CITATION: 2363523 Ontario Inc. v. Nowack, 2017 ONSC 5240
COURT FILE NO.: CV-14-500797 DATE: 20170630
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
2363523 Ontario Inc. Plaintiff
– and –
Steven Nowack Defendant
Norman Groot, for the Plaintiff
Self-represented
HEARD: June 30, 2017
REASONS FOR DECISION
S. F. DUNPHY, J. (ORALLY)
[1] I have two matters before me: the sentencing of Mr. Nowack contempt found by me on August 15, 2016 and a motion by Mr. Nowack requesting me to vary or discharge an earlier sentence for contempt made by me on April 18, 2016. These were heard before me yesterday and this is my ruling.
[2] I shall not recite the complete procedural history of this matter here. An abridged background sufficient for present purposes is as follows:
a. On September 16, 2015, Diamond J. issued a judgment in favour of the plaintiffs against Mr. Nowack that included an order that he “within 30 days of this Order, provide to the Plaintiffs an accounting of any and all financial transactions completed by him using or in any way relating to the Plaintiff’s funds, including producing bank statements, FXCM statements, and transaction documents including copies of wire transfers, cheques or other forms of transaction, from any of his accounts into and from which the Plaintiffs’ funds were deposited”;
b. On January 8, 2016, I convicted Mr. Nowack of contempt of that order of Diamond J. having given him further opportunities to comply;
c. After stops and starts and dashed hopes of full compliance being imminent, the sentencing hearing was conducted on April 18, 2016 and I sentenced Mr. Nowack at that time to 30 days in jail;
d. In addition to the jail sentence, I made further highly specific orders detailing exactly what it was that Mr. Nowack was to do to accomplish the accounting that remained to be accomplished and ordered that he do this within 45 days of his release from custody;
e. In a nutshell, my order required him to account for every material (over $1,000) outflow from the account at TD into which the plaintiffs’ funds had been deposited from the date of deposit until the date the relevant account went to $0.00, repeating the process at each account into which any funds were subsequently deposited if Mr. Nowack had control over that account;
f. Mr. Nowack appealed his sentence and was granted interim release pending appeal after serving 10 days of his 30 day sentence (i.e. there are 20 days remaining to be served);
g. On August 15, 2016, I convicted Mr. Nowack of contempt – again – this time for failure to comply with my April 18, 2016 order and the very specific (and simple) accounting he was asked to do there;
h. I did not schedule a sentencing hearing immediately as Mr. Nowack advised that he was scheduled to undergo surgery the next day and there may be a delay before he was well enough to come to court – accordingly, the sentencing date was left to be set;
i. Mr. Nowack’s appeal was heard on October 14, 2016 and dismissed on December 16, 2016;
j. I shall not attempt to list all of the hearings and rulings made between then and now beyond noting that:
i. This sentencing hearing was deferred on a number of occasions until today’s date, most recently (in May) due to indications of something of a change in attitude from Mr. Nowack;
ii. The Court of Appeal granted further extensions on the stay of its order that Mr. Nowack complete the remainder of his sentence, most recently to allow him to obtain the results of an application for leave to appeal to the Supreme Court of Canada and to allow him to bring the motion he did bring yesterday;
k. Mr. Nowack did attend a number of examinations under oath at the instance of the plaintiff in May and early June and the parties are now at loggerheads as to how full and complete Mr. Nowack’s compliance with my order of April 18, 2016 has been; and
l. As has been his habit at pretty much every appearance before me, Mr. Nowack filed no materials in advance but sought to ambush his opponent by filing his responding material at the hearing itself (a practice that does little to demonstrate bona fides or turning over a new leaf).
[3] I propose to address the following issues:
a. What are the relevant principles of sentencing?
b. Has the contempt been purged in whole or to the fullest extent possible?
c. Ought the April 18, 2016 contempt sentence be varied or discharged? and
d. What is the appropriate sentence for the contempt found by me on August 15, 2016?
(a) What are the relevant principles of sentencing?
