Court File and Parties

Court File No.: CV-17-586690 Date: 2024-05-17 Ontario Superior Court of Justice

Between: Gary Comeau, Plaintiff And: 1140398 ONTARIO LTD., SMP SPECIALITY METAL PRODUCTS INC., JOHN CUNERTY, MAY ANIS, BNP ADVISORS INC., 1570859 ONTARIO INC. AND BASS LAKE HOLDINGS INC., Defendants

Counsel: John Carlo Mastrangelo/Andrew Winton, Lawyers for the Plaintiff/Appellant Samuel Robinson and Geri Angelova, Lawyers for the Defendants

Heard: March 7, 2024

Reasons for Decision

G. DOW, J.

[1] The plaintiff seeks an order that the defendant, May Anis has committed and be held in contempt of court for giving false evidence and breaching orders of this court. Her counsel also represents her holding company, BNP Advisors Inc. The remaining defendants did not participate in the motion.

[2] As agreed by the parties, the hearing on any finding of contempt is separate from what proceeds if the finding of contempt is made and proceeds to what is often called “the penalty phase”. Here, for circumstances detailed below, the sanction being sought is to strike out the Fresh As Amended Statement of Defence of the defendants Anis and BNP Advisors Inc. dated May 24, 2021 and that Ms. Anis be imprisoned for 60 days.

Background

[3] This action arises out of a shareholder/employment dispute. The plaintiff and defendants, John Cunerty and May Anis (who are spouses), established a metal supply business in 1995 that evolved into the making and selling hot tub cover lifters. By September, 2017 the relationship had soured and the plaintiff was locked out and/or terminated. This action seeks remedies and oppression and damages for wrongful dismissal including misappropriation of revenue and corporate opportunities. In addition, there is an issue with regard to issuance and redemption of preferred shares in SMP Specialty Metal Products Inc.

[4] By 2021, production orders by Justice Myers had been required and discrepancies had arisen in the evidence produced by the defendants. Further discrepancies including banking records were admitted to have been falsified by May Anis in an affidavit sworn February 27, 2023. This was followed by an order for relief by Justice Pollak, March 31, 2023 where an investigative receiver was appointed and the defendant Anis was required to advise the receiver of the “existence of any property of the corporation” with “immediate and continued access to the property”.

[5] On July 7, 2023, Justice Schabas heard the plaintiff’s motion for a Mareva injunction and other relief. This included contempt on the part of May Anis for having breached the orders of Justice Myers, June 3, 2021, Justice Sanderson, February 23, 2023 and Justice Pollak, March 31, 2023. The grounds included admissions as to forged documents, records and banking statements.

[6] The reasons of Justice Schabas (2023 ONSC 407), heard and released July 7, 2023, not only granted a Mareva injunction but held May Anis in contempt.

[7] The penalty imposed by Justice Schabas was payment of $400,000 as the costs incurred by the plaintiff attributable to the contempt proceeding (2023 ONSC 5493).

[8] Upon review of Justice Schabas’ initial reasons and with the submissions of counsel, it is clear he addressed the following actions:

a) “repeatedly produced forged bank records and cheques, and lied about them under oath” (paragraph 4);

b) subsequently found “a large number of additional falsehoods which she also maintained when examined under oath on the new information” (paragraph 7);

c) provided the court appointed investigative receiver “with more falsified records and false information” (at paragraph 9); and

d) “recently repaid her employer approximately $1.3 million that she says she had embezzled from that employer, an investment company” (at paragraph 17).

Analysis

[9] Justice Schabas had available and referred to the second interim report of the receiver dated June 7, 2023. This review of the previous contempt is relevant to ensure May Anis is not subject to, as raised by her counsel, punishment again for the same deeds as addressed by Justice Schabas. Counsel relied on Section 11(h) of the Canadian Charter of Rights of Freedoms in this regard.

