Hazelton Lanes Inc. v. 1707590 Ontario Ltd, 2014 ONCA 793

By Sharpe, Simmons,Benotto JJ.A

Ontario Court of Appeal

Nov 14, 2014

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BETWEEN

Hazelton Lanes Inc. and Stephen Chan

Plaintiffs (Respondents)

and

1707590 Ontario Limited and John Faraci, Adriana Verrelli, Susete Antunes, Rose Sperandeo, 1203279 Ontario Limited, and Isis Societe Co. Ltd.

Defendants (Appellants)

Milton A. Davis, Ronald D. Davis and Robert Macdonald, for the appellants

William A. Chalmers, for the respondents

Heard: June 23, 2014

On appeal from the orders and judgments of Justice P. Theodore Matlow of the Superior Court of Justice, dated September 16, 2013, October 15, 2013 and November 8, 2013 and December 23, 2013.

Simmons J.A:

A. INTRODUCTION

[1] This appeal arises out of the trial of a commercial action between the respondents, Stephen Chan and Hazelton Lanes Inc. (“Hazelton”), and the appellants, John Faraci and 1707590 Ontario Limited (“170”). Respondents’ counsel originally estimated that the trial would last three days. Rather than three days, the trial consumed about 50 days of court time, consisting of about 30 days of evidence and about 20 days of motions.

[2] Even though the trial had consumed so much court time, the trial judge did not decide the case on the merits.

[3] Instead, on what was to have been day 36 of the trial, he permitted the respondents to add several defendants and new causes of action, including fraud and conspiracy. In addition, he granted to the respondents an ex parte Mareva injunction against the appellants and the added parties based on findings that all had engaged in a “fraudulent scheme” to hide assets.

[4] Further, the trial judge ordered the appellants to “comply fully” within six business days with 19 directions that the trial judge had given to Faraci during his cross-examination. These directions required Faraci to obtain, produce and organize for inspection masses of documents that had never previously been requested.

[5] Although Faraci and 170 produced many documents and made them available for inspection, the trial judge made a finding, on a subsequent motion, that Faraci and 170 were in contempt for failing to comply fully with the 19 directions. As a remedy for their contempt, the trial judge ordered Faraci and 170 to post $35,000 as security for costs. When that order was not complied with, the trial judge struck the appellants’ statement of defence and counterclaim and ultimately granted partial default judgment, by way of two judgments and one order, on all major aspects of the respondents’ original claims against the appellants. In addition, the trial judge awarded the respondents $650,000 in costs on a substantial indemnity basis.

[6] The appellants appeal five orders and judgments made by the trial judge:

i) the order finding the appellants in contempt for failing to comply fully with the trial judge’s mid-trial directions concerning production of documents;

ii) the order striking out the appellants’ statement of defence and counterclaim;

iii) two judgments and one order granting the respondents partial default judgment on their original claims against the appellants together with $650,000 in costs on a substantial indemnity basis.

[7] The appellants raise several issues on appeal, including: loss of jurisdiction due to reasonable apprehension of bias; lack of evidence capable of proving contempt; misapplication of the rules relating to default judgment; insufficiency of reasons; and failure to apply the principles of proportionality and reasonableness in awarding costs.

[8] In my view, the issue of reasonable apprehension of bias is dispositive of this appeal.

[9] Concerning that issue, the appellants submit that the trial judge demonstrated a reasonable apprehension of bias through a number of actions, including:

· his interjections during Faraci’s cross-examination;

· his suggestion to respondents’ counsel that he move for a Mareva injunction;

· his mid-trial findings in his reasons on the motion for a Mareva injunction and related rulings that Faraci and the added defendants committed fraud and that Faraci’s testimony was not credible;

· his 19 mid-trial directions to Faraci and 170 to produce masses of documents not previously requested and of little or unknown relevance to the issues at trial;

· his mid-trial finding that Faraci and 170 were in contempt for failing to comply fully with his 19 directions relating to production of documents – when he did not advert to Faraci’s evidence concerning substantial compliance with the directions.

[10] For the reasons that follow, I conclude that, when considered cumulatively, the trial judge’s conduct of the trial creates an appearance that he prejudged Faraci’s conduct and credibility and aligned himself with the respondents on the issue of mid-trial production in a manner that rendered the trial unfair.

[11] Accordingly, I would allow the appeal on the basis of reasonable apprehension of bias, set aside the judgments and orders under appeal and order a new trial before a different trial judge.

B. BACKGROUND

[12] To fully appreciate the allegation of reasonable apprehension of bias, it is necessary to have some understanding of the relationship between the parties, the issues at trial and the events at trial. After reviewing these matters, I will turn to the specific allegations concerning reasonable apprehension of bias.

(1) The Parties and Their Relationship

[13] Faraci is a lawyer and the sole shareholder, officer and director of 170.

[14] Stephen Chan is a businessman and the controlling shareholder and directing mind of Hazelton.

[15] Faraci and Chan met in 1993 or 1994. For many years, Faraci acted as a solicitor for Chan and some of Chan’s companies.

[16] In 1999, Faraci acted for Chan and one of his companies, Combi Capital Group Limited (“Combi”), in connection with the purchase of commercial premises in Toronto commonly referred to as Hazelton Lanes.

[17] It is undisputed that Faraci negotiated a 3% interest in Hazelton Lanes for himself around the time of Combi’s purchase of Hazelton Lanes.

[18] Between 2001 and 2011, first Faraci, and then 170, leased office space in Hazelton Lanes, initially from Combi and later from Hazelton.

(2) The Relationship Between Faraci and Chan Deteriorates

[19] At least according to Faraci, in recent years, the relationship between him and Chan had begun to deteriorate. In 2006, another law firm acted when Combi transferred Hazelton Lanes to Hazelton. Hazelton and Chan claimed that Faraci’s 3% interest in Hazelton was paid out around that time by a net payment of $376,686.45. Although Faraci acknowledges receipt of that payment, he claims that his 3% interest in Hazelton Lanes continued.

[20] Faraci states that, by June 2011, his relationship with Chan had fallen apart. Anticipating a sale of Hazelton Lanes, he sued Chan and Hazelton in another proceeding, claiming a 3% ownership interest in the premises.

[21] In that same month, June 2011, Faraci obtained an order in the other proceeding requiring that $1,000,000 from the proceeds of the sale of Hazelton Lanes be paid into court.

[22] It is undisputed that, on October 17, 2011, Hazelton re-entered 170’s rented premises and purported to terminate 170’s lease for non-payment of rent.

