On April 16, 2015, the Supreme Court of Canada released its Reasons for Judgment in the case of Carey v. Laiken, 2015 SCC 17, clarifying that a specific intention to breach a court order is not necessary for a finding of contempt, and clarifying when a Court can and cannot revisit a finding of contempt that it has previously made.
Mr. Carey was counsel for Mr. Sabourin and his companies in a case involving offshore investments that had gone poorly. Ms. Laiken had invested heavily with Mr. Sabourin and his group of companies. The money was lost and, after Mr. Sabourin sued Ms. Laiken for $364,000, alleging a deficit in her margin account, she counterclaimed for $800,000 claiming that he had defrauded her.
During the proceedings, the Ontario Superior Court of Justice issued a Mareva injunction, freezing the assets of Mr. Sabourin and his companies pending trial. As is customary in Mareva injunctions, the order prohibited not only the respondents, but also anyone with knowledge of the order, from disposing or otherwise dealing with any of Mr. Sabourin’s assets.
A few months after the initial order, Mr. Carey received a cheque for $500,000 from Mr. Sabourin, with no explanation or instructions, and deposited it into his trust account. After first instructing Mr., Carey to use the money to try and settle with unrelated third party creditors (instructions that were wisely declined) Mr. Sabourin told Mr. Carey to use the funds to try and settle with Ms. Laiken instead, something within the injunction’s scope.
However, after failing to reach a settlement with Ms. Laiken’s counsel, during which time Mr. Carey did not mention the existence of the trust funds, Mr. Carey agreed to return the balance of the funds to Mr. Sabourin – after deducting a further amount for future legal fees, given that the parties had agreed that the injunction did not prohibit payment of fees. Mr. Carey accordingly re-transferred $440,000 to Mr. Sabourin. A month later, Mr. Sabourin told Mr. Carey he was terminating the retainer, went out of business, and disappeared.
Meanwhile, other creditors of Mr. Sabourin obtained judgment against him and put his assets and companies into receivership. The receiver learned of the funds that Mr. Carey had at one time held, and demanded an accounting. By then, only $6,000 remained. After Ms. Laiken obtained summary judgment dismissing Mr .Sabourin’s initial claim and granting her counterclaim, she obtained an order holding Mr. Carey in contempt of court for breaching the Mareva injunction by releasing the funds to Mr. Sabourin.
At a subsequent hearing to determine the penalty for the contempt, however, the motions judge revisited her decision. Mr. Carey now testified that he thought that he had been acting in accordance with his professional obligations, simply returning the money that was in excess of what was required for legal fees, and that did not count as a “transfer” of the funds. He also claimed that he thought he had an obligation, arising out of solicitor-client privilege, not to alert counsel for Ms. Laiken to the existence of the funds at the time, and that extended to justifying their release. The motions judge reversed herself, deciding that the terms of the order may not have been clear to Mr. Sabourin and doubting whether or not Mr. Carey’s interpretation of it was deliberately and wilfully blind.
The Ontario Court of Appeal unanimously allowed the appeal and restored the initial contempt finding. While it accepted that Mr. Carey did not specifically desire to breach the order, that was not a necessary element to establish in order to find him liable for civil contempt. Mr. Carey knew of a clear court order and committed an act that violated it: that was all that need be shown. Mr. Carey appealed.
There were two issues before the Supreme Court of Canada:
- What is the required intent necessary to find contempt?
- Was the motions judge permitted to revisit the initial decision finding Mr. Carey in contempt?
Mr. Carey argued that where someone a) could not purge the contempt in question, b) is a lawyer, or c) is a third party to the order, then to find contempt, a Court must find that the person specifically intended to disobey the order, i.e.: they intended to be in contempt. In contempt cases, the alleged contemnor is often given the chance to “purge” their contempt, i.e.: to undo the action that has breached the court order, or to comply with the order, before punishment for the contempt is imposed. Here, there was no way for Mr. Carey to get the money back, and he argued that he thought he was acting in accordance with professional obligations.
The Court rejected this wholeheartedly, reaffirming that the elements for civil contempt are as follows, to be proved beyond a reasonable doubt:
- There must be an order that states clearly and unequivocally what must or must 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 acted intentionally, in doing what the order prohibits, or not doing what it requires.
The Court held that to create a heightened requirement for the mental element of civil contempt where the contempt could not be purged, or where a lawyer felt he or she had a conflicting legal duty, was neither consistent with the jurisprudence nor with the goals of civil contempt: securing compliance with court orders and protecting the integrity of the administration of justice. There was no logic or justice in requiring a higher standard, and no reason to “treat with special charity” people whose own actions had made further compliance with the order impossible.
The Court also held that requiring a specific intent to breach a court order would put the test too high and make the mental element of contempt dependent on the type of order alleged to have been breached. It would open the door to mistakes of law as defences, with the perverse result that mistakes of law “become a defence to an allegation of civil contempt but not to a murder charge.”
Mr. Carey’s plea that lawyers should be held to a different standard fell on deaf ears. There was no reason to treat lawyers differently than others in determining the mental element of contempt. Given that reliance on legal advice does not shield parties from a finding of contempt, there was no reason to depart from that principle just because the legal advice the contemnor was relying was his own. Mr. Carey’s argument that the “repayment of excess fees” was not a “transfer” as prohibited in the order was dismissed out of hand. He was aware that the order prohibited transfers and giving the money back to Mr. Sabourin was clearly a transfer. If he had doubts as to his obligations, or obligations with respect to disclosure of the funds’ existence, he could have left the money in his trust account while they were clarified.
The Court held that the motions judge had erred by revisiting her original decision finding Mr. Carey in contempt. The starting point is that, in contempt proceedings, where an initial finding of contempt has been made at the first stage of a two-part proceeding on guilt and penalty, it is usually final. Where a party purges its contempt or complies with the order, or – in exceptional cases — if new evidence comes to light, then a court may revisit the original finding. However, in this case, the motions judge allowed Mr. Carey to relitigate the original contempt finding by offering evidence as to his intentions. In doing so, she erred, and erred further in setting her original decision aside.
While Carey does not break new legal ground, it is an important reaffirmation of the goals and elements of civil contempt, and shows the Court’s reluctance to allow exceptions, or to create different classes of alleged contemnors. Its reluctance in this respect extended most of all to lawyers who should know the paramount importance of complying with court orders and protecting the administration of justice.