Court File and Parties

COURT FILE NO.: 15-65689 DATE: 2016, July 11 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

CHRISTOPHER STEEVES and JEREMY STEEVES Plaintiffs (Responding Parties) – and – DOYLE SALEWSKI INC. Defendant (Moving Party)

Counsel: Peter Mantas and T. Khoury Counsel for the Plaintiffs (Responding Parties) Richard G. Dearden and Anastasia Semenova Counsel for the Respondent (Moving Party)

HEARD: May 11, 2016

Tausendfreund, J.

SUMMARY JUDGMENT MOTION BY THE DEFENDANT

REASONS

OVERVIEW

[1] This is a Summary Judgment Motion by the Defendant, appointed as the Receiver/Manager and then as the Trustee in Bankruptcy (“Trustee” or “DSI”) of the estate of Golden Oaks Enterprises Inc. (“GOE”) and its principal, Jean-Claude Lacasse (“JCL”). The Trustee seeks a dismissal of this action.

[2] The issues in this action arise from the bankruptcies of GOE and JCL on July 9, 2013. JCL at all times was the principal and guiding mind of GOE. The Trustee challenged certain mortgage securities granted by GOE and/or JCL to the Plaintiffs, as well as interest payments and commissions to them, all as preferences under s. 95 of the Bankruptcy and Insolvency Act (“BIA”). The Trustee took the further position that certain interest payments from GOE to the Plaintiffs were usurious and as such offended s. 371 of the Criminal Code of Canada.

[3] The Plaintiffs were two of 153 investors in GOE.

[4] The Plaintiffs and the Trustee agreed to a private and in camera arbitration. In November, 2014 these parties signed a “Mini-Trial Agreement” (the “M-TA”) which addressed the procedure of the proposed arbitration. It included this term.:

3. The parties and the arbitrator undertake and agree that unless there is a written agreement, court order, or other legal requirement to the contrary, all documents, transcripts and other materials and information disclosed during the course of the Mini-Trial will be held in confidence and used only for purposes of the Mini-Trial . . .

Of note is the fact that this agreement makes no reference to the expected reasons and/or decision of the arbitrator and whether that decision is to be subject to the above noted confidentiality agreement.

[5] On August 11, 2015, the arbitrator released his decision to the parties in this arbitration. Within two days, the Trustee had disseminated the decision by regular mail and a website link to 162 creditors of GOE and to reporters of the Ottawa Citizen and the CBC.

[6] The Plaintiffs, Christopher Steeves (“CS”) and Jeremy Steeves (“JS”) claim that in publically releasing the arbitration decision, the Trustee breached his obligation detailed in para. 3 of the “M-TA” and thereby the Plaintiffs’ expectation of privacy and confidentiality in relation to the arbitration. They state that the Trustee had a duty to keep the arbitration decision, which contained confidential and sensitive information, private and confidential, unless the Trustee obtained the Plaintiffs’ consent in writing or a court order. They seek damages for economic harm and emotional distress. The Trustee takes the position that the confidentiality agreement between the parties was limited to the arbitration hearing beyond which it did not extend. The Trustee states that the arbitration agreement did not encompass the decision itself, particularly as the arbitrator two days after his release of the decision confirmed that he saw nothing which would suggest the decision was to remain confidential. The Trustee additionally states that it agreed to this arbitration process and to have the bankrupt estate fund it on the basis that this decision was to be a “test case” involving numerous other creditors in this bankruptcy.

[7] The Plaintiffs’ position on this motion is that these issues cannot be resolved by a summary judgment motion, but require a trial with viva voce evidence.

FACTS

[8] On July 9, 2013, seven named unsecured creditors of GOE had started a Notice of Application against GOE and JCL and obtained an order without notice appointing DSI as Receiver and manager of all property and assets of GOE and JCL. That order had a return date of July 25, 2013 on notice to the debtors and all interested parties. The court file number of this application is 13-58192 (“court file 13-58192”).

