Fresno Pacific University Foundation v. Date:, 2015 MBCA 70

Citation: Fresno Pacific University Foundation v. Date: 20150717 Grabski et al., 2015 MBCA 70 Docket: AI14-30-08290 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Madam Justice Holly C. Beard Mr. Justice Christopher J. Mainella BETWEEN : FRESNO PACIFIC UNIVERSITY ) FOUNDATION ) ) (Plaintiff) Appellant ) J. A. Pollock - and - ) for the Appellant ) BLAIR GRABSKI ) L. K.

Troup ) for the Respondent (Defendant) Respondent ) ) - and - ) ) THE BNF WAREHOUSE SALES ) COMPANY LTD., 5436886 MANITOBA ) Appeal heard: LTD. trading as J AND J TRADING ) May 6, 2015 COMPANY, 5741204 MANITOBA LTD., ) and ALANA CROATTO ) Judgment delivered: ) July 17, 2015 (Defendants) Respondents ) STEEL and BEARD JJ.A. [ 1 ] The plaintiff, Fresno Pacific University Foundation (Fresno), is appealing the dismissal of its motion for contempt against Blair Grabski (Grabski), one of the defendants, to enforce an order requiring him to return 9,737 pieces of artwork belonging to it.

Facts [ 2 ] In the underlying proceeding in 2009, Fresno consigned a significant number of pieces of artwork to the corporate defendants and Grabski for sale in Canada. Over half of the artwork was neither paid for nor returned to Fresno, so it sued for its payment and/or return. In 2013, it obtained default judgment against each of the defendants, although it has agreed not to proceed against Alana Croatto. Two of the corporate defendants, The BNF Warehouse Sales Company Ltd. and 5436886 Manitoba Ltd. (543), have been dissolved, while the other defendant, 5741204 Manitoba Ltd., is no longer in business.

Thus, there is no possibility of enforcing the money judgment against the corporate defendants. Fresno has not obtained a money judgment against Grabski as he has declared bankruptcy, so Fresno’s only recourse is to locate the artwork. [ 3 ] Grabski had originally filed a statement of defence, but he subsequently withdrew that after signing a waiver of independent legal advice. Fresno obtained judgment against him in April 2013. As part of the default proceeding, Fresno obtained an order against Grabski requiring that he deliver the 9,737 pieces of artwork to it.

It then filed the motion for contempt against Grabski, in his personal capacity and as an officer of 543, to enforce its order and to obtain the return of the artwork. To date, the artwork has not been returned.

[4] Grabski acknowledges that the artwork was delivered to his store in Edmonton, Alberta. However, on September 22,2009, he was in a car accident and could not work. His businesses failed and, a few weeks after the accident, the landlord gave him anotice to vacate the premises in Edmonton within three weeks. Since he was unable to go to Edmonton, he arranged with an individual,who is now apparently deceased, to store the artwork for him at a facility in Ontario.

He is unable to provide any information withrespect to any of the arrangements that were made to have the goods transferred, where they went or who was responsible for paymentand he has no documentation relating to the transfer of the artwork.

His position is that he cannot return artwork that he does not haveand cannot locate. [5] The parties appeared before the motion judge on three occasions, December 2013, April 2014 and September 2014. [6] Grabski appeared on the first occasion with counsel, whom he had just recently retained, and the matter proceeded asa cross-examination in aid of execution of both Ms Croatto and Grabski because the motion judge was not satisfied with the affidavitmaterial before him.

Grabski’s counsel asked that his client be given further time to locate the artwork and file further materials, so thematter was adjourned. [7] On the second appearance, it transpired that Grabski’s efforts during the last four months consisted of sending oneemail to the driver of the vehicle in which the artwork had been transported. There was no information forthcoming as to the missingartwork. No further materials were filed in support of any efforts made by Grabski. After some discussion, Grabski’s counsel suggestedthat the matter be further adjourned to allow Grabski to hire an investigator.

