2017 ABQB 538, 2017 ABQB 538

Court of Queen’s Bench of Alberta Citation: 473440 Alberta Ltd v Lenaco Homes Masterbuilder Inc, 2017 ABQB 538 Date: 20170906 Docket: 1403 14123 Registry: Edmonton

Between: 473440 Alberta Ltd. and Evelyn Faye Morrison Plaintiffs - and - Lenaco Homes Masterbuilder Inc., Lenaco Homes Ltd., Ismail Naboulsi, John Contessa, John Doe and Jane Doe Defendants And between: Ismail Naboulsi Plaintiff by Counterclaim - and - 473440 Alberta Ltd., Evelyn Faye Morrison, James Morrison, Reid-Built Homes Ltd., Reid Worldwide Corporation, John Doe and Jane Doe Defendants by Counterclaim _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice K.P. Feehan _______________________________________________________

I. Overview [ 1 ] The Applicants, Masterbuilder and Ismail Naboulsi, apply to have the Respondents, 473440 and Reid Worldwide, as well as their legal counsel in two actions, Hannan, Turnbull Wallace and Alcock, held in civil contempt for breach of the confidentiality provision of a Production Order of this Court. The Applicants have not established that the Respondents’ actions amount to civil contempt. However, it is appropriate for the Court to grant procedural orders to uphold the rule of law, and the dignity and processes of the Court. II. Issues [ 2 ] The Court must determine the following issues: 1.

Did the confidentiality provision of the Production Order clearly and unequivocally state what should and should not be done? 2. Did the Respondents have actual or inferred knowledge of the confidentiality provision of the Production Order, or act in wilful blindness to those provisions? 3. Did the Respondents intentionally do the act prohibited by the confidentiality provision of the Production Order? 4. Did the Respondents have a reasonable excuse for their actions? 5.

In any event of the finding on civil contempt, should procedural orders be granted to uphold the rule of law, and the dignity and processes of the Court? [ 3 ] The answers to the issues posed are “no” to issues 1, and 2 (in part), and “yes” to issues 2 (in part), 3, 4 and 5. III. History of the Litigation [ 4 ] This application relates to the current Lenaco action before this Court, and the Vivo action involving many of the same parties.

The parties and relationships in each action are set out in the following diagrams: Lenaco Action [ 5 ] In the Lenaco action, commenced September 29, 2014, 473440 and Faye Morrison allege that Ismail Naboulsi and Contessa secretly began carrying on Lenaco’s business through a new company, Masterbuilder, and secretly transferred the business assets, name and goodwill of Lenaco to Masterbuilder without Faye Morrison’s or 473440’s knowledge or consent, for the express purpose of excluding Faye Morrison from the business.

Faye Morrison and 473440 advance claims in shareholder oppression, constructive trust, knowing receipt, tracing, unjust enrichment, conversion, knowing or dishonest assistance, and debt.

[ 6 ] A counterclaim in the Lenaco action was filed by Ismail Naboulsi on November 3, 2015 against Faye Morrison, 473440, James Morrison, Reid-Built Homes, and Reid Worldwide alleging conspiracy to cause injury to him and his businesses, unlawful interception of a private communication, and abuse of process, which he says was motivated by malice, spite and vengeance. [ 7 ] Legal counsel for Faye Morrison and 473440 in the Lenaco Action were Hannan and Turnbull Wallace, of the Burnet, Duckworth & Palmer firm. [ 8 ] In the Vivo action, commenced August 25, 2015, Reid Worldwide and 473440 sued Vivo Ristorante, Ismail Naboulsi, certain corporations of Ismail and Grace Naboulsi, and others, alleging fraudulent misrepresentations, fraud, concealment of material facts, breach of trust, knowing assistance in breach of trust, knowing receipt of trust funds, and oppression. [ 9 ] On April 7, 2016, a counterclaim was filed in the Vivo action alleging conspiracy between Reid Worldwide, 473440, Faye and James Morrison, and abuse of process.

Legal counsel for Reid Worldwide and 473440 were Alcock and Hannan, of the Burnet, Duckworth & Palmer firm. [ 10 ] In addition to the Lenaco and Vivo actions, there are seven other actions before the courts involving these parties. [ 11 ] The numerous actions between these parties have involved aggressive litigation.

The Lenaco action has already seen one unsuccessful civil contempt application by Faye Morrison and 473440 against Lenaco and Masterbuilder (oral decision of Ackerl J. on September 18, 2015), and a successful application by Faye Morrison and 473440 to remove legal counsel for Masterbuilder, Lenaco, Ismail Naboulsi and Contessa ( 473440 Alberta Ltd v Lenaco Homes Masterbuilder Inc , 2016 ABQB 435 , [2016] AJ No 881). The Procedure Card in the Lenaco action shows 117 entries and in the Vivo action, 42 entries. IV. History of the Application A.

Background to the Production Order [ 12 ] On December 16, 2014, Faye Morrison and 473440 brought an application to prohibit Lenaco and Masterbuilder from transferring, selling or assigning real property, freezing their credit facilities, prohibiting them from declaring or paying dividends or making distribution, loans or advances outside the ordinary course of business, directing them to preserve and not modify nor delete records, setting aside the sale of all or substantially all of the assets of Lenaco to Masterbuilder, requiring an accounting for profits and advantages, and directing that Lenaco be wound up and dissolved.

