Court File and Parties

COURT FILE NO.: CV-21-00664307-0000 DATE: 2023-12-07

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JCCKS CAPITAL CORP. and CONCEICAO FERREIRA, AS ESTATE TRUSTEE FOR HE ESTATE OF JOSE LUIS FERREIRA, Plaintiffs

AND:

2523039 ONTARIO INC., LUIS DE PESSOA, also known as LUIS PESSOA, also known as LUIS DE SA PESSOA, also known as LUIS SA PESSOA, also known as LUIS F DE SA PESSOA, also known as LUIS FERREIRA PESSOA and IPB REALTY & FINANCE INC., Defendants

BEFORE: VERMETTE J.

COUNSEL: Sarah Rustomji, for the Plaintiffs Allen Wilford, for the Defendants 2523039 Ontario Inc. and Luis De Pessoa

HEARD: December 5, 2023

Endorsement

[1] On September 25, 2023, I released an endorsement (2023 ONSC 5375) (“September 25, 2023 Endorsement”) finding that the Defendant 2523039 Ontario Inc. (“252 Ontario”) was in contempt of court for intentionally failing to do what it was compelled to do under two paragraphs of the Order of Associate Justice Jolley dated November 30, 2021 (“Deposit Order”). The September 25, 2023 Endorsement provided that the question of the proper penalty for 252 Ontario’s contempt of court would be addressed at a second hearing, and set out a timetable for the delivery of additional evidence and facta.

[2] The sentencing hearing was ultimately scheduled for December 5, 2023. Both sides filed additional evidence and I heard submissions at the oral hearing.

[3] After considering the parties’ evidence and submissions, I find that the appropriate sentence is to order 252 Ontario and the Defendant Luis De Pessoa (also known as Luis Pessoa, Luis De Sa Pessoa, Luis Sa Pessoa, Luis F De Sa Pessoa, Luis Ferreira Pessoa) (“Mr. De Pessoa”) to pay a fine in the amount of $25,000.00, for which they are jointly and severally liable. I also order 252 Ontario and Mr. De Pessoa to pay costs to the Plaintiff JCCKS Capital Corp. (“JCCKS”) on a full indemnity basis and to provide additional information/documents that should have been provided already.

A. FACTUAL BACKGROUND

[4] In the September 25, 2023 Endorsement, I found that 252 Ontario was in contempt of court with respect to the following two paragraphs of the Deposit Order:

2. THIS COURT ORDERS that within thirty (30) days of the date of this Order, 252 Ontario will provide to JCCKS an accounting of all amounts paid under the 252 Ontario Mortgage and received by 252 Ontario from April 3, 2018 up until the date of this Order.

3. THIS COURT ORDERS that any payment made towards the 252 Ontario Mortgage, including payments made by the mortgagor towards the 252 Ontario Mortgage, from the date of this Order shall be paid into the trust account of Allen Wilford of A. Wilford Professional Corporation.

[5] The “252 Ontario Mortgage” is the charge registered in the Land Registry Office on April 3, 2018 as Instrument Number WR1105196 against the property known municipally as 15 Norfolk Avenue, Cambridge, Ontario (“Norfolk Property”).

[6] The September 25, 2023 Endorsement also included the following paragraph (para. 59):

I wish to give 252 Ontario an opportunity to purge its contempt before the sentencing hearing by providing a proper accounting with respect to the 252 Ontario Mortgage from April 3, 2018 until today. The accounting must include all backup, supporting documents and records, including, but not limited to, copies of any and all available cheques, bank drafts, wire details, e-transfers, bank account details, bank statements, ledgers, correspondence (including e-mails) and/or documents of any kind in relation to any payment (either from or to 252 Ontario) pursuant to the 252 Ontario Mortgage. The accounting shall include exact amounts, specific dates, as well as detailed, full and complete information about any interest charged under the 252 Ontario Mortgage and how the monies that were received were allocated between principal and interest. The accounting and its supporting documentation shall be attached to an affidavit of Mr. De Pessoa confirming the truth and accuracy of the accounting. The accounting must be provided by October 26, 2023. [Emphasis in the original.]

[7] Further to the September 25, 2023 Endorsement, Mr. De Pessoa swore an affidavit on October 25, 2023. The “accounting” portion of the affidavit is discussed below.

[8] Also further to the September 25, 2023 Endorsement, Mr. De Pessoa provided medical evidence that he was not able to attend the sentencing hearing in person. Mr. De Pessoa is currently in Portugal and his doctors have opined that he is unable to fly at this time as a result of medical issues related to car accidents in which Mr. De Pessoa was involved in Portugal. Based on the medical evidence provided, I allowed Mr. De Pessoa to attend the hearing via Zoom. As a result, the sentencing hearing proceeded by videoconference.