The motion judge gave directions that, in addition to hiringa private investigator, Grabski should make extensive efforts of his own to locate the artwork. [8] On the third appearance, it was determined that Grabski had retained one private investigator in the United States anda second one in Ontario, each of whom provided a very short report that disclosed nothing beyond attaching a death certificate from thestate of Washington for a Kamal Ebriham Alawas. Grabski had made no other efforts to locate the artwork.

Decision of the Motion Judge [9] The motion judge dismissed the motion for contempt with short reasons, finding that “[t]here is insufficient evidencebefore me to warrant a finding of contempt against Mr.

Grabski.” In finding that Grabski had “substantially complied with my directionin April,” the motion judge commented that if Fresno’s solicitor felt there were additional measures that Grabski could have, and shouldhave, taken to locate the artwork, then Fresno’s solicitor should have informed Grabski of that earlier than the date of the court hearing. [10] Fresno appeals, arguing that the motion judge erred in three ways: 1. that the motion judge made a palpable and overriding error in determining that the facts before him were insufficient to ground themotion for contempt; 2. that the motion judge made a palpable and overriding error in determining that Grabski substantially complied with all of thejudge’s direction of April 22, 2014; and 3. that the motion judge erred in law in determining that Fresno’s solicitor had a duty to point out any additional measures Grabskishould have taken with respect to investigative reports.

Standard of Review [11] It is within a judge’s discretion to find a party in contempt and to determine the appropriate sanction. See 1984Enterprises Inc. v. Strider Resources Ltd. et al., 2013 MBCA 100 at para. 27, 299 Man.R. (2d) 251; and Broda v. Broda et al., 2004ABCA 72 at para. 5, 346 A.R. 372. [12] On review of a discretionary decision, the appellate court may not substitute its own decision unless it finds that thejudge proceeded on wrong principles or on an erroneous view of the facts, or there is likely to be a failure of justice.

The standard ofcorrectness applies where there is an error of principle and the standard of palpable and overriding error applies when there are errors offact. The Law of Contempt [13] Queen’s Bench Rules, Man. Reg. 553/88, Rule 60.10(1), governs a motion for a contempt order. In disposing of such amotion, the judge may make such order “as is just” (QB Rule 60.10(5)). Following “a finding” of contempt, he or she may order thecontemnor to be imprisoned, pay a fine, do or refrain from doing

an act, pay just costs, and comply with any other order the judgeconsiders necessary. [14] There are two types of contempt: civil and criminal. Criminal contempt has an element of public defiance to it. It is anact obstructing the administration of justice which tends to bring the court into disrepute and is, therefore, an offence against society. See United Nurses of Alberta v. Alberta (Attorney General), (SCC), [1992] 1 S.C.R. 901; and R. v.

Jacob (J.D.), 2008MBCA 7 at paras. 24-25, 225 Man.R. (2d) 111. [15] While the distinction is not always clear-cut, all parties are agreed that we are dealing here with a case of civil contemptof court. The core of civil contempt is failure to obey a court order of which the alleged contemnor is aware. Even though this is a caseof civil contempt, the breach of the court order must be proven to the criminal standard of proof beyond a reasonable doubt. [16] There is a difference between a finding of contempt and the imposition of a sanction for it.

Sometimes the distinction isreferred to as the liability stage and the sanction stage. At the liability stage, the Supreme Court of Canada has recently confirmed inCarey v. Laiken, 2015 SCC 17 at paras. 33-35, that the elements of civil contempt of court are: the order alleged to have been breachedmust state clearly and unequivocally what should and should not be done; the party alleged to have breached the order must have had

actual knowledge of it; and the party allegedly in breach must have intentionally done the act that the order prohibits or intentionallyfailed to do the act that the order compels. It is this last element that is the focus of this appeal and was the focus of the appeal in theCarey case. [17] A finding of persistent or spiteful conduct is not necessary. In both facta, counsel listed proof of wilful and persistentconduct as being one of the elements to be proven in a finding of civil contempt. In so doing, counsel rely on the case of MacNaughtonv.