As a result of that application, a first Consent Preservation Order was issued on December 19, 2014, essentially obliging Lenaco and Masterbuilder to conduct themselves in the ordinary course of business. B. The Production Order and Confidentiality Provisions [ 13 ] On April 22, 2015, the parties attended before the Court on a receivership application arising out of the application of December 16, 2014.

The parties agreed to a second Preservation Order and a Production Order requiring the disclosure of Lenaco’s and Masterbuilder’s financial records. [ 14 ] On the Production Order application, Hannan, counsel for Faye Morrison and 473440, said: ...we’ve, agreed on the language for the form of order, on disclosure of records by the defendants to – the defendant companies to the plaintiff company.

Effectively the books, records and info of -- the information of both companies will be disclosed for the purpose of examining the business and financial affairs of the companies, subject to one exception, which is that any books, records or information of the Lenaco Masterbuilder company will be subject to effectively a for your eyes only agreement such that those records will be viewed by 473’s legal counsel and accounting professionals that will execute a confidentiality agreement, and that exception is based around the idea that Lenaco Homes Masterbuilder is a home building company.

The husband of Faye Morrison is the CEO of a competing company [Reid- Built Homes]. [Transcript, April 22, 2015; p 2, ll 20-31; emphasis added] [ 15 ] The form of Production Order was subject to several drafts between counsel. The final form was agreed to on June 3 and granted on June 10, 2015. The terms of the Production Order are the subject of this contempt application and provide in full: 1.

Subject to paragraph 2, the Defendant companies shall provide 473440 Alberta Ltd. with copies of, or access to, the books, records and information of the Defendant companies reasonably required to examine the business and financial affairs of the companies. 2.

With respect to any Lenaco Homes Masterbuilder books, records and information provided in accordance with paragraph 1 of this Order, such books, records and information will not be disclosed or produced to anyone other than Plaintiff’s legal counsel and its accounting professionals who have executed or agreed to a Confidentiality Agreement or a Confidentiality Order of this Honourable Court. 3.

Any party may apply to vary this Order on five days’ notice. [Emphasis added] [ 16 ] In correspondence dated July 22, 2015, counsel for Faye Morrison and 473440 suggested that until a proposed form of confidentiality agreement was in place, as contemplated in the Production Order, records produced would be given to their accountants

“under the usual implied undertaking conditions...that prevents us (and our accountants) from sharing your clients’ records and information with Mr. Morrison (which I understood was the sole basis for making the Confidentiality Agreement part of the Order)”. In a reply on the same date, counsel for Lenaco and Masterbuilder indicated he “could live with the implied undertaking” but wanted to ensure that Faye Morrison and 473440 “also understand the obligations of the implied undertaking in relation to disclosure of information to Mr. Morrison”.

Counsel for Faye Morrison and 473440 indicated, again on same date, that both Faye and James Morrison were “aware of Faye’s implied undertaking obligations”. [ 17 ] No confidentiality agreement was ever finalized, nor was any confidentiality order ever issued by the Court. [ 18 ] On July 23, 2015, Hannan, on behalf of Faye Morrison and 473440, provided their retained accountants, Craig Fryzuk and Sarah Hawco of BDO Canada Limited, with copies of the Preservation Orders and Production Order.

Hannan stated in the email: You will see in the [Production Order] that there is a requirement that our accountants sign a Confidentiality Agreement in connection with receiving documents produced under the order. Opposing counsel...and I agreed that although such an agreement is not yet signed..., you are bound under the usual implied undertaking obligations and can proceed with your work. The implied undertaking simply means that the documents can’t be used other than for the purposes of the litigation.

Their specific concern is the disclosure of Lenaco information to Jim Morrison who is the CEO of a competing business to Lenaco. [ 19 ] Records production from Lenaco and Masterbuilder was provided to counsel for Faye Morrison and 473440, and through them to BDO, by letters of July 17, September 9, September 30, October 15, November 18, November 30, and December 1, 2015, and May 24, 2016.

Each of the cover letters providing records specifically indicate that the production was made “pursuant to the confidentiality provisions of that [Production] Order”, or words to that effect, or referenced earlier production letters containing that proviso. [ 20 ] During the course of records production, the counterclaim was filed on November 3, 2015, adding James Morrison, Reid- Built Homes and Reid Worldwide as defendants by counterclaim, as a result of which correspondence was exchanged between counsel as to the effect of the counterclaim on the confidentiality provisions in the Production Order. [ 21 ] On November 23, 2015, Turnbull Wallace wrote to counsel for Lenaco and Masterbuilder indicating that with the recent filing of the counterclaim, the Production Order would need to be varied: The confidentiality

section of the Production Order was intended as additional security to reinforce the pre-existing implied undertaking rule and was not intended to block the Parties within the litigation from reviewing and having access to the records and documents produced and relevant to the Action itself. However, on the face of it, the wording of the Order now improperly restricts the Parties within the Action and is keeping BD&P from properly working with and taking instruction from our clients.

