COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Reliable Mortgages Investment Corp. v. Chan,

2014 BCCA 14

Date: 20140110

Docket:
CA040765

Between:

Reliable Mortgages
Investment Corp.

Respondent

(Plaintiff)

And

Sylvia Chan and
Alice Lee

Appellants

(Defendants)

Before:

The Honourable Mr. Justice Low

The Honourable Madam Justice Stromberg-Stein

The Honourable Mr. Justice Willcock

On appeal from:  An
order of the Supreme Court of British Columbia, dated
March 5, 2013 (
Reliable Mortgages Investment Corp. v. Chan
,
2013 BCSC 301, Vancouver Docket S115440).

Oral Reasons for Judgment

Counsel for the Appellants:

G.J. Niemela

Counsel for the Respondent:

R.J. Ellis

Place and Date of Hearing:

Vancouver, British
  Columbia

January 10, 2014

Place and Date of Judgment:

Vancouver, British
  Columbia

January 10, 2014

Summary:

On this appeal from a decision dismissing an application
to strike the respondents action, the appellants argued the action brought
against them by the plaintiff mortgage corporation ought to be barred as the
cause of action and fundamental issues had been, or ought to have been, decided
in a previous foreclosure action.

Held: appeal dismissed. The trial judge was correct in
finding that neither cause of action estoppel nor issue estoppel applied. While
the
foreclosure
proceedings were a bar to claims on the mortgage or arising out of the mortgage
contract, they were not a bar to claims arising out of the failure of the
contract to protect the respondents interests.
The respondent mortgage corporation
was not required to argue a case in conversion at the foreclosure trial. The
previous trial judge had left the question of negligence or wilful blindness in
relation to such a claim open for litigation.

[1]

WILLCOCK J.A.
: This is an appeal from the judgment of
Mr. Justice Burnyeat dismissing an application brought by the defendants
to dismiss the plaintiffs claim on the grounds that it is barred by the
doctrine of
res judicata
or amounts to an abuse of process by relitigation.

Background

[2]

On May 26, 2009, Reliable Mortgages Investment Corporation (Reliable)
issued a Petition, naming Sylvia Chan and Jason Lee as respondents, by which it
sought: a declaration that a mortgage registered in the New Westminster Land
Title Office on March 12, 2009, charged certain lands; a declaration of
default; a six-month redemption period; an order for sale; and judgment against
the respondents in the amount of $265,257.24, as at May 21, 2009, and per
diem interest thereafter.

[3]

By order granted by Master Baker on June 24, 2009, the petition was
held to act as a writ of summons and statement of claim, and the claim
described in the petition was moved to the trial list.

[4]

The claim came on for trial in May 2011 and resulted in the
August 9, 2011 judgment of Mr. Justice Smith indexed at 2011 BCSC
1080. The reasons begin with a succinct description of the background:

[1]        The respondent Sylvia Chans nephew used a forged
power of attorney to mortgage her house without her knowledge. The petitioner
Reliable Mortgages Investment Corp. (Reliable) now seeks to foreclose on that
mortgage.

[2]        The mortgage proceeds of almost $250,000 were
deposited into Ms. Chans bank account, but she says her nephew, Jason
Lee, told her it was his money and persuaded her to transfer the funds to him.
She says she trusted him and did not press for a clear explanation of where the
money had come from or why it had gone into her account.

[3]        A mortgage obtained by
fraud without the knowledge of the property owner would normally be
unenforceable, but Reliable says it is entitled to an
order nisi
of
foreclosure in this case because Ms. Chan actively, if unwittingly,
assisted in the fraud by transferring the money when she could have discovered
the truth by making reasonable inquiries.

[5]

The effect of Ms. Chans knowledge of the fraud perpetrated upon
Reliable on the validity of the mortgage was addressed in the judgment, in the
context of the discussion of the nature of the protection afforded to a party
affected by the fraudulent execution of a document later registered by the
Land
Title Act,
R.S.B.C. 1996, c. 250.

[6]

The trial judge was referred to the judgment of this court in
Gill v.
Bucholtz
, 2009 BCCA 137, and particularly the passage of the judgment at
para. 27 that reads as follows:

[27]      ... On its plain meaning, the exception in s.
23(2)(i) to the indefeasibility of title applies and the phrase void
instrument in s. 25.1(1) includes a mortgage taken from a person who obtained
her title by fraud or forgery, as occurred in this case. The Act preserves the
nemo
dat
rule with respect to charges  even where the holder has relied on the
register and dealt
bona fide
with a non-fictitious registered owner. The
mortgagees in this case did not acquire any estate or interest in Lot 4 on
registration of their instruments because having been granted by a person who
had no interest to give, those instruments were void, both at common law and
under s. 25.1(1). ...

[28]      The Legislature of
British Columbia would appear to have adopted the policy that the cost of
frauds perpetrated against mortgagees and other chargeholders should be borne
not by the public (as the funders of the Assurance Fund) but by lenders and
other chargeholders themselves. Whether this policy choice is a good one or not
is not for us to decide. We must give effect to the language of the statute in
its ordinary and grammatical meaning.

[7]

Mr. Justice Smith addressed that argument at para. 32:

[32]      Reliable argues that
Gill
is distinguishable because the mortgage proceeds in this case went into Ms. Chans
bank account and she knowingly signed the money over to the fraudster. Reliable
says she was in the best position to discover the fraud, but instead actively
assisted in it by transferring the funds to Jason Lee without asking obvious
questions.

[8]

In support of the proposition that this courts decision in
Gill
was distinguishable, Reliable cited the decision in
Isaacs v. Royal Bank of
Canada
, 2010 ONSC 3527, affd 2011 ONCA 88. The trial judge found:

[36]

In
my view,
Isaacs
is of no assistance to Reliable. First of all, whatever
the state of the law may be in Ontario, I am bound by the British Columbia
Court of Appeals clear interpretation of the applicable British Columbia
statute in
Gill
.

[37]      I also note that neither the chambers judge nor the
Court of Appeal in
Isaacs
referred to provisions in Ontario legislation
that are broadly similar to ss. 25.1 and 26 of the British Columbia [Act]. It
was presumably not necessary to refer to them because Ms. Isaacs had in
fact signed the mortgage documents and the bank had already exercised its
rights under the mortgage by selling the property.

[38]      The Ontario Statute was
considered in
Lawrence v. Maple Trust Company
, 2007 ONCA 74, where a
property owners signature was forged on a transfer of the property and the
fraudulent transferee then obtained a mortgage. The Ontario Court of Appeal
found for the property owner and set aside the mortgage, thus arriving at the
same result, although through a somewhat different analytical approach, as that
reached by the British Columbia Court of Appeal in
Gill
. The Ontario
Courts subsequent decision in
Isaacs
would therefore not apply on these
facts, even in Ontario, and it does not distinguish
Gill
, which is
binding upon me.

[9]

Because Ms. Chan had not signed the mortgage it did not create a
valid charge on Ms. Chans property. The foreclosure petition was
dismissed.

[10]

In dismissing the claim the trial judge expressly noted:

[40]      I stress that in
dismissing Reliables claim, I am only finding that it is not entitled to
execute on the mortgage security, which was the only claim advanced in this
proceeding. I make no comment on any other cause of action that Reliable may
have against Ms. Chan or anyone else.

[11]

Reliable then issued a notice of civil claim on August 15, 2011,
against Ms. Chan and Ms. Lee. (BC Supreme Court action, Vancouver
registry No. S115440). In that action Reliable says the mortgage in
question was fraudulently executed by Jason Lee purporting to act on behalf of Ms. Chan.
It says the proceeds of the mortgage were deposited into Ms. Chans bank
account on March 13, 2009, and she authorized the transfer of the sum of
$200,000 to Jason Lee by way of bank draft and further authorized the transfer
of the sum of $46,182 to a bank account owned or controlled jointly by Jason
Lee and the appellant Ms. Lee. Reliable seeks damages against Ms. Chan
and Ms. Lee for fraud and conversion. It says Ms. Chan and Ms. Lee
knew or ought to have known: Jason Lee was perpetrating a fraud on Reliable;
that Ms. Chan paid out the proceeds of the mortgage without making any
adequate inquiry as to the source of the money, and; they knew or ought to have
known they were not legally entitled to possess or deal with the net mortgage
proceeds.

[12]

Ms. Chan and Ms. Lee deny they participated in or knew that
Jason Lee was perpetrating a fraud on Reliable and claim to have made an
adequate inquiry as to the source of the money and obtained a satisfactory
response. They further say there was a finding by the judge in the foreclosure
proceedings that there was no evidence they had any specific knowledge of
Reliable, the mortgage, or the forged power of attorney when Ms. Chan
signed the documents transferring funds to Jason Lee on March 13, 2009. Ms. Chan
and Ms. Lee say Reliable is precluded from relitigating issues determined
at the foreclosure trial.

[13]

On May 28, 2012, Ms. Chan and Ms. Lee filed an application for
an order striking the claims against her as an abuse of process.

[14]

In support of their application Ms. Lee and Ms. Chan say that
on the day before the foreclosure trial, counsel for Reliable advised Ms. Chans
lawyer it would be relying on conversion as a cause of action at the trial. Ms. Chans
counsel objected to late notice of this cause of action that had not been pled.

[15]

The issue of the addition of conversion as a new cause of action was
discussed on May 10, 2011, at the opening of the trial. This appeal turns,
in part, on the manner in which the trial judge addressed the submissions made
at the opening.

[16]

In his opening statement counsel for Reliable indicated that what was
being sought was an
order nisi
of foreclosure, a declaration of the
amount due under the mortgage, and a declaration that the mortgage charged the
property. This was referred to as the usual
order nisi
relief. Counsel
expressed the view that it was his intention to reserve the right to argue the
conversion issue. Counsel for Ms. Chan advised the court of his position:
Reliable had an opportunity to advance any claim it wished to bring to trial and
an opportunity to adjourn the trial to do so. He did not object to an
adjournment to permit Reliable to advance a conversion claim but did object to
a conversion claim being brought up at a later date. The court was advised
that if the trial proceeded Ms. Chan would rely upon
res judicata
to defeat later claims, to the extent she could do so.

[17]

The trial judge addressed those submissions by saying:

Well, I think that is how we have to deal with it, in the
sense that this  this has been pled as a foreclosure action. I have no idea at
this point whether I will be able to decide that off the top of my head or Im
going to have to reserve on it. Then the chips will have to fall where they may
as to whether there is  there can further proceedings on a conversion matter,
right?

