SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LORI LOEB, Applicant
AND
ARTHUR LOEB, Respondent
BEFORE: Justice Kane
COUNSEL: Michael J. Stangarone, for the Applicant
Andrea R. Camacho, for the Respondent
Michael S. Rankin, for Kamlo Holdings Limited (Non-Party Respondent)
HEARD: March 5, 2013 - The Trial Herein is scheduled to proceed at the end of May, 2013.
Amended ENDORSEMENT
The amendment occurs at para. 87 allowing both parties to submit their costs submissions.
1The applicant/mother presents a motion for an order:
a) To compel the father to answer undertakings, advisements and refusals from his May 2012 examination;
b) To compel production by the father and Kamlo Holding Limited (“Kamlo”) of some 39 documents or points of information.
2The father presents a cross motion for an order:
a) To compel the mother to answer undertakings and advisements from her May, 2012 examination.
BACKGROUND
3This action began in 2004 shortly after the parties separated. The trial was scheduled to proceed in October 2012 but was then adjourned to January 2013 and now May 2013. Eight plus years is too long and each party agrees they want the trial to proceed in May 2013.
4The remaining issue for trial is past and future spousal support. The principle question is determination of the respondent father’s past and present income.
5Interim spousal support was ordered on an annual income presumed to be $500,000. Ms. Loeb submits that the payor’s income for support purposes was and is much higher.
6This is not a case of simply considering the father’s personal income tax returns and Notices of Assessment. Mr. Loeb, together with his father and two brothers, have over the years built a very successful business involving the ownership and development of real property. That business is carried on through a number of operational and holding companies, trusts and joint ventures with third parties.
7In addition to income from employment with one or more of these corporations, Mr. Loeb in the past received compensation and benefits in the form of dividends, loans and business expenses. The extent of those and obtaining disclosure from this group of companies or trusts is the reason for this motion on the eve of trial.
8Historically, loans were extended to Mr. Loeb by one or more of this group of companies. Mr. Loeb in this action declared that the companies, controlled by his father and or his brothers, announced that no further money would be lent to him and he was required to repay outstanding loans to these corporations. Mr. Loeb advised that there was no documentation to evidence these two decisions by the lender corporations.
9This original version of this motion was presented on August 30, 2012. It was adjourned at the request of Mr. Loeb to September 7, 2012 and adjourned again to March 5, 2013. Mr. Loeb filed extensive responding materials to this motion along with his cross motion on February 27, 2013, six days before the date of argument. Mr. Loeb argues that Ms. Loeb has delayed proceedings herein continuously.
BVI and MPI
10Ms. Brent (“BVI”) was originally retained by both parties to assist in a business valuation and calculation of Mr. Loeb’s income. The joint retainer did not work. BVI continued thereafter to act solely for Mr. Loeb. BVI has now taken upon itself to release work product performed exclusively for Ms. Loeb. BVI is precariously close to entering the fray.
11Ms. Loeb retained a separate valuator, Mr. DeBresser (“MPI”), as her expert to conduct a study of the corporate/estate structure and determine Mr. Loeb’s current and past income to enable the court to determine spousal support.
12MPI issued a list of disclosure documents it needed to examine in December 2011. A number of those information requests have not yet been provided. MPI’s opinion and report is not yet complete.
13Mr. Loeb, in relation to several documents requested, argues he cannot produce them as he does not control the company or the trust and/or the items requested are irrelevant to the income determination issue.
14Mr. Loeb argues further that the applicant has delayed too long, the trial must proceed, with or without a report from MPI.
15Kamlo takes the position that it will produce no more information from the subject group of companies and trusts. Kamlo and Mr. Loeb submit that Ms. Lobe is by res judicata, prevented from seeking any remaining information of MPI’s December, 2011 list.
16Ms. Brent was permitted to meet with corporate officials in preparation of its reports. MPI have been denied that opportunity.
17It is alleged that BVI worked within the limitations placed upon it by Mr. Loeb as to what it may see and what kind of support documentation it may examine to verify the accuracy of statements as to things such as expenses, reimbursement of expenses, corporate loans to shareholders and directors, loan history, availability of loans and repayment obligations.
18Ms. Loeb argues BVI has not tested the information given, such as by review of documents, corporate credit card expenses and personal bank records.
