



COURT OF APPEAL FOR ONTARIO

CITATION: Business Development Bank of Canada v. Cavalon
    Inc.,

2017 ONCA 663

DATE: 20170822

DOCKET: C62906 & C62909

Weiler, van Rensburg and Huscroft, JJ.A.

BETWEEN

Business Development Bank of Canada

Applicant (Respondent)

and

Cavalon Inc., 2365222 Ontario Limited, Autometric
    Autobody Inc., 2145009 Ontario Inc. and
Robert Francis
    Bortolon, also known as Robert Bortolon

Respondents (
Appellant
)

and

Robyrt Regan

Non-Party (Appellant)

Doug LaFramboise, for the appellant Robert Francis
    Bortolon

Alfred J. Esterbauer, for the appellant Robyrt Regan

Benjamin Frydenberg, for the respondent

Heard: June 8, 2017

On appeal from the judgment of Justice Douglas K. Gray of
    the Superior Court of Justice, dated November 7, 2016 with reasons reported at
    2016 ONSC 4084 and 2016 ONSC 6825.

Weiler J.A.:

A.

Overview

[1]

In these two interrelated appeals, Robert Bortolon, a principal of
    Cavalon Inc., 2365222 Ontario Ltd. (236), 2145009 Ontario Inc. (214), and Autometric
    Autobody Inc., (collectively, the Bortolon companies), and Bortolons former
    lawyer, Robyrt Regan, appeal from findings of civil contempt and the custodial
    portions of their penalties, namely, 90 days imprisonment.

[2]

For the reasons that follow, I would dismiss the appeals from the
    findings of contempt. In relation to the penalty, I would uphold the imposition
    of a custodial sentence but would reduce the sentence to 45 days imprisonment
    for each of Bortolon and Regan.

B.

Facts

(1)

Background

[3]

Business Development Bank of Canada (BDC) loaned Cavalon
    $100,000 which was secured by a General Security Agreement (GSA).

[4]

Cavalon defaulted on its loan and did not make any repayments on
    the principal. In April 2010, BDC commenced an action for judgment in the
    amount of the indebtedness, which it obtained in December 2011.

[5]

A fire occurred at Cavalons premises in November 2013. The insurer
    valued the assets lost in the fire at approximately $98,000. 236 asserted it owned
    the assets and was therefore entitled to the insurance proceeds. It submitted the
    proceeds were not subject to the GSA between Cavalon and BDC.

[6]

Because of this dispute between BDC and 236 as to entitlement to the insurance
    proceeds, the insurer paid the amount into court (the insurance fund).

[7]

BDC contended that Bortolon shifted assets from Cavalon to his other
    companies, and ultimately to 236, for the purpose of circumventing BDCs
    judgment and security against Cavalon. In May 2014, BDC brought an application
    seeking judgment against 236 and the other Bortolon companies pursuant to the
    oppression provisions of the Ontario
Business Corporations Act
, R.S.O. 1990, c. B.16
.
It also
    sought payment of the insurance fund out of court.

[8]

Regan acted as counsel for Bortolon and some of his companies, but not
    236, from late 2007 until mid February 2013. The solicitor-client relationship ultimately
    ended and a dispute arose between Bortolon and Regan over unpaid legal fees, as
    well as over Regans antique Cadillac, which Bortolon had possession of and
    refused to return.

(2)

Le May Order

[9]

BDC brought a motion seeking a declaration that Bortolon and his
    companies had waived solicitor-client privilege with respect to their
    relationship with Regan, an order directing Regan to attend to be examined, and
    an order directing Regan to produce documents it had requested in a letter
    dated January 29, 2015. The documents related to Regans solicitor-client
    relationship with Bortolon and his companies and were relevant to BDCs
    oppression claim.

[10]

BDC obtained an order dated March 11, 2015 from Le May J., granting this
    relief on consent (the Le May Order).

(3)

Regan letter

[11]

On March 16, 2015 Regan and BDC confirmed that Regans examination would
    proceed on May 5, 2015 and Regan would provide BDC access to the records in his
    possession by March 31, 2015. That same day, Regan sent a letter to Bortolons
    lawyer, Doug LaFramboise (the Regan letter), which read in part:

Without intending to be mischievous, I feel obliged to give you
    fair warning that there are a number of factual inconsistencies between the
    statements deposed to in Mr. Bortolons affidavit  and the information
    contained in the various original documents in my possession. The nature of
    these inconsistencies is likely to be highly prejudicial to your clients. It is
    also equally likely that these same inconsistencies will come to the attention
    of BDCs counsel upon their review of the documents which they are entitled to
    see  It goes without saying that if your clients were to settle their
    outstanding account with me and complete the terms of the settlement [return
    the Cadillac]  then your clients would have a right to the return of their
    file materials (which amount to approximately 18 file boxes, more or less) in
    priority to the demands for their production by BDC.

[12]

On March 27, 2015 Regan informed BDCs counsel that he was not in
    possession of any of Bortolons files, and that he only retained documents
    pertaining to the now settled litigation between himself and Bortolon and an
    earlier complaint made by Bortolon to the Law Society of Upper Canada.

[13]

On May 1, 2015 BDC received five boxes of Regans files from Bortolon.
    The documents in the five boxes were only of marginal relevance to the matters
    at issue in BDCs proceeding against Bortolon and his companies.

[14]

On June 4, 2015 Regan produced approximately four boxes of documents for
    inspection at his office. The Regan letter was among the documents included in
    the four boxes.

