Citation and Court Information

CITATION: Peerenboom v. Peerenboom, 2018 ONSC 5118

DIVISIONAL COURT FILE NO.: 13/18

DATE: 20180911

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: NICOLE PEERENBOOM, Applicant (Respondent)

AND:

ROBERT PEERENBOOM, Respondent (Appellant)

AND:

HAROLD PEERENBOOM. Respondent (Added Party)

BEFORE: Then, Low and Myers JJ.

COUNSEL: Dani Z. Frodis, for the Applicant (Respondent)

Nancy J. Tourgis, for the Respondent (Appellant)

Symon Zucker, for the Respondent (Added Party) Harold Peerenboom

HEARD: August 29, 2018

REASONS FOR DECISION

[1] This is an appeal from the interlocutory order of Hood J. dated December 18, 2017, requiring the appellant (husband) to pay to the respondent (wife) $150,000 for interim costs and disbursements. The appeal was heard on August 29, 2018 and was dismissed with reasons to follow. These are the reasons.

[2] The order appealed from was a second order for interim costs and disbursements, the first having been made by Stevenson J. on June 16, 2016. The appellant sought without success to appeal that order.

[3] The order arises in the context of an acrimonious matrimonial dispute that has proceeded with less than optimal smoothness. Issues concerning custody, support and property have all been in play and the support and property issues remain to be tried.

[4] The parties were married in 2002 and separated in 2013. There are four children of the marriage. In 2007, following a period of marital discord, the parties entered into a domestic contract prepared by the appellant’s solicitors and executed by the respondent with independent legal advice.

[5] Paragraph 1.3 of the domestic contract provides:

Rob’s Family has substantial wealth and assets and wishes to involve him in their affairs but only on the basis that, should the relationship between Rob and Nikki end for whatever reason, Nikki has no claim on the assets which Rob derives from the Family, or their value and have requested the parties enter into this Domestic Contract to release all property rights but for Rob’s personal assets and joint assets as described below.

[6] The principal effect of the contract was respondent’s release of rights to which she may have otherwise had a claim for equalization in assets owned by or anticipated to be owned by the appellant.

[7] The two provisions in the Domestic Contract at the heart of the property dispute are paragraphs 5 and 6:

5.1 (a) Rob may soon be the beneficiary of certain gifts or other transactions by which he acquires an interest in 44 Old Forest Hill Road, Toronto, Ontario, which may or may not become a matrimonial home of the parties, as well as an interest in various other corporations. 44 Old Forest Hill Road was acquired for approximately $1.3 million and its current value may be well in excess of that figure. These corporate interests may be worth hundreds of thousands of dollars now, and millions of dollars in the future. Nikki hereby releases all her Rights to these assets should Rob acquire them in any fashion as well as any assets or property into which they can be traced in the future.

(b) In the future, Rob may receive substantial income from Excluded Property. Nikki acknowledges this income may not be shared with her pursuant to paragraph 2.1.

6.1 The parties’ present residence is leased. The lease expires in approximately two years. At a reasonable time before the expiry of the lease Rob and Nikki will jointly purchase a Matrimonial Home. Although it may be financed, Rob will be responsible for the deposit and down payment, which will total between $150,000 and $250,000. The title will be held in joint tenancy. Notwithstanding paragraph 5 hereof, on any Marriage Breakdown the Net equity (or proceeds of sale in the case of a sale of the Matrimonial Home) will be shared equally between the parties, but Nikki’s one half of the equity will be excluded from the calculation of her Net Family Property.

6.2 This provision applies to any replacement dwellings for this first Matrimonial Home.

[8] 44 Old Forest Hill Road was owned by Mandrake Properties Inc. at the time of the domestic contract. As evidenced by the parcel register, the appellant purchased 44 Old Forest Hill Road from Mandrake Properties Inc. on October 30, 2008 with a purchase price of $1,200,000 that was paid substantially with funds borrowed under a charge to the Bank of Nova Scotia for $950,000.