She suggested that amendment of the Production Order was appropriate so that all current parties to the action would have access to the materials produced under the Production Order. [ 22 ] On November 24, 2015, counsel for Lenaco and Masterbuilder responded: Rather than variation of the Order, it would seem to me more appropriate for the Order to be deemed to have been satisfied pursuant to Rule 9.22 [Application that judgment or order has been satisfied]. There has already been considerable confusing overlap between enforcement of the Order and disclosure of information pursuant to

Part 5 of the Rules [Disclosure of Information, Rules 5.1-5.44]. For the purpose of ongoing litigation the disclosure provisions of the Rules are satisfactory for the purpose of exchange of relevant and material records, subject of course to impl[ied] confidentiality.

There is no present need for any Production Order. [ 23 ] Discussion between counsel continued about the need for further production and whether it would be pursuant to the Production Order or an “implied undertaking”, now an express undertaking pursuant to Rule 5.33, Confidentiality and use of information (see also Rule 6.11(1)(f), Evidence at application hearings and 8.17(3), Proving facts). [ 24 ] On November 27, 2015, Turnbull Wallace rejected the proposal that there was no further need for production, indicating: “Our clients will maintain the [Production] Order at this time.” [ 25 ] She further wrote: However, we also note from your letter, you do not appear to consider the documents produced under the [Production] Order (and in furtherance of

part 5 of the Rules) to require a special shield of confidentiality. As previously stated, we believe it is appropriate to share the documents produced in this Action with all named parties of the Action as is contemplated under the Rules, and will do so on a go- forward basis. Please advise immediately should your client have any concerns with the parties to the Action receiving the documentation that has been produced in the Action under the Production Order or in relation to

Part 5 of the Rules. [ 26 ] On November 30, 2015, counsel for Lenaco and Masterbuilder indicated there had been a “misunderstanding” concerning his letter of November 24, 2015 and wrote: ...those particular records which had been produced pursuant to

part 5 of the Rules are subject to implied confidentiality and do not require a “special shield”. However, records produced pursuant to the [Production] Order remain subject to the provisions of that Order. He admitted, however, that there would be “some overlap” with respect to the records produced through those two methods.

[ 27 ] On April 14, 2016, Turnbull Wallace wrote again to counsel for Lenaco and Masterbuilder requesting additional information “Further to the [Production] Order filed June 10, 2015”. [ 28 ] On April 28, 2016, counsel for Lenaco and Masterbuilder responded to the request for additional information “arising from the June 10, 2015 [Production] Order” and indicating that the records sent “from June to December 2015” had been sent in compliance with that Production Order. [ 29 ] On May 6, 2016, Turnbull Wallace responded that she did not believe “compliance with the [Production] Order has been made in finality” and requested further documents from both Lenaco and Masterbuilder pursuant to the Order. [ 30 ] On May 10, 2016, counsel for Lenaco and Masterbuilder disagreed that the Production Order required further information on a go-forward basis and wrote that the purpose of the Production Order was to obtain information which would allow valuation of the shares of Faye Morrison and 473440 at the time certain assets were transferred to Masterbuilder. [ 31 ] Despite this lengthy exchange between counsel, no application was ever made to the Court to vary the terms of the Production Order or its confidentiality provision, nor for relief from the now express confidentiality undertaking pursuant to Rule 5.33(1)(a), nor for an order that the confidentiality provision of the Production Order had been satisfied pursuant to Rule 9.22(1), nor, with respect to the Vivo action, an order for evidence taken in one action to be utilized in another pursuant to Rule 6.11(1)(f).

C. Disclosure of Masterbuilder Information [ 32 ] On July 11, 2016, Hawco and Fryzuk of BDO finalized a 48-page report reviewing the business affairs of Lenaco and Masterbuilder from 2011 to July 2016. They indicated they had reviewed the accounting records, tax returns, banking and credit card records, land titles, and corporate searches produced by Lenaco and Masterbuilder “pursuant to the [Production] Order filed June 10, 2015”.

They disclosed that the information upon which they relied included Masterbuilder’s 2014/2015 general ledger, and throughout the report referenced various sources of Masterbuilder information: a. ledgers and source documentation such as bank statements and credit card statements post May 2014 (para 21); b. cost of goods sold account for the period ended October 1, 2015 (paras 24 & 103); c. records with respect to wages and management fees, particularly in 2014 (paras 26 & 63); d. records for purchase of 2014 and 2015 Edmonton Oilers tickets and 2014 memberships at the Royal Mayfair Golf Club (paras 52 & 53); e. cash payment and loan records beginning July 14, 2014 (paras 67, 70, 72, 74 & 75); f. revenue records for the eight months ended December 31, 2014 (para 79); g. journal entries for the year ending December 31, 2015 (paras 87 & 104); h. legal fee payments in August 2015 (para 97); i. consulting invoices for July 2015 (para 100); j. detailed job allocations to December 31, 2014 (paras 106 & 109); and k. account books from January 1 through September 30, 2015 (paras 118-129). [ 33 ] In the BDO report, the authors were critical of Lenaco and Masterbuilder, citing: a. improper accounting; b. improperly stated tax returns; c. excessive personal expenses of the directors; d. inappropriate or improper related-party transactions; e. the purchase of personal homes for the directors and related third parties with company funds; f. improper land purchases and joint venture agreements; g. transactions outside the normal course of the companies’ business operations; h. extraction of funds from the companies for the benefit of the directors and likely detriment to Faye Morrison; i. writing off existing liabilities which were owing to Faye Morrison; j. writing off of amounts due from Ismail Naboulsi and Contessa; and k. use of the cost of goods sold account as a “slush account...to offset other journal entries unrelated to revenue production, to remove certain liabilities from the Balance Sheet without having to properly account for them, and to bury expenses that were potentially improper”.