[15]

During Regans examination, he admitted he had sent the Regan letter to
    Bortolons counsel, was aware of the requirement of the Le May Order to produce
    documents to BDC by March 31, 2015 and said he released approximately 18 boxes
    of documents to Bortolon without making copies of them. When asked why the
    documents were returned to Bortolon rather than made available for inspection
    by BDCs counsel, as required by the Le May Order, Regan said Bortolon had a
    higher right to the material.

(4)

Motion for contempt

[16]

BDC brought a motion for contempt. In response, Regan swore an affidavit
    he had condensed the files in his possession to 14 boxes and had delivered all
    of those boxes to Bortolon on March 25, 2015. However, Bortolons affidavit
    filed on the contempt motion stated he only received five boxes of documents,
    which he immediately sent to BDCs lawyers.

C.

Judgment below

(1)

Contempt findings

[17]

The elements of contempt, which must be established beyond a reasonable
    doubt, are the following: (a) the order alleged to have been breached must
    state clearly and unequivocally what should and should not be done; (b) the
    party alleged to have breached the order must have had actual knowledge of it;
    and (c) the party allegedly in breach must have intentionally done the act that
    the order prohibits or intentionally failed to do the act that the order
    compels: see
Carey v. Laiken
, 2015 SCC 17, [2015] 2 S.C.R. 79, at
    paras. 32-35.

[18]

The motion judge held the first and second elements of contempt had been
    made out. The Le May Order required the documents in question be inspected at
    Regans office, and the documents had to be in Regans possession and not at
    Bortolons premises for that to take place. Further, Regan had knowledge of the
    Le May Order, as he was in court when it was made and he referred to the Order
    in the Regan letter. Bortolon, as a party, had actual knowledge of the Le May
    Order.

[19]

With respect to the third element of contempt, the motion judge held
    that Regan transmitted relevant documents to Bortolon that ought to have been
    available for inspection by BDC. The motion judge found that Bortolon and Regan
    made a deal whereby Regan would ship relevant highly prejudicial documents to
    Bortolon, rather than make them available for inspection by BDC, in exchange
    for Bortolon settling his dispute with Regan. The motion judge found that Regan
    shipped 14 boxes of documents to Bortolon and Bortolon subsequently shipped only
    five boxes of material to BDC. Electronic copies of some records Regan
    subsequently produced did not include any highly prejudicial documents.

[20]

Accordingly, the motion judge found both Bortolon and Regan in contempt
    of the Le May Order.

(2)

Penalty

[21]

A separate penalty hearing took place three months later.

[22]

BDC did not seek a penalty of incarceration against the contemnors. Rather,
    BDC sought an order striking Bortolon and his companies responding material
    and, in effect, default judgment, in relation to its oppression application.

[23]

The motion judge noted the positions of the contemnors, who each
    submitted that if the court was disposed to impose a penalty, a non-custodial
    penalty would be appropriate. Counsel for Bortolon acknowledged that in the
    circumstances, he could not contend that the finding of contempt ought not to
    have been made. He submitted, however, that Regan had instigated the
    impropriety, and Bortolon only ever received five boxes of material. Counsel
    for Regan similarly acknowledged that the issue of contempt could not be
    revisited. Regan apologized for writing the Regan letter, but took the position
    that he did not intentionally violate the Le May Order.

[24]

The motion judge held the initial contempt findings could not be
    revisited because neither Bortolon nor Regan had purged their contempt and it
    was doubtful they could do so. No new facts or evidence had come to light at
    the penalty hearing and, having regard to
Carey
, at paras. 65-66, it
    was too late to revisit the findings.

[25]

The motion judge next considered mitigating factors. There was no
    history of Bortolon or Regan having a criminal record, or a history of
    violating court orders. He noted an apology would ordinarily be a mitigating
    factor, but Bortolon had not apologized and Regans was not a true apology but
    an explanation for his actions. The contempt had not been purged and it was
    doubtful it could be.

[26]

The motion judge also considered the contemnors conduct as an
    aggravating factor because it was an affront to the administration of justice
    and was carried out for personal advantage.

[27]

The motion judge noted BDC would never be satisfied it could obtain a
    fair hearing of its application because of Bortolon and Regans conduct. BDCs
    request that the responding material be struck and that it be granted default
    judgment was therefore an appropriate sanction.

[28]

The motion judge did not accept the submission that 236 was an innocent
    bystander. He rejected the argument that simply because 236 was incorporated
    after Regan stopped representing Bortolon, any documents in Regans possession
    would not be relevant to 236. Regan could well have had documents in his
    possession that would have shown a pattern of conduct on the part of Bortolon
    and his associates to engage in schemes to shuffle assets and make it difficult
    to know which company owned what.

[29]

Ultimately, the motion judge held this was an appropriate case to strike
    the responding material and to grant default judgment.

[30]

In the circumstances, deterrence and denunciation were primary factors.
    In view of the contemnors very serious conduct, the motion judge held only a
    custodial penalty would suffice: The message is not only that court orders
    must be obeyed, it is that if compliance or non-compliance with a court order
    is bartered for some perceived personal advantage the contemnor will face a
    very serious penalty indeed.

[31]

Bortolon and Regan were each sentenced to 90 days imprisonment.

[32]

The motion judge awarded costs of the proceedings against the
    respondents to the application in the sum of $20,000, costs for an additional
    motion in the sum of $4,000 payable by Bortolon, and costs of the contempt
    motion fixed at $75,000 payable severally in the amount of $37,500 by each of
    Bortolon and Regan.

D.

Issues on appeal

Bortolon appeal (C62909)

[33]

In relation to the contempt hearing, Bortolon contends that because the
    Le May Order was directed at Regan, he should not have been found liable in
    contempt. He also submits there were material conflicts in the evidence
    respecting the number of boxes that Regan delivered to him. In any event, 236
    was the rightful claimant to the insurance fund, and the motion judge erred in
    ordering default judgment.  Finally, Bortolon asserts an inability to purge his
    contempt.

