ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-12-464405

DATE: 20150723

BETWEEN:

DEBORAH SUTTON
Plaintiff

– and –

RONALD BALINSKY, ALLAN LIPMAN,
ALAN RUDOLPH, LIPMAN ZENER & WAXMAN LLP and BDO CANADA LLP
Defendants

Milton A. Davis and Samantha M. Green, for the Plaintiff

William E. Pepall, Brian N. Radnoff for the Defendants Allan Lipman and
Lipman, Zener & Waxman LLP

Gavin J. Tighe and Jane. E. Sirdevan for the Defendant Ronald Balinsky

J. Gregory Richards and Marie-André Vermette for the Defendants Alan Rudolph and BDO Canada LLP

HEARD: May 11, 12 and 13, 2015

REASONS FOR JUDGMENT

SEAN F. DUNPHY, J.

[1] On May 4, 2007, Mrs. Deborah Sutton signed a marriage contract. She was 57 years of age at the time. Two days later, she left the family home and took up residence in British Columbia. She has never since returned to reside and remains separated (but not divorced) from her former spouse.

[2] Under the Marriage Contract, Mrs. Sutton waived claims to support and equalization payments in exchange for a long-term, structured stream of employment income, share redemption and enhanced pension payments coming primarily from a family-owned business as well as a 50% share of other family assets. She claims the package was represented to her at the time as having a “value” of $10.48 million whereas she only discovered in 2012 that the present value (in 2007) of the payments to be made to her after factoring in taxes and time value of money was much less: approximately $4.67 million. She claims to have been unaware of the impact of taxes or interest on the value of the settlement she accepted until she first learned the present value in February 2012 .

[3] In this action, the plaintiff alleges the agreement she made was one-sided and failed in significant ways to protect her rights as a spouse. She alleges that she did not receive adequate disclosure of material assets from her husband, that she failed to understand adequately the nature and consequences of the agreement she was entering into and in particular claims that she did not understand her rights to support and equalization of property under the Family Law Act, R.S.O. 1990, c. F-3. Instead of bringing suit against her husband to re-open the Marriage Contract on those grounds under s. 56(4) of the FLA, Mrs. Sutton has elected to sue her own lawyer on the transaction (Mr. Balinsky) as well as the legal and financial advisors of the family companies (Mr. Lipman and Mr. Rudolph respectively) who advised both spouses during the negotiation of the Marriage Contract. She alleges negligence and breaches of fiduciary duty on their part deprived her of the opportunity to receive the marriage contract she was otherwise entitled to. She claims substantial damages and will seek to argue for these based upon what she would have received in a settlement but for such negligence or breaches of duty of the defendants.

[4] She commenced these proceedings on September 27, 2012 after approximately five years of efforts to negotiate or mediate amendments and improvements to the Marriage Contract with her husband through various intermediaries and utilizing a number of legal and financial advisors. During that five year period, she sought revisions to almost every material element of the Marriage Contract with limited success.

[5] The defendants have each brought motions for summary judgment asking me to dismiss Mrs. Sutton’s action against them. They do so based on two main grounds. Firstly, they plead that Mrs. Sutton knew or ought to have known of the essential elements of her alleged claim against them more than two years prior to her decision to commence proceedings against them in 2012. For this reason, they claim that the proceeding must be dismissed as being barred pursuant to the Limitations Act, 2002, S. O. 2002, c. 24. Secondly, they claim the entire proceeding is an abuse of process because, if her allegations of lack of knowledge and understanding are true, then she has an avenue available to her under s. 56(4) of the FLA to seek redress from the very party who is actually liable to make equalization payments or contribute to her support: her husband. Thus, they claim, she has suffered no damages.

[6] The plaintiff responds to these motions alleging that the issues cannot properly be dealt with in a summary judgment proceeding without benefit of a trial to make the necessary findings of fact. She also defends the motions on the merits, claiming that she discovered the existence of her claim against these defendants only shortly before commencing this action in 2012 when she learned the present value of her settlement was less than expected and claims the right of any plaintiff to decide which of many possible defendants she chooses to pursue.

[7] Having carefully reviewed the evidence before me, and in particular the plaintiff’s own contemporary writings expressed in letters and emails, I have concluded that a trial is not necessary fairly to dispose of the matters raised by these motions having regard to the tools available to me on this motion pursuant to Rule 20.04(2.1) of the Rules of Civil Procedure.