[23] Nor is it disputed that, on October 19, 2011, Hazleton Lanes was sold to First Capital Holdings (Ontario) Corporation (“First Capital”) for $108,000,000.

[24] Under the terms of the June 2011 order, $1,000,000 from the proceeds of that sale was paid into court to the credit of the other action.

(3) The Issues at Trial

(a) Chan and Hazelton’s Claim Against Faraci and 170

[25] On October 19, 2011, the same day Hazelton Lanes was sold, Hazelton and Chan commenced this proceeding against 170 and Faraci by notice of application. On December 23, 2011, a consolidation order was made joining their application with other pending proceedings. Under the terms of the consolidation order, Hazelton and Chan were to be plaintiffs and 170 and Faraci were to be defendants.

[26] As set out in their original statement of claim, Hazelton and Chan claimed, among other things, the following relief:

i) Hazelton Against 170

· $7,324.94 in rental arrears under a 2006 lease between Hazelton and 170 for office space in Hazelton Lanes;

· a declaration that the version of the lease governing the relationship between Hazelton and 170 was that set out in Schedule “A” to the statement of claim (this version contained no handwritten alterations); and

· a declaration that the 2006 lease between Hazelton and 170 was validly terminated on October 17, 2011 for non-payment of rent.

ii) Chan Against Faraci

· a declaration that Faraci failed to advise Chan of the requirement that certain written fee agreements for legal services entered into between Chan and Faraci for all or part of the years 2006 to 2010 required approval by an assessment officer and that, in any event, the $375,163.05 in fees paid was not fair and reasonable;

· an order that some portion of the $375,163.05 in legal fees paid by Chan’s companies to Faraci under the fee agreements be repaid to Chan; and

· a declaration that Chan was entitled to the return of $20,000 paid to Faraci by one of Chan’s companies in 1998 in relation to a real estate transaction that did not close and which funds Chan claimed Faraci had applied on account of legal fees without his consent.

[27] During the trial, Hazelton and Chan amended their statement of claim to add allegations that both Faraci and 170 had breached the terms of their leases by subletting the rented premises without the landlord’s consent.

(b) Faraci and 170’s Statement of Defence and Counterclaim

[28] In their original statement of defence and counterclaim, 170 and Faraci denied that Hazelton and Chan were entitled to any relief. Instead, they advanced the following version of the material facts.

(i) The Lease Arrangements and Termination of 170’s Tenancy

[29] In 2001, at the request of Chan, Faraci relocated his law office to Hazelton Lanes. As a result of their relationship and because of Faraci’s 3% ownership interest, Chan advised Faraci that Faraci could lease office space in Hazelton Lanes rent free.

[30] However, to implement this arrangement, and to maximize the income of Hazelton Lanes on its books and records, Faraci’s lease required that rent be paid at an inflated rate. In addition, Chan directed Faraci to bill him for services in an amount equivalent to the monthly rent stipulated in Faraci’s lease and to use the payments on account to pay the rent.

[31] In 2006, just before the expiry of Faraci’s lease, an agreement was made for a new five-year lease under which 170 became the tenant. Certain handwritten amendments were made to the proposed Hazelton–170 lease, adding the following terms:

· upon the expiry of the initial five-year term, 170 would be entitled to renew the lease for a further five-year term at market rent less 20 percent; and

· all rental payments under the lease and the renewal term would be paid by the landlord.

[32] Around December 2010, Faraci’s rapport with Chan began to suffer. With the exception of one cheque received in February 2011, the payments from Chan and his companies to cover 170’s rent stopped thereafter.

[33] On two occasions after December 2010, 170 paid (under protest) amounts that Hazelton claimed were owing for rental arrears. In addition, 170 purported to exercise its option to renew the lease. However, 170 and Faraci declined to pay an amount that Hazelton demanded on account of rental arrears on or about October 3, 2011. On October 17, 2011, two days before the sale of Hazelton Lanes, Hazelton re-entered the rented premises and purported to terminate 170’s lease for non-payment of rent. However, as Chan and his companies had failed to honour their obligations to pay 170’s rent, Faraci and 170 claimed that Hazelton had terminated 170’s lease improperly.

(ii) The Fee Agreements

[34] According to Faraci and 170, Faraci stopped providing legal services on a regular basis for Chan and his companies around October 2008. Nonetheless, from November 2008 onward, 170 continued to send monthly statements of account to Chan or his companies for rental payments, described as “general services”, and 170 continued to apply the payments received on account of monthly rent.

[35] Among other things, Faraci denies that Chan or his companies paid Faraci $375,163.05 in legal fees. Rather, a large portion of the payments were on account of rent.

[36] Although Faraci acknowledges that there were written “Service Contracts” for all or part of 2006, 2007 and 2008, he denies that any such agreements were in place for the balance of 2008 or any part of 2009 or 2010.

[37] According to Faraci, between September 2006 and October 2008 he received $149,248.94 on account of legal services from Chan or his companies.

(iii) The $20,000 Deposit

[38] Faraci acknowledges that, on April 15, 1998, Chan advanced $20,000 to him as a deposit to be paid to a realtor in relation to a real estate transaction. The transaction did not close and litigation against the vendor ensued. According to Faraci, on June 5, 1998, Chan instructed him to apply the $20,000 on account of Faraci’s legal fees – which Faraci subsequently did.

(iv) The Counterclaim

[39] In their counterclaim, Faraci and 170 claim, among other things, the following relief:

i) a declaration that the version of the lease governing the relationship between Hazelton and 170 is that set out in Schedule “A” to the statement of defence and counterclaim (this version includes handwritten amendments setting out the renewal option and the requirement that the landlord pay the rent);

ii) declarations and other relief concerning the allegedly improper termination of the lease between Hazelton and 170. In particular, 170 claims a declaration that it is entitled to monies originally paid into escrow when Hazelton Lanes was sold to First Capital to account for its claim for a five-year renewal option. The funds were later paid into court to the credit of this action.[1]

(4) Events at Trial

(a) The Trial is Scheduled for Three Days

[40] Under the terms of the December consolidation order and a subsequent consent order made in February 2012, the trial was scheduled for three days.

(b) The Trial Quickly Exceeds the Three-Day Estimate

[41] Following the commencement of the trial on April 16, 2012, the three-day estimate for trial was quickly exceeded.

[42] The appeal record does not include transcripts of the proceedings prior to November 21, 2012. However, according to Hazelton and Chan, their witnesses began testifying on April 18, 2012 and continued over 11 days (April 19, 20, 23, 24, June 4, 5, 6, 7, 12, 13, and October 9, 2012). Chan’s examination-in-chief consumed 4.5 hours over two court days; he was cross-examined for 18.6 hours over seven court days. Six other witnesses testified for the respondents.

