Shinder v. Shinder
[Indexed as: Shinder v. Shinder]
Ontario Reports
Court of Appeal for Ontario
Pepall, Hourigan and D.M. Brown JJ.A.
August 31, 2018
142 O.R. (3d) 321 | 2018 ONCA 717
Case Summary
Family law — Domestic contracts — Setting aside — Respondent seeking to set aside separation agreement on basis that appellant failed to disclose that he was beneficiary of family trust — Motion judge erring in finding non-disclosure in light of fact that appellant's evaluator provided trust indenture to respondent's counsel before parties entered into separation agreement — Motion judge also erring in finding that it was unnecessary to determine what respondent's counsel or accountant knew as respondent herself was unaware that appellant was beneficiary — Respondent deemed to have knowledge as result of knowledge of her counsel — Appellant's omission of his interest in trust from his financial statements not amounting to non-disclosure for purposes of s. 56(4) of Family Law Act — Family Law Act, R.S.O. 1990, c. F.3, s. 56(4).
R commenced proceedings against her former spouse N and N's father, S, seeking an order setting aside a separation agreement, damages for conspiracy to commit fraud and deceit and punitive damages. She claimed that when she entered into the separation agreement, she was unaware that N was a beneficiary of a family trust established by S. She asserted that N's interest had not been disclosed. N and S brought motions for summary judgment dismissing R's application. The motion judge dismissed N's motion for summary judgment, granted S partial summary judgment (insofar as he was not required to produce an affidavit of documents) and, although not requested, granted partial summary judgment in R's favour. She found that N had deliberately failed to disclose his interest in the trust to R, and that R did not know of N's interest in the trust before entering into the separation agreement. N and S appealed.
Held, N's appeal should be allowed in part; S's appeal should be allowed.
In view of the fact that N's evaluator had provided R's counsel with the trust indenture, which described the nature of N's interest in the trust, the motion judge erred in finding that there was non-disclosure. The motion judge also erred in finding that it was unnecessary to review what R's counsel or accountant knew as R was unaware that N was a named beneficiary of the trust. The knowledge of R's counsel was imputed to R. R was deemed to have knowledge of N's interest in the trust. N's omission of his interest in the trust from his financial statements could not turn N's actual disclosure and R's knowledge into non-disclosure for the purposes of s. 56(4) of the Family Law Act. Even if the omission from the financial statements could be characterized as non-disclosure, s. 56(4) also requires the court to consider whether the implicated asset is "significant". The motion judge did not engage in that analysis. There was no genuine issue requiring a trial. N's interest in the trust, which he received from S during the marriage, was excluded from net family property under s. 4(2) of the Family Law Act. As there was no genuine issue requiring a trial on the issue of non-disclosure, there could be no genuine issue requiring a trial for damages for conspiracy to commit fraud, deceit or punitive damages. The motion judge's order should be set aside, except the paragraph stating that, unless the separation agreement was set aside, all of the other issues raised (s. 7 expenses, child support, etc.) were to be dealt with by the mediation/arbitration process stipulated in the separation agreement.
The motion judge erred in her treatment of S's motion for summary judgment. She did not consider the requisite tests to establish the claims asserted against S for conspiracy to commit fraud, deceit and punitive damages. If she had done so, it would have been obvious those tests could not be met based on the record before her and that there was no genuine issue requiring a trial.
Authorities
Virc v. Blair (2014), 119 O.R. (3d) 721, [2014] O.J. No. 2301, 2014 ONCA 392, 42 R.F.L. (7th) 304, 372 D.L.R. (4th) 224, 319 O.A.C. 359, 239 A.C.W.S. (3d) 968 — considered
Other cases referred to:
- Acharya Holdings Ltd. v. Standard Trust Co., [2014] N.J. No. 56, 2014 NLCA 13, 346 Nfld. & P.E.I.R. 348 [Leave to appeal to S.C.C. refused [2014] S.C.C.A. No. 187]
- Anderson v. McWatt, [2016] O.J. No. 3740, 2016 ONCA 553
- Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452, [1983] S.C.J. No. 33, 145 D.L.R. (3d) 385, 47 N.R. 191, [1983] 6 W.W.R. 385, 21 B.L.R. 254, 24 C.C.L.T. 111, 72 C.P.R. (2d) 1, 19 A.C.W.S. (2d) 352
- Durbin v. Monserat Investments Ltd. (1978), 20 O.R. (2d) 181, [1978] O.J. No. 3414, 87 D.L.R. (3d) 593, 5 R.P.R. 15 (C.A.)