So, but Im not certain I  I
think Mr. Niemela is correct, that conversion is a different cause of
action and he should not be expected to  and it may require different or
additional evidence and he shouldnt be expected to deal with it in this
proceeding, all right? Okay.

[18]

The trial proceeded on those terms. The appellants say that in his
judgment, at its conclusion, the judge made two significant findings of fact in
relation to the
res judicata
argument now advanced:

a)

that after being told the money belonged to Jason Lees company Ms. Chan
asked no further questions about the source of the money deposited in her
account in March 2009; and

b)

that there was
no evidence Ms. Chan had specific knowledge of Reliable, the mortgage, or
the forged power of attorney when she signed the document transferring funds on
March 13, 2009.

[19]

Reliable says the May 2011 trial addressed only its claim to enforce a
mortgage and the current action is based on a distinct and separate cause of
action, namely: fraud and conversion.

Judgment appealed from

[20]

The appellants application came on for hearing before Mr. Justice
Burnyeat in chambers on January 18, 2013. Judgment was reserved to March 5,
2013. It is indexed at 2013 BCSC 301.

[21]

The application was dismissed. The chambers judge held:

[17]      I am satisfied that issue estoppel does not apply.
The issue that was before N. Smith J. was the enforceability of the
Mortgage and not what happened with the funds after they were advanced by
Reliable. There was no decision relating to conversion and, in fact, N. Smith J.
specifically stated that the only issue that he was deciding was the issue of
the enforceability of the Mortgage and that he would be making no comments on
any other causes of action that might be available to Reliable. When originally
commenced, it would not have been possible to include a claim for conversion
under the Petition as causes of action which can be claimed in a Petition could
not include such an action.

[18]      Once the Petition was converted for Trial purposes,
it would have been possible to apply to amend the pleadings to claim conversion
and, at the same time, to add Ms. Lee as a party. While it would have been
preferable to add Ms. Lee, to amend the pleadings and to adjourn the
Trial, that was not done. However, not having proceeded in that manner, the
ability to later deal with the issue of conversion was specifically reserved in
the decision of N. Smith J.

[19]      Regarding cause of action estoppel, it is clear
that no decision on conversion was decided at the Trial before N. Smith J.
The issue of a conversion claim against Ms. Chan and Ms. Lee was
specifically raised before N. Smith J. While the conversion claim was
not to be raised during the currency of the Trial, the possibility of later
raising a conversion claim was left open when N. Smith J. commented
that: there can be further proceedings on a conversion matter, and that
conversion is a different cause of action ... it may require different or
additional evidence .... While it would have been preferable for the Trial to
be adjourned in order that there could also be a hearing of the conversion
issue, that was not done. However, I am satisfied that that step was not
necessary in order to preserve the right of Reliable to proceed as it did.

[20]      I cannot find that there has been abuse of process
as I cannot find that what is proposed in the Action is a relitigation of the
Trial before N. Smith J. The integrity of the judicial
decision-making process in the first proceeding will not undermined. Nothing in
this Action will deal with the decision relating to the enforceability of the
Mortgage. At the same time, I cannot find that Reliable seeks to avoid
compliance with the Order made by N. Smith J. There is no challenge
of that Order either directly or indirectly.

[21]      In view of what was
stated before N. Smith J. and in view of what was stated by N. Smith J.,
I am satisfied that the integrity of the judicial decision-making process would
be undermined if Reliable is not in a position to claim against Ms. Chan
and Ms. Lee. Accordingly, the application of Ms. Chan and Ms. Lee
is dismissed.

The Appellants Position on Appeal

[22]

The appellants rely upon the doctrines of cause of action estoppel and
issue estoppel and say this action is an abuse of process by relitigation.

[23]

The appellants rely upon the first five of the estoppel doctrines
described in Donald Langes text,
The Doctrine of Res Judicata in Canada:
Third Edition
(Markham: LexisNexis Canada Inc. 2010) at p.11:

There are six essential doctrines developed by the courts of
Canada. Each one of these doctrines may be applied with rigour based on its
precise meaning. In their most concise definitions, the six essential estoppel
doctrines are:

(1)  Issue estoppel bars an issue which has actually been
decided in the first proceeding.

(2)  Issue estoppel under the rule in
Henderson
bars
an issue which could have been brought in the first proceeding.

(3)  Cause of action estoppel, the trust
res judicata
,
bars a cause which has actually been decided in the first proceeding.

(4)  Cause of action estoppel under the rule in
Henderson
bars a cause which could have been brought in the first proceeding.

(5)  Abuse of process by relitigation bars a second
proceeding when the integrity of the judicial decision-making process in the
first proceeding will be undermined.

(6)  Collateral attack bars a second proceeding when a party,
bound by an order, seeks to avoid compliance with that order by challenging the
order itself and its enforceability, not directly but indirectly in a separate
forum.

With respect to the policy
grounds, a consideration of issue estoppel or cause of action estoppel focuses
upon the interests of the litigants. A consideration of abuse of process by
relitigation or collateral attack focuses upon the justice system.

[24]

The appellants do not rely upon an argument that these proceedings are a
collateral attack on the judgment of the trial judge.

Issue Estoppel

[25]

The appellants say the allegation in the conversion action that Ms. Chan
and Ms. Lee knew or ought to have known that Jason Lee was perpetrating a
fraud on the plaintiff, directly challenges the findings of fact made in the
reasons for judgment at trial. There is an allegation that Ms. Chan knew
or ought to have known the proceeds of the mortgage deposited to their accounts
were suspicious and yet did not make any inquiry as to the source of the money.
The appellants note that at para. 16 of his judgment the trial judge held:

Ms. Chan signed a transfer
slip that authorized a $200,000 draft to Jason Lee and a transfer of $46,182.50
to an account belonging to Alice Lee, on which Jason Lee also had signing
authority. Ms. Chan says she trusted Jason Lee and signed the documents as
requested, without paying much attention to the transaction. She did not ask
how much had been deposited into her account and, after being told the money
belonged to Jason Lees company, asked no further questions about the source of
the money.

[26]

They say, further that at para. 21 the trial judge held:

There is no evidence that Ms. Chan
had any specific knowledge of Reliable, the mortgage or the forged power of
attorney when she signed the document transferring funds on March 13,
2009.

[27]

They do not cite the balance of that paragraph of the judgment:

I agree that, in signing the
transfer at Jason Lees request without further inquiry, she was at best
negligent and perhaps wilfully blind. The question is whether that negligence
or wilful blindness is relevant to this action, as it has been pleaded.

[28]

The appellants say the chambers judge erred in not finding the issues of
Ms. Chans knowledge raised in the pleadings in the conversion action were
addressed and determined at paras. 16 and 21 by the trial judge.

Cause of Action Estoppel

[29]

The appellants say the chambers judge erred in equating the phrase
cause of action with the name or classification given to a wrong or remedy
rather than the factual situation entitling one to a remedy. The appellants say
Reliable did not place all legal theories before the court and the chambers
judge erred in not adopting the approach described in
Henderson v. Henderson
(1843), 3 Hare 100, 67 ER 313 (Ch), requiring the parties to litigation to
bring forward their whole case.

[30]

The appellants say the trial judge did not reserve to Reliable the right
to bring further action but simply reserved the question whether such action
might be barred by cause of action estoppel.

Abuse of Process by Relitigation

[31]

The appellants say the chambers judge erred in finding there was not an abuse
of process. They say the conversion action is relitigation of the facts and
issues that were before Mr. Justice Smith. The same witnesses will be
called and the same facts will be addressed.

The
Conversion Action Against Ms. Lee

[32]

The appellants argue Ms. Lee, by acting as a witness in the first
trial, is a privy to Ms. Chan, and any estoppel that arises in favour of Ms. Chan
would similarly arise in favour of Ms. Lee. They say there is evidence
that the respondent had in its contemplation, before the beginning of the trial
in the first action that Ms. Lee would become a defendant in a later cause
of action. The appellants argue the respondent could have and ought to have
amended its pleadings to include Ms. Lee in the first action.

The Respondents Position on Appeal

[33]

The respondent says the chambers judge exercised his discretion in
accordance with correct principles and that neither cause of action estoppel
nor issue estoppel apply to bar the cause of action (although counsel for the
respondent concedes that at the trial there may be certain issues it is barred
from addressing or findings it cannot challenge - such specific issue estoppel
being a matter for consideration by the trial judge). It says cause of action
estoppel does not apply because the conversion claim was neither advanced nor
determined in the foreclosure proceedings. The cause of action in the case
under appeal is said to be distinct, is founded upon different evidence and
requires new and different findings of fact. In fact there is no issue in this
regard, as all counsel describe the claim in conversion as a distinct cause of
action.

[34]

The respondent relies, in particular, on para. 40 of the reasons
for judgment at trial, cited above, reserving issues for later determination.

Discussion

Res
Judicata

[35]

The principle of
res judicata
is founded upon two broad
principles of public policy: (1) the state has an interest that there
should be an end to litigation; and (2) no individual should be tried more
than once for the same cause, often stated as no one should be twice vexed:
Angle
v. M.N.R
., [1975] 2 S.C.R. 248. As the Supreme Court notes in
Penner v.
Niagara (Regional Police Services Board),

2013
SCC 19 at 28:

[
28
]

Relitigation of an issue wastes
resources, makes it risky for parties to rely on the results of their prior
litigation, unfairly exposes parties to additional costs, raises the spectre of
inconsistent adjudicative determinations and, where the initial decision maker
is in the administrative law field, may undermine the legislatures intent in
setting up the administrative scheme. For these reasons, the law has adopted a
number of doctrines to limit relitigation.

[36]

Two types of estoppel fall under the rubric of
res judicata
:
cause of action estoppel and issue estoppel. The first operates in respect of
the whole cause of action, whereas the second applies with respect to
particular issues.

Standard
of Review

[37]

Whether litigation of a cause or issue is barred by the application of
the doctrine of
res judicata
is a question of law and is reviewable on a
standard of correctness:
Cliffs Over Maple Bay (Re),
2011 BCCA 180.

[38]

In this case the trial judge found that neither cause of action estoppel
nor issue estoppel applied and the standard of review of that decision is
correctness.

Issue Estoppel

[39]

Issue estoppel is applied to prevent relitigation of a particular
factual issue, even where the cause of action is not the same. In
Danyluk v.
Ainsworth Technologies Inc.,
2001 SCC 44 at para. 25, the necessary
preconditions to the operation of issue estoppel were described by the Supreme
Court of Canada. Issue estoppel may be invoked where:

1. the same
question as that before the court has been previously decided;

2. the judicial
decision said to create the estoppel was final; and

3. the parties to
the judicial decision or their privies were the same persons as the parties to
the proceedings in which the estoppel is raised.

