Court File and Parties
COURT FILE NO.: CV-08-7670-00CL DATE: 20181031 SUPERIOR COURT OF JUSTICE – ONTARIO
RE: CANADIAN NATIONAL RAILWAY COMPANY, Plaintiff
AND:
SCOTT PAUL HOLMES, JENNIFER LYNN PARISIEN, ALSO KNOWN AS JENNIFER LYNN FLYNN IN HER PERSONAL CAPACITY AND AS THE SOLE PROPRIETOR AND OPERATING AS EFFICIENT CONSTRUCTION, JANICE SHIRLEY MAUREEN HOLMES, MURRAY FUSSIE, SCOTT ALBERT POLE, RICK SOUSA, IN HIS PERSONAL CAPACITY AND OPERATING AS TRAX UNLIMITED, MICHAEL SOUSA, IN HIS PERSONAL CAPACITY AND OPERATING AS TRAX UNLIMITED, JULIE SOUSA, 2035113 ONTARIO LTD., COMPLETE EXCAVATING LTD., operating as, MONTEREY CONSULTING & CONSTRUCTION LTD., 2071438 ONTARIO LTD., operating as Complete Trax, 2071442 ONTARIO LTD., THE SCOTT HOLMES LIVING TRUST, THE JENNIFER LYNN FLYNN LIVING TRUST, GREYSLONE LTD., BELVIEW MANAGEMENT LTD., ERIC LONG and 1340619 ONTARIO LTD., operating as Monterey Consulting & Construction Ltd., Defendants
BEFORE: S.F. Dunphy J.
COUNSEL: Monique J. Jileson, Brendan F. Morrison, Nilou Nezhat, for the Plaintiff R. Leigh Youd, for the respondent Tomas Brown Robert Allan Klotz, for the respondents Greyslone Ltd., Belview Management Ltd. Marc Kestenberg and James Parker, for the respondent Angela Assuras Gavin J. Tighe, counsel for non-party Robert Lof
HEARD at Toronto: In Writing
REASONS FOR DECISION
[1] This is my third and final set of reasons issued in relation to the hearing before me on June 27, 2018. I issued a handwritten endorsement, followed by a preliminary ruling on certain issues inviting written submissions on those issues and on the matter of costs on September 13, 2018. I have now reviewed those submissions and am issuing my final ruling.
[2] The facts and prior rulings are reviewed in my reasons of September 13, 2018: Canadian National Railway Company v. Holmes, 2018 ONSC 5362. There were two issues remaining to be dealt with: Further submissions if any relative to my interim ruling set forth in paragraphs 11-13 of my September 13, 2018 ruling and the matter of costs.
(a) Confirmation of Interim Ruling
[3] I set forth below the interim ruling I made on September 13, 2018 to which issue the parties were directed to make further written submissions if they saw fit:
[11] In the face of this motion, none of Greyslone, Belview or Mr. Czerlau availed themselves of the opportunity to provide me with any basis to believe that those two companies have ever been anything more than fronts for persons unknown.
[12] Mr. Czerlau’s answers in relation to Mr. Holmes cannot be qualified other than as deliberate stonewalling. If he had no authority, Ms. Assuras had none. Mr. Czerlau has provided no reliable evidence from which it might be concluded that he had such authority while the entire tenor of his evidence leads to the inference that he had none. His testimony and answers to undertakings also leads to the inference that Mr. Holmes has a role in Greyslone and Belview that Mr. Czerlau has sought to shield from view.
[13] In all of the circumstances of this case, I propose to draw negative inferences as regards the bona fides of Greyslone and Belview and to infer that Belview and Greyslone have not been acting at arm’s length to Mr. Holmes at any material time to this litigation. In such circumstances, no claim to privilege can stand. The circumstances justifying such a negative inference include the failure to identify who had authority to act on behalf of the two companies before 2017 and why, the unexplained failure to revive the companies for eight years after their status was first raised in the litigation and Mr. Czerlau’s evasive, misleading and stonewalling behavior during his examination as regards his role in the companies, the litigation and as regards Mr. Holmes. I am also proposing to order that the entire file of Ms. Assuras be produced to the plaintiff and to disallow any and claims for privilege over any portion of the file.
