Supreme Court

IN THE SUPREME COURT OF THE NORTHWEST TERRITORIES BETWEEN: CANADIAN IMPERIAL BANK OF COMMERCE - and -

882432 N.W.T. LTD., ACTIVE SERVICE AND MAINTENANCE LTD., ELIAS SARAVANJA and MARIA SARAVANJA

(Defendants) Judgment Debtors

AND: IN THE MATTER OF an application for an order declaring the Respondent Ellas Saravanja to be in,:;~ contempt: BETWEEN: CANADIAN IMPERIAL BANK OF COMMERCE and ELIAS SARAVANJA Application to find Elias Saravanja in civil contempt allowed. further steps to be taken.

Heard at Yellowknife on October 12th and 29th 1993 Judgment filed: November 16th 1993

REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE M.M. de WEERDT Counsel for the Applicant, Judgment Creditor: G.R. Phillips, Esq. Counsel for the Respondents, Judgment Debtors: G. MacLaren, Esq.

CV 03932 (Plaintiff) Judgment Creditor

,., '^^-'^-''•'''^jf^''\ ^ .X̂ # # ' Applicant - * • • ' • ' Respondent Directions given as to

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I IN THE SUPREME COURT OF THE NORTHWEST TERRITORIES BETWEEN: CANADIAN IMPERIAL BANK OF COMMERCE and -

882432 N.W.T. LTD., ACTIVE SERVICE AND MAINTENANCE LTD., ELIAS SARAVANJA and MARIA SARAVANJA

AND: IN THE MATTER OF an application for an order declaring the Respondent Elias Saravanja to be in contempt:

BETWEEN: CANADIAN IMPERIAL BANK OF COMMERCE % Applicant - and -

ELIAS SARAVANJA

REASONS FOR JUDGMENT Is Elias Saravanja in civil contempt of this Court for non-compliance with the Rules of Court governing his examinations in aid of execution respecting the judgment against both him and the other judgment debtors? If so, should the Court order him to be imprisoned until he purges the contempt? I

CV 03932 (Plaintiff) Judgment Creditor

(Defendants) Judgment Debtors

Respondent

-2-I. Jurisdiction 2 Contempt is within the Court's inherent jurisdiction. It is a means to enable the Court to protect its authority from any improper interference or frustration. And since the jurisdiction is not precisely defined in legislation, it must be exercised with scrupulous care and only in cases where the contempt has been clearly shown beyond reasonable doubt. 3 Generally, if other means are available to deal with the situation, it is preferable to use those other means as a matter of judicial discretion, given the extraordinary character of the contempt powers of the Court. 4 A succinct and frequently quoted definition of contempt is to be found in R. V. Gray, [1900] Q.B. 36 (Div.Ct.) at page 40, where Lord Russell of Killowen C.J. held # -that, among other things: ... any act ... calculated to obstruct or interfere with the due course of justice or the lawful process of the Court is a contempt of Court.

5 In the present case, the Bank relies upon Rule 415 of the Rules of Court: 415. Where the judgment debtor or other person liable to be examined does not attend, and does not allege a sufficient reason for not attending or, if attending, refuses to disclose his property means or his transactions or does not make satisfactory answers respecting them, he may be held in civil contempt.

The conduct described in general terms in Rule 415 is well recognized in law as constituting contempt: Balogh v. St. Alban's Crown Court, [1975] 1 Q.B. 73 (C.A.)

-3-at pages 8 4 to 8 5 . The Bank also invokes Rules 613 to 615 of the Rules of Court, in part as fo l lows : 613. (1) The court may, of its own motion or upon application, declare that any person is in civil contempt.

(2) The court may order any person to appear before it or may order any person to be taken into custody and brought before it to show cause why he should not be held in civil contempt.

614. Every person is in civil contempt who (a) fails, without adequate excuse, to obey any order of the court, other than an order for the payment of money, (b) fails, without adequate excuse, to obey a subpoena to attend as witness, served upon him, or to attend for examination for discovery in accordance with an appointment therefor served upon him, or to comply with any notice or order for production of documents, within his power or possession, served upon him, (c) being a witness in any action or proceeding or upon examination for discovery refuses to be swom or to affirm or to answer proper questions, ... (f) has done or failed to do any act or thing, which act or failure to act by these Rules or by any ordinance or other statute in force of the Northwest Territories constitutes contempt of court or civil contempt.

615. (1) Every person in civil contempt is liable to any one or more of the following:

(a) imprisonment until he has purged his contempt, ... (2) The court may also order any person in civil contempt to pay any other person such costs and expenses as may be considered proper.

(3) The Court may waive the imposition of any sanction or suspend any punishment where a person held in civil contempt has purged his contempt.

