Court File and Parties

Court File No.: FC-12-1503 Date: 2015/11/13 Superior Court of Justice – Ontario

Re: Rahul Kochar (Applicant) And: Amita Kochar (Respondent)

Before: Justice D. R. Aston

Counsel: Carol A. Crawford, for the applicant Beverley Johnston, for the respondent Philip Augustine, for the non-parties, Cuckoo Kochar, Alan Halpern and Rajiv Khare

Heard: October 15 and 16, 2015

Endorsement

Aston J.,

Introduction and Background

[1] Both sides seek further production and disclosure from the other. An ancillary issue is the respondent wife’s request to obtain evidence from non-parties under the provision of Family Law Rule 20(5).

[2] Mr. Kochar is the Vice President of Operations for a successful family business, DCR/Phoenix Group of Companies (“Phoenix Group”), which encompasses more than 30 corporations, primarily involved in land development and residential real estate. The company was established by his father, Cuckoo Kochar, who is still the President, Chief Executive Officer and controlling mind of Phoenix Group. In her request for further production and disclosure, Ms. Kochar is not just looking for information from the applicant but also requests oral discovery of Cuckoo Kochar and two senior officers of Phoenix Group, Alan Halpren and Rajiv Khare. These three non-parties oppose her request for their discovery. Mr. Kochar also seeks further production and disclosure. I will address the details of what each side is asking for from the other after some comment on the broad issues and the general legal principles underlying motions of this kind.

[3] The disposition of discovery and disclosure requests requires a preliminary identification of the triable issues in order to assess the relevance of the information or evidence sought. However, it is not enough that information or evidence is technically or remotely relevant to an issue. Other considerations such as proportionality, fairness, cost, delay and interference with the privacy interests of non-parties must also be taken into account. Twenty years ago the Court of Appeal made this often quoted observation in addressing a request for production and discovery from non-parties[^1]

The discovery process must also be kept within reasonable bounds. Lengthy, some might say interminable, discoveries are far from rare in the present litigation environment…unless production from and discovery of non-parties is subject to firm controls and recognized as the exception rather than the rule, the discovery process, like Topsy will just grow and grow. The effective and efficient resolution of civil law suits is not served if the discovery process takes on dimensions more akin to a public inquiry than a specific law suit.

[4] One of the major reforms that followed the subsequent work of the Task Force on the Discovery Process in Ontario was an amendment to the Rules of Civil Procedure emphasizing the “proportionality principle” as an overarching and general operative element in those rules. The proportionality principle was already enshrined in the Family Law Rules by Rule 2. Rule 2 encourages courts to downsize the procedure in any given case so long as the court is still able to justly deal with the issue raised. Comprehensive or exhaustive oral examination or production of documents may make access to justice unnecessarily expensive or protracted. Merely proving the relevance of a document may be insufficient to warrant production. To order production the court must be satisfied that it would be “unfair” to the party seeking production to go on with the case without the document or information. In essence the document must be found to be important to a party’s case, especially in relation to the amount at stake: see Himel v. Greenberg, 2010 ONSC 2325 at paras. 27 and 30 – 31.

[5] The disposition of these motions must temper full disclosure of relevant information with the proportionality principle. In Saunders v. Saunders 2015 ONSC 926, Kiteley J. addressed motions very similar to those now before this court. I agree with, and adopt, her general comments in Saunders and in particular paragraphs 13 and 14 of that decision which read as follows:

Fourth, disclosure is not a weapon and is not intended to overreach. As is clear in this case and too many others before the court, the process of disclosure has become an independent battle within the overall litigation campaign.[^2] As Perell J. held in Boyd v. Fields[^3]:

Full and frank disclosure is a fundamental tenet of the Family Law Rules. However, there is also an element of proportionality, common sense, and fairness built into these rules. A party’s understandable aspiration for the utmost disclosure is not the standard. Fairness and some degree of genuine relevance, which is the ability of the evidence to contribute to the fact finding process are factors. I also observe that just as non-disclosure can be harmful to a fair trial, so can excessive disclosure be harmful because it can confuse, mislead or distract the trier of fact’s attention from the main issues and unduly occupy the trier of fact’s time and ultimately impair a fair trial.

