Executive Summary: Key Legal and Evidentiary Issues

• Propriety of substantial contempt sanctions against a corporate litigant that repeatedly and deliberately obstructed a mandatory court-ordered audit.
• Justification for requiring PSP to pay into court nearly $2 million in audit costs, tied to its own obstruction of the audit process.
• Appropriateness of appointing the existing auditor, Ernst & Young, as Investigative Receiver despite PSP’s complaints about independence.
• Extent to which proportionality constrains contempt penalties where there is ongoing non-compliance, financial gain, and the need for general deterrence.
• Interpretation of r. 60.11(6) of the Rules of Civil Procedure and whether a corporate officer can be made jointly and severally liable for corporate contempt without a separate personal contempt finding.
• Sufficiency of the evidentiary record regarding the sole director’s involvement in contempt to justify remitting the issue of his personal financial exposure to the motion judge.

Background and contractual relationship

Peoples Trust Company (PTC) is a trust company that provides payment card services, while PSP Services Inc. (PSP) operates as a payment processing company. The parties entered into an Acquiring Services and Sponsorship Agreement in 2019 governing their commercial relationship. Among the key contractual protections for PTC was a right to conduct on-site inspections or audits of PSP to verify PSP’s compliance with the Agreement. This inspection and audit right became central once concerns arose about PSP’s performance and risk profile.

Chargebacks, reserves and termination of the agreement

During the life of the Agreement, PSP began to experience a higher-than-expected level of chargebacks on the transactions it processed. In the payment card context, elevated chargebacks can signal non-compliant merchant behaviour, higher fraud risk or systemic problems in how transactions are being managed. PTC, concerned that PSP was not complying with the Agreement, relied on its contractual rights and required PSP to increase reserve funds, a standard risk-mitigation mechanism in payment card and acquiring arrangements. PSP refused to follow that route and instead chose to terminate the Agreement altogether.

Dispute over the audit right and mandatory injunction

Termination did not end the dispute. PTC sought to exercise its contractual audit right to conduct an on-site review of PSP’s operations to assess compliance and risk. PSP resisted, taking the position that the contractual right to conduct an audit did not survive the termination of the Agreement. Faced with that stance, PTC turned to the courts and obtained a mandatory injunction compelling PSP to facilitate the audit. Despite the injunction being in place, PSP repeatedly failed to cooperate with the audit process. The court-appointed auditor, Ernst & Young (EY), faced ongoing non-compliance, with PSP refusing to follow directions, requiring multiple demands and further court appearances to attempt to move the audit forward.

Contempt finding and PSP’s continuing non-compliance

On January 9, 2025, Justice Chalmers found PSP in contempt of court. He concluded that PSP had “intentionally frustrated the audit process,” rejecting the notion that any non-compliance was merely accidental or logistical. PSP was given a two-month window to purge its contempt before the court proceeded to a penalty phase, but PSP did not cure its non-compliance. In the penalty reasons, Justice Chalmers emphasized several aggravating features: PSP had engaged in repeated acts of contempt over a prolonged period; it failed to purge its contempt despite the opportunity; there was evidence PSP had financially benefitted from its contempt; its principal, Mr. Danny Gurizzan, refused to apologize or acknowledge wrongdoing; and PSP’s chronic disregard for court orders made general deterrence a “paramount consideration” when crafting an appropriate sanction.

Sanctions imposed at the penalty stage

The motion judge imposed a suite of significant remedies directed at both enabling the audit and addressing PSP’s contempt. First, he appointed Ernst & Young as Investigative Receiver to strengthen EY’s authority and practical ability to complete the audit, signalling that the regular audit structure had been undermined by PSP’s obstruction. Second, he ordered PSP to pay into court an amount equal to the audit costs incurred by EY to date, totalling $1,998,612.07. This payment into court was designed to secure the audit costs and ensure that funds would be available to cover the portion of those costs attributable to PSP’s obstruction, as later determined by EY. Third, he awarded PTC costs of the contempt motion—covering both the liability and penalty stages—in the lump sum of $500,000. These orders collectively reflected the court’s view that PSP’s conduct warranted a firm, deterrent-oriented response.