These provisions, like those of Rule 4 1 5 , lie clearly w i th in the scope of the

-4-t Court's inherent contempt powers under law: see Balogh v. St. Alban's Crown Court, cited above. 9 No question has been raised as to the effect, if any, of section 127 of the Criminal Code or the provisions of the Constitution Act, 1867 and the Northwest Territories Act, R.S.C. 1985, c. N-27, in respect of the above mentioned Rules. Nor has any question been raised with respect to section 7 of the Canadian Charter of Rights and Freedoms, in the proceedings to date. That being so, I shall not consider the impact, if any, of these constitutional and statutory provisions here, other than to note the requirements of scrupulous care and proof beyond reasonable doubt which I have already mentioned.

II. Background 10 The action giving rise to judgment against Mr. Saravanja and the other judgment debtors was commenced by the Bank on June 13th 1992. 882432 N.W.T. Ltd. ("882432") is named as a co-defendant together with Active Service and Maintenance Ltd. ("Active"), Elias Saravanja and Maria Saravanja; but no relief is claimed against 882432 in the statement of claim. The relief claimed against the defendants other than 882432 is upon their guarantees of certain debts due by 882432 to the Bank and on the security given by them to the Bank for the satisfaction of those guarantees. None of the defendants defended the action; they merely filed a demand of notice. 11 On July 28th 1992 the Bank filed a notice of motion for relief in the nature f

of foreclosure or sale of the property forming the security given to the Bank by the defendants other than 882432. The defendants filed a notice of motion to adjourn the Bank's application sine die; but the adjournment was denied. An order was granted, instead, in terms of the Bank's notice of motion, by the Chambers judge on August 24th 1992. Judgment against the defendants in person, other than 882432, was adjourned sine die. 12 On May 5th 1993, formal judgment was entered against all the defendants jointly and severally, for $147,442.14 plus taxed costs of $10,817.73, as ordered by a Chambers Judge on March 3rd 1993. Although the terms of the formal judgment make no mention of the foundation upon which it rests, the Clerk's notes in the file show that ^ the Chambers Judge made the order for entry of that judgment by consent of all parties when the matter was spoken to in Chambers on March 3rd 1993. Since this was not a default judgment, the formal judgment should have recited the order made in Chambers, stating the names of counsel appearing and reflecting the consent of all parties. That it does not do so is, however, a matter of form only and does not invalidate the judgment. 13 In the meantime, an order for sale and vesting was granted in Chambers on March 1st 1993. One of the properties forming the Bank's security was thereupon sold for $45,000. Be that as it may, a certificate was obtained from the office of the Clerk of the Court on June 30th 1993, to the effect that the judgment of May 5th 1993 (in other words, against them personally and not merely in respect of the secured property) V remained outstanding in the sum of $147,442.14 plus costs of $10,817.73. Given that ^ the amount of $45,000 had been paid to the Bank's solicitors through the Court registry.

-6-f the certificate would appear to be inaccurate as to the amount then due under the judgment. It is nevertheless plain that a sum in excess of $100,000 appeared still to be owing on the judgment at that time. 14 Almost immediately after the judgment of May 5th 1993 was entered, the Bank's solicitors took steps to examine Mr. Saravanja in aid of execution pursuant to Rules 410 and 411 of the Rules of Court. These Rules state: 410. (1) Where a writ of execution has been entered against the property of a judgment debtor, the judgment creditor may, without order, examine the judgment debtor on oath before the clerk as to where

(a) the property and means he had when the debit or liability that was the subject of the cause or matter in which judgment has been obtained against him was incurred, or, in the case of a judgment for costs only, at the time of the commencement of the cause or matter, (b) the property and means he still has at the time of discharging the judgment, (c) any disposal he has made of property since contracting the debt or incurring the liability, or in the case of a judgment for costs only, since the commencement of the cause or matter, and (d) any and what debts are owing to him. (2) No further examination shall be had without an order until the expiration of one year from the close of the preceding examination.

(3) On the order of the court, a judgment creditor may examine the employee or former employee of the judgment debtor with respect to any matter about which he could examine the judgment debtor under subrule (1).

4 1 1 . (1) Where the judgment is against a corporation the judgment creditor may in like manner examine any of the directors or officers of the corporation upon oath touching

t (a) any amount unpaid upon the stocks or shares held by shareholders of the corporation, and for that purpose may obtain the names and addresses of the shareholders and particulars of the stock or shares held or owned by each and the amount paid thereon. (b) the name, address or other pertinent information relating to any director or former director of the corporation, (c) debts owing to the corporation, (d) the property of the corporation, and (e) any disposal of property since contracting the debt or incurring the liability in respect of which the judgment was obtained or, in the case of a judgment for costs only, since the commencement of the cause or matter.

