Carey v. Laiken2015 SCC 17 (Civil procedure — Contempt of court — Required intent)

On appeal from the judgment of the Court of Appeal for Ontario (2013 ONCA 530) dated August 27, 2013, setting aside a decision of Roberts J. (2012 ONSC 7252).

L brought contempt proceedings against C, alleging that he had breached the terms of a Mareva injunction by returning over $400,000 to his client S for whom he was holding it in trust. The injunction was issued in the course of litigation between L, S and related parties. It enjoined any person with knowledge of the order from disposing of, or otherwise dealing with, the assets of various parties, including those of S. The motions judge initially found C in contempt. She was satisfied that the injunction was clear and that C had knowingly and deliberately breached it by transferring the funds. When the parties reappeared before the motions judge for determination of the appropriate penalty, C moved to reopen the contempt hearing. He filed new evidence in support of his assertion that he had acted in a manner consistent with the practice of counsel generally, and he testified about what he perceived to be his professional obligations and his motivations in dealing with the trust funds. Based on the new evidence, the motions judge set aside her previous finding of contempt. The Court of Appeal allowed the appeal and restored the initial contempt finding.

Held (7:0): The appeal should be dismissed.

The law does not require that a person breach an injunction contumaciously or with intent to interfere with the administration of justice in order to satisfy the elements of civil contempt. All that is required to establish civil contempt is proof beyond a reasonable doubt of an intentional act or omission that is in breach of a clear order of which the alleged contemnor has notice. Contumacious intent or lack thereof goes to the penalty to be imposed following a finding of contempt, not to liability. Furthermore, there is no principled reason to depart from the established elements of civil contempt in situations in which compliance with a court order has become impossible either because the act that constituted the contempt cannot be undone or because of a conflicting legal duty. Where a person’s own actions contrary to the terms of a court order make further compliance impossible, it is neither logical nor just to require proof of some higher degree of fault in order to establish contempt. It also undermines one of the purposes of contempt findings — to deter violations of court orders — to treat with special charity people whose acts in violation of an order make subsequent compliance impossible. The fact that civil contempt is quasi criminal in nature also provides no justification for carving out a distinct mental element for particular types of civil contempt cases. Nor does reliance on legal advice shield a party from a finding of contempt. The law should not permit lawyers to escape a finding of contempt because they have, in effect, relied on their own legal advice. Further still, where a lawyer acts for a client in relation to an order to which the client is a party, he or she should be held to the same standard of compliance with that order as the client.

L brought contempt proceedings against C, alleging that he had breached the terms of a Mareva injunction by returning over $400,000 to his client S for whom he was holding it in trust. The injunction was issued in the course of litigation between L, S and related parties. It enjoined any person with knowledge of the order from disposing of, or otherwise dealing with, the assets of various parties, including those of S. The motions judge initially found C in contempt. She was satisfied that the injunction was clear and that C had knowingly and deliberately breached it by transferring the funds. When the parties reappeared before the motions judge for determination of the appropriate penalty, C moved to reopen the contempt hearing. He filed new evidence in support of his assertion that he had acted in a manner consistent with the practice of counsel generally, and he testified about what he perceived to be his professional obligations and his motivations in dealing with the trust funds. Based on the new evidence, the motions judge set aside her previous finding of contempt. The Court of Appeal allowed the appeal and restored the initial contempt finding.

In this case, C was in contempt. The Mareva injunction clearly prohibited dealing with money held in trust, and C’s other conduct showed that he understood that. Even assuming that the existence of the funds was protected by solicitor client privilege at the time of the transfer, C’s assumed duty to guard that privilege did not conflict with his duty to comply with the order. C needed only to leave the funds in his trust account once they had been deposited there in order to fulfill both duties. Moreover, leaving the funds in his trust account would not have conflicted with his other asserted professional obligations. It is also no answer for C to say that he breached the order so that he would avoid the possibility of a future ethical dilemma, in the event that L obtained judgment against his client and he might have to decide how to comply with any solicitor client privilege obligations, with the Mareva injunction and with any duty to avoid assisting his client in evading execution arising from the judgment. In any event, even accepting that C believed that there was a true conflict, there were other appropriate avenues open to him other than making a unilateral decision to breach the order.

While the Rules of Civil Procedure do not prescribe the form of contempt proceedings, as a general rule, they are bifurcated into a liability phase — where the case on liability proceeds and a defence is offered — and, if liability is established, a penalty phase. Once a finding of contempt has been made at the first stage, that finding is usually final and may only be revisited in certain circumstances, such as where the contemnor subsequently complies with the order or otherwise purges his or her contempt, or in exceptional circumstances, where new facts or evidence have come to light after the contempt finding was made. In this case, the motions judge erred in exercising her discretion to permit C to relitigate the initial contempt finding. C’s attack on the motions judge’s earlier finding was based on evidence he ought to have filed at the first hearing. Moreover, as the Court of Appeal stated, a party faced with a contempt motion is not entitled to present a partial defence at the liability stage and then, if the initial gambit fails, have a second “bite at the cherry” at the penalty stage. This would defeat the purpose of the first hearing.

The judgment of the Court was delivered by Cromwell J.

Neutral Citation 2015 SCC 17. Docket No. 35597

http://scc-csc.lexum.com/scc-csc/scc-csc/en/item/15289/index.do