COURT FILE NOS.: CV-10-0138-00; CV-11-964-00; FS-09-0953-00

DATE: 20120507

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Nashaat Aly et al v. Nader Halal Meat Inc. et al (CV-10-0138-00)

AND:

Naima Mohamed El-Sayed Mohamed El Feky v. Nader Halal Meat Inc. et al (CV 11964-00)

AND:

Naima Mohamed El-Sayed Mohamed El Feky v. Adel Mohamed Tohamy (FS-09-0953-00)

BEFORE: Ricchetti, J.

COUNSEL: Counsel for Adel Tohamy, A. Farooq

Counsel for Ms. El-Feky, J. Lagoudis

HEARD: May 4, 2012

ENDORSEMENT

[1] The trial in the above three proceedings is scheduled to commence on May 14, 2012 as one hearing involving all of the parties in the above three proceedings and will proceed for at least 4 weeks.

[2] Adel Tohamy (“Tohamy”) brings this motion seeking an order which will permit Adel Tohamy to secure a line of credit or mortgage on the matrimonial home in the amount of $400,000.

[3] Essentially, Tohamy states that neither himself, the businesses at issue nor his children have the financial ability to fund the litigation costs unless he is permitted to borrow funds against the matrimonial home. An affidavit in support of the motion was filed by Tohamy setting out his financial affairs. Affidavits from Nader and Tamer Tohamy (his sons) were filed setting out their financial affairs. The affidavits address the inability of the corporate defendants to fund the litigation costs.

[4] Mr. Farooq is counsel for Tohamy, his sons and the corporate defendants in the above three proceedings. Any advance from the line of credit or mortgage on the matrimonial homes is to be used to pay Mr. Farooq’s legal fees and disbursements in defending Tohamy, his sons and the corporate defendants.

[5] Naima Mohamed El-Sayed Mohamed El Feky (El-Feky”) opposes the motion.

[6] The other parties to these actions did not appear or take a position on this motion.

[7] The facts are set out in my prior endorsement which ordered these three actions to be heard together. I will not repeat the facts but I will add the following relevant facts:

a. The matrimonial home is 1478 Adamson St., Mississauga, Ontario. It was acquired in 1994 by Tohamy and El-Feky who were married at the time. Title was taken jointly and remains held in the same manner today. The matrimonial home was acquired for $325,000. It is presently valued at approximately $850,000. There are no mortgages against the matrimonial home. However, Legal Aid Ontario has filed two liens, totaling up to $250,000 securing El-Feky’s legal fees;

b. Tohamy, his sons and the corporate defendants have been defending the Aly Action where the Aly’s claim a 20% interest in the various businesses and the plaza. The businesses and the plaza are presently in the name of Tohamy and his sons through the corporate defendants. If Tohamy is successful in his defence of the Aly claim, it inures for the potential benefit of El-Feky who also claims an interest in the same businesses and plaza;

c. There are widely divergent opinions on the current value of the businesses or their current profitability;

d. There are also widely divergent opinions on the current value of the plaza. However, the lowest value suggested is $6,000,000. There are substantially higher estimates of value for the plaza. There is currently $1.7 million dollars secured against the plaza;

e. A Certificate of Pending Litigation prevents Tohamy from accessing the plaza or the businesses to pay for legal fees;

f. El-Feky brought a motion several weeks ago seeking funding to permit her to prosecute her claims and, if she chooses, to defend the Aly’s claim. However, before the motion was heard, El-Feky and Legal Aid Ontario came to an agreement which resulted in the second lien being filed on the matrimonial home; and

g. Legal Aid Ontario is prepared to postpone its liens to permit Tohamy to obtain funding from the matrimonial home for legal fees but only if the amount does not exceed the total amount of $250,000.

[8] Tohamy states that none of himself, his sons and the corporate defendants has funds with which to defend the claims. He claims they are already in debt to his counsel and cannot continue to retain counsel for the trial of these actions.

[9] A tremendous amount of financial information has been disclosed showing this alleged inability to fund the litigation costs. El-Feky denies that full or accurate financial disclosure has been made by Tohamy, his sons or the corporate defendants. This may or may not be the case but it cannot be resolved on the affidavits before me. What is clear is the lack of any significant assets, where there is no factual dispute, which Tohamy or his sons or the corporate defendants can presently and easily access to raise funds to the legal expenses needed to proceed with this trial over the next few weeks.

[10] It is troubling that Tohamy brought this motion on the eve of trial. The prior trial date on the validity of the separation agreements was scheduled for two weeks in March. It did not proceed. The present trial date, originally intended to deal with the Aly Action, is scheduled for three weeks, possibly four. All counsel were told and agreed to keep four weeks free in March, 2012.

[11] The motion could be dismissed on this basis alone. However, it would be unfair to dismiss the motion on the basis the request was brought late when El-Feky essentially did the same thing two weeks ago.

[12] The court has the jurisdiction to permit Tohamy to encumber the matrimonial home.

