Date: 20020607
Docket: T-2161-98
Neutral citation: 2002 FCT 650
BETWEEN:
JAMES FISHER & SONS PLC
Plainfiff
AND:
PEGASUS LINES LIMITED S.A.
Defendant
REASONS FOR ORDER AND ORDER
ROULEAU, J.
[1] This show cause came before me at Montreal on April 25, 2002 as a result of an Order issued by Pinard J. on October 12, 2001 in which he had determined that one James Karathanos was in contempt for failure to comply with Orders issued from time to time by this Court, all pursuant to rule 466 of the Federal Court Rules.
[2] The matter giving rise to the contempt proceedings originates under the following circumstances.
[3] On February 22, 1999, the Court properly accepted for registration a judgment from the High Court of Justice, Queen's Bench Division of England, dated October 30, 1997, as a judgment of this Court and ordered Pegasus Lines Limited S.A. ("Pegasus") to pay $290,491.49 (together with interest and costs) to James Fisher & Sons PLC ("Fisher"), the plaintiff in the proceedings.
[4] In May 1999, Fisher caused Mr. Karathanos to be personally served with a Direction to Attend at an examination in aid of execution as a representative of Pegasus' agent in Montreal. Mr. Karathanos is the president of Amican Navigation Inc. ("Amican"). Questions arose as to the relationship between Amican and Pegasus. Fisher brought a motion and on August 13, 1999, Associate Chief Justice Lutfy found some commercial relationship between Amican and Pegasus and as a result ordered that Mr. Karathanos, personally and as President of Amican, should undergo examination in aid of execution as an officer of Pegasus. However, the Order also provided an "escape clause" in the event that further information could be advanced to show that Mr. Karathanos was not an officer of Pegasus.
[5] During the course of his examination on September 10, 1999 and September 21, 1999, Mr. Karathanos gave numerous undertakings but failed to answer many if not most of them. The plaintiff brought a motion to compel such answers and its motion was granted on November 16, 1999 by Prothonotary Morneau.
[6] Fisher remained unsatisfied with the answers provided and brought a further motion for better answers to the undertakings that had been given. At about the same time, Mr. Karathanos brought his own motion seeking to be relieved of further examination in accordance with Associate Chief Justice Lutfy's "escape clause". Both motions were heard by Justice Pelletier who, on May 15, 2001, rejected Mr. Karathanos' motion and ordered that he provide full answers to the undertakings that had been sought by the plaintiff: 2001 FCT 489.
[7] Those answers were finally provided on July 4, 2001, the day before Mr. Karathanos' examination was set to continue. Nevertheless, the plaintiff remained unsatisfied with the answers.
[8] During the examination on July 5, 2001, eighteen additional undertakings were given and these are the undertakings that are at the heart of the current motion. All eighteen undertakings outlined in the transcript from the examination reveal that, with the exception of one undertaking, Mr. Karathanos' counsel promised to answer all undertakings by August 15, 2001, with the remainder to be answered by August 31, 2001.
[9] On August 16, 2001, plaintiff's counsel noted that Mr. Karathanos had already failed to live up to his undertaking and by fax dated September 5, 2001, plaintiff's counsel noted that Mr. Karathanos had then exceeded all deadlines and indicated that a further motion, returnable on September 17, 2001, would be brought before the Court for an Order that answers to undertakings be provided by noon on September 18, 2001, with requests for costs. The penultimate paragraph of that fax states:
Please also be advised that it is our intention, if the Court makes the said Order and your client fails to comply with any part of the Order, to forthwith apply for a Contempt Order against your client. We shall ask that as sanction, inter alia, your client be ordered personally to pay to the Plaintiff the amount of the judgement in the action, together with full solicitor-client costs.
[10] The plaintiff did in fact serve and file a Notice of Motion on September 12, 2001 and the matter was heard on September 17, 2001 by Justice Blanchard. Jean-Marie Fontaine, counsel for Mr. Karathanos, who testified during this application, swore that he attended the hearing and was instructed to consent to the motion, except with respect to the matter of costs. In his affidavit, Mr. George Pollack, lead counsel for Mr. Karathanos, also admitted to having seen a draft of Justice Blanchard's Order (as prepared by plaintiff's counsel) at approximately 11:30 a.m., after the hearing but before it was signed.