[34]

In relation to penalty, Bortolon submits the motion judges sentence of
    90 days incarceration is disproportionate to his actions.

Regan appeal (C62906)

[35]

In relation to the contempt hearing, Regan submits the motion judge
    erred:

(a)

in
    holding Regan in contempt by failing to apply the correct legal framework;

(b)

in
    finding Regan had failed to comply with the Le May Order; and

(c)

in
    finding Regan had failed to purge his contempt.

[36]

In relation to penalty, Regan submits the motion judge erred in imposing
    a 90 day sentence.

E.

Analysis

(1)

Standard of review

[37]

Questions of fact are subject to the standard of palpable and overriding
    error. Questions of law are subject to a correctness standard. Questions of
    mixed fact and law are subject to the same standard as questions of fact,
    unless the motion judge erred in principle with respect to the characterization
    of the standard or its application, in which case, the error will amount to an
    error of law: see
Housen v. Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R.
    235, at paras. 8-10, 26-28.

(2)

Contempt findings

Bortolon appeal (C62909)

(a)

236 is not entitled to the insurance fund

[38]

Bortolon asserts that 236 is the rightful claimant to the insurance fund
    and he, Bortolon, is only a 33 percent shareholder. By way of ancillary relief
    on appeal, Bortolon has requested an order setting aside the default judgment
    BDC obtained against 236 as part of its remedy for contempt.

[39]

236 was a respondent to the contempt motion and was represented
    throughout the contempt proceeding by LaFramboise. The motion judge cited 236
    in contempt and the penalty imposed was judgment for damages in an amount
    equivalent to Cavalons indebtedness to BDC (ordered pursuant to the oppression
    provisions of the
Ontario Business Corporations Act
), an order for
    payment of the insurance fund out of court to BDC, and costs.

[40]

236 has not appealed any of the orders made against it. Bortolon, as a
    shareholder of 236, has no standing to seek relief on behalf of 236 for himself.
    Rather, he must bring a derivative action or the corporation must bring the
    action: see
Hercules Management v. Ernst & Young,
[1997] 2 S.C.R.
    165, at para. 59, affirming the rule in
Foss v. Harbottle
(1843), 67 E.R. 189 (U.K.H.L.)
.

[41]

There is no basis therefore to interfere with the motion judges finding
    of contempt or the judgment granted to BDC as against 236.

(b)

Bortolon was bound by the Le May Order

[42]

Bortolon concedes that the first two elements for a finding of contempt 
    specificity as to what is to be done and actual knowledge of the order  are
    met. This concession is appropriate. The Le May Order specified that the documents
    required to be produced were those BDC had requested in its lawyers letter to
    Regan dated January 29, 2015. Bortolon had actual knowledge of the Order because
    it was granted on consent and LaFramboise, Bortolons lawyer, was present in
    court when Le May J. made the Order.

[43]

In relation to the third element of contempt  that the party allegedly
    in breach must have intentionally failed to comply with the order  Bortolon
    submits only Regan, not he, is bound by the Le May Order. Therefore, Bortolon
    cannot be found in contempt even if he facilitated the violation of the Order
    by entering into the transaction proposed in the Regan letter. Bortolon has
    provided no authority in support of this submission.

[44]

By contrast, BDC has put forward a number of authorities that establish
    a person may be found in contempt for aiding and abetting a contempt of court.
    Non-parties may also be found in contempt for knowingly acting in contravention
    of a court order: see
Sycor Technologies Inc. v. Kiaer,
2015 ONSC 734,
    70 C.P.C. (7th) 315;
U.F.C.W., Locals 175 & 633 v. Rainy Lake Hotel
(2005)
,
143 L.A.C. (4th) 135 (Ont.
    S.C.);
Canada Transport Co. v. Alsbury,
[1953] 1 S.C.R. 516;
Canada
    Metal Co. v. Canadian Broadcasting Corp.(No. 2 )
(1975), 4 O.R. (2d) 585
    (H.C.), affd 11 O.R. (2d) 167 (C.A.); and
Re Tilco Plastics Ltd. v. Skurjat
    et al., Ontario (AG) v. Clark et al.,
[1966] 2 O.R. 547
(H.C.).

[45]

This ground of appeal is dismissed.

(c)

There was no real conflict in the evidence and the motion judge did not
    err in holding Bortolon in contempt

[46]

Bortolon submits there is a material conflict in the evidence as to
    whether he turned over all of the documents he received, and his contempt has
    not been proven beyond a reasonable doubt.

[47]

As demonstrated below, it was open to the motion judge to accept the
    evidence he did and to find Bortolon in contempt.

[48]

Bortolons affidavit in response to the contempt motion states, at para.
    7, In March of 2015, I and Mr. Regan agreed to settle our outstanding account
    between ourselves. Bortolon makes no reference to the Regan letter of March
    2015. In that letter, Regan effectively tied the resolution of the proceeding
    with BDC to the resolution of his dispute with Bortolon, by essentially telling
    Bortolon he would hand over highly prejudicial documents to BDC unless they
    reached an arrangement. That letter referenced 18 boxes of documents in Regans
    possession that were subject to production under the Le May Order.

[49]

Bortolons affidavit further states, at para. 8, Mr. Regan, through my
    business partner Gaspare Caruso arranged to have my boxes returned to me and
    the car  returned to Mr. Regan.