[43] According to Hazelton and Chan, the case for Faraci and 170 began on October 10, 2012. Faraci’s examination-in-chief consumed 27.1 hours over eight court days (October 10, 12, 15, 17, 18, 19, November 19, 20 and 21, 2012); his cross-examination occurred over 10 days between November 2012 and February 2013 (November 21, 22, 27, 28 and 30, 2012; January 28, 30 and 31 and February 1 and 4, 2013).

[44] On November 21, 2012, soon after Faraci’s cross-examination began, the trial judge interjected and made comments to the effect that Faraci’s evidence “defie[d] common sense” and was “gobbledygook”. I will describe these interjections in greater detail in the analysis section of these reasons.

(d) The Trial Judge Makes Mid-Trial Directions

[45] Although many factors undoubtedly contributed to the length of this trial, at least part of the explanation lies in the fact that, prior to trial, Hazelton and Chan took the position that many events preceding 2006 on which Faraci and 170 relied were irrelevant. Hazelton and Chan therefore refused production in relation to those issues. At trial, the trial judge ruled against the respondents’ position, leading respondents’ counsel to seek and obtain directions for production of documents during Faraci’s cross-examination that had not previously been requested during the pre-trial production and discovery process.

[46] Another factor is that, during Faraci’s cross-examination, the trial judge permitted respondents’ counsel to conduct what was effectively a judgment-debtor examination of Faraci because Faraci acknowledged that other parties had paid some of 170’s rent and because Faraci claimed that 170 could have paid the rental arrears Hazelton had demanded on October 3, 2011.

[47] In the result, during his cross-examination of Faraci, respondents’ counsel sought and obtained, over the objections of appellants’ counsel, 19 directions from the trial judge requiring the appellants to obtain, produce and organize for respondents’ counsel’s inspection masses of documents that had never previously been requested.

[48] Many of the directions overlapped. A consolidated summary of all the directions is included in Appendix “A” to these reasons.[2]However, the following examples illustrate the breadth of the production directions the trial judge gave to Faraci during his cross-examination. Among other things, the trial judge ordered Faraci to:

· produce his personal income tax returns from 1998 to 2009, and, if necessary, make enquiries of his accountant to obtain copies of the same, and, if still necessary, request complete copies of all tax returns since 1998 from the Canada Revenue Agency;

· produce copies of any information and documents used in the preparation of his 2010 and 2011 tax returns, if he took any steps to file them before the trial’s conclusion;

· produce all documentation relating to his trust accounts, including bank account statements, ledgers, and reconciliations, from 1998 to the date of trial;

· produce copies of any bank documents in his possession that pertain to his personal and corporate bank accounts, from the beginning of 1998 to the date of trial; and

· produce copies of all statements, invoices, bills, and all other documents pertaining to payments received and expenses incurred by Faraci in his provision of legal services to clients in 2010 and 2011.

(e) The Trial Judge Suggests that the Respondents Bring a Motion for a Mareva Injunction

[49] On Friday, February 1, 2013, respondents’ counsel indicated that he intended to complete his cross-examination of Faraci on Monday, February 4, 2013 and that, in addition, he intended to bring a mid-trial motion for costs.

[50] Although the trial judge had previously said he was not prepared to make a mid-trial order for costs, respondents’ counsel asserted that evidence given by Faraci suggesting that he and 170 had made themselves judgment proof warranted a reconsideration of the issue.

[51] In response, the trial judge said that an order “that would impede Mr. Faraci’s apparent efforts to divest himself of assets] might be more appropriate”.

[52] Faraci’s cross-examination was not completed on Monday, February 4, 2013, and the motion for costs was not addressed.

(f) The Trial Judge Makes the February 7, 2013 Order for a Mareva Injunction, for Compliance with the Directions and Related Relief

[53] On the next court date, Wednesday, February 6, 2013, Hazelton and Chan brought a motion seeking to amend their statement of claim by adding five new defendants and several new causes of action, a Mareva injunction against all defendants and an order bifurcating the current trial from the trial of the amended claims. The motion was brought without notice to the new defendants. Because notice to 170 and Faraci had been given only minutes before the hearing commenced, the trial judge treated the motion as ex parte with respect to all defendants.

[54] On February 7, 2013, the trial judge released an endorsement permitting Hazelton and Chan to amend their statement of claim and granting their request for a temporary ex parte Mareva injunction against all defendants. I will return to this endorsement in the analysis section of these reasons. However, in essence, the trial judge made findings that Faraci and the added defendants had engaged in a fraudulent scheme to hide assets and that, in these circumstances, Faraci’s participation in the trial was an “abuse [of] the civil justice system” because he was “engaging it without any financial risk.”

[55] In his endorsement, the trial judge adjourned any issues relating to the conduct of the balance of the trial. He also reserved all claims for costs for consideration at the conclusion of the trial. He denied Hazelton and Chan’s request for certificates of pending litigation against properties owned by the added defendants. However, he ordered Faraci to “comply fully with all orders directed to him throughout the trial”.

[56] Paragraph 7 of the formal order flowing from the trial judge’s endorsement reads as follows:

7. THIS COURT ORDERS that Faraci and 170 shall comply fully with all orders directed to him throughout the trial of this proceeding no later than on February 15, 2013, failing which, the plaintiffs may renew the pending motion brought on February 6, 2013, for an order finding Faraci and 170 to be in contempt of court. [Emphasis added.]

(g) Chronology of Subsequent Events

[57] The following chronology sets out the subsequent events at the trial that culminated in the default judgments:

· On February 15, 2013, Faraci and 170 served a notice of motion for leave to appeal the February 7, 2013 order.

· On March 8, 2013, Faraci and 170 served a notice of motion for a stay of the February 7, 2013 order.

· On April 2, 2013, the stay motion was dismissed.

· Also on April 2, 2013, Faraci and 170 Ontario changed counsel.

· On April 4, 2013, Faraci and 170 served a notice of motion seeking, among other things: i) an order setting aside the February 7, 2013 order; ii) an order directing the trial judge to recuse himself; and iii) a mistrial.[3] According to Faraci and 170, they requested that this motion be heard by a judge other than the trial judge, but the trial judge refused.

· On April 25 and 26, and May 1, 2013, the Faraci-170 motion was heard. At the conclusion of the hearing, the trial judge dismissed the motion with reasons to follow.