[9] The home was not registered in joint ownership, but to the appellant alone. The property was occupied by the parties and their children as the matrimonial home. The marriage broke down in 2013. On August 22, 2014, a little more than a year after the separation, the respondent wife caused a designation of matrimonial home to be registered on title. This application commenced in 2014.

[10] The issues initially joined in the litigation have morphed over time. The central property dispute, however, concerns the treatment of the matrimonial home. Whereas the respondent initially took the position that the domestic contract was not valid, the pleadings as they currently stand indicate that the respondent now affirms the validity of the contract. The property issue to be decided at trial therefore turns on the proper construction of the contract, whether the appellant is in breach of the contract, and if so, what remedy should follow.

[11] The appellant is a member of a very wealthy family the patriarch of which is the added party, Harold Peerenboom, the appellant’s father. While the parties were married and cohabiting, they and their four children lived in a manner consistent with possession of very significant income and assets. At the time of the separation, the appellant was president of Mandrake Management Consultants, one of the appellant’s family’s corporations. The appellant has a 2.2% interest in the corporation. In 2012, he earned $188,071 from that corporation.

[12] Following the separation and the initiation of litigation, the appellant’s means and assets appear, according to his financial statements, to have undergone a catastrophic reduction. In 2014, the appellant’s income dropped by two thirds and he earned $62,194 from Mandrake Management Consultants. He attributed this reduction in earnings to lower commissions, child care responsibilities and enrolment in an MBA program at the University of Toronto.

[13] In 2015, the appellant ceased to be president of Mandrake Management Consultants. According to the appellant, he was fired. He went to work at another of his family’s businesses, Crestwood School, as marketing and communications director at $65,000 a year. The appellant has a 10.1% interest in this business.

[14] In August 2015, the appellant’s father Harold Peerenboom, obtained a default judgment against the appellant for about $950,000 upon an allegation of unpaid loans. Part of the judgment appears to arise from a debt in favour of the appellant’s sister that did not mature until 2018. The appellant’s initial financial statement of January 9, 2015 does not quantify a debt to his father. There is a civil action by the respondent to set aside the default judgment challenging the bona fides of the debts alleged to support the judgment.

[15] To date, the appellant has not disclosed a valuation of 44 Old Forest Hill Road. According to the evidence of the respondent, the appellant has not cooperated to permit her to have the property valued. The appellant has not disclosed a valuation of his 2.2% interest in Mandrake Management Consultants. He has not disclosed a valuation of his 10.1% interest in Crestwood School.

[16] On the motion before Stevenson J. of June 9, 2016, the appellant claimed to be destitute. Stevenson J. rejected that assertion and held that the appellant had resources or access thereto to enable him to pay interim costs and disbursements.

[17] On the appellant’s financial statement of June 1, 2016, the appellant shows annual income for $65,000.04 and annual expenses of $145,370.04.

[18] In the same financial statement, he shows debts at Valuation date of $1,838,605.85 and debts at the statement date of $2,199,095.82. He shows a second mortgage in favour of CIBC obtained post Valuation date of $298,294.35 and a debt of $56,253 acquired post-Valuation date and a line of credit from Scotiabank.

[19] In the November 2017 statement, he shows annual income of $48,956.64 and annual expenses of $63,679.92. In that statement, he shows debts at Valuation date of $2,009,139.29 and debts at statement date of $1,357,970, the latter amount not including the default judgment in favour of Harold Peerenboom which is the subject of the respondent’s action to set aside.

[20] In the June 2016 statement, he shows total property at Valuation date of $10,760 and at statement date of ($2,786).

[21] In the November 2017 statement, he shows total property at Valuation date of $141,598 and at statement date of $4,585.

[22] As noted above, the appellant had not (and still has not) disclosed valuations of the real property at 44 Old Forest Hill Road or of his interests in Mandrake Management Consultants Inc. and Crestwood School.