[50]

Regans affidavit of November 25, 2015 states that the material was
    condensed into 14 boxes. On March 25, 2015 those boxes were given to Steve
    Sweet, a tow truck operator, whom Regan had hired to recover the Cadillac.
    Sweet advised Regan that once the Cadillac had been placed on the tow truck
    hoist, he handed the 14 boxes over to an individual who appeared to be in care
    and control of Bortolons business premises. Attached to Regans affidavit is a
    copy of the picture Sweet sent to him on March 26, 2015 showing Regans
    Cadillac on the hoist.

[51]

Caruso is a shareholder of 236 and he swore an affidavit in response to
    the motion. Carusos affidavit offers no evidence on the chain of custody of
    the documents, although Bortolon identified him as the person involved.

[52]

Bortolons affidavit states, at para. 9, that he received five boxes
    from Regan. His affidavit is lacking in detail that could have been provided by
    Caruso.

[53]

Bortolon further swears, at para. 11, Upon receipt of the boxes, I
    immediately sent the boxes to the offices of Chaitons Law Firm. Chaitons are
    the lawyers for BDC. This paragraph is patently false. Regans evidence is that
    the handover took place on March 25, 2015. BDCs counsel, Sam Rappos, confirms
    Regans evidence. He states that on March 27, 2015 Regan informed him that he
    was not in possession of any of Bortolons files. The affidavit of Rappos
    further states the five boxes were not dropped off until May 1, 2015 and
    Bortolons counsel, LaFramboise, confirms the boxes came from Bortolon. Bortolon
    had possession of the documents for five weeks. Bortolon has not contradicted
    any of this evidence.

[54]

Thus, in his affidavit, Bortolon lied about returning the boxes
    immediately and tried to conceal the fact he had the boxes for five weeks. The
    affidavit also contains the bald, self-serving statement, at para. 10, I knew
    exactly what documents Mr. Regan had in his possession and this was exactly the
    documents that were returned to me.

[55]

In the circumstances, it was open to the motion judge to disbelieve
    Bortolons evidence. Further, he was entitled to find, on the evidence he
    accepted, that Bortolons contempt had been proven beyond a reasonable doubt.

[56]

Bortolon further submits he is being punished for Regans negligence in
    not keeping copies of the relevant documents.

[57]

Nowhere in his evidence does Bortolon state he assumed Regan had copies
    of the documents. Further, the suggestion that Bortolon thought Regan kept
    copies of the documents and would turn them over to BDCs lawyers defies common
    sense. If Bortolon thought that Regan would provide copies of the documents to
    BDCs lawyers then there would be no incentive for him to pay Regan and to
    return the Cadillac. Bortolon suddenly agreeing to pay Regan and to return his
    car only makes sense if he thought BDC would not receive the documents in the boxes.

[58]

The motion judge was entitled to find, as he did, that highly relevant
    documents to BDCs lawsuit disappeared from the boxes Regan sent to Bortolon,
    due to Bortolons actions. As a result, BDC would be unable to obtain a fair
    hearing. No palpable and overriding error has been shown in relation to this
    finding.

[59]

Bortolon also asserts he had no chance to purge his contempt. This is incorrect.
    He had three months between the contempt and penalty hearings to do so. In any
    event, the ability to purge contempt is relevant to penalty, but not to
    liability: see
College of Optometrists (Ontario) v. SHS Optical Ltd.
,
2008 ONCA 685, 93 O.R. (3d) 139, at
    para. 79., leave to appeal refused, [2008] S.C.C.A. No. 506.

[60]

The finding of contempt in relation to Bortolon is affirmed.

Regan appeal (C62906)

(a)

The motion judge did not err in applying the legal framework; he did not
    err in finding Regan had failed to comply with the Le May Order and failed to
    purge his contempt

[61]

The motion judge stated that in the absence of any request for
viva
    voce
testimony, he assumed the parties were content that the matter be
    determined on the basis of the record as it was. Regan submits, however, the
    fact that BDC chose not to cross-examine him on his affidavit should not
    operate to his detriment. Regan submits a moving party in a contempt proceeding
    should be obliged to cross-examine the alleged contemnor on his or her evidence
    if there is an intention to contradict it.

[62]

Regans overall position is that BDC failed to prove beyond a reasonable
    doubt that Regan was in contempt of the Le May Order. In support of his
    position, Regan submits the motion judge erred by basing his findings on BDCs
    statements of belief and speculative assumptions, and by failing to give any
    weight to Regans evidence that he had complied with the terms of the Le May
    Order. Further, there was no direct evidence that Regan withheld or failed to
    provide BDC with access to relevant documents he had in his possession. In
    fact, Regan retained copies of the documents that he believed were subject to
    the Le May Order and provided BDCs counsel access to those documents. Regan
    submits the motion judge engaged in forbidden reasoning by accepting BDCs
    evidence and rejecting his evidence in a conclusory manner.

[63]

The short answer to these submissions is that the weight to be attached
    to evidence is a matter for the motion judge. Cross-examination is not the only
    way in which disbelief of a witnesss evidence may arise. Regans evidence was
    internally inconsistent and the motion judge was entitled to rely on these
    internal contradictions to reject it. The inferences the motion judge drew from
    the evidence were open to him and his findings are grounded in the evidence. He
    committed no palpable and overriding error.

[64]

Central to Regans submissions is his affidavit of May 31, 2016 which
    states, at para. 6, I do not and never did have any materials which are
    directly relevant to the matters subject of this application (the dispute over
    the insurance proceeds). The motion judge was entitled to reject this evidence
    for the reasons given below.

[65]

First, the Le May Order was clear. It required Regan to produce for
    inspection the documents that BDC requested in its lawyers letter dated January
    29, 2015. Regan reviewed the draft Order, consented to it, and was present in
    court when it was made. In Regans responding material before Le May J., he
    never suggested he did not have the documents BDC had requested.