- LeVan v. LeVan (2008), 90 O.R. (3d) 1, [2008] O.J. No. 1905, 2008 ONCA 388, 51 R.F.L. (6th) 237, 239 O.A.C. 1, 167 A.C.W.S. (3d) 934
- Sanzone v. Schechter, [2016] O.J. No. 3760, 2016 ONCA 566, 402 D.L.R. (4th) 135, 92 C.P.C. (7th) 26, 267 A.C.W.S. (3d) 830
- Vescio v. Peterman (1999), 45 O.R. (3d) 613, [1999] O.J. No. 4039, 127 O.A.C. 60, 47 M.V.R. (3d) 89, 92 A.C.W.S. (3d) 131 (C.A.)
- Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18, 209 D.L.R. (4th) 257, 283 N.R. 1, J.E. 2002-405, 156 O.A.C. 201, 20 B.L.R. (3d) 165, 35 C.C.L.I. (3d) 1, [2002] I.L.R. I-4048, REJB 2002-28036, 111 A.C.W.S. (3d) 935
Statutes referred to:
Family Law Act, R.S.O. 1990, c. F.3, Preamble, ss. 4(2) [as am.], 56 [as am.], (4), (a)
Procedural History
APPEALS from the order of Janet Wilson J., [2017] O.J. No. 3703, 2017 ONSC 4177 (S.C.J.) and from the costs order dated August 1, 2017.
Counsel:
- Harold Niman and Vanessa Amyot, for appellant Neil Allen Shinder
- Stephen Grant and Erin Crawford, for appellant Solomon Shinder
- Jaret Moldaver and Lindsay Konkol, for respondent
The judgment of the court was delivered by
Introduction
1Neil and Randi Shinder were married on July 28, 1996 and have two children, ages 21 and 20. The couple separated on September 9, 2009. They entered into a separation agreement on June 25, 2012 and subsequent minutes of settlement varying that agreement on February 27, 2014.
2In 2016, Randi commenced proceedings against Neil and Neil's father, Solomon ("Sol"), seeking, among other things, an order to set aside the separation agreement and the minutes of settlement. She asserted that, when she entered into the separation agreement and the minutes of settlement, she was aware that Sol had established the Solomon and Zelaine 1 Shinder Canadian Grandchildren Family Trust (the "trust") but did not know that Neil was a beneficiary. She asserted that his interest had not been disclosed.
3Neil and Sol brought motions for summary judgment to dismiss Randi's application. The motion judge dismissed Neil's motion for summary judgment, granted Sol partial summary judgment (insofar as he was not required to produce an affidavit of documents), and, although not requested, granted partial summary judgment in Randi's favour on two issues. First, the motion judge found that Neil deliberately failed to disclose his interest in the trust to Randi. Second, she found that Randi did not know of Neil's interest in the trust prior to entering into the separation agreement and the minutes of settlement, and, as such, Neil's defence that Randi knew of his interest could not succeed.
4Neil and Sol appeal from this order. For the reasons that follow, I would allow Neil's appeal, with the exception of para. 7 of the order below, which remains in effect, and which remits certain issues to mediation/arbitration as the parties agreed. I would also allow Sol's appeal.
Factual Background
5At their date of marriage in 1996, Neil held 48 common shares in Coofer Holdings Inc. ("Coofer"), a company controlled by Sol. Two years prior to the couple's separation, Sol reorganized his holdings, including his shares in Coofer, initiated an estate freeze, and, with the consent of his two sons, established separate trusts (one Canadian and one American) for each of his son's families. As found by the motion judge, Sol's stated intention was to pass the benefit of future growth in his estate to his five grandchildren, including Randi and Neil's two children. The Canadian trust holds common shares of Coofer. As a result of this estate freeze, on January 1, 2008, in exchange for the surrender of his common shares in Coofer, Neil received preference shares in Coofer having a fixed value of $1,106,784 with no voting rights and with dividends payable at the discretion of the board of directors.
6While they were married, Randi and Neil developed companies that marketed and distributed beauty products. Randi handled the creative component of the business including product development and marketing, and Neil handled the day-to-day operations and finances of the businesses. The companies were very successful, and by the parties' separation, they were worth tens of millions of dollars.
