ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-11-00425824
DATE: 20150915

BETWEEN:

MARK RIDER
Plaintiff

– and –

STEPHEN GRANT
Defendant

Don Jack & Mark van Zandvoort, for the Plaintiff

Paul J. Pape, Tanya A. Pagliaroli & Joanna Nairn, for the Defendant

HEARD: April 13, 14, 15, 17, 20, 21, 27 & 28, 2015

REASONS FOR JUDGMENT

D. A. WILSON J.

[1] In this action, the Plaintiff Mark Rider [“Rider”] sues his former solicitor Stephen Grant [“Grant”] for negligence arising out of the preparation of a marriage contract [“the contract”] in 1999. Rider claims damages for the amounts he had to pay his former wife, Annie Russell, [“Russell”] pursuant to the terms of the marriage contract as well as the legal fees he paid in litigating the terms of the contract. Rider also claims damages arising from his alleged inability to purchase shares in a company in which he was involved such that he lost his controlling shareholder position.

Background

[2] Mark Rider is a businessman, entrepreneur who founded a corporate travel company, Rider Travel Group, in 1982. This was an extremely successful business and in 1998, Rider sold his travel business for $67 million, the amount of which was payable in two tranches: $42.6 million in 1998; and the balance of $25 million in 2000.

[3] Rider first married in 1971 in Quebec. There were no children of this marriage and it ended in divorce in 1977. In June 1990, Rider married Louise Leventhal [“Leventhal”] with whom he had a daughter, Courtney. They separated a month later in July 1990. Rider retained counsel, William Fanjoy [“Fanjoy”], and entered into a separation agreement dated May 23, 1991 [Exhibit 1, tab 2].

[4] Rider encountered problems with custody and access to his daughter and he was referred to Grant in 1995. Eventually, Rider and Leventhal resolved their issues through the execution of Minutes of Settlement in 1997, a resolution which was negotiated by Grant.

[5] Rider and Russell decided to marry and set the wedding date for June 13, 1999. Russell had an adopted daughter, Natasha, and she and Rider adopted a newborn baby, Halle, in 1999. Rider was a wealthy man by that point and he wished to have a marriage contract. Negotiations ensued with Russell’s counsel but the contract was not signed as of the wedding date. Rider and Russell married on June 13 as planned, and the marriage contract was eventually signed in December, 1999.

[6] In July 2009, Rider had a cardiac arrest and during this period of time, Russell advised Rider that she was ending the marriage. She filed an application in November 2009 requiring that Rider comply with the terms of the marriage contract. He opposed the relief sought, arguing that the marriage contract was not valid and that his net worth had diminished from $40 million at the date of marriage to approximately $18 million at the date of separation.

[7] Russell brought a motion for partial summary judgment of certain provisions in the marriage contract. The motion was heard by Justice Belobaba and in written reasons dated September 7, 2010, he granted Russell’s motion. As a result, Rider had to pay Russell approximately $5.6 million.

[8] Following the sale of his travel business, Rider was involved in a company he started called TimePlay. It was a technology start-up company and Rider was the majority shareholder. The Plaintiff asserts that as a result of having to pay Russell monies pursuant to the marriage contract he did not have the ability to participate in the further financing of the company and as a consequence, he slipped from the controlling shareholder to holding only 11% of the shares.

[9] The negligence action against Grant was commenced in May 2011 claiming damages of approximately $20 million. It is alleged that Grant was negligent in not including a “downside clause” in the marriage contract and as a result, is liable for the damages suffered by Rider.

Positions of the Parties

The Plaintiff

[10] Rider claims that he was unfamiliar with the provisions of the Family Law Act, R.S.O. 1990 c. F.3[“FLA”] and he did not understand how equalization of Net Family Property [“NFP”] worked. He retained Grant to represent him in the negotiation of a marriage contract with Russell because he had substantial wealth and needed protection. Grant was recommended to Rider as a leader in the family law field so he relied completely on his advice and recommendations.