[66]

Second, BDCs position was that Bortolon shifted assets between his
    companies and pledged the same assets as were pledged to BDC to the Toronto
    Dominion Bank (TD) as security for a loan. One of the categories of documents
    ordered to be produced in the Le May Order was any and all dealings between
    Cavalon and 214, another of Bortolons companies. Regan was asked to produce
    the demand letter from TD to 214 and the loan agreement. These documents were
    central to BDCs case. On June 5, 2015 BDC examined Regan as follows:

Q. Would you have a copy of the demand from TD Bank?

A. Not anymore.

Q. That would have been returned as part of the documents of
    Mr. Bortolon?

A. Correct.

Q. In investigating or dealing with that matter, would you have
    obtained a copy of the loan agreement from Mr. Bortolon?

A. Either that or from the Banks counsel.

Q. And you dont have possession of that anymore?

A. No.

Q. That would have gone back to Mr. Bortolon recently?

A. It would have.

[67]

The above questions and answers are but one example that Regans
    assertion in his affidavit that BDC did not prove he possessed any relevant
    documents is factually incorrect. Regans examination reveals he delivered
    relevant documents to Bortolon that he ought to have produced pursuant to the
    Le May Order.

[68]

Third, Regans submission contradicts his own letter to Bortolon dated
    March 2015, which stated he had 18 boxes of documents that were highly
    prejudicial and would otherwise be produced to BDC. For the reasons already
    given in relation to the Bortolon appeal, the fact that Bortolon claimed he
    only received five boxes from Regan does not raise a material conflict in the
    evidence. Regardless of how many boxes Regan delivered to Bortolon, the
    uncontradicted evidence is BDC only received five boxes of marginally relevant
    materials.  The Regan letter and Regans own examination indicate more
    documents should have been produced.

[69]

The motion judge was entitled to rely on the statements Regan made in his
    March 2015 letter, and in his examination, in rejecting Regans bald statement
    in his affidavit.

[70]

Regan also asserts he retained electronic copies of all relevant
    documents. But, Regan did not mention he had any electronic copies of the
    documents in his possession in his letter to BDC of March 27, 2015. The letter
    simply said he was no longer in possession of the files relating to Bortolon or
    his companies.

[71]

During his examination on June 5, 2015 Regans evidence was he released
    18 boxes of documentation to Bortolon without making copies. He justified this
    on the basis that Bortolon had a higher right to the material. Although Regan
    submits he meant he had not retained paper copies and that he made electronic
    copies, this too is contradicted by his own evidence. While being questioned in
    relation to the role of 214, Regan was asked about his electronic record
    keeping practices. He was specifically asked whether he had a policy of
    scanning incoming documents or documents that a client provided [to him] for
    litigation purposes. He stated, Not at that point in time. He then explained
    that his electronic record keeping practice only expanded when he left his sole
    practice and joined another law firm. That happened after his retainer with
    Bortolon and his various companies had been terminated.

[72]

The motion judge did not make any palpable and overriding errors in his
    findings of fact.

[73]

Based on his findings, the three elements of the test for contempt were
    made out beyond a reasonable doubt, and the motion judge did not err in holding
    Regan in contempt. Regans appeal with respect to the finding of contempt is
    dismissed.

(3)

Penalty

[74]

At the penalty phase of a contempt hearing courts have a wide
    discretion. Rule 60.11(5) of the
Rules of Civil Procedure
, R.R.O.
    1990, Reg. 194 provides that the court may make such order as is just,
    including that the judge may order the contemnor:

(a)

be
    imprisoned for such period and on such terms as are just;

(b)

be
    imprisoned if the person fails 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
    other order that the judge considers necessary, and may grant leave to issue a
    writ of sequestration under rule 60.09 against the persons property.

[75]

The penalty imposed here consisted of striking the response to the
    application proceedings resulting in default judgment in favour of BDC, an
    order for the payment out of court to BDC of the insurance fund, and custodial
    sentences of 90 days each for Bortolon and Regan. They were each also required
    to pay significant costs of the motion, on a substantial indemnity scale. The
    motion judge concluded, at para. 43, only a custodial penalty would suffice
    in this case. That aspect of the penalty is appealed to this court.

(a)

Purpose and guiding principles in sentencing for civil contempt

[76]

A deliberate breach of a court order may constitute either a civil or a
    criminal contempt. A criminal contempt requires, in addition to a deliberate
    violation of a court order, an element of public defiance calculated to lessen
    societal respect for the courts: see
U.N.A. v. Alberta (Attorney General)
, [1992] 1
    S.C.R. 901
, at para. 21. The choice of penalty for contempt
    must recognize the important distinction between civil and criminal contempt.

[77]

It is well recognized that the purpose of a sentence for criminal
    contempt is primarily punishment, whereas the purpose of a sentence for civil
    contempt is primarily about coercion, designed to protect and enforce the
    rights of a private party: see
Korea Data Systems Co. v. Chiang,
2009
    ONCA 3, 93 O.R. (3d) 483, at para. 11.

[78]

However, while gaining compliance with the courts orders is the primary
    aim of sentencing in civil contempt proceedings, courts have also recognized
    that acts of civil contempt, like criminal contempt, undermine the authority of
    the courts and diminish respect for the law: see
Mercedes-Benz Financial v.
    Kovacevic
(2009)
,
308
    D.L.R. (4th) 562 (Ont. S.C.), at para. 11
; Niagara Regional Police Services
    Board v. Curran
(2002)
,
57 O.R. (3d) 631
(S.C.),
at
    para. 35
; Sussex Group Ltd. v. 3933938 Canada Inc
., [2003] O.T.C. 664
    (S.C.), at para. 12.