7On separation, Randi and Neil proceeded to negotiate the terms governing the demise of their marriage. Their financial affairs were complex, and they held significant assets. Indeed, two years prior to their separation, they had sold one of their corporations for approximately $80 million. Based on his income tax return for the year 2009, Neil had gross annual income in excess of $14 million, as did Randi. Each of them retained experienced counsel and accountants to assist in identifying, evaluating and dividing their holdings.
8Randi commenced proceedings against Neil on December 7, 2010. Among other things, she requested an unequal division of the parties' net family property. In her application, Randi noted that Neil had an interest in various entities including Coofer. She stated that Coofer had undergone a reorganization; new shares had been issued; and "[v]irtually no information has been provided about this reorganization". She requested full and complete disclosure.
9The parties exchanged financial statements. Although he listed his share interest in Coofer and that he was a beneficiary of an entirely different Shinder family trust, Neil did not list his additional interest as a beneficiary under the trust in his sworn financial statements, dated April 5, 2011 and November 22, 2011. He identified excluded property as having a nil value. In his November 22, 2011 financial statement, he identified the $1,106,784 redemption value of the preferred shares in Coofer, noting that no dividends were expected to be paid.
10On April 8, 2011, Randi and Neil consented to an order addressing disclosure and questioning at a case conference conducted by Herman J. Neil was ordered to provide a disclosure request to Randi by April 29, 2011; Randi was ordered to provide any additional disclosure requests to Neil by April 15, 2011; Neil was ordered to reply by May 15, 2011; and Randi was ordered to reply by May 30, 2011. In addition, leave for questioning was granted.
11Pursuant to that order, on April 14, 2011, Randi's counsel, Annie Noa Kenet of the law firm Goldhart & Associates, wrote to Neil's counsel, Harold Niman and Daryl Gelgoot, and requested itemized information identified by Andrew Freedman of Duff & Phelps, the accountant retained on behalf of Randi.
12There were 131 items listed and numerous headings in the letter. Among other things, Ms. Kenet sought rent rolls for certain properties at the date immediately preceding Coofer's reorganization, at the date of separation, and currently. Ms. Kenet also sought information on the trust.
13By letter dated May 13, 2011, Neil's valuator, Linda Brent of Brent Valuations Inc., responded to the information identified by Mr. Freedman. Her 23 pages of answers together with enclosures were forwarded to Mr. Gelgoot. The enclosures referred to in the responses were contained on an attached CD and were also listed on an accompanying index. Ms. Brent wrote that, if Mr. Gelgoot had any questions, he should not hesitate to contact her.
14Ms. Brent responded that the request for rent rolls before reorganization and currently was not relevant. Further consideration would be given to the request if particulars of the purpose and its relevancy were provided. Furthermore, the information was not in Neil's possession but had been requested from Sol who had refused to provide it for reasons of confidentiality relating to the interests of third parties from whom consent was required. As for the information as of the date of separation, Ms. Brent noted that Neil held fixed value preference shares and since his contingent interest in the trust was received as a gift during marriage and was excluded property, the request was not relevant. She reiterated that further consideration would be given to the request if particulars of the purpose and relevancy were provided and repeated the problem relating to Sol, confidentiality and the need for third party consent. Essentially the same answer was given in response to Ms. Kenet's request for the fair market value of marketable securities held by Coofer.
15Under the heading "S&Z Canadian Grandchildren Family Trust", the following items were requested by Randi's advisors: the trust indenture; trust returns for 2007, 2008, 2009 and 2010; financial statements for 2007, 2008, 2009 and 2010; and the ages and names of Sol and Zelaine's grandchildren.
16Ms. Brent identified and enclosed the trust indenture for the S&Z Canadian Grandchildren Family Trust, dated December 4, 2007. The trust indenture described Neil as an original trustee, along with Sol and Zelaine. Both Neil and Randi were also described as beneficiaries, although Randi was a beneficiary only while she and Neil lived together in a conjugal relationship:
1.(c) "beneficiary" means the person or persons who are entitled to any benefit hereunder whether such benefit is contingent or absolute or whether such benefit is a right to receive income or capital or is an interest in income or capital of the trust fund, and without limiting the generality of the foregoing, shall include SOLOMON SHINDER, ZELAINE SHINDER, NEIL SHINDER, RANDI SHINDER and the children of NEIL SHINDER;
(i) provided that ZELAINE SHINDER shall only be a beneficiary of this Trust upon the death of her husband, SOLOMON SHINDER;
(ii) and provided that the spouse of NEIL SHINDER shall only be a beneficiary of this Trust while she and NEIL SHINDER live together in a conjugal relationship[.]
