Canadian Private Copying Collective v. Fuzion Technology Corp.

Canadian Private Copying Collective v. Fuzion Technology Corp.
Court (s) Database
Federal Court Decisions
Date
2009-08-05
Neutral citation
2009 FC 800
File numbers
T-1655-04
Notes
Digest
Decision Content
Federal Court
Cour fédérale
Date: 20090805
Docket: T-1655-04
Citation: 2009 FC 800
Ottawa, Ontario, August 5, 2009
PRESENT: The Honourable Mr. Justice Martineau
BETWEEN:
CANADIAN PRIVATE COPYING COLLECTIVE
Applicant
and
FUZION TECHNOLOGY CORP.
and 1565385 ONTARIO INC.
and MICKEY YEUNG
Respondents
REASONS FOR JUDGMENT AND JUDGMENT
[1] On November 4, 2008, Prothonotary Roger Lafrenière issued an order pursuant to rule 467 of the Federal Courts Rules, SOR/98-/706 (Rules), ordering the respondent, Mr. Mickey Yeung (Yeung) to appear before a judge of this Court to hear proof of the act with which he is charged and be prepared to present any defence that he may have with respect to the charge of contempt brought by the applicant, Canadian Private Copying Collective (CPCC).
I. BACKGROUND
[2] CPCC is the collecting body designated under paragraph 83(8)(d) of the Copyright Act, R.S. 1985, c. C-42 (the Act) to collect and distribute the private copying levies payable by manufacturers and importers of blank audio recording media (blank discs) to eligible authors, performers and makers of sound recordings. Manufacturers and importers of blank discs are obliged under the law to track and report sales activity to the CPCC. They must also keep records from which the CPCC can readily ascertain, through an audit, the amounts payable under the Private Copying Tariffs (the tariffs).
[3] Fuzion Technology Corp. (Fuzion) was an Ontario company incorporated in August 1997, with a registered office at 250 Steelcase Road East, Markham, Ontario. It was involved in the business of distributing computer hardware as well as trade of blank discs as a service to its customers. It was dissolved effective February 17, 2005. Fuzion had three shareholders. Albert Shum (Shum) acted as president and was the controlling and majority shareholder of Fuzion with 65 percent of the shares of the company. There was a second shareholder by the name of Alex Lau (Lau) who held 20 percent. Later on, Lau sold his 20 percent share to Shum. The third shareholder was Yeung who had a minority interest of 15 percent in the company. Yeung acted as Vice-President of Operations.
[4] In October 2002, Fuzion began reporting imports and sales of blank discs to the CPCC. Fuzion’s reports cover the period from July – August 2002 until November – December 2003. The reports were signed by Yeung himself or another Fuzion employee. In January and February 2003, CPCC’s former auditors attended Fuzion’s premises but were unable to complete their audit. In the meantime, in or around December 2002 or January 2003, Shum advised Yeung that he intended to leave Canada permanently and planned to close down Fuzion. He had other business interests in China and preferred to pursue them there.
[5] On March 13, 2003, Yeung incorporated 1565385 Ontario Inc. (FTC) and registered the business name of “FTC Computers”. On April 1, 2003, FTC bought Fuzion’s entire stock of computer goods (including blank discs) for $597,120.84 plus GST on a consignment basis since FTC did not have sufficient funds to pay for the inventory up front (the consignment transaction). Yeung was the sole shareholder and director of FTC at the time of the consignment transaction.
[6] At first, FTC operated from 250 Steelcase Road, Markham, Ontario. Yeung’s desire was that when Fuzion ceased operations and FTC was operating fully, Fuzion’s suppliers and customers would hopefully not even notice the transition. Over the next few months, invoices sometimes used the hybrid name of “FTC Fuzion Technology”. However, all the invoices used the GST number of FTC and not the GST number Fuzion had used. On May 14, 2003, FTC entered into a lease for its own premises located at 81 McPherson Street, Markham, Ontario, for occupancy as of July 15, 2003. On May 31st, 2003, Yeung resigned as a director of Fuzion. FTC effectively moved in their new premises sometime in July 2003. At that time, FTC bought from Fuzion used furniture, equipment and telephone system, as well as a 2002 Dodge Caravan for $20,424.16. FTC was fully operational by the fall of 2003. FTC did not submit any reports to CPCC.