19Ms. Loeb alleges that prior to separation, Mr. Loeb frequently arranged within this corporate structure for the expensing and payment, by one or more corporations, of the renovation costs to their home.
20Mr. Loeb, it is alleged, disclosed several internal ledgers to BVI, delayed production of same to MPI and will not produce all general ledgers requested by MPI.
21Mr. Loeb cites the substantial legal fees he has incurred in this litigation. It later appeared that those costs, or large portions thereof, have been paid by one or more corporations until 2011. Ms. Loeb argues she needs the source documents to test that assertion as this payor is declaring these as ongoing expenses.
22BVI has issued the following reports to determine Mr. Loeb’s income in order to calculate spousal support, namely:
September, 2005 – Brent’s Preliminary Income Calculations – 2002, 2003 and 2004;
August 26, 2010 - Brent’s Draft Adjusted Income Calculations – 2005, 2006, 2007, 2008 and 2009;
June 27, 2012 – Brent’s Adjusted Income Calculations – 2005 to 2008 and 2009, 2010 and 2011;
Ms. Brent’s Affidavit dated February 27, 2013.
23Mr. Loeb, at the time, declared his 2006 income to be $470,000. In 2008, he acknowledged he had received capital dividends from Artco, between 2005 and 2008, totalling $1,023,000. That amount grossed up apparently amounts to some $ 1,900,000.
24BVI, in its draft August 2010 report, states Mr. Loeb’s Line 150 income in 2006 was $547,000, while his adjusted income excluding non-recurring items in 2006 was $945,000.
25BVI reports that Mr. Loeb’s adjusted income excluding non-recurring income, from 2005 to 2011, has varied between a low of $563,000 and a high of $1,454,000.
26MPI alleges that there are discrepancies between the share registers produced by Mr. Loeb and the corporate chart prepared by BVI.
27MPI’s requests for information to determine income of Mr. Loeb consist of the following:
December 16, 2011 - Original Production Request;
November 23, 2012 - Letter to Brent from DeBresser;
August 17, 2012 - Revised Second Production Request;
August 17, 2012 – Letter to Brent repeating request for disclosure in # 3 above;
November 23, 2012 – Third Production Request;
February 19, 2013 – Fourth Production Request;
February 25, 2013 - items 8, 20, 14, 23, 26, 27, 28, 32, 33, 45, 47, 51, 52, 53, 54, 55;
March 3, 2013 - Fifth Production Request – items 3, 8, 11, 12, 14, 16, 17, 20, 23, 25 to 29, 32, 34, 36, 37, 42, 45, 46, 47, 52 to 60.
DISCLOSURE BY MR. LOEB
28Mr. Loeb and Kamlo argue that the temporary Consent Order of Sheffield J. dated January 19, 2012, disposed of the disclosure sought in the MPI request dated December 16, 2011 and prevents any further information production or remaining productions requested by MPI on December 16, 2011.
29Neither the temporary Order nor the hand written consent signed by the parties state that Ms. Loeb’s motion for much broader information relief is dismissed or withdrawn. Such disposition could, if intended, have been indicated.
30Neither Mr. Loeb nor Kamlo treated the January 19, 2012 Consent Order as a final disposition of all the information MPI requested on December 16, 2011.
31Mr. Loeb, following such consent temporary Order, provided and Kamlo permitted numerous items of disclosure, including items listed in the MPI letter of December 16, 2011 and documentation from corporations he did not control.
32In providing this corporate information post January 19, 2012, Mr. Loeb was both a party to this action and an Officer, Director and/or a non-controlling Shareholder of several of the corporations providing the information.
33Disclosure subsequent to January 19, 2012 includes:
- October 11, 2012 - Disclosure Reply by Mr. Loeb producing:
Share Purchase Agreement between Kamlo and the father;
Share Purchase Agreement between Ambassador and the father;
One Directors Resolutions from Kamlo and Ambassador regarding redemption of shares;
Financial Statements from 2001 to 2004 of Ambassador, Artco, Kamlo and 1395165 (01 to 04);
996826 (01-04) Financial Statements of Iber Road Joint Venture for 01 to 03;
Corporate tax returns for 1395165 (01 to 04) and Artco (01 to 11);
T- 3 Trust Income Tax Return (03) and Statement of the Trust Account Balance (at inception and current);
Notice that further disclosure was being compiled for presentment.