MacNaughton (1998), (MB KB), 132 Man.R. (2d) 318 (Q.B.), which in turns relies on the decision in Paton v.Shymkiw (1996), (MB KB), 114 Man.R. (2d) 303 (Q.B. (Fam. Div.)). [18] There is a difference between proof of the element of intention and the residual discretion of a judge to refuse to make afinding of contempt even if all the elements have been proven.

As the Supreme Court of Canada noted in Carey (at para. 37): … [W]here an alleged contemnor acted in good faith in taking reasonable steps to comply with the order, the judge entertaining acontempt motion generally retains some discretion to decline to make a finding of contempt ….

While I prefer not to delineate the fullscope of this discretion, given that the issue was not argued before us, I wish to leave open the possibility that a judge may properlyexercise his or her discretion to decline to impose a contempt finding where it would work an injustice in the circumstances of the case. [19] Paton was a case in which a father was requesting that an order of contempt be made against the mother for refusinghim access to the child of the marriage.

After a review of contempt within family law, the court concluded that the jurisprudenceindicated that particular restraint should be used in resorting to powers of contempt in family law cases and consequently, the courts havegenerally held that denial of access must be willful and persistent before finding the custodial parent in contempt. [20] However, in relation to the element of intent, the expression “willful” is intended to “exclude only casual, accidental orunintentional acts of disobedience” (Paton at para. 25).

See also 1984 Enterprises Inc. at paras. 53-55. [21] Thus, in determining civil contempt, one does not have to prove persistent conduct to show intention to breach an order. The Supreme Court of Canada in Carey confirmed that the intention required for civil contempt is the intention to commit the act inquestion. There is no requirement that it be proven that the alleged contemnor knew the act was prohibited and deliberately chose to doit anyway. When dealing with an omission, as in this case, the party seeking a finding of contempt must prove no more than thedefendant consciously omitted to do what was required.

See Topgro Greenhouses Ltd. et al. v. Houweling, 2003 BCCA 355 at para. 6,184 B.C.A.C. 118. [22] However, a contempt order is a power of last, rather than first, resort and should be used cautiously and with greatrestraint. A contempt finding may be inappropriate in the circumstances of a given case, even where the necessary elements are madeout; for example, where there is a defence of impossibility of compliance (see Carey at para. 41; Metaxas v. Galaxias (The), (FC), [1989] 1 F.C. 386; and Jackson v.

Honey, 2009 BCCA 112, 267 B.C.A.C. 210). [23] So, as stated, where an alleged contemnor acted in good faith in taking reasonable steps to comply with the order, thejudge entertaining a contempt motion retains some discretion to decline to make a finding of contempt. The court may decline to make afinding of contempt where the defendant has exercised due diligence and done everything possible to comply with the terms of theorder. See Morrow, Power v.

Newfoundland Telephone Co. et al. (1994), (NL CA), 121 Nfld. & P.E.I.R. 334 (Nfld.C.A.) at para. 20, quoted approvingly in Carey at para. 37. [24] In the case of Broder Estate v. Broder, 2005 ABCA 442, 376 A.R. 180, the appeal court vacated the finding ofcontempt because compliance with the order was impossible at the time the order was made (at paras. 20-22). [25] In Contract Funding Group Inc. v. Osacenco, [2001] O.J. No. 3293 (QL) (Sup. Ct.), the defendants defaulted on theircar lease payments and the plaintiff obtained judgment against them ordering payment, interest and delivery of the vehicle.

A motionwas then filed and granted seeking a mandatory order compelling the defendants to deliver the vehicle. The defendants failed to do soand a motion for contempt was filed. [26] In dismissing the motion, the court stated that it was satisfied on the balance of probabilities that, despite reasonableefforts having been made by the defendants, there were no reasonable means or expectation of finding the automobile at this point andthat the defendants’ actions had not been taken in order to make compliance with the court order impossible.

The defendants gaveevidence that the vehicle had been moved to Romania two years prior to any proceedings being initiated. Thus, the defendants hadproven their defence, on the balance of probabilities, of impossibility of performance. [27] However, where the person’s own conduct makes future compliance with the order impossible, that would not excusethe person’s actions. As Cromwell J. stated in Carey (at para. 41): ….

