Hazelton Lanes Inc. et al. v. 1707590 Ontario Ltd. et al., 2014 ONCA 793

• Judge: Sharpe, Simmons and Benotto, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: November 12, 2014
• Jurisdiction: Ontario
• Citations: 2014 ONCA 793;(2014), 326 O.A.C. 301 (CA)

Hazelton Lanes Inc. v. 1707590 Ont. (2014), 326 O.A.C. 301 (CA)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. NO.008

Hazelton Lanes Inc. and Stephen Chan (plaintiffs/respondents) v. 1707590 Ontario Limited and John Faraci , Adriana Verrelli, Susete Antunes, Rose Sperandeo, 1203279 Ontario Limited and Isis Societe Co. Ltd. (defendants/ appellants )

(C57686; C58205; C58206; 2014 ONCA 793)

Indexed As: Hazelton Lanes Inc. et al. v. 1707590 Ontario Ltd. et al.

Ontario Court of Appeal

Sharpe, Simmons and Benotto, JJ.A.

November 12, 2014.

Summary:

The plaintiffs brought a commercial action for damages against the defendants. An estimated three day trial took up 50 days of court time, including 20 days of motions. The action was not decided on the merits. On day 36, the trial judge permitted the plaintiffs to add several defendants and new causes of action, including fraud and conspiracy. At the trial judge's suggestion, the plaintiffs applied for, and the trial judge granted, an ex parte Mareva injunction against the defendants based on findings that all had engaged in a "fraudulent scheme" to hide assets. The trial judge also ordered one of the defendants (Faraci) to "comply fully" within six days with 19 directions requiring Faraci to obtain, produce and organize for inspection masses of documents that the plaintiffs had not previously requested. Although Faraci and his numbered company produced many of the documents, the trial judge found them in contempt for failing to "fully" comply with the 19 directions. As a remedy, the defendants were ordered to post $35,000 as security for costs. When that order was not complied with, the trial judge struck the defendants' statement of defence and counterclaim and ultimately granted the plaintiffs partial summary judgment and $650,000 in costs on a substantial indemnity basis. The defendants appealed the contempt order, the order striking the statement of defence and counterclaim, and the granting of partial summary judgment and costs. The plaintiffs argued, inter alia, a reasonable apprehension of bias.

The Ontario Court of Appeal allowed the appeal on the ground of reasonable apprehension of bias by the trial judge. The court set aside the judgments and orders under appeal and ordered a new trial before a different trial judge.

Courts - Topic 691

Courts - Disqualification - Bias - Reasonable apprehension of bias - The plaintiffs brought a commercial action for damages against the defendants - The action was not decided on the merits - On day 36, the trial judge permitted the plaintiffs to add several defendants and new causes of action, including fraud and conspiracy - At the trial judge's suggestion, the plaintiffs applied for, and the trial judge granted, an ex parte Mareva injunction against the defendants based on findings that all had engaged in a "fraudulent scheme" to hide assets - The trial judge ordered one of the defendants (Faraci) to "comply fully" within six days with 19 directions requiring Faraci to obtain, produce and organize for inspection masses of documents that the plaintiffs had not previously requested - Although many of the documents were produced, the trial judge found the defendants in contempt for failing to "fully" comply with the 19 directions - As a remedy, the defendants were ordered to post $35,000 as security for costs - When that security was not posted, the trial judge struck the defendants' statement of defence and counterclaim and granted the plaintiffs partial summary judgment and $650,000 in costs on a substantial indemnity basis - The defendants appealed the contempt order, the order striking the statement of defence and counterclaim, and the granting of partial summary judgment and costs on the ground of a reasonable apprehension of bias - The Ontario Court of Appeal allowed the appeal and ordered a new trial before a different trial judge - Three aspects of the trial judge's conduct raised a reasonable apprehension of bias: "i) statements and findings made during the trial indicating that the trial judge had prejudged Faraci's conduct and credibility - namely, the trial judge's interjections and adverse comments on Faraci's credibility during Faraci's cross-examination; his suggestion that plaintiffs' counsel bring a Mareva injunction motion; and his findings on the Mareva injunction motion and a related ruling that Faraci had engaged in a fraudulent scheme to divest himself of assets; ii) the 19 directions for mid-trial production of masses of documents that had not previously been requested and the relevance and probative value of which had not been established; and iii) the finding that Faraci and 170 were in contempt for failing to comply fully with the 19 mid-trial directions, where the ruling contained no analysis of the extent to which Faraci and 170 had complied or of the validity of their reasons for any non-compliance." - See paragraphs 58 to 66.

Cases Noticed:

Committee for Justice and Liberty Foundation et al. v. National Energy Board et al., [1978] 1 S.C.R. 369; 9 N.R. 115, refd to. [para. 58].

R. v. R.D.S., [1997] 3 S.C.R. 484; 218 N.R. 1; 161 N.S.R.(2d) 241; 477 A.P.R. 241, refd to. [para. 59].

Metropolitan Properties Co. (F.G.C.) Ltd. v. Lannon, [1968] 3 All E.R. 304 (C.A.), refd to. [para. 60].

Benedict v. Ontario (2000), 136 O.A.C. 259; 51 O.R.(3d) 147 (C.A.), refd to. [para. 61].

Pinochet, Re, [1999] 1 All. E.R. 577; 237 N.R. 201 (H.L.), refd to. [para. 62].

R. v. Bow Street Metropolitan Stipendiary Magistrate et al. - see Pinochet, Re.

Wewayakum Indian Band v. Canada and Wewayakai Indian Band, [2003] 2 S.C.R. 259; 309 N.R. 201, refd to. [para. 63].

Chippewas of Mnjikaning First Nation v. Ontario (Minister Responsible for Native Affairs) et al. (2010), 265 O.A.C. 247; 2010 ONCA 47, leave to appeal refused (2010), 409 N.R. 396 (S.C.C.), refd to. [para. 64].

Marchand v. Public General Hospital Society of Chatham et al. (2001), 138 O.A.C. 201; 51 O.R.(3d) 97 (C.A.), leave to appeal refused (2001), 282 N.R. 397; 156 O.A.C. 358 (S.C.C.), refd to. [para. 64].

Counsel:

Milton A. Davis, Ronald D. Davis and Robert Macdonald, for the appellants;

William A. Chalmers, for the respondents.

This appeal was heard on June 23, 2014, before Sharpe, Simmons and Benotto, JJ.A., of the Ontario Court of Appeal.

On November 12, 2014, Simmons, J.A., released the following judgment for the Court of Appeal.