In addition, the trust indenture provided that any beneficiary's interest in the trust property or its interest was excluded property for family law purposes:
- The Interest of any beneficiary in any property of the Trust, any income from property of the Trust, any accretion in value of property of the Trust and any property into which the above mentioned property can be traced, including any income from the traced property, shall constitute his or her exclusive property and shall be excluded from his or her net family property, as such term is defined in the Family Law Act, R.S.O. 1990, c.F.3 as amended, and shall not form part of any present or deferred community of property or value shareable with his or her spouse under the laws of any jurisdiction.
(Emphasis added)
17In response to the request for production of the trust returns, Ms. Brent responded that no tax returns had been filed, but she enclosed an exemption for fiscal years 2009 and 2010. She stated that no financial statements had been prepared for the years 2007 to 2010. She provided the ages and names of the children of Neil and Randi but stated that those of the other grandchildren were not relevant.
18As mentioned, in her letter, Ms. Brent also described Neil's interest in the trust as "contingent" and as "excluded property".
19In her cross-examination for the purposes of the summary judgment motion, Randi stated that she did not read Ms. Brent's letter.
20In his affidavit sworn June 17, 2011, Neil repeated some of Ms. Brent's responses and stated that his contingent interest in the trust was received as a gift during marriage, was excluded property, and therefore not relevant.
21In an affidavit sworn by Sol on August 3, 2011, he attached a corporate chart listing Neil as one of the beneficiaries of the trust. He also stated that the ultimate residual beneficiaries of the trust were Neil and Randi's children.
22Randi's lawyers and Mr. Freedman did not pose any follow-up questions on the trust. Nor did anyone else on Randi's behalf.
23Neil and Sol agreed to produce documentation on Coofer but, before doing so, asked that Randi sign a confidentiality agreement. She refused to do so. Ultimately, as mentioned, on June 25, 2012, the parties entered into a separation agreement. It provided that Randi and Neil had each investigated the other's financial circumstances to his or her satisfaction. They subsequently varied their agreement and entered into minutes of settlement, dated February 27, 2014, following a mediation before Alfred Mamo.
24On September 1, 2016, Randi commenced proceedings against Neil and Sol. Among other things, she sought an order setting aside the separation agreement and the minutes of settlement. She asserted that Neil had failed to truthfully disclose his assets. If the separation agreement and the minutes of settlement were not set aside, or in any event, Randi claimed damages for conspiracy to commit fraud, deceit and punitive damages of $250,000. As revealed by her amended application, the factual basis for these three claims mirrored her claim that the two agreements be set aside for non-disclosure. Both parties and the motion judge approached the summary judgment motions on the basis of non-disclosure.
25In her amended application, Randi also sought other relief including damages for various breaches of the settlement agreement and the minutes of settlement relating to removal of certain household contents, child support, s. 7 expenses, RESPs and bonds in favour of the two children of the marriage, failure to share tax benefits, and damages for conversion relating to household contents.
Motion Judge's Decision
26On the summary judgment motions brought by Neil and Sol, the motion judge identified the only issue for consideration as being whether there was a triable issue that Neil had failed to disclose that he was a beneficiary of the trust. She noted that, under s. 56(4)(a) of the Family Law Act, R.S.O. 1990, c. F.3, the court may set aside a domestic contract if a party has failed to disclose to the other significant assets existing when the domestic contract was made. She went on to emphasize the need to make disclosure and stressed that accurate and complete financial statements are crucially important and particularly so in complex cases. She found that Neil had failed to disclose his interest in the trust in his financial statements. She was unable to determine from the evidence before her whether Randi's counsel, accountant or advisors were aware of the terms of the trust. However, relying on Virc v. Blair (2014), 119 O.R. (3d) 721, [2014] O.J. No. 2301, 2014 ONCA 392, she determined that there had been non-disclosure, and Neil and Sol had failed to show that Randi knew of Neil's interest in the trust.