[23] The motions judge made an order that the appellant pay to the respondent a further sum of $150,000 for interim costs and disbursements. He applied the four part discretionary test in Ludmer v. Ludmer, 2012 ONSC 4478. He found that the tests were met.

[24] The standard of review controlling this appeal is found in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 SCR 235: at para 4: an appellate court “may substitute its own view of the evidence and draw its owns inferences of fact where the trial judge is shown to have committed a palpable and overriding error or made findings of fact that are clearly wrong, unreasonable or unsupported by the evidence.” This court will not interfere with the motions judge’s findings of fact unless the error, if found to be palpable – that is, obvious – is shown to have affected the result. In short, if the totality of the evidentiary record before the motions judge is capable of supporting the result despite the error, deference will be accorded.

[25] The criteria to be considered on a motion for interim costs and disbursements is set out in Ludmer v. Ludmer. It is a four part test, the components of which are correctly summarized at paragraph 8 of the motions judge’s endorsement. The order is a discretionary one, and is granted in order to level the playing field where there appears to be very significant disparity in resources.

[26] The appellant does not challenge the quantum of fees and disbursements said to be necessary, but appeals on the grounds that the motions judge erred in finding that the other three parts of the test were met, namely that the respondent’s claim is meritorious, that the respondent was unable to fund her litigation, and that the appellant has the resources or access to resources to pay interim costs and disbursements requested.

[27] With respect to the first part of the four part test, the appellant argues that the motions judge erred in concluding that the respondent’s claim had merit without re-assessing it but instead relying on the assessment made by Stevenson J. on the first motion for interim costs and disbursements. The motions judge wrote, at para. 10 of the endorsement, “I am not about to engage, as the RH asks me to, in a detailed revisitation of the merits of the AW’s claim. It has already been found that the AW’s claim has merit. I agree with Stevenson J.’s prior determination, in any event, for the reasons given by her.”

[28] It is said that the opinion of Stevenson J. in June 2016 that the claim had merit was formed at a time when the pleaded issues were different and the record was not complete: at that time, the civil trial had not begun and therefore there had not been testimony elicited from the respondent at commencement of that trial that could, it is said, dilute the strength of the respondent’s case.

[29] In the Amended Amended Application of October 5, 2017, the pleading in effect at the time of the order under appeal, the respondent seeks relief on the basis that the domestic contract is valid and has been breached by the appellant. Stevenson J. specifically analyzed the claim from that perspective in her reasons of June 9, 2016 at paragraphs 32 – 37. On the basis of the pleadings as they stood at the date of the motion, the issues for trial may fairly be said to have been narrowed, but it was, in our view, reasonable for the motions judge to hold, in light of uncontested facts and cognizant of the respondent’s evidence in the civil trial, that the claim had some merit. The threshold on this part of the test is not a high one. The moving party needs to show an arguable case. In this case, the outcome turns on the proper construction of the contract, and much of the factual matrix for that purpose is not in dispute. We find no error of law in the motions judge’s approach and we are not satisfied that the motions judge erred in holding that this part of the four part test was satisfied.

[30] The appellant argues that the motions judge erred in finding that the respondent is unable to fund the litigation. The appellant argues that absent evidence that the respondent’s lawyers refuse to act for her without payment of her debt owing, there is no basis for the finding.

[31] We are satisfied that there was an ample evidentiary basis for the motions judge’s factual finding on this point and are of the view that it is not a sine qua non that there be explicit evidence of counsel’s refusal to continue to act, particularly in a case like this where it would arguably be improper on the part of counsel to abandon the client on the eve of trial.

[32] With respect to the issue of whether the appellant had resources to pay, we are persuaded that the motions judge overlooked in the appellant’s affidavit his denial of any value in his corporation whose 2016 financial statement showed retained earnings of $532,279.

