SUPERIOR COURT OF JUSTICE - ONTARIO
DATE: 20120210
DOCKET: 06-FD-322394 FIS
RE: Joshua Josephson, Applicant
AND:
Michelle Hanna, Respondent
AND:
Howard Creek Properties Limited, Added Party
BEFORE: Czutrin J.
COUNSEL:
Harold Niman and Deborah MacKenzie , for the Applicant
Francine Sherkin , for the Respondent
Jonathan L. Rosenstein , for the Added Party
HEARD: February 2, 2012
ENDORSEMENT
[ 1 ] While there were more issues on the motion scheduled for February 2, 2012 I heard submissions concerning the request of the Respondent wife requesting an order that the Applicant husband answer questions put to the husband either refused or partially answered and undertakings or refusals to satisfy undertakings concerning the issues related to No No Inc. (“No No”) and Howard Creek and financial disclosure questions put to Applicant relating to the issues of the husband’s ’s claim for payment pursuant to a loan agreement to cover the cost of home renovations and purchase of furnishings.
[ 2 ] In order to determine whether the orders should be made I need to revisit my previous rulings dated February 10, 2010 and December 30, 2010 but also keep in mind that relevance remains the overall governing consideration.
[ 3 ] The husband commenced this case seeking a divorce and judgment based on a Promissory Note and Loan Agreement executed by the parties.
[ 4 ] The wife defended the divorce and also disputed the Loan Agreement alleging it was invalid and unenforceable claiming “breach of good faith, breach of fiduciary duty and material misrepresentation”.
[ 5 ] In a separate civil action and in this family action, now ordered to be tried together, the wife sought damages alleging a breach of agreement between husband and wife based on her allegation that the husband promised to give her 3% of the shares of No No.
[ 6 ] The husband seeks a declaration that the wife has no interest in No No.
[ 7 ] The parties commenced cohabitation in 1999 and entered into a domestic contract that neither party calls into question.
[ 8 ] The claims made are unrelated to any claims arising out of the parties’ marriage, cohabitation, or separation, but relate to a Promissory Note and Loan Agreement and alleged agreement related to the No No shares. While they were married and cohabited while the agreement and alleged agreements were made here are no corollary claims under the Divorce Act or the Family Law Act raising issues with respect to the parties’ domestic contract.
[ 9 ] The husband moved into a home owned by the wife prior to their marriage and they entered into a Cohabitation Agreement intended, amongst other things, to protect the wife’s interest in the home. When the parties decided to renovate the home the parties entered into a loan agreement whereby the husband agreed to finance the renovations and purchase of furnishings. The documentary evidence of the loan consists of a letter, Promissory Note, a Direction and Authorization and several schedules. Parties had separate legal representation.
[ 10 ] The note provided a decreasing debt obligation by wife to the husband dependant on triggering events and length of their cohabitation.
[ 11 ] With respect to the Loan Agreement issue, the wife alleged that she would never have entered into the Agreement had she known that her husband was having an affair. She additionally raises the defence to the loan agreement and its validity claiming a breach of fiduciary duty and material misrepresentation by the undue influence in relation to the disputed Loan Agreement.
[ 12 ] While on December 30, 2008 I ruled on a promissory note disclosure request, “… the most appropriate course is to allow the fullest and most expansive questioning and disclosure consistent with the motion before me”, it cannot be read to preclude revisiting the issue based on what was asked, answered, disclosed and what further questions were asked based on relevance and proportionality.
[ 13 ] The parties’ counsel have not agreed on the wording of the order arising from my December 30, 2008 order and returned January 12, 2010. On that date, I ordered the parties to exchange undertakings and refusals and proceed to questioning.
[ 14 ] I provided that , “when the parties return to questioning after completing documentary disclosure, they can object if they are of the view that questions or undertakings have not been answered or satisfied. They can return, if necessary, to receive a ruling on the appropriateness of the question and whether the question has been answered on the undertaking satisfied.”
[ 15 ] The husband was questioned on June 2, 2010.
