ONTARIO SUPERIOR COURT OF JUSTICE

2016 ONSC 4647 COURT FILE NO.: CV-16-0095 DATE: 2016-07-15

B E T W E E N:

Lakehead Roofing & Metal Cladding Ltd., Applicant Ms. R. Carlino, for the Applicant

- and -

1304808 Ontario Inc., Respondent Mr. D. Matson, for the Respondent

HEARD: June 27, 2016, at Thunder Bay, Ontario Madam Justice H.M. Pierce

Reasons on Motion for Contempt

Introduction

[1] The applicant seeks a finding that the respondent is in contempt of the interim order of Mr. Justice D. Newton dated March 4, 2016.

[2] The applicant was a tenant of the respondent corporation. Both parties occupied the same commercial space where building equipment, tools and materials were stored. Some of the principals of the respondent are shareholders in the applicant corporation.

[3] A shareholders’ dispute erupted in January, 2016, which prompted the respondent to terminate the applicant’s tenancy, effective February 29, 2016. As of February 12, 2016, the respondent distrained the applicant’s chattels for non-payment of rent. The respondent says the sum of $66,291.00 was outstanding on the tenancy. The applicant paid the sum of $59,951.98 for rent up to February 12, but refused to pay the balance. The applicant contends that the tenancy was terminated when distraint was invoked and no further rent was owed thereafter because the respondent changed the locks on that date.

[4] The applicant brought an application seeking damages for wrongful distraint and other relief. The parties, through their counsel, appeared before Mr. Justice J. Fregeau on February 26, 2016. Because of short service, Fregeau J. adjourned the matter to March 1, 2016, on terms that no assets on the leased premises be removed, altered, damaged or utilized in the interim.

[5] The case returned to the court on March 1, 2016, before Mr. Justice D. Newton who ordered that the applicant’s employees be permitted to attend at the premises to obtain their personal possessions.

[6] The removal of the employees’ personal possessions was problematic. The respondent’s representatives did not permit Hugh Fennell, an employee of the applicant, to enter the building. Other employees were permitted only to remove what belonged to them and not to retrieve the personal belongings of their colleagues, even though authorized to do so. The respondent’s personnel placed other restrictions on the retrieval of personal property, not in accordance with the court’s order or any agreement between the parties. However, the order of March 1, 2016, is not the subject of this contempt motion.

[7] The case was adjourned to March 3, and the parties were ordered to prepare an itemized list of property still in dispute. The interim order of Fregeau J. was continued.

[8] On March 3, 2016, the parties and their counsel entered into negotiations concerning the terms of an interim order. On March 4, Justice Newton signed an order incorporating the terms the parties had agreed upon. The text of the order appears at Schedule “A” to these reasons. The order was duly served on the respondent’s counsel who forwarded it to the respondent. There is no doubt that the respondent had proper notice of the order. The notice of motion seeking a finding of contempt has been properly served.

[9] The relevant portions of the order, for purposes of the contempt motion are:

1. This court orders that the Applicant, and its employees, are entitled to supervised access, and that access shall be provided by the Respondent, to the premises located [at] 1450 Rosslyn Road, Thunder Bay, Ontario (the “Leased Premises”), beginning on March 7, 2016 daily from 8:00 a.m. to 4:30 a.m. for a period of two (2) weeks (hereinafter referred to as the “Removal Period”), for the purpose of obtaining and removing the following agreed upon assets of Lakehead:
   • (b) All contents owned by Lakehead located in the north half of the shared storage building;
   • (g) All items not in dispute as detailed in Exhibit “G” of the affidavit of Ken Perrier, attached…
2. This court orders that both Parties shall act reasonably while on the Leased Premises during the Removal Period. If any party acts unreasonably, cost consequences shall flow against the unreasonable party.
3. This court orders that no assets of the Applicant that remain on or in the Leased Premises shall be removed, altered, damaged or utilized in any way, until further ordered by this Court.

The Law

[10] Contempt of court proceedings were considered by the Supreme Court of Canada in Carey v. Laiken, 2015 SCC 17; [2015] 2 S.C.R. 79. Civil contempt is available to permit the court to control its own process and uphold its dignity. See: par. 30. The court must determine the following elements in order to make a finding of contempt:

1. whether the order alleged to have been breached clearly and unequivocally states what should and should not be done;
2. whether the party who allegedly breached the order had actual knowledge of it; and
3. whether the party allegedly in breach of the order acted intentionally to do what the order prohibits or intentionally failed to do what the order compels.

