The Court of Appeal of Alberta’s decision, Tornqvist v Shenner, 2022 ABCA 133, addresses the type of evidence required to support a finding of civil contempt. While the underlying action involved a dispute between minority shareholders and the sole director of a company, the facts are strikingly similar to many estate disputes. As a result, it serves as an important reminder to all estate litigators: if seeking to hold someone in contempt of a court order, hearsay evidence is not sufficient.
Daryl Shenner was the president and sole director of Zybertech CA. In December 2019, the minority shareholders of Zybertech CA commenced an action against Mr. Shenner alleging that he had used company funds for personal matters. In July 2020, the parties obtained an order on consent which, among other relief, restricted Mr. Shenner from withdrawing funds from Zybertech CA or its affiliates.
PricewaterhouseCoopers LLP (PWC) was appointed by the court to review Zybertech CA’s financial records, as well as those of its affiliate corporations. After its appointment, PWC alerted the counsel for the minority shareholders of its findings: “In our review of the Zybertech transactions, we have noted a transfer out of the Zybertech USA Wells Fargo bank account on January 20, 2021 in the amount of $368,829.22 with the following notation: “online transfer to Shenner D…””
After filing an affidavit which attached the email received from PWC, the minority shareholders obtained an order holding Mr. Shenner in contempt of the July 2020 consent order. The motion judge ordered Mr. Shenner to either return or account for the funds by July 24, 2021, failing which he would be fined $250/day until he complied.
Mr. Shenner appealed the motion judge’s finding of contempt. Among other arguments, Mr. Shenner alleged that he could not be found in contempt on the basis of hearsay evidence. Mr. Shenner pointed out the flaws in relying on the email from PWC alone:
- The minority shareholders did not put forward any direct evidence of the alleged contemptuous withdrawal, such as bank records or communications from bank officials.
- The email represented double hearsay; the fact that it was relied on by the minority shareholders as the basis of their belief did not alter its character.
- The email from PWC lacked sufficient detail to support the finding of contempt. In particular, the reference to “Shenner D” could refer to Mr. Shenner or his wife, with whom he was involved in acrimonious divorce litigation.
The Court of Appeal of Alberta accepted Mr. Shenner’s submissions. The only evidence submitted in support of the allegation of the contemptuous withdrawal of funds was the email from PWC, which was double hearsay. That hearsay evidence alone was insufficient to support a finding of contempt and the motion judge’s order was set aside.
Interim court orders restraining an individual from withdrawing funds from an account or an estate are par for the course in disputes over the ownership of joint accounts, litigation regarding the management of an incapable’s assets, and other allegations of misconduct by a fiduciary. When emotions are running hight, it may be tempting to go to court at the first sign of an improper withdrawal. However, Tornqvist v Shenner serves as a reminder of the need to probe the alleged misconduct before acting: hearsay is no substitute for direct, reliable evidence.