[11] Grant knew that Rider invested in speculative stocks and new companies so he should have taken that into account when drafting the provisions of his marriage contract. Although Rider was extremely successful, his financial future was uncertain. Rider was a risk taker, an entrepreneur who liked to invest in new, unproven companies. Rider wanted to ensure his assets were protected, especially given that Russell had not been employed for a number of years and brought no assets into the marriage. He relied on Grant to ensure he secured the utmost protection for him.

[12] There was no discussion between Grant and Rider about what might occur if the Plaintiff’s net worth declined during the marriage. Grant never explained the phrase NFP and he did not review the terms of the contract with Rider prior to signing. At no time was the phrase “downside protection clause” mentioned. Rider was never advised that he would have to pay the amounts set out in the marriage contract regardless of his financial situation in the future. He understood that if his wealth declined he would not have to pay the lump sum set out in the contract.

[13] Rider’s assets were adversely affected by the downturn in the economy in 2008. His wealth diminished to $15-$18 million. It was only after Russell sued to enforce the contract that Rider learned there was protection that could have been included in the marriage contract for such catastrophic changes. Grant failed to advise him of the availability of such protection and as such, he was negligent.

The Defendant

[14] Stephen Grant was retained by the Plaintiff to draft a marriage contract; Grant was advised by Rider that the negotiations would be done between Rider and Russell. Not only was Rider an extremely sophisticated businessman, he was also experienced in family law matters, having executed a prior marriage contract and having been involved in litigation with his former spouse. Rider refused to make full financial disclosure and he negotiated the terms to be included in the contract. Grant advised him to set the $3 million aside, which was a small fraction of his net worth at the time. Rider chose not to accept that recommendation. The marriage contract that was drafted by Grant did exactly what the Plaintiff retained him to do: it protected his assets in the event of a marriage breakdown, protected him from equalization and provided certainty for the future.

[15] The Plaintiff’s credibility is seriously in dispute and he ought not to be believed. The expert evidence makes it clear that Grant’s conduct met the standard of care; even the Plaintiff’s own expert conceded that if Grant’s evidence about the events surrounding the drafting and execution of the marriage contract is accepted, there was no breach of the standard of care. In any event, the Plaintiff cannot prove he suffered any damages. The Defendant submits that the claim ought to be dismissed in its entirety.

The Evidence

Mark Rider

[16] Mark Rider was born in 1950 and is 65 years of age. After graduating as an engineer, he worked in that profession but eventually left to become an entrepreneur. He founded the Rider Travel Group in 1982; this was a corporate travel company and it became the largest of its kind in Canada. Rider spun off various divisions in the early 1990s and the company was extremely successful.

[17] In 1995, Rider experienced difficulties with Leventhal concerning custody and access to Courtney so he retained Grant to represent him. Negotiations ensued between Grant and Leventhal’s lawyer and Minutes of Settlement were signed October 16, 1997 [Exhibit 1, tab 50]. During these negotiations, there was no issue of division of net family property and Rider was unaware of how equalization worked when couples separated. In 1998, Rider sold Rider Travel Group for the sum of $67.6 million which was payable in two tranches: $42.6 million in 1998 and the balance of $25 million in 2000. He wanted to invest in start-up companies.

[18] In early 1999, Rider decided to marry Russell and wished to have a marriage contract because he had been building his net worth and felt that he needed protection. The Plaintiff asked Grant to represent him to obtain a marriage contract; no new retainer was signed. Rider told Grant about the nature of his businesses and investments and told him that he had sold Rider Travel and received the first instalment of funds. Russell was not bringing any assets with her into the marriage and had not worked for a long time, so Rider needed protection for his significant assets and he relied “utterly” on Grant in this respect. He wished to settle on a lump sum payment for spousal support and property.

[19] Rider testified that Grant never explained to him how the provisions of the Family Law Act worked nor did he explain how equalization of NFP worked. There was no discussion about what would happen in the future if Rider’s wealth increased or decreased. Rider testified that he was not aware that a provision could be inserted into the agreement that limited his requirement to pay Russell in the event of a downturn in his wealth. Rider conceded that at the time he was negotiating the marriage contract with Russell he never anticipated any financial losses. It was Rider who negotiated with Russell and advised Grant what to include in the contract.