See: paras. 33 – 35.

[11] The Supreme Court cautioned that resort to the contempt power should be used sparingly: para. 36. The standard of proof is proof beyond a reasonable doubt.

The Allegations of Contempt

[12] The applicant alleges that the respondent acted in contempt of Justice Newton’s order in four respects:

1. the respondent’s representatives behaved unreasonably by swearing at Mr. Key and by removing rolls of wire mesh from Mr. Key’s truck;
2. the respondent’s representatives refused to let the applicant remove an 8 foot brake stored on the north side and owned by the applicant;
3. the respondent restricted access by some of the applicant’s representatives to the leased building and prohibited Mr. Hugh Fennell from entering the building on the leased premises; and
4. the respondent cut the lock on the applicant’s secure storage within the metal shop area and relocated the applicant’s tools and equipment to another area on the premises. The applicant says the relocation of tools and equipment made it much more difficulty to inventory and sort them. As well, the applicant contends that items are missing and siding it needed for a contract could not be located, thereby delaying work and affecting the applicant’s reputation. It also alleges that a flatbed trailer was moved to an unsecured area of the property, outside the gated area.

Discussion

[13] There is no doubt that the respondent’s representatives had actual knowledge of the order of Mr. Justice Newton. Two of them were present with their counsel when its terms were negotiated by the parties. Once entered, the order was delivered to the respondent by its counsel.

[14] Dealing with the first grounds of alleged contempt: I am not persuaded that swearing at the applicant’s representatives, which is denied by the respondent, is grounds for resort to the court’s contempt powers. I accept that relations between the representatives of the applicant and the respondent were heated. Even if the allegation is true, the court is not in the business of enforcing standards of polite behaviour.

[15] Mr. Key is an employee of the applicant. In argument, the applicant conceded that the Mr. Key loaded wire mesh rolls in his truck by mistake. The rolls did not actually belong to the applicant. Therefore, the respondent’s act of removing the mesh rolls from the Key truck was reasonable and did not breach the order. The purpose of the order is to permit the controlled removal of the applicant’s chattels, not those of others.

[16] Dealing with the second ground alleged for contempt: the applicant alleges that the respondent breached the order when it prevented the applicant from removing its 8 foot brake. The brake, used for bending metal, was not listed in the applicant’s chattels appended to the order. However, the applicant alleges that the presence of the brake in the north part of the premises where its other goods were stored constitutes proof that the equipment belongs to the applicant.

[17] The respondent contends that the brake belongs to another construction company associated with the respondent’s representative. It argues that it, too, stored certain chattels in the north part of the premises, so that the location of the equipment is not determinative of ownership. The respondent also argues that the applicant confused the 8 foot brake with a 10 foot brake that it already retrieved.

[18] Neither party could produce documentary evidence of ownership. In the circumstances, the evidence does not establish beyond a reasonable doubt that the applicant owned the 8 foot brake and was prevented from removing it in breach of the order. This allegation of contempt therefore fails.

[19] Dealing with the third ground alleged for contempt: the applicant argues that the respondent restricted access to the premises and outright refused to admit Mr. Fennell, an employee of the applicant. Whether certain of the applicant’s staff were restricted following the March 4th order is contentious. However, the respondent concedes that Mr. Fennell was only permitted outside the building but not inside.

[20] The respondent contends that that the order is not clear and unequivocal. Alternatively, the respondent argues that it was justified in refusing Mr. Fennell access inside the building because he and his crew had previously caused damage to the building. In the further alternative, it submits that by providing that the applicant’s access be supervised, the order permits the respondent to direct who can enter the building.

[21] Is the order sought to be enforced clear and unequivocal? I conclude that it is. Paragraph 1 of the order specifies that the applicant and its employees are entitled to supervised access to the premises at specified times for the purpose of removing certain chattels. The order requires the parties to act reasonably and terminates the respondent’s distraint of the applicant’s assets on the premises.

[22] The Canadian Oxford Dictionary (2001, Oxford University Press, Don Mills, Ontario) defines “supervise” as 1. superintend, oversee the execution of (a task, etc.). 2. Oversee the actions or work of (a person). “Supervision” has a like meaning.