[9] A Receivership Order followed on July 25, 2013, drawn on the title of proceedings of court file 13-58192. That order appointed DSI as Receiver and manager of the estate of GOE and JCL. It included these terms:

16. . . . no proceeding or enforcement process in any court or tribunal. . . shall be commenced or continued against the Receiver except with the written consent of the Receiver or with leave of this court.

17. . . . the Receiver shall incur no liability or obligation as a result of his appointment for the carrying out of the provisions of this Order, save and except any gross negligence or wilful misconduct on its part. . .

18. . . . the Receiver be at liberty to serve this Order, any other materials and orders in these proceedings, any notices or other correspondence . . . to the Debtors’ creditors or other interested parties. . .

19. . . . the Receiver is hereby authorized to establish a website for these proceedings. . . and to post a copy of this Order and any subsequent proceedings and Orders of this court on that website.

20. . . . the Receiver is authorized to serve its reports in these proceedings on the Debtors by posting any such reports on the website.

21. . . . the Receiver is authorized but not obligated to post an advertisement in the Ottawa Citizen and the Globe and Mail advising all creditors of the Debtors of these proceedings.

[10] On July 26, 2013, DSI was appointed as Trustee in Bankruptcy for the estate of GOE and JCL.

[11] Following a mediation and on July 29, 2014, the parties to this action filed Minutes of Settlement under the title of the proceeding of court file 13-58192. Included were these terms:

1. The parties hereby agree that any and/or all issues and disputes as between them shall be referred to a private binding arbitration.

2. . . .the expense of the arbitration shall be borne by the Receiver.

3. The binding arbitration shall be held in camera.

4. The terms of this procedural settlement shall be filed with the court and [are] subject to court approval.

[12] Based on these Minutes of Settlement, the parties signed the “M-TA” in November, 2014. That agreement was drawn under the title of proceedings of the application in court file 13-58192. None of the named Applicants in that court file are a party to that agreement.

[13] The bankruptcy proceeding in court file 13-58192 continued periodically before Justice Kershman to address issues as they arose from time to time. One of these proceedings was on September 11, 2014. Most, if not all of the parties, including these Plaintiffs were present, either personally or by counsel. An excerpt of the transcript now follows:

Mr. Dutrizac (Counsel for Trustee): Now, I would say Your Honour that with Mr. Steeves, those issues - - we’re - - the applicants and the Receiver are treating this as a test case . . . on these issues. I don’t know if we want to continue going after these gentlemen while we’re doing the test case. . . we’re dealing with the second issue in front of a - - an arbitrator. . . we’re going to get a ruling on it and some of these second mortgagees may back off or. . . continue on depending on what the result is.

The Court: . . . is it a written decision?

Mr. Dutrizac: Yes.

The Court: And is the decision confidential?. . . It says, “The terms of this procedural settlement shall be filed with the court.” So it - - it would be in open court. . .

Mr. Dutrizac: Yes.

The Court: . . . if you use it as a test case and the settlement is sealed then you can’t tell anybody else about the results of your test case. . .

Mr. Dutrizac: Yes.

The Court: So does it - - does it say anything about. . .

Mr. Dutrizac: It - - it doesn’t.

The Court: So the terms of this one are not confidential?

Mr. Dutrizac: I don’t think they can be.

The Court: But so am I sealing the terms of this settlement agreement as well?

Mr. Dutrizac: The Steeves settlement agreement?

The Court: Yes.

Mr. Dutrizac: I - - I don’t think we can . . . we’re talking about a test case and that was the intent. It’s going to be a private arbitration, out of the public eye but the fact that it’s happening I don’t think should be sealed.

Unidentified Speaker From Body of the Court: So then we - - can we agree that the proceedings are private but only the terms of settlement are public?

Mr. Dutrizac: Yeah. I think that’s the idea.

The Court: . . . Now, let’s talk about the Steeves matter.