[7] On September 10, 2004, CPCC filed an application under Part VIII of the Act, asking inter alia that all three respondents, Fuzion, FCT and Yeung, make available to CPCC’s auditors, all of the business, accounting and financial records of Fuzion and FTC (CPCC’s application). FTC and Yeung challenged CPCC’s application. They took the position that FTC was a completely separate corporation from Fuzion. Since FTC had never imported or manufactured any items covered by the tariffs, it had no obligation to report sales of blank discs to CPCC. Fuzion never appeared or defended itself in the proceedings brought by CPCC. Shum is now said to be pursuing his business interests in China. That said, as aforementioned, Fuzion was dissolved effective February 17, 2005.
[8] On October 25, 2006, the Court granted CPCC’s application: Canadian Private Copying Collective (CPCC) v. Fuzion Technology Inc., 2006 FC 1284. Since FTC took physical control of the computer stock of Fuzion following the conclusion of the consignment transaction, Justice von Finckenstein who heard the matter considered at the time that CPCC had the right “to audit the books of a vendor of blank disc[sic] who may be subject to levies” and “[FTC] must now assume responsibility and account for the computer stock that was sold on a consignment basis”.
That said, Justice von Finckenstein cautioned that “[t]here may have been legitimate business reasons” for FTC, directed by Yeung, to conclude the consignment transaction and further found that “[t]here [was] also no evidence that this was done to defraud creditors”. Thus, Justice von Finckenstein stated in his reasons that he was “prepared to pierce the corporate veil to the extent of allowing CPCC to audit the books of FTC to ascertain whether any of the blank disks[sic] sold by FTC [were] subject to levy under Part VIII of the [Act]” (my underlining). Justice von Finckenstein further considered that for an order directing Fuzion and FTC to submit to an audit “to be effective”, same would also have be directed at Yeung personally. He noted in this regard that Yeung “has the best knowledge as to how the records of Fuzion and FTC were handled and kept”. Furthermore, on the particular affidavit evidence before him, Justice von Finckenstein considered at the time that Yeung was principally involved in the “blurring of the boundary of Fuzion and FTC”. Thus, the Order had to include Yeung “to ensure his absolute cooperation”.
[9] Paragraph 1 of the order dated October 25, 2006 and issued by Justice von Finckenstein (the Order) stipulates:
Within thirty days of this order the Respondents, Fuzion Technology Corp., 1565385 Ontario Inc. and Mr. Mickey Yeung, shall make available to the Applicant’s auditors, for the purpose of an audit, all of the business, accounting and financial records of Fuzion Technology Corp., and 1565385 Ontario Inc., from which the Applicant’s auditors can readily ascertain:
i. the amounts payable, and
ii. the information required,
under the Private Copying Tariffs certified by the Copyright Board.
[10] On November 29, 2006, the Court dismissed FTC and Yeung’s motion to reconsider the Order, asking the Court to amend the Order and restrict same to the records relating to the blank discs which were the object of the consignment transaction: Canadian Private Copying Collective v. Fuzion Technology Corp., 2006 FC 1448. Justice von Finckenstein was of the view then that Yeung’s reconsideration motion went beyond the mere correction of clerical errors as he was not willing to consider any new evidence at this time.
[11] On October 25, 2007, the Federal Court of Appeal dismissed FTC and Yeung’s appeal of the Order: 1565385 Ontario Inc. v. Canadian Private Copying Collective, 2007 FCA 335.
[12] On November 4, 2008, an order was made ex parte by Prothonotary Lafrenière requiring Yeung to appear before the Court on January 19, 2009 and be prepared to answer the charge of contempt made against him by CPCC. The act with which Yeung is specifically charged under the order is that:
he, by his conduct, breached the Order of Justice von Finckenstein dated October 25, 2006 by failing to make available to the Applicant’s auditors, for the purpose of an audit, all of the business, accounting and financial records of Fuzion Technology Corp. and 1565385 Ontario Inc. within 30 days of the Order of Justice von Finckenstein dated October 25, 2006, or within 30 days of the date of the Judgment of the Federal Court of Appeal dated October 25, 2007 (my underlining) (the charge).
[13] On November 13, 2008, Yeung was personally served with the order to appear.
[14] A hearing was held before me on January 19 and June 16, 2009, in Montreal and Toronto respectively, during which CPCC and Yeung presented their viva voce evidence.
II. EVIDENCE ADDUCED AT THE HEARING
[15] All the evidence relevant for this contempt proceeding was adduced on January 19, 2009.
Prosecuting Party
[16] Despite the fact that the charge makes explicit reference to an alleged breach with respect to FTC records, CPCC’s counsel made clear in her opening statement that the alleged contempt was really in respect of Yeung’s failure to make available to CPCC’s auditors the records of Fuzion. It was conceded that no levies are due by FTC to CPCC.