[ 34 ] A draft copy of the BDO report was provided by counsel to Faye Morrison. [ 35 ] On July 11, 2016, Faye Morrison and 473440 applied again for the appointment of a receiver for the operations of Lenaco and Masterbuilder, returnable July 19, 2016. That application was supported by the affidavit of Fryzuk of July 12, 2016, which affidavit attached as Exhibit “C” the BDO report of July 11, 2016, but without supporting appendices, documents or records.

The only person to receive copies of the appendices was counsel for Lenaco and Masterbuilder. [ 36 ] The receivership application and the Fryzuk affidavit were served on Grace Naboulsi, the wife of Ismail Naboulsi, as a “direct or indirect owner of Lenaco and...Masterbuilder”, and Conte Holdings, to the attention of Contessa, on July 12, 2016 by correspondence signed by Turnbull Wallace for Hannan.

Those service letters summarized a number of conclusions from the BDO report and concluded: In our view, there has been serious criminal conduct in relation to the Company’s financial affairs and we have recommended to our client that a complaint be filed with the Edmonton Police Service. [ 37 ] Additionally, on July 20, 2016, Turnbull Wallace sent an electronic copy of the filed affidavit of Fryzuk by email to Faye Morrison, who in turn showed it to James Morrison. D.

Derivative Disclosure in the Vivo Action [ 38 ] On May 12, 2016, Reid Worldwide and 473440 brought an application in the Vivo action to set aside the licensing of certain trademarks pursuant to a draft Trademark License Agreement. Reid Worldwide and 473440 were represented by Alcock, assisted by Hannan. [ 39 ] Alcock testified that when speaking to Hannan and Turnbull Wallace, he learned of and received a copy of the BDO report. [ 40 ] On July 25, 2016, Alcock had Brandi Hughes, a legal assistant at Burnet, Duckworth & Palmer, swear an affidavit attaching as Exhibit “A” the BDO report of July 11, 2016.

On July 27, 2016, he sent an unfiled copy to counsel for Reid Worldwide and 473440, and also to another counsel in the Vivo action not involved in the Lenaco action. [ 41 ] During the application on July 27, 2016, Alcock sought to enter into evidence the unfiled Hughes affidavit with the attached BDO report but the Court refused to admit the report into evidence and dismissed the application. During the course of the application, Alcock, on his own initiative, undertook to the Court to file the affidavit with the attached BDO report in the Vivo action, and he did so on July 29, 2016. V.

Alleged Breaches [ 42 ] Counsel for Masterbuilder and Ismail Naboulsi allege the following breaches of the Production Order: 1. production of the draft BDO report to Faye Morrison; 2. attachment of the finalized July 11, 2016 BDO report to the July 12, 2016 affidavit of Fryzuk; 3. service of the Fryzuk affidavit, with attached BDO report, on Grace Naboulsi and Conte Holdings on July 12, 2016; 4. provision of the filed Fryzuk affidavit, with attached BDO report, to Faye Morrison on July 20, 2016, who in turn showed it to James Morrison; 5. attachment of the BDO report to the July 25, 2016 Hughes affidavit; 6. production of the Hughes affidavit, with attached BDO report, on July 27, 2016 to other counsel in the Vivo action who were not involved in the Lenaco action; and 7. filing of the Hughes affidavit, with attached BDO report, in the Vivo Action, on July 29, 2016. [ 43 ] Although there is no dispute that each of these actions occurred, the issue before this Court is whether such actions constitute civil contempt under the common law and pursuant to the Alberta Rules of Court , Alta Reg 124/2010.

VI. Law [ 44 ] Courts have inherent jurisdiction to deal with contempt of their orders.

In the leading case on the common law test for civil contempt, Carey v Laiken , 2015 SCC 17 , [2015] 2 SCR 79, the Supreme Court endorsed the following principles: − contempt of court rests on the power of the court to uphold its dignity and process, and the rule of law directly depends on the ability of the courts to enforce their process and maintain their dignity and respect: para 30; − the purpose of a contempt order is first and foremost a declaration that a party has acted in defiance of a court order: para 30; − use of the contempt power is discretionary; it should be used cautiously and with great restraint, not to obtain routine compliance with court orders nor as a mere means of enforcing judgments; it is an enforcement power of last rather than first resort: paras 31 & 36; − contempt proceedings are bifurcated to address first liability and then penalty: para 18;