[23] The provision for supervised access does not entitle the respondent to dictate which of the applicant’s employees may enter the building and which may not; it only permits the respondent to oversee the actions of the applicant’s employees on the premises. Implicit in the provision for supervision is a condition that all may enter, but all are subject to supervision. Supervision will prevent damage to the premises or removal of chattels that do not belong to the applicant. Excluding individuals is not an inherent part of supervising their access.

[24] Mr. Fennell was known to the respondent’s representatives when the terms of the order were negotiated. The respondent previously excluded him from the building when he arrived to retrieve his personal belongings. If the respondent wished to exclude him from access because of prior damage to the building, it should have negotiated his exclusion into the terms of the order or made submissions to the court to obtain this exclusion.

[25] I conclude that, in the heat of the dispute, the respondent unilaterally imposed an exclusion that was not in the order. In doing so, I conclude that the respondent intentionally failed to do what the order compels: to grant the applicant’s employees admittance to the premises for the purpose of removing its chattels. Mr. Fennell’s exclusion was intentional and unreasonable. It was not justified. It had the effect of reducing the applicant’s work force inside the building to expedite the sorting and removal of chattels. By excluding Mr. Fennell, the respondent’s representative took the law into his own hands.

[26] I therefore find the respondent in contempt of court for refusing Mr. Fennell access to the building as provided in clauses 1 and 5 of Justice Newton’s order.

[27] Finally, dealing with the fourth ground alleged for contempt, the applicant submits that cutting a lock on secure storage housing its tools and equipment and relocating them within the premises constitutes an intentional breach of clause 12 of the order. The applicant says the relocation of tools and equipment left chattels in disarray. It was then much more difficult to inventory and sort them. As well, siding needed to perform a contract could not be located, thereby delaying work.

[28] Mr. Brescia, an employee of the applicant, also alleges that his flatbed trailer was moved outside the secure perimeter of the premises in contravention of the order.

[29] Clause 12 prohibits the applicant’s assets on the premises being removed, altered, damaged, or utilized in any way, until further order of the court.

[30] The respondent submits that the cutting of the lock was not pleaded as an alteration of the applicant’s goods and therefore cannot form the basis of a finding of contempt. It cites the maxim, de minimis. The full maxim is de minimis non curat lex, meaning the law does not concern itself with trifles. I agree that the fact of removing a lock, by itself, does not warrant a finding of contempt. However, the removal of the lock must be seen in the context of whether goods were removed to another location on the premises.

[31] The respondents submit that 90% of the chattels in the tin and mechanic’s shop were moved from their prior location before Justice Newton’s order and that no chattels were moved after the order. Mr. Hollinsworth, for the respondent, claims he has no knowledge of missing tools.

[32] In the alternative, the respondent submits that moving assets does not violate clause 12 of Justice Newton’s order because the order prohibits removal of the assets from the premises. I agree with this submission. While it would have been much easier for the applicant to access its goods in their existing shop locations, the order requires only that the assets not be removed from the premises. The evidence does not show that the flatbed trailer was moved off the premises. Finally, there is no suggestion that the applicant’s tools and equipment were altered, damaged or used, as clause 15 also prohibits.

[33] Even if I am incorrect in this conclusion, I cannot find, beyond a reasonable doubt, that the applicant’s assets were moved after Justice Newton’s order of March 4, 2016. The affidavit evidence conflicts and the time sheets showing two of the respondent’s workers at the premises are equivocal. I am suspicious that chattels were moved within the building following Justice Fregeau’s order of February 26, 2016, but relocation within the building does not amount to removal from the premises.

[34] While the applicant points to missing tools, there is no proof beyond a reasonable doubt that the respondent has taken them. There is, however, the taint of ill-will and unreasonable behaviour on the respondent’s part. It is clear that, fuelled by the shareholder dispute, the respondent’s personnel intended to make the applicant’s removal of its goods as difficult as possible. However, suspicion as to the whereabouts of siding and tools does not meet the standard of proof.

Penalty

[35] The applicant submits that the court should consider the respondent’s disregard of previous orders when assessing the fine, which it says should be $5,000. The applicant also seeks punitive damages of $10,000 for the respondent’s wilful disobedience of the order as well as costs of $10,000.

[36] Unfortunately, the respondent did not specifically address penalty in its submissions.