[17] Ms. Alison Thomas (Thomas), forensic accountant and business evaluator with Cole & Partners, the firm presently acting as CPCC’s auditors was the only witness heard on behalf of the applicant. Her report of June 24, 2008 was produced at the hearing (Exhibits P-1 and D-2). Apart from Thomas’s testimony and report, a number of documents which would have been produced at the hearing by Ms. Monique Perron, who works for Ogilvy Renault, if she had been heard orally, were produced with the consent of counsel (Exhibit P-2). The applicant also produced in evidence the sworn affidavit of Yeung, dated November 12, 2004, which had been filed by FTC and Yeung in relation to CPCC’s application, prior to the issuance of the Order (Exhibit P-3).
[18] The following facts have been established by the applicant.
[19] In November 2007, Cole & Partners in Toronto (CPCC’s present auditors) were mandated by CPCC to continue the audit that was started in 2003 and to assess whether FTC and Fuzion had accurately reported any sale of imported blank discs to the CPCC in accordance with the applicable tariffs. Relevant documents needed for this audit would include purchase records (including import records), sales records, and inventory records. With said records (including accounting records as well as source documents, such as vendor invoices and customer invoices), the audit could be satisfactorily completed.
[20] On November 26, 2007, Thomas met with Yeung and his present counsel, Mr. Igor Ellyn (Ellyn), at the premises of FTC. She sought at this occasion relevant information or documents in order to conduct the audit both for FTC and Fuzion for the period of December 18, 1999 to August 2007 (the period covered by audit).
[21] During the audit, FTC and Yeung provided to Thomas all relevant information and documents pertaining to FTC. In passing, Thomas mentioned that during her presence at FTC’s premises, for privacy right reasons, she was not allowed to record customer or vendor names and to make copies of documents which could contain said information. However, this did not seem to be a problem to complete her audit and prepare a report. It is not challenged today by CPCC that Yeung was fully co-operative during the audit. Indeed, Yeung and FTC’s accountant, Ms. Alice Ma (Ma) guided Thomas through her general assessment of FTC’s warehouse.
[22] According to CPCC’s own records, levies had been paid by Fuzion to CPCC for the imports of blank discs for the reporting periods of July to August 2002 as well as September and October 2002. Thomas wanted to have complete access to Fuzion’s purchase records, sales records and inventory records for the period covered by the audit. However, no documents other than the ones already submitted by Ellyn during litigation on behalf of Yeung and FTC, were provided to Thomas during the course of her audit. Yeung and Ellyn advised Thomas that Shum was the only person with access to Fuzion’s records and that attempts to contact Shum had been unsuccessful. In early December 2007, Thomas attended again the premises of FCT to conduct follow-up procedures and was told that no further progress had been made and that any attempts to contact Shum had been unsuccessful.
[23] As a result of this audit, Thomas submitted her audit report on June 24, 2008 (Exhibits P-1 and D-2) (the Thomas report).
Alleged contemnor
[24] Yeung has denied being in contempt and of having had any wilful intention to breach the Order or to deliberately act in defiance of the authority of the Court. The following facts have been established by the alleged contemnor.
[25] Yeung completed a Bachelor Degree in Science in 1983 in Toronto and thereafter worked as a sales representative in the computer business. After his studies, he returned to Hong Kong where he stayed between 1983 and 1990. Following his return to Canada, Yeung first worked in Toronto for a company named Sun Moon Star, which was based in Taiwan. Shum was doing business with Sun Moon Star. Shum was then working for a company called the E-Prom. Sometime in 1997, Shum asked Yeung to work for him and take a participation in his new company. Fuzion had just been recently incorporated by Shum. Yeung acquired 15 percent of Fuzion’s shares. Lau held 20 percent. In turn, Shum held 65 percent of the shares. Later in 2001, Shum bought back Lau’s shares in Fuzion. Shum then held 85 percent of Fuzion’s shares.
[26] Shum was the president of Fuzion and Yeung’s direct boss. Yeung reported to Shum. Yeung received the title of Vice-President of Operations because this would look better with Fuzion’s clients. Yeung was basically responsible of the administration of the warehouse. He had no direct implication with the purchase of blank discs. This was Shum’s direct responsibility. In 2003, Fuzion employed some 15 persons. The only officer who had the power to sign checks, without a second signature, was Shum himself. Otherwise, two signatures were required, that of Yeung and another employee of Fuzion. Shum was the “purchasing guy” while Yeung was the one “who’s doing the administration”. Yeung would be signing reports based on the invoices and purchase orders, verify if the accounts were paid, etc. This also meant filing reports with CPCC.
