remedy was to rectify the loan contract so as to reduce the interest rate below the legal limit. Only those amounts paid in excess of the legal limit need, in principle, be returned;
(b) The arbitrator erred at law in ordering that commissions paid contrary to the Securities Act and the Real Estate and Business Brokers Act be repaid; and
(c) The arbitrator erred at law in not applying the doctrine of set-off when determining what quantum of the interest payments or the commissions must be repaid by the Applicants.
[44] In the present case, the Court finds that the arguments of the Proposed Intervenors echo the arguments being advanced by the Applicants. Following the reasoning in R v. Morgentaler, 1993 CanLII 158 (SCC), [1993] 1 S.C.R. 462, the Court finds that the Proposed Intervenor will not make any useful addition to the hearing of the Application. The Court’s finding is the same whether or not the Respondents to the Application would be put to increased costs.
[45] The Court does not find that the Proposed Intervenors will contribute a different and valuable perspective to the proceedings. While they may contribute a slightly different perspective, the Court finds that the perspective is not considered to be a valuable perspective in this case.
[46] Therefore, on this ground, under Rule 13.01(1)(b), the Court finds that the Proposed Intervenors’ motion fails.
Rule 13.01 (1)(c) - “question of law or fact in common”
[47] The third ground available under Rule 13.01(1)(c), is whether there exists between the Proposed Intervenors and “one or more of the parties to the proceedings a question of law or fact in common”.
[48] The Court acknowledges that there are certain background facts in common, because the investments were made with either Golden Oaks or Lacasse. However, the Court also is aware that each of the Proposed Intervenors has a specific set of facts in relation to their own involvement which are completely separate and apart from those facts in the Application and separate from the other Proposed Intervenors’ situations. There are differences in debt instruments, the amounts of monies advanced, the interest rates, the terms, when the funds were lent and to whom – to name a few.
[49] The Court does not find that the majority of the facts are in common with those in the Application. While there are background facts in common, the specific facts related to each individual case are not.
[50] As to common questions of law, the arbitration, was binding on the Applicant and the Respondents. It was not binding on any of the Proposed Intervenors.
[51] While the issue of set-off may be a question of law that is in common, that question of law will be applied to each Proposed Intervenor’s case, but will be based on different sets of facts.
[52] The Court notes that the doctrine of set-off has already been argued by the Applicants. The same argument by the Proposed Intervenors again would only be echoing the Applicants’ position.
[53] The Court believes that adding the Proposed Intervenors, will widen or add to the points in issue. This concern was dealt with in the Morgentaler, where the Court said that, “while the role of an intervener is to present the court with submissions which are useful and different” from the perspectives given by the parties, “[a]n intervener is not entitled, however, to widen or add to the points in issue”. At page 464 the Court said, “An intervener cannot introduce a new issue on the ground that it is a response to an argument made by the appellant if the respondent has chosen not to raise the issue.”
[54] The choices of the parties over which issues to litigate was dealt with more recently in Bedford v. Canada (Attorney General), 2011 ONCA 209, 231 C.R.R. (2d) 113 [Bedford]. In Bedford, the Court of Appeal refused leave to intervene, noting at paragraph 6 that “[t]he proposed intervention does not merely raise an alternative legal argument in relation to the ss. 7 and 2(b) issues but rather raises an entirely new ground on which to challenge the legislation.”
[55] In Bedford, though the proposed intervenor submitted that it would be beneficial to deal with all constitutional issues at once, including the s. 15 argument, the Court noted that “the parties chose not to raise this issue and the application judge did not address s. 15 in her reasons” (at para. 7). Though the issues may be related, the Court emphasized the importance of allowing the actual parties, not the intervenors, to define the record: “The parties have framed the issues and developed the record as they thought best” (at para. 16).
[56] In the case of Blue Mountain Resorts Ltd. v. Den Bok, 2011 ONSC 1909, the Divisional Court refused the application for leave to intervene from the Ontario Association of the Chiefs of Police under Rule 13.01 relying on the reasoning in Bedford. The Court was particularly concerned with the additional time delays that would be required if the Proposed Intervenor was allowed to raise its new issues (at paras. 16-17).
[57] In the present case, some of the arguments raised by the Proposed Intervenors raise new issues which are not contemplated by the original Application.
[58] The Court is aware that the concerns of time delay are not a factor in this case because a timetable has already been established for this Application to move forward.
[59] At the same time the Court is concerned that the Proposed Intervenors will be raising new issues, which would move the Application into uncharted waters thereby adding further time and expense to an already protracted proceeding. The Court is satisfied that the Proposed Intervenors can adequately raise these issues in arguing their own specific cases.