[40]

It is important that the issues in consecutive proceedings be clearly
characterized in order to properly address a claim that proceedings are barred
by issue estoppel:
Clayton v. Garrett (Guardian ad litem of)
(1995), 6
B.C.L.R. (3d) 268 (B.C.C.A).

[41]

In my view the issue in the case at trial involved the characterization
of the validity of the mortgage as between Reliable and Ms. Chan. In the
case at bar, the issue involves the question whether Ms. Chan, in
transferring the funds at Jason Lees request without further inquiry, was
negligent or willfully blind.

[42]

While the trial judge made findings with respect to what was known by Ms. Chan
at the time the mortgage proceeds were deposited in her account and paid out to
Mr. and Ms. Lee, it cannot, in my view, be said that he made any
finding with respect to the adequacy of the inquiry made by Ms. Chan when
she received those funds and dealt with them.

[43]

In paras. 15 through 20 of the reasons for judgment, the trial
judge described Ms. Chans evidence. There is no indication that evidence
was accepted wholly or in part by the trial judge, save and except the express
finding in para. 21 of the reasons for judgment where he found there was no
evidence before him that Ms. Chan had any specific knowledge of Reliable,
the mortgage or the forged power of attorney when she transferred the funds.
The balance of the reasons for judgment addresses the question whether
negligence or willful blindness was relevant to the action as it has been
pleaded. Ultimately, as is clear from the reasons for judgment, the adequacy
of Ms. Chans inquiry was found to be irrelevant to the case before the
trial judge. The chambers judge, in my opinion, was correct in finding that
there was no issue estoppel in relation to that specific question.

Cause of Action Estoppel

[44]

Cause of action estoppel is concerned with ensuring that parties bring
forward all claims and defences with respect to the cause of action in a
proceeding, such that, if they fail to do so, they will be prevented from
claiming these in a subsequent proceeding. In
Henderson
, Wigram V.C.
said:

The plea of
res judicata
applies, except in special cases, not only to points upon which the court was
actually required by the parties to form an opinion and pronounce a judgment,
but to every point which properly belonged to the subject of litigation, and
which the parties, exercising reasonable diligence, might have brought forward
at the time.

[45]

More recently, in
Hoque v. Montreal Trust Co.
(1997), 162 N.S.R.
(2d) 321, [1997] N.S.J. No. 430 (N.S.C.A.), Cromwell J.A. (as he then
was), reviewed this basic principle of cause of action estoppel:

My review of these authorities shows
that while there are some very broad statements that all matters which
could
have been raised are barred under the principle of cause of action estoppel,
none of the cases actually demonstrates this broad principle. In each case, the
issue was whether the party
should
have raised the point now asserted in
the second action.

[Emphasis in original.]

[46]

I cannot accede to the appellants argument that the chambers judge
erred in failing to find Reliable was barred from advancing the conversion
action because of its failure to advance its whole case in the foreclosure
proceedings. It cannot be said that Reliable ought to have brought forward the
conversion claim in the foreclosure action. Unlike the claims made by the
plaintiff in
Ba-Oose Inc. v. HSBC Bank Canada
, 2011 BCCA 511, a recent
decision of this court addressing the issues that ought properly to be
addressed in an
in rem
action on a mortgage, the allegations made by the
respondent do not go to the root of the mortgage claim. They are distinct from
the claims addressed on the foreclosure. The chambers judge was clearly of the
view that the rule in
Henderson
should not apply in circumstances where,
as here, an
in rem
action is commenced by petition by a party seeking
relief to which it is entitled under the mortgage. The proceedings commenced by
the petitioner were not intended to resolve all claims that might arise in the
event it could not obtain relief pursuant to the terms of the mortgage. In my
view the chambers judge could properly regard the foreclosure proceedings as a
bar to other claims on the contract or arising out of the contract but not a
bar to claims arising out of the failure of the contract to protect Reliables
interests.

[47]

That being said, even if it could be argued that Reliable ought to have
advanced all claims against Ms. Chan and Ms. Lee in the foreclosure
proceedings after they were moved to the trial list, it should not be barred
from bringing in the action in conversion in the special circumstances of this
case. The trial judge was alive to Reliables intention to seek other relief other
than that to which it claimed to be entitled under the mortgage. His judgment
reflects the intention to reserve to Reliable any claim that Reliable might
have arising out of Ms. Chans negligence or willful blindness. In such
circumstances it would, in my view, be inequitable to bar Reliable from
bringing such a claim on the basis that it ought to have sought all relief and
addressed all issues in the foreclosure action.

Abuse of Process by Relitigation

[48]

In
Toronto (City) v. C.U.P.E., Local 79
, 2003 SCC 63, Arbour J.
described the circumstances in which the Court should recognize abuse of
process by relitigation. The court found that the inherent jurisdiction of
courts to prevent such an abuse could be used to preclude the relitigation of
an issue, even where issue estoppel cannot be said to have arisen. In
Petrelli
v. Lindell Beach Holiday Resort Ltd.,
2011 BCCA 367, Groberman J.A.
explained the development of this area of
res judicata
:

[71]      Allowing a party to relitigate an issue that has
been finally determined in previous proceedings, then, challenges the integrity
of the adjudicative function of the courts in two respects. First, the
duplication of efforts results in inefficient use of judicial resources. This
inefficiency directly impacts the ability of the courts to function. It also
tends to diminish public respect for the judicial process. Second, in opening
up the possibility of inconsistent findings of fact, relitigation of an issue
diminishes the credibility authority of judgments.

[72]      These challenges to the
integrity of the adjudicative functions of the court occur when a court is
asked, in litigation, to come to a different finding of fact on an issue than
was reached in previous litigation. There are situations in which overriding
concerns of fairness to the parties require such challenges to be tolerated.
The Supreme Court of Canada in
Toronto v. C.U.P.E.
recognized, however,
that a robust doctrine of abuse of process by relitigation means that such
challenges may be avoided where there are no such fairness concerns.

[49]

In my view, there is nothing in the conduct of the respondent in this
case that challenges the integrity of the adjudicative functions of the court.
The respondent alerted the trial judge in the foreclosure action to its
intention to seek further or other relief in the event the mortgage was
unenforceable. It now does so. As I have noted above there is in my view
nothing in the judgment in the foreclosure action that finally determines any
question that precludes the respondents action from continuing.

[50]

It should be noted, however, that the respondent concedes that the
judgment finally determines all questions relating to the validity of the
mortgage and the respondent acknowledges that it will be precluded from
relitigating those issues. In finding that the chambers judge was correct to
dismiss the motion to strike the pleadings and dismiss the action, I would not
wish to be thought to have precluded the parties from seeking further
directions or orders from the trial judge in relation to the extent that the
issues, either of fact or law, that have been finally determined.

Conversion Action Against Ms. Lee

[51]

As I have found that there is no application of
res judicata
that
would bar the claim or justify its dismissal, it is unnecessary to consider
whether such estoppel would apply to Ms. Lee.

[52]

For those reasons I would dismiss the appeal.

[53]

LOW J.A.
: I agree.

[54]

STROMBERG-STEIN J.A.
: I agree

[55]

LOW J.A.
: The appeal is dismissed.

The Honourable Mr. Justice Willcock


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Schober v. Tyson Creek Hydro Corporation

2014 BCCA 12

Date: 20140110

Docket: CA041379

Between:

Peter Schober

Appellant

(Petitioner)

And

Tyson Creek Hydro
Corporation

Respondent

(Respondent)

THIS FILE IS SUBJECT
TO A SEALING ORDER OF THE COURT OF APPEAL.

THE SEALING ORDER
WAS LIFTED BY THE SUPREME COURT OF CANADA ON JUNE 12, 2014.

Before:

The Honourable Mr. Justice Low

The Honourable Madam Justice Stromberg-Stein

The Honourable Mr. Justice Willcock

On appeal from the
Supreme Court of British Columbia, November 8, 2013
(
Schober v. Tyson Creek Hydro Corporation
, 2013 BCSC 2042
Vancouver Registry No. S136825)

Oral Reasons for Judgment

Counsel for the Appellant:

D.P. Church, Q.C. and
  M.W. Bhuler

Counsel for the Respondent:

J.M. Sullivan and L.
  Cundari

Place and Date of Hearing:

Vancouver, British
  Columbia

January 7, 2014

Place and Date of Judgment:

Vancouver, British
  Columbia

January 10, 2014

Summary:

The appellant sought an
order declaring that a transcript of his examination for discovery, given on
behalf of his employer in an underlying suit, is subject to an implied
undertaking of confidentiality from his employer and, consequently, his
employer should be prohibited from disclosing the transcript and the
information contained within it for any purpose outside of the underlying
action. On appeal, the appellant argued that the implied undertaking of
confidentiality applies not just to the party seeking the information on
discovery, but to all parties to the action.

Held: appeal dismissed. The
implied undertaking of confidentiality is given to the court by the inspecting
party and is meant to protect the privacy interests of the party giving
evidence on discovery. This undertaking does not extend so far as to prevent
the party that is being discovered from using any information presented in
discovery for purposes beyond the subject litigation.

[1]

WILLCOCK J.A.:
The appellant, by petition filed on September 12,
2013, sought an order declaring that the transcript of his examination for
discovery conducted on May 23, 2013, and the information in the transcript are
subject to an implied undertaking of confidentiality by the respondent, Tyson
Creek Hydro Corporation (TCHC) and an order prohibiting the disclosure of that
information or the use of the transcript for any purpose outside the action
pending between TCHC and others in the Vancouver Registry of the Supreme Court
(the Underlying Litigation).

[2]

The petition was dismissed by Mr. Justice Cohen on November 8, 2013, for
reasons indexed at 2013 BCSC 2042, which have since been sealed by order of the
Supreme Court and this Court.

[3]

The appellant seeks to set aside the order dismissing the petition and to
substitute in its place an order describing the undertaking it says should be
binding upon TCHC in relation to the transcript and information disclosed on
discovery.