[27] Yeung remembers being present when CPCC’s former auditors came to Fuzion’s premises in January and February 2003. The auditors came at three occasions. Fuzion’s premises were then located at 250 Steelcase Road in Markham, Ontario. Yeung requested Shum to take charge of the audit; however, Shum was too busy to come to Canada. The first two visits, Yeung was entirely cooperative but the auditors also wanted to have copies of the records. At that time, Yeung was instructed by Shum not to provide copies of the requested documents to the auditors until Fuzion had obtained legal advice.
[28] I pause to mention that Yeung explained in the course of his testimony that in December 2002 or January 2003, Shum was in the process of establishing a new business in China. Shum was no longer interested to work in Canada and was thinking to close down Fuzion. Would Yeung be interested in buying the company? Shum and Yeung continued to have discussions after the last visit of CPCC’s auditors in February 2003. Shum and Yeung finally reached a verbal agreement. Fuzion’s inventory was transferred on consignment to FTC on April 1st, 2003 for a sum close to $600,000.00 that Yeung could not pay immediately. Yeung would pay back Shum as sales would be made by FTC which had been incorporated by Yeung sometime in March 2003. Both companies had distinct GST numbers. The consignment transaction also included blank discs. The blank discs only represented around 4 or 5% of the acquired inventory, and Yeung remembered that they had been bought in Canada. As part of the deal, Shum had also asked that Fuzion’s employees be offered employment.
[29] In May 2003, Yeung resigned as a director of Fuzion. Although FTC hired many of the former employees of Fuzion, still, there were a few employees who continued to work directly for Shum or Fuzion in Toronto. During some three months Fuzion and FTC shared the same premises. However, Fuzion and FTC maintained separate accounting and financial records. FTC moved in July 2003 to their new location on McPherson Street, in Markham, Ontario. At this occasion, they did not take any other records than the customer base, accounts receivable and accounts payable that pertained to FTC. No documents relating to Fuzion’s business were taken from the Fuzion’s premises. We will see below that in 2004 and 2005 at the least Fuzion’s records were physically located at Shum’s parents’ house and under the control of Shum.
[30] Yeung took numerous steps in 2004 or 2005 following CPCC’s application, to obtain relevant documents from Fuzion pertaining to the blank discs which were the object of the consignment transaction. Yeung directly contacted Shum in China. Shum told him to verify the documents that were in boxes at his parents’ house located at 8 Sapphire Drive, Richmond Hill, Ontario. That same day, Yeung went to Shum’s parents and took with him 11 boxes of documents (the lent boxes). I pause to mention that the documentary evidence produced at the hearing by Yeung attests that Fuzion remained in operation for a while after the consignment transaction and started to use, in August 2003, a new business address, 8 Sapphire Drive, Richmond Hill, Ontario, that is Shum’s parents house (see 13 invoices from Fuzion to FTC, dated April 1, 2003 to March 31, 2004, tabs 13 to 25 of Exhibit D-1).
[31] In making the search in the lent boxes, Yeung was only interested by the documents which pertained to blank discs that were sold in April 2003 to FTC. Yeung did not search or felt obligated at that time to review documents relating to Fuzion’s sales or imports of blank discs prior to the consignment transaction. That said, Yeung was able to retrace in the boxes old supplier invoices relating to the blank discs covered by the consignment transaction (see 2003 invoices from FXPRO and Mars Computer Canada Inc. to Fuzion, tabs 8 to 12 of Exhibit D-1). With the help of Ma, Yeung verified this information with FTC’s inventory. Sometime in 2005, Shum made arrangements to have the lent boxes picked up at FTC’s premises and returned to him. Fuzion was dissolved effective February 17, 2005, that is some 20 months prior to the making of the Order of Justice von Finckenstein which was issued on October 25, 2006.
[32] After the issuance of the Order, several attempts were made by Yeung or his counsel to contact Shum by phone, e-mail and courrier. The testimony of Yeung in this regard is corroborated by the documents produced at the hearing (Exhibit D-1 and D-3).
[33] At that time, Yeung tried to contact Shum at the only telephone number that he had for him in China more than thirty times and was unable to get through, as the line appeared to have been disconnected.
[34] On November 23, 2006, a brief of relevant documents in possession of Yeung and of FTC was prepared and sent to CPCC’s counsel. Yeung confirmed that the brief included the documents which had been found in the lent boxes (Exhibit D-1).