I agree as well with the observation by Harper J. in Berta v. Berta[^4]:

The duty of all experts to the court to be neutral and objective in providing their evidence and opinions is extremely important. Being neutral and objective does not mean an expert cannot be critical and seek out relevant documents sufficient to perform their task. They must diligently review those documents and arrive at their considered opinion based on that thoughtful analysis. That does not mean that the expert starts out with the presumption that he or she will unearth every single document that in any way might tie into another document in order to conduct a “forensic type of review” in all cases. Experts must approach their task with thoroughness without having a complete disregard to the proportionality of the task the issues and the costs.

[6] In this case the respondent’s apparent litigation strategy is concerning and not irrelevant to the consideration of her requests for production and discovery. In April 2012 when the respondent learned that her husband was about to start this court proceeding, she sent an email to the applicant’s parents. She advised them that “the court will order a company valuation, a forensic accountant audit and trust disclosure”. She went on to say that if the applicant took the matter to court “the bread and butter of Miki and Zara, you and I and the lives of all the employees in the office will be gambled away” and that “the company will be exploited, and all cases are public knowledge. Everything is disclosed, and I mean everything”. In anticipation that Mr. Kochar would be starting the court proceeding on Wednesday, Ms. Kochar wrote to her in-laws “I think you should on Tuesday morning take away his car keys and car, which is company property, his cell phone, which is company property, his Amex, tell him he cannot step foot inside the office Tuesday onwards, he is fired due to this lack of judgment as a human being, he is a risk to the company, not worthy of being called your son right now…Totally abandon him”. She concluded the email with the words, “I urge you, please take this drastic step before Wednesday or all your hard work and future of the company will be sacrificed…This has to be done NOW or it will be too late”.

[7] It is reasonable to infer that the expansive, intrusive, expensive and potentially embarrassing disclosure now sought by the respondent is designed to get her in-laws to influence their son in her favour.

[8] I agree with J. Wilson J. in Zafir v. Diamond 2008, Carswell Ont. 2030 at para. 24:

The court must be vigilant to potential tactics and abuse on both sides, including potential hiding of assets…but also the tactic of involving wealthy family members in litigation in an attempt to lever a settlement.

[9] The parties married in the fall of 2004 and separated 6 ½ years later in the spring of 2011. At the time, Mr. Kochar was 32 years old and Ms. Kochar, 28. They have two children, Zara now seven years of age and Mikhil who will be six this December. The parties share parenting of the children approximately equally. Ms. Kochar remained in the matrimonial home for almost four years after the parties separated. It was sold earlier this year for approximately $400,000. In the year the parties separated, Mr. Kochar’s income, on his tax return, was $204,500. It is quite evident that his income for support purposes is somewhat higher than that. The critical question is how much more.

[10] On the motion for interim support in this proceeding, Kershman J. imputed approximately $25,000 additional income to Mr. Kochar to reflect the value of his company vehicle, cell phone and other benefits. However, Ms. Kochar continues to maintain that Mr. Kochar’s income for support purposes is more than twice as much as his tax returns show. Her belief in that regard stems mainly from the lifestyle that the parties enjoyed while they were together and which Mr. Kochar seems to have enjoyed since. A main purpose in her request for further discovery and production is to prove what she believes his true income to be.

[11] The two main issues are equalization of net family property and the determination of Mr. Kochar’s income for the purposes of spousal support and child support.

Net Family Property

[12] The respondent submits that a valuation of the Phoenix Group of Companies and the Kochar Family Trust is relevant to her claim for equalization of net family property. I disagree.

[13] The nature of the respondent’s fishing expedition, and concomitant cost, is apparent from the level of detail she wants her proposed expert to examine for each of the 30 or more companies that comprise the Phoenix Group – articles of incorporation, all historical financial statements back to 2007, shareholder agreements, a description of management personnel (with job description and particulars of their employment history and remuneration), strategic business plans, labour and employment agreements, recent budgets, details of work in progress, construction progress reports, marketing strategies and salaries and benefits of other persons holding corporate titles similar to Rahul Kochar. See Exhibits A and B to Mr. Clarke’s affidavit of February 11, 2015. The extent of the information and documentation he asks for is astoundingly beyond what is reasonable.