[11] Justice Blanchard's Order states in part:
UPON hearing the representations of the solicitors for the Plaintiff and for James Karathanos;
IT IS HEREBY ORDERED THAT:
1. James Karathanos shall serve on the Plaintiff and file into Court the answers to undertakings 1 to 18, as set out to the Schedule hereto, no later than noon on September 18, 2001.
[12] The motions judge did in fact append a schedule to his Order setting out all eighteen undertakings. The Court record indicates that certified copies of Justice Blanchard's Order were sent to the parties by fax and by regular mail; in addition, the plaintiff also caused a copy of the Order to be served personally on Mr. Karathanos at 7:25 p.m. on the day the Order issued, September 17, 2001.
[13] Mr. Karathanos' solicitors purported to answer undertakings 1, 2, 3, 4, 5, 10, 11, 14, 15, 16, 17, and 18 before noon on September 18, 2001. By fax dated September 19, 2001, the plaintiff indicated to Mr. Karathanos' solicitors that it intended to bring a motion for contempt, as previously threatened; such motion was in fact served and filed on the same day. The Notice of Motion alleges that Mr. Karathanos violated Justice Blanchard's Order by failing to answer undertakings 6, 7, 8, 9, 12, and 13 altogether, and by failing to provide proper and responsive answers to undertakings 3, 5, 11, 14, 15, and 16. By fax dated September 20, 2001, Mr. Karathanos' solicitors purported to answer undertakings 6, 8, 9, 12, 13, and 14.
[14] The plaintiff continues to complain that some of the answers provided are not responsive; however, on the date of this hearing, no further attempt had been made to resolve these issues. I would simply note therefore that undertaking 7 has never been answered nor does the Court's record reveal that answers were ever filed with the Court (except as included as part of other documents).
[15] In his defence, Mr. Karathanos filed a Motion Record on September 24, 2001, with proof of service on September 21, 2001. The parties appeared before Justice Pinard who, on October 12, 2001, dismissed the motion against Mr. Karathanos' solicitors, Mr. Pollack and the firm Sproule Pollack. However, he went on to say the following:
With respect to James Karathanos, however, I am satisfied that there is a prima facie case that contempt pursuant to Rule 466 supra has been committed. I therefore order that James Karathanos appear before a judge of this Court at 9:30 a.m. on Monday, October 22, 2001 at the Federal Court of Montreal, 30 McGill Street, Montreal, Quebec and be prepared:
a) to hear proof that he has disobeyed the Order of Mr. Justice Blanchard of this Court, dated September 17, 2001 by failing to serve on the Plaintiff and file into Court timely and/or appropriate answers to undertakings 3, 5, 6, 7, 8, 9, 11, 12, 13, 14, 15 and 16 of the Schedule of Undertakings appended to the said Order, and
b) be prepared to present any defence that he may have.
[16] Plaintiff's counsel caused Mr. Karathanos to be personally served with Justice Pinard's Order at his home on October 16, 2001 at around 6:50 p.m. On the scheduled date, however, the contempt hearing was adjourned until a half-day could be scheduled and the parties appeared before me on April 25, 2002. Mr. Karathanos did not attend. At the hearing I heard testimony from Mireille Tabib, counsel for the plaintiff; Richard Léger, the bailiff who personally served Mr. Karathanos with Justice Pinard's Order; and Mr. Fontaine, who appeared before Justice Blanchard on behalf of Mr. Karathanos.
[17] At the hearing, counsel for Mr. Karathanos admitted that his client had, in a strict sense, not complied with the Order of Justice Blanchard and that Mr. Karathanos acted in contempt of Court. However, he continued to advance mitigating factors, based on Mr. Fontaine's testimony and Mr. Pollack's affidavit, by submitting that mistakes were made in good faith and without any intention to willfully ignore or disregard the Orders of this Court. Furthermore, he argued that the plaintiff was not prejudiced in its case.