Where, as here, the person’s own actions contrary to the terms of a court order make future compliance impossible, I fail to see thelogic or justice of requiring proof of some higher degree of fault in order to establish contempt. The appellant’s submission alsooverlooks the point that one of the purposes of the contempt power is to deter violations of court orders, thereby encouraging respect forthe administration of justice. It undermines that purpose to treat with special charity people whose acts in violation of an order makesubsequent compliance impossible. ….

[28] So, in the case of Michel v. Lafrentz et al. (1998), 1998 ABCA 231 , 219 A.R. 192 (C.A.), the defence raisedwas inadvertence and misunderstanding. The court in that case found the defendant guilty of civil contempt since it concluded that thecause of the failure to comply with the court order was simple neglect. [29] The court held (at paras. 21, 23-24): …. Where someone is ordered by the court to do something, he or she must use a sufficient degree of diligence to perform, or to havethe act performed …. Doubtless the person ordered to perform is not an insurer.

Had an accidental fire suddenly destroyed his records, or his accountant beenrun over by a bus, likely either would excuse some delay, and maybe some temporary incompleteness, and there would not be contemptof court in the meantime. But it would not suffice to delegate the duty to the office boy. Nor did it suffice here to delegate the duty to a lawyer, or accountant, andnot diarize or follow up on the matter. An order of a court to do

an act requires reasonable care in doing the act personally, or indelegating the matter to suitable responsible persons, and then checking to see that it has been carried out in a prompt and proper fashion. Analysis [30] As can be seen from the above review of the jurisprudence, even if the elements of contempt have been proven beyondreasonable doubt, there remains residual discretion in the motion judge to refuse to make a finding of contempt.

There are many factorsthat a judge might consider in the exercise of his/her discretion. [31] One of them is where noncompliance is due to circumstances beyond the control of the alleged contemptuous party. The person ordered to perform is not an insurer. It would bring the administration of justice into disrepute if a person was held incontempt for not performing

an act that it was impossible for him/her to perform. [32] However, the person cannot be excused if the impossibility of performance was brought about by his/her own actionsor deliberate inaction. The person ordered to perform must show the court that he acted in good faith and made reasonable efforts tocomply with the court order. [33] In this case, the motion judge’s decision was effectively one conclusory sentence: “There is insufficient evidencebefore me to warrant a finding of contempt against Mr.

Grabski.” The motion judge does not explain the many aspects of evidence thatcall into question the efforts of Grabski to locate the artwork. [34] Despite being ordered to produce all documents relating to any and all attempts made to recover the artwork, Grabskidid not think he needed to respond to that order. Other than making a few unanswered phone calls, Grabski never made any inquires asto the whereabouts of the artwork. He did not respond to Fresno’s inquiries when attempts were made by Fresno to do so until after theaction was filed.

Although statements of defence were filed by all defendants (Grabski filed his on September 15, 2011), none state thatthe artwork has been lost or is missing, or mentions Mr. Alawas. [35] Although there were many occasions between the fall of 2009 and his examination in 2012 that called for Grabski todisclose the removal of the artwork to Ontario, he did not do so. [36] In his affidavit of June 3, 2013, Grabski states that he gave the artwork to an individual named Kamal Alawas. In hisexamination for discovery, he said he gave it to Abby Kamal.

In the email sent to counsel as part of his undertakings, Grabski said hegave it to Abby Farrage. When asked why he had given three different names for one individual, he stated that he was confused. This isso even though he had previously testified that he had known this person for years and had done business with him before. [37] According to Grabski, a person picked up the artwork in Alberta and then made the decision to transport it to Ontario. Grabski did not ask that person for any written confirmation nor did he agree upon the charges for the transportation and storage of theartwork.