[79]

The Supreme Court of Canada noted in
Vidéotron Ltée. v. Industries
    Microlec produits électriques Inc
., [1992] 2 S.C.R. 1065, at para. 16,
    that the public law aspects of contempt of court have moved it somewhat beyond
    the realm of private law, and the public law aspects of contempt of court
    should be reflected in the sanctions which are imposed. The court stated, at
    para. 14:

The penalty for contempt of court, even when it is used to
    enforce a purely private order, still involves an element of "public
    law", in a sense, because respect for the role and authority of the
    courts, one of the foundations of the rule of law, is always at issue. In

United Nurses of Alberta v. Alberta
    (Attorney General)
, [1992] 1
    S.C.R. 901
, McLachlin J. established a direct connection between
    contempt of court and the rule of law, at p. 931:

The rule of law is at the heart
    of our society; without it there can be neither peace, nor order nor good
    government. The rule of law is directly dependent on the ability of the courts
    to enforce their process and maintain their dignity and respect. To maintain
    their process and respect, courts since the 12th century have exercised the
    power to punish for contempt of court.

[80]

Epstein J.A. noted in
Boily v. Carleton Condominium Corp. 145
,
2014

ONCA

574
,
121
    O.R. (3d) 670, at para. 79:

The purpose of a penalty for civil
    contempt is to enforce compliance with a court order and to ensure societal
    respect for the courts. [Citation Omitted.] The remedy for civil contempt is
    designed not only to enforce the rights of a private party   but also to
    enforce the efficacy of the process of the court itself.

[81]

Because civil contempt engages issues of public law and the need to
    condemn acts which undermine the authority and dignity of the court, punishment
    has been recognized as a secondary purpose for sentencing in such cases. Watt
    J.A. stated in
College of Optometrists (Ontario),
at para. 106: The
    underlying purpose of contempt orders is to compel obedience and punish
    disobedience. The Alberta Court of Appeal similarly noted, in
Builders
    Energy Services Ltd. v. Paddock
, 2009 ABCA 153, 457 A.R. 266, at para. 13,
    that [t]he purpose of contempt proceedings is twofold: to ensure compliance
    with court orders and to punish the contemnor. As well, decisions of the
    Superior Court of Justice have recognized the dual purpose of sentencing in
    civil contempt. In
2363523 Ontario Inc. v. Nowack
, 2016 ONSC 2518,
    affd 2016 ONCA 951, 135 O.R. (3d) 538, at paras. 68-72, leave to appeal to
    S.C.C. refused, 37376 (June 1, 2017)  Dunphy J. stated:

There are two primary purposes
    to be served in sentencing, and I must have regard to both in this case. First
     and usually primarily, the objective of sentencing is to coerce the contemnor
    to comply with the orders in question.



A second objective of sentencing
    is punishment. Punishment serves to denounce conduct that requires denouncing
    and thereby deter the contemnor specifically and others more generally who
    might contemplate breaches of court orders at will. If a party has
    disagreements or issues with an order that has been made, it must nevertheless
    be complied with unless validly stayed or reversed on appeal in accordance with
    the rules. There is no self-help after an order has been issued.

See also
Law Society of Upper Canada v. Fingold
,
    2016 ONSC 5684, at paras. 38-43.

(b)

Imposing a jail sentence
    in cases of civil contempt

[82]

In civil cases, incarceration is rare. Ordinarily, a finding of
    contempt, together with a fine or some other order in relation to the
    litigation, is sufficient to gain compliance and restore the authority of the
    court. In
Chiang,
this court observed, at para. 90:

Custodial sentences for civil contempt are rare. Lengthy
    custodial sentence are even rarer. 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 to protect the
    courts authority. Ordinarily incarceration is a sanction of last resort. [Citation
    omitted.]

[83]

With respect to the observation that Canadian courts have tended to
    punish contempt of court leniently, Brown J. (as he then was) stated in
Mercedes-Benz
    Financial
, at para. 10 :

I suspect this observation was based on the commentary
    contained in the document published in May, 2001 by the Canadian Judicial
    Council entitled,
"Some Guidelines on the Use of
    Contempt Powers"
, where, at page 40, the following statements are
    found:

In Canada punishment for
    contempt has been quite moderate, reflecting the courts' usual view that a
    conviction for contempt and a modest fine is usually sufficient to assert the
    courts' authority, to protect their dignity or to ensure compliance. Often
    these sentences are imposed after the contemnor has apologized and purged his
    or her contempt which substantially mitigates any punishment that might
    otherwise be imposed.

[84]

I would add that, in cases of serious breaches of court orders, the Canadian
    Judicial Council recognized that jail was an appropriate sanction. At page 39
    the Council stated:

If the contempt has not been purged and the contempt is a
    serious one, or if there has been a deliberate disobedience of a court order
    accompanied by violence or other flagrant misconduct then imprisonment or heavy
    fines become more likely, but care must be taken to ensure that the disposition
    of the proceedings does not appear to be bullying or vengeful. [Citation
    omitted.]



Imprisonment should be imposed only in cases of serious
    deliberate disobedience, violence or wilful interference with the course of
    justice. Repeated breaches of a restraining order would justify imprisonment,
    as would
a single breach of an order
if the breach were a serious one. [Emphasis
    added.]