[14] Greyslone and Belview or Ms. Assuras shall have 14 days to state in writing any additional grounds not argued before me on June 27, 2018 as to why I ought not to make the orders and findings I propose to make. I shall not make a final ruling until the deadline passes or I have reviewed the submissions received if any.
[16] In light of my proposed findings in relation to Ms. Assuras’ file, I also propose to order that the entire files of each also be produced to the plaintiff. I grant the same 14 day period for written submissions to be made to me prior to a final ruling being made.
[4] Two submissions were received in response to my invitation. Counsel to Mr. Holmes requested leave to make submissions regarding any negative inference I might intend to draw in relation to Mr. Holmes and counsel for the plaintiff suggested that Stockwoods LLP as the Independent Supervising Solicitor already appointed in this case would be an appropriate repository for the solicitor’s files turned over to the court pursuant to my order of June 27, 2018. No submissions on these issues were received from any other party.
[5] As regards Mr. Holmes, the plaintiff submits and I agree that it is rather late in the day for Mr. Holmes to seek to participate in this motion. Mr. Holmes’ counsel was present in court when the date was set for the motion and was served with the motion materials, but did not seek to file any materials or appear.
[6] I can see no basis to interfere with or alter any of the findings made or proposed to be made by me in my September 13, 2018 ruling with the exception of the destination of the solicitors’ files currently held by the court.
[7] Whatever the impact in Ontario of the Bahamian law relevant to the revival of struck companies, there is no evidence that anyone with authority capable of being revived retroactively (i.e. a director or officer) ever purported to engage or instruct Ms. Assuras. Mr. Czerlau was the sole source of her instructions as solicitor and his evasive, misleading and obstructive answers to direct questions on the subject provide no foundation to infer that Greyslone or Belview were ever acting bona fide and in a properly authorized corporate capacity in relation to this litigation and the matters raised in it. Further, Ms. Assuras purported to continue to act and take steps in this litigation long after having been advised of their lack of status. I have no reason to doubt the sincerity of her assumption that Mr. Czerlau had caused steps to be taken to revive the corporations, but I have no basis to accept or infer any such explanation in relation to him.
[8] I am therefore ordering that all of the solicitors’ files currently held by the court (those of Ms. Assuras, Mr. Lof and Mr. Brown) shall be delivered into the custody of Stockwoods LLP as Independent Supervising Solicitor. The ISS shall be directed to deliver to the plaintiff documents or copies of documents found in such files relating in any way to the funds Greyslone and Belview were ordered to account for by Hainey J. on October 12, 2016.
[9] The ISS is also directed to make a list of all documents in such files relating to Mr. Holmes or any other defendant in the litigation (other than documents already produced in such litigation or part of the court record) in relation to any matter at issue in the litigation and to produce such list to the plaintiff. The plaintiff shall be entitled to request production of such additional documents by further motion if so advised. On any such motion, the onus will be upon the party opposing production to demonstrate the existence of any privilege attaching to such documents.
[10] The remainder of the files will be held pending further order of the court or shall be returned to the solicitors from which they came should the litigation be settled or finally resolved.
(b) Costs
[11] The plaintiff was successful on the motion and seeks substantial indemnity costs in the amount of $19,878.53. It also seeks an order that such costs be payable jointly and severally by Ms. Assuras and Mr. Czerlau personally. The plaintiff’s position raises two issues: the person or persons who ought to be ordered to pay costs and the scale of such costs. No issue was taken by any party with the amounts listed in the plaintiff’s costs outline. I have reviewed the outline independently and find it to be fair and reasonable as to the amounts claimed. Obviously scale and liability are a different matter.
[12] No costs are sought against Mr. Lof or Mr. Brown. Both were respondents to the motion, but took no substantive role in it beyond agreeing to abide by any ruling the court should make. They delivered their files promptly pursuant to my direction. No costs order will be made against either of them.
[13] Mr. Czerlau – allegedly now appointed as a director [1] – retained and instructed counsel to appear on the motion on behalf of both corporations. Ms. Assuras retained counsel who represented her separately.