27The motion judge went on to conclude that it was unnecessary to have a trial on the issue of non-disclosure. She dismissed Neil's motion for summary judgment and granted Randi partial summary judgment on two issues: (i) that Neil had deliberately failed to disclose his interest in the trust to Randi; and (ii) that Randi did not have actual knowledge of the non-disclosure when she entered into the June 25, 2012 separation agreement. Neil's attempt to defend the action on the grounds of Randi's knowledge could not succeed. The motion judge left for further hearing, following full disclosure by Neil, whether Neil's failure to disclose that he was a beneficiary of the trust was material or significant non-disclosure within the meaning of s. 56 of the Family Law Act. In addition, Neil was to file a sworn financial statement, and he was to answer refusals arising from his cross-examination and produce the documents requested by Randi. The motion judge also ordered that unless the separation agreement was set aside on the ground of non-disclosure, all of the other issues raised (s. 7 expenses, child support, contents and any other alleged breaches related to the failure to share tax benefits, etc.) were to be dealt with by the mediation/arbitration process stipulated in the separation agreement.
28As for Sol's request for summary judgment, the motion judge found that, although he was aware that Neil was a beneficiary of the trust, Sol had failed "to squarely reveal the truth". In his affidavit, Sol had stated that the ultimate residual beneficiaries of the trust were Neil and Randi's children. He had attached a corporate chart that showed Neil and Randi as trust beneficiaries, but the motion judge stated that it was in fine print and barely legible.
29The motion judge did not expressly dismiss Sol's motion for summary judgment and such a dismissal is not found in the order. It would appear that the motion judge implicitly dismissed his motion. She also ordered Sol to answer refusals from his cross-examination and to produce the documents requested by Randi. The motion judge dismissed Randi's request for Sol to file an affidavit of documents with respect to assets owned by Neil at marriage and separation.
30The motion judge invited the parties to bring a motion before her to address any objections about the scope of disclosure relating to the refusals. Both Neil and Sol brought motions, and the motion judge made a further order clarifying and amplifying the scope of the information to be provided.
31The motion judge subsequently ordered Neil and Sol to pay Randi's costs fixed in the amount of $70,000, 75 per cent to be paid by Neil and 25 per cent to be paid by Sol.
Appeal Proceedings
32Both Neil and Sol sought to appeal from the motion judge's July 13, 2017 order and her order on costs. Leave to appeal was requested of the Divisional Court, and notices of appeal were also filed in the Court of Appeal.
33The Divisional Court granted leave to appeal from para. 1 of the July 13, 2017 order (dismissing Neil's summary judgment motion); para. 3 (requiring him to file a financial statement); and para. 4 (requiring him to answer refusals from his cross-examination). The Divisional Court would have granted leave to appeal paras. 2 (granting Randi partial summary judgment on the issues of Neil's non-disclosure and Randi's lack of actual knowledge) and 7 (on sending all of the other issues raised to mediation/arbitration as provided for under s. 6 of the separation agreement in the "Dispute Resolution" section) but for the fact that they were final in nature. The Divisional Court also granted leave to appeal the costs order of August 1, 2017.
34On consent, Hourigan J.A. consolidated Neil and Sol's Divisional Court appeals with Neil's appeal in the Court of Appeal.
35On appeal, the appellants did not press the motion judge's referral of all other issues to a mediator/arbitrator (Alfred Mamo) in either their factums or oral argument and no cross-appeal is taken with respect to that aspect of the motion judge's decision.
Issues
36On appeal, in essence, Neil raises three issues.
37First, he submits that the motion judge made palpable and overriding factual errors in finding that he intentionally failed to disclose his interest in the trust when the separation agreement and minutes of settlement were being negotiated, in finding that Randi had no knowledge of his interest in the trust prior to entering into the separation agreement, and in granting partial summary judgment to that effect in Randi's favour. Second, he argues that the motion judge erred in law in dismissing his motion for summary judgment. Third, he submits that the motion judge erred in awarding Randi costs of the motions in the sum of $70,000 against Neil and Sol.
38For his part, Sol raises four issues on appeal.
39Sol submits, first, that the motion judge erred in granting partial summary judgment in Randi's favour and in dismissing his motion for summary judgment on the basis that the motion judge failed to consider the relevant law in determining the validity of Randi's claims against him; second, that she erred in finding that Neil (and Sol) had intentionally failed to disclose his interest in the trust; and third, that she erred in awarding costs to Randi. Fourth, he takes issue with the motion judge's order that he provide answers to refusals from his cross-examination and make production of documents.
Analysis
Section 56(4) of the Family Law Act
40Section 56(4) of the Family Law Act permits a court, on application, to set aside a domestic contract or a provision in it,
56(4) . . .
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
41A domestic contract includes a separation agreement.