[20] In February 1999, Rider received the first draft of the marriage contract from Grant. There were various points that were left blank as he had to discuss them with Russell, such as the quantum of spousal support and the purchase of a house for her. The agreement was not finalized by the time of the wedding on June 13, 1999, but they proceeded to get married. According to the Plaintiff, there was no discussion with Grant about the consequences of getting married without a signed marriage contract.

[21] The lawyers had discussions and on June 8 [exhibit 1, tab 84], counsel for Russell, Ms. Feldman wrote to Grant advising that there had to be changes to the draft marriage contract and she requested full financial disclosure from Rider. Feldman expressed concerns about the quantum of the lump sum support and the purchase of a house for Russell.

[22] In October, after Rider and Russell returned from their honeymoon, the discussions about the marriage contract resumed. At trial, Rider agreed his net worth was $77 million at the time his marriage contract was being negotiated, but conceded that he instructed Grant to indicate to Russell’s counsel that his net worth was at least $40 million. According to Rider, it was not that he was trying to hide his actual wealth from Russell; rather, it was impossible to put a number on his worth because of the speculative nature of his investments. Rider was adamant that he told Grant that he had invested in very speculative stocks and start-up companies. Rider was agreeable to making a payment of $3 million for spousal support and property claims and buying Russell a house in Lawrence Park.

[23] The final version of the marriage contract was signed in December 1999 [exhibit 1, tab 109]. Rider denied that Grant reviewed the terms of the contract with him before he signed it. Grant never spoke to Rider about the possibility of including a downside protection clause or what would happen in the event that Rider’s fortunes declined over the period of the marriage, despite the fact that Grant was well aware of the risky nature of Rider’s investments.

[24] Rider denied that Grant ever advised him to set aside $3 million to ensure he had the funds to make the payments under paragraph 7 of the agreement. He was not told and did not understand that he was required to make the payment to Russell in any event, regardless of his financial circumstances. It was his understanding that the agreement to pay the lump sum of $3 million and the purchase of the house set out in paragraph 7 was conditional on his net worth increasing after marriage. To put it another way, Rider testified that he had an “out” and if his assets did not increase in value by the date of separation, he would not have to make the payment.

[25] Rider was adversely affected by the financial downturn in 2008. The stock market declined and Rider’s safe asset base deteriorated. His investments in speculative stocks were worth relatively little. On July 30, 2009, he suffered a cardiac arrest and he was admitted to the Intensive Care Unit of Sunnybrook Hospital. While he was there, Russell told him that she was leaving the marriage and taking the two children.

[26] In November 2009, Russell filed a claim for payment in accordance with the executed marriage contract and brought a motion for partial summary judgment. Rider retained Harold Niman to represent him and materials were filed in opposition to the motion, including an affidavit from Rider’s accountant Jason Price.

[27] Rider testified that the first time he heard the phrase “downside clause” was at the hearing of the motion for summary judgment, when it was used by Russell’s lawyer during the motion. Russell’s lawyer submitted to the judge that a downside risk clause could have been included in the marriage contract but was not. Justice Belobaba [Exhibit 1, tab 137] rejected Rider’s argument that unanticipated circumstances had occurred since the execution of the marriage contract in that his net worth had deteriorated. Instead, he found that the formation of the contract was unimpeachable. Justice Belobaba did not accept Rider’s argument that enforcing the contract would be unconscionable and Rider was ordered to comply with the terms of the contract and he paid Russell approximately $5.6 million.

[28] As a result, Rider stated he was short on cash. He had started a company called TimePlay in 2002 and he was the Chairman and majority shareholder. In needed growth capital but because he had no funds he was unable to meet TimePlay’s funding requests in 2010 and 2011. As a result, he went from holding 53% of the shares to 11%, which is demonstrated by the schedule of investments which was filed at exhibit 1, tab 178.

[29] Rider testified that had Grant told him of the availability of a downside clause in the event of a decrease in his net worth, Rider would have asked Russell to agree to this term without financial disclosure. If she refused, he would not have married her; if they married without signing the deal and she later refused, Rider would have ended the marriage. He had retained Grant to provide him with the fullest protection possible from a marriage contract and he failed to do this.

... (continues exactly as in the source through paragraph [185] and the footnotes)

D. A. Wilson J.

Released: September 15, 2015