− in order to establish liability, each of the following three elements of civil contempt must be established beyond a reasonabledoubt, para 32: 1. the order alleged to have been breached must state clearly and unequivocally what should and should not be done; forexample, an order may be found to be unclear if it is missing an essential detail about where, when or to whom it applies, if itincorporates overly broad language, or if external circumstances have obscured its meaning: para 33; 2. the alleged contemnor must have had actual, or inferred, knowledge of it or have been wilfully blind to the order: para 34;and 3. the alleged contemnor must have intentionally done the act that the order prohibits, or intentionally failed to do the act thatthe order compels; it is not necessary that the alleged contemnor intended to disobey the order; “contumacy” [perverse and obstinateresistance or disobedience] goes to penalty rather than liability; the alleged contemnor cannot rely on a misinterpretation of a clear orderor legal advice to shield it from a contempt finding; similarly, lawyers cannot rely on their own legal advice as a shield: paras 35, 38, 42& 44. [45] The Supreme Court in Carey confirmed prior law to the effect that the mens rea required is only an intention to commit theprohibited act or the intentional, wilful or reckless failure to perform the required act: Precision Forest Industries v Cox, 2013 ABQB524, [2013] AJ No 1000 at para 41. [46] Rooke J. (as he then was) in Point on the Bow Development Ltd v Kelly (William) & Sons Plumbing Contractors Ltd, 2006ABQB 775 at para 21, 405 AR 1 noted that while the act that constitutes contempt must be intentional, rather than accidental, neither ageneral intent to do the act forbidden nor a specific intent to disobey is required.

See also Michel v LaFrentz, 1998 ABCA 231, [1998]AJ No 1489 at para 24; Saunders v Saunders, 2017 ABQB 163, [2017] AJ No 222 at para 11; Broda v Broda, 2004 ABCA 72, [2004]AJ No 180 at para 7; FIC Real Estate Fund Ltd v Lennie, 2014 ABQB 105, [2014] AJ No 184 at paras 82 & 83; 2363523 Ontario Inc vNowack, 2016 ONCA 951, [2016] OJ No 6508 at para 24. [47] Sloppy and unacceptable practice, without more, does not amount to contempt: Miller v 32807 Alberta Ltd (1986), 1986ABCA 123 , 70 AR 303, [1986] AJ No 407 at para 3 (CA); Precision Forest Industries at para 31; Jutte v Jutte, 2007 ABQB191, [2007] AJ No 426 at para 44. [48] In Alberta, Rule 10.52(3) additionally provides: 10.52(3) A judge may declare a person to be in civil contempt of Court if (

a) the person, without reasonable excuse, (

i) does not comply with an order ... of which the person has actual knowledge... . [Emphasis added] [49] There is a difference of opinion in the case law as to the onus in relation to reasonable excuse. Rules 10.51 and 10.52contemplate that the alleged contemnor will appear to “show cause” why that person should not be declared to be in civil contempt.

Thatbegs the question as to what, if any, onus lies on the alleged contemnor in relation to a reasonable excuse. [50] In Schitthelm v Kelemen, 2013 ABQB 42, [2013] AJ No 154 at para 43, Yamauchi J. relied upon Calgary (City) v Chisan(2002), 32 MPLR (3rd) 256, [2002] AJ No 1713 (QB), in stating that the onus of proof remains at all times on the applicant. YamauchiJ. considered Charter case law in holding that Rule 10.52(3)(a)(iii) does not shift the overall burden of proof.

Rather, once the applicanthas proven all of the elements beyond a reasonable doubt, the evidential burden shifts to the alleged contemnor to “show cause” why thecourt should not find him in contempt. [51] In para 79 of FIC Real Estate Fund, Graesser J. held that once the applicant has established beyond a reasonable doubt thethree elements of contempt, the onus switches to the alleged contemnor to establish a reasonable excuse on a balance of probabilities. [52] Both Schitthelm and FIC were decided before the Supreme Court issued its decision in Carey.

The Supreme Court in Careynoted at para 42 that civil contempt is quasi-criminal in nature, such that proof is required beyond a reasonable doubt. The Court inCarey also noted that one purpose of sentencing for civil contempt is punishment for breach of a court order: para 31. Indeed,imprisonment is available in Alberta as a sanction for contempt: Rule 10.53(1).

The Court also has inherent power to impose sanctionsnot specified in the Rule and to fashion remedies not prohibited by the Rules or common law: Point on the Bow Developments Ltd vWilliam Kelly & Sons Plumbing Contractors Ltd, 2007 ABCA 204, [2007] AJ No 655 at para 14. [53] In Amalgamated Transit Union, Local No 569 v Edmonton (City), 2015 ABQB 620, [2015] AJ No 1395 at paras 55-59,Renke J. considered the positions in Schittelm and FIC and adopted in a modified form the approach in Schittelm.

He held that once thethree elements have been established by the accuser, the evidential burden shifts to the alleged contemnor to point to some evidence thatwould raise a reasonable doubt about whether he or she had a reasonable excuse for failing to comply with the order or other directive.As Renke J. pointed out, placing an evidential burden on the alleged contemnor is logical as the subject matter of the excuse liesparticularly within his or her knowledge.

Renke J. added that the person claiming the excuse must point to some evidence which mayraise a reasonable doubt as to whether he or she subjectively relied on the excuse, and the excuse must have been reasonable. [54] This approach is consistent with the treatment of general justifications or excuses in the criminal law. As Prof.