Background

[4]

The underlying litigation arises out of damage to electrical generating
equipment constructed by TCHC at Tyson Creek on the Sunshine Coast of British
Columbia, as result of the entry of particulate matter into the turbine, and an
order preventing the continued operation of that equipment for a period of time
as a result of the discharge of that particulate matter into Tyson Creek. That
damage and the interruption in the use of the plant are said to have arisen as a
result of the unexpected accumulation of glacial flour in Tyson Lake when the
surface level of the lake was reduced by the operation of the electrical
generating equipment. The underlying litigation is founded upon claims in
contract and negligence against parties TCHC says caused or contributed to
design flaws that led to unexpected abrasion and damage to the Tyson Creek facility
and to the discharge of unexpected effluent into Tyson Creek.

[5]

The flow of water to the TCHC turbine was drawn from Tyson Lake and was
intended to be returned to Tyson Creek and, ultimately, the Tzoonie River. The
TCHC project was planned, built, and operated on the understanding that TCHC
would obtain necessary permits to draw water for its operation from the
regulatory authority established by the Province of British Columbia pursuant
to the
Water Act
, R.S.B.C. 1996, c. 483. Those permits required periodic
reporting to the Province.

[6]

At all material times Mr.
Schober, the appellant, was an officer, director, and manager of TCHC. In May
2013, he was examined for discovery with respect to matters at issue in the
litigation by Mr. Hirst, counsel for the defendant
, Kerr Wood Leidal
Associates Limited.
After the conclusion
of the first portion of his examination for discovery (which has been adjourned
but is continuing) representatives of TCHC
met with staff of the
Ministry of Forests, Lands and Natural Resource Operations of the Provincial
Government and made some disclosure of evidence gleaned from the appellants
examination with respect to the accuracy of the records kept and the nature of
the reporting the appellant had made to the regulatory authority on behalf of
TCHC.

[7]

On being advised of TCHCs intention to disclose information from his
examination for discovery to the regulatory authorities, the appellant brought
the petition, the dismissal of which has led to this appeal.

Decision Appealed From

[8]

The appellants petition was founded upon the proposition that all
evidence obtained on discovery is produced pursuant to an implied undertaking
on the part of all parties to the litigation, that the evidence will be used
for no purpose other than the prosecution or defence of the litigation in which
the discovery is conducted. The appellant says he was compelled to attend the
examination for discovery and he could have been found to be in contempt of
court if he had refused to attend or give responsive answers. He says anyone
compelled to attend at discovery is entitled to the benefit of an implied
undertaking of confidentiality. He argues such an undertaking was implicitly
given to him not only by the party conducting the examination for discovery but
by all other parties to the litigation, including TCHC, on whose behalf he was
testifying. He says that undertaking ought to preclude TCHC from making use of
any of the information disclosed on his discovery and should specifically
preclude TCHC from providing a transcript of the examination for discovery to
the regulatory authorities.

[9]

Following an
in camera
hearing on September 23, 2013, the
appellants petition was dismissed. The judge referred to authorities limiting
the use that may be made of the transcript by the other parties. He held:  it
is well-settled that the implied undertaking only applies where the opposing
party attempts to use the evidence outside the action. He held the law does
not support the submission made by the appellant that applying the implied
undertaking to the circumstances in this case would serve the interests of
justice. He held:

[46] I do not view this
application as one to protect the privacy of the petitioners personal
information potentially damaging to his interests. The petitioners conduct,
which is at the center of TCHCs concern, is conduct he did in TCHCs name. In
my view, TCHC is not and should not be precluded by an implied undertaking from
disclosing its own conduct to the provincial regulator.

[10]

The appellant says the judge erred in concluding that the appellants
privacy interest in the damaging information was not protected by the implied
undertaking of confidentiality.

[11]

This is said to be a case of first instance.

Discussion

[12]

The narrow question in this case is whether an authorized representative
of a corporation can rely upon a doctrine intended to protect the privacy of
persons compelled to testify in civil proceedings, to preclude the corporation from
disclosing testimony with respect to information in its care or control he has
given on its behalf at an examination for discovery.

[13]

The implied undertaking of confidentiality is considered to be necessary
so the public interest in complete and candid discovery does not trench upon
the privacy interests of individuals compelled to testify. It is a measure of
protection afforded to privacy interests.

[14]

The undertaking
was restated in British Columbia by this Court in
Hunt
v. T & N plc
, [1995] 5
W.W.R. 518, 4 B.C.L.R. (3d) 110, where
the history of the doctrine was
briefly described as follows:

[42]      Keeping in mind that pre-trial proceedings are
generally private, and that papers are often the dearest property a man can
have, per
Entick v. Carrington
(1765), 95 E.R. 807 at 818, we have no
doubt that, prima facie,
a party obtaining production of documents is under
a general obligation, in most cases, to keep such documents confidential
,
whether or not they disclose private or confidential material. Such seems to
have been the view of all the judges in
Kyuquot
[
Kyuquot Logging Ltd.
v. British Columbia Forest Products Ltd.
(1986), 5 B.C.L.R. (2d) 1, 30
D.L.R. (4th) 65, (B.C.C.A.)].

[43]      This view seems to receive considerable support
from an historical perspective, much of which was reviewed in
Kyuquot
,
starting with an ancient text,
The Principles and Practice of Discovery
,
by Edward Bray, 1885, where it was stated, at p. 238:

A party who has
obtained access to his adversary's documents under an order for production has
no right to make their contents public or communicate them to any stranger to
the suit
...nor to use them or copies of them for any collateral
object....If necessary an undertaking to that effect will be made a condition
of granting an order....

In another passage, Bray stated that documents obtained on
production could not be used except under the authority of the Court.

[44]
Bray,
of course, wrote in the context of the English practice before discovery of
documents could be obtained without an order. However, we believe the principle
he states is the correct one. As Esson J.A. points out in
Kyuquot
, at p.
8, the law stood relatively unchanged until
Alterskye v. Scott
, [1948] 1
All E.R. 469 (C.A.)
when, for the first time, it was held that the
receipt of documents created an implied undertaking not to use them for any
purpose outside the action in which they were produced and that such obligation
could be enforced by proceedings for contempt.

[45]      In
due course, this led to the notable case of
Home Office v. Harman
(1982),
[1983] 1 A.C. 280 (H.L.), which, to say the least, dramatically confirmed the
existence of such an undertaking in England. This decision has been much
criticized, but it established the context for the decision in
Kyuquot
.

[Emphasis
added.]

[15]

In
Home Office v. Harman
, the implied undertaking was described
as a safeguard against abuse of what Lord Diplock referred to at page 300 as
the inroad, in the interests of achieving justice, upon the right of the
individual to keep his own documents to himself... In that case the issue was
described in the following terms at page 302:

So the questions of law in this
appeal are: whether it is the duty of the solicitor of one party to civil litigation,
who in the course of discovery in that litigation has obtained possession of
copies of documents belonging to the other party to the litigation, to refrain
from using the advantage enjoyed by virtue of such possession for some
collateral or ulterior purpose of his own not reasonably necessary for the
proper conduct of the action on his clients behalf; and if so, whether a breach
of that duty constitutes a contempt of court.

[16]

This principle led to the expression of the rule at page 304 of the judgment
in
Home Office v. Harman
in the following terms:

an order for production of
documents to a solicitor on behalf of a party to civil litigation is made upon
the implied undertaking given by the solicitor personally to the court (of
which he is an officer) that he himself will not use or allow the documents or
copies of them to be used for any collateral or ulterior purpose of his own, his
client or anyone else; and any breach of that implied undertaking is a contempt
of court by the solicitor himself. Save as respects the gravity of the contempt
no distinction is to be drawn between those documents which have and those
which have not been admitted in evidence; to make use for some collateral or
ulterior purpose of the special advantage obtained by having possession of
copies of any of an adverse partys documents obtained upon discovery is, in my
view, a contempt of court.

[17]

The specific object of the law in imposing the obligation was described
by Lord Denning M.R. in
Riddick v. Thames Board Mills Ltd.,
[1977] Q.B.
881 at 896:

Compulsion [to disclose] is an
invasion of a private right to keep one's documents to oneself. The public
interest in privacy and confidence demands that this compulsion should not be
pressed further than the course of justice requires.

[18]

That concern is reflected in Rule 31.22 of
The Civil Procedure Rules
1998 (U.K.)
, No. 3132 (L. 17), dealing with documentary
discovery, which specifically refers to the use that may be made of documents
by the party to whom a document has been disclosed.

[19]

The decision of this Court in
Hunt,
founded upon these
principles
,
was considered and followed in Ontario in
Goodman v.
Rossi
(1995), 24 O.R. (3d) 359, 125 D.L.R. (4th) 613 (C.A.). In that case,
the court noted that the commentary of Bray in
The Principles and Practice
of Discovery
on the rule appeared under the heading:
as
to the
obligation
of the inspecting party
not to divulge the contents of the
documents to other persons (emphasis added). The Ontario Court of Appeal cites
Hobhouse J. in
Prudential Assurance Co. v. Fountain Page Ltd.
, [1991] 1
W.L.R. 756 (Q.B.D.) to describe the rationale for the rule in the following
terms:

The rational basis
for the rule is that where one party compels another,
either by the
enforcement of a rule of court or a specific order of the court,
to
disclose documents or information whether that other wishes to or not, the
party obtaining the disclosure is given this power because the invasion of the
other partys rights has to give way to the need to do justice between those
parties in the pending litigation between them; it follows from this that the
results of such compulsion should likewise be limited to the purpose for which
the order was made, namely, the purposes of that litigation then before the
court between those parties and not for any other litigation or matter or any
collateral purpose. [Emphasis in original.]

[20]

The scope and purpose of the implied undertaking was considered by the
Supreme Court of Canada in
Juman v. Doucette
, 2008 SCC 8. In that case the
pressing question before the court was whether there is or should be an
exception to the implied undertaking of confidentiality permitting the
disclosure of evidence of criminal misconduct. The court underlined the
important function of the rule in encouraging candor. The undertaking was
described in broad terms at paragraphs 25 to 28 of the judgment in that case.
Throughout, however, the undertaking was considered to have been implied on the
part of the party obtaining discovery with the assistance of the compulsion of
the Rules. At paragraph 4 of the judgment Binnie J., for the court, held:

Thus the rule is that both
documentary and oral information obtained on discovery, including information
thought by one of the parties to disclose some sort of criminal conduct,
is
subject to the implied undertaking. It is not to be used
by the other
parties
except for the purpose of that litigation, unless and until the
scope of the undertaking is varied by a court order or other judicial order or
a situation of immediate and serious danger emerges.

[Emphasis in
original.]