Attempt to extend liability to PSP’s principal under r. 60.11(6)

PTC also sought to extend financial responsibility for the contempt-related penalties beyond the corporation to its directing mind. It relied on rule 60.11(6) of the Rules of Civil Procedure, which empowers a court, where a corporation is in contempt, to make an order against “any officer or director of the corporation” and to grant leave to issue a writ of sequestration against that person’s property. PTC asked that PSP’s principal, Mr. Danny Gurizzan, be held jointly and severally liable with PSP for the financial penalties flowing from the contempt. Justice Chalmers declined to do so, reasoning that because Mr. Gurizzan was not a named defendant in the action and the January 3, 2025 endorsement had not found him personally in contempt, he was not prepared to impose a penalty on him personally.

PSP’s appeal of the contempt penalties

PSP appealed the penalty order to the Court of Appeal. It argued primarily that the motion judge had misapplied the principle of proportionality, asserting that the sanctions were disproportionate to what it characterized as a series of logistical mishaps and honest mistakes in trying to comply with a complex undertaking. The Court of Appeal rejected this reframing, pointing out that the motion judge had already found intentional obstruction of a court order, and those findings had not been appealed at the liability stage. PSP also challenged the finding that EY was sufficiently independent to serve as Investigative Receiver, but the court noted that PSP had not appealed the appointment itself; the real target of PSP’s complaint was the order requiring it to pay $1,998,612.07 into court for audit costs.

The Court of Appeal held that there was no factual or legal basis to interfere with the penalty structure. The motion judge had found that PSP’s obstruction had increased the audit’s cost, and PSP did not argue that this finding was tainted by palpable and overriding error. In that context, requiring PSP to post the full cost into court, subject to EY’s later determination of what portion was attributable to PSP’s obstruction, was neither disproportionate nor unfair. This was the penalty phase of a contempt motion following repeated failures to comply with court orders, and the judge was entitled to require meaningful financial assurance that the latest order would be honoured. The appellate court also refused to disturb the $500,000 costs award for the contempt motion, finding no error in principle and nothing “plainly wrong” that would justify granting leave to appeal the costs order.

The cross-appeal on director liability and interpretation of r. 60.11(6)

PTC cross-appealed the refusal to impose joint and several liability on Mr. Gurizzan. The Court of Appeal agreed that the motion judge had misunderstood the proper operation of r. 60.11(6). The rule exists precisely to allow courts, where a corporation is in contempt, to reach officers and directors who have not separately been found personally liable for contempt, provided the evidentiary and legal criteria are met. If a prior personal contempt finding against the officer were a prerequisite, r. 60.11(6) would add nothing and have “no purpose.”

However, the Court of Appeal did not simply substitute its own order making Mr. Gurizzan jointly and severally liable. On the record before it, there were insufficient findings about the specific role and involvement of Mr. Gurizzan, as the sole officer and director of PSP, in the acts of contempt. Those factual determinations were better suited to the motion judge, who had heard the evidence and was positioned to assess credibility and responsibility. The appellate court therefore allowed the cross-appeal, clarified the proper legal framework under r. 60.11(6), and remitted the issue of whether to impose joint and several liability on Mr. Gurizzan back to Justice Chalmers for rehearing.

Disposition and overall outcome

In the final disposition, the Court of Appeal dismissed PSP’s appeal in its entirety, thereby leaving intact the core sanctions imposed for corporate contempt: PSP must pay into court $1,998,612.07 representing the audit costs incurred by EY to date, and it remains liable for $500,000 in costs of the contempt motion at first instance. The court also awarded PTC its costs of the appeal in the amount of $33,000, inclusive of HST and disbursements. The cross-appeal was allowed only to the extent of sending the question of Mr. Gurizzan’s potential joint and several liability back to the motion judge; no additional monetary figure was fixed against him personally at this stage, so the amount of any personal exposure for the director cannot yet be determined. Taken together, the outcome confirms PTC as the successful party overall, with total confirmed monetary orders and costs in its favour—either payable directly to it or paid into court for the benefit of the audit—amounting to $2,531,612.07.