SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: FS-09-355254
DATE: 20130604

RE: Mary Bintas, Applicant

AND:

Dimitrios Bintas, Respondent

BEFORE: Madam Justice C. Horkins

COUNSEL:
Jaret Moldaver Counsel, for the Applicant

Andrea L. Di Battista Counsel, for the Respondent

HEARD: May 30, 2013

ENDORSEMENT

[1] The Applicant brings a motion for an order directing the Respondent and Spark Auto Electric Co. Ltd. (“Company”) to produce the disclosure requested by the Applicant’s valuator Mr. Pont of AP Valuations. As well the Applicant seeks an order severing the divorce from the corollary relief.

Divorce Issue

[2] On consent I order that the divorce be severed from the corollary relief and that the Applicant pay for the cost of the divorce.

The Disclosure Request

[3] The disclosure requested is set out in a document “updated as of June 28, 2012”. The following disclosure is requested from the respondent and Company:

Mr. Bintas (personal):

1. In 2011, Mr. Bintas reported ‘other expenses’ of $5,841 against his rental income. Please provide details and a breakdown of these expenses;

Spark Auto Electric Co. Ltd. (“SAE”):

2. We understand that SAE is a family owned and operated business. Please provide details of the relationship between the four shareholders of SAE;

3. Schedule of compensation paid to each shareholder for the fiscal years 2008 to 2011;

4. Copy of all T4s issued to shareholders for the years 2008 to 2011;

5. Explanation for the increase in accounting and legal fees in 2011 including a breakdown of who amounts were paid to and what services were provided;

6. Explanation for the year-over-year fluctuation in advertising expenses from 2008 to 2011;

7. Explanation for the year-over-year fluctuation in insurance expenses from 2008 to 2011 including a breakdown of who the amounts were paid to and what type of insurance was purchased;

8. We understand that Mr. Bintas was reimbursed for the business use of his automobile in 2009 to 2011. In this regard, please provide an explanation as to the business use of the vehicle and how the amounts were determined; and,

9. Detailed general ledgers for the fiscal years ended July 31, 2008 to 2011.

[Previously requested. We acknowledgement receipt of handwritten account summaries. Please provide complete details of all account transactions for the years 2008 to 2011. Alternatively, please provide access to all records of accounting for SAE for the years indicated above.]

[4] The Respondent is a 25% owner in the Company. It is a successful family business. The Respondent’s brother confirms that the Company remunerates family members in a manner that is not necessarily related to work performed or the interest held. The Respondent along with his family also owns a commercial property. The Respondent owns 25% of this property.

[5] The Respondent has retained an expert valuator, Philip Katz. There is no evidence on this motion from this expert aside from the fact he has been retained (the retainer is confirmed in Respondent’s counsel’s email dated August 18, 2011).

[6] In a letter dated February 14, 2012 from Mr. Moldaver to Mr. Pont, Mr. Moldaver confirms that he is retaining Mr. Pont to determine the Respondent’s income. Mr. Pont’s first request for disclosure was sent to the Respondent’s counsel on April 19, 2012. It is obvious from this request that Mr. Pont was conducting an income analysis and an analysis of the Respondent’s ownership interest in the Company. There was no reply and a follow-up request was made on May 23, 2012. A list of the information requested was attached to both letters. The list shows that the Applicant was requesting information from the Respondent and the Company and that this included information about the Respondent and related parties in the Company (i.e. the other owners). One of the requests directed to the Company was a request to produce the Company’s “detailed general ledger for the fiscal years ended July 31, 2008 to 2011”.

[7] Counsel for the Respondent replied on May 29, 2012. This letter provides various documents that were requested. This responding letter provides various personal information for the Respondent and Company information spanning the years 2008-2011. The letter states that detailed ledgers for the Company are enclosed for 2008-2011. No complaint was made about the nature of the disclosure Mr. Pont required.

[8] Mr. Moldaver replied on July 4, 2012 sending an “updated information request” from Mr. Pont. This request is the same request for information that the Applicant now seeks from the Respondent and the Company on this motion. Obviously Mr. Pont had reviewed the May 29, 2012 disclosure and had decided that it was not complete and further disclosure was required. For example, he states in his list that he received “hand written account summaries” not the “detailed ledgers” for 2008-2011 that he had requested.