[4] It is certainly true that the objectives in sentencing for civil contempt are not the same as they are in criminal law. In cases of civil contempt, the primary objective being pursued is coercion geared to obtain compliance. It would be a mistake, however, to assume that it is the only objective being pursued.
[5] Respect for the rule of law is a fundamental organizing principle of our society. Our courts issues hundreds or even thousands of orders every day. We do so in the expectation that the parties will respect the fact that they have had their day in court and when a decision is made, the expectation is that it will be obeyed. There are avenues for redress – appeals may be taken, stays may be sought and obtained. However, at the end of the day, the bedrock assumption of our system is that people will follow an order once properly made.
[6] It follows from this that the defence of the rule of law is also an objective pursued in contempt proceedings. This means that deterrence – both specific (i.e. relating to the particular offender) and general (relating to others who might be tempted to follow in his path) – must enter into the balance.
[7] The foregoing being said, compliance is the primary objective and custodial orders using the court’s contempt powers are only to be issued cautiously and with great restraint: Carey v. Laiken, 2015 SCC 17 at para. 36.
(b) Has the contempt been purged in whole or to the fullest extent possible?
[8] There is no question that the contempt has not been purged. However, to give credit where at least some is due, there has been progress. I shall elaborate.
[9] Back in October 2013, before judgment was signed in this matter, the parties were before D.M. Brown J. (as he then was) dealing with interim matters. At that time, the financial records that had been produced revealed that approximately $630,000 of the funds originally given to Mr. Nowack by the plaintiffs had left the account into which they were deposited to parts unknown. The balance of the funds were transferred to the famous trading account of FXM where the evidence strongly suggested all was consumed in a torrent of trading losses engineered by Mr. Nowack.
[10] I reviewed the bank records in connection with the sentencing order granted by me on the first contempt motion. It was apparent that these funds were transferred away over a relatively brief period of time (about two months) and in a small number of transactions. I am advised that these were fifty in number.
[11] Mr. Nowack did not bestir himself once between the date the judgment was granted until today to actually obtain copies of the transaction records relating to those fifty transactions. Armed with my order of April 18, 2016, the plaintiffs did it themselves.
[12] Mr. Nowack was able to answer questions about 47 of them. The three about which he had no memory, however, were among the largest and most obviously of interest:
a. A USD$50,000 bank draft from TD payable to Mr. Nowack personally that was deposited to the Forest Hill Branch of Bank of Montreal the same day (February 1, 2013);
b. A $40,000 draft from TD payable to Mr. Nowack personally that was deposited to National Bank of Canada on March 31, 2013; and
c. A $24,300 debit memo transfer between two TD accounts in Mr. Nowack’s name on February 11, 2013.
[13] Mr. Nowack’s claimed purging of contempt consists of little more than having sat through several days of examinations where he has answered questions based on the accounting the plaintiffs did at their own expense. It was not what I ordered, but it was certainly better than nothing.
[14] I do not wish to belittle the effort. The transcripts that I have scanned show that there was some detailed examination and a motivated Mr. Nowack generally sought to be helpful to the extent his memory allowed. His assistance did not however extend to actually doing anything substantial outside of the official examiner’s chambers though.
[15] Two examples suffice to make the point.
[16] During the course of his examination, Mr. Nowack pleaded that he was unable to answer some questions directed at him because he claimed not to have access to the Crown disclosure. To call this exasperating (to me) is to understate things somewhat. For months leading up to the sentencing in August, 2016, the problem was the inverse: Mr. Nowack had the disclosure but claimed to be prohibited from sharing any of it (including his own records) with the plaintiff. I ordered him at that time to deliver up the Crown disclosure under seal and to permit the plaintiff to get a copy made on notice to the Crown who could object to the extent it had an interest to protect. The problem was swiftly solved. In October I ordered the records returned to Mr. Nowack. During the course of this hearing, Mr. Nowack claimed that he had been unable to get the records back in October because the court could not find them. Whether that was so for a brief time in October, I cannot say but am prepared to assume that it might. However, this very subject came up before me on May 31, 2017. Mr. Groot advised at that time that the records were sitting at the court office and only an order from me was wanting (as it turns out, I had made that order in October, but no one remembered that). I clearly said that such an order would be no problem. My shock in being advised at this hearing that the records had still not been retrieved (I handed them to Mr. Nowack in the courtroom) was severe, as was my skepticism at Mr. Nowack’s claim that he had been unable to pursue accounting for the missing $114,000 for want of access to these records. There is a word for this: diligence. Mr. Nowack has shown virtually none, hardly an exemplary approach for one facing a contempt sentencing hearing.