[21]

The undertaking is
properly considered to be given to the court by parties obtaining discovery
with the assistance of the court process and thereby invading anothers private
rights. It does not extend, for example, so far as to preclude a lawyer from
disclosing documents produced to him by his own client where that lawyer is
being discovered by another party in a subsequent action. In rejecting such a
claim, the Ontario Court of Appeal in
Sobeski v.
Mamo,

2012 ONCA 560
,
held:

[33]      As this court stated
in
Kitchenham v. AXA Insurance (Canada)
, 2008 ONCA 877, 94 O.R. (3d) 276,
at para. 10, the Rule exists to protect the privacy interest of the party
compelled by the rules of disclosure to provide that information
to
another party
to the litigation [emphasis of Armstrong J.A.].

[22]

While the court in that case was considering the undertaking now
embodied in the
Rules of
Civil Procedure
,
R.R.O. 1990, Reg. 194
, the description of the protected privacy interest
and the limitation of the undertaking to the use of information given to
another
party
(and not an undertaking between individuals who have collectively
made discovery for one party) is, in my view, apposite.

[23]

The party making discovery need give no undertaking as to the use it
will make of the information in its own possession or control.

[24]

The undertaking has never stood as a bar to a party voluntarily
disclosing information or testimony from its own examination for discovery.

[25]

Further, the undertaking does not relieve a party of the obligation to
disclose its own testimony in prior litigation with respect to the matters in
issue in current litigation, or to permit a party to shield such information
from discovery
.
In that respect I regard as correct the views expressed
by Ehrcke J. in
Wilson v. McCoy
, 2006 BCSC 1011 at para. 13 (also
referred to by Binnie J. in
Juman
), by Williams J. in
British
Columbia v. Tekavec,
2012 BCSC 1348 at para. 11, and in Peter Fraser, John
W. Horn and Susan A. Griffin,
The Conduct of Civil Litigation in British
Columbia
, 2d ed., loose-leaf (Markham, Ont.: LexisNexis, 2007), in the
following terms at 17-34:

However, the undertaking does not
apply to allow a party to resist disclosure of materials in a second action
that originated with that resisting party in an earlier proceeding, such as the
resisting partys own examination for discovery transcripts or notices to
admit.

[26]

The same result
has obtained in Ontario, where the Court of Appeal has determined that both the
common law rule and the provision in the Ontario Rules constrain only the
recipient of information and that no undertaking to the court is given by the
party making discovery. (See
Kitchenham v. AXA
Insurance (Canad
a)
,
supra
, and
Tanner v. Clark

(2003), 63 O.R. (3d) 508
(C.A.), affg
(2002), 60 O.R. (3d) 304
(Div. Ct.), leave to appeal to S.C.C.
refused,
[2003] 3 S.C.R. viii
,
[2003] S.C.C.A. No. 192
.)

[27]

There is no dispute in this case that the material evidence of the
appellant was evidence with respect to information collected by TCHC and on its
behalf. The appellants testimony with respect to his own conduct was testimony
with respect to the manner in which he discharged obligations owed to the
company as its manager.

[28]

I agree with the conclusion of the chambers judge in this case that we
should not imply an undertaking on the part of TCHC to the court to maintain
the confidentiality of the evidence of its own representative with respect to
corporate knowledge and corporate actions at his examination for discovery as
its representative.

[29]

In my view, there was ample basis to support the chambers judges
conclusion that the appellant personally had no privacy interest in the
information disclosed on his examination for discovery, which was conveyed to
the Ministry of Forests, Lands and Natural Resource Operations.

[30]

There is no basis on the evidence to find that discovery trenched upon the
appellants personal privacy interest. It is that personal privacy interest
that is protected, properly and vigorously, by the court with a view toward
ensuring complete and candid discovery. In my view the chambers judge was
correct in rejecting the appellants argument that he could prohibit TCHC from
disclosing his testimony or information in his possession to the provincial
government, simply because he disclosed that information at his examination for
discovery.

[31]

On this appeal counsel has vigorously advanced the position that the
appellant has a personal interest in maintaining confidentiality of the
evidence given on his examination for discovery because its disclosure might
result in his prosecution. There is no doubt that he has a personal interest in
the issue. The real question is whether he ought to be entitled to assert a
personal claim to privacy in the information or evidence given on his
examination for discovery. In my view the chambers judge was correct in finding
that he could not assert such a claim. That being the case, I see no reason to
extend to him the protection of an implied undertaking or to find that TCHC, as
the party giving discovery, is not free to use that discovery as it sees fit,
without limitation.

[32]

For those reasons I would dismiss the appeal.

[33]

LOW J.A.:
I agree.

[34]

STROMBERG-STEIN J.A.
: I agree.

[35]

LOW J.A.:
The appeal is dismissed.

The Honourable Mr.
Justice Willcock


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

First Majestic Silver Corp. v. Davila,

2014 BCCA 11

Date: 20140113

Dockets: CA041279;
CA041285

Docket No.: CA041279

Between:

First Majestic
Silver Corp.,
First Silver Reserve Inc., and
Minera El Pilon, S.A. de C.V.

Respondents

(Plaintiffs)

And

Hector Davila
Santos and
Minerales y Minas Mexicanas, S.A. de C.V.

Appellants

(Defendants)

- and -

Docket No.: CA041285

Between:

First Majestic
Silver Corp.

Appellant

(Plaintiff)

And

Hector Davila
Santos and
Minerales y Minas Mexicanas, S.A. de C.V.

Respondents

(Defendants)

Before:

The Honourable Madam Justice Neilson

(In Chambers)

On appeal from:  An
order of the Supreme Court of British Columbia, dated September 13, 2013 (
First
Majestic Silver Corp. v. Davila
, 2013 BCSC 1704, Vancouver Docket No.
S078106).

Counsel for First Majestic Silver Corp.

H. Shapray, Q.C.
B. Cramer

Counsel for H.D. Santos and Minerales y Minas Mexicanas

D. Church, Q.C.
M. Buhler

Place and Date of Hearing:

Vancouver, British Columbia

December 4, 2013

Further Submissions Received:

December 17 and 19,
  2013

Place and Date of Judgment:

Vancouver, British
  Columbia

January 13, 2014

Summary:

Applications for leave to
appeal the terms of a post-judgment Mareva injunction are dismissed. The
situation is fluid and the Supreme Court is the proper venue for further
variation proceedings. Neither party meets the criteria for granting leave to
appeal.

Reasons for Judgment of the Honourable
Madam Justice Neilson:

[1]

Both the plaintiffs (in file CA041285) and the defendants (in file
CA041279) in the action below apply for leave to appeal the terms of a worldwide
post-judgment
Mareva
injunction imposed against the defendants on
September 13, 2013. For the following reasons, I would dismiss both
applications for leave.

[2]

The original dispute between the parties involved proprietary rights
over the Bolaños mining property in Mexico, operated by the Mexican defendants,
Mr. H. D. Santos and
Minerales Y Minas Mexicanas
, S.A.
de C.V (MMM). At trial, the plaintiffs primary allegation was that, by
acquiring the Bolaños property, Mr. H. D. Santos, the former president, CEO,
and director of the plaintiff First Silver Reserve Inc., appropriated a
corporate opportunity that belonged to First Silver and breached his fiduciary
duty to that company. The plaintiff First Majestic Silver Corp. is the parent
company and assignee of First Silvers claim.

[3]

On April 24, 2013, following a 60-day trial, Mr. Justice Myers granted
judgment for the plaintiffs. As they had elected damages in lieu of a proprietary
remedy, he awarded equitable compensation of USD 93.84 million for the lost
opportunity: 2013 BCSC 717.

[4]

On May 23, 2013, the defendants filed a notice of appeal, and on
June 10, 2013, the plaintiffs filed a cross appeal. The appeal precludes
execution proceedings in Mexico, which is not a reciprocating state.

[5]

The plaintiffs scheduled an examination in aid of execution of Mr. H.D.
Santos in Vancouver for June 11 and 12, 2013, but he failed to attend.

[6]

On June 13, 2013, the plaintiffs brought an application before Madam
Justice Dickson for a worldwide post-judgment
Mareva
injunction against
the defendants. Dickson J. issued a
status quo
interim order at the
hearing, and delivered reasons on June 24, 2013 granting the injunction:
2013 BCSC 1209. She found that there was a strong
prima facie
case
and a real risk of irreparable harm if the injunction was not granted, as the
defendants did not have sufficient assets in British Columbia to satisfy the
judgment and the Bolaños mine was their only other known asset. She also noted
there was uncontradicted evidence that the defendants might sell the mine
before execution could be achieved. She rejected Mr. H. D. Santos explanation
for his failure to appear at the examination in aid of execution, and found the
balance of convenience tipped in favour of the plaintiffs, as there was no
evidence the defendants would be prejudiced by the injunction.

[7]

On June 25, 2013, Myers J. issued supplementary reasons for
judgment that included an order that CAD 14.85 million held in trust for the
defendants by their British Columbia solicitors be paid to the plaintiffs in
partial satisfaction of the judgment: 2013 BCSC 1126.

[8]

On June 27, 2013, Madam Justice D. Smith granted the plaintiffs
application in this Court for security for the trial judgment and ordered the
defendants to post security of USD 79 million within 90 days, failing which the
plaintiffs would be at liberty to apply for an order dismissing the defendants
appeal as abandoned: 2013 BCCA 312.

[9]

The parties were unable to settle the terms of Madam Justice Dicksons June 24
order, and appeared before her again on June 28, 2013 for that purpose. Their
disagreement centred on the extent to which the defendants should be able to continue
to operate the mine. The plaintiffs maintained that the
caveat
proposed
by the defendants, which would permit the mine to operate in the ordinary
course of business should not be included in the order as this could
significantly diminish the value of the mine during what might be an extended
appeal period. Dickson J. affirmed that her order was intended to provide
security for the outstanding judgment, but held the defendants could operate
the mine as long as they did not diminish its value beyond a
de minimis
level:
2013 BCSC 1212. She stated:

[9]        Despite counsels able
submissions, I am not persuaded the reference to the ordinary course of
business should be deleted from the June 24 Order, at least at this juncture.
In my view, it would be unduly cumbersome and inconvenient to require the
defendants to seek a variation in order to permit the conduct of mining
operations of any kind.  Although I accept there is a theoretical possibility
the injunction could continue well into the future, that is by no means certain
or even a substantial likelihood.  If, however, the plaintiffs concerns are
borne out and the defendants operate the mine in a manner that diminishes its
value beyond the
de minimis
level an application to vary the June 24
Order can be made.