[85]

More recently, Belobaba J. commented in
Ceridian Canada Ltd. v.
    Azeezodeen,

2014

ONSC

4162
, 69 C.P.C. (7th) 29, affd
2014

ONCA

656
,
69
    C.P.C. (7th) 40,  at para. 24:

This court has imposed jail sentences ranging from five days to
    one year in cases of civil contempt. Each of the custodial cases have two
    things in common: one, the defendants breach, like here, was knowing and
    deliberate; and two, the length of the jail term was a function of the
    continuing nature of the contempt discounted by the degree of remorse or
    apology on the part of the defendant. In my view, where the breach of a court
    order is knowing and deliberate, continues over several days, and the only
    response from the defendant is defiance without remorse, a jail sentence is
    appropriate.

[86]

Ordinarily, the period between a finding of contempt and the penalty
    hearing gives the contemnor an opportunity to purge his or her contempt. At the
    penalty hearing, if the contemnor has purged his or her contempt, as Belobaba
    J. noted, this is a significant mitigating factor with respect to the penalty
    imposed. Where, as here, the impossibility of purging the contempt is a
    situation of the contemnors own making, it is not a mitigating factor: see
Echostar
    Communications Corp. v. Rodgers,
2010 ONSC 2164, 97 C.P.C. (6th) 177, at
    para. 45.

[87]

A wilful flagrant breach of a single court order that shows a callous
    disregard for the courts authority, or that causes significant prejudice to
    the other party may attract a jail sentence: see
Mercedes-Benz Financial,
at
    para. 35.

[88]

While each case is fact specific, incarceration has been imposed in
    numerous cases for failure to produce documents or corporate records: see
Sussex
    Group Ltd. v. Sylvester
(2002)
,
62 O.R. (3d)
    123
(S.C.), at para. 85 (6 months);
Nelson Barbados Group Ltd. v.
    Cox,
2010 ONSC 569,
at para. 35 (
3
    months and a fine of $7500);
Cellupica v. Di Giulio,
2011 ONSC 1715
,
105 O.R. (3d) 687, at para. 49 (90 days);
Sussex Group Ltd. v. 3933938
    Canada Inc.,
[2003] O.T.C. 683 (S.C.), at para. 15 (2 months);
Nowack,
at para. 114 (1 month).

[89]

As noted above, serious violations of court orders  even if only one
    order or one instance  can warrant a jail sentence. In determining whether a
    jail sentence is needed to adequately vindicate the due administration of
    justice, the context in which the contempt occurs is an important
    consideration: see
Langston v. Landen
, 2011 ONCA 242, at para. 1. Because
    incarceration is ordinarily a penalty of last resort, the court must also
    consider whether any other penalty short of incarceration would be a sufficient
    sanction for the gravity of the contempt, taking into consideration the
    sentencing principles applicable to civil contempt.

(c)

Sentencing
    principles applicable to civil contempt

[90]

The factors relevant to a determination of an appropriate sentence for
    civil contempt were set out by Epstein J.A. in
Boily,
at para. 90. The
    factors can be summarized as follows:

(a)

Proportionality
of
    the sentence to the wrongdoing  a sentence must be proportionate to the
    gravity of the offence and the degree of responsibility of the offender: see
    also
Chiang
,
at para. 86;
Mercedes-Benz Financial,
at
    para. 12.

(b)

Presence of
aggravating
    and mitigating
factors: see also
Chiang
,
at paras. 50-51,
    87-89;
Sussex Group Ltd. v. Fangeat
, [2003] O.T.C. 781 (S.C.), at para.
    67.

(c)

Deterrence and
    denunciation
 the sentence should denounce unlawful conduct and promote a
    sense of responsibility in the contemnor, and deter the contemnor and others
    from defying court orders: see also
Chiang
,
at para. 91;
Fangeat
,
    at para. 67.

(d)

Similarity of sentence
in like circumstances.

(e)

Reasonableness
of a
    fine or incarceration: see generally
Chiang
.

[91]

Epstein J.A. concluded that specific and general deterrence are the most
    important sentencing objectives in civil contempt cases. Other courts have also
    noted the principles of deterrence to be the primary sentencing principle in
    cases of civil contempt. The British Columbia Court of Appeal endorsed a
    similar view in
Majormaki Holdings Ltd. v. Wong
, 2009 BCCA 349, 97
    B.C.L.R. (4th) 64, at para. 28.

(d)

The motion judge did
    not err in concluding that the appellants conduct warranted a jail sentence in
    this case

[92]

The motion judges determination of the appropriate penalty is entitled
    to considerable deference. An appellate court should only intervene where there
    is an error in principle in arriving at the sentence, or the sentence is
    clearly unfit: see
Boily,
at para. 78.

[93]

As the central aggravating factor, the motion judge noted the very
    serious nature of the contempt  a person governed by a court order bartered
    non-compliance with the order for some personal advantage. He found, at para.
    50, that the evidence admits to only one conclusion; Regan made a deal whereby
    his claim against Bortolon would be satisfied in exchange for which the highly
    prejudicial documents in his possession would be given to Bortolon. Implicit in
    the arrangement was that this course of conduct would result in the prejudicial
    materials never being provided to BDC.

[94]

Regan failed to seek advice from other counsel or obtain further
    directions from the court before instigating a course of action which
    permanently altered the ability of BDC to obtain a fair trial. He was motivated
    by personal financial gain and took actions which violated the courts Order,
    and his ethical and professional responsibilities as an officer of the court.

[95]

As I have indicated, where the contemnors have adopted obstructionist
    tactics and flagrantly ignored a court order to produce documents as required
    by the court, jail sentences have been imposed. Imprisonment has also been held
    to be appropriate where the refusal to comply with an Order frustrates the
    gathering of important information  with adverse consequences to the
    plaintiff:

see
Echostar,
at para. 55. See also,
Sylvester,
at paras. 83, 95.
In this case, Bortolon and Regans
    actions frustrated BDCs right to obtain important information to prove its
    case.