[14] Moreover, the applicant husband has no interest in any of the companies that comprise the Phoenix Group. He has never been a shareholder of any of them. There is some evidence he is being groomed to take over the businesses someday but on the valuation date, and even today, he has no ownership interest whatsoever. He is a salaried employee, nothing more.

[15] The respondent’s request for additional documentation and disclosure for the Kochar Family Trust is also irrelevant to the determination of net family property and too far reaching.

[16] The Kochar Family Trust was wound up on May 19, 2012, twenty-one years after the trust was created, as required by the terms of the trust. Its only asset, one common share of 871442 Ontario Inc., was distributed to Madhu Kochar, Mr. Kochar’s mother.

[17] The Kochar Family Trust has never held any asset other than one common share of this numbered company. However, Cuckoo Kochar owns shares of 871442 Ontario Inc. which give him voting control over both the numbered company and Phoenix Group. During its entire existence, no dividends were ever paid to the Kochar Family Trust, nor was any income ever earned by or distributed from that Trust. More specifically, the applicant never received any benefit from the Kochar Family Trust. The Trust was essentially dormant from its inception in 1991 until it was wound up in 2012.

[18] Mr. Polowin, one of the trustees, has deposed clearly and unambiguously that the trustees had decided to wind up the Trust and distribute its only asset to Madhu Kochar before the parties’ separation on March 11, 2011. It is significant that the decision to wind up the Kochar Family Trust, and to transfer its only asset to Mr. Kochar’s mother, was made before valuation date. This is not a case of using hindsight. The actual winding up 14 months post valuation date was simply the implementation of a decision already made. Expressed another way, the winding up of the Trust without any distribution to the applicant was foreseeable on valuation date.

[19] This evidence comes from one of the three trustees and is based on personal firsthand knowledge. It is unambiguous and dispositive of the issue of whether the husband’s net family property includes anything of value on the valuation date respecting this trust.

[20] With respect to the Kochar Family Trust, the husband’s interest is merely that of a discretionary beneficiary. The first observation I would make about his interest in the trust is that he is not even a contingent beneficiary. There is no legal precedent for the proposition that the beneficiary of a discretionary trust, without any power of appointment, has a proprietary interest in the trust for the purposes of the broad definition of property in Part II of the Family Law Act. Mr. Kochar’s “interest” is akin to the expectation of an inheritance, which has consistently been found not to form part of a spouse’s net family property. However, even if he technically has an “interest in property”, it is clear from the evidence in this case that the value to the applicant husband is nil.

[21] The value of the 2013 Kochar Family Trust, first established two years after the parties separated, and any further explanation regarding its particulars, is unnecessary and irrelevant.

[22] The respondent’s requests for information and documentation to enable her proposed expert to value the Phoenix Group or either Kochar Family Trust for the purpose of determining net family property are dismissed.

Determination of Applicant’s income

[23] The respondent’s expert witness, Mr. Clarke, deposes that detailed information and documentation on the value of the Phoenix Group of Companies is “necessary” for his determination of the applicant’s income. In his affidavit of February 11, 2015 (Tab 3, Volume 8 Continuing Record) Mr. Clarke sets out in detail an enormously long list of documents and information that he purports to need, much of it for the valuation of Phoenix Group and the Kochar Family Trust, but also significant and extensive information and documentation that he says is relevant to the determination of Mr. Kochar’s income for support purposes. I am not convinced that the information is as critical as Mr. Clarke makes it out to be.

[24] Before the parties separated, the husband’s salary with Phoenix Group was $127,931 in 2009 and $166,526 in 2010. From the time of the separation in 2011 to the present, his salary has been $204,500.00 plus benefits and perks. The suggestion that he may be underpaid in relation to the magnitude of the group of companies he works for pre-supposes that he has a choice; that he could either earn more elsewhere or that he could demand a bigger salary from his father, who ultimately determines his total remuneration.

[25] It seems obvious on the evidence that the applicant would be a fool to look for alternative employment elsewhere given his long term prospects with the Phoenix Group. The applicant admits that he has not asked for a raise since the separation in 2011. However, in addition to his salary and benefits, he has been subsidized in his living expenses to a significant degree by both his parents and the Phoenix Group. It is legitimate to delve into that subsidy.