[10] The subsequent acts of contempt upon which the plaintiff relies and submits are new are the following:

a) First, as part of the Mareva order, swearing an affidavit as to worldwide assets as of July 12, 2023, May Anis claimed her ownership interests in real property was limited to a place in Haliburton and a place in Etobicoke. When cross-examined on that affidavit July 17, 2023, in confirming these ownership interests, she then volunteered having made a loan to a daughter for a downpayment of a house in Halifax stating “I don’t own that property”. A search of the title confirmed May Anis was listed as holding “a fee simple” along with two others (unlike Scotia Mortgage Corporation which was listed as “a interest holder”). In this regard, May Anis produced a “Acknowledgment of Loan and Indemnity Agreement” executed August 31, 2021 identifying a $103,786.55 loan, the terms of repayment and “the Property is owned as tenants-in-common” and, upon repayment of the loan in its entirety, the lender was obligated to “execute a Quit Claim Deed”.

b) Second, the redemption of preferred shares in SMP Specialty Metal for the year ending June 30, 2023 in the amount of $1,052,372 was not disclosed until productions of those financial statements to the receiver. This was contained in a third report from the receiver, dated January 24, 2024. The funds were directed to be paid for legal fees and to other corporations with no funds being transferred to May Anis (see letter January 18, 2024 from counsel for the other defendants to plaintiff’s counsel, part of Exhibit “C” to the Affidavit of Daniel Kim sworn February 26, 2024). The entitlement to take such action is a contested issue in this action.

c) Third, the receiver’s third report, January 24, 2024 disclosed contact with May Anis’ former employer and that “our investigations confirm that Anis misappropriated $1.364 million from FW, a family office which flowed into 157, of which approximately $821,000 was utilized to fund the SMP Entities from 2015 through 2020 (referred to as “ FW Misappropriated Funds ”). We recently discovered that a further approximately $1.8 M was misappropriated by Anis from FW, a large portion of which was injected into 157.”; and

d) Fourth, prior to the motion before Justice Schabas, that is, in October, 2022, counsel for May Anis and BMP Advisors advised plaintiff’s counsel that tax returns “directly from CRA” were being obtained and produced in a digital file available for review by plaintiff’s counsel. On March 20, 2023, in cross-examination, May Anis confirmed the returns produced were obtained “directly from CRA” (questions 375 to 378). As noted by counsel for May Anis, the plaintiff’s expert chartered accountant had identified discrepancies in the tax returns as early as February, 2023 (Exhibit “A” of the Affidavit of Ron Allen sworn March 8, 2023) which stated on its fifth page “Therefore, it is highly unlikely that both the Presented BNP 2003 to 2012 Filed Returns and BNP 2003 to 2012 Assessed Returns are authentic”. In the bottom paragraph on that page, the reports states “The only way to be certain that the Plaintiff has been provided with accurate and authentic tax return information from 2002 to present is for CRA to provide the BNP Assessed Returns, from 2002 to present directly to the plaintiff or his counsel.”

Issue – Late Service

[11] The defendant noted in its factum, the Second Amended Notice of Motion which added the falsified tax returns was not served until March 1, 2024, four days prior to the hearing of this motion (and thus not compliant with Rule 37.07(6) which requires seven days). As a result, I inquired if a request for an adjournment was being made. Counsel for May Anis and BNP Advisors declined to make that request noting, sensibly, it had prepared for the issue to be addressed in the event such a request was not granted. It should also be noted this was in the face of being advised the plaintiff would be opposing such a request.

Issue – Strict Compliance

[12] Counsel for the defendant relied on caselaw which sets out contempt motions are subject to “ strictissimi juris ” or the law is to be interpreted in the strictest manner. In this regard, the requirement under Rule 60.11(2) for personal service in motions for a contempt order was noted. It is clear, the intent of strictissimi juris is to ensure substantial compliance and procedural fairness. I was referred to the reasoning of the Court of Appeal in Susin v. Susin, 2014 ONCA 733 which addressed this very issue and where the court was satisfied, as I am here, that the defendants, May Anis and BNP Advisors, have suffered no “substantial wrong or miscarriage of justice”. This rule can give way to Rule 2.03 which allows the court to “dispense with full compliance with the rules where the interests of justice require it.” (see paragraphs 28 and 33 of Susin v. Susin, supra).

Issue – Ownership or Loan

[13] I disagree with the submission by counsel for May Anis and BNP Advisors that she did not “own a property at Nova Scotia” (at paragraph 26 of the Anis/BNP factum).