· June 19, 2013 was the first return date of the contempt motion. The respondents relied on Faraci’s cross-examination as well as a Plaintiff’s Brief of Outstanding Directions and a Plaintiff’s Brief of Attempted Compliance. In response, Faraci filed an affidavit sworn May 27, 2013 claiming that he had complied with the directions “[t]o the extent that it is possible”. The trial judge adjourned the contempt motion to August 27, 2013 to permit the respondents to file an amended notice of motion “to show that the underlying basis of the motion … include[ed] all of [the trial judge’s] orders directed to Faraci”.

· August 27, 2013 was the second return date of the contempt motion. In response to the amended notice of motion, Faraci filed a further affidavit sworn July 30, 2013 setting out particulars of the documents he had supplied, the efforts he had made to obtain other documents and the documents he had been unable to find or obtain.

· On September 16, 2013, the trial judge ordered that the Mareva injunction should continue as against one of the added defendants. In his endorsement, he commented adversely on Faraci’s credibility and that of the added defendant.

· Also on September 16, 2013, the trial judge found 170 and Faraci in contempt for failing to comply with his previous orders “listed in the chart at tab ‘A’ of The Plaintiffs’ Brief of the Outstanding Directions”. Rather than striking their statement of defence and counterclaim, as had been requested, the trial judge ordered that 170 and Faraci pay $35,000 into court on or before October 4, 2013 as security for costs of the motion and steps taken in relation to it.

· On September 27, 2013, the appellants delivered a notice of appeal from the September 16, 2013 order. In their notice of appeal, the appellants asserted that the trial judge lost jurisdiction due to a reasonable apprehension of bias prior to making the September 16, 2013 order. Among other grounds, the appellants asserted that the trial judge failed to give reasons for dismissing the mistrial/recusal motion.

· October 7, 2013 was the return date of the respondents’ motion to strike out the appellants’ amended statement of defence and counterclaim for failing to comply with the September 16, 2013 order. The respondents’ motion record included a copy of the appellants’ notice of appeal from the September 16, 2013 order.

· On October 10, 2013, the trial judge released reasons for dismissing the mistrial/recusal motion. In his reasons, he noted that “it might well have been better had [he] used different language [in his ruling on the Mareva injunction] to dispel any inference that [he] had made a finding of fraud against Faraci.” However, he said his “intention was to convey only that there was ‘strong prima facieevidence’ of a fraudulent scheme by Faraci.” On October 15, 2013, the trial judge struck out the appellants’ statement of defence and counterclaim for failing to make the payment into court required under his order of September 16, 2013.

· On November 8, 2013, the trial judge granted to the respondents partial default judgment on the following claims: i) Hazelton’s claims against 170 and Faraci in relation to their tenancies at Hazelton Lanes; ii) Chan’s claim against Faraci for $20,000 paid to Faraci in 1998 in relation to a real estate transaction; and iii) Chan’s claim for the return of client documents.[4]

· Also on November 8, 2013, the trial judge ordered that the money paid into court in relation to the Hazelton-Capital One escrow agreement be paid out to Hazelton.

· On December 23, 2013, the trial judge granted to Chan and Hazelton partial default judgment setting aside the fee agreements, reducing the amount payable by Chan under the fee agreements to $13,399.04 and requiring that Faraci repay $350,000 to Chan. In addition, the trial judge awarded the respondents costs of the action fixed on a substantial indemnity basis in the amount of $650,000.[5]

C. REASONABLE APPREHENSION OF BIAS

[58] The test for reasonable apprehension of bias is that set out in de Grandpré J.’s dissenting opinion in Committee for Justice and Liberty v. Canada (National Energy Board) (1976), [1978] 1 S.C.R. 369 (S.C.C.), at pp. 394-95, which reads as follows:

[T]he apprehension of bias must be a reasonable one, held by reasonable and right minded persons, applying themselves to the question and obtaining thereon the required information…. [The] test is “what would an informed person, viewing the matter realistically and practically – and having thought the matter through – conclude. Would he think that it is more likely than not that [the decision-maker], whether consciously or unconsciously, would not decide fairly.”

[59] The Supreme Court of Canada has repeatedly endorsed this test. In his reasons in R. v. S. (R. D.), [1997] 3 S.C.R. 484, Cory J. explained, at para. 111, that the test set down by de Grandpré J. in Committee for Justice and Liberty contains a “two-fold objective element”: not only must the person considering the alleged bias be reasonable, but “the apprehension of bias itself must also be reasonable in the circumstances of the case.”

[60] It has also been held that, in order to maintain public confidence in the administration of justice, the appearance of judicial impartiality is as important as the reality. In Metropolitan Properties Co. (F.G.C.) Ltd. v. Lannon, [1968] 3 All E.R. 304 (C.A.), at p. 310, Lord Denning M.R. stressed the importance of the appearance of judicial impartiality. He said:

[I]n considering whether there was a real likelihood of bias, the court does not look at the mind of the justice himself.... It does not look to see if there was a real likelihood that he would, or did, in fact favour one side at the expense of the other. The court looks at the impression which would be given to other people. Even if he was as impartial as could be, nevertheless, if right-minded persons would think that, in the circumstances, there was a real likelihood of bias on his part, then he should not sit. And if he does sit, his decision cannot stand.

[61] This passage was cited with approval by Major J. in his dissenting reasons in S. (R. D.), at para. 11, and by this court in Benedict v. Ontario (2000), 51 O.R. (3d) 147. In Benedict, this court added, at para. 20:

We note that while Lord Denning M.R. spoke in terms of a “real likelihood” rather than a “reasonable apprehension”, inNational Energy Board de Grandpré J. took care to state that such variations in the expression used should not generally be treated as involving any substantive difference in the approach to be taken. “Reasonable apprehension”, “real likelihood”, “reasonable likelihood” and “reasonable suspicion” amount to the same standard.

[62] This reasoning accords with the decision of Lord Nolan in R. v. Bow Street Metropolitan Stipendiary Magistrate et al., [1999] 1 All E.R. 577 (H.L.), at p. 592: “[I]n any case where the impartiality of a judge is in question the appearance of the matter is just as important as the reality.”

[63] The appearance of impartiality was emphasized in Wewaykum Indian Band v. Canada, [2003] 2 S.C.R. 259, at para. 66:

[W]here disqualification is argued, the relevant inquiry is not whether there was in fact either conscious or unconscious bias on the part of the judge, but whether a reasonable person properly informed would apprehend that there was.