Mr. Dutrizac: On the Steeves settlement, unlike the other three minutes of settlement, the parties in fact did not agree to seal or keep confidential the terms of the settlement. Now what they did agree to is to conduct what has been agreed upon. The fact that they’ve made that agreement and the terms of the procedural settlement I do not believe should be sealed; the conduct of what has been agreed upon is private. But the fact that it’s occurring and who it’s going to occur before, I don’t believe that that’s necessarily something that should be sealed.

The Court: Okay. Mr. Steeves, do you wish to speak to that?. . .

Mr. Steeves: . . . my brother and I would both like to keep it sealed. We don’t feel we should be treated any different than anyone else and we’d like the whole process of what we agree on, the settlement, et certera all to be sealed.

The Court: Why?

Mr. Steeves: Well, for personal reasons right away. I don’t want to be in any more media, I don’t want to be publicized on websites, I don’t want to be in any more public reports. . .

The Court: The court has no control of that.

Mr. Steeves: I understand that. . .

The Court: . . . they requested the confidentiality, yours did not. . .

Mr. Steeves: . . . I’m now requesting it if possible. . .

Mr. O’Toole: . . . the material I received from Mr. Steeves is a copy of the minutes of settlement. Now it’s not a final settlement, unlike the other matters, it is a procedural settlement which agrees that the dispute will be resolved by private binding arbitration. I certainly concur that the proceedings in the arbitration will be confidential between the parties. Any determinations made by [the arbitrators] will be confidential and binding as between the parties but the court should note that there has already been public dissemination of the minutes - - of the procedural minutes of settlement. I got them by email from Mr. Steeves. . .

The Court: . . . I don’t see anything in here that is - - that requires confidentiality. It sets out a procedure of what will happen in relation to your issue. . .

Mr. Steeves: Can I ask where this information will be published?

The Court: I have no idea. . . the Receiver would not be putting it on its website.

Mr. Steeves: Perfect.

The Court: Now if somebody went to court and asked to see the file and asked to see this document and they took it and they put it on their website, . . . the court has no - - no control over that.

[14] In November 2014 the parties signed the “M-TA” setting out the terms of the proposed arbitration. As were the Minutes of Settlement, this document also was styled in the title of proceeding of court file 13-58192. In addition to para. 3 already noted above, it included this para:

7. In addition to the arbitrator’s fees, Doyle Saleswki Inc., in its capacity as Receiver and Trustee in bankruptcy of Golden Oaks Enterprises Inc., and Jean-Claude Lacasse will pay the costs of all disbursements relating to the matter. . .

[15] The following is an excerpt of the transcript of the continuation of the bankruptcy proceedings in this matter before Justice Kershman on December 23, 2014 (attended by CS among others):

Mr. Dutrizac: . . . that on the issue of usury we had agreed that we would proceed with the mini trial and deal with that issue as a test case. . . we had agreed to park that issue for now pending the outcome of the Steeves mini trial.

Mr. Fogarty (Counsel for the Bankruptcy Applicants): One thing that’s critical though I think is that the decision that may be rendered by [the arbitrator] is going to be looking at this question of the usurious rates of interest and the applicable law and that may also be of assistance to how. . . my clients will be dealt with because if [the arbitrator] comes up with a decision that is instructive on sort of how the issue of usurious rates of interest are to be dealt with, that may also result in some of my clients’ claims either agreeing that they won’t be advancing them or it will be reduced or having to pay some money back. But that’s something we have not engaged in a dispute right now with the Receiver because we wanted to see, get a judicial pronouncement as opposed to spending a lot of money from both sides until this issue has been clarified . . .

Mr. Scott (to Justice Kershman) : You suggested that the charge will be ahead of any remaining second mortgages and I’ve just asked, before you rank them higher than any second mortgages remaining that maybe you wait until the results of the mini trial because I believe and maybe I’m wrong that that was one of the issues being discussed in the mini trial, the validity of the second mortgages. . .