42Section 56(4)(a) permits but does not require a court to set aside a domestic contract. Put differently, the court's inquiry does not end with a finding of failure to disclose significant assets or debts. Rather, the court must also consider whether it is appropriate to exercise its discretion in favour of setting aside the agreement: LeVan v. LeVan (2008), 90 O.R. (3d) 1, [2008] O.J. No. 1905, 2008 ONCA 388, at para. 51. As with all matters of statutory interpretation, provisions should be interpreted in a way that accords with the objectives of the Act.
43As stated in its preamble, the objectives of the Act include providing for "the orderly and equitable settlement of the affairs of the spouses upon the breakdown of the partnership".
44The primary issue in this case, as framed by the parties and the motion judge, is whether, despite the omission in the sworn financial statements, Neil's interest in the trust was nonetheless disclosed. Second, did Randi have knowledge of Neil's interest in the trust; and third, in any event, was Neil's interest in the trust significant?
(a) Neil's Grounds of Appeal
(i) Disclosure and Randi's Knowledge
45Neil's interest in the trust as a named beneficiary -- and not just the shares in his own name that he did disclose -- should have been listed on his sworn April 5 and November 22, 2011 financial statements. That is, while he did disclose both his common and preference shares in Coofer in both the April and November financial statements as well as income received from that company and from Esbak -- another of his father's companies -- he should have included his interest as a named beneficiary under the trust under the heading of excluded property.
46The parties exchanged financial statements and then consented to an April 8, 2011 court order that governed their mutual disclosure responsibilities. It was implicit from this order that further disclosure was anticipated. Indeed, what followed was an exchange of correspondence and requests for further disclosure between the parties' counsel and their financial advisors that encompassed details about the trust.
47As mentioned, in her May 13, 2011 letter, Ms. Brent responded to the correspondence sent by Randi's lawyers and the questions asked by Randi's accountant. She provided the trust indenture to counsel for Randi. It described the nature of Neil's interest in the trust as did Ms. Brent. She described his interest as both contingent and excluded. She confirmed that no tax returns had been filed and that no financial statements had been prepared and provided the names and ages of Neil and Randi's children.
48In the face of this disclosure, the motion judge's findings cannot withstand scrutiny. Moreover, and significantly, the motion judge erred in her analysis of Randi's knowledge of the trust.
49The motion judge concluded that Randi was unaware that Neil was a named beneficiary of the trust and stated, at para. 133, that"[i]n these circumstances, it is not necessary to review what her counsel or accountant did or did not know".
50This was in error. The general rule is that, in the ordinary case, the knowledge of an agent is imputed to its principal, there being a "presumption that an agent will communicate his knowledge to the principal because it is his duty to do so": Vescio v. Peterman (1999), 45 O.R. (3d) 613, [1999] O.J. No. 4039 (C.A.), at para. 2, citing Durbin v. Monserat Investments Ltd. (1978), 20 O.R. (2d) 181, [1978] O.J. No. 3414, 87 D.L.R. (3d) 593 (C.A.), at p. 595 D.L.R. As in Vescio, this rule also applies to imputing knowledge of a solicitor to his or her client. As Rowe J.A. (as he then was) stated in Acharya Holdings Ltd. v. Standard Trust Co., [2014] N.J. No. 56, 2014 NLCA 13, 346 Nfld. & P.E.I.R. 348, at para. 16, leave to appeal to S.C.C. refused [2014] S.C.C.A. No. 187:
It is a settled principle of law that the knowledge of the solicitor is imputed to his or her client: Rolland v. Hart (1871), L.R. 6 Ch. App. 678 (H.L.), at 681-82. (See also: Stoimenov v. Stoimenov (1985), 50 O.R. (2d) 1 (ONCA), at paragraph 11; Beechwood Cemetery Co. v. Graham (1998), 117 O.A.C. 59 (CA), at paragraph 53.)
51The Court of Appeal's decision in Anderson v. McWatt, [2016] O.J. No. 3740, 2016 ONCA 553, relied upon by Randi, in no way detracts from this principle. Instead, that was a case where the wife's counsel was found not to have knowledge of an asset that the husband fraudulently asserted was not in his name. The Court of Appeal merely confirmed that the statement made by the wife's counsel in a letter that the wife may have a claim against the property, depending on what emerged in the examination of the husband, did not amount to knowledge that the husband in fact owned the property in question.