[17] The second example is related. Two of the transfers (USD$50,000 and $40,000) went to Bank of Montreal and National Bank of Canada respectively. Mr. Nowack had been examined in October 2013 about what accounts he had and had testified under oath that he had no financial accounts other than the ones listed. He was specifically asked if he had an account with Bank of Montreal or used their services in the past year and denied that he had. Those answers were demonstrably false. The USD$50,000 bank draft was payable to him and, when the TD Bank draft was retrieved, the stamps on its back reveal that it was deposited at the Forest Hill branch of Bank of Montreal the same day it was drawn: February 1, 2013. The account number into which it was deposited is also revealed. When shown the draft on his examination in May of this year, Mr. Nowack disclaimed any memory of the circumstances. He did nothing to follow up with the Bank until he was examined again on the subject two weeks ago. At that point, he went to the Bank and was told that a formal request through the legal department would be needed due to his legal status (facing fraud charges in criminal court). Again, diligence was entirely lacking.
[18] Mr. Nowack is not, I hasten to point out, before me for sentencing based upon his false answers regarding his financial accounts given in October 2013. However, the answers given at that time threw the plaintiff off the scent of these accounts for almost four years and Mr. Nowack never came clean on the subject although ordered to do so from the date of Diamond J,’s order of September 2015 until now. This is a bad fact to be sure.
[19] The bottom line is that $114,000 (ignoring foreign exchange rates) remains unaccounted for and most of that was in two accounts that Mr. Nowack never disclosed although obliged to do so.
[20] I am not impressed with his purging efforts.
[21] Mr. Slansky argued that Mr. Nowack has done what he could on this topic since he saw the documents on May 31, 2017. I am not convinced that this is so – the delay in taking any steps to retrieve the Crown disclosure or to look for the National Bank or Bank of Montreal records since then has not helped. More to the point, Mr. Nowack has sat on his hands for more than a year when he could have been taking cooperative steps to get those records.
(c) Ought the April 18, 2016 contempt sentence be varied or discharged?
[22] I can see no basis to alter the sentence that I rendered on April 18, 2016 for the reasons I gave at that time. Purging efforts since then have been too little and too late. Mr. Nowack has had health issues and serious ones. However, I do not accept that this has prevented him from devoting any time to these issues for as long as he claims it has. I have sympathy for the health problems he has had to deal with, but this cannot be wielded as an all-purpose shield for months on end and there is no medical evidence to sustain that claim now or at any of his previous appearances before me.
(d) What is the appropriate sentence for the contempt found by me on August 15, 2016?
[23] This chapter of this case needs to be brought to an end. Mr. Nowack has dragged his feet and been uncooperative for far too long. His recent change of heart cannot be qualified as full-throated, but it is at least welcome. I cannot say that I can understand the reason for his stubborn refusal to come clean. He has led the people he clearly views as his tormentors through a merry chase. In addition to the losses giving rise to the judgment against Mr. Nowack, the cost of pursuing the accounting ordered as part of their judgment has cost the plaintiffs several hundred thousand dollars. It is all but certain that those losses will never be made good and were entirely avoidable had Mr. Nowack resisted the temptation to fight a losing rear-guard action against a judgment he disagreed with but which is nevertheless final. While it has been fairly clear for some time that the plaintiffs are very likely throwing good money after bad and have little likelihood of finding a hidden source of recovery, Mr. Nowack has denied them the minimal level of assistance required to verify that this is so. It is hard to avoid the conclusion that Mr. Nowack’s actions have been largely motivated by spite.