B. 252 ONTARIO’S ACCOUNTING

[9] Mr. De Pessoa’s affidavit sworn October 25, 2023 contains evidence about this action that is unrelated to the accounting that he was ordered to provide with respect to the 252 Ontario Mortgage. For the purpose of this motion, the unrelated information is irrelevant and, consequently, I will not discuss it.

[10] As for the accounting portion of the affidavit, it includes very little backup, supporting documents and records. Further, it raises more questions than it answers. A few examples are set out below.

[11] Mr. De Pessoa states in his affidavit that only $60,000 was advanced to the mortgagors under the 252 Ontario Mortgage. However, the bank draft to the mortgagor’s lawyer that is attached as an exhibit is in the amount of $63,000, not $60,000. No explanation is provided for this discrepancy.

[12] Mr. De Pessoa also states the following in paragraph 4 of his affidavit:

The amount advanced to [the mortgagors] was only $60,000.00 not the full $170.000.00. The interest was prepaid for one year term, hence only $60,000.00 being advanced. No principle [sic] payments were received from April 3, 2018 to the time of the first extension in June 9, 2019 as the payments were prepaid.

[13] Mr. De Pessoa does not provide any information about the prepaid interest and the prepaid principal payments. While “prepaid interest” clearly constitutes interest charged under the 252 Ontario Mortgage, no information and no accounting are provided with respect to such prepaid interest. It is likely that the prepaid interest and prepaid principal payments were considered as advances on top of the $60,000 (or $63,000) that was paid to the mortgagors. Again, no specific amounts and no accounting is provided regarding these “prepaid payments”.

[14] Mr. De Pessoa also gives evidence that 252 Ontario received $113,503.61 in July 2019 for a partial discharge of the 252 Ontario Mortgage and in connection with the registration of a Postponement of Interest. The lawyer’s letter enclosing the cheque reads as follows:

Dear Sir:

Re: MATIAS/SOUSA [i.e., the mortgagors] and 2523039 ONTARIO INC. Discharge of third mortgage & Postponement 15 Norfork [sic] Avenue, Cambridge Our File No.: 25055

Please find enclosed herewith a certified cheque in the sum of $113,503.61 being the amount required to discharge this mortgage inclusive of interest to July 5, 2019.

[15] No explanation is provided with respect to this payment, in particular why 252 Ontario was receiving $113,503.61 when it allegedly only advanced $60,000 to the mortgagors.

[16] Finally, Mr. De Pessoa attaches to his affidavit a “Mortgage Amending and Postponement Agreement” dated July 3, 2019. Among other things, this agreement refers to: (a) the principal amount owing under the 252 Ontario Mortgage to be paid down to $41,500.00; and (b) the mortgagors prepaying interest for the entire term of the amended charge (i.e., from July 1, 2019 to July 1, 2021) in the amount of $8,821.74. The obligations set out in this agreement are inconsistent with Mr. De Pessoa’s affidavit evidence. According to Mr. De Pessoa, he did not receive any payments under the 252 Ontario Mortgage until May 4, 2020. Again, no explanation is provided for these discrepancies.

C. DISCUSSION

[17] On this sentencing hearing, JCCKS seeks an order striking the Statement of Defence and Amended Statement of Defence of 252 Ontario and Mr. De Pessoa. In the alternative, JCCKS seeks the imposition of a fine on 252 Ontario and Mr. De Pessoa in the amount of $50,000.00 or the incarceration of Mr. De Pessoa for a period of sixty days.

[18] A judge has a broad discretion in crafting the penalties on a finding of contempt of court. Under Rule 60.11(5) of the Rules of Civil Procedure, the judge may make such order as is just and, where a finding of contempt is made, the judge may order that the person in contempt: (a) be imprisoned for such period and on such terms as are just; (b) be imprisoned if they fail to comply with a term of the order; (c) pay a fine; (d) do or refrain from doing an act; (e) pay such costs as are just; and (f) comply with any order that the judge considers necessary. See Susin v. Susin, 2014 ONCA 733 at para. 53.

[19] Rule 60.11(6) provides that where a corporation is in contempt, the judge may also make an order against any officer or director of the corporation.

[20] The purpose of a penalty for civil contempt is to enforce compliance with a court order and to ensure societal respect for the courts. Because civil contempt engages issues of public law and the need to condemn acts that undermine the authority and dignity of the court, punishment has been recognized as a secondary purpose for sentencing in such cases. See Business Development Bank of Canada v. Cavalon Inc., 2017 ONCA 663 at paras. 77-81.

