Written by: Irvin Schein

There was a time long ago when under common law, judgment debtors could be imprisoned for failing to pay debts. Obviously, and thankfully, that is no longer true. However, judgment debtors who ignore court orders made in debt collection proceedings against them do take the risk of jail time as the penalty for their misconduct.

“I fought the law, and the law won.”

The Rules of Civil Procedure give the court discretion to order incarceration if a party is found to have disobeyed a court Order. This is most often seen in the context of a judgment creditor attempting to locate assets to satisfy a judgment, and a judgment debtor doing his or her best to frustrate those efforts.

A perfect example is illustrated by the recent Ontario Court of Appeal decision in Doobay v. Diamond.

In 2007, the Plaintiffs obtained a judgment by default against Anthony Diamond in the amount of about $850,000. In May, 2008, Mr. Diamond was examined under oath as part of the Plaintiffs’ efforts to locate assets to satisfy the judgment. He refused to answer any questions. Several months later, the Court ordered him to re-attend to answer questions. As a result, he was examined again in December, 2008. He still refused to answer a substantial number of questions.

In the summer of 2009, the Court ordered him to provide written answers to almost all of the over 400 outstanding questions that had previously been asked of him. He was also required to attend again in late 2009 to answer any follow up questions arising out of his answers.

Mr. Diamond missed the deadline for providing written answers. He later provided something that looked like answers. The Plaintiffs were not content and brought a motion before the Court for a contempt order, alleging that Diamond’s conduct essentially disregarded the previous court orders.

The motion for the contempt order occupied three days’ of hearing time. At the end of it, the Court found that almost all of his answers had been unresponsive and constituted a “deliberate attempt to obfuscate the issue before the court for the purpose of avoiding complying with the Order”. As far as the Court was concerned, this constituted a “flagrant disregard for the Court process”, and, without being given any more chances, Mr. Diamond was sentenced to 21 days in prison and a fine of $20,000.

After an unsuccessful attempt to appeal that decision, Mr. Diamond served his sentence in early 2011. Since the Plaintiffs still did not have answers most of their questions, they brought another motion for contempt. Diamond responded by purporting to answer more of the questions, but at the hearing of this next motion, the judge concluded that even these answers demonstrated “the same evasiveness and unwillingness to comply with the Court Orders” that had been displayed previously. The judge found that Diamond had failed to purge his contempt, remained in contempt of court, and noted that “serving a previous period of jail time has not influenced his attitude and conduct”. He was sentenced to a term of incarceration of a further 42 days and an additional fine of $40,000.

Diamond appealed that decision to the Court of Appeal. The Court of Appeal determined that Diamond knew exactly what he was doing. He understood each of the Court Orders, he understood exactly what questions had to be answered, and he deliberately failed or refused to answer them. The Court of Appeal found that the motion court judges had tried to send a clear message to Diamond that his conduct would not be tolerated but unfortunately, the message was not strong enough to make the point. The appeal was dismissed.

I have been involved in contempt motions in this type of circumstance. Quite frankly, they are great fun. I have been one of many lawyers who have had the experience of sitting across the table from a judgment debtor who treats the examining counsel and his or her questions with insolence and contempt, or clearly and obviously lies through his teeth. Such debtors may not realize that the next step for examining counsel is to bring a motion on the point. While a contempt Order cannot be sought at that time, if an Order for re-attendance is made, and the debtor fails to comply with it in any way, the next step after that is a motion for a contempt Order. If the debtor neglects to attend, the court may issue a warrant for the debtor’s arrest. He is then brought to court in handcuffs (that’s the fun part for the previously abused counsel – and his creditor client). What happens next usually depends on how much groveling the debtor does, and how convincing he is. It gives an entirely new meaning to the phrase “how do you plead”!

When a contempt Order is made, in most cases, a debtor will be given an opportunity to purge his contempt by complying with the previous disobeyed court Orders. However, as this case demonstrates, the court may well exercise its discretion to impose a jail sentence without first providing such an opportunity.

The moral of the story? Be very, very careful to obey court orders to the letter. If you are unhappy with an Order that is made, the answer is to appeal it, not ignore it. If the appeal fails, do as you are told. Remember the line from a great ‘60s song: “I fought the law, and the law won”.

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