[10]

Madam Justice Dicksons order, to which I will refer as the Initial
Order, ultimately included these terms:

2.         Until
further order of this court, each of the defendants ... shall not dispose of,
pledge, mortgage, transfer, diminish (save and except in the ordinary course of
business) or assign the ownership and/or value of the mineral concessions,
surface land and infrastructure  known collectively as the Bolaños Mine, and
which was the subject matter in part of this action (the Proposed
Disposition) save and except that these prohibitions shall not apply if as
part of any such Proposed Disposition or otherwise the sum of US $79 million is
deposited in the trust account of Church & Company, counsel for the
defendants, and not released therefrom until further order of the court or
pursuant to a written agreement between the parties.

3.         Insofar
as this order purports to have any extraterritorial effect, no person shall be
affected thereby or concerned with the terms thereof until it shall be declared
enforceable or be enforced by a foreign court and then it shall only affect
them to the extent of such declaration or enforcement, unless they are: (a)
either of the defendants or (b) persons who are subject to the jurisdiction of
this Court and (i) have been given written notice of this order at their
residence or place of business within British Columbia, and (ii) are able to
prevent acts or omissions outside British Columbia which assist in the breach of
the terms of this Order.

4.         Any of the parties hereto and
any other person affected by this Order are at liberty to apply to this Court
for further directions.

[11]

On September 4, 2013, the plaintiffs brought an application before Madam
Justice Griffin to vary the Initial Order by removing the
caveat
, and
adding terms requiring the defendants to pay any net cash flow generated by the
mine to the plaintiffs lawyers in trust, and to produce documents detailing
mine production and net cash flow. In support, they presented new evidence
suggesting the defendants were extracting as much as 800 tons per day (tpd) of
ore from the Bolaños mine, which could deplete two of the mines key veins in
two years if the defendants are high-grade mining those veins. The defendants
opposed the application. They argued the Court had no jurisdiction to make such
orders against Mexican defendants. As well, they produced second-hand evidence,
through an employee of their counsels firm, that they were only mining 400 to
500 tpd, and contended this was not a change in circumstances that would
justify variation of the Initial Order.

[12]

On September 13, 2013, in reasons indexed at 2013 BCSC 1704,
Griffin J. found circumstances had changed because there had been no
evidence of the defendants operations at the mine at the hearing before Madam
Justice Dickson. Madam Justice Griffin affirmed the Courts intention was to
preserve the value of the mine as security for the plaintiffs judgment, and
accepted the plaintiffs could suffer irreparable harm if operations at the mine
diminish its value below the unpaid portion of the judgment. While she found
the defendants disclosure was less than impressive, and the plaintiffs new
evidence raised concerns, she concluded the plaintiffs evidence was
speculative and insufficient to justify an order that all mining must cease. She
therefore declined to remove the
caveat
, but as an interim solution
she ordered the defendants to produce monthly reports about the mines
operations and limit MMMs mining to 500 tpd, its current level of operations
according to the defendants evidence:

[59]      In my view the plaintiffs counsel has more work to
do to organize a submission which fairly and objectively presents the evidence
of the Mines overall value, and the impact of estimated ongoing mining on that
value, in order that the Court may fairly draw conclusions as to whether
current mining operations in the short term do or do not materially impair the
security available to satisfy the plaintiffs judgment.

[60]      I conclude that in weighing the prejudice to both
sides there is an interim solution which will allow the Mine to be carried on
at the level which the defendants say is their current level of operations, 400
to 500 tons of ore per day, but will provide security for the plaintiffs
judgment and allow the plaintiff to come back to court for the further relief
it seeks or alternative relief if it is not given sufficient information to
provide confidence that its security is being protected.

[61]      I am going to grant the
plaintiff an order requiring the defendants to provide information regarding
the Mines operations and cash flow generated from those operations, with
liberty to the plaintiff to return to court once this information is provided,
or on the defendants failure to provide it.  This is the type of information
which the plaintiff would be entitled to in ordinary judgment enforcement
proceedings and there is no prejudice in requiring the defendants to produce it
now.  Failure to produce this information will of course raise the possibility
of an adverse inference being drawn against the defendants on any future
application.

[13]

As to the defendants argument that she did not have jurisdiction to
make orders affecting the operations of a Mexican mine, Madam Justice Griffin
observed that the personal defendant was a former director of the plaintiffs,
which were BC companies, that both defendants had attorned to the jurisdiction
of the courts of this province, and that they had not raised this issue in the
proceedings before Madam Justice Dickson. She pointed out the Initial Order was
an
in personam
order, as was her intended order, and both simply
directed the defendants to do or refrain from doing certain actions. As well,
she noted paragraph 3 of the Initial Order, which prevented it having effect
beyond the Supreme Courts jurisdiction, would continue to apply.

[14]

Her order, to which I will refer as the Variation Order, added these terms
to the Initial Order:

In carrying on mining at the
     Bolaños Mine in the ordinary course of business, the defendants are
     required:

(a)

to limit
mining operations such that they do not exceed mining of 500 tons of ore per
day;

(b)

to limit the
nature of the mining operations such that they not engage in high grade mining;

(c)

to preserve all Net Cash Flow,
such preservation to be in a location and place disclosed to First Majestic

[15]

The Variation Order also required the defendants to provide the
plaintiffs with monthly reports detailing the scale and type of mining activity
at the Bolaños mine and the amount and location of its monthly net cash flow.
The other terms of the Initial Order remained in place.

[16]

When the defendants failed to post security in compliance with the order
of D. Smith J.A., the plaintiffs brought an application in this Court to
have the appeal dismissed, which was granted on October 23, 2013:
2013 BCCA 458.

[17]

The defendants sought a review of the order dismissing their appeal under
s. 9(6) of the
Court of Appeal Act
, R.S.B.C. 1996, c. 77,
which was heard on December 10, 2013. Judgment has been reserved.

The
Issues Arising from the Applications for Leave

[18]

These applications raise four issues:

(a)      Should
this Court refuse to hear the defendants application for leave because they
are in violation of the Variation Order?

(b)      Should
the defendants have leave to appeal the issue of whether Madam Justice Griffin
lacked jurisdiction to make the orders in paras. 1(a) and (c) of the
Variation Order?

(c)      Should
the defendants have leave to appeal the issue of whether Madam Justice Griffin
erred by giving no, or insufficient, weight to the balance of convenience underlying
the terms of the Initial Order?

(d)      Should
the plaintiffs have leave to appeal Madam Justice Griffins decision to permit
the
caveat
to remain in place?

Analysis

[19]

I begin with the preliminary issue of whether the defendants
application should be heard at all.

[20]

On the morning of this hearing, the plaintiffs sought to introduce an
affidavit sworn by an employee of their counsel the day before, which exhibited
MMMs monthly operation reports for the Bolaños mine for October 2013, which
had just been delivered to plaintiffs counsel, as well as reports for March to
August, 2013, which had been delivered to them in October. The plaintiffs argue
these reports clearly demonstrate that MMM is mining more than 500 tpd at the
Bolaños mine and is therefore in violation of the Variation Order. They contend
this Court should therefore refuse to hear the defendants application for
leave.

[21]

This Courts general practice is to refuse to hear an appeal if the
appellant has failed to comply with the order under appeal without a good
explanation. This is not a rule of universal application, however, as the Court
retains a discretion to proceed in appropriate circumstances:
Mazara v.
Mazara
, 2010 BCCA 287 at para. 8.

[22]

Because the affidavit was sworn and delivered to the defendants on the
eve of this hearing, the parties were permitted to submit supplementary arguments
as to its import. These suggest the records of the mines operations exhibited
to the affidavit may be selective, and invite the Court to make findings of
fact and credibility on what may be an incomplete evidentiary record. This
Court is ill-equipped to undertake such an analysis. The proper venue for such
submissions is the Supreme Court, particularly since the Variation Order specifically
contemplates that the parties will return to that Court if information received
from the defendants is unsatisfactory and indicates further variation should be
considered. I am persuaded the affidavit should not be admitted, and does not
preclude me from hearing the defendants application for leave.

[23]

I turn to the criteria for leave to appeal. These were summarized in
V.F.
v. E.B.
, 2011 BCCA 238, at paras. 19-21:

(1) whether the point on appeal is of significance to the
practice;

(2) whether the point raised is of significance to the action
itself;

(3) whether the appeal is
prima facie
meritorious or,
on the other hand, whether it is frivolous; and

(4) whether the appeal will
unduly hinder the progress of the action.

[24]

The onus rests on the party seeking leave to establish these criteria.
The over-riding concern will be whether granting leave will serve the interests
of justice.

[25]

This Court is reluctant to grant leave to appeal a discretionary order,
unless the party seeking leave can establish the order was clearly wrong or
creates serious injustice:
V.F.
at paras. 22-23.

[26]

While the parties have brought separate applications for leave, their
positions on items 1, 2, and 4 of the leave criteria are similar, and I will
therefore address these in both applications at the same time. I will then
consider the merits of each of the proposed grounds of appeal, and will
conclude by considering whether the interests of justice favour granting leave
to either applicant.

Is an
appeal of significance to the practice?

[27]

Both parties rely on the rarity and severity of post-judgment
Mareva
injunctions to support the contention that an appeal would be significant to
the practice. The defendants say this Court to date has not considered such an order
and so this would be a matter of first instance. As well, they assert that the
question of whether a British Columbia court has jurisdiction to restrict the
operations of a foreign business asset by virtue of a post-judgment injunction
is a grey area and a novel issue of interest to the profession.

[28]

The plaintiffs emphasize the differences between a
Mareva
injunction
made prior to trial and one made after judgment has been rendered. They argue
it is important for an appellate court to address this, and affirm that the
judicial cautions associated with a pre-judgment order are no longer a concern here
as there is no uncertainty as to the outcome of the action, and the injunction
issues in favour of a judgment creditor.

[29]

A
Mareva
injunction is in essence a discretionary order, based on
the particular facts of each case. I am not persuaded an appeal of the
Variation Order would produce a result of general interest to the practice.

Is an
appeal of significance to the action?

[30]

At this post-judgment stage, the present value of the Bolaños mine, its
ongoing level of operations, and the disposition of its net profit are central
issues for both parties. From the plaintiffs perspective, the mine is the only
known asset of the defendants, and there is contradictory evidence as to
whether it is capable of satisfying the judgment. On the defendants side, any
restriction of MMMs mining operations and cash flow may jeopardize its
facility and the jobs of its 390 workers.

