COURT FILE AND PARTIES

COURT FILE NO.: 05-114/09
DATE: 20120720
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: RACHEL SKROBACKY, by her attorneys for property Madelon Niman and Suzan Zarnett, MADELON NIMAN and SUZAN ZARNETT personally and in their capacities as Trustees of the Skrobacky Family Trust 2,

Plaintiffs

AND:

JACK FRYMER, SAMUEL STERN (also known as SAM STERN), JANICE STERN, CAROL FRYMER, GARFIN ZEIDENBERG LLP, STEINBER, MORTON HOPE & ISRAEL LLP, STACY MITCHELL, THE CANADA TRUST COMPANY in its capacity as Estate Trustee During Litigation of the Estate of Abraham Skrobacky, ES-LEA HOLDINGS LIMITED, ES-LEA INVESTMENTS LIMITED, K.R.S. CONSTRUCTION LIMITED, CAMWOOD CONSTRUCTION LIMITED, CAMWOOD INVESTMENTS LIMITED, QUEEN PETER HOLDINGS INC., QUEEN BROWN HOLDINGS INC, KING PETER INVESTMENTS INC., JANFAR HOLDINGS LIMITED, S. STERN FINANCIAL CORPORATION, JAN-SAM HOLDINGS LTD., JORDALE MANAGEMENT INC., 1253174 ONTARIO LTD., MAX STERN INVESTMENTS LIMITED, BAYCREST CENTRE FOR GERIATRIC CARE, ISRAEL SOLDIERS FUND, JEWISH NATIONAL FUND OF CANADA, BETH DAVID SYNAGOGUE OF TORONTO, ZAREINU EDUCATIONAL CENTRE, ADAM NIMAN, DALE NIMAN, JEREMY NIMAN, DARA ZARNETT, DAVID ZARNETT, FRANCIS CUTLER (also known as FRANCES CUTLER HAHN), and MERCEDES STEWART

Defendants

BEFORE: Whitaker, J.

COUNSEL:
Chris Bredt / Danielle Joel / Ewa Krajewska, for the Plaintiffs

Melanie Yack for the Stern Defendants

A. Dryer for the Frymer Defendants

A. Antoniou for the Garfin Zeidenberg LLP Defendants

Albert S. Frank for Queen Peter, Queen Brown, King Peter, Max Stern Inv. Inc. And Janfar Holding

HEARD: May 8, 2012

ENDORSEMENT

What This Case is About

1 . This is a motion brought by Rachel Skrobacky (“Rachel”) for an advance payment of 4.5 million dollars. The funds are sought from the estate (the “Estate”) of Rachel’s late husband Abe Skrobacky (“Abe”).

2 . The requested funds are an advance from an equalization payment under the Family Law Act R.S.O. 1990 c. F.3 (the “Act”) or in the alternative, partial summary judgment under Rule 20 of the Rules of Civil Procedure (the “Rules”).

3 . Rachel argues that the defendants have no standing or interest in the motion – either under the Act or Rule 20 .

4 . The motion is opposed by the Stern, Frymer and Queen Peter defendants (the “defendants”) as those defendants are grouped and identified in the action. The defendants assert they have standing and an interest in the motion, and further, Rachel does meet the test for an advance and that the advance would be to their detriment and therefore unreasonable.

5 . Canada Trust Company is the Estate Trustee During Litigation (“ETDL”). The ETDL agrees with Rachel that the motion should be granted and the advance made.

6 . As I have considered the defendants’ submissions on the merits it is unnecessary to deal with the issue of standing.

7 . For reasons which follow, I find the defendants do not have an interest to assert in the motion and the motion should be allowed – particularly given the agreement of the ETDL.

What Happened?

8 . The principal facts are not in dispute.

9 . Abe and Rachel immigrated to Canada in 1948 with no possessions or assets. They had two children; the plaintiffs Madelon Niman (“Madelon”) and Suzan Zarnett (“Suzan”).

10 . Rachel and Abe remained married until Abe’s death on November 6, 2009.

11 . On the day before Abe’s death, Rachel’s net family property was $412,910.49. On the same day, Abe’s family property exceeded 9.5 million dollars.

12 . Rachel is now 80 years old and suffers from advanced Alzheimer’s disease. She lives in Baycrest nursing home. Rachel’s two daughters are her litigation guardians and attorneys for property.

13 . On December 2, 2009 Rachel filed an election to take an equalization of net family property under the Act .

14 . After Abe’s death Madelon and Suzan attempted to obtain financial information about their parents’ affairs from Jack Frymer ( a lawyer) and Sam Stern (a mortgage broker), both business associates of Abe’s.

15 . On December 18, 2009 Madelon and Suzan on behalf of themselves and Rachel, commenced an application against the defendants.

16 . At the initial hearing of the application, Low J. ordered the defendants to disclose information to the plaintiffs including all testamentary documents. Canada Trust Company was appointed as ETDL. Justice Low’s order permitted Rachel to withdraw her election under the Act or to commence an application for equalization.

17 . In response to the production order, Frymer and Stern produced a purported will of Abe’s dated April 8, 2004. This will prepared by Frymer named Frymer as the residual beneficiary. There were two codocils to Stern’s benefit.

18 . The 2004 will and codicils made by Abe and prepared by Frymer were in stark contrast to two wills made by Abe and Rachel in 1995. The earlier wills granted a life interest to the surviving spouse with an unlimited right to encroach on capital and on their mutual deaths, distribution to the daughters and their children.