[24] Mr. Nowack has never provided the accounting that he was ordered to provide. At his most co-operative (and that is not saying much) he agreed to answer questions to the best of his memory about the accounting the plaintiffs did at their own expense and through their own effort and sleuthing. This limited degree of co-operation came too little and far too late, all allowances being made for the illness that has justifiably occupied some of his attention during that time frame.
[25] While coercion and compliance are the primary goals of sentencing in cases of civil contempt, deterrence and defending the rule of law comes to the fore where, as here, coercion has little further point. The damage has been done – the year lost and expenses thrown away will not be recovered.
[26] I am also conscious that other plaintiffs continue to have expectations that an accounting will be performed. I do not wish to be the cause of deferring their access to this any longer than is necessary. It is deference to their claims to Mr. Nowack’s attention rather than any consideration that he may be entitled to leniency that leads me towards a more moderate sentence than might otherwise be the case.
[27] In all the circumstances, I am ordering that Mr. Nowack shall serve an additional 21 days after he has completed the 20 days remaining on his previous sentence. Balancing all of the considerations before me, including the limited degree of co-operation he has recently shown but also the additional avoidable harm that his mulish resistance has inflicted on his victims, this appears to me to be a fit and just outcome.
[28] However, this chapter of the saga must now come to an end. We are well past the point of diminishing returns. The unaccounted for funds at this point are not insignificant by any means – over $114,000 – but they pale in comparison to the expenses incurred in seeking an accounting to say nothing of the underlying judgment.
[29] Two of the un-accounted for transfers went to accounts at previously undisclosed institutions. Mr. Nowack’s assistance in getting further information, even if offered proactively and enthusiastically (it has not been) would very likely accelerate matters little at this point. I am ordering National Bank of Canada and Bank of Montreal to furnish to the plaintiffs copies of all account records, including copies of cheques, debit memos and the like, from any accounts in the name of Mr. Nowack or over which he had signing authority in 2013 (and until the date of closure of such accounts or today, whichever first occurs). Such records are to be provided without the requirement for consent from Mr. Nowack, this order dispensing with the requirement for such consent. Of course, the plaintiffs will be responsible for the reasonable costs of the two financial institutions in making copies of the required records.
[30] Subject to the right of the plaintiffs to examine Mr. Nowack should they choose on any records obtained from National Bank or Bank of Montreal (and any questions arising from a review of those records), I am discharging Mr. Nowack from further compliance with paragraph 6 of the order of Diamond J. dated September 15, 2015 or paragraphs 2 and 3of my order of April 18, 2016. It is time to move on.
(e) Disposition
[31] Accordingly, I am ordering as follows:
a. The stay of my order of committal dated April 18, 2016 is dissolved and Mr. Nowack shall be returned to custody to serve the remaining twenty days of his sentence;
b. Mr. Nowack is sentenced to a further 21 days for contempt of my order of April 18, 2016 pursuant to his conviction on August 15, 2016;
c. The warrant of committal to be issued shall be consecutive to the one of April 18, 2016 such that Mr. Nowack shall serve a total of 41 days in custody from today’s date;
d. The plaintiffs shall be authorized without further order and at their own expense to obtain copies of the records (including cheques, debit memos and similar documents) maintained by Bank of Montreal or National Bank of Canada in the name of Mr. Steven Nowack or over which he had signing authority in 2013, such records to be produced up until the present time or account closure whichever first occurs.
[32] I have reviewed the bill of costs for these contempt proceedings. The plaintiffs have claimed $151,372 on a substantial indemnity basis. Mr. Slansky took no objection to the fees beyond the scale claimed. I am allowing the plaintiff’s costs at $93,736.24 being the partial indemnity costs claimed plus HST and disbursements.
S. F. DUNPHY, J.
Released: June 30, 2017
CITATION: 2363523 Ontario Inc. v. Nowack, 2017 ONSC 5240 COURT FILE NO.: CV-14-500797 DATE: 20170630
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
2363523 Ontario Inc. Plaintiff
– and –
Steven Nowack Defendant
REASONS FOR JUDGMENT
S. F. Dunphy, J.
Released: June 30, 2017