[13] Rule 23 of the Family Law Act provides:

The court may, on the application of a spouse or person having an interest in property, by order,

(b) authorize the disposition or encumbrance of the matrimonial home if the court finds that the spouse whose consent is required,

(i) cannot be found or is not available,

(ii) is not capable of giving or withholding consent, or

(iii) is unreasonably withholding consent,

subject to any conditions, including provision of other comparable accommodation or payment in place of it, that the court considers appropriate;

[14] It is an unusual case where the court permits one party to encumber the matrimonial to pay their legal fees because, by doing so, the other party may be prejudiced when the issues of equalization and support have been finally determined and the encumbering party cannot satisfy the judgment.

[15] However, the facts of this case are highly unusual.

[16] There are substantial other assets from which El-Feky will be able to recover on her judgment, if successful. All of the issues (family law and corporate claims) are before this court, are being tried together and will be decided at one time. Equity can be done given the substantial and numerous assets in this case.

[17] Given this situation, going through the different scenarios:

a. If Tohamy is successful in defending El-Feky’s claims, then there is no prejudice to El-Feky as she would have released all her claims including to the matrimonial home; or

b. If El-Feky is successful, she will be entitled to an equalization of family property and support (potentially retroactive and prospective). On first blush, there is more than 50% of the equity remaining in the matrimonial home so that asset is well protected. What of her other claims? There is at least $4,300,000 equity in the plaza. Even if the Aly’s are successful, their 20% interest would amount to $1,200,000 (using the lowest $6.MM value). It would still leave $3,100,000 of current value to secure El-Feky’s claim (which she was a 25% shareholder at separation). In addition to the plaza, there are several successful businesses in which Tohamy has substantial interests which are also to be dealt with and provide substantial additional security for El-Feky's claims if successful. The actual current value of the businesses is in dispute, but there is little doubt there is significant value there today.

[18] I invited El-Feky’s counsel to come up with a scenario where El-Feky’s claims, if successful, would exceed the value of the assets (the home, businesses and plaza) available for distribution under the Family Law Act or the Ontario Business Corporations Act. Counsel could not point to such a scenario. I can think of none.

[19] It should also be remember that the funds will be used for legal fees to permit Tohamy, his sons and the corporate defendants to continue to defend the Aly Action which is a potential benefit to El-Feky.

[20] I am satisfied that this is one of those very unusual cases where one party should be permitted to encumber the matrimonial home.

How Much?

[21] Tohamy asks for $400,000. I am not prepared to grant this much. El-Feky’s counsel points out a very significant fact that no estimated Bill of Costs has been presented. However, there is senior and junior counsel and the trial will likely proceed for the entire four weeks.

[22] I also reduce the amount because it is important to remember that the trial is about to start and everyone has known about the trial date for some time. The lateness of the motion is a factor to be considered.

[23] Further, the parties did avoid the costs of the two week trial that had been scheduled but did not proceed in March 2012 (all parties were present and ready to proceed) without any party expressing a need for additional security to raise money for legal costs.

[24] Legal Aid Ontario will have to agree to postpone its liens to permit any financier certainty of its prior security. Legal Aid Ontario was not given notice of this motion but has agreed to postpone its liens for a Letter of Credit or mortgage in the amount of $250,000. Limiting the amount to $250,000 avoids postponing this motion until Legal Aid Ontario is put on notice.

[25] Any shortfall which might arise to Tohamy, his sons or the corporate defendants, if any, will have to come from other assets or cash flow Tohamy and his children have from the business which, even on the facts set out in the record, have some limited capacity for further borrowing or generating income.

What Terms?

[26] Tohamy shall be entitled to encumber the matrimonial home up to $250,000 as a first charge or security for a letter of credit on the following terms:

a. El-Feky shall execute the appropriate documentation to permit Tohamy to obtain the loan and give the security;

b. El-Feky will obtain the consent of Legal Aid Ontario to permit the borrowing as a first charge on the matrimonial home;

c. The first charge shall be for no more than $250,000 but shall not be a charge for any overdue interest. Tohamy and/or his sons and/or his businesses will have to keep the interest current as it accrues. I simply do not want overdue or outstanding interest on the charge or letter of credit to further encumber the matrimonial home;

d. The funds shall be paid directly into Mr. Farooq’s trust account into a separate trust account. The amounts may be disbursed to cover for future invoices for reasonable legal fees rendered in these three proceedings only. Mr. Farooq will provide to this court an accounting of the balance in this separate trust account when requested by this court. Mr. Farooq will pay into court any balance in the trust account when requested to do so by this court; and

e. This amount shall be considered to be an advance to Tohamy on account of any family property equalization (if necessary) or be dealt with in such manner as the trial judge considers just and appropriate (if necessary) amongst Tohamy, his sons and the corporate defendants.

[27] If any difficulties arise, any counsel, on notice to the other counsel, can request a telephone conference call with me to deal with the difficulties. This is to be arranged through my assistant, Bonnie Russell. Ms. Russell can be contacted through the Judge’s Administration Office. There will be no emails directly to me setting out the position of the parties.

Costs

[28] Both parties have provided me with their Costs Outline.

[29] Either party which seeks costs of these motions may make written submissions limited to three pages which submissions must be served and filed within 2 weeks of today’s date.

[30] The responding party may make responding submissions within 1 week thereafter, also limited to 3 pages.

Ricchetti, J.

Date: May 7, 2012