Don Stuartexplains in Canadian Criminal Law (5th ed) (Toronto: Carswell, 2007), at 477: ...it is consistently held that the only burden on the accused is the evidential one of pointing to evidence putting the defence in issue.There is no departure from the general rule that the Crown must prove guilt beyond a reasonable doubt and therefore no reversal of the

onus of proof which would be subject to Charter review. The Crown must negative a justification or excuse.

Where the defence is not put in issue by the Crown case, the accused has a duty of adducing some evidence although this does not mean he has to prove anything or to testify. [ 55 ] I agree with and adopt the approach as described in Schittelm and modified in Amalgamated Transit Union , given the quasi- criminal nature of civil contempt and the fact that the potential penalties for contempt, which include imprisonment, may trigger Charter rights. [ 56 ] Where an applicant fails to establish the elements of contempt, that is not necessarily the end of the matter.

The court retains discretion and jurisdiction to make necessary orders when it is satisfied that justice and respect for an undertaking of confidentiality demands a sanction. [ 57 ] For example, in Jutte , Brooker J. ordered that certain questions and answers given at discovery be struck, that a transcript be struck as an exhibit to the defendant’s discovery, and that one party turn over to another all of the defendants’ transcripts in their possession.

He also awarded costs on an indemnity basis to the unsuccessful applicant who was obliged to initiate the application and bring the matter before the court for directions. [ 58 ] In FIC Real Estate Fund , Graesser J. determined that the respondent was not guilty of contempt, but nevertheless awarded indemnity costs against him for failure to comply with a court order. [ 59 ] In Saunders , Rooke A.C.J., while not finding contempt, directed a Family Law Practice Note 7 intervention to address the respondent’s failure to work with his spouse to facilitate access once she started making requests to see their son.

VII. Analysis A. Did the confidentiality provision of the Production Order clearly and unequivocally state what should and should not be done? [ 60 ] The confidentiality provision of the Production Order was generally quite clear: 1.

Masterbuilder books, records and information; 2. will not be disclosed or produced to anyone; 3. other than to Plaintiff’s legal counsel; and 4. to accounting professionals who have executed or agreed to a confidentiality agreement or confidentiality order. [ 61 ] One concern with the actual wording of the confidentiality provision is whether the conjunctive word “and” in item 1 above should actually be interpreted as a disjunctive “or”.

The concern is whether the production of information of Masterbuilder, but not its books or records, to anyone other than legal counsel and its accounting professionals would constitute a breach of the confidentiality provision. [ 62 ] More problematic is the history of counsel’s

interpretation and re-interpretation of the confidentiality provision. [ 63 ] First, counsel initially agreed in the exchange of emails of July 21 and 22, 2015 that until a proposed form of confidentiality agreement was in place, production to the accountants could be under what was formerly called the implied undertaking (now express in Rule 5.33; see also Rules 6.11(1)(f) & 8.17(3)).

Neither a confidentiality agreement nor a confidentiality order with respect to production to the accounting professionals was ever completed. [ 64 ] Second, the history of the communications between the parties also raises an issue as to whether counsel for 473440 and Reid Worldwide understood, despite the broad wording of the confidentiality provision, that it was solely intended to prevent Masterbuilder books, records and information falling into the hands of James Morrison.

That is what Hannan indicated to the Court on April 22, 2015 and what he advised the BDO accountants in provision of the various orders to them by correspondence of July 23, 2015. [ 65 ] Third, one must question whether the provisions of the confidentiality order, particularly with respect to James Morrison, Reid-Built Homes and Reid Worldwide, were overtaken by the addition of those parties to the action by counterclaim on November 3, 2015, entitling them to full production of relevant material, records and documents under Rules 5.1(1), 5.2(1), 5.6(1)(b) & 5.16.

That was the position taken by Turnbull Wallace in her correspondence of November 23, 2015 in which she requested amendment of the Production Order so that all parties to the action would have access to all produced books and records. Counsel for Lenaco and Masterbuilder agreed that by November 24, 2015 there had already been considerable confusing overlap between books and records produced under the confidentiality provisions of the Production Order and production under

Part 5 of the Rules.

That is why he apparently suggested an agreement (although the Rule itself requires an application) pursuant to Rule 9.22, that the confidentiality provisions of the Production Order had been satisfied. [ 66 ] Fourth, there was considerable apparent confusion in the exchange between counsel of correspondence dated November 23, 24, 27 and 30, 2015 as to whether an agreement was reached that the confidentiality provision of the Production Order was replaced by “a generally implied undertaking”, now express pursuant to Rule 5.33, covering more than simply production to the accountants. [ 67 ] Fifth, there also appears to have been confusion between counsel as to whether only the production portions of the Production Order would still be in effect, but not the confidentiality provisions.

That was the position of Turnbull Wallace in her correspondence of

November 27, 2015 when she required maintenance of the Production Order but indicated there was no further need for a “special shield of confidentiality”. She appeared to follow that division of the Production Order in her correspondence of April 14 and May 6, 2016. Counsel for Lenaco and Masterbuilder, in return correspondence dated April 28 and May 10, 2016, debated whether further production was required, but did not address again whether production had been or would be pursuant to the confidentiality provisions of the Production Order or pursuant to

Part 5 of the Rules. [ 68 ] All of this evidence as to counsel’s varying

interpretations of the meaning and effect of the Production Order and the confidentiality provisions therein, relates to the period prior to any of the alleged breaches of those provisions. [ 69 ] The wording of the confidentiality provision of the Production Order appears to be reasonably clear on its face, although quite broad. However, the

interpretation of that Order, its application, and the various waivers of portions of the Order as between counsel, considerably muddied the waters.