[21] The following factors are relevant to a determination of an appropriate sentence for civil contempt:

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 Boily v. Carleton Condominium Corporation 145, 2014 ONCA 574 at para. 90 (“Boily”).

[22] I discuss these factors in turn below.

[23] Proportionality of the sentence to the wrongdoing. The principle of proportionality requires that the punishment fit the wrongdoing. Any sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender.

[24] In my view, there is a significant degree of responsibility and blameworthiness on the part of 252 Ontario and Mr. De Pessoa, especially with respect to the failure to provide an accounting. This failure is the result of a deliberate course of conduct over two years. 252 Ontario entered into a consent order with legal advice on November 30, 2021 which required that it provide an accounting within 30 days. It failed to do so, despite the fact that counsel for the Plaintiffs wrote to counsel for the Defendants many times to request the accounting ordered in the Deposit Order. 252 Ontario’s failure to provide an accounting continued after JCCKS brought this motion for contempt in October 2022, which was originally scheduled for July 7, 2023. See The Corporation of the Township of King v. 11547372 Canada Inc., 2022 ONSC 2261 at para. 16 (“King”).

[25] The first time that 252 Ontario purported to provide an accounting was on August 9, 2023. However, as I found in the September 25, 2023 Endorsement (para. 52), the accounting did not comply with the Deposit Order.

[26] In the September 25, 2023 Endorsement, I gave 252 Ontario an opportunity to purge its contempt by providing a proper accounting, and I gave detailed directions regarding the information that had to be provided. However, as set out above, the accounting that was provided was sloppy, inadequate and obfuscating, and it did not comply with my directions. Thus, 252 Ontario has still failed to provide an accounting.

[27] Before turning to the other factors, I wish to discuss briefly the main penalty sought by the Plaintiffs, i.e., the striking of the Statement of Defence of 252 Ontario and Mr. De Pessoa. In my view, this sanction is not a proportionate one. In addition to being a very severe sanction, I find that this punishment would not fit the wrongdoing. This is because the action includes claims that are unrelated to the 252 Ontario Mortgage and the Norfolk Property. Preventing 252 Ontario and Mr. De Pessoa from defending all the claims advanced by the Plaintiffs would be disproportionate.

[28] Mitigating factors. Mitigating factors may justify a lighter sentence. A number of mitigating factors have been identified in the case law, including the following: (i) attempts to purge the contempt; (ii) genuine signs of remorse; (iii) apologetic behaviour; (iv) efforts to mitigate damages on other parties; (v) medical conditions; (vi) first convictions of contempt; (vii) admissions of contempt; (viii) willingness to comply with, or to consent to, orders of the court; (ix) the existence of separate sanctions for the same factual circumstances; and (x) there are dependents who rely on the contemnor. See King at para. 18.

[29] The only applicable mitigating factors in this case are: (i) 252 Ontario’s attempt to purge the contempt; (ii) Mr. De Pessoa’s medical condition; and (iii) 252 Ontario’s first conviction of contempt.

[30] However, it is my view that these mitigating factors should not be given significant weight in light of the following:

a. 252 Ontario’s attempt to purge the contempt with respect to its failure to provide an accounting was inadequate, and 252 Ontario should have known that it was inadequate. I note, however, that 252 Ontario made the payment required by paragraph 6 of the Deposit Order on August 10, 2023.[^1]

b. Mr. De Pessoa’s medical condition did not arise until August 2022, many months after the deadline to provide the accounting ordered in the Deposit Order. Further, his medical condition did not prevent him from preparing responding materials and being cross-examined.

c. While, based on the record before me, this is 252 Ontario’s first conviction of contempt, 252 Ontario and Mr. De Pessoa have failed to follow other directions of the Court, including the failure to provide medical evidence to justify Mr. De Pessoa’s non-attendance on September 25, 2023, and the failure to comply with my directions regarding the accounting to be provided (e.g., the direction that “detailed, full and complete information about any interest charged under the 252 Ontario Mortgage” be provided).

[31] Aggravating factors. Aggravating factors include the following: (i) a deliberate course of conduct over a lengthy period of time; (ii) numerous breaches of court orders; (iii) repeated acts of contempt; (iv) benefitting financially from contempt; (v) demonstrating disrespect for the court, including by lying to the court, offering an insincere apology and giving only the appearance of complying with orders; (vi) if the breach occurred with full knowledge and understanding of the contemnor rather than by mistake or misunderstanding; (vii) rejecting the authority of the court; (viii) public safety concerns: (ix) living a life of relative luxury in the face of orders restricting the use of assets; (x) failing to seek legal advice until learning of the pending contempt motion; and (xi) a finding of contempt of fresh orders while a contempt motion is pending. See King at para. 20.