[26] Mr. Kochar drives a Porsche Cayenne which Phoenix Group leases for $3700 per month. Phoenix Group also pays gas and servicing costs, maintenance, repair and vehicle insurance. The business also pays for Mr. Kochar’s cell phone and allows him access to the corporate suite at Canadian Tire place. Mr. Kochar admits that the personal benefit portion derived from these company paid expenses ought to be imputed to him for support purposes. The parties disagree on the quantification of the personal benefits, but the particular costs have been provided.

[27] In addition, Mr. Kochar has a corporate American Express card which he routinely presents to Phoenix Group for payment, in whole or in part. A Phoenix Group employee decides which items are properly business expenses. It reimburses Mr. Kochar for business expenses. To the extent that those expenses are a business expense, not a personal benefit, no income would be imputed to Mr. Kochar. However, it seems that many items not characterized as business expenses are paid directly or indirectly by his father, Cuckoo Kochar. In a similar vein, there seems to be a history of other receipts, other than just those charged to the corporate American Express card, which are treated in similar fashion, including meals and entertainment. During the marriage, Ms. Kochar says she was told that all expenses for the former matrimonial home like bedding, towels, lamps, furniture, groceries, alcohol for personal consumption, garden supplies and the like were expensed through Phoenix Group. She says she was directed to keep receipts for groceries and furniture and to submit them to the bookkeeper for the Phoenix Group for reimbursement. Mr. Kochar refutes that evidence. However, a review of the transcript of Mr. Kochar’s questioning demonstrates that his personal spending and his corporate spending are intertwined and that he effectively receives reimbursement, directly or indirectly, for many personal expenses. There is evidence that Mr. Kochar’s parents pay personal expenses directly for his benefit, such as private school costs for the children.

[28] In Whelan v. O’Connor, (2006) RFL (6th) 433 at para. 21, Mackinnon J. distilled the case law on the question of whether, and when, gifts received from another family member ought to be considered as income for support purposes. At this juncture, the only issue is whether a trial judge might impute income to the applicant (or to the respondent for that matter) having regard to the legal test in Whelan. It is germane to the determination of the husband’s income in this case that he be required to reveal particulars of all “gifts” to him from his parents or from the corporations his father controls in the form of personal expenses paid for by Cuckoo Kochar or a Phoenix Group company.

[29] The respondent “suspects” that the applicant’s personal legal fees in this case have been paid by Phoenix Group and expensed as business expenses. Mr. Kochar has deposed that his father paid those legal fees, as a loan to him. The wife’s request for proof of who paid the husband’s legal fees, and whether they were expensed by Phoenix Group, is not relevant if paid as a loan. Moreover, her request seems to be based more on the respondent’s litigation strategy, referred to earlier, rather than any income attribution claim. This particular request crosses a line, and is refused.

[30] It is legitimate to enquire more deeply into the financial assistance Mr. Kochar has received from his parents and the Phoenix Group, but the wife’s request for information and documentation goes too far. The probative value of a full blown valuation of the Phoenix Group of companies or the Kochar Family Trust does not justify the cost of that line of enquiry for the inferential impact it might lend to the assessment of Mr. Kochar’s income for support purposes. In the disposition to follow, selective limited disclosure will be ordered in a manner that balances the probative value with the cost and delay that would occur as a consequence of the wide open expansive disclosure Mr. Clarke would need in a perfect world.

Disposition

Applicant’s Undertakings

[31] All the applicant’s undertakings have been fulfilled.

Applicant’s Objections and Refusals

[32] With respect to all credit card charges related to the Revelstoke residence the applicant is to identify which charges are personal to him and which are personal to his father and why.

[33] The respondent seeks copies of the applicant’s corporate credit card statements for the period January 1, 2009 forward (transcript page 66 questions 4 to 8). The applicant has subsequently provided those statements for the period January 2010 to March 2014. The only dispute outstanding is whether the applicant ought to provide the corporate credit card statements for the calendar year 2009. Though the parties did not separate until the Spring of 2011, I find that the probative value of the 2009 statements may justify the cost of ordering this additional production from April 1, 2009 forward.

[34] The applicant is to provide third-party confirmation of the account numbers of all credit cards for which he has submitted statements to Phoenix Group for reimbursement or payment for the period April 1, 2009 to the present, with particulars of the dates covered by each account.