As a result, I find that, in the words of the Supreme Court in Carey at para 33 , “external circumstances have obscured its meaning” and therefore the confidentiality provision did not clearly and unequivocally state what should and should not be done. [ 70 ] I conclude that Masterbuilder and Ismail Naboulsi have not proven beyond a reasonable doubt the first element of civil contempt. [ 71 ] Although this finding puts an end to the matter, I will nevertheless consider whether the other elements have been established beyond a reasonable doubt. B.

Did the Respondents have actual or inferred knowledge of the confidentiality provision of the Production Order or act in wilful blindness to those provisions? [ 72 ] There is no issue as to whether Hannan and Turnbull Wallace had actual knowledge of the confidentiality provision in the Production Order. Hannan spoke to that provision in court, and both Hannan and Turnbull Wallace participated in the negotiation of that provision with counsel for Masterbuilder and Ismail Naboulsi, and were the drafters of the provision. Both also participated in the extensive discussions with respect to

interpretation, application and potential waiver of any portions of that provision. [ 73 ] Alcock says that although he never saw the Production Order itself with the confidentiality provision, he did read the first paragraph of the BDO report which clearly indicated that BDO had reviewed Masterbuilder books and records “which were produced by the Company in Alberta Court of Queen’s Bench Action No. 1403 14123 pursuant to the Court Order filed June 10, 2015”. [ 74 ] Alcock was aware that the BDO report had been filed as an Exhibit to the Fryzuk Affidavit on the public record, and thought as a result that the contents of the report were no longer confidential and could be used in other court proceedings.

However, he took no steps to inform himself about the terms of the Production Order, nor to bring an application pursuant to Rule 6.11(1)(

f) for evidence in one action to be utilized in another, before he caused the BDO report to be attached as an exhibit to the Hughes Affidavit and filed in the Vivo action on July 29, 2016. [ 75 ] Counsel for Masterbuilder and Ismail Naboulsi submits, based upon the decision in Michel v LaFrentz at para 21 that a “sufficient degree of diligence” is expected, particularly where legal counsel are involved.

Alcock did not seek out and review a copy of the Production Order once he knew that production had been made pursuant to order, nor did he make an application to utilize evidence from the Lenaco action in the Vivo action. [ 76 ] While this conduct may be argued to evidence sloppy practice or lack of diligence, it does not, without more, permit the Court to conclude he acted in wilful blindness, nor to infer knowledge on his part.

As a result, I do not find that Masterbuilder and Ismail Naboulsi have proven beyond a reasonable doubt Alcock’s knowledge of the confidentiality provisions of the Production Order. [ 77 ] The application for civil contempt was also directed against Faye and James Morrison. However, each of those Respondents specifically denied knowledge of the confidentiality provision in the Production Order.

Counsel for the Applicants described this lack of knowledge as “unusual and disconcerting”, but conceded that it undermines any prospect of a finding of contempt against them. [ 78 ] However, counsel for the Applicants notes the evidence that Faye Morrison was aware she was not permitted to discuss any confidential information with anyone but her lawyers, Hannan reviewed the obligations under the “implied undertaking” with her, and she admitted having showed the BDO report to James Morrison. The Applicants submit that this should be taken into consideration if a finding of contempt is made against her counsel.

As contempt has not been established against Hannan and Turnbull Wallace, no finding of contempt follows as against Faye Morrison on the allegations in the application, without proof of her knowledge of the confidentiality provision of the Production Order. Further, this evidence does not buttress the case against Hannan and Turnbull Wallace. [ 79 ] I conclude that the Applicants have not established the second element of civil contempt as against any of the Respondents. C.

Did the Respondents intentionally do the act that was prohibited by the confidentiality provision of the Production Order? [ 80 ] As previously noted, it is only necessary for the applicant to establish an intention to do the physical act that is prohibited, not a general intention to do a forbidden act, nor a specific intention to disobey an order. [ 81 ] It is clear that Hannan, Turnbull Wallace and Alcock all intended the acts which they performed. None of those acts was accidental, mistaken, based upon a fundamental misunderstanding, or unintentional.

They did not act in a way which was in knowledgeable defiance of the court order, contumacious, in obstinate resistance or disobedience, but that is not the test. At all times, they intended to do the acts which they performed, and if the acts done were those prohibited by the Production Order, this element of

civil contempt has been established. [ 82 ] Also clear is Faye Morrison’s intention to show the Fryzuk affidavit, received by her on July 20, 2016, to James Morrison. Again, this conduct was clearly intentional. [ 83 ] The Applicants have established the third element beyond a reasonable doubt. D.

Did the Respondents have a reasonable excuse for their actions? [ 84 ] The practices of Hannan, Turnbull Wallace and Alcock may be characterized by some as sloppy or insufficiently diligent, perhaps with respect to the failure by Hannan and Turnbull Wallace to return to Court to vary the terms of the Production Order or its confidentiality provision, to receive relief from the express confidentiality undertaking pursuant to Rule 5.33(1)(a), or for an order that the confidentiality provision of the Production Order had been satisfied pursuant to Rule 9.22(1).