Grabski never received an invoice from that person nor did he receive any confirmation that the artwork went to Ontario. [38] Grabski says that all receipts, bills of lading, paperwork, etc., with respect to the artwork, were in his office inEdmonton, Alberta and were disposed of or thrown out, but he did not know by whom. Grabski did not ask anyone in Edmonton to lookfor the paperwork and made no effort to find out what happened in Edmonton.

He could not remember the full name of his manager inEdmonton, even though she had worked for him for several years, and did not obtain an affidavit from her explaining what had happenedto the paperwork. [39] Grabski did not have an address book or business records with Kamal Alawas’ phone number and he called numbers heobtained from the internet. He wrote a letter, “To whom it may concern” dated July 2, 2013, to an address he obtained from theinternet. He did not write any other letters and he made no attempt to locate anyone by the name of Abby Kamal or Abby Farrage.

Other than having made two telephone calls and sending the letter, he did nothing to locate the artwork. [40] Finally, Grabski acknowledged during the examination that no one else had knowledge of the removal of the artwork toOntario and he has no proof of Mr. Alawas’ existence.

[ 41 ] The motion judge expressed his own disbelief of Grabski’s story several times. At the conclusion of Grabski’s examination, the motion judge stated that Grabski’s story was very hard to believe. He also stated that one explanation is that Grabski knows what happened to the artwork and “simply isn’t telling us the truth.” [ 42 ] The motion judge also stated: ... Mr. Grabski hasn’t been responding to the plaintiff, hasn’t been responding even to court orders. He just ignores them. And he does have a rather contemptuous attitude, I suppose, to even a court order.

And he may have to pay the consequences of that. But I want to make sure we give him every opportunity to find the artwork if it’s still out there. . . . . . And he certainly hasn’t made any serious efforts to do so to date. . . . . . .... And I really am convinced that I’m not getting the true story at this stage. .... [ 43 ] Again, at the conclusion of the April 22, 2014 hearing, the motion judge advised Grabski: No, no. It’s not just a report from a private investigator. I want Mr. Grabski to make extensive efforts, every effort he can to find this artwork in addition to engaging a private investigator.

And that private investigator should be engaged immediately. And you should advise [Fresno’s counsel] of the name of the private investigator as well. And Mr. Grabski will have to cooperate fully with the private investigator and provide all the information he does have to that private investigator. . . . . . And if Mr. Grabski doesn’t do these things he should come with his razor and toothbrush, as I say, okay? . . . . . That message should be very clear, Mr. Grabski. [ 44 ] Grabski’s casual efforts towards the court seem to have continued even after these very clear comments from the motion judge.

He did retain the services of private investigators in Ontario and in the state of Washington and neither investigator was able to obtain any information which would assist in locating the artwork. However, neither investigator had any background in locating missing artwork.

As a matter of fact, while the reports mention attempts to locate Kamal Alawas, neither report states the purpose for which the investigators were retained and Grabski stated that he was unable to produce the email giving the investigators instructions. [ 45 ] Notwithstanding the motion judge’s explicit instructions that Grabski was to make extensive efforts to find the artwork in addition to engaging a private investigator, no other efforts of any kind were made by Grabski.

He did not contact art traders, advertise in newspapers, art journals or trade magazines or instruct the investigators to do so. [ 46 ] Even if one focusses on the attempt to locate Kamal Alawas, Grabski did not provide information to the investigators that the man they were looking for might have been known by other names. He did not think that it was important to do so. Moreover, he did not examine the report from the investigators in any detail.

The report from the Washington investigator indicates no contact information for any relative of Kamal Alawas was located, however, the death certificate attached to that report provides the contact information of Alawas’ stepdaughter. [ 47 ] Yet, after all of that and even given the motion judge’s previous comments that unless better efforts were made, Grabski had better come to court with “his razor and toothbrush,” the motion judge concluded that “[t]here is insufficient evidence before me to

warrant a finding of contempt against [Grabski].” He indicated that if there were additional measures that Grabski could have taken to locate the artwork, Fresno should have pointed it out. [ 48 ] The order was clear and unequivocal. Grabski was to return the artwork. There is no question that Grabski was aware of the order compelling him to return the artwork, that the contents of the order were explained to him and that he was informed that failure to comply with the order would result in contempt proceedings against him. He withdrew his statement of defence and signed a waiver of independent legal advice.