[31]

It is thus apparent that any change to paragraphs 1(a) and (c) of the
Variation Order would be significant to the action. I am concerned, however,
that a change arising from these contemplated appeals may not be significant,
given the fluidity of the situation and the fact the Supreme Court represents a
more efficacious means of accomplishing a variation. Madam Justice Griffin stated
the Variation Order was an
interim
order, pending proper disclosure of
production information by the defendants and greater certainty as to any appeal
period. She anticipated a further application to vary in the Supreme Court once
these matters had crystallized. As previously stated, that is the proper court to
consider a further change in the Variation Order. An appeal of that order, if
it is outdated by proceedings in the Supreme Court, will be of little
significance to the parties.

Will an
appeal unduly hinder the course of the action?

[32]

The parties maintain an appeal will not hinder the course of the action
since final judgment has been given. As I have just observed, however, if a further
application to vary in the Supreme Court is successful an appeal taken from the
Variation Order may become an unnecessary hindrance.

Do the proposed
grounds of appeal have merit?

1.
Did the chambers judge have jurisdiction to make the Variation Order?

[33]

The defendants maintain Griffin J. erred by failing to recognize the difference
between ordering preservation of the asset, and intervening to interfere in its
operations. They say she also erred in limiting her analysis to personal
jurisdiction. Had she considered whether she had subject matter or territorial
jurisdiction to order the terms in paragraphs 1(a) and (c) of the Variation Order,
she would have recognized that the restriction on mining operations intrudes on
the exclusive jurisdiction of the Mexican courts over mineral resources in
Mexico. In support, they point to expert opinion that the operations of Mexican
mines are subject only to Mexican laws governing exploitation of mineral
resources, and are beyond the jurisdiction of the courts of this province.

[34]

The defendants express similar concerns about the order precluding MMM from
accessing its net cash flow, arguing it intrudes on Mexican mining operations and
it is directed not at preservation, but is a step in execution in a foreign
country. They submit that for both reasons this term lies beyond the Supreme
Courts jurisdiction.

[35]

In my view, this ground of appeal has little merit. The defendants
arguments fail to appreciate that a
Mareva
injunction is an equitable
remedy, and equity acts
in personam
. The courts
in personam
jurisdiction to enjoin conduct abroad is not founded on any assertion of
judicial or administrative rights in the foreign territory but on its powers
over the parties against whom the injunction is ordered. It is clear the
Supreme Court had
in personam
jurisdiction over the defendants here,
which afforded the basis for an order freezing their
ex juris
assets.

[36]

Both Madam Justice Dickson and Madam Justice Griffin were clearly
sensitive to the limits on their extra-territorial jurisdiction. This is
exemplified by the
Babanaft
proviso that appears in para. 3 of both
orders, in a form derived from
Derby & Co. v. Weldon (Nos. 3 & 4)
(1988), [1990] 1 Ch. 65 (C.A.), and adopted in this province in
Mooney v.
Orr (No. 1)
(1994), 98 B.C.L.R. (2d) 318 (S.C.), which is clearly directed
to limiting the extraterritorial effect of the injunction on third parties.

[37]

Moreover, I am not persuaded the defendants Mexican law evidence
strengthens their argument. This is directed to the question of whether Mexican
authorities would recognize and enforce an order from a British Columbia court
that directs the defendants to cease all mining operations at the Bolaños
property. That is not the order that was made. The Variation Order simply
limited mining to what the defendants said was the present level of operations.
Moreover, there is no evidence it has forced the defendants to act in contravention
of Mexican law. The Order simply binds the defendants personally to preserve
their assets. Its enforceability in Mexico is unrelated to these personal
obligations, which stem from their participation in litigation in this
province.

2. Did the
chambers judge err by ignoring the purpose and balance of convenience
established by the Initial Order?

[38]

The defendants say the clear purpose of the Initial Order was to provide
security for the unpaid portion of the trial judgment. In that context, Madam Justice
Dickson found the balance of convenience supported an order that permitted MMM
to continue to operate the Bolaños mine in the ordinary course of business. Her
decision was supported by projections that indicated the mines production
would be more than adequate to pay the balance of the judgment. The defendants
argue there were no new circumstances to justify Madam Justice Griffins
decision to reassess the balance of convenience and, on her own initiative,
vary the Initial Order by capping production at 500 tpd and restricting the
defendants access to any net cash flow received by MMM.

[39]

I see little merit in this ground of appeal. There was evidence before
Griffin J. to support a finding that there had been a change of circumstances
since the Initial Order, and that a reassessment of the balance of convenience
was required. Madam Justice Dickson had no evidence before her about the extent
of the defendants ongoing mining, due primarily to their resistance to disclosure.
The focus of concern when she made the Initial Order was a possible sale of the
mine. By contrast, the defendants presented second-hand evidence before Madam
Justice Griffin that they were mining 400-500 tpd at the Bolaños mine. She
found the defendants disclosure was less than impressive and rendered the
plaintiffs concerns about dissipation speculative. The available projections
of the mines future production capability diverged, with some indicating it
could easily satisfy the judgment. In my view, there is little likelihood this
Court would interfere with her decision to exercise her discretion by reassessing
the balance of convenience in order to maintain the objective of preserving the
asset, and by striking a reasonable balance until the parties were in a
position to return with more reliable information. The defendants cannot claim
prejudice as the Variation Order capped mining at what they said was MMMs present
level of operations, and the direction to preserve the mines net cash flow
permitted expenditures in the normal course of business.

3. Did the
chambers judge err in failing to remove the caveat?

[40]

This proposed ground of appeal, advanced by the plaintiffs, is in effect
a mirror image of the defendants second proposed ground. The plaintiffs rely
on the more pessimistic projections of the mines value, and argue Griffin J.
erred by failing to find the balance of convenience favoured a cessation of all
mining until the judgment is satisfied. They assert that the
caveat
was
only included in paragraph 2 of the Initial Order as an afterthought, in
response to the defendants concern the order would preclude
de minimis
mining. Now evidence led before Griffin J. demonstrates MMM is mining up to 500
tpd, well beyond
de minimis
mining. As well, the plaintiffs point to findings
at trial as to the defendants misconduct, misrepresentation, and breach of
fiduciary duty, and their ongoing recalcitrance in producing satisfactory
information about the mines operations.

[41]

The plaintiffs also argue that, in placing the onus of proof on them, Madam
Justice Griffin failed to appreciate the significant distinctions between
pre-judgment and post-judgment
Mareva
injunctions. They maintain that,
in the post-judgment context, the defendants should be required to make full
disclosure of their activities and intentions with respect to the mining at the
Bolaños property, and should bear the onus of establishing this is necessary
and will not diminish the mines value. They say that prejudice to the
defendants should not be a relevant consideration at this stage unless they can
establish the injunction freezes assets that are disproportionate to the judgment.

[42]

The defendants respond that the plaintiffs did not appeal Madam Justice
Dicksons decision to permit the
caveat
, and say this ground is an
impermissible collateral attack on the Initial Order. Madam Justice Griffin
also rejected such a term. They maintain that, having failed twice, the
plaintiffs should not be permitted to use an appeal as a third attempt to shut
down the mine when there has been no material change that would justify the
removal of the
caveat
. Finally, they point out the plaintiffs elected equitable
damages rather than a proprietary remedy, and so should not be permitted to
interfere with the mines operations.

[43]

For similar reasons to those expressed with respect to the defendants
second proposed ground of appeal, I am not persuaded there is merit to this ground.
The Variation Order was an
interim
discretionary order based on Madam
Justice Griffins factual findings, and it is unlikely this Court would interfere
to substitute its own view of the appropriate level of mining operations,
particularly when the Supreme Court provides a more appropriate forum for
regulating this issue as new evidence emerges.

[44]

As to the differences between pre-judgment and post-judgment
Mareva
orders,
the authorities recognize a distinction, observing the courts will more readily
make post-judgment orders:
Republic of Haiti v. Duvalier
(1988), [1989]
1 All. E.R. 456 (C.A.) at 465
E
; and
Babanaft International v. Bassatne
(1988),
[1990] 1 Ch. 13 (C.A.), at 37
C
,
40
D
. A
Mareva
injunction
remains an exceptional remedy, however, even in the post-judgment context, and
I do not read these decisions as going so far as to shift the onus of proof.
Instead, they appear to apply a lower burden on the plaintiff.

[45]

In my view, Madam Justice Griffin acknowledged this by adopting, at
para. 35 of her reasons, Madam Justice Dicksons earlier review of the law
in which she stated (2013 BCSC 1209 at para. 39):

As is apparent from the
foregoing, the overarching consideration in each and every case is the balance
of justice and convenience between the parties.  This is true whether a Mareva
injunction is sought in a pre or post-judgment context.  As to the latter,
however, the concern noted in
Tracey
about tying up a defendants assets
to provide security for a judgment that may never be obtained is obviously no
longer a factor for consideration.  In my view, this is a significant
difference which should be weighed in the balance where, as here, the
application is brought after an award has been made in favour of the plaintiff.

[46]

I am not convinced Griffin J. failed to recognize this principle in
weighing the limited evidence before her, and making an interim order directed
to facilitate expansion of the evidentiary record for future applications.

Do the interests of
justice favour granting either application?

[47]

As is evident from my analysis, I am of the view the Variation Order
strikes a reasonable balance in a fluid situation, pending further disclosure
by the defendants and greater certainty as to whether their appeal will
proceed. As more information becomes available, the Supreme Court is the proper
forum to deal with an application to vary that order. I am not persuaded the
interests of justice would be served by granting either application for leave
to appeal the Variation Order.

Conclusion

[48]

Both applications for leave to appeal are dismissed.

The
Honourable Madam Justice Neilson


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Pearlman v. Phelps,

2014 BCCA 20

Date: 20140116

Docket: CA039642

Between:

David Pearlman

Appellant

(Plaintiff)

And

Phelps Leasing
Ltd. and Thanh Hoang Phan

Respondents

(Defendants)

Before:

The Honourable Madam Justice Kirkpatrick

The Honourable Mr. Justice Frankel

The Honourable Mr. Justice Groberman

Review of Order: Court
of Appeal of British Columbia, July 2, 2013

(Pearlman v. Phelps
, Vancouver Registry No. CA039643 and CA040978)

Oral Reasons for Judgment

Appellant appearing In Person:

D. Pearlman

Counsel for the Respondent:

V.G. Critchley

Place and Date of Hearing:

Vancouver, British
  Columbia

January 16, 2014

Place and Date of Judgment:

Vancouver, British
  Columbia

January 16, 2014

Summary:

Review application
dismissed.

