Ontario Court of Appeal Finds Trial Judge Biased: Hazelton Lanes Inc v 1707590 Ontario Limited

The Ontario Court of Appeal ordered a new trial under a different trial judge after finding a reasonable apprehension of bias on the part of Ontario Superior Justice Ted Matlow in Hazelton Lanes Inc v 1707590 Ontario Limited, 2014 ONCA 793 [Hazelton Lanes]. Justice Matlow’s objectivity has been questioned by the Canadian Judicial Council in the past, when an inquiry panel made a finding against him before being overturned in the Council’s recommendations to the Federal Minister of Justice.

The matter at trial arose from a client bringing an action against his former solicitor when their relationship turned sour following an elaborate series of financial transactions. While ostensibly attempting to unpack the relationship between the parties and curb the Defendant solicitor’s evasive strategy during trial, Justice Matlow assumed an active role that escalated to the point of issuing 19 directions, numerous ex parte Mareva injunctions and a finding of contempt against the Defendant. The Court of Appeal found that the extent of this active involvement, coupled with a lack of detailed reasoning for the Trial Judge’s decisions, cumulatively amounted to a reasonable apprehension of bias.

The Court of Appeal implicitly affirmed that some cases may require trial judges to play a more active role in fact-finding with the proviso that detailed reasons must accompany decisions arising from such active involvement.

Facts Leading to Trial

Solicitor John Faraci and his business entity, 1707590 Ontario Limited, acted as Defendants against former client Stephen Chan and his business entity, Hazelton Lanes Inc. In 1999, Faraci had acted for Chan in the latter’s purchase of Hazelton Lanes, a commercial property in Toronto. Two years later, Faraci moved his practice to an office space within Hazelton Lanes and the parties had an ongoing business relationship for the next ten years.

At around the time when Hazelton Lanes was sold in 2011, Chan terminated Faraci’s lease for non-payment and the parties came to be in dispute over the nature of financial arrangements between them in the previous ten years. As the Plaintiff in the eventual litigation, Chan claimed that Faraci had overcharged for legal services and failed to pay rent for the office space at Hazelton Lanes. In response, Faraci claimed that he and Chan had entered into an elaborate financial arrangement intended to raise the rental value of Hazelton Lanes while actually providing Faraci with rent-free office space. Under this alleged arrangement, Chan would pay monies to Faraci for the sole purpose of having Faraci return the same amounts to Chan as rent payments.

Summary of Trial Proceedings

Although parties’ counsel had estimated that the trial would consume approximately three days of court time, 50 days of court time elapsed without any resolution of the matter. The judge considered Faraci evasive during his 10-day cross-examination and became concerned that Faraci appeared to have taken actions to render himself “judgment proof.” To address concerns over Faraci evading payment of judgment, the judge suggested and then granted ex parte Mareva injunctions against added parties who were suspected of holding Mr. Faraci’s money. Addressing concerns over Faraci’s evasiveness, the judge made interjections in Faraci’s cross-examination that resulted in 19 directions requiring Faraci to produce numerous documents within six business days.

When Faraci failed to completely produce the requested documents on time, the judge found Faraci in contempt and made further orders for Faraci to pay security for costs to the court. Faraci appealed these decisions on the grounds that the judge had lost jurisdiction due to a reasonable apprehension of bias. Following this, the judge struck out Faraci’s statement of defence and counterclaim due to non-payment of security for costs. Accordingly, default and partial default judgments were rendered in favour of the Plaintiff, Chan.

Court of Appeal Finding

Applying the test set out by the Supreme Court of Canada in Committee for Justice and Liberty v Canada (National Energy Board) (1976), [1978] 1 SCR 369 [National Energy Board], the Ontario Court of Appeal decision penned by Justice Simmons found that the events of trial cumulatively gave rise to a reasonable apprehension of bias on the part of Justice Matlow. The Court of Appeal ordered a new trial to be presided over by a different judge of the Superior Court.

According to the test in National Energy Board, a reasonable apprehension of bias exists where such a finding would be made by “an informed person, viewing the matter realistically and practically – and having thought the matter through.” Following Marchand (Litigation Guardian of) v Public General Hospital Society of Chatham (2000), 51 OR (3d) 97 (CA), the Court of Appeal affirmed that a high threshold of proof must be met to sustain a finding of bias against a judge. To meet the threshold, evidence must clearly show that a judge’s mind may be apprehended as closed or predisposed to a particular result.

The Court of Appeal found that the high threshold was cumulatively met by numerous facts that were evident from the record of the trial proceedings.

First, the trial judge made numerous comments that indicated he had drawn conclusions on Mr. Faraci’s credibility prior to the completion of the trial. These comments included the suggestion of a need for Mareva injunctions and the characterization of Faraci’s testimony as “gobbledygook” that “defie[d] common sense.”

Second, the Court of Appeal questioned the appropriateness of the trial judge’s 19 directions to Faraci, which required the Defendant to promptly produce a “mass of documents” that had not been previously sought during the proceeding. While the Court of Appeal agreed that Faraci was an “evasive, unresponsive and generally uncooperative witness,” it found that these issues could have been sufficiently addressed through “much more modest directions for production.”

Third, the Court of Appeal expressed particular concern over the lack of detailed reasons corresponding to the trial judge’s finding of contempt against Faraci. The Court of Appeal strongly admonished this particular feature of the trial, stating that “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.”

Commentary 

While the impugned elements of Justice Matlow’s approach may have stemmed from good faith efforts to manage complicated facts and to address a Defendant who was far from forthcoming, the Court of Appeal’s judgment illustrates that the credibility of the judiciary is placed at stake whenever trial judges become involved to such extent. Where such involvement is adopted by a judge, the Court of Appeal’s decision suggests meticulous transparency as a safeguard against the apprehension of bias.

In making its dispositive ruling on the issue of bias, the Court of Appeal reserved its most strongly worded admonishment for the judge’s failure to provide detailed reasons for his contempt finding.Unlike the judge’s comments on the Defendant’s credibility and his instructions requiring the Defendant to produce extensive documentation on short notice, a lack of detailed reasons for the contempt finding was distinguished as demonstrating an alignment with the Plaintiff.

This distinction suggests that the trial judge’s interjected comments and excessive directions may not have sufficed to justify a finding of bias. While the Court of Appeal thus left a door open for such measures to be considered acceptable, the door was closed to a corresponding failure to provide reasons where such measures are adopted–particularly where these measures result in findings of contempt.

Conclusion

The Court of Appeal’s decision reflects an approach to bias that aims to protect judicial discretion while requiring strict accountability for exercises of that discretion, especially where judges stray close to the line of acting in the interests of one of the parties to a proceeding. At the same time, the escalation in the complexity of the matter in Hazelton Lanes provides members of the judiciary with ample reason to carefully consider any active involvement in the first place.