52It was a palpable and overriding error for the motion judge to state that she was unable to determine whether Randi's counsel, accountant or advisors were aware of the terms of the trust. There can be no real issue that disclosure was made to Randi's counsel and financial advisor; indeed, among other things, they were given the trust indenture that clearly identified Neil as a trust beneficiary, financial statements for Coofer for the years preceding the couple's separation, and a Coofer valuation report prepared to effect the estate freeze and to value Neil's shares in Coofer. Furthermore, this was not disclosure that was in any way buried. The trust was specifically mentioned in correspondence between counsel and the financial advisors. Randi was deemed to have knowledge as a result of the knowledge of her counsel.
53In resolving their financial issues arising from marital breakdown, these parties received advice from highly experienced advisors. With the benefit of that advice, they settled their affairs. In their separation agreement, both Randi and Neil stated that each had "investigated the other's financial circumstances to his or her satisfaction". They consented to an order governing the process, and through her counsel and financial advisors, Randi is deemed to have had knowledge of Neil's interest in the trust.
54Neil's omission of his interest in the trust in his November 2011 financial statement does not alter these facts. Although he ought to have included this interest in that portion of the financial statement that addresses excluded property, its omission cannot serve to turn actual disclosure and Randi's knowledge into non-disclosure for the purposes of s. 56(4) of the Family Law Act.
55Lastly, the motion judge's reliance on Virc v. Blair was misplaced. That case involved undisputedly significant non-disclosure. This is not that case.
56It follows that the motion judge erred in granting partial summary judgment to Randi. I would set aside paras. 2 and 3 of the motion judge's order of July 13, 2017.
(ii) Significance of the Asset
57Even if the omission from the financial statements could be characterized as non-disclosure, s. 56(4) also requires the court to consider whether the implicated asset is "significant". The motion judge did not engage in this part of the analysis. Instead, she deferred the issue to be addressed in the future without considering whether there was a genuine interest requiring trial.
58Here, there was not a genuine issue requiring a trial. Section 4(2) of the Family Law Act excludes from net family property, and therefore from equalization, any property "acquired by gift or inheritance from a third person after the date of the marriage". The trust comprised Sol's property and Neil's common shares in Coofer that had originally been given to him by Sol and then exchanged for preference shares that were disclosed to Randi and included in both of Neil's financial statements. In the face of the disclosure of these Coofer shares, any additional benefits Neil might receive under the trust would constitute a gift or inheritance acquired after the date of the marriage and hence would have to constitute excluded property as defined under the Family Law Act. Although not determinative, this is consistent with s. 22 of the trust indenture, which declares any benefit received by any beneficiary under the trust to be excluded property for family law purposes. Ms. Brent responded to the questions posed by Randi's advisors and also noted that Neil's interest in the trust would have to constitute excluded property. One may reasonably conclude that this factor informed the decision made on Randi's behalf to forego further questioning on the trust despite Ms. Brent's invitation for particulars on the purpose and relevancy of the request.
(iii) Neil's Motion for Summary Judgment and the Interlocutory Provisions of the Order Below
59Neil also asserts that the motion judge erred in refusing to grant his motion for summary judgment. In his notice of motion seeking summary judgment, Neil had requested that Randi's application be dismissed in its entirety.
60Given the process and Randi's knowledge, there is no genuine issue requiring a trial on the issue of non-disclosure. It follows that there could be no genuine issue requiring a trial for damages for conspiracy to commit fraud, deceit or punitive damages, all of which rely on the same constellation of facts as set out in Randi's amended application. I would grant Neil's request for summary judgment in this regard. As such, I would dismiss the claims asserted in paras. 1, 2, 11, 12 and 13 of Randi's amended application.
61As for the other issues raised by Randi, the motion judge stated, at para. 7 of her order:
Unless the Separation Agreement is set aside in its entirety on the narrow ground of the non-disclosure of Neil's interest in the Trust, all of the other issues raised (section 7 expenses, child support, contents, and any other alleged breaches related to failure to share tax benefits, etc.) shall be dealt with by the Mediation/Arbitration process stipulated in the Separation Agreement.
62I see no reason to interfere with this disposition. The separation agreement remains in force as do the minutes of settlement. All other outstanding issues should be resolved by the s. 6 mediation/arbitration process in the separation agreement and s. 20 of the minutes of settlement.
63I would also allow Neil's appeal from the interlocutory provisions, at para. 4, of the order under appeal. They derive from Randi's claim that the separation agreement and minutes of settlement be set aside on the basis of non-disclosure, which cannot succeed. Thus, they have no further relevance.
(iv) Costs
64Neil asks that the costs award of $70,000 in Randi's favour be set aside, and that the costs below and of the appeal be awarded to him instead. Generally, in family and other civil proceedings, costs follow the event. Certainly, Neil should be entitled to his costs of the appeal and the Divisional Court proceedings.