[35] On November 26, 2007, following the judgment of the Federal Court of Appeal, a registered letter was sent by FTC and Yeung’s counsel to Shum’s address in China, but no further response was received from Shum. The letter reads as follows:
We are the lawyers for FTC Computers and Micky Yeung. We understand that you are the majority shareholder of Fuzion Technology Inc.
1. We request your prompt co-operation to enable FTC Computers and Mr. Yeung to comply with an Oct. 25/06 Order of the Federal Court of Canada, which require FTC Computers and Mr. Yeung to make available to the auditors of the Canadian Private Copying Collective (“CPCC”), for the purpose of an audit, all of the business, accounting and financial records of Fuzion Technology Corp. and 1565385 Ontario Inc., from which the Applicant’s auditors can readily ascertain: i. the amounts payable, and ii. the information required, under the Private Copying Tariffs certified by the Copyright Board.
2. Mr. Yeung and FTC Computers appealed this decision to the Federal Court of Appeal. By Order made on October 25, 2007, the Federal Court of Appeal dismissed the appeal. Therefore, Mr. Yeung and FTC Computers have an obligation to comply with the Federal Court Order of Oct 25-06.
3. FTC Computers and Mr. Yeung have already forwarded to CPCC all of the documents you previously made available.
4. However, CPCC wishes to examine further documents and computer records and intends to visit the premises of FTC Computers for this purpose on Nov. 26-07.
5. Kindly advise promptly where the documents of Fuzion Technology Corp. relating to the purchase of blank audio media are located and when they can be made available for the review of CPCC’s auditors.
A copy of the Federal Court’s Order and the Federal Court of Appeal’s Order are attached. In each case, the Order is at the bottom of the decision of the judge.
[36] On November 26, 2007, a similar request was also sent by e-mail to Shum from Ellyn informing Shum that he was the lawyer for FTC and Yeung and that pertaining to the Order further documents and records were urgently required for Fuzion (Exhibit D-3).
[37] Yeung also tried to contact Shum through numerous e-mails, all of which remained unanswered. The last e-mail sent on January 17, 2008 was automatically returned to Yeung.
[38] Again, the testimony of Shum on these various attempts is corroborated by the numerous documents produced at the hearing (Exhibit D-3).
[39] Finally, during the weekend of January 17, 2009, Yeung once again visited Shum parents’ house. Shum’s parents were not willing to provide him Shum’s personal contact information. Shum’s parents also said they did not know about any Fuzion’s documents.
[40] It is to be noted that Yeung’s contact information has not changed for the past ten years.
III. SUBMISSIONS MADE BY THE PARTIES
[41] On June 16, 2009, counsel presented their oral submissions with respect to this contempt proceeding and referred the Court in a number of authorities. Additional case law and written arguments were also submitted by counsel after the matter was taken under reserve.
Prosecuting Party
[42] CPCC submits that contempt has been proven beyond a reasonable doubt.
[43] The applicant submits that the Order is clear and its validity has been confirmed by the Federal Court of Appeal. The requested records were needed by CPCC’s auditors to complete the audit of Fuzion. Yeung knowingly breached the Order by failing to provide all records of Fuzion. That said, while CPCC is aware that Fuzion kept operating for a number of months after the consignment transaction, CPCC is not seeking that Yeung be found in contempt for not providing Fuzion’s documents which pertains to the period after the consignment transaction (ie. April to December 2003).
[44] Despite Yeung’s efforts to obtain Fuzion’s records from Shum after the Order and up to the date of the hearing, CPCC submits that this is a factor only relevant with respect to sentencing. Under the Order, Yeung, FTC and Fuzion were jointly and severally obliged to provide all of FTC and Fuzion’s records. The failure to do so by Yeung constitutes a breach of the Order and thus amounts to contempt. If Yeung could not obtain Fuzion’s records from Shum, CPCC submits that Yeung should have instead contacted Fuzion’s former suppliers and obtain from them copies of invoices of blank discs for all the years covered by the audit. Moreover, Yeung was careless and negligent in not assuring himself through former Fuzion employees, before the Order was made, that he could have access or obtain Fuzion’s records for the period prior to the consignment transaction. Therefore, Yeung did not act diligently in this case.
[45] CPCC does not seek the imprisonment of Yeung. The imposition of a fine of $5,000.00 will suffice to act as deterrent. Reasonable disbursements and costs on a solicitor-client basis totalling $33,806.73 should also be awarded to CPCC.
Alleged contemnor
[46] Yeung submits that the required elements of contempt have not been proven beyond a reasonable doubt.