[18] The plaintiff relies on the fact that, having proper notice of its motion, Mr. Fontaine did not object to the Order that all undertakings should be answered by noon the following day and that Mr. Karathanos (as well as his solicitors) were well aware of the Order and its content. In respect of the latter, the plaintiff relies upon the transcript of Mr. Karathanos' examination in aid of execution (July 5, 2001), the plaintiff's Motion Records filed September 12, 2001 and September 19, 2001, and the Order of Justice Blanchard, dated September 17, 2001, which aside from being forwarded to the parties' solicitors by the Court, was served personally upon Mr. Karathanos. Hence, the plaintiff submits that there is no reason, other than Mr. Karathanos' unlawful, willful and continuous delay tactics, for the failure to comply with Justice Blanchard's Order.
[19] At the hearing, the plaintiff continued to advance its argument that many of Mr. Karathanos' answers are not responsive. However, as I stated then, it is not the function of this Court to assess the quality of Mr. Karathanos' answers within the context of the current motion. Mr. Karathanos appears concerned about the amount of work required to answer the undertakings; he should never have agreed to the undertakings in the first place. His replies consist of a question to a question. Similarly, a vague answer cannot be qualified with "as near as we can decipher" and "we will probably have to clarify this", without any further explanation. Therefore, Mr. Karathanos should also be taken to have not answered undertakings 5 and 11, which I have set out below.
| 5.
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Undertaking:
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To review the various disbursement accounts and supporting documentation with a view to finding those instances were disbursements did not tally with proofs of payment and... etc.
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Answer:
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Amican has verified disbursements accounts and as it advised during the course of Mr. Karathanos' examination, payments were frequently effected by way of one cheque which covered several different invoices. To the extent that if you have specific queries with respect to specific disbursements that you believe did not tally with proofs of payment, Mr. Karathanos or someone from the company's accounting department would be pleased to meet with you and deal with your queries on an item by item basis. This may be the most expeditious way of undertaking.
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| 11.
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Undertaking:
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To determine what the state of account was between Pegasus and Amican on January 1, 1994 and to advise how this was determined.
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Answer:
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The answer that we received from Amican was somewhat difficult to understand and we will probably have to clarify this upon the undersigned's return to the office on September 20, 2001. As nears we can decipher, however, there was no outstanding balance at the opening of 1994.
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[20] There is no doubt that Mr. Karathanos was vague, evasive and uncooperative; wilfully engaging in delaying tactics in these proceedings and is without a doubt in contempt of Orders of this Court.
[21] With respect to penalty, the plaintiff submits that Mr. Karathanos has been attempting to hinder the plaintiff's efforts to execute its judgment against Pegasus by hiding the fact that Amican, a company owned and directed solely by Mr. Karathanos, owes Pegasus an amount that would be sufficient to satisfy the debt. Alternatively, the plaintiff continues to advance its argument that Pegasus is a sham corporation, that the controlling hand is Mr. Karathanos, either personally or through Amican. In the plaintiff's view therefore, it would be appropriate for the Court to hold Mr. Karathanos personally liable for the full amount of the English judgment entered against Pegasus and as such the penalty should equate the amount of the judgment.
[22] With respect to the quantum of penalty, I cannot accede to the plaintiff's suggestion that Mr. Karathanos should be held personally liable for the full amount of the judgment. I have arrived at this conclusion for at least two reasons. First, this is not an appropriate motion to lift the corporate veil and, in fact, the plaintiff has not introduced any evidence that could satisfy the test for granting such an Order. The plaintiff cannot do indirectly what it cannot do directly. Further, any penalty that is to be paid by a contemnor is paid into Court and is not recoverable by the plaintiff.