(i) Position of the parties
[14] The plaintiff submits that it is entitled to costs from each of these – including Mr. Czerlau. There is no reason to expect that a costs award as against Greyslone and Belview would be enforceable. They have no known assets in the jurisdiction and have outstanding unsatisfied costs orders. There is no information that they have any assets in any other jurisdiction likely to enforce such an order. Ms. Assuras chose to defend the motion actively rather than submit to the ruling of the court as did Mr. Lof and Mr. Brown even though the purported clients, Greyslone and Belview had retained separate counsel and were resisting the motion on the merits. Mr. Czerlau has been the directing mind and will of the litigation as regards Greyslone and Belview from the beginning and has been intentionally misleading, obstructive and evasive as found by the court. Any discretion that might be exercised in favour of Ms. Assuras is negative by her actions over the past nine years and her conduct during the 2016 examination of Mr. Czerlau.
[15] Greyslone and Belview’s counsel took no objection to costs being awarded against these companies per se, but advised the court that he is not acting for Mr. Czerlau in his personal capacity and that he had not been personally served with the plaintiff’s written submissions seeking costs against him personally.
[16] Ms. Assuras submits that her conduct has not risen to the level required by the Supreme Court of Canada in Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin, [2017] 1 SCR 478, 2017 SCC 26 to justify the imposition of costs upon a solicitor personally. Her conduct in the litigation prior to this motion has already been determined by Hainey J. not to rise to the level warranting a costs award against her personally and her behavior on this motion, while active or even vigorous, does not approach the Jodoin standard of undermining the authority of the courts or engaging in deliberately dishonest or malicious misconduct. Further, she submits that the plaintiff has not provided her with the notice contemplated by Rule 57.07(2) of the Rules of Civil Procedure and an opportunity to present further evidence or cross-examine. While she took part in the motion, she had a positive ethical obligation to do so as and to assert the privilege on behalf of the client. Ms. Assuras also disputes the claimed substantial indemnity scale of costs, but takes no issue with the amount of partial indemnity costs claimed by the plaintiff ($13,626.70).
(ii) Analysis and disposition
[17] In my view, Ms. Assuras’ conduct on this motion extended well beyond the ethical obligations of a lawyer to represent a client and to assert the clients’ privilege. The purported clients were in fact separately represented on the motion and vigorously asserted the claimed privilege. There was no question of the clients’ interests not being asserted and vigorously so. She chose to take an active role as a party – a decision that neither the circumstances nor the nature of the dispute required of her.
[18] This case can readily be distinguished from Jodoin by reason of the active role Ms. Assuras chose to play on a motion where her clients’ interests were already represented by independent counsel. Rule 57.07(2) is similarly of no application where the lawyer is a party respondent to the motion and thus has full notice of the motion and full opportunity to present such evidence and submissions as she saw fit. It should have been readily apparent that there is a risk that cost would follow the event on such a motion and any questions in that regard could easily have been raised in advance to obtain clarification. Further, Rule 57.07(2) requires the lawyer to be given a “reasonable opportunity to make representations to the court”. Ms. Assuras was afforded such an opportunity in this case, but has given no indication that there is evidence that she requires an opportunity to lead on the matter or what the nature of that evidence is. She has not asked for more time to make submissions and filed detailed written submissions disputing the claim that she should be personally liable for costs.
[19] I find no substantive merit in either the Jodoin or Rule 57.07(2) objections. Ms. Assuras was a party respondent to the motion who chose – unlike two other similarly situate counsel – to intervene in the motion. Costs ought to follow the event in this case and I so rule. Ms. Assuras may properly and reasonably be made the object of a costs award.
[20] As regards Mr. Czerlau, the objection of lack of personal service is not a convincing one. Mr. Czerlau claims to be a director of the companies and, as is now known, is the only person who has given instructions on behalf of the two companies for many years. He alleges that he is now (since 2017) a director of both companies, but has refused to provide information about the source of his instructions prior to then (or even to provide enough information to assess the bona fides of his alleged appointment as director). I have found him to have been deliberately misleading, obstructive and evasive under oath in these proceedings. His interventions have been directed at preventing the plaintiff from discovering critical and relevant information. He alone has been instructing the company’s counsel in relation to this motion. I have no hesitation in finding that I have jurisdiction to make an award of costs against him personally and that this is an appropriate case to do so.