(2) On the order of the court a judgment creditor may examine the employee or former employee of the corporation with respect to any matter about which he could examine an officer or director of the corporation under subrule (1).

15 It is apparent that the Bank was concerned as to the whereabouts of certain f items of heavy equipment which formed part of its security under the terms of its agreements with 882432, so that it might seize and sell that equipment pursuant to those terms. More specifically, there were the following items subject to a chattel mortgage granted by 882432 to the Bank on September 17th 1990: One 1976 International Highway Tractor s/n #2327FGA14181, One 1975 B Michigan Loader s/n #75B409B301CAC, One C-7 Tree Farmer Skidder s/n #7712, One 1981 Fruehauf Trailer s/n #0X610465, One Timberjack 230D Skidder s/n #779270, Two Husky 288 with 20" bar s/n #9510321 and s/n #9510266, I One Husky 3120 XP with 37" bar s/n #9410094.

-8-I 16 In addition, there were two other chattel mortgages. One, dated October 10th 1990, was granted to the Bank by 882432 respecting the following items: One GMC 6500 Tow Truck, Serial #CE 6132124435, One 1 HC Eagle Coe T/A Tractor, Serial #1HSRET6R1GHB12372, and One Bell Super Feller Buncher, Serial #BCH2260. 17 The other chattel mortgage is dated October 18th 1991. Under it 882432 granted the Bank a security interest in the following items: Wood Machine (Processor), Serial #WWP 101-86, and 1979 IHC Truck c/w 20' Box and Hoist, Serial #E2327JG A 11194. 18 There is no indication, in the second of these three chattel mortgages, as to the location of the property mentioned as security. However, the first chattel mortgage gives Drayton Valley in Alberta as the location of the property it lists; and the third chattel mortgage gives Yellowknife in the Northwest Territories as the location of the listed property.

III. Attempts to Examine Mr. Saravanja 1. May 13th 1993 19 The affidavit of Craig MacGregor, sworn on May 7th 1993, shows that 882432 and Mr. Saravanja were both served on that date at Yellowknife with notice of appointment for examination in aid of execution. The date and time of the examination

-9-were stated in the notice to be May 13th 1993 at 10.00 o'clock in the forenoon. The place of the examination was stated to be the office of the Clerk of this Court on the second floor of the Courthouse at Yellowknife. Nothing has been filed to show otherwise. I therefore find, as a fact, that due notice of the examination was given pursuant to Rule 414: 414. (1) A person liable to be examined may be served with an appointment signed by the person before whom the examination is to be held, or a copy thereof, and, where the examination is to take place under an order, with a copy of the order.

(2) Service shall be made at least 48 hours before the time appointed for the examination.

20 In addition, 882432 and Mr. Saravanja were served, at the same time, with A a copy of the Bank's notice of its intention to enforce its security pursuant to subsection 244(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (as amended). This notice listed the items of property above mentioned, so that they would be identifiable against the corporate records of 882432. 21 The Court file does not contain any affidavit respecting the alleged non-attendance of 882432 or Mr. Saravanja in response to the notice. Instead, a written statement, signed by the Court Reporter, has been filed. It states that the Clerk of the Court, then Ms. M. Melinchuk, and Mr. G. Phillips of counsel for the Bank, were present but that there was "No representation for the defendant by 10.20 a.m." Even if this is taken to mean that Mr. Saravanja did not appear (and it is at best equivocal on that point), this document is not sufficient in proof of the alleged failure of Mr. Saravanja to I

-10-appear. In the absence of the required proof of that fact, I rule that am unable to find Mr. Saravanja to have been in contempt for breach of the Rules on that occasion. 22 In reaching this conclusion, I have also examined what purports to be a copy of a letter dated May 10th 1993, addressed to Mr. Phillips, apparently signed by Mr. Saravanja and placed in the file. No attempt has been made to authenticate this by affidavit, or to prove its delivery to Mr. Phillips. The letter indicates that Mr. Saravanja was not available to attend on the examination due to other commitments, not having been consulted as to the date of the examination. However, it is not necessary, given my above ruling, to weigh this purported letter or its contents in the balance; though, if it had been made evidence through an appropriate affidavit, it might have permitted me to rule in the Bank's favour in respect of the alleged breach of the Rules by Mr. Saravanja on May 13th 1993. 23 As mentioned at the outset, the Court is obliged to consider any allegation of contempt with scrupulous care; and no one is to be found in contempt except on voluntary admission or upon proof of the alleged contempt beyond reasonable doubt; and that means on the basis of evidence before the Court in accordance with the Rules and the Evidence Act, R.S.N.W.T. 1988, c. E-8.