[35] If he has not already done so, the applicant is to produce all corporate credit card statements for cards he used for the period April 1, 2009 to April 1, 2011, together with particulars of which items he paid personally, in whole or in part, without reimbursement.

[36] The applicant was asked to produce credit card statements for the wife’s corporate Amex card during the period of time she was employed by Phoenix Group. The applicant takes the position that these are irrelevant to the determination of Mr. Kochar’s income for support purposes. I disagree. They may shed some light on lifestyle and finances before the date of separation that could assist the trial judge. The information is to be provided.

[37] In a similar vein, the applicant was asked to produce copies of the respondent’s corporate cell phone account for the period she had a cell phone paid for by Phoenix Group. It is my view that it is sufficient for a trial judge to know that she had such a cell phone provided to her without going to the actual invoices. This request is refused.

[38] The applicant was asked to provide copies of the tax returns for the Kochar Family Trust for the years 2007 to 2012. Though the applicant has previously advised that no returns were filed except for 2012 (the year the Trust was wound up), the applicant does not object to providing a copy of that 2012 return. On consent, so ordered.

[39] I have reviewed all the other objections and refusals by the applicant from his oral examinations. I find that the additional information sought by the respondent is either already answered irrelevant to the determination of Mr. Kochar’s income for support purposes or that its probative value is negligible in relation to the job it creates or the cost involved. The remaining advisements and refusals listed by the respondent need not be answered or produced by the applicant for the reasons already given earlier in these reasons with respect to relevancy and proportionality. It would not be unfair to the respondent to proceed with the case without the information and the applicant’s objections to these remaining questions are sustained.

Further disclosure by Applicant

[40] The respondent has requested that her expert Mr. Clarke be able to discuss documents listed in his letters with the external and internal accountants of Phoenix Group. This request is too open-ended. These motions will have determined what information and documentation is to be made available to Mr. Clarke. If he has specific follow-up questions that can only be answered by an internal or external accountant, those questions may be put to the applicant by way of written interrogatory, but the request for him to have open-ended access to unnamed non-parties is refused.

[41] Both sides have agreed to produce their credit card and bank statements on an ongoing basis until trial. Those documents are ordered to be produced quarterly, starting November 1, 2015 by email to the solicitor for the opposite party.

[42] The applicant submits his card statements to Phoenix Group and is reimbursed for those that are deemed to be business expenses. There is some evidence that non-business items are paid for by Phoenix Group but charged to Cuckoo Kochar’s shareholder account, relieving the applicant from payment for those particular personal expenses. On oral questioning the applicant undertook to advise of the particulars of business expenses reimbursed to him and he has fulfilled that undertaking to date. He is to continue to provide that information and documentation quarterly by email. He is also to provide particulars of all expenses incurred by him and charged to his father’s shareholder account from April 2009 to the present, and on an ongoing basis.

Respondent’s undertakings

[43] Amita Kochar is to verify and advise within 30 days whether her 2012 US tax return has been completed, or when it will be. She is to provide a copy as soon as possible.

[44] The respondent was asked to produce copies of four particular bank statements and has answered that the statements are not available to her. There is no apparent reason why these statements should be unavailable to her and it is insufficient to pass off the costs of obtaining the statements to the applicant by simply providing a direction. The respondent is ordered to produce the following:

a) her statements for BMO account number 3843-82315-456 from January 1, 2010 to the date the account was closed or proof from the bank such statements are not available;

b) statements for BMO account number 3843-8215-194 from January 1, 2010 to the date the account was closed or proof from the bank such statements are not available;

c) statements for Habib American Bank account number 701213033 for the period January 1, 2010 to March 22, 2010; and

d) statements for Habib American Bank account number 701301139D from January 1, 2010 to the present.

[45] At transcript page 43, question 231 of her oral questioning, Ms. Kochar undertook to make enquiries and advise where a $20,000 deposit to her Habib American Bank account came from in July 2010. Her answer that the funds came from her Harris private bank account is refuted by the statements subsequently produced for her Harris private bank accounts. This undertaking therefore remains unfulfilled and Ms. Kochar is to produce her BMO account statements or other evidence providing corroboration of where that $20,000 deposit came from.