The same can be said regarding Alcock’s failure to inform himself about the terms of the Production Order, or to bring an application pursuant to Rule 6.11(1)(

f) for evidence in one action to be utilized in another. However, for the reasons set out above with respect to the first element of proof for civil contempt: a clear and unequivocal statement in the order as to what should and what should not be done, I find that if in fact they failed to comply with the terms of the confidentiality provision of the Production Order, as alleged, then they have pointed to evidence that they had reasonable excuse for their actions. E.

Should procedural orders be granted to uphold the rule of law, and the dignity and processes of the Court? [ 85 ] If a finding of contempt is made, some, but not all, of the appropriate remedies are set out in Rule 10.53(1) and (2), including the striking of part of a commencement document, affidavit or pleading, the staying of an application, dismissal of a claim, a prohibition on use of a record or evidence at an application or trial, and costs. [ 86 ] In this matter, Masterbuilder and Ismail Naboulsi ask for dismissal of the upcoming receivership application, or prohibition on use of the BDO report in that receivership application, and prohibition from bringing a similar application, removal of Burnet, Duckworth & Palmer as counsel, removal of the Fryzuk and Hughes affidavits from the respective court files, limiting of further disclosure from Masterbuilder, and a significant costs award. [ 87 ] This is a case where, despite a finding that 473440, Reid Worldwide, Hannan, Turnbull Wallace and Alcock are not in civil contempt, certain procedural orders should be granted for the purpose of alleviating prejudice to Masterbuilder and Ismail Naboulsi, insofar as that is possible, attempting to create an even playing field as the action continues, and to uphold the rule of law, and the dignity and processes of the Court. [ 88 ] As a result, the following procedural orders are granted: 1.

In the Lenaco action, the BDO report of July 11, 2016 attached as Exhibit “C” to the Fryzuk affidavit of July 12, 2016 shall be sealed until such time as an application to set aside all or any part of this order to seal is made pursuant to Rule 6.34. Until such order, no further use nor publication of the BDO report may be made in the Lenaco action; 2. In the Vivo action, the BDO report of July 11, 2016, attached as Exhibit “A” to the Hughes affidavit of July 25, 2016, is struck and shall be removed from the Court file.

No further use nor publication of the BDO report may be made in the Vivo action without a further court order pursuant to Rule 6.11(1)(

f) that the BDO report filed, and now sealed, in the Lenaco action may be utilized in the Vivo action; 3. No further use nor publication of the BDO report of July 11, 2016 may be made by any of the parties in the Lenaco action or the Vivo action without an order of this Court to vary the terms of the Production Order or its confidentiality provision, or for relief from the now express confidentiality undertaking pursuant to Rule 5.33(1)(a), or for an order that the confidentiality provision of the Production Order has been satisfied pursuant to Rule 9.22(1); 4.

Counsel shall agree upon a form of Confidentiality Agreement or obtain a Confidentiality Order from the Court with respect to the restricted further access to or use by BDO of the books, records and information of Masterbuilder; and 5. Counsel shall prepare Supplemental Affidavits of Records which list all of the records produced in the Lenaco action to date, differentiating between:

a) records produced pursuant to the Production Order,

b) records produced pursuant to

Part 5, Rules 5.5 to 5.10 of the Alberta Rules of Court , and

c) records produced pursuant to both methods; and if there is a dispute as to the method by which records were produced, that dispute is to be resolved by further court order. [ 89 ] Determination as to whether the BDO report of July 11, 2016 is an expert report properly admissible at trial, pursuant to Rules 5.34 through 5.38 and the common law, will be left to the trial judge. VIII.

Conclusion [ 90 ] The Court dismisses the application by Masterbuilder and Ismail Naboulsi to have 473440, Reid Worldwide and their legal counsel, Hannan, Turnbull Wallace and Alcock, held in civil contempt for breach of the confidentiality provision of the Production Order. [ 91 ] However, procedural orders are granted to uphold the rule of law, and the dignity and processes of the Court.

IX. Costs [ 92 ] Costs of this application are awarded to Masterbuilder and Ismail Naboulsi pursuant to tariff items 8 (para 4), 19, 20 and 21 of Column 5,

Schedule C of the Alberta Rules of Court . Heard on the 25 th day of July, 2017. Dated at the City of Edmonton, Alberta this 6 th day of September, 2017. K.P. Feehan J.C.Q.B.A. Appearances: William W. Shores, Q.C. Shores Jardine LLP for the Applicants Lenaco Homes Masterbuilder Inc. and Ismail Naboulsi Perry R. Mack, Q.C. Peacock Linder Halt & Mack LLP for the Respondents J. Kelly Hannan, Jocelyn M. Turnbull Wallace, and Craig O. Alcock Donald R. Cranston, Q.C. Bennett Jones LLP for the Respondents 473440 Alberta Ltd., Evelyn Faye Morrison, James Morrison, and Reid Worldwide Corporation Michael J. McCabe, Q.C.

Reynolds Mirth Richards & Farmer LLP for Lenaco Homes Ltd. and John Contessa, not parties to the application