[47] Yeung submits that he had no intention to contravene the Order or to defy a process of the Court (an offence for which incidentally he is not charged of under an order to appear before a judge). Any breach of the Order is purely technical and not deliberate on his part. Yeung submits that he has not the remote interest in not producing the requested documents of Fuzion and if he had them, he would give them today to CPCC. He is not personally liable for any past debt of Fuzion and there was no amount due by FTC with respect to the blank disks which were the object of the consignment transaction. Yeung submits that he does not have to answer for things done before the Order was issued, in any event, if the conduct of the parties prior to the issuance of the Order must be assessed, it is CPCC who were negligent. Two whole years elapsed between the time the application was made and the Order was issued by the Court. CPCC knew from the first day they made their application that Fuzion was not operating anymore. They failed to move for some mareva injunction, interlocutory order or mandatory order requiring that the books and records of Fuzion be immediately delivered pending the adjudication of their application.
[48] Following the issuance of the Order or the Judgment of the Federal Court of Appeal, Yeung submits that he acted in a diligent manner and did everything that could be reasonably done by himself to comply with the Order. Once the Order of the Court was issued, as far as FTC is concerned, Yeung complied with same, without abandoning his right to appeal the Order. Yeung submits that this is not a case of wilful blindness. He had no personal duty or obligation under the law to maintain or keep records. He could not anticipate in advance what would be the Order of the Court. There is no personal fault on his part. Shum is the one to totally blame. Yeung submits that Shum was at all relevant times the main shareholder and controlling mind of Fuzion. The evidence clearly establishes that, except for the short period of time where Yeung was in possession of some 11 boxes of documents belonging to Fuzion, it was Shum who had possession and control of the requested records. Shum has disappeared and Yeung does not know where he can be now. It has become impossible, and it is still impossible today, for Yeung to personally comply with the Order.
[49] Thus, Yeung submits that he should not be found in contempt, and subsidiary, if found in contempt, a symbolic fine of $1.00 should be imposed. Reasonable disbursements and costs on a solicitor-client basis totalling $25,681.41 should also be awarded to Yeung.
IV. LEGAL PRINCIPLES
[50] Contempt of court can be either civil or criminal (Poje v. British Columbia (Attorney General), [1953] 1 S.C.R. 516). In this case, the respondent Yeung is charged of civil contempt.
[51] Rules 466 to 472 of the Rules establish a code governing civil contempt.
[52] Under rule 466 of the Rules, and subject to rule 467 of the Rules, a person is guilty of contempt of Court who:
(a) at a hearing fails to maintain a respectful attitude, remain silent or refrain from showing approval or disapproval of the proceeding;
(b) disobeys a process or order of the Court;
(c) acts in such a way as to interfere with the orderly administration of justice, or to impair the authority or dignity of the Court;
(d) is an officer of the Court and fails to perform his or her duty; or
(e) is a sheriff or bailiff and does not execute a writ forthwith or does not make a return thereof or, in executing it, infringes a rule the contravention of which renders the sheriff or bailiff liable to a penalty.
(my underlining)
[53] The charge brought today against the respondent Yeung is having breached of paragraph 1 of the Order issued by Justice von Finckenstein. This offence is specifically contemplated by rule 466 (b) of the Rules and relates in particular to disobedience of an order of the Court.
[54] A finding of contempt is always a very serious matter. Civil contempt is, criminal or quasi-criminal. This is so because “[t]he penalty for contempt of court, even when it is used to enforce a purely private order, still involves an element of “public law”, because respect for the role and authority of the courts, one of the foundations of the rule of law, and a proper administration of justice are always at issue”: Vidéotron Ltée v. Industries Microlec Produits Electroniques Inc., [1992] 2 R.C.S. 1065, at page 1075.
[55] Such legal formalism is not surprising in view of the fact that, in this jurisdiction for instance, rule 472 (a) of the Rules provides that where a person is found to be in contempt, the judge may order the person be imprisoned for a period of less than five years or until the person complies with the order. Since there is a risk of deprivation of liberty of the individual charged of contempt, the requirements of fundamental justice prescribed by section 7 of the Canadian Charter of Rights and Freedoms Part I of the Constitution Act, 1982, being schedule B to the Canada Act 1982, c.11 (the Charter) apply in the case of contempt proceeding under the Rules (Frank v. Bottle (1994), 74 F.T.R 251). With respect to the right guaranteed by section 11 (c) of the Charter of an accused not to be compelled to testify, it already codified by Rule 470 (2). However, as decided by the Supreme Court of Canada in Vidéotron Ltée, this right exists even if the rules of procedure of civil contempt in some provincial jurisdictions are silent.