[37] The Court of Appeal considered the disposition for civil contempt in Boily v. Carleton Condominium Corporation 145, 2014 ONCA 574, 121 O.R. (3d) 670. At para. 105, the court held that general and specific deterrence were the most important objectives of a contempt penalty. At para. 108, the court accepted that, in general, awards for civil contempt in Canada range between $1,500 and $5,000. The factors relevant to determining the sentence for contempt are:

(a) the proportionality of the sentence to the wrongdoing; (b) the presence of mitigating factors; (c) the presence of aggravating factors; (d) deterrence and denunciation; (e) the similarity of sentences in like circumstances; and (f) the reasonableness of a fine or incarceration.

See: para. 90. The court explained that the principle of proportionality means that the punishment must fit the wrongdoing: para. 91.

[38] In this case, the respondent has been found in contempt of the order for excluding Mr. Fennell from access to the premises, which was unreasonable in the circumstances and contrary to clause 1 of the order. The other allegations of contempt were not proven.

[39] There are no mitigating factors. The respondent did not purge its contempt nor apologize, but instead, sought to justify the behaviour of its representative.

[40] No aggravating factors are alleged. Wilful disobedience of a court order is an element of contempt, not an aggravating factor. Because the applicant did not move for contempt findings in relation to previous orders, I do not consider prior conduct as a pattern and therefore aggravating.

[41] The only case of comparable circumstances cited in argument was Boily, in which the Court of Appeal ordered a fine of $7,500 where condominium directors ignored a court order to restore landscaping to its original design.

[42] As it is impossible to incarcerate a corporation, a fine is the appropriate remedy in these circumstances.

[43] In Mastronardi Produce Ltd. v. Butera, 2011 ONSC 5481, [2011] O.J. No. 5423 (Ont. Sup. Ct.) at para. 38, the court suggested some factors that should be considered in assessing fines for contempt:

a) the ability of the contemnor to pay a fine; b) whether the contemnor has admitted the breach; c) whether a formal apology has been offered to the court; d) whether the breach was a single act or part of a pattern of conduct; e) whether the breach was committed with the full knowledge that it was a breach; f) the extent to which the conduct of the contemnor displayed defiance of the order; and g) whether the court order was a private dispute or some public benefit lay at the root of the order.

[44] In this case, there was no evidence about the ability of the contemnor to pay a fine. There was no admission of a breach and no apology offered to the court. The breach constituted a single act: the exclusion of Mr. Fennell from the premises. I conclude that Mr. Hollinsworth committed the breach in a fit of pique, heedless of the order. There is a flavour about his conduct that he was angry and did not care what the order said. He had convinced himself that the respondent was in the right and he intended to interfere with an orderly removal of the applicant’s goods. Accordingly, he wilfully behaved in defiance of the order.

[45] This is a private dispute, which has been aggravated by the conflict between shareholders.

[46] The litigation is on-going. Now is the time to emphasize to the parties that the court’s orders must be strictly observed.

[47] The penalty should be of such weight to speak to denunciation and deterrence, but not out of step with other cases of like nature. Court orders are not a guideline, to be followed or not at the whim of the parties. A great deal of time has already been spent by the parties in litigating this issue, to the detriment of their respective businesses. Significant court time has also been required to deal with what began as a very small dispute.

[48] The respondent has been found in contempt of the order of Mr. Justice Newton dated March 4, 2016. It shall pay a fine in the sum of $5,000 within thirty days.

Punitive Damages

[49] This was an interim motion. The respondent has already been penalized for its contempt by a fine. Damages sustained by the applicant, if any, will be litigated in this application. The court may then consider whether punitive damages are appropriate in the context of the whole case. Accordingly, punitive damages are not appropriate on the interim motion.

Costs

[50] As the court noted in Mastronardi, at para. 44, substantial indemnity costs are warranted when a finding of contempt is made. Unfortunately, neither party filed a bill of costs when this motion was argued.

[51] The court file contains an application record, a motion record, a supplementary motion record and a further affidavit, a factum prepared by senior counsel, and a book of authorities. The respondent filed a responding affidavit, factum and authorities. The principal affiants for both parties were cross-examined for two hours and the transcript was used on the return of the motion. The parties previously attended before another motions judge for half a day but were not reached. Argument was presented by junior counsel which approached half a day.

[52] Significant costs have been incurred to date over the matter of contempt. The applicant shall have its costs on a substantial indemnity scale, fixed at $8,000, payable within thirty days.

The Hon. Madam Justice H.M. Pierce Released: July 15, 2016