[16] The arbitration proceeded over 13 days from November 24, 2014 to April 22, 2015. Only the parties to this action and counsel attended.

[17] The arbitrator released his decision on August 11, 2015 by cover letter which was not marked confidential and was addressed to the parties and counsel involved in the arbitration and to counsel for the 7 named Applicants in court file 13-58192.

[18] The decision, drawn on the title of proceedings of court file 13-58192 concluded with this summary:

“74. To summarize, as I have been asked to do, the date of the initial bankruptcy event was July 9, 2013. GOE was clearly insolvent by December, 2012 and probably by July 31, 2012. This was never a viable business and it was severely unprofitable. CS and JCL were joint venture partners in the Broadview properties and as time went on they worked closely together in promoting the sale of Promissory Notes. Throughout, CS received referral commissions as did JS, although to a much lesser extent . . .

“75. The second round of secured Mortgages registered April 15, 2013, were granted within 90 days of the initial bankruptcy event and are void as against the Trustee.

“76. The first round of Second Mortgages registered April 5, 2013, were granted within 12 months of the initial bankruptcy event and are void as against the Trustee for the reasons I have given.

“77. CS and JS received $58,757.31 from GOE on the sale of 233 Wood Street East that was within 90 days of the initial bankruptcy event and therefore is void as against the Trustee. CS and JS were not dealing at arms’ length with GOE.

“78. The payment of $50,000.00 that SC and JS received from GOE on the sale of 50 Largo Crescent was within 12 months of the initial bankruptcy event and is void as against the Trustee.

“79. Except as I have noted in my reasons, CS and JS received payments of usurious interest. SC’s conduct with JCL and LS (“Lorne Scott”) did not amount to the tort of civil conspiracy.

“80. Accordingly, I order the following:

1. That CS and JS return or repay to the Receiver the usurious interest I have found they received;
2. CS and JS return to or repay the Receiver all referral commissions received from GOE;
3. The Charges (Second Mortgages) granted in favour of CS and JS within 3 months of the initial bankruptcy event are void as against the Trustee (Section 95(1)(a) BIA );
4. CS and JS are to return or repay the preferences received in the sum of $58,757.31 and $50,000.00;
5. The Charges (Second Mortgages) granted in favour of CS and JS within 12 months of the initial bankruptcy event are void as against the Trustee (Section 95(1)(b) BIA );
6. I will hear further from the parties as to the exact amount with respect to the Charges to be repaid to the Receiver;
7. The claim of civil conspiracy is dismissed;
8. I will hear from the Parties on the issue of the pre-Judgment interest and costs.”

[19] On the same day, namely August 11, 2015, the Trustee delivered a summary and a full copy of the decision to the Ottawa Citizen and the CBC. On August 12th and 13th, 2015, the Trustee delivered this summary to 162 creditors of GOE and included a website link to the decision. When contacted after the release of the decision on the question of its confidentiality, the arbitrator replied on August 13, 2015:

“. . . having had the opportunity to once again review the originating documentation, by which I was guided, I see nothing that would suggest the decision is to remain confidential. This documentation included the handwritten Minutes of Settlement, the Mini-Trial Agreement as well as the endorsement of Kershman, J. Indeed as Mr. Fogarty states, the applicants are parties to the litigation and as such are entitled to read the decision as of course is any party. Any purpose served by conducting the Mini-Trial on a confidential basis has now expired. If Mr. Steeves wishes to have the Minutes varied he is of course free to bring such an application.

Analysis

SUMMARY JUDGMENT MOTIONS

[20] Rule 20.04(2) of the Rules of Civil Procedure allows the court to grant summary judgment if satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. In Hryniak v. Mauldin, 2014 SCC 7 at para. 49, the court explains that:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[21] Although the Moving Party bears the onus of demonstrating that there is no genuine issue requiring a trial, the Responding Party is under an evidentiary burden to satisfy the court that its claim has a real chance for success: Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423 at pp. 434-435. Mere assertions of facts will not meet this evidentiary burden. As the Court of Appeal held in Goldman v. Devine, 2007 ONCA 301, at para. 23, “[s]elf-serving evidence that merely asserts a defence or a claim without providing some detail or supporting evidence is not sufficient to create a genuine issue for trial”.