[64] A review of this court’s recent statements in Chippewas of Mnjikaning First Nation v. Ontario, 2010 ONCA 47, 265 O.A.C. 247, leave to appeal to S.C.C. refused, [2010] S.C.C.A. No. 91, at paras. 229-30, and Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (2000), 51 O.R. (3d) 97, leave to appeal to S.C.C. refused, [2001] S.C.C.A. No. 66, at para. 131, reveals the following principles for assessing a claim of reasonable apprehension of bias that are particularly applicable in this case:

· “Impartiality reflects the state of mind in which the judge is disinterested in the outcome and is open to persuasion by the evidence and submissions. In contrast, bias reflects a state of mind that is closed or predisposed to a particular result on material issues”:Marchand, at para. 131.

· The threshold for a finding of reasonable apprehension of bias is high. “Courts presume that judges will carry out their oath of office”: Marchand, at para. 131.

· To determine that a reasonable apprehension of bias exists requires “a fact-specific inquiry” that considers “the facts and circumstances of a particular trial”: Chippewas, at para. 230.

· “The party alleging reasonable apprehension of bias has the onus of proving it on the balance of probabilities”: Marchand, at para. 131.

· The grounds for finding a reasonable apprehension of bias must be substantial; establishing an allegation of judicial bias requires “cogent evidence”: Marchand, at para. 131.

[65] If a judge’s words or conduct give rise to a reasonable apprehension of bias, it colours the entire trial. Therefore, on appeal, “a finding of actual or apprehended bias will ordinarily result in a new trial”: Marchand, at para. 131.

D. ANALYSIS

[66] In my view, an informed person, viewing the trial judge’s conduct realistically and practically, would reasonably conclude that at least three aspects of that the trial judge’s conduct, taken together, give rise to a reasonable apprehension of bias:

i) statements and findings made during the trial indicating that the trial judge had prejudged Faraci’s conduct and credibility – namely, the trial judge’s interjections and adverse comments on Faraci’s credibility during Faraci’s cross-examination; his suggestion that plaintiffs’ counsel bring a Mareva injunction motion; and his findings on the Mareva injunction motion and a related ruling that Faraci had engaged in a fraudulent scheme to divest himself of assets;

ii) the 19 directions for mid-trial production of masses of documents that had not previously been requested and the relevance and probative value of which had not been established; and

iii) the finding that Faraci and 170 were in contempt for failing to comply fully with the 19 mid-trial directions, where the ruling contained no analysis of the extent to which Faraci and 170 had complied or of the validity of their reasons for any non-compliance.

(1) Statements and Findings Made During the Trial Concerning Faraci’s Conduct and Credibility

(a) Interjections and Comments During Faraci’s Cross-Examination

[67] On November 21, 2012, soon after Faraci’s cross-examination began, the trial judge interjected and made comments to the effect that Faraci’s evidence “defie[d] common sense” and was “gobbledygook”.

[68] The first interjection occurred after Faraci acknowledged that he had paid higher than market rent for the office space he occupied at Hazelton Lanes to create artificial income for Hazelton. Faraci maintained that this arrangement was not illegal so long as it was disclosed to prospective lenders or purchasers. According to him, “the key” was how “the document was used” and whether it was disclosed to third parties.

[69] In response to this evidence, the trial judge challenged Faraci’s explanation:

THE COURT: Mr. Faraci, your explanation, with respect, defies common sense. Now, I want to give you a chance to re-think it.

What would be the point of setting up, what I think is a scheme, if it weren’t to deceive somebody with the information that appears in financial records or statements and things like that. There would be no point, would there, in setting up this kind of scheme and then going and telling the lender or the purchaser what the true facts are.

So you knew, I’m sure – I shouldn’t put it that strongly – I put it to you that you must have known that Mr. Chan was going to use this for an improper purpose.

THE WITNESS: I knew I was paying a higher rent, Your Honour –

THE COURT: Come on, Mr. Faraci, think about it carefully. This wasn’t done for some business reason or tax reason or some other bon[a] fide reason. This was done to set the table so that Mr. Chan could mislead other people about what the true income of Hazelton Lanes was.

THE WITNESS: According to my lease, if he used it for those purposes, that’s fine, that’s fine.

THE COURT: Mr. Faraci, I give up. I won’t pursue it with you. [Emphasis added.]

[70] After this exchange, the trial judge put it to Faraci that the whole purpose of the inflated rental scheme would fail if Chan disclosed it to lenders or purchasers. Faraci agreed. The trial judge then suggested there was no reason for Faraci to engage in the scheme unless he was “prepared to close [his] eyes” to what Chan was doing. In response, Faraci maintained that his role was to tell Chan whether a particular tenant was a strong tenant or a weak tenant. The trial judge described explanation as “gobbledygook”, “not making sense”, and “not addressing the point”. Excerpts of these portions of Faraci’s cross-examination are included in Appendix “B” to these reasons.

[71] Considered in isolation, these comments could be viewed as reflecting nothing more than a trial judge’s exasperation with a difficult witness. However, considered in the context of the trial judge’s other conduct that suggests that he prejudged Faraci’s conduct and credibility, they form part of a pattern that gives rise to a reasonable apprehension of bias.

(b) The Suggestion that Plaintiffs’ Counsel Bring a Mareva Injunction Motion

[72] I have reviewed the genesis of the Mareva injunction motion above. I note simply that, whenever granted, a Mareva injunction is an extraordinary remedy. It provides a moving party with broad relief before the issues in the case are determined. The granting of such relief is exceptional. Granting such relief mid-trial is even more exceptional.

[73] Here, the trial judge suggested that a mid-trial Mareva injunction motion would be appropriate. The suggestion that the respondents might reasonably bring a mid-trial motion for such extraordinary relief creates an appearance that the trial judge had prejudged Faraci’s conduct and that he was aligning himself the respondents. This conduct by the trial judge contributes to the appearance of a reasonable apprehension of bias. Further, as I will explain, this appearance of bias is confirmed by the trial judge’s reasons for granting the Mareva injunction he had suggested.

[74] In his reasons for granting the Mareva injunction, excerpts of which are set out below, the trial judge found that Faraci had engaged in a fraudulent scheme to divest himself of assets. As the trial judge himself later noted in his reasons for denying the recusal/mistrial motion (which were delivered after the appellants filed their notice of appeal of the contempt motion), he should have done no more in his reasons on the Mareva injunction motion than state that the evidence gave rise to a prima facie case. By going further and making findings, the trial judge effectively prejudged at least some of the issues on the added claims and commented adversely on Faraci’s honesty and credibility:

During his cross-examination … [Faraci] described how he has, since about 2001, systematically divested himself of his assets and has become judgment proof. His scheme for achieving this objective was carried out in concert with the new defendants with whom he engaged in numerous non-arm’s length transactions and to whom he effectively transferred large sums of money.… As part of their role in Faraci’s fraudulent scheme, the new defendants provided Faraci with cash from time to time for his personal day to day needs as he request[ed] it. I am persuaded that those payments were really a return to Faraci of his own money by those to whom he transferred it to hold for him in order to conceal the extent and whereabouts of his own wealth….