[56] There was some debate between counsel during the hearing on the nature of the offence created by Rule 466 (b),disobeying a process or order of the Court, which was said by the applicant’s counsel to be some kind of absolute liability offence (or strict liability offence) where mens rea is not a required element. I cannot accept this proposition.
[57] Rule 466 has to be read in conjunction with Rule 472. The fact is that imprisonment is always a potential result of a finding of contempt. We know that imprisonment cannot be imposed for an absolute liability offence since the judgment rendered by the Supreme Court of Canada in Reference re B.C. Motor Vehicle Act (British Columbia) s. 94(2), [1985] 2 S.C.R. 486. Thus, rule 466 (b) of the Rules cannot create an absolute liability offence. Otherwise, rules 466 (b) and 472 of the Rules could be the subject of a challenge under the Charter.
[58] That said, a person can certainly be punished for the wilful disobedience of an order of this Court when it is within that person’s capacity to comply with same. Where no satisfactory reason is given for non-compliance, that person may be found in contempt under rules 466 (b) and 472 of the Rules and in at least one case of civil contempt heard by this Court, the requisite element of mens rea was said to be a necessary requirement of the offence: Lyons Partnership, L.P. v. MacGregor (2000), 5 C.P.R. (4th) 157, at para. 5. (In Lyons, Justice Lemieux found the defendant in breach of an interlocutory injunction restraining the use of the Barney character pending trial).
[59] Moreover, mens rea is currently required by the Courts in the province of Quebec in civil contempt proceedings: Syndicat des travailleurs d’Olympia (CSN) v. Olymel, s.e.c., [2009] J.Q. no. 1142 at paras. 32 to 34 (Que. S.C.) 6; Canadian Union of Public Employees, Local 301 v. Montreal (City), [1997] 1 S.C.R. 793, at paras. 66 and 67; Daigle v. Corporation Municipale de la paroisse de St. Gabriel de Brandon [1991] R.D.J. 249 (Que. C.A.); Rocques v. Sans, J.E. 2004-790 (Que. C.A.). In Ontario, the Court of Appeal of Ontario recently re-asserted: “A contempt process – even a civil contempt process – is criminal in nature and requires proof of the contemptuous conduct beyond a reasonable doubt. The conduct must be wilful, deliberate and of a contumacious and egregious nature” (Anthes v. Wilson Estate, [2005] O.J. No. 1780, 197 O.A.C. 110, at para. 4).
[60] I am also convinced that intent, which corresponds to the “mental element” in a charge of civil contempt, is a necessary ingredient of any finding of guilt under the Rules. This includes the offence of disobeying a court order or process which is embodied by rule 466 (b) of the Rules. That said, rule 467 (3) of the Rules stipulates that the Court must be satisfied that there is a prima facie case that contempt has been committed. As stated recently by the Federal Court of Appeal: “To so satisfy the Court, the alleging party must show a prima facie case of wilful and contumacious conduct on the part of the contemnor” (Chaudhry v. Canada, 2008 FCA 173, at para. 6, referring to Imperial Chemical Industries PLC v. Apotex, [1989] F.C.J. No. 130; 24 C.P.R. (3d) 176 (F.C.T.D.)).
[61] In The Canadian Oxford Dictionary, Edited by Katherine Barber (Oxford University Press (2001), the words “contumacious” and “wilful” are defined as follows:
contumacy / n. stubborn refusal to obey or comply ? contumacious / adj. [Latin contumacia from contumax, perhaps related to tumre swell
wilful / adj. (also wilful) 1 (of an action or state) intentional, deliberate (wilful murder; wilful neglect; wilful disobedience). 2 (of a person obstinate, headstrong. ? wilfully adv. Wilfulness n. [Middle English from WILL² + -FUL].
[62] Justice Pelletier, as he then was, stated in a similar way in Mennes v. Warkworth Institution, 2001 FCT 571, at para. 5, that a show-cause motion “requires proof of a court order or other court process, proof of the respondent’s knowledge of the order or process and proof of a deliberate flouting of the court order or process” (my underlining).