[96]

In this case, disobedience of the Order was knowing and deliberate.
    While the contempt involved a single act, it was unlikely that the contempt
    could be purged. I would also agree with the motion judges assessment of the
    apology provided by Regan at the sentencing hearing. Namely, that it was
    equivocal, and an attempt to explain his conduct; it was not a true apology.
    Bortolon offered no apology. Thus, an important mitigating factor is not
    present in this case.

[97]

The motion judge properly observed that as far as he was aware, neither
    Bortolon nor Regan had a criminal record.

[98]

Although BDC did not seek a penalty beyond having Cavalons pleading
    struck and default judgment issued in its favour, the motion judge noted, at
    paras. 12-13, that BDC invited him to consider imposing a significant penalty.
    He further noted, at para. 20, Bortolons counsels submission that a
    non-custodial penalty should be preferred. The parties were clearly aware that
    the motion judge was contemplating a serious penalty, including incarceration,
    and were given the opportunity to make submissions to persuade him that a
    non-custodial sentence was sufficient. It was left to the court to determine
    what, if any, penalty would be imposed.

[99]

In coming to the conclusion that only a jail sentence would send the
    message that this type of conduct will not be tolerated, the motion judge
    acknowledged the exceptional nature of jail sentences for civil contempt,
    stating, at para. 26, that sanctions for contempt are to be imposed
    sparingly. It is also implicit that the motion judge turned his mind to other
    available sanctions and rejected them when he stated, at para. 43, In view of
    the very serious conduct of Mr. Bortolon and Mr. Regan, I consider that only a
    custodial penalty will suffice. While it would have been preferable if the motion
    judge had expressly addressed the question of why a fine would not suffice to
    meet the principles of sentencing, the context in which the contempt occurred
    supports the motion judges conclusion that the egregious conduct of Bortolon and
    Regan not only interfered with BDCs ability to ever have a fair trial, but
    amounted to an affront to the administration of justice that justified a
    penalty of incarceration.

(e)

The length of
    the sentence imposed was not proportionate

[100]

At para. 38 of
    his decision, the motion judge cited six cases where custodial sentences were
    imposed which ranged from three months to 18 months. He did not provide any
    analysis of the cases, nor did he acknowledge relevant points of distinction
    between this case and the cases he cited which attracted significant periods of
    incarceration. As a result, there are two important considerations the motion
    judge did not address in determining the length of sentence:

1.

All the cases
    cited by the motion judge involved numerous breaches or persistent
    obstructionist conduct by the contemnor. This case involved a single breach of
    a single court order. This is a significant point of distinction and impacts
    the proportionality assessment and what sentence adequately addresses the
    gravity of the contempt;

2.

Given that BDC
    achieved the remedy it sought (default judgment) and the primary purpose of
    sentencing in civil contempt cases is to remedy the private rights of the
    litigants, the motion judge failed to recognize that this key purpose had been
    satisfied by ordering default judgment.

[101]

These considerations
    were relevant to assessing a proportionate sentence for both Bortolon and Regan.
    Having regard to them, I would hold that the motion judge erred with respect to
    the proportionality of the sentence he imposed and would allow the appeal to
    the extent of reducing the sentence to 45 days for each
contemnor
.

[102]

As a consequence of the contempt finding, the Law Society of Upper Canada levied an interim suspension of Regan's licence to practice law, effective December 29, 2016. This was a collateral consequence that the motion judge was unable to take into account because it occurred after he delivered his reasons on penalty. Ordinarily this consideration would be taken into account and could weigh in favour of a reduction in the sentence for Regan: see R. v. Pham, 2013 SCC 15, [2013] 1 S.C.R. 739, at para. 11. But, as he was the instigator of the offence, I would maintain the parity of the sentences. The three days in custody that Regan and Bortolon served following the imposition of the penalty and prior to their release pending appeal will, of course, be credited against their sentence.

F.

Costs

[103]

BDC was obliged
    to respond to the appeal respecting the motion judges finding of contempt. My
    decision to reduce the length of the sentences for Bortolon and Regan should
    not affect BDCs entitlement to costs.

[104]

Having regard to
    the motion judges finding as to the seriousness of the conduct involved and
    its effect on the administration of justice, costs are payable on a substantial
    indemnity basis, and I so order: see
College of Chiropractors of Ontario v.
    Dies
, 2015 ONSC 2828, varied on other grounds, 2016 ONCA 2, at para. 21;
Niagara
    Regional Police Services Board,
at para. 49; and
SNC-Lavalin Profac
    Inc. v. Sankar,
2009 ONCA 97, 94 O.R. (3d) 236, at para. 19.

[105]

Accordingly, I
    would order the costs of the appeal to be paid on a substantial indemnity basis,
    and I would fix those costs in the amount of $27,500 inclusive of all
    applicable taxes and disbursements. As did the motion judge, l would hold that
    liability for those costs should be several, not joint. Thus, Bortolon is
    responsible for $13,750 in costs, as is Regan.

G.

Disposition

[106]

For the reasons given, I would dismiss the appeals as to the findings of contempt. I would allow the appeals with respect to penalty to the extent of setting aside the 90 day sentences of imprisonment imposed, substitute a sentence of 45 days for each of Bortolon and Regan, and credit them with the three days they have already served. I would fix costs of the appeal on a substantial indemnity basis in the amount of $27,500 all inclusive, and award those costs severally in the sum of $13,750 each, against Bortolon and Regan.

K.M. Weiler J.A.

I agree K. van
    Rensburg J.A.

I agree Grant
    Huscroft J.A.

Released: August 22, 2017