[32] There are several aggravating factors in this case, including the following:

a. As noted above, 252 Ontario has failed to comply with the Deposit Order for two years. It did not purport to comply with the obligation to provide an accounting until August 2023, which was 20 months after the Deposit Order was made.

b. 252 Ontario breached two different paragraphs of the Deposit Order and, as noted above, 252 Ontario and Mr. De Pessoa failed to comply with subsequent directions of the Court.

c. 252 Ontario failed to do anything until after the original return date for the contempt motion (i.e., July 7, 2023).

d. The sloppiness and obfuscation reflected in 252 Ontario and Mr. De Pessoa’s response to this motion suggest disrespect for the Court and their giving only the appearance of complying with orders.

e. While Mr. De Pessoa attempts to blame others and alleges some degree of mistake/misunderstanding, I do not find this evidence credible in light of the clear evidence that he knew about the Deposit Order, the very lengthy period of non-compliance with the Deposit Order, and the numerous communications from counsel for the Plaintiffs asking 252 Ontario to comply with the Deposit Order.

[33] Deterrence and denunciation. The primary purpose of sentencing in contempt proceedings is deterrence, both general and specific. The punishment for contempt should serve as a disincentive to those who might be inclined to breach court orders because our legal system is wounded when court orders are ignored. The sentence must be one that will repair the wound and denounce the conduct. Context is of particular importance when considering the issue of deterrence. See Boily at paras. 105-106.

[34] Specific deterrence needs to be considered in this case given the long period of non-compliance on the part of 252 Ontario and the failure of 252 Ontario and Mr. De Pessoa to comply with subsequent court directions. To the extent that this case deters other would-be contemnors from breaching court orders, general deterrence can also be promoted. See King at para. 23.

[35] Similarity of sentences in like circumstances. JCCKS referred to some cases in its Factum and oral submissions, but none of them are factually similar to the present case. 252 Ontario and Mr. De Pessoa did not rely on any case law on this motion.

[36] Reasonableness of a fine or incarceration. The Court of Appeal has noted that custodial sentences for civil contempt are rare, and that Canadian courts have tended to punish contempt of court leniently. Ordinarily, the mere conviction for contempt together with a modest fine suffices to obtain compliance and protect the court’s authority. See Chiang (Re), 2009 ONCA 3 at para. 90 and Boily at paras. 108-111.

[37] In my view, this is not one of the rare cases where a custodial sentence would be appropriate. However, I consider that a fine would be appropriate in this case.

[38] When determining a fit fine, the court should consider the economic circumstances of the contemnor, and the amount of fine that will have enough of an impact on the contemnor to induce future compliance with the court’s orders: see King at para. 26. A fine must be a punishment, not a nuisance, because deterrence is not achieved unless fines are imposed in meaningful amounts. See Niagara (Municipality) (Police Services Board) v. Curran, 2002 49405 at para. 36 (Ont. S.C.J.).

[39] I have no evidence before me regarding the economic circumstances of 252 Ontario and Mr. De Pessoa.

[40] Considering the amounts in issue in this case, the degree of responsibility of 252 Ontario and Mr. De Pessoa, the mitigating and aggravating factors set out above and the need for specific deterrence, I find that an appropriate fine in this case is $25,000.00. Further to Rule 60.11(6) and the fact that Mr. De Pessoa is the directing mind of 252 Ontario, I order that 252 Ontario and Mr. De Pessoa are jointly and severally liable to pay this fine to the Provincial Treasurer (see SNC-Lavalin Profac Inc. v. Sankar, 2009 ONCA 97) within 90 days.

[41] In addition, I find that it is just to make the following orders:

a. Mr. De Pessoa is ordered to provide his personal banking records from April 3, 2018 to May 4, 2020 and from April 2022 to August 8, 2022, as he undertook to do during his cross-examination held on November 14, 2023. No valid ground has been provided for Mr. De Pessoa’s attempt to renege on this undertaking. If these records have not been requested already, they are to be requested forthwith and they are to be provided to JCCKS within three days of being received by Mr. De Pessoa from his bank.

b. Mr. De Pessoa is to provide by January 15, 2024 detailed, full and complete information (including all backup, supporting documents and records) with respect to any interest charged under the 252 Ontario Mortgage, including prepaid interest. This information and any supporting documentation are to be included in an affidavit of Mr. De Pessoa.

c. Mr. De Pessoa is to provide by January 15, 2024 detailed, full and complete information (including all backup, supporting documents and records) with respect to any prepaid principal payments under the 252 Ontario Mortgage. This information and any supporting documentation are to be included in an affidavit of Mr. De Pessoa.

d. Mr. De Pessoa is to provide by January 15, 2024 detailed, full and complete information (including all backup, supporting documents and records) with respect to the payment in the amount of $113,503.61 received by 252 Ontario in July 2019, including what this amount represents and how it relates to the accounting with respect to the 252 Ontario Mortgage. This information and any supporting documentation are to be included in an affidavit of Mr. De Pessoa.