[60] The Proposed Intervenors’ argue that this case is analogous to Roks. In that case, Mr. Roks was convicted of second degree murder as a result of arson and was appealing his conviction on the grounds that Section 229(c) of the Criminal Code, R.S.C. 1985, c. C-46 breached a Section 7 charter right. The proposed intervenor in Roks, John Magno was being prosecuted for his involvement in the same arson which had led to the conviction of Roks. The Court of Appeal allowed Magno to intervene because of the close factual connections between the two cases and because of the outcome of the Roks appeal would be binding on Magno’s prosecution.
[61] In Roks, the proposed intervenors argued that the Courts’ decision also rested on the fact that Magno was further removed from the arson than Roks which would enable him to add a different and valuable perspective to the proceedings, despite the fact that he did not propose to add to the existing record – see para. 13.
[62] The Proposed Intervenors’ argue that both aspects of Roks apply to this case. They claim that by facing claims in Small Claims Court, which most of them are, they are in the same situation as Magno in that there is a considerable factual overlap with the Steeves arbitration and, like Roks decision would be binding on Magno’s prosecution, this Court’s decision on the Application has the potential to rest on conclusions of law that would be binding in their cases. At the same time, the Proposed Intervenors are further removed from the Golden Oaks scheme than were the Applicants, and will contribute a different and valuable perspective to the questions which the Court must decide.
[63] This Court does not see how the Roks case is analogous to the present situation or how it would apply. The Roks case is not a motion under Rule 13.01. The Court understands that the Peel test was applied, however, the Court does not agree that there is enough of a factual overlap with the Steeves arbitration. While the background facts may be similar, the essential facts of each particular case are not, e.g. the differences in the debt instruments, interest rates, terms, etc., as previously mentioned.
[64] Furthermore, while this Court’s decision has the potential to rest on conclusions of law that would be binding on the Proposed Intervenors’ cases, this Court finds that there is only a potential and not a certainty that this will occur. Therefore, the Court does not accept this argument on behalf of the Proposed Intervenors.
[65] Therefore on the Rule 13.01(1)(c) ground, the Court finds that the Proposed Intervenors’ motion fails.
Conclusion
[66] For the reasons set out above, the Proposed Intervenors’ motion fails.
Costs
[67] Neither party has requested costs. Accordingly, there will be no order as to costs.
[68] Order accordingly.
Justice Stanley Kershman
Date: March 31, 2016
CITATION: Steeves v. Doyle Salewski Inc., 2016 ONSC 2223
COURT FILE NO.: 15-65688
DATE: 2016/03/31
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: CHRISTOPHER STEEVES and JEREMY STEEVES,
Applicants
AND
DOYLE SALEWSKI INC., RICHARD JUHASZ, JAMES HUNT, GRAHAM T. ROSE, DENISE ROSE, CHRISTOPHER ROSE, AL MAYHEW and ADELE MAYHEW
Respondents
AND
JANET ARSENAULT, JOSEE BOUCHARD, RICHARD MARTIN, VINCENT CARRIER, PAUL LALONDE, MONIQUE LALONDE, TANYA CONTANT, HEATHER BORQUZ, BARBARA KENNEDY, RONALD LEDUC, 2044475 ONTARIO INC., MARK MCKENNA, JUDY MCKENNA, SUSAN MCKILLIP, JOHN MCKILLIP, 1531425 ONTARIO INC., JOE MESSA, ERNEST TOSTE, JEREMY MITCHELL, WILLIAM MYLES, CAMILLE GERARD RUEL, LE-THU NGUYEN, CLAUDIA NICHOLSON, ARMEN PATEL, LORNE SCOTT, OKSANA STRELBITSKI, IBRAHIM MANSOUR, VINKO SURLA, UMAR CHAUDREY and PAUL ST. LAURENT,
Proposed Intervenors
BEFORE: Justice Stanley Kershman
COUNSEL: Jason Duterizac, Counsel for Respondents – Acting for the Receiver
Winston Fogarty, Counsel for Respondents – Acting for Unsecured Note Holders
Alyssa Tomkins and Érik Labelle Eastaugh, Counsel, for Proposed Intervenors
Endorsement
Justice Stanley Kershman
Released: March 31, 2016
[^1]: The word Intervenor has been spelled differently throughout this decision and in quotes within the decision. The Court is aware of the variant in the spelling and retains the original spelling to ensure accuracy.