[9] Counsel for the Respondent replied on July 31, 2012 on behalf the Respondent only and gave an answer to item 1 on the disclosure request. She advised that counsel for the Company would respond to the balance of the items. The answer to item 1 is incomplete. There is no breakdown of the $5841 “other expense” that Mr. Pont requested.

[10] Mr. Chan replied on August 1, 2012 on behalf of the Company. He questioned why such information was being requested if Mr. Pont was only conducting a valuation of the Respondent’s interest in the company as of the date of separation in 2008.

[11] When Mr. Moldaver replied on August 31, 2012 he reminded Mr. Chan that it was his client’s right to hire a valuator to determine a party’s interest in the company and “prepare an income analysis”.

[12] At the request of the Respondent, the Applicant had previously signed a confidentiality agreement. Now Mr. Chan was requesting that the Applicant’s valuator also sign a confidentiality agreement. Mr. Chan provided a draft confidentiality agreement and it was reviewed by Mr. Pont. This draft described Mr. Pont’s work as a “limited valuation of the company”.

[13] In a letter dated September 21, 2012, Mr. Pont’s concerns were forwarded to Mr. Chan. Mr. Pont would not sign the draft confidentiality agreement because he did not know what was meant by a “limited valuation of the company” and such a phrase could possibly preclude work “including but not limited to income analysis, review of net family property item” etc.

[14] Delay followed and on December 18, 2012 Mr. Moldaver wrote to Mr. Chan stating that “if Mr. Pont’s comments are agreeable, kindly make the required changes” and forward the confidentiality agreement for final review.

[15] Various correspondence back and forth followed. At no time did the Company ever challenge the scope of Mr. Pont’s intended work or the information requested in the disclosure list provided many months before. As of January 23, 2013 Mr. Moldaver was still waiting for a final draft confidentiality agreement so that it could be signed by Mr. Pont. He expressed his frustration with the delay in his letters dated January 21 and 23, 2013 pointing out that they had spent hours and “thousands of dollars” trying to negotiate the terms of the confidentiality agreement. In both letters Mr. Moldaver stated that his client would proceed with her motion for disclosure if there wasn’t a resolution by the end of that week.

[16] Finally the confidentiality agreement was signed at the end of January 2013. Mr. Moldaver delivered a signed copy on January 31, 2013 with another copy of the disclosure request. He asked for disclosure by February 8, 2013, failing which a motion would be brought.

[17] Mr. Chan replied on February 7, 2013 and questioned why Mr. Pont required information that was not relevant to a valuation of the Respondent’s interest in the Company. While Mr. Moldaver did not reply until April 2, 2013 it was always obvious that Mr. Pont’s disclosure request covered the need to analyze the Respondent’s income. Mr. Pont explained the reasons for the disclosure in his letter of April 2, 2013 as follows:

“In order to complete our work, we require certain disclosure as outline in our schedule of preliminary information required updated as at June 28, 2012 (enclosed for your convenience). In particular, the requested information is required primarily for the purpose of determining the quantum of personal and/or discretionary expenses, if any, paid for by Spark Auto Electric Co. Ltd. (“SAE”) on behalf of Mr. Bintas in the years under review. Further, the information is required to assess the potential availability of corporate pre-tax income to Mr. Bintas.

With respect to item 1 dealing with the “other expenses” reported in 2011 against Mr. Bintas’ rental income, we note that an email from Ms. Di Battista dated July 31, 2012 advises that the expenses represent cumulative interest on a business loan that has been serviced by Mr. Bintas, but which was not claimed for the three years preceding 2011. In this regard, we ask that Mr. Bintas provide supporting documentation (i.e. bank statements, loan records, etc.) for the quantum of interest payments made on the loan in the years 2008 to 2011 along with details of the business for which the loan was required.”

[18] In my view this is a satisfactory explanation. While it is not a detailed explanation, the type of disclosure requested is clearly relevant to the valuation and/or the income analysis. This is particularly so given that the Respondent’s income source is from the family Company.