[21] Each of the two companies, Ms. Assuras and Mr. Czerlau should be jointly and severally liable for the plaintiff’s costs of the motion.
[22] This leaves the question of scale.
[23] On this question, I am of the view that a distinction can and should be drawn between the respondents on the motion. I am not prepared to go so far as to find that the question of Ms. Assuras’ conduct prior to the 2016 judgment cannot enter into consideration by reason of the decision of Hainey J. (discretion may be exercised based on the cumulative effect of conduct even if at an earlier time the conduct was not judged as rising to the relevant level). However, Ms. Assuras’ conduct on this motion, while vigorous, cannot be characterized as exceptional or reprehensible. On its own, it certainly would not cause me to consider substantial indemnity costs. As much as I am prepared to admit of the theoretical possibility that her more recent conduct can be considered the straw that broke the camel’s back for the purpose of considering my discretion, the recent conduct does not so strike me and I am of the view that deference ought to be shown to the assessment already made of that conduct by Hainey J.
[24] Ms. Assuras has taken no objection to the amount of the plaintiff’s partial indemnity claim - $13,626.70 – and she shall be ordered to pay this amount.
[25] I reach the opposite conclusion in regards to Mr. Czerlau and the two companies for the reasons already extensively canvassed by me here and in my two prior rulings. Mr. Czerlau and through him the two companies, has acted in a way that warrants sanction. His conduct in the 2016 examination – particularly in light of the subsequently discovered information – was reprehensible and scandalous. Mr. Czerlau has played a central role in delaying and deferring the plaintiff from getting on the trail of the funds the two companies were ordered to account for two years ago. Substantive indemnity costs awards as against Mr. Czerlau and the two companies are eminently justified.
[26] Mr. Czerlau, Greyslone and Belview are jointly and severally ordered to pay the plaintiff the sum of $19,878.53 in substantive indemnity costs. Ms. Assuras is ordered to pay $13,626.70 of such sum and her liability shall be joint and several with Mr. Czerlau, Greyslone and Belview to such extent.
[27] Order accordingly. If the parties are unable to agree on the form of order, the plaintiff may send me its form of order along with copies of any comments on the form received within ten days of emailing its draft to counsel. I shall consider any comments received and finalize and issue the order as needed.
S.F. Dunphy J.
Date: October 31, 2018
ADDENDUM
[1] Shortly after releasing these reasons, Mr. Kestenberg drew my attention to his letter of September 26, 2018 that was intended to be responsive to my request for submissions.
[2] He correctly surmised that his letter had not come to my attention and he was absolutely correct to point this out to me.
[3] I have reviewed the letter and the submissions made by him. I do not consider that these alter my findings or my ruling. He is correct that a retainer letter was found in the file and the letter was signed by Mr. Czerlau. Mr. Czerlau’s answers under oath in 2016 that he was not involved with the defendant companies – answers given in Ms. Assuras’ presence as counsel - do not appear any less misleading in light of the existence of that previously undisclosed retainer agreement. I have been unable to conclude that Mr. Czerlau had valid corporate authority to retain Ms. Assuras and the claim to privilege over the file in those circumstances remains untenable.
[4] Privilege is indeed something that is not lightly interfered with. I have not lightly done so.
[5] In the circumstances, I am making no alteration to my ruling.
[6] It will be for the ISS to determine what if any evidence of co-ordination with Mr. Holmes is to be found in the seven boxes that comprise this file and Mr. Holmes may or may not have a privilege to assert over any such communications. My order provides a mechanism for dealing with that eventuality.
S.F. Dunphy J.
Date: October 31, 2018
[1] I have no basis to accept or reject the contention that he has been validly appointed since the revival of the two corporations in 2017. A photocopy of a page from the Minute Book of the corporations appears to suggest that he has been appointed but given my findings in relation to Mr. Czerlau, I attribute only some weight to that document.