December 21, 2012. Enclosed amended corporate chart, Kamlo Shareholder Agreement, Mr. Loeb’s shareholder loan schedules with Artco and 1395165 and Articles of Amendment of Ambassador.
February 21, 2013. Enclosed shareholder loan schedules from 1395165 and Kamlo Co-Tenancy pertaining to father and dividends payment schedule by 1395165, 2001 to date.
34It is to be noted regarding the above sources of disclosure that Mr. Loeb apparently does not have voting control of Kamlo, Ambassador Artco, T-3 Trust or Iber Road Joint Venture. Notwithstanding that lack of voting control, it appears he and those controlling those corporations considered the information released relevant to determine his level of income and producible.
35The above post January 19, 2012 disclosure demonstrates Mr. Loeb and Kamlo did not consider the January 19, 2012 Consent Order as a final disposition of MPI’s December, 2011 disclosure request. Kamlo, in addition, is not a signatory to the consent resulting in the January 19, 2012 temporary Order.
36The Consent Order did not determine finally what is producible. It has not be treated by anyone as such since its issuance. Res judicata does not apply in favor of Mr. Loeb or the corporate/trust group.
LEGAL PRINCIPLES
Family Law Rules
37The relevant rules on this motion are:
R. 2(2) and (3) – Court is to deal with cases like this justly to each party and appropriate to the level of complexity but subject to the demands by the volume of other cases.
R. 19(1) – Parties must list documents in their control, or available on request, in their affidavit of documents.
R. 19(11) – Documents available only from non-parties, without which it would produce unfairness to a party, may be ordered to be produced for examination and copying.
R. 20(5) – Third party production orders and examination of are also available if otherwise unavailable and needed for fairness, subject to consideration of delay and expense.
Caselaw
38Relationship of the third party to one or more of the parties is a relevant consideration: see Godwin v. Bryceland, 2008 ONCJ 495, 60 R.F.L. (6th) 233, and Ontario (Attorney General) v. Ballard Estate (1995), 26 O.R. (3d) 39 (C.A.).
39Necessity as to an issue in the case must be demonstrated: see Santill v. Piselli, 2010 ONSC 2874, 87 R.F.L. (6th) 135, and Bennie v. Tersigni, 2011 ONCJ 626. It appears that further disclosure production is required to enable MPI to complete its report and pemit the applicant to participate fairly in the trial.
40The test of unfairness and necessity are established if there is evidence one party is hiding information or failing to disclose information material to the issue in dispute: see Marcoccia v. Marcoccia, 2009 ONCA 162, 63 R.F.L. (6th) 287. Mr. Loeb has in the past been less than forthcoming in producing relevant information.
41Disclosure of material information from third parties may shorten a trial if produced beforehand: see Bennie v. Tersigni, 2011 ONCJ 626.
42It is not uncommon in family law litigation that family members and their businesses will align themselves so as to support and protect a family member defending a support or property claim, see Hagley-Holmes v. Hagley (2005), W.D.F.L. 3614, CarswellsOnt 2840, Noik v. Noik (2001), 14 R.F.L. (5th) 370 (Ont Sup. Ct.) and Himel v. Greenberg, 2010 ONSC 4084, 93 R.F.L. (6th) 384. As demonstrated by Kamlo, such alignment has occurred here to protect the respondent.
43The scope of document production articulated under the Federal Child Support Guidelines, S.O.R./97-175, as am. (“Guidelines”), for employed parties is not, depending on the circumstances, the maximum level of production obtainable.
ANALYSIS
44Subsection 21(2) of the Guidelines dealing with a spouse controlling a corporation does not address spouses who have an interest but not control.
45It would appear that ss. 16 and 21(1) and (2) of the Guidelines create automatic and minimum levels of information production, not a ceiling.
46Proportionality is not a foreign principle to family law litigation. Accepting its application, the layers of corporate and trust involvement and impact on the respondent’s income and expenses in this case require extensive disclosure. Ms. Loeb is not responsible for this increased work created by the Loeb corporate and trust structure.
47The layers of corporations in this case extend from those in which Mr. Loeb owns some or all of the shares, is an employee, is a Director or Officer, down to partially or fully owned subsidiaries and to corporations or partnerships in which joint ventures are carried on. The likely direct impact on the respondent’s salary likely decreases as one descends the layers of this corporate/trust group.
