



COURT OF APPEAL FOR ONTARIO

CITATION:
SA
    Capital Growth Corp. v. Mander Estate, 2012 ONCA 681

DATE: 20121010

DOCKET: C55588

Sharpe, Gillese and Watt JJ.A.

BETWEEN

SA Capital Growth Corp.

Applicant

and

Christine Brooks as Executor of the Estate of
    Robert Mander, deceased and E.M.B. Asset Group Inc.

Respondents

and

Peter Sbaraglia

Moving Party

(Appellant, Respondent by way of cross-appeal)

and

RSM
    Richter Inc. and Ontario Securities Commission

Responding Parties

(Respondent, Appellant
    by way of cross-appeal)

Kevin D. Toyne, for the appellant Peter Sbaraglia

Matthew Gottlieb and Shannon Beddoe, for the respondent RSM
    Richter Inc. (now Duff & Phelps Canada Restructuring Inc.)

Evan Cobb, for the applicant SA Capital Growth Corp.

Jennifer Lynch, for the respondent Ontario Securities
    Commission

Frank Lamie, for Tonin & Co. LLP and Peter Tonin

Heard: October 2, 2012

On appeal from the order of Justice L.A. Pattillo of the Superior
    Court of Justice, dated May 23, 2012, with reasons reported at 2012 ONSC 2800,
    110 O.R. (3d) 765.

BY THE COURT:

[1]

The appellant faces allegations before the Ontario Securities Commission
    (OSC) related to an alleged Ponzi scheme. In an unrelated proceeding and at
    the suit of the respondent SA Capital Corp., a court-appointed receiver conducted
    an investigation of the appellant, his wife, and companies they controlled in
    relation to the alleged Ponzi scheme. The appellant sought and obtained from
    the Superior Court a third-party production order requiring the respondent, RSM
    Richter Inc. (the receiver), to produce materials the appellant claims he
    needs in order to make full answer and defence in the OSC proceedings.

[2]

The appellant appeals that order, arguing that the Superior Court judge
    erred by failing to order further production. The receiver cross-appeals
    arguing that no production should have been ordered.

[3]

For the following reasons, we conclude that the appeal should be
    dismissed, the cross-appeal allowed, and the order requiring the receiver to
    produce materials set aside.

Analysis

[4]

The appellant submits that the third-party production order was
    justified on two grounds:

1.       the appellant
    is an interested person in the receivership and is thereby entitled to
    production; and

2.       the Superior
    Court has the authority to order third-party production to protect the
    appellants right to make full answer and defence before the OSC.

[5]

We are unable to accept either of these propositions.

1. Interested person

[6]

In our view the application judge correctly found that a court-appointed
    receiver cannot be compelled to produce documents obtained in the exercise of
    its mandate in the receivership to be used in a separate proceeding.

[7]

The application judge recognized that in some circumstances, a party
    involved in a receivership can insist upon the production of documents and
    materials that have been obtained by the receiver. Reference was made to
Bennett
    on Receiverships
,3
rd
ed. (Toronto: Thomson Reuters, 2011) at p.
    232:

As a fiduciary, the receiver owes a duty to make full
    disclosure of information to all interested persons including prospective
    purchasers. The receiver is obliged to respond to requests for information
    consistent with the position of the person making the request. The receiver
    must produce all documents in its possession which are relevant to the issues
    in the receivership.

[8]

The reach of the phrase interested person was discussed and applied by
    Greer J. in
Re Battery Plus
(2002), 31 C.B.R. (4
th
) 196
    (Ont. S.C.J.), where interested person was held to include parties who have a
    direct interest in the subject matter of the receivership itself but to exclude
    parties who seek production of documents that do not relate to a specific
    purpose concerning the receivership itself. This approach is in line with the
    case law that states that receivers are not subject to cross-examination on
    their reports except in exceptional or unusual circumstances: see
Bell
    Canada International Inc. (Re)
(2003), A.C.W.S. (3d) 790 (Ont. S.C.J.);
Impact
    Tool & Mould Inc. (Re)
(2007), 41 C.B.R. (5
th
) 112 (Ont.
    S.C.J.), affirmed (2008), 41 C.B.R. (5
th
) 1 (Ont. C.A.), leave to
    appeal refused, [2008] S.C.C.A. No. 220; and
Anvil Range Mining Corp. (Re)
(2001),
    21 C.B.R. (4
th
) 194 (Ont. S.C.J.). It is also consistent with bankruptcy
    case law that establishes that a court officer (trustee in bankruptcy) will not
    be compelled to produce documents created and obtained as part of its duties in
    one proceeding for a collateral purpose: see, for example,
Impact Tool
    & Mould Inc. (Trustee of) v. Impact Tool & Mould Inc. (Interim Receiver
    of)
(2006), 79 O.R. (3d) 241 (C.A.);
GMAC Commerical Credit Corp. 
    Canada v. TCT Logistics Inc.
(2002), 37 C.B.R. (4
th
) 267 (Ont.
    S.C.J.).