[1]

KIRKPATRICK J.A.
: Mr. Pearlman applies pursuant to s. 96 of the
Court
of Appeal Act
, R.S.B.C. 1996, c. 77, to discharge or vary the order of a
single justice, which dismissed his application for leave to appeal.

[2]

The test Mr. Pearlman must satisfy is well known and is set out in
Halderson
v. Coquitlam (City)
, 2000 BCCA 672. On at least six occasions during his
oral submissions, we asked Mr. Pearlman to address the manner in which the
justice was said to have erred. He did not do so.

[3]

The onus not having been met, I would dismiss the review.

[4]

FRANKEL J.A.
: I agree.

[5]

GROBERMAN J.A.
: I agree.

[6]

KIRKPATRICK J.A.
: The review is dismissed.

The Honourable Madam Justice Kirkpatrick


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

R. v. Rich,

2014 BCCA 24

Date: 20140116

Docket: CA041025

Between:

Regina

Respondent

And

Vincent Noel Rich

Appellant

Before:

The Honourable Madam Justice Kirkpatrick

The Honourable Mr. Justice Frankel

The Honourable Mr. Justice Groberman

On appeal from: An
order of the Supreme Court of British Columbia, dated March 14, 2013 (
R. v.
Rich
, 2013 BCSC 760, Terrace Docket No. 29011)

Oral Reasons for Judgment

Counsel for the Appellant:

G. Botting

Counsel for the Respondent:

C. Lusk

Place and Date of Hearing:

Vancouver, British
  Columbia

January 16, 2014

Place and Date of Judgment:

Vancouver, British
  Columbia

January 16, 2014

Summary:

The accused was sentenced to
2½ years in prison following conviction on one count of sexual exploitation. He
appeals, arguing that the sentence is not a fit one, and also that the trial
judge ought to have considered his immigration status and imposed a sentence of
less than 2 years imprisonment to avoid the possibility of the accused losing
the right to appeal a potential removal order. Owing to subsequent changes in
the Immigration and Refugee Protection Act, those consequences may now apply to
any sentence of 6 months or more. Mr. Rich now seeks to have the sentence
imposed by the trial judge vacated and replaced by a suspended sentence with a
30 month period of probation. Held: Appeal dismissed. The sentence was in all
respects a fit one. A sentence of less than 2 years imprisonment would not have
been appropriate given the gravity and circumstances of the offence. It would
not be appropriate for this court to impose a suspended sentence with probation
on the basis suggested by the appellant, which would put the court in the
position of concealing the real nature of the sentence from the official
record.

[1]

GROBERMAN J.A.
: After a ten day trial, the accused was found
guilty of one count of sexual assault and one count of sexual exploitation in
respect of offences committed against his daughter, R.R., when she was between
14 and 16 years old. In accordance with a defence submission (with which the
Crown agreed) that the principle in
Kienapple v. The Queen
, [1975] 1
S.C.R. 729 applied, a conditional stay was entered in respect of the sexual
assault count, and a conviction was entered only on the sexual exploitation
count. The judge sentenced the accused to 2½ years imprisonment and he applies
for leave to appeal the sentence.

[2]

The accused, who was 50 years old at the time of sentencing, was born in
the United States and remains an American citizen. Although he was brought to
Canada as a young boy, and has lived in this country since that time, he has
never obtained Canadian citizenship. Originally, he feared that, because he had
been sentenced to a period of imprisonment in excess of two years, he might be
deported, and would have no right of appeal from a removal order. As a result
of amendments to s. 64 of the
Immigration and Refugee Protection Act
,
S.C. 2001, c. 27, a sentence of 6 months or more will probably now have that
effect. Mr. Rich's immigration status was mentioned in passing in a
pre-sentence report, but it does not appear that it was the focus of
submissions to the sentencing judge. It is not mentioned in her reasons for
sentence.

[3]

The accused argues that the sentence imposed is overly harsh. He places
particular emphasis on the possibility that he may be deported. He says, in the
circumstances of this case, a fit sentence would be a suspended sentence with a
period of probation. He says that, considering that he has now been in custody
for 10 months and is a good candidate for parole, substituting a suspended
sentence with probation of 30 months would be appropriate, as it would, for
practical purposes, impose the same punishment and treatment on him as was
imposed by the trial judge, without any immigration consequences.

[4]

The Crown takes the position that the sentence imposed was a fit one,
and says the appeal should be dismissed.

The Offence

[5]

The sexual exploitation charge was laid in respect of the accuseds
conduct towards his daughter, R.R. In June 1998, when R.R. was 14 years old,
her mother was hospitalized for a period of time following an emergency
caesarian section. While her mother was in hospital, the accused began to enter
R.R.s room (which she shared with her sister) at night. On these occasions, he
pulled R.R.s underwear down, moved her legs apart and touched her vaginal area
with his fingers. The assaults occurred while R.R.s sister was asleep.

[6]

After her mother returned home from the hospital, the accused continued
to engage in sexual touching of R.R. of the same nature, sometimes including
digital penetration of her vagina. R.R.s evidence was that the accused engaged
in such contact with her 40-50 times while she shared a room with her sister,
and on approximately 30 further occasions after she moved into her own room at
the age of 15. The incidents continued until R.R. ran away from home at the age
of 16.

[7]

The judge was satisfied beyond a reasonable doubt that the accused
engaged in the sexual contact alleged by R.R. While the judge did not come to
any conclusion as to exactly how many such events occurred, it is evident that
she accepted that it happened routinely. The sentencing appears to have
proceeded on the basis that there were dozens of instances in which the accused
engaged in sexual conduct with R.R. when she was between the ages of 14 and 16.

Circumstances of the Accused

[8]

Mr. Rich was 50 years old at the time of sentencing. He has a grade 11
education, and worked steadily throughout his life, primarily in the forest
industry. While he was a heavy user of marihuana, it was not suggested that
drug use or dependency played any role in the offence for which he was
convicted.

[9]

Mr. Rich had a criminal record, but it was described by the sentencing
judge as minor and dated and not relevant to the sentencing.

[10]

The accused had some letters of support from family members, though his
relationship with R.R.s mother broke down as a result of the allegations
against him. He had, at the time of sentencing, established a new relationship
with another woman, and supported her and her children and grandchildren.

[11]

The psychiatric assessment report provided to the court indicated that
the accused was at a low risk of reoffending.

[12]

The judge noted that the accused minimized or denied his sexual
violence, and expressed little remorse or empathy for R.R. She also noted that
the offences had had very serious impacts on R.R.s life.

[13]

The judge considered the defence submission that a conditional sentence
was appropriate, but rejected it. She considered that a sentence of less than
two years would not meet the objectives of sentencing.

Analysis

[14]

The accuseds primary submission is that the potential consequences of
the sentence on the accuseds immigration status ought to have been taken into
account by the sentencing judge. With considerably less vigour, in his written
submissions (though not in his oral argument) he contends that the sentence,
even absent immigration concerns, was unfit.

[15]

I would reject the contention that the sentence is unfit. The accuseds
offence was a very serious one. The fact that the accused was the victims
father is a particular aggravating factor. The accused breached his position of
trust, and took advantage of his childs vulnerability for his own purposes. He
ought to have been protecting his daughter; instead he was taking advantage of
her. The offence occurred over an extended period, and only ended when the
victim ran away from home.

[16]

The accused had not, at the time of sentencing, taken responsibility for
his wrongdoing, instead minimizing it. He did not have insight into his
distorted attitudes.

[17]

The accused does not cite any cases similar to the case before us in
which a suspended sentence has been imposed. While the accused cites a few
cases in which conditional sentences have been imposed in respect of sexual
crimes against children, I would say that such a disposition is unusual. In the
case before us, there are (absent immigration concerns, which I will come to)
no extraordinary factors that would make such a disposition appropriate.

[18]

I also agree with the Crowns observation that as society becomes more
aware of the impact of sexual abuse on children, there has been an escalation
in the severity of sentences imposed where children are the victims of sexual
offences, a proposition for which the Crown cites
R. v. Allen
, 2012,
BCCA 377 at para. 57. Few of the cases cited by the defence are recent ones.

[19]

The sentence imposed by the trial judge was well within the range of
appropriate sentences for this offence. Indeed, I would say that it is, in the
circumstances of this offence, a considerably more lenient sentence than might
have been imposed.

[20]

I turn, then, to the immigration issue. While it is now clear that
immigration consequences can be considered by a court in imposing a sentence,
it is equally clear that such consequences will not justify the imposition of a
sentence that is otherwise unfit:
R. v. Pham,
2013 SCC 15. While the
sentencing judge in this case did not expressly consider the immigration issues
raised on this appeal, she did consider the question of whether a sentence of
less than two years might be appropriate. She determined that such a sentence
would be insufficient in this case, particularly given the goals of deterrence
and denunciation.

[21]

I am of the view that the sentencing judge was correct in her analysis.
I acknowledge that there is some evidence before this court that the accuseds
rights of appeal in respect of a potential deportation order might be affected
by the length of the sentence. Nonetheless, I am of the view that the trial
judge was correct in finding that a sentence of less than two years would not
have been fit in this case. The concerns with respect to deportation do not
transform such a disposition into an appropriate sentence.

[22]

Mr. Botting has suggested that substituting, today, a suspended sentence
with a 30 month period of probation would, from a practical standpoint, not
change the actual conditions that Mr. Rich will face. If his sentence is left
unchanged, he will probably serve the next 20 months on parole. If a suspended
sentence is substituted, he will serve the next 20 months on probation, under
similar conditions.

[23]

Mr. Botting's submission requires this court to engage in an odd sort of
wilful blindness. We would, for the purposes of gauging the fitness of the
sentence, take into account the 10 months time served. For the purposes of
official records, however, that time would be labelled as probation, so as to get
around immigration laws. In my view it would be unseemly and inappropriate for
this court to engage in that sort of concealment and doublethink.

[24]

Our role is to determine whether the sentence imposed by the trial judge
was a fit one. In my view it was.

[25]

Accordingly, while I would grant an extension of time to apply for leave
and would grant leave to appeal, I would dismiss the appeal.

[26]

KIRKPATRICK J.A.
: I agree.

[27]

FRANKEL J.A.
: I agree.

[28]

KIRKPATRICK J.A.
: Leave to appeal is granted. The appeal is
dismissed.

The Honourable Mr. Justice Groberman