[8] In my view, the defendants’ motions for judgment should succeed and this action must be dismissed with costs on both grounds raised.

[9] The core of Mrs. Sutton’s complaint is that she entered into an improvident Marriage Contract on May 4, 2007 that adversely affected her rights when she separated from her husband two days later. The time of execution of the Marriage Contract or, at the latest, the time of separation is when the damages, if any, occurred in relation to the acts or omissions (allegedly negligent advice or breaches of fiduciary duty) that preceded the execution of the agreement . Pursuant to s. 5(2) of the Limitations Act, Mrs. Sutton bore the onus of demonstrating the she learned of the facts giving rise to her possible claims against her professional advisors on a date which is later than May 4, 2007, which later date must be less than two years prior to her having commenced this action. To discharge that onus, the plaintiff has alleged that she only “discovered” that the value of her settlement after taxes and accounting for time-value of money was less than $10.48 million in 2012. That key fact, she claims, is what brought the existence of a possible claim against the defendants before her. On the evidence before me, that allegation of the basis of her later discovery is simply impossible to sustain and I can only find that she has failed to discharge the onus laid upon her by s. 5(2) of the Limitations Act.

[10] Within no more than six months of the date of execution of the Marriage Contract (if not prior), she certainly knew and understood that several millions of dollars in taxes would be payable out of the $10.48 million figure she claims to have believed she would receive free of tax. As well, she demonstrated in her negotiations both before and after she entered into the Marriage Contract that she had an acute understanding of the time value of money and negotiated various economic issues with that concern in mind.

[11] Whether expressed as failure to discharge her onus of establishing a later date for the actual discovery by her of her claims or as a finding that a reasonable person with her capabilities and in her circumstances would have discovered the possible claims sooner, the outcome is the same. If there is a single material fact that the plaintiff discovered within two years of bringing this action in 2012 that led to her discovery of a claim, she has been unable to articulate what that fact is beyond the patently untrue statement that she had not understood the present value of what she was receiving after tax. Well before that time, she was aware of the accurate value of the family business overall if not in granular detail. She understood its debts, its earnings and its prospects in considerable detail. She knew of her possible interest in the family trust and the nature and value of its interest in the family business. She was aware of all of the components of the settlement represented by the Marriage Contract including when they were payable, which payments were taxable and at what rate. She knew within a very few weeks of her separation that she was finding the Marriage Contract to be inadequate to her needs and exerted efforts to re-work almost every facet of it in intermittent negotiations and mediation efforts over almost five years before determining to turn to litigation. By June 2007 she had concluded that Mr. Balinsky had failed to advise her to investigate an obligation to pay insurance premiums that she decided on her own to agree to in the Marriage Contract without realizing the cost- $350,000 over 19 years. She had formed the view that Mr. Rudolph and Mr. Lipman were acting on behalf of her husband and his companies and that she could not rely upon them and so advised various new advisors she retained. She had retained her own legal and financial advisors, even if she claims to have kept them on restricted mandates to keep her costs down. She claims to have taken no steps to investigate claims or possible claims against any of the defendants despite all of this knowledge and all of this available professional help. The evidence on these matters is overwhelming and almost exclusively in her own hand. I can find no necessity for a trial to establish facts so clearly and obviously established in the plaintiff’s own words.

[12] The action must be dismissed both as having been commenced more than two years after the claims were presumed by s. 5(2) of the Limitations Act to have been discovered by the plaintiff and more than two years after a reasonable person with her knowledge and in her circumstances would have discovered the claims.

[13] I also find that the action as framed is an abuse of process and should be stayed for that reason. The plaintiff is pursuing her legal and financial advisors in damages for a remedy that ought to have been pursued, if at all, under the FLA as against her husband. It would be contrary to public policy and fundamental principles of fairness to permit the plaintiff to circumvent the FLA in this fashion. The defendants have no right of contribution or indemnity against the husband whose obligation it is to provide support or make equalization payments. Her rights to support and divisions of property arise under the FLA and should be determined under that statute and not in this collateral fashion.

[14] The facts as I have found them and more detailed reasons follow below.

... (continues verbatim exactly as provided in the source text) ...

Sean F. Dunphy, J.

Released: July 23, 2015