65I would, therefore, order those costs to be paid by Randi to Neil fixed in the amount of $30,000 on a partial indemnity scale, inclusive of disbursements and applicable tax.
66As for costs below, I would set aside the order for $70,000 in favour of Randi, and order Neil and Randi to bear their own costs of those proceedings. Although Neil was successful, given the omissions in his 2011 financial statements, it is fair and reasonable that Neil bear some of the burden for the proceedings.
(b) Sol's Grounds of Appeal
67As mentioned, Sol submits that the motion judge erred (i) in granting partial summary judgment in Randi's favour and failing to grant summary judgment in his favour because the motion judge did not apply the relevant law to his motion for summary judgment; (ii) in finding that Neil intentionally failed to disclose his interest in the trust; and (iii) in ordering costs of the motion in the amount of $70,000 against Sol and Neil. As mentioned, he also appeals the interlocutory provisions of the motion judge's order.
68Since the second ground of appeal overlaps with Neil's and has already been addressed, I will only discuss the other three grounds.
69I agree with Sol that the motion judge erred in her treatment of his motion for summary judgment.
70The motion judge did not consider the requisite tests to establish the claims asserted against Sol: conspiracy to commit fraud, deceit and punitive damages. If she had, it would have been clear that these tests could not be met based on the record before her and that there was no genuine issue requiring a trial.
71On a motion for summary judgment, each party has to "put their best foot forward" in relation to any material issues to be tried: Sanzone v. Schechter, [2016] O.J. No. 3760, 2016 ONCA 566, 402 D.L.R. (4th) 135, at para. 32. Here, Randi did not adduce evidence that would support the requisite elements of the causes of action and claims asserted against Sol. On the conspiracy to commit fraud claim, there simply is no evidence to sustain the requirement that the course of conduct adopted by Sol had the predominant purpose of causing injury to Randi or that his conduct was unlawful, directed towards Randi and in circumstances where he should have known that injury to her would likely result. See Canada Cement Lafarge Ltd. v. British Columbia Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452, [1983] S.C.J. No. 33. Sol's intention, as found by the motion judge, was to implement an estate freeze to organize his corporate and personal affairs to pass on the benefit of future growth to his grandchildren. He effected the freeze two years before Randi and Neil separated and initially, she too was a beneficiary. Moreover, no injury ensued. Similarly, with the claim of deceit, this claim cannot be sustained. I have already concluded that Neil's interest in the trust was disclosed. In the light of this conclusion, a finding of deceit could not be grounded in Sol's statement that the ultimate beneficiaries were Neil and Randi's children coupled with the corporate chart that disclosed Neil's interest. Lastly, again there is no evidence to support Randi's claim of punitive damages. No finding could be made that Sol's conduct was "malicious, oppressive and high-handed" such that it "offends the court's sense of decency": Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18, at para. 36.
72It follows that Sol's motion for summary judgment should have been granted. Given this outcome, I would also allow Sol's appeal from the interlocutory provisions of the order.
Disposition
73For these reasons, I would allow Neil's appeal in part. That is, para. 7 of the underlying order shall remain in effect to the extent that it permits Randi to pursue the other issues she raises (as described by the motion judge, s. 7 expenses, child support, contents, as well as any other alleged breaches related to a failure to share tax benefits, etc.) through the mediation/arbitration process stipulated in the separation agreement. I would set aside the partial summary judgment in favour of Randi, dismiss Randi's claim that the separation agreement and minutes of settlement be set aside on the basis of non-disclosure of Neil's interest in the trust, and set aside the costs order below. I would order Neil and Randi to bear their own costs of the proceedings below and would order Randi to pay Neil's costs of the appeal, including the Divisional Court proceedings, on a partial indemnity scale fixed in the amount of $30,000, inclusive of disbursements and applicable tax.
74I would allow Sol's appeal. I would order Randi to pay $20,000 in costs of the proceedings below. In addition, she is to pay costs of the appeal, including the Divisional Court proceedings, on a partial indemnity scale fixed in the amount of $20,000, inclusive of disbursements and applicable tax. Although fraud was pleaded, it played a minimal role in the argument and analysis, and I am satisfied that a partial indemnity costs award is fair and reasonable in the circumstances.
N's appeal allowed in part; S's appeal allowed.
Notes
1 Sol's wife.
End of Document