19 . This action was brought in December 2010. Various claims are asserted against the defendants and others including a declaration that the 1995 will is valid and the 2004 will and codocils are invalid.

20 . After the close of pleadings and with leave, the defendants have amended their pleadings for the purpose of pursuing cross claims against the plaintiffs. The cross claims only arise on the plaintiffs’ success in the action.

21 . The plaintiffs with leave have commenced derivative actions with respect to corporate entities in which the Estate had an interest.

22 . When the equalization motion came before Justice Hainey on January 13, 2012, it was adjourned by agreement, including that the defendants would be entitled to appear and make submissions on the return of the motion.

23 . The defendants argue that Abe’s net family worth is far less than the advance claimed - due mainly to their claims on the Estate. These claims were asserted after the action was brought.

24 . The ETDL has consented to the equalization payment to Rachel of 4.5 million dollars without prejudice to her ability to claim a further balance. If the advance turns out to be an overpayment, the ETDL has agreed to take steps to recover the funds. There is nothing in the material to suggest there would be any particular or unique challenges in recovering these funds should they exceed Rachel’s entitlement.

Rachel’s Entitlement to Equalization Payments under the Act

25 . The relevant provisions of the Act are set out in sections 5 , 6 and 7 .

26 . Sections 5(1) and (2) of the Act permit a surviving spouse to an entitlement of one half of the difference between them of the value of the net family property. There are no statutory qualification criteria.

27 . Section 7(1) of the Act permits an application to the court to determine any matter regarding the surviving spouse’s entitlement under section 5.

28 . Section 6(1) of the Act provides that where the deceased spouse has a will, the surviving spouse shall elect to take under the will or to receive the entitlement under section 5 .

29 . Section 7(2) of the Act provides that entitlement under sections 5(1) , (2) and (3) is “personal as between the spouses”.

30 . Section 5(7) describes the purpose of section 5, that being to recognize the joint responsibilities of spouses “inherent in the marital relationship”.

31 . There is no issue that Rachel is on her election and at some point, entitled to an equalization payment, based on the current estimated value of Abe’s net family property. The only issue though is whether it is appropriate to permit the advance sought at this time.

The Standing of the Defendants

32 . As I indicated earlier, Hainey J. did not deal with the issue of standing when this matter was originally in front of him but rather provided the defendants with the opportunity to appear and make submissions on the motion.

33 . As I have permitted the defendants to participate fully in the motion and have considered their submissions on the merits, it is not necessary for me to determine whether they would otherwise have standing.

The Test for an Advance

34 . There appears to be no case that sets out the test for an advance equalization payment where one spouse is deceased.

35 . I accept the plaintiff’s submission that it is appropriate to use the same test that applies where both spouses are alive. That test is set out by Karakatsanis J. (as she then was) in Laamanen v. Laamanen (2006), 2005 50808 (ON SC) , 25 R.F.L (6 th ) 441 .

36 . This is a three part test;

(i) that there is a reasonable requirement for the funds;

(ii) there is little doubt that the person making the request will receive an equalization payment of at least that amount; and

(iii) it is just in the circumstances.

37 . On the first point, Rachel has indicated that she needs the advance to fund what is complex and expensive litigation. There is little doubt that Rachel’s existing assets could be quickly consumed by costs in this litigation. In my view the need to pursue her claims in this litigation is a reasonable requirement.

38 . On the second point, Rachel has a statutory right to an eventual equalization payment. The amount of 4.5 million claimed is considered appropriate by the ETDL and this conclusion has not been challenged by the defendants. If Rachel and the ETDL agree that the amount of advance is appropriate given the size of the Estate, this is an issue as between the parties in accordance with section 7(2) of the Act – that entitlement to an equalization payment is “personal as between the spouses”.

39 . The ETDL in this case has negotiated the quantum of the claim, was not aware of the defendants’ claims when the amount was settled, revisited the claim when it became aware of the defendant’s claim and did not change its mind.

40 . As counsel for the ETDL described it during argument, the ETDL examined all options and concluded that no reason could be found to preclude the payment and the payment certainly seemed consistent with the provisions of section 5 of the Act .

41 . Thirdly, it is just in the circumstances. The defendants are neither beneficiaries or creditors at this point. The 2004 will and the cross claims are no more than unproven claims against the estate. Rachel on the other hand is a creditor and beneficiary.

42 . The defendants have not suggested that the payment of the advance will prejudice their claims against the estate but rather their concerns deal only with their ability to execute a judgment should one be obtained. In this way the defendants are no different from any other claimant facing uncertainty of execution. This cannot mean that the advance payment is unreasonable. The ETDL has undertaken to pursue any eventual overpayment should there be one.

43 . For these reasons, I see no prejudice or harm to the defendants if the advance payment is made. On the other hand, Rachel will be prejudiced in her ability to prosecute this action without the funds. The balance of harm and the reasonableness of the request favours allowing the motion.

44 . Rachel is entitled to her request for a partial payment of her equalization payment. Whereas here, the ETDU agrees, even if the defendants have standing, there is no basis for withholding the payment.

45 . As to the issue of partial summary judgment, there is no issue which requires a trial as the ETDU agrees with the plaintiffs. It is apparent that there is no issue requiring a trial between Rachel and the ETDU.

46 . Partial summary judgement should be granted providing for the advance as sought.

Outcome

47 . The motion is allowed. Order accordingly.

48 . Brief written submissions as to costs may be made within 20 days.

Whitaker, J.

Date: July 20, 2012