WATSON, Rowbotham and Schutz JJA

10.52: Declaration of civil contempt

Case Summary

The Appellant, 829693 Alberta Ltd. (“829”), challenged the Case Management Justice’s finding of contempt pursuant to Rule 10.52 for 829’s failure to produce financial statements in accordance with three production orders. 829 also challenged the Case Management Justice’s choice of remedy in striking 829’s pleadings and awarding full indemnity Costs against it.

The Respondent, Envacon Inc. (“Envacon”) had leased a portion of a building owned by 829 and, for a time, the parties also shared a computer server. In 2011, Envacon terminated the lease and commenced an Action alleging the lease was invalid, and 829 counter-claimed seeking damages alleging missing equipment and files. Over the course of the litigation, three Orders to produce information pertaining to 829’s financial statements (two for “financial statements” and one for “unconsolidated financial statements”) were granted (the “POs”). The Case Management Justice found 829 in contempt for failing to produce any of the requested financial statements and gave 829 an opportunity to purge its contempt by granting it a further extension to produce the unconsolidated financial statements requested in Production Order 3 (“PO 3”), failing which 829’s pleadings would be struck. The Case Management Justice also ordered Costs on a full indemnity basis for all Court Actions related to obtaining the financial records.

On Appeal, 829 argued that the Case Management Justice erred by, inter alia: (i) holding it in contempt for failing to create records that never existed or requiring it to recreate records using information that could not be located; and (ii) imposing unreasonable penalties. The Court of Appeal noted that the a finding of civil contempt requires proof beyond a reasonable doubt of an intentional act or omission that is in fact a breach of a clear order of which the alleged contemnor has notice. A review of the jurisprudence requires three elements to be proven: (i) the order must state clearly and unequivocally what should be done (or not done); (ii) the alleged contemnor must have actual notice of the order; and (iii) the alleged contemnor must have intentionally failed to do the act compelled by the order.

The Court emphasized that in cases where there is no element of public defiance, civil contempt should be seen primarily as coercive rather than punitive. The Court concluded that there was no contempt of POs 1 and 2 because there was some uncertainty as to whether Envacon was required to produce unconsolidated financial statements and, therefore, these Orders did not meet the requirement of a “clear order”. The Court was satisfied that PO 3 was clear in its requirement to produce unconsolidated financial statements. Accordingly, the Case Management Justice’s remedy should have been coercive and not punitive in order to bring about compliance. Therefore, the Court concluded that it was appropriate to set aside the striking of 829’s pleadings and varied the penalty imposed. The Court found that Envacon was entitled to Costs on a full indemnity basis for only those steps taken in relation to securing compliance with PO 3.

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