48What is fair, relevant and needs to be produced increases with the complexity of the financial and business circumstances of the parties. Mr. Loeb’s financial matters are complex involving a number of trusts and sophisticated corporations. The rights of the payee to information increases by necessity.
49Mr. Loeb has access to all the information sought and more. He has an information and accessibility advantage over Ms. Loeb in this action where the very issue is his past and current level of income.
50If there is shifting of income to limit the exposure of Mr. Loeb, it is most likely to involve his father or two brothers.
51To the extent Mr. Loeb does not control a corporation or trust, he is a Director and/or Officer of several of these entities which entitles him to access information beyond the access rights of a minority shareholders in a corporation. It is unlikely that Mr. Loeb’s father or brothers would deny him access to the books and records of these entities.
52Minute books containing Resolutions of Directors and Shareholders are informative and corroborative of elements including compensation and benefits. MPI may obtain copies of portions considered relevant.
53BVI has been afforded more access and disclosure then MPI from this corporate and trust group.
54Relevancy will be clearer to the trial judge. A court at this stage should be cautious against denying access to information which may be relevant unless its lack of relevance is apparent or established.
55There remains 2.5 months until trial. Conducting a full forensic audit of the full group of corporations, trusts and limited partnerships is not required to inform Ms. Loeb or the court as to the income level of the respondent. The remaining time until trial prevents that level of audit in any event.
DOCUMENT PRODUCTION
56The production hereby ordered is described in the chart in Ms. Loeb’s Factum at para. 95 (hereinafter referred to as “A”) and the updated letter from MPI to applicant’s counsel dated March 3, 2013, with appendix, (hereinafter both referred to as “B”). The numbers below refer to the same numbers in A and B.
57The obligation to produce, as articulated below, is against Mr. Loeb and Kamlo to the extent that the documents and information exists.
#3 - The corporate chart must be produced and should have been provided years ago. It will contain the detail current to March 5, 2013, as described in B.
58#3 is background summary information which will be of assistance to the court. Inclusion of other shareholders who are family members will be of assistance in the event of differential treatment or income to Mr. Loeb prior to and since the date of separation. Absence of control by the respondent is not necessarily reflective of consideration levels flowing to him.
#8 and #20 - Production hereby ordered of copies of the T-4 slips and summaries from Ambassador and Artco but only for the respondent, his father and his brothers for the period 2003 to 2011.
#11 – Denied as unnecessary.
#12 – Produce the information requested in #12(c) of B but not where the expense is allocated within a company.
59Reimbursement of expenses may not equate to income but, at a minimum, it reduces expenses claimed and is relevant.
#14 – The general ledgers in B are to be produced but restricted to expense payments paid to or for the benefit of Mr. Loeb and his brothers during 2002 to 2012.
#16 – Produce the same for the period 2002 to 2012 as requested in B. Not commented upon by BVI.
#17 – Produce as described in B for the period 2002 to 2012. Not commented upon by BVI.
#20 – T-4 slips and summaries from Artco to be provided as per B for the period 2003 to 2011 and 2012, if available. Not commented upon by BVI.
#23 – Provide the shareholder loan schedules as requested in B for the respondent, his father and his two brothers for the period 2002 to 2012.
#25 – Provide details as requested in B to be provided for Mr. Loeb, his father and two brothers for the period 2002 to 2012.
#26 – MPI shall have the right to speak once in person, or by some other method as selected by MPI, to the persons identified in paragraph 11 of report of BVI identified in B. Not commented upon by BVI.
#27 – Produce same. Not commented upon by BVI.
#28 –Access granted. To be exercised in Ottawa.
#29 – Granted as per B for the period 2002. Originals to be produced in Ottawa with MPI to select copies of those required.
#32, 34, 36 and 37 - Granted as described in B but limited to the respondent, his father and his brothers and to the period 2002 to 2012. Not commented upon by BVI.
#42 – Granted as described in B but limited to corporations in which the respondent is or was an Officer, Shareholder or Director and only for the period 2002 to 2010. Not commented upon by BVI.
#45 – Granted as per B but limited to years 2004 to 2011.
#46 – Granted as described in B but limited to Mr. Loeb, his father and two brothers to show any shifts since separation.