2. May 28th 1993 24 Once again, due notice of the examination to be held on May 28th 1993 was given, as the affidavit material shows. I had to search the file to find it, but it is

- 11 -there. 25 Mr. Saravanja attended at the appointed time and place on this occasion, as shown in the transcript copy exhibited to the affidavit of Noel Sinclair, sworn on September 17th 1993. It is apparent from the transcript, however, that Mr. Saravanja challenged the adequacy of the notice, saying that he required more time to prepare to answer the anticipated questions. In particular, Mr. Saravanja alleged that the Bank was withholding information from him; but he did not specify the nature of this information. 26 It appears to me that there is only one inference to be drawn from the transcript evidence. Mr. Saravanja refused to answer simple direct questions put to him on behalf of the Bank by its solicitor, Mr. Phillips. At page 6, lines 14 to 22, Mr. I Saravanja became abusive, accusing Mr. Phillips of "childish behaviour" when pressing such a question.

27 Mr. Saravanja made a pretence of having received inadequate notice; but, in fact, he had received at least 48 hours notice, as required by Rule 414. And it is difficult to understand why he (as a major shareholder, officer and director, of 882432) claimed to require more time to answer whether or not 882432 owned a specific item of equipment, unless it was to check the corporate records for a serial number or some such thing. Mr. Saravanja offered no reason for the need for more time, other than that he had asked the Bank for unspecified information which it had allegedly failed to disclose to him. I f ind, on the evidence before the Court, that Mr. Saravanja on May 28th J 1993 refused and failed to answer proper questions put to him by Mr. Phillips contrary

-12-to Rule 415 and paragraph 614(c) of the Rules of Court. I have reached this conclusion entirely independently, although I note that a similar conclusion was reached by the Chambers judge on June 8th 1993, as shown in Exhibit "B" to the affidavit of Noel Sinclair sworn on September 17th 1993 at page 5, line 16, to page 6, line 5.

3. July 22nd 1993 29 Following various proceedings in Chambers on June 7th and 8th and on July 19th and 20th 1993, of which a partial record appears in the transcripts exhibited to the affidavit of Noel Sinclair earlier mentioned, Mr. Saravanja attended for further examination in aid of execution on July 22nd 1993, as ordered by the Court. A copy of each of the orders made then in Chambers, as pronounced in Mr. Saravanja's presence at the time, is also exhibited to the above mentioned affidavit. 30 On this occasion Mr. Saravanja did provide answers to certain of the questions put to him. However, he professed not to know the answer to quite a number of the questions. On page 1 of the transcript of proceedings on July 22nd (Exhibit "F" to Noel Sinclair's affidavit), at lines 15 to 17, for example, the following exchange is recorded: page 1 15 Q Do you understand the purpose of this 16 proceeding this morning? 17 A No. 31 Mr. Phillips then continued as follows:

•IS-IS Q Well, for your information, the purpose of the 19 examination this morning under the rules of court is 20 for you to answer questions that I am going to ask you 21 regarding your assets, your income, your liabilities, 22 your expenses and also those of the two corporate 23 defendants, does that enlighten you as to the purpose 24 of this examination? 25 A In part. 26 Q I would like to start with the corporate defendant 27 882432 NWT Limited, does that company own any page 2 1 equipment? 2 A I don't know. After several further exchanges in which Mr. Saravanja demonstrated a total lack of genuine responsiveness to questioning, Mr. Phillips read in the notice of appointment for the examination so that Mr. Saravanja might fully realise what was required of him, at the same time reminding Mr. Saravanja of the Court's orders. Mr. Phillips then questioned Mr. Saravanja further, referring to the list of equipment annexed to the notice of appointment for May 13th 1993 which, as I have found, was duly served on Mr. Saravanja on May 7th 1993. Mr. Saravanja professed not to recognize the equipment as listed in that notice, stating that he was not familiar with the serial numbers and, furthermore, that he was not entitled to answer for the corporate judgment debtors.

-14-33 As the examination continued, Mr. Saravanja asked Mr. Phillips to "facilitate a lawyer to make this matter go speedily in court" (see page 6, lines 10 to 12 of the transcript). Mr. Saravanja professed a lack of awareness of any obligation to bring relevant documentation with him for the examination (page 7, lines 6 to 15); and likewise as to whether 882432 had filed any income tax return for 1992 (page 7, lines 20 to 22). On being asked whether he had sworn an affidavit on August 7th 1992, produced for his inspection, his first response was "I don't recall" (page 9, line 21); following which, after considerable further questioning, he eventually acknowledged his signature on the affidavit (page 10, lines 12 to 18). Once again, the answers show a deliberate absence of genuine responsiveness. Mr. Saravanja even claimed (at page 13, lines 15 to 19) that he did not know whether he had filed a personal tax return in the past year, without first checking with his accountant. His accountant, according to the record, was sitting beside him during the examination.