[63] We are now at the second stage of the contempt proceeding. The test mentioned by the Federal Court of Appeal in Chaudhry, above, applies equally, except that all the required elements for finding the alleged contemnor in contempt must now be proven by the applicant “beyond a reasonable doubt”. Therefore, the acts constituting the alleged breaches must be intentional or deliberate, or they must arise out of a serious indifference or a contemptuous disregard at the Court. In that sense, “deliberate” certainly includes any conduct which is fully considered, not impulsive or accidental. In this respect, the “wilful blindness” of the alleged contemnor may also be considered: (Church of Scientology of Toronto v. Cooper), [1984] O.J. No. 1400; Canada (Minister of National Revenue – M.N.R.) v. Iwaschuk, 2004 FC 1602; Brilliant Trading Inc. v. Wong, 2005 FC 1214). This approach is consistent with the case law on civil contempt in various provinces referred to by the parties or consulted by the Court.
[64] Indeed, the resort to a “three-pronged test” to make a finding of civil contempt in the case of a court order or process is firmly established in Ontario: Bell Express Vu Limited Partnership v. Torroni, 2009 ONCA 85 and Hobbs v. Hobbs (2008), 240 O.A.C. 202, 54 R.F.L. (6th) 1 (C.A.). The test has been summarized the following way by the Ontario Court of Appeal in Prescott-Russell Services for Children and Adults v. G.(N) (2006), 82 O.R. (3d) 686, at para. 27:
The criteria applicable to a contempt of court conclusion are settled law. A three-pronged test is required. First, the order that was breached must state clearly and unequivocally what should and should not be done. Secondly, the party who disobeys the order must do so deliberately and wilfully. Thirdly, the evidence must show contempt beyond a reasonable doubt. Any doubt must clearly be resolved in favour of the person or entity alleged to have breached the order.
[65] While the test for civil contempt embodies a “wilful and contumacious conduct” on the part of the alleged contemnor (Chaudhry, above, at para. 6), it has sometime been said by this Court that the “wilful” element does not automatically equate to a need to establish mens rea, as this concept may be understood in the case of criminal contempt: LifeGear, Inc. v. Urus Industrial Corp., 2004 FC 21; Merck & Co. v. Apotex Inc., 2003 FCA 234, at para. 60; Telus Mobility v. Telecommunications Workers Union, 2002 FCT 656.
[66] As explained by the Supreme Court of Canada in United Nurses of Alberta v. Alberta (Attorney General), [1992] 1 S.C.R. 901, [1992] S.C.J. No. 37, at para. 55, to establish criminal contempt, it must be proven beyond a reasonable doubt that the accused defied or disobeyed a court order in a public way (the actus reus), with intent, knowledge or recklessness as to the fact that the public disobedience will tend to depreciate the authority of the court (the mens rea). In this respect, when it is clear the accused must have known his or her act of defiance will be public, it may be inferred that he or she was at least reckless as to whether the authority of the court would be brought into contempt. However, if the circumstances leave a reasonable doubt as to whether the breach was or be expected to have this public quality, then the necessary mens rea would not be present and the accused would be acquitted, even if the matter in fact became public.
[67] That said, I have no doubt that the intention to do or refuse to do what is ordered by a court in a civil proceeding is needed to establish a civil contempt in this jurisdiction or elsewhere in Canada. The particular offence created by rule 466 (b) of the Rules consists of the intentional doing or refusal to do an act which is in fact prohibited or mandated by the Order. The “fault element” (LifeGear, Inc., above, at paras. 22 and 23) or “mental element” will correspond to the proof beyond a reasonable doubt of the “wilful disobedience” of the court order by the alleged contemnor, combined with the “deliberate flouting” of the court order (Mennes, at para. 5). Thus, knowledge of the order by the alleged contemnor, and knowing disobedience of the order must both be proved by the applicant beyond a reasonable doubt: Sherman v. Canada Custom Revenue Agency, 2006 FC 1121, at para. 11.
[68] In conclusion on this point, like it has been decided in other jurisdictions, the intention of the alleged contemnor as manifested in its action or inaction is clearly relevant not only for the purpose of determining the appropriate penalty but also in determining whether or not contempt existed (in addition to cases already cited: Morrow, Power v. Newfoundland Telephone Co., 121 Nfld. & P.E.I.R. 334, [1994] N.J. No. 197 at paras. 18 and 19).
Proof beyond a reasonable doubt
[69] At the hearing before the judge, the prosecuting party will be the first to present his evidence of contempt. The alleged contemnor may or may not adduce evidence. This flows from the fact that the prosecuting party bears the ultimate burden to prove beyond a reasonable doubt that there is contempt. As the case may be, the alleged contemnor may wish to testify at the hearing to explain why he or she did not comply with the court order. This is also consistent with the purpose of the hearing which is to permit the alleged contemnor “to present any defen