[ 16 ] For this ruling on the issue of the loan agreement I am only dealing with the wife’s chart commencing at page three and identified as questions 4 – 16 dealing with husband’s financial circumstances at the time, as wife’s counsel described, of the decoration, home renovations start, at the time when disputed agreement was signed and at the time of the continuing and expanding work being done.
[ 17 ] The wife alleges this goes to the husband’s wealth, “his ability to afford the decorations/renovations and his duty of utmost good faith and superior financial bargaining power”.
[ 18 ] I also am dealing with the same chart Questions 17 to 28, commencing at page 8 dealing with No No. With respect to the No No and Howard Creek Claims (the Added Party) the wife claims that the husband and or his company Howard Creek holds shares on her behalf in NO No Limited, a start up pharmaceutical company. The husband and his company deny this claim.
[ 19 ] With respect to the husband’s financial situation, if relevant, the husband was prepared to allow the wife to pursue getting more or better information through his accountant/bookkeeper to the extent they can do so without having to obtain them from third parties, provided that the wife pays their retainer and full costs for the accountant and bookkeeper regarding this task.
[ 20 ] Absent knowing the cost of this task, I am not sure the wife is prepared to accept these conditions.
[ 21 ] The husband did answer questions related to his financial position, but the wife sought back up documentation and sought to test his answers.
[ 22 ] The husband’s accountant provided a memorandum dated June 14, 2010 entitled “Net Assets”.
[ 23 ] The memorandum states, “I have attached a spreadsheet that outlines the various assets that you owned in the years 2002 – 2005”.
[ 24 ] The spreadsheet (excluding the issues between the parties) suggests net value of his assets of $575,850 in 2002 to $2,522,464 as of 2005.
[ 25 ] In order to prepare this spreadsheet, I would assume that the accountant relied on documents in his possession.
[ 26 ] If these documents are easily accessible, then it would be fair for him to produce it and for the Respondent to pay reasonable costs of locating and duplicating.
[ 27 ] While I remain unconvinced whether more detail is appropriate, I ask husband’s counsel to ask the bookkeeper and accountant whether the documents relied on for the memorandum are readily available, the cost of copying these and then for wife’s counsel to consider her willingness to pay these costs.
[ 28 ] I reviewed the proposed Amended Answers appended as of the wife’s counsel’s clerk’s affidavit as Exhibit F, in particular the paragraph commencing at paragraph 18 under the heading “Disputed Loan Agreement” which informs the relevance of the questioning and disclosure.
[ 29 ] With respect to the alleged material non-disclosure and lack of good faith, prior to a recent case on the issue of disclosure on extra-marital affair, I allowed questioning on this issue. That order remains and it will remain for the trial judge to determine relevance and what impact, if any, has to vitiating the Loan Agreement.
[ 30 ] Nothing else about the wife’s Answer would lead me to order any further financial disclosure.
[ 31 ] This ruling does not deal with disclosure requested to prove the husband’s quantification of funds paid by him pursuant to the Loan Agreement. He has the obligation to prove this claim by credible, quantifiable, admissible and understood evidence.
No No Inc. Issues:
[ 32 ] Unlike the issues related to the Loan Agreement, and while not commenting on the chances of success and the validity of the claim, as director and shareholder and given the pleadings, I am satisfied that husband is entitled to access to the documents requested and the husband should disclose same. While the undertaking to provide a letter requesting answers may have technically satisfied the specific undertaking, the purpose and underlying request I find, subject to a letter from No No’s solicitors to the contrary that may be the subject matter of a non-party motion, as outlined, starting at page 8 – 10 of the wife’s’s chart of refusals and undertaking items 17 – 28, I find items 18, 19, 20, 21, 23, 24 to be relevant and shall be satisfied within 30 days. I see no purpose served in delaying this disclosure to a finding of whether the wife has made out her claim for relief.
[ 33 ] This disclosure might address such issues between the parties as to whether the husband is able to hold his interest in trust, is able to transfer a portion of his shares and if the wife is ultimately entitled to damages in lieu of other remedies with preliminary estimate of range of values established by the disclosure
[ 34 ] This may also inform the parties of potential settlement options.
[ 35 ] Costs may be addressed on the remainder of the motion is heard.
Czutrin J.
Released: February 10, 2012