Accordingly, I have concluded that I must take what may be seen as a very unusual, perhaps unprecedented, step in the interests of justice by granting the order that is described below. Otherwise, Faraci will likely continue to abuse the civil justice system by engaging it without any financial risk. [Emphasis added.]

[75] The trial judge’s subsequent statements, in an endorsement dated September 16, 2013, concerning whether the Marevainjunction should continue as against the added defendant Susete Antunes only add to the perception that the trial judge had drawn adverse conclusions about Faraci’s conduct and credibility:

The evidence of Antunes and Faraci, viewed separately and together, has no air of reality and, when compared, are in conflict on many important factual issues. Both Antunes and Faraci will have to deal with serious issues relating to credibility if this action is ultimately tried. As well, all of their evidence must be viewed in light of Faraci’s earlier admission, made without any reasonable explanation, that he has already dissipated all of his assets and survives only with the generosity of persons such as Antunes who are willing to provide him with money from time to time when he requests it. [Emphasis added.]

[76] Taken together, these comments add to the perception of a reasonable apprehension of bias. In my view, a reasonable person would inevitably conclude that the trial judge granted and continued the injunction because he had prejudged the conduct and credibility of Faraci and those associated with him.

(2) The 19 Mid-Trial Directions for Production of Documents

[77] According to respondents’ counsel, his cross-examination of Faraci was longer than it should have been for two reasons, both of them Faraci’s fault. First, Faraci was evasive, unresponsive and generally uncooperative in his cross-examination. Second, respondents’ counsel was required to address with Faraci in his cross-examination various extraneous issues that Faraci attempted to add to the lis between the parties in the action. To deal with these issues, respondents’ counsel was required to obtain production of related documents.

[78] While acknowledging that most, if not all, of the productions sought were for the purpose of challenging Faraci’s credibility, respondent’s counsel submits that a review of Faraci’s cross-examination demonstrates that the 19 directions for mid-trial productions were appropriate and necessary.

[79] I agree that a review of Faraci’s cross-examination reveals that he was an evasive, unresponsive and generally uncooperative witness. Otherwise, I reject respondents’ counsel’s submissions.

[80] On my review of the transcript, respondents’ counsel launched into many areas of cross-examination that were extraneous to the issues at trial. Moreover, in many, if not most instances, the documents he requested were of little, no or unknown relevance to the issues at the trial. Where the requested documents may have been of some relevance – generally to Faraci’s credibility – much more modest directions for production would have sufficed. If such documents were not produced, then it would have been open to the trial judge to draw an adverse inference from their non-production.

[81] Instead of taking a realistic and proportionate approach to production (or curtailing the various lines of cross-examination), the trial judge directed and oversaw production of masses of documents mid-trial, without analyzing the potential relevance or probative value of the documents at issue and without considering the impact of his directions on trial efficiency and fairness.

[82] Considered globally, in my opinion, the number, breadth and fundamental lack of relevance of the documents that were the subject of the 19 directions for production create an appearance that the trial judge was disdainful of Faraci and 170 and that he was prepared to accede unquestioningly to respondents’ counsel’s production requests. In effect, the trial judge aligned himself with the respondents on the production issue and lost all sense of what was proportionate and necessary to preserve trial fairness and efficiency. Two examples will suffice to illustrate these points.

[83] The first example begins with respondents’ counsel’s cross-examination of Faraci about Faraci’s understanding of 170’s obligation to pay rent to Hazelton.

[84] Faraci claimed that 170 was not obliged to pay rent if it did not receive funds from Chan or his companies. Respondents’ counsel pointed out that rent had been paid in response to notices of default issued by Hazelton on two occasions in 2011, albeit under protest, which was after Faraci claimed that Chan and his companies had stopped sending rent monies.

[85] As part of the flow of this cross-examination, Faraci revealed that the funds to pay the rent had been supplied by others. On receiving this information, respondents’ counsel began questioning Faraci about how he had arranged his affairs.

[86] This in turn, led to questions about Faraci’s ability to pay the amount demanded for rent immediately prior to Hazelton re-entering 170’s premises and terminating its tenancy.

[87] As a result of this questioning, respondents’ counsel requested, and the trial judge directed that Faraci produce, numerous documents relating to his personal financial affairs. For example, Faraci was directed to:

· contact his former counsel and obtain details of all judgments filed against him of which his former counsel is aware;

· produce all bank documents pertaining to his personal and corporate bank accounts, from the beginning of 1998 to the date of trial; and

[88] The trial judge gave these directions before Chan and Hazelton had amended their pleadings to allege fraud and conspiracy. In the circumstances, the documents had no apparent relevance to the issues then pleaded. In effect, the trial judge permittedrespondents’ counsel to turn Faraci’s cross-examination into a judgment-debtor examination. As I have said, by doing so, the trial judge appears to have aligned himself with the respondents, which contributed to the appearance of a reasonable apprehension of bias.

[89] The second example involves the trial judge’s direction to Faraci to produce all documentation relating to his trust accounts, including bank account statements, ledgers, and reconciliations, from 1998 to the date of trial.

[90] The request for the direction arose initially out of Faraci’s evidence that he may have deposited a cheque he received in June 2006 for $376,686.45 in relation to his 3% interest in Hazelton Lanes into his trust account. Respondents’ counsel wanted an explanation of how Faraci disbursed those funds. The requested direction expanded further so that respondents’ counsel could explore the flow of funds into and out of Faraci’s trust account relating to Chan’s claim for the return of $20,000 paid to Faraci in 1998 for a deposit on a real estate transaction. The direction was further expanded so that respondents’ counsel could verify whether Faraci had received any funds from Chan to pay as inducements to other tenants.

[91] The problem with respondents’ counsel’s requests is twofold. First, the documents had not been requested in advance of trial as part of the normal process of production and discovery. Second, with limited exceptions, the requested documents could not assist in resolving the issues at trial.

[92] What Faraci did with the $376,686.45 he received in 2006 was irrelevant to the issues at trial.