He cannot claim now that he did not understand what he was doing because he did not have legal representation. [ 49 ] While it is acknowledged that Grabski has omitted to return the artwork, he submits that he has tried his best but cannot locate it.

Fresno argues that either Grabski is not telling the truth, that he has not used reasonable efforts to locate the artwork, or it was his own actions that made compliance with the order impossible. [ 50 ] If circumstances occurred which rendered the performance of the order impossible, then there was an evidentiary burden on Grabski to show that those circumstances had not arisen as a result of his actions and that he had, in good faith and with diligence, taken reasonable steps to comply with the order.

See Michel at para. 21 . [ 51 ] After carefully re-examining the transcripts and considering the motion judge’s own statements on all three occasions that Grabski appeared before him, we have no choice but to conclude that the motion judge misdirected himself.

Not only are the inconsistencies between the evidence from Grabski, the judge’s remarks in December 2013, April 2014 and his decision in December 2014, not explained in the motion judge’s reasons for decision, but from the judge’s final comments on December 2014, it appears he was of the opinion that the onus was on Fresno to prove beyond a reasonable doubt that Grabski was capable of returning the artwork, and that Grabski had no obligation to show due diligence. Remedy [ 52 ] Fresno asks that the appeal be allowed and Grabski be held in contempt.

The matter would then have to be returned to the Court of Queen’s Bench for a hearing as to the appropriate sanction to be imposed. [ 53 ] Since the matter would have to be returned to the Court of Queen’s Bench, in any case, for a decision as to the appropriate sanction, we would return the matter as a whole for a fresh hearing both as to liability and, if appropriate, sanction. This would allow for findings of fact to be made as to good faith and the exercise of reasonable diligence.

This would be a reasonable compromise between using contempt proceedings as a last resort and ensuring that individuals treat court proceedings and orders with respect and not casual disdain. [ 54 ] This does not provide much comfort to Fresno who has been pursuing a resolution to this unusual case for many years. The only comfort we can give lies in the order of costs. Costs [ 55 ] Fresno was successful in this court and is entitled to costs. However, the proceedings on appeal were handled properly and there was no undue delay.

Therefore we would not accede to Fresno’s request for solicitor-client costs in this court. [ 56 ] Fresno requests solicitor-client costs for the motion in the court below. At that motion, although Grabski was successful, the court did not award costs because the motion judge was not satisfied with the manner in which Grabski had conducted the litigation up to that date. The court felt that the defendant unnecessarily prolonged the litigation as a result of his actions. We agree entirely.

Two of the three hearings were adjourned at the request of the defendant and his response to questions by the court and counsel for Fresno indicated a lack of attention to the court process. Regardless of the final outcome, Grabski’s handling of the litigation was unacceptable. Whether it rises to a level which would justify solicitor-client costs, we will leave that to the Court of Queen’s Bench to consider when it deals with the merits of the issue at a fresh hearing and considers the issue of costs as a whole. Conclusion [ 57 ] The motion judge made an error in principle.

In reaching this conclusion, we do not intend to depart in any way from the general principles that the elements of contempt must be proven beyond a reasonable doubt and that the contempt power should be used cautiously and with great restraint. [ 58 ] His order should be set aside and a new hearing ordered so that the presiding judge may exercise his or her discretion in light of the application of the appropriate legal principles as stated in these reasons.

Once that is done, and if a finding of contempt is made, the judge may then take into account a variety of factors in fashioning an appropriate sanction. [ 59 ] The discretion in imposing a sanction is a broad one. Without in any way attempting to be exhaustive (and assuming without deciding that contempt is established here), there are several relevant considerations, including the diligence of the alleged contemnor in attempting to comply with the order and the extent of the resulting prejudice to Fresno. [ 60 ] We would allow the appeal and order costs on the appeal on a party-and-party basis. J.A. J.A.

I agree: J.A.