D. COSTS

[42] In contempt proceedings, costs are generally payable on a full or substantial indemnity basis: see Bickram v. Bickram, 2015 ONSC 705 at para. 71, King at para. 27 and Castillo v. Xela Enterprises Ltd., 2022 ONSC 6696 at para. 6.

[43] I find that an award of costs on a full indemnity basis is appropriate in this case. This motion was made necessary by the conduct of 252 Ontario and Mr. De Pessoa. Further, 252 Ontario had ample time to comply with the Deposit Order after the contempt motion was scheduled, but it failed to do so.

[44] JCCKS seeks costs on a full indemnity basis in the amount of $28,255.03. Even if costs are awarded on a full indemnity basis, those costs must be reasonable full indemnity costs: see Fortress Real Developments Inc. v. Rabidoux, 2018 ONCA 686 at para. 68.

[45] I have reviewed JCCKS’s costs outline and I find that the hourly rates used are reasonable. The time spent is also largely reasonable given the several attendances and the need to address the evidence filed by 252 Ontario and Mr. De Pessoa.

[46] In my view, it is appropriate to apply a small discount to the amount sought by JCCKS to take into account the fact that I only accepted two of the four allegations of contempt advanced by JCCKS. The discount is not significant because the extra work required to argue the two additional allegations of contempt that were rejected would not have been significant. A small discount is also justified with respect to the July 7, 2023 hearing which had to be adjourned because of service issues.

[47] Taking the foregoing into account, as well as the factors set out in Rule 57.01(1) of the Rules of Civil Procedure and the reasonable expectations of the parties, I find that the fair and reasonable award of costs in favour of JCCKS is in the all-inclusive amount of $24,000.00, for which 252 Ontario and Mr. De Pessoa are jointly and severally liable. In my view, this is an amount that 252 Ontario and Mr. De Pessoa should reasonably have expected to pay in the event that they were unsuccessful on the contempt motion. The costs are to be paid by 252 Ontario and Mr. De Pessoa to JCCKS within 30 days.

E. CONCLUSION

[48] I order the following sentence for the contempt of 252 Ontario:

a. 252 Ontario and Mr. De Pessoa shall pay to the Provincial Treasurer within 90 days a fine in the amount of $25,000.00, for which 252 Ontario and Mr. De Pessoa are jointly and severally liable.

b. 252 Ontario and Mr. De Pessoa shall pay to JCCKS within 30 days JCCKS’s costs of the contempt motion on a full indemnity basis in the all-inclusive amount of $24,000.00, for which 252 Ontario and Mr. De Pessoa are jointly and severally liable.

c. Mr. De Pessoa shall provide his personal banking records from April 3, 2018 to May 4, 2020 and from April 2022 to August 8, 2022. If these records have not been requested already, they shall be requested forthwith and they shall be provided to JCCKS within three days of being received by Mr. De Pessoa from his bank.

d. Mr. De Pessoa shall provide by January 15, 2024 detailed, full and complete information (including all backup, supporting documents and records) with respect to any interest charged under the 252 Ontario Mortgage, including prepaid interest. This information and any supporting documentation are to be included in an affidavit of Mr. De Pessoa.

e. Mr. De Pessoa shall provide by January 15, 2024 detailed, full and complete information (including all backup, supporting documents and records) with respect to any prepaid principal payments under the 252 Ontario Mortgage. This information and any supporting documentation are to be included in an affidavit of Mr. De Pessoa.

f. Mr. De Pessoa shall provide by January 15, 2024 detailed, full and complete information (including all backup, supporting documents and records) with respect to the payment in the amount of $113,503.61 received by 252 Ontario in July 2019, including what this amount represents and how it relates to the accounting with respect to the 252 Ontario Mortgage. This information and any supporting documentation are to be included in an affidavit of Mr. De Pessoa.

Vermette J.

Date: December 7, 2023

[^1]: JCCKS’s position is that 252 Ontario’s payment should have been in a higher amount, but, at this time, I do not have cogent evidence before me showing that a higher amount should have been paid.