[14] Subject to any finding by a Nova Scotia court, (the plaintiff advising of a hearing scheduled for May 28, 2024 in that regard---see paragraph 51 of the plaintiff’s factum), May Anis appears to have an ownership interest in her daughter’s property registered on title, with a written agreement she holds that ownership title as a tenant in common. The value of the interest is limited to the extent of the loan made. It must also be relinquished upon repayment of the loan. As a result, I am satisfied beyond a reasonable doubt that May Anis failed to properly disclose her interest and is thus in contempt of the court order to disclose all of her interests in real property. It is relevant that when asked, May Anis properly disclosed what she characterized as a loan.

[15] It should also be noted the parties agree on the test and elements of contempt, being that set out in Carey v. Laiken, 2015 SCC 17, (at paragraphs 33 to 35). I find each of the three elements has been proven.

Issue – Redemption of Preferred Shares

[16] This relates to an issue being litigated and was disclosed by production of financial statements to the investigator receiver. I agree with the submissions of counsel for May Anis/BNP that the plaintiff has failed to identify any specific order of this court that the redemption be disclosed or required prior consent or approval. Indeed, the plaintiff acknowledged the preferred shares are “a key issue in the plaintiff’s claim” (at paragraph 3(a) of his factum). The propriety of the redemption will be determined by settlement or at trial. As a result, there is no finding of contempt.

Issue – Misappropriation/Embezzlement of Funds

[17] I agree with the plaintiff’s characterization of May Anis’s statement of repaying her employer of $1,364,322.61 “to facilitate a full restitution payment” (see paragraph 4 of the Supplementary Affidavit of May Anis, sworn July 4, 2023) as an attempt to convey this was the extent of her misappropriation of funds. I also agree with the evidence of additional misappropriation of funds of $1.8 million as hearsay from her employer to the investigator receiver and “continues to be investigated”.

[18] While these funds are related to this action to the extent they were allegedly used to fund one of the defendants, they are from a non-party and do not appear to be the subject of any specific order for full disclosure. As a result, I find no contempt has occurred.

Issue – Falsified Tax Returns

[19] It is clear the original disclosure and production of the tax returns in question were falsified by May Anis given subsequent production directly from the Canada Revenue Agency (“CRA”). Counsel for May Anis/BNP relied on the disclosure by the plaintiff’s expert chartered accountant before the motion proceeded before Justice Schabas pointing to that accountant’s (Ron Allen) statement (detailed above) of his concern the returns provided to that point were “highly unlikely” to be “authentic”. It was this information which appears to have led to obtaining the returns directly from the CRA. The production of the returns did not apparently occur until February, 2024 or after the decision of Justice Schabas.

[20] Thus, I find this amounted to contempt because there was only suspicion of falsified returns (as opposed to having been proven beyond any reasonable doubt). Further, May Anis was well aware of her having falsified the returns initially provided and that her actions were under scrutiny in the face of the previous contempt motion. She had the opportunity to actually “come clean” before Justice Schabas by disclosing, before he determined the penalty, all of her improper actions. This would have made it clear she was being punished for all of her contemptuous actions. Instead, she remained silent or, at least, failed to specifically request this deception be included in consideration of what sanction should be imposed.

[21] As a result, each of the three requisite elements for a finding of contempt have been proven.

Conclusion

[22] I have found that May Anis in contempt with regard to two of the four issues presented, being her ownership interest in the Nova Scotia property and providing falsified tax returns. A date for submissions on appropriate penalty needs to be arranged. I propose it be between June 17-20, 2024. Counsel shall confer and advise my assistant of an agreeable two hour time slot during that period (at michelle.giordano@ontario.ca).

[23] Any additional material addressing this issue (limited to 15 double spaced pages in a readable font) shall be exchanged and uploaded to CaseLines (in a new, separate bundle) on or before June 10, 2024.

Costs

[24] The Costs Outline of the defendants, Anis and BNP Advisors was in the amount of $27,604.77 for partial indemnity fees inclusive of HST arising to $46,007.95 for full indemnity costs (again inclusive of HST). This compares to the plaintiff’s Costs Outline in the amount of $37,104.12 for partial indemnity fees (inclusive of HST and disbursements) arising to $61,348.27 for full indemnity (again inclusive of HST and disbursements).

[25] Given the payment of costs may form part of sanctions to be imposed, I defer any decision to the subsequent hearing. Any joint submission or agreement by the parties on the appropriate sanction and/or costs would be welcomed.

Mr. Justice G. Dow Released: May 17, 2024