[93] As for the $20,000 advanced by one of Chan’s companies to serve as a deposit, Faraci acknowledged receiving the funds but claimed that Chan had authorized him to apply them to his legal fees. It was up to Faraci to show when and based on what authorization the funds were disbursed from his trust account. How a broad review of the flow of funds into and out of his trust account might assist the respondent is not apparent. A direction requiring Faraci to produce the trust ledger and any related documents demonstrating when the trust funds were disbursed and how this was authorized would have been sufficient. Had Faraci failed to produce documents relevant to proving his case, it was open to the trial judge to draw an adverse inference.

[94] Concerning the possibility that Faraci had received funds from Chan, deposited them into his trust account and then paid them out as tenant inducements, it was Faraci who was claiming that Chan had paid tenant inducements. Accordingly, it was up to Faraci to prove it. Moreover, other than perhaps in relation to one transaction, Faraci did not assert that Chan had given him money for tenant inducements that he deposited into trust and then paid out. It was therefore unnecessary for respondents’ counsel to disprove such an allegation.

[95] Based on the breadth and scope of this direction, it is apparent that it required production of a significant number of documents. The trial judge himself acknowledged that the documents he was directing Faraci to produce were of uncertain relevance. As he stated in making this direction, “I want Mr. Faraci to come with [a] large box of trust related records tomorrow … [a]nd we’ll see … if they are admissible, relevant and all that.”

[96] The fact that the trial judge would make a direction involving such extensive production with no apparent purpose related to resolving the issues at trial contributes to the appearance that he had aligned himself with the respondents, and to the creation of a reasonable apprehension of bias.

(3) The Trial Judge’s Contempt Ruling

[97] In his September 16, 2013 endorsement finding the appellant in contempt, the trial judge noted factors indicating that 170 and Faraci were fully aware of the trial judge’s directions for production and what they required. He gave the following additional reasons for his finding of contempt:

I am persuaded beyond a reasonable doubt that the Faraci defendants have wilfully engaged in ongoing efforts throughout this trial to delay it and impede the efforts of the plaintiffs to bring this action to the moment of judgment. The failure of Faraci to comply with my orders has been part of that strategy. He has partially complied, in drips and drabs, only when pressured by my orders and the prospect of being found in contempt and punished. He has rarely done what he has been ordered to do within the time limits prescribed. To the extent that he has complied, he has routinely done so in a way that makes it difficult to examine the fruits of his efforts.

When Faraci was cross-examined by [counsel for Hazelton and Chan], he was questioned on issues related to the extent of Faraci’s compliance with my orders. Many of those questions were met with Faraci’s refusal to answer on the advice of his present counsel…. That advice, and Faraci’s refusals as disclosed in the transcript of evidence, were not only wrong but unreasonable. In these circumstances, I draw an inference adverse to the Faraci defendants. This conduct supports my findings that the conduct on the part of Faraci that constitute contempt was wilful and deliberate. There is no other reasonable inference that can be made.

Faraci’s conduct throughout this trial has been consistent with his strategy to obstruct and delay this trial.…

Faraci’s strategy must not be allowed to succeed. His ongoing efforts to hijack this trial are an affront to the administration of justice. Unless I interfere, they will also threaten the plaintiffs’ right to a fair trial.

[98] In addition to the contempt finding, the trial judge stated that, even if he had not found Faraci and 170 in contempt, he would have made an order for security for costs under rule 60.12(c) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which permits a court to make “such other order as is just”, where a party has failed to comply with an interlocutory order.

[99] The difficulty with the trial judge’s contempt finding (and his alternative security for costs order) is that he conducted no analysis of the extent to which Faraci and 170 had complied with his directions or of the extent to which any non-compliance was due to factors beyond Faraci’s and 170’s control. The trial judge did not advert to Faraci’s affidavits in which he provided particulars of what had, and had not been, produced and the reasons for any non-production.

[100] As I have said, my review of the trial judge’s mid-trial directions leads me to conclude that their breadth, scope and lack of relevance to the issues at trial contributes to a reasonable apprehension of bias. His willingness to invoke the quasi-criminal remedy of contempt in relation to those directions only adds to that appearance.

[101] Moreover, in the circumstances of this case, the trial judge’s failure to consider Faraci’s evidence and his failure to conduct a direction by direction analysis of compliance suggests more than mere inadvertence or misapprehension. Rather, his treatment of the issue demonstrates he had become aligned with the respondent.

E. CONCLUSION

[102] For the reasons I have explained, I conclude that the cumulative effect of the trial judge’s conduct gave rise to the appearance of a reasonable apprehension of bias.

[103] As part of their submissions, the respondents argued that, in the absence of a complete trial record, such a finding should not be made. They rely on the fact the appellants did not file a full trial transcript with the court; rather, all the appellants filed was a copy of Faraci’s cross-examination.

[104] In the particular circumstances of this case, I would not accept this submission.

[105] I acknowledge that an appeal court will generally look to the trial record “in its entirety” to determine whether a claim for reasonable apprehension of bias has been made out: Chippewas, at para. 230. In general, it is necessary to consider the complete record to determine whether the trial judge deprived a party of the ability to advance its case, or treated the parties in such an uneven manner that trial fairness was compromised.

[106] In this case, however, no complete trial record exists; the trial was not completed. Rather, the appellants’ pleadings were struck and the respondents moved successfully for default judgment.

[107] The respondents claim that the trial judge’s ruling that pre-2006 issues were relevant and Faraci’s evidence-in-chief somehow justified respondents’ counsel’s demands and the trial judge’s actions during Faraci’s cross-examination. They say this court is unable to assess the claim of reasonable apprehension of bias because we do not have the full record.

[108] I would not accept this submission. As I have said already, respondents’ counsel also claimed that a review of Faraci’s cross-examination would demonstrate why the 19 mid-trial directions were necessary and appropriate. I rejected that submission. The respondents have not identified specific aspects of the balance of the trial that would justify the trial judge’s actions or detract from the appellants’ claim of a reasonable apprehension of bias.

[109] Given the facts and circumstances of this particular trial, I am satisfied that the record before us provides an adequate basis to assess the trial judge’s conduct of the trial.

F. DISPOSITION

[110] For the foregoing reasons, I would allow the appeal, set aside the judgments and orders under appeal and order a new trial before a different trial judge.

[111] Although I would order a new trial, I have also accepted the respondents’ submission that the personal appellant was a difficult and uncooperative witness. In my view, it is apparent, from a review of the record, that all parties contributed to the trial spiralling out of control. In the circumstances, I would make no order as to the costs of the trial below.

[112] For the same reason, I would make no order as to the costs of the appeal.

Released:

“MLB” “Janet Simmons J.A.”