[23] However, I would disagree with Mr. Karathanos' submission that the present motion is high-handed or unduly harsh. Mr. Karathanos has attempted to avoid being examined on two occasions and has been singularly uncooperative in satisfying undertakings. It is only through Court Orders that the plaintiff has been able to elicit any responses from Mr. Karathanos. Furthermore, little, if anything, has been done by Mr. Karathanos to consider the plaintiff's objections (some of which I have already said are clearly valid) in the many months or so that have passed since this motion was initiated.
[24] At the hearing on April 25, 2002, the Court also raised Mr. Karathanos's failure to attend. On his behalf, Mr. Sproule argued that attendance is not required by the Federal Court Rules nor was it clearly prescribed by the Order of Justice Pinard who wrote "I therefore order that James Karathanos appear..." but did not say "personally appear". Indeed, other judges of this Court have expressed the same concern given the quasi-criminal nature of contempt proceedings which may give rise to the possibility of incarceration; nevertheless, it is also clear that individual defendants have been found guilty of civil contempt even though they did not appear for their hearings: Society of Composers, Authors and Music Publishes of Canada v. Timberlea Investments Ltd. (1998), 152 F.T.R. 198, Society of Composers, Authors and Music Publishers of Canada v. 946945 Ontario Inc., [1999] F.C.J. No. 287 (T.D.).
[25] Regardless, Mr. Karathanos' counsel is arguing semantics and, as I see it, is faced with a clear Order from Justice Pinard. Mr. Karathanos' absence at the hearing before me can only be considered as a further aggravating factor and further evidence of his total disrespect for Orders of this Court and, in my mind, is relevant to the penalty that I will impose.
[26] In reaching an appropriate fine, I must consider both aggravating and mitigating factors. On the one hand, I have considered the fact that Mr. Karathanos failed to comply to answer undertakings by certain fixed dates; that he consented to the Order that he eventually violated. I have also considered the nature of the violation, attempts made to remedy it, and the history of these proceedings. I note in particular that undertaking 7 has never been answered and that answers to undertakings 5 and 11 are clearly inadequate.
[27] On the other hand, I am aware that efforts were made to provide answers shortly after September 18, 2001 and that most answers were provided within a short period of time thereafter. There is no evidence to suggest previous disregard of the Court's proceedings. Although Mr. Karathanos argues that he was improperly advised by previous counsel and that he was unaware of two of the undertakings, I have great difficulty accepting this submission. Counsel admits that he advised his client with respect to the content of the plaintiff's Motion Record dated September 12, 2001 and that Mr. Karathanos agreed to consent to the motion (except for the matter of costs). Furthermore, the undertakings were given in the course of Mr. Karathanos' own examination and in addition Justice Blanchard's Order was later served upon him personally.
[28] Having considered each of these factors, along with the jurisprudence of this Court, I hereby impose a fine of $3,000.00 for contempt. I reject Mr. Karathanos' argument that Fisher has only achieved partial success on its motion for contempt and no costs should be awarded. I am satisfied that the plaintiff is entitled to its costs of this motion as well as the motion before Justice Pinard which I fix at a total of $6,000.00. Both penalty and costs are to be paid within 60 days of the date of this Order; failure to comply, Mr. Karathanos is condemned to serve a term of 60 days incarceration.
[29] Finally, Mr. Karathanos is again ordered to provide a complete answer to undertakings 5, 7, and 11 within 30 days of the date of this order.
JUDGE
OTTAWA, Ontario
June 7, 2002
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-2161-98
STYLE OF CAUSE: James Fisher & Sons v.
Pegasus Lines Limited
PLACE OF HEARING: Montréal, Québec
DATE OF HEARING: April 25, 2002
REASONS FOR ORDER : The Honourable Mr. Justice Rouleau
DATED:
APPEARANCES:
Peter Cullen & FOR PLAINTIFF
Mireille Tabib
J. Kenrick Sproule FOR DEF. J. KARATHANOS
SOLICITORS OF RECORD:
Stikemen, Elliott FOR PLAINTIFF
Montréal, Québec
J. Kenrick Sproule - Law Offices FOR DEFENDANT
Montréal, Québec
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