[33] The following is paragraph 15 of the motion judge’s reasons:

Moreover, the AW at paragraph 34 of her affidavit points out that the RH is sole shareholder of company that has retained earnings in 2016 of $532,279. While the RH addressed, in his responding affidavit, the issue of the lack of rental income for the Forest Hill property (which was also pointed out by the AW at paragraph 34 of her affidavit) he failed to address the issue of this company and its retained earnings. He has not denied what is said by the AW. While the company is mentioned in his most recent financial statement, no value is given for the company as he has chosen to exclude it from any net family property, claiming that is excluded by the Contract, which is being litigated. While it may be excluded by the contract that does not means that the RH is prevented from using it to fund expenses. Nor does this claim of exclusion mean that it does not have to be valued. Under Part 7 of the financial statement it is supposed to be valued.

[34] The corporation 1727414 Ontario Inc. is wholly owned by the appellant. In the financial statement before the court on the first motion for interim costs in June 2016, the appellant did not disclose the existence of this asset.

[35] In the November 2017 financial statement, the existence of the corporation was disclosed, but the motions judge was correct in observing that the appellant did not value the asset in his financial statement. The motions judge was correct that the appellant had a duty in the litigation to value the asset. He was incorrect, however, in saying that the appellant had not denied what the respondent had alleged about the corporation. The appellant’s evidence was that several months before creation of 2016 financial statement for the corporation, he had received a letter from his accountant dated May 31, 2016 indicating that the value of the corporation was nil because its sole asset was an investment in another corporation whose assets themselves had no value.

[36] In our view, the totality of the material concerning 1727404 Ontario Inc., including the evidence of the appellant, did not afford a cogent and reliable basis for concluding what the value of the corporation was. The financial statement for the corporation showed retained earnings of $532,279 and as the appellant was the sole shareholder, the contents of the financial statement may be inferred to have emanated from him. There is no note to reader concerning the retained earnings.

[37] “Retained earnings” is neither cash – in this case – nor is it the value of the corporation. We do not construe the motions judge’s comment at paragraph 15 as suggesting that he was labouring under the mistaken impression that it was. His observation was that there was no disclosure of the existence of the corporation in his earlier financial statement and no valuation of the corporation in the appellant’s current financial statement. He does not conflate retained earnings with ready cash or with value of the corporation.

[38] To the extent that the appellant contends that the value of the corporation was nil, there was, in our view, no admissible and reliable evidence before the motions judge as to the value of the corporation. The May 31, 2016 letter from the appellant’s accountant to the appellant was not a valuation, the author not being a valuator, and the document lacking the information expected of a valuation. The content of the letter was not adduced as evidence on the motion, and if it had been, would have been of negligible probative value, being based on unspecific hearsay information emanating from undisclosed sources.

[39] We do not read paragraph 15 of the motion’s judge’s reasons as a finding that the appellant’s ability to pay was founded on retained earnings in 1727404.

[40] If it was a palpable error that the motions judge failed to take cognizance of the appellant’s denial of any value in 172 despite its stated retained earnings, the next inquiry is whether the error was overriding – whether the outcome would have been affected by the error.

[41] In our view, there was evidence before the motions judge apart from the evidence of retained earnings shown in the financial statement of appellant’s corporation, capable of supporting the finding that the appellant had either resources or access to resources to pay interim costs.

[42] The evidence in family law motions is not routinely subjected to cross-examination. The motions judge has to assess the evidence on a paper record and is entitled to accept some, none or all of the evidence. If there is some evidence upon which a fact could reasonably be found, this court will not interfere.

[43] In the context of the appellant’s refusal to value assets, most significantly 44 Old Forest Hill Road, a comparison of the financial statement of June 2016 with that of November 2017, and the facts set out by Stevenson J. at paragraphs 49 to 53 of her reasons, we are not persuaded that that there was no evidentiary basis, taking the appellant’s denial of value in 172 into account, upon which the motions judge could find ability to pay. There was no overriding error.

[44] There is no basis therefore to interfere in the motion judge’s decision.

Low J.

I agree: ___________________________

Then J.

I agree: ___________________________

Myers J.

Date: September 11, 2018