[22] The first step for a court is to determine whether there is a genuine issue requiring a trial based only on the evidence presented. If the court is satisfied that there is no genuine issue requiring a trial, the court shall grant summary judgment: R. 20.04(2). In determining whether there is a genuine issue for trial, the court should consider whether the need for a trial can be avoided by ordering the presentation of oral evidence under R. 20.04(2.2) or relying on the fact finding powers in R. 20.04(2.1) namely:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[23] Under R. 20.04(2.2), the court, for purposes of exercising any of the powers set out in subrule (2.1), may order that oral evidence be presented by 1 or more parties. As noted in Hryniak:

63 This power should be employed when it allows the Judge to reach a fair and just adjudication on the merits and it is the proportionate course of action.

However, one must keep in mind that it is designed to determine if there is a genuine issue requiring a trial: see Hryniak at para 65.

Position of the Parties

Defendant (Moving Party)

[24] At the time the “M-TA” was signed, the Trustee had commenced over 80 actions in Small Claims and in the Superior Court of Justice against other parties who the Defendant believed had received usurious interests, unlawful commissions and/or preferences. The Trustee at all times expected the eventual arbitration decision to be treated as a test case and precedent for these other actions. As such, the Trustee expected the arbitration decision to be non-confidential. For that reason, the Trustee had agreed to absorb the entire cost of the arbitration. The Trustee further states that the decision was not marked “confidential” by the arbitrator who stated, one or two days after his release of the arbitration decision, that he saw nothing that would suggest the decision was to remain confidential. The Trustee further states that he had an obligation to inform the other creditors of the estate about the decision.

Plaintiffs (Responding Parties)

[25] The Plaintiffs, for their part state that, as realtors in the Ottawa area, they had a keen interest to keep the arbitration and its expected decision out of the public forum. They believed and still do that a negative result of the arbitration from their perspective would likely have a deleterious effect on their future livelihood as realtors. They see the Trustee’s release of the arbitration decision as a breach of an implied term of the “M-TA”.

Issues

[26] In the face of these apparently opposing interests and positions, it is surprising that the “M-TA” did not specifically and in detail address the proposed treatment of the expected arbitration decision. Was it to remain confidential, in whole or in part, or was it to be treated as a public document? This question raises a number of issues, including these which I now summarize:

a) Para. 3 of the “M-TA” does not specifically refer to the decision of the arbitrator. It states that the parties and the arbitrator undertake and agree that, unless there is a written agreement, court order, or other legal requirement to the contrary, all documents, transcripts and other materials and information disclosed during the course of the Mini-Trial will be held in confidence and used only the purposes of the Mini-Trial. Paragraph 4 of the agreement states clearly that the arbitrator will not be liable to the parties or anyone participating in the arbitration and shall have the immunity of a Superior Court Judge. Based on that paragraph, my reasons will not address the actions of the arbitrator.

The questions which arise from paragraph 3 of the M-TA include these:

• Do the words “used only for the purposes of the Mini-Trial” include the arbitrator’s decision? • The arbitrator’s decision is based entirely on documents, transcripts and other materials and information disclosed during the course of the “M-TA”. If that is so, must the arbitrator’s decision be held in confidence? • If not, what meaning and intent is to be ascribed to paragraph 3?

b) Although the Applicants in court file 13-58192 were not parties to the “M-TA” which is drawn under that title of proceedings, were these 7 named parties by virtue of being included in the title of proceedings of the “M-TA” entitled to receive a copy of the decision?