#47 – Granted as per B but restricted to Mr. Loeb, his father and two brothers and to the years 2002 to 2012. Not commented upon by BVI.
52, 53 and 54 – Granted as per B but limited to the period 2002 to 2012.
#55 – Granted as per B but limited to the years 2003 to 2011.
#56 – Granted as per B but limited to nature of investment and classes of shares and percentages held by Artco in businesses identified, unless included in corporate chart as per #3.
#57 – Granted as per B from 2002 to date but limited to identification of who are the other partners, their relationship if any to the respondent and identification of percentage interest in LP held by 96826.
#58 – Granted but limited to the years 2009 to date.
#59 – Granted but limited to the years 2009 to present.
#60 - Granted.
60MPI is to sign a Confidentiality Agreement with terms to be agreed upon by counsel for the parties.
TIMING
61Kamlo and Mr. Loeb are ordered to provide the above ordered production to MPI no later than 17:00 hours on April 8, 2013. In the interim, the respondent and Kamlo are required to send documentation as assembled to MPI no less frequently than Wednesday of each week.
62The applicant is not responsible to pay for employees of the respondent, Kamlo, trusts or subsidiaries companies to assemble this information. The productions ordered results from the business activities and structure of the respondent. Ms. Loeb is required under the FLR to pay photocopying costs of 10 cents per page.
63MPI’s report is to be served no later than May 3, 2013.
64BVI’s reply report, if any, shall be served no later than May 22, 2013.
65Production disputes arising from this Order are to be determined in the interim via telephone conference call with Kane J. at 4:00 p.m. on dates provided by the Trial Coordinator.
APPLICANT’S UNDERTAKINGS AND REFUSALS
66Question references below refer to the question numbers from the transcript of examination of Ms. Loeb.
UNDERTAKINGS
67Questions 20, 53 and 316. Applicant to request copy of statements from financial institution and/or previous lawyers and provide to the respondent.
68Questions 248 and 258 to 263 are to be answered.
69Questions 447 to 482 are to be answered.
70Question 324 - applicant to provide detail and evidence of principal repayment.
71Question 487 - to be answered.
RESPONDENT’S UNDERTAKINGS AND REFUSALS
72Question references below refer to the question numbers from the transcript of the examination of Ms. Loeb.
REFUSALS
73Questions numbered 14, 107, 108, 134 are denied as not relevant, too broad given the singular issue of spousal support and the respondent’s income level or within the knowledge or capacity of Ms. Loeb to obtain.
74Question 101 - to be answered and documents provided if available as this relates to extent of personal costs paid by one of the Loeb Group of Corporations.
75Question 176 - Mr. Loeb is to provide applicant’s counsel with his letter requesting this information and any reply thereto. Denied beyond this point.
76Question 232 - Mr. Loeb has advised he cannot confirm whether such payments made. Therefore answered.
77Question 292 - respondent to answer this question to the extent he can.
78Question 332 - to be answered.
79Question 389 - respondent is to advise what financial arrangements he has made currently and the extent thereof for the benefit of Merissa.
80Question 390 - respondent to advise what physiotherapy costs were paid or covered by a Loeb corporation since separation.
81Questions 234, 320 to 323, 332 to 338, 359, 360, 372, 376 383, 404, 406, 418, 420 and 404 are withdrawn and will not be answered.
UNDERTAKINGS
82Question 207 - proof of payment to be provided, if available.
83Question 245 - already answered.
84Questions 254, 256, and 273 to be answered.
85No other refusals or undertakings to be answered by either party.
86Each party is to answer the above undertakings and refusals no later than April 30, 2013.
COSTS
87The applicant shall have 14 days from the release of this amended endorsement to serve and file her written submissions on costs. The respondent shall have 14 days from that date to serve and file his written submissions on costs. The applicant shall then have 7 days to serve and file a reply if she wishes to do so.
Justice Kane
Date: 20130322
Loeb v. Loeb, 2013 ONSC 1730
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: LORI LOEB, Applicant
AND
ARTHUR LOEB, Respondent
BEFORE: Judge
COUNSEL: Michael J. Strangarone, for the Applicant
Andrea R. Camacho, for the Respondent
Michael S. Rankin, for Kamlo Holdings Limited (Non-Party Respondent)
amended ENDORSEMENT
Justice Kane
Released: 20130322