[46] With respect to the undertakings given on oral questioning October 21, 2014 (as summarized at Tab D to the affidavit of Susan Rowat found at Volume 16, Tab 1 of the Continuing Record), the respondent is to satisfy the following outstanding undertakings: 1, 2, 3, 6, 38, 39, and 41.

Further disclosure by Respondent

[47] Both sides have agreed to produce their credit card and bank statements on an ongoing basis until trial. Those documents are ordered to be produced quarterly, starting November 1, 2015 by email to the solicitor for the opposite party.

[48] I have already addressed the respondent’s request for pre-separation bank account and credit card documents. The applicant seeks the same production from the respondent but he has not established why that information or documentation is relevant to any issue the trial judge will need to decide. It is not enough to say “If I have to do it, she should too.” That request is dismissed.

[49] The respondent’s unsuccessful application to lease a Tesla motor vehicle would have included financial representation on her part. The respondent is to execute whatever direction is required to enable the Tesla dealership (or other body to which that application to lease was submitted) to produce to counsel for the applicant a complete copy of that application.

[50] In her financial statements sworn July 11, 2012 and May 3, 2013, the respondent stated that she had received jewelry worth $430,000 as wedding presents prior to the date of marriage and that her jewelry on the date of separation was worth $500,000. She now claims that all her jewelry has been sold but has refused to provide any valuations or documents related to the sale or even particulars of the individual items and sale prices for each. The applicant’s request for production of the remaining jewelry in the respondent’s possession in order for him to have an independent appraisal conducted is too late. The jewelry is gone. However, it is not too late to order the respondent to provide a direction to Oliver Jewelry in Toronto that will authorize release to the applicant’s solicitor of a copy of the inventory of jewelry purchased by Oliver Jewelry from the respondent and the price paid for each piece.

[51] Except as already ordered herein, the requests for additional production and disclosure from the respondent found at Tab B of the applicant’s factum on these motions is dismissed.

Questioning non-parties

[52] Steven Pittman’s affidavit of April 2, 2015 explains the method for payment of expenses on Mr. Kochar’s corporate Amex card, a procedure followed by other employees having corporate credit cards. Employees are required to submit receipts for the charges on the card. The accounting department at Phoenix Group matches receipts with credit card statements and follows-up to obtain any missing receipts. The receipts are reviewed and sometimes questioned as to the nature and/or purpose of the charge to determine if it is a business expense or personal expense. Business expenses are reimbursed to the cardholder. In the case of Mr. Kochar, those items determined to be personal expenses are charged to Cuckoo Kochar’s shareholder loan account. I have addressed this by ordering the applicant himself to produce additional information and documentation.

[53] The extensive questioning and disclosure of non-parties as requested by the respondent would cause unacceptable delay and undue expense. That said, she is entitled to some further disclosure, though limited in scope, which the applicant might not be able to provide in a timely manner. If the disclosure and production now ordered proves to be unavailable from the applicant, it would be unfair to the respondent to carry on the case without it. The motion for discovery from non-parties is dismissed but without prejudice to the respondent’s right to bring another similar motion should the applicant fail to provide the production and disclosure now ordered.

[54] For now, the Summons to Witness served on each of the non-parties is quashed.

Other requests for relief

[55] The applicant’s request to sever and grant the divorce has already been decided, as has the respondent’s claim for life insurance as security for the husband’s support obligation.

[56] The parties have suggested there may be a benefit in having this case assigned to Master McLeod or a judge of the Family Court for case management. I will not make that order now, but encourage informal steps to accomplish that assignment.

[57] The request to consolidate this proceeding with the foreclosure proceeding is adjourned without a fixed date. It is premature to deal with that request before the pending motion for summary judgment in the foreclosure proceeding.

[58] All other requests for relief in the various motions heard October 15 and 16 are either withdrawn or dismissed based on these reasons.

[59] If the parties are unable to agree on costs of these motions, written submissions may be directed to my attention within the next 30 days.

Justice D. R. Aston

Date: November 13, 2015

[^1]: Ontario (Attorney General) v. Ballard Estate (1995), 1995 CanLII 3509 (ON CA), 26 OR 3d 39 (Ont.C.A.)

[^2]: Fuda v. Fuda, 2010 ONSC 5698 at para. 4

[^3]: [2006] O.J. No. 5762 at para. 12

[^4]: 2014 ONSC 3919 at para. 53