[19] The test is some semblance of relevance. Pleadings define the scope of production. The Applicant claims that the Respondent’s family is co-operating with the Respondent to intentionally depress his income. She claims they started to do this when the family became aware of their marital difficulties. As Herman J. states in her May 27th, 2011 decision in this application, the Applicant points to “three practices that changed in 2008: income splitting with spouses stopped; no bonus was paid in 2008 and 2009; and the amount of money retained in the company increased significantly”. While the Respondent denies that his income has been intentionally depressed, the Applicant is entitled to dispute this position and pursue disclosure to assist her in this litigation. Herman J. notes at paragraph 31 of her decision that it is “unclear” if the Respondent was treated differently from other family members and if changes were made with or without knowledge of the Respondent’s marital difficulties. She states that “further disclosure and questioning are required”.

[20] As in Marcoccia v. Marcoccia 2009 ONCA 162, [2009] OJ No 729, broad disclosure is justified when there is concern about whether income has been truly and accurately reported. Counsel for the Respondent had no problem producing handwritten account summaries in response to the request for detailed general ledgers for 2008-2011 (clearly needed for an income analysis). Mr. Pont’s disclosure request was made on June 28, 2012. Counsel never questioned the relevancy of this request. Counsel for the Company is now trying to restrict (or refine this disclosure) because they argue Mr. Pont’s work is limited to a valuation of the business. This is clearly wrong and any family lawyer would know that the Applicant requires an income analysis of the Respondent’s earnings from this family Company.

[21] It is telling that the Respondent’s own valuator has not offered any evidence. If Mr. Pont’s disclosure request is not relevant, I would have expected counsel and or their valuator to articulate their position explaining this. They did not do so.

[22] Rule 19 of the Family Law Reform Act provides for disclosure of a broad range of documents “with a view to find a fair disclosure” (Cunningham v. LeFebvre [2006] OJ No 760 at 24).

[23] The disclosure requested is relevant to a material issue in this case: valuation of the Respondent 25% interest in the family Company and/or analysis of his income for the purpose of determining the proper amount of child and spousal support. It would be unfair to require the Applicant to proceed without this disclosure. Either the Respondent or the non-party Company has control over the requested disclosure. Further, such disclosure is available (See Himel v. Greenberg [2010] OJ No 4623 at 30).

Confidentiality Agreement

[24] I will deal briefly with the confidentiality agreement that Mr. Pont and A.P. Valuations signed.

[25] The Company requested this confidentiality agreement and it was signed in January 2013. The confidentiality agreement was drafted by Mr. Chan on behalf of the Company. It refers to the valuator conducting a valuation of the company. In fact the valuator is also conducting an analysis of the Respondent’s income which is obvious from the file. To avoid any further dispute about the scope of this agreement, it was agreed that all signatories to this confidentiality agreement will amend this agreement to add the following words: “The valuator is also conducting an income analysis and this agreement covers the income analysis”. The parties to the confidentiality agreement will initial this amendment within 12 days. In my view it is imperative that there be no further delay in moving this application forward. The issue of the confidentiality agreement has already consumed too much time and caused too much delay.

Conclusion

[26] The delay occasioned in this application is unfortunate. The matter must now proceed promptly. I order that the Respondent and the Company provide the disclosure requested by Mr. Pont in the list dated June 28, 2012.

[27] Order to go per paragraphs 1 and 2 of the Applicant’s Notice of Motion. Relief requested in paragraph 5 is adjourned. Applicant may seek relief in the future for costs/funding referred to in paragraph 5.

[28] Relief requested in paragraph 3 is denied. If Mr. Pont has any further disclosure requests they will be dealt with as they arise by the Respondent and company in a timely manner.

[29] I order that the parties set a timetable for moving this Application forward and file it with the court within 30 days. A settlement conference must be scheduled before the end of 2013.

[30] I order that the confidentiality agreement be amended by adding the following words: “The valuator is also conducting an income analysis and this agreement covers the income analysis”. Further, the parties to the confidentiality agreement will initial this amendment within 12 days.

[31] If parties cannot agree on costs of this motion they will exchange brief written submission that allow for a reply and deliver them to me within 30 days.

C.Horkins, J.

Date: June 4, 2013