“NOV 12 2014” “I agree Robert Sharpe J.A.”

“I agree M.L. Benotto J.A.”

Appendix “A”

· Produce his income tax returns from 1998 onward, and, if necessary, make enquiries of his accountant to obtain copies of the same, and, if still necessary, request complete copies of all tax returns since 1998 from the Canada Revenue Agency;

· Produce copies of any information and documents used in the preparation of his 2010 and 2011 tax returns, if he took any steps to file them before the trial’s conclusion;

· Produce any documents that he provided to his accountant that make specific reference to the approximately $7,620 in rent that a sub-tenant allegedly paid to rent office space from Faraci;

· look through all of his documents pertaining to a separate action (the “3-percent action”), produce all such documents relevant to the current proceeding and prepare a supplemental affidavit of documents accordingly – though the trial judge later withdrew his direction to prepare a supplemental affidavit of documents;

· fax his former counsel and ask for details of all judgments against him of which his former counsel is aware;

· produce any records relating to the receipt and disbursement of a June 19, 2006 HSBC bank draft payable to him in the amount of $376,686.45;

· produce all trust documentation, including bank account statements, ledgers, and reconciliations, from 1998 until the present;

· provide a list of all new documents produced and allow plaintiffs’ counsel to inspect the originals of all such documents, save for those over which Faraci asserted privilege;

· produce letters sent by Faraci to Chan requesting a reporting letter that Faraci believed had been provided to Chan by another law pertaining to the Hazelton Lanes refinancing that closed on May 16, 2006;

· produce copies of any bank documents in his possession that pertain to his personal and corporate bank accounts, from the beginning of 1998 to the present;

· review and verify charts prepared by plaintiffs’ counsel describing the contents of Faraci’s bank statements;

· write to Faraci’s accountant and request any documents provided by Mr. Faraci to Revenue Canada or its agent, or provided by Revenue Canada or its agent, that indicate Faraci’s professional earned income and expenses from 1998 onward.

Appendix “B”

THE COURT: Well, did you follow up on it in any way? Did you say, look, if you don't disclose this, you and I could get into big trouble? Did you ever do anything like that?

THE WITNESS: I didn't put it that way. I said, make sure you're that you're disclosing everything to the funder, it's important, any inducements of any nature.

THE COURT: Now, so let me go back to an earlier discussion that you and I had this morning. If Mr. Chan were to do what you say is the right thing and make disclosure, wouldn't that defeat the whole purpose of these schemes?

THE WITNESS: It would.

THE COURT: So why do it?

THE WITNESS: No. I don’t know if he did it or – I don’t know.

THE COURT: No, but if he were to do what I think you implied was the right thing, and that was to make disclosure to lenders or purchasers, then those people would know that the income was inflated and the whole purpose for which this was designed would fail.

THE WITNESS: That’s correct.

THE COURT: So if doing it the honest way would result in the failure of these schemes, why do them at all unless you were prepared to close your eyes and pretend – sort of not look at what Mr. Chan –

THE WITNESS: No, no. That’s not true at all, Your Honour. My role was to get the tenant who he was satisfied with. I bring the tenant in. A document is signed, whether it’s a lease or otherwise, an offer to lease, okay? At that time, when the transaction is done – the time that the transaction is done, there are certain numbers. I advised them – for example, with the art gallery, I told him right at the beginning, I said, he’s very, very weak. I don’t know if he’ll last. And he said, fine, I’ll take care of it, if I have to.

I did not see any exchange of cheques on rent between the art gallery and Mr. Chan. My role was, when the agreement was signed, I had to tell him whether he was a strong tenant, weak tenant. I did not collect any cheques, I did not issue any cheques, I did not deliver any cheques, save and except on the gym. That’s the one he gave me the funds after the agreement was signed and I gave it to the gym and they gave it – handed it back to him.

So the so-called arrears – I guess if I can give an explanation is this –

THE COURT: Mr. Faraci, I can let you go on, but I tell you this respectfully, this is gobbledygook. You’re not making sense and you’re not addressing the point that I’m raising with you. If you want time to address the issue that I’m raising with you, give you all the time you need, but I don’t want you to go on now with other stuff.

THE WITNESS: Fair enough.

THE COURT: Do you have anything more to say in response to the point that I raised with you, that is, if Mr. Chan were to act honestly and make full disclosure, that would defeat the whole purpose of this. I think you agreed that it would.

THE WITNESS: Yes.

THE COURT: So then why bother doing it?

THE WITNESS: He did it. It was done.

THE COURT: Okay, that’s enough….

THE COURT: Continue.

[RESPONDENTS’ COUNSEL]: Yes. Unfortunately … We were not able to hear the last answer that Mr. Faraci gave to you – to Your Honour.

THE COURT: I don’t think it was responsive or of any probative value in any way.

RESPONDENTS’ COUNSEL: Thank you, Your Honour.

THE COURT: Well, except from the adverse inference that I might be entitled to draw from it.

[1] $300,000 was originally paid into escrow. Under the terms of a February 24, 2012 consent order, $280,000 was paid into court to the credit of this action. The balance of the escrowed funds were paid to First Capital on account of legal fees.

[2] Appendix “A” contains thirteen bullet points. They are a consolidated summary of the trial judge’s nineteen overlapping directions.

[3] In support of their motion, Faraci and 170 asserted that the trial judge had created a reasonable apprehension of bias in two ways: first, through his findings of fact made on the motion for a Mareva injunction; and, second, through his directions for production of documents relating to matters not put in issue by the pleadings.

[4] The trial judge’s reasons for granting this relief read as follows:

Partial default judgment re the issue in accordance with the following paragraphs of the draft Judgment marked as “Schedule A” to the notice of motion within returnable on November 6/13:

Paragraphs 1 - 3, inclusive, and 20 – 26, inclusive.

I will hear further submissions regarding the other relief claimed on November 12/13. Costs reserved.

[5] The December 23, 2013 endorsement reads as follows:

Further partial Judgment is to issue in accordance with paragraphs 14 to 19, inclusive of the draft Judgment marked as “Schedule A” to the notice of motion.

The plaintiffs are further entitled to the costs of all steps taken in this action, fixed on a substantial indemnity level at $650,000, all-inclusive, to be recovered from the defendants 1707590 Ontario Limited and John Faraci.

I am satisfied that the plaintiffs are entitled to costs at that level because of the reprehensible conduct of the Faraci defendants throughout this as described by me in the previous endorsements made. The measures taken on behalf of the plaintiffs, and the time spent by the counsel, were fully justified, fair and reasonable.