[9]

The OSC proceedings are clearly separate and distinct from the
    receivership. The appellant does not seek production for the purpose of
    advancing any legal claim or interest in the receivership but rather for a
    purpose collateral to the receivership, namely, his defence before the OSC.
    Accordingly, in our view, the appellant is not an interested person as his request
    was made for a purpose collateral to the receivership proceeding.

[10]

We
    agree with the receivers submission that to recognize a right to require the
    receiver to produce material for purposes collateral to the receivership could
    lead to serious mischief. A court-appointed receiver is an officer of the
    court, not a regular litigant. Officers of the court should be left to perform
    their functions and duties without the distraction, added cost and potential
    chilling effect on their investigations that could result from permitting
    open-ended access to the fruits of their investigation.

2. Full answer and defence

[11]

The
    application judge made the third-party production order on the basis that the
    appellant was entitled to the material he ordered produced to make full answer
    and defence to the allegations he faces before the OSC. The application judge
    applied, by way of analogy, the procedure contemplated by
R. v. OConnor,
[1995] 4 S.C.R. 411
in criminal
    proceedings.

[12]

In
    our view, the application judge erred. However, in fairness, we observe that
    the basis upon which we reach that conclusion does not appear to have been
    clearly articulated before the application judge.

[13]

It
    was inappropriate for the Superior Court to make what amounted to an
    interlocutory procedural order in relation to a proceeding pending before the
    OSC.

[14]

Matters
    such as disclosure, third-party production, and other pre-hearing orders
    required to ensure fair process are quintessentially matters to be dealt with
    by the tribunal that will decide the case. Requests for third-party production
    give rise to issues of relevance, cost, delay and fairness, and it has long
    been recognized that the judge or tribunal charged with final decision-making
    authority is best placed to resolve such issues. In this case, it is for the
    OSC to determine what procedural rights should be accorded to the appellant and
    it is for the OSC to ensure that the appellant is accorded a level of
    procedural fairness commensurate with the allegations he faces. If, at the end
    of the day, the appellant is not accorded appropriate fairness in the OSC
    proceeding, the law provides him with appropriate remedies.

[15]

Further,
    resort to the courts on an interlocutory basis disrupts orderly decision-making
    by the tribunal. There is a long-established principle that ordinarily, neither
    appeals nor judicial review should be entertained until after the tribunal proceedings
    have come to a final conclusion. Although this application did not take the
    form of an appeal or application for judicial review, it was inconsistent with
    that basic principle.

[16]

In
    view of the conclusion we have reached, we make no comment on the merits of the
    appellants assertion that he has a procedural right in the OSC proceeding to a
    third-party production order or on whether the documents he seeks are relevant.

[17]

We
    are aware of the fact that before the appellant brought his application before
    the Superior Court, a time when he was acting in person, he brought a motion
    before the OSC requesting third-party production from the receiver. The
    receiver was not served with that motion. The motion was heard by a single
    commissioner who ruled that the OSC does not have the authority to order
    productions from the Receiver, who is an independent officer of the Court and
    observed that, as Staff counsel had submitted, the respondent was not left
    without a remedy. The commissioner did not specify what remedy he had in mind,
    but we were informed during oral argument that the OSC Staff had pointed out
    that the appellant could seek a summons including an order for production of the
    material he seeks in the OSC proceeding or he could go to the Superior Court
    and ask for an order for third-party production pursuant to rule 30.10 of the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194.

[18]

The
    appellant did not challenge that ruling but instead commenced this Superior
    Court application for third-party production.

[19]

We
    agree with the receiver that rule 30.10 could have no application to the
    appellants request. That rule provides orders for third-party production on
    motion by a party for a document that is relevant to a material issue in the
    action. The rule plainly does not confer jurisdiction on the Superior Court to
    make freestanding production orders for production of documents sought in
    relation to proceedings before agencies or tribunals such as the OSC.

[20]

We
    make no comment on whether the commissioner was right or wrong in his ruling.
    We observe, however, that the dismissal of the appellants motion for third
    party production does not preclude the appellant from seeking an alternative
    remedy before the OSC.   In any event, the refusal to order production within
    the OSC proceedings cannot confer authority on the Superior Court to make such
    an order if, as we find, there is no basis in law for the Superior Court to
    exercise that authority.

Conclusion

[21]

For
    these reasons, the appeal is dismissed, the cross-appeal is allowed, and the
    order of the Superior Court is set aside.  We have received the receivers bill
    of costs for the application before the Superior Court and for this appeal. We
    will entertain brief written submissions in support of that request, to be
    submitted within 7 days from the release of these reasons and responding
    submissions from the appellant within 7 days thereafter.

Robert J. Sharpe J.A.

E.E.
    Gillese J.A.

David Watt J.A.

Released: September 10, 2012