c) Assuming that there is a legal obligation on the Trustee to share the arbitrator’s decision with other creditors of the bankrupt estate, could that obligation have been limited to the order of the arbitrator in paragraph 80 of that decision? In the alternative, could it have been limited to the summary the arbitrator provided in paragraphs 74 to 80 of his decision? In the further alternative, as the “M-TA” does not include or refer to the decision of the arbitrator, but which decision arguably might be included in the “M-TA”by inference, would it have been more prudent for the Trustee to have sought an agreement or court order prior to the Trustee’s release of that decision to third parties?

d) If the Trustee had an obligation to release the decision to creditors of the bankrupt estate, did that obligation extend to the arbitrator’s website and to the Trustee’s release of the decision to the media? Assuming that there was an expectation or obligation for the release of at least a summary and/or the order of the arbitration decision, could or should the Trustee’s release of that deicsion have been limited to the creditors of the estate, excluding the release to the Trustee’s website and to the media?

e) It appears from the transcript of the bankruptcy proceedings before Kershman, J particularly on September 11, 2014 that different views were expressed as to the meaning, extent and application of the confidentiality agreement of the then pending arbitration. Should that have been a signal to the parties to further define or clarify the extent or meaning of the words that “the private binding arbitration will be held in confidence and used only for the purposes of the Mini-Trial”?

f) The Trustee commenced over 80 actions in Small Claims Court and in the Superior Court of Justice against parties the Trustee alleges received usurious interest, unlawful commissions and preferences. The Trustee intended to rely on the arbitration decision as a test case with respect to these actions. The Trustee states that it would not have agreed to fund the arbitration but for the use the Trustee expected to make of the arbitration decision as a test case. That may be so, but that reasoning does not appear to have been shared with the Plaintiffs leading up to the signing of the “M-TA” nor was that intent or expectation referenced in the “M-TA”. Assuming the decision is helpful to the Trustee as a test case, is the release of the entire decision, including to the Trustee’s website and to the media required for that purpose? Perhaps the arbitration order and/or the summary the arbitrator provided in that decision would have been sufficient for that purpose.

g) After the release of the decision and in response to an inquiry from the parties, the arbitrator replied in part:

“I see nothing that would suggest the decision is to remain confidential”.

What part, if any, does this opinion have in the resolution of one or more of the above issues?

h) Was there a meeting of the minds with respect to:

i) The meaning, extent and application of the term “private binding arbitration” in the Minutes of Settlement of July 29, 2014; and ii) These words in the “M-TA”. . . “will be held in confidence and used only for the purposes of the “Mini-Trial”?

[27] I find that a resolution of these issues including the meaning, use, application and interest of the immediately above noted phrases requires a trial. That includes the interpretation and application to these facts of paragraphs 16 and 25 of the Receivership Order of Justice Kershman July 25, 2013. These paragraphs address the issues of whether a consent of the Receiver or leave of the court is required before an action may be commenced against the Receiver and whether the liability of the Receiver is limited to any gross negligence or wilful misconduct on its part.

[28] As I see it, the overreaching question giving rise to most, if not all of the above issues is whether the arbitration decision is partly or even entirely the product of all “documents, transcripts, and other materials and information disclosed during the course of the Mini-Trial” referred to in para 3 of the “M-TA”. If so, does the cloak of confidentiality mentioned in the “M-TA” inferentially envelop the arbitration decision and to what extent?

[29] I conclude that a resolution of these issues requires a trial, as does the issue of the damages the Plaintiffs seek.

[30] In reaching this conclusion, I have considered whether I should seize myself of the matter, as was proposed in Hryniak at para. 78. As this is an Ottawa file and I am chambered in Belleville, I conclude that to do so would likely assist neither the administration of justice nor the parties. Accordingly I decline to do so.

[31] The parties are represented by senior counsel who appeared to have moved this action along with some dispatch. For that reason and the fact that I saw nothing in the material on this motion that would require directions under R. 20.05, I decline to do so.

[32] If the parties are unable to resolve the matter of costs, I may be spoken to within 30 days of the release of these reasons.

Justice W. Tausendfreund Released: July 11, 2016