COURT FILE NO.: FS-12-7837M DATE: 20160427
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Paul Douglas Berberich Applicant
Lawrence K. Greaves, for the Applicant
- and -
Cynthia Maria Berberich Respondent
William Humphrey, for the Respondent
HEARD: April 6, 8, 11, 14, 15, 18, 19, 20, 21 & 22, 2016
REASONS FOR JUDGMENT
Conlan J.
I. Introduction
The Issue
[1] Did the husband, Paul Berberich, improperly skim money from the couple’s landscaping business? That is the main question to be decided.
The Parties
[2] Paul Berberich, the Applicant husband, is 52 years old. Cynthia Berberich (now Wand), the Respondent wife, is the same age. They have an adult daughter.
[3] The couple was married in August 1988 and separated after 23 years in August 2011. They were divorced in January 2013.
[4] The parties were at all material times equal shareholders and both directors and officers of Majestic Garden Centre & Landscaping Inc. (“Majestic”), located near Hanover, Ontario.
The Litigation History
[5] The litigation took on a torturous path from April 2012, when the husband commenced his Application, to April 2016, when the trial finally started, however, the vast majority of the issues were settled before the puck dropped.
[6] In November 2015, the wife amended her Answer. It is that pleading that formed the basis of the trial, thus, on agreement of the parties, the wife presented her case first.
[7] In her amended Answer, the wife sought an unequal division of net family property in her favour; a finding that the husband personally and his new landscaping business are liable for breach of contract, breach of trust and breach of fiduciary duty; an order that Majestic be dissolved/wound-up; and damages in the amount of $500,000.00 plus another $250,000.00 in exemplary damages (punitive and aggravated).
[8] The wife pleads and relies on section 134 of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended.
[9] A forensic accounting report placed the total figure of alleged misappropriated (at least missing) money at $178,739.00. As a result of some payments since, the wife’s current calculation is $109,500.00. She took the position at trial that the said $109,500.00 ought to be paid by the husband to her (not simply to Majestic and then be split between the parties equally).
[10] In a nutshell, the wife’s allegation is that Majestic did work for several customers who paid in cash, and that cash money was pocketed by Mr. Berberich.
[11] The husband, in his pleading in reply to the wife’s amended Answer, denies that he misappropriated any money and seeks damages from the wife in the amount of $200,000.00 for having to defend himself against what he calls slanderous allegations.
The Trial
[12] The parties brought their dispute before me in Owen Sound, and a trial was held commencing April 6, 2016 and lasting ten days, though not all consecutive. The last day of trial was April 22nd.
[13] At trial, I heard from 18 witnesses called by the wife:
(i) Herself (who also testified, very briefly, in reply);
(ii) Randy Fritz (who testified that he hired Majestic to do landscaping work at his property in Burlington in July 2011 and paid $19,000.00 for the work in the form of a money order that he gave to the husband but payable to Brian Weber, at the husband’s direction, and who testified that the husband asked him to lie about it afterwards, presumably to try to hide the money from the wife);
(iii) Leslie Fritz (Randy’s wife);
(iv) Craig Osborn (who testified that he bought some landscaping materials from Majestic in 2011, had them delivered to his property in Inverhuron and paid the husband $8,017.00 in cash, and who testified that the husband asked him to lie about it afterwards, presumably to try to hide the money from the wife);
(v) Irvin Wand (the wife’s father and owner of the property that Majestic was operated from; he had a verbal agreement with Majestic to be paid $1,000.00 per month in rent);
(vi) Robert Blackmore (who testified that he hired Majestic to do landscaping work at his property in Hanover in August 2010 and paid $11,400.00 in cash to the husband);
(vii) John Chapin (who testified that he hired Majestic to do landscaping work at his property in Bruce County in 2010 and paid about $10,000.00 in cash to the husband);
(viii) Edward King (who testified that he hired Majestic to do landscaping work at his property in Hanover in August 2010 and paid $11,000.00 in cash to the husband);
(ix) Brenda Kaufman [who testified that she purchased landscaping materials from Majestic in September 2011 and paid $1,850.00 in cash to someone (a male but not the husband) at Majestic’s business premises];
(x) Cynthia Stevens (who testified that she hired Majestic to do landscaping work at her property in Clifford in September 2010 and paid $14,750.00 in cash in total – the first payment of $7,000.00 in cash was given to a female employee, not the wife, at Majestic’s business premises, and the second payment of $7,750.00 in cash was given to the husband);
(xi) Jerry King (who testified that he hired Majestic to do landscaping work at his property in Neustadt in the spring of 2010 and paid in three parts: $3,200.00 cash given to the husband, another cash payment given to an unknown female employee at Majestic’s business premises, and a cheque in the amount of $600.00-$800.00);
(xii) Diann Vail (who was permitted to give expert opinion evidence in the field of handwriting identification and who delivered two reports which compared a known writing of the husband with other documents and found that they were all written by the same person);
(xiii) Robert Beitz (who testified that he hired Majestic to do landscaping work at his property in Chesley around the time noted on the documents marked Exhibit 24 and paid for it in three parts: $1,000.00 in cash that he gave to the husband, plus $1,500.00 in cash that his wife gave to someone working at Majestic’s business premises, plus a cheque payable to Majestic written by his wife in the amount of $4,649.75);
(xiv) James Durrer (who testified that, in 2011, he hired Majestic to do landscaping work at his property in Mildmay and paid to a female employee at Majestic’s business premises $9,500.00 in cash, which payment the husband acknowledged because he was there at the time it was made);
(xv) Kelly Grein (who testified that she hired Majestic to do landscaping work at her property in Hanover in June 2011, and her husband paid $3,000.00 in cash to Mr. Berberich, which payment he later told her he would deny in Court);
(xvi) Rod Grein (Kelly’s husband, who confirmed that he paid the $3,000.00, approximately, to the husband in cash);
(xvii) Carolynn Widdes (who testified that she hired Majestic to do landscaping work at her property in Walkerton in May 2010 and paid to the husband $7,500.00 in cash); and
(xviii) William Byron Henderson, commercial account manager at Bank of Montreal, Hanover (who testified that, in April 2012, the husband purchased a property on Highway 4 for $375,000.00, that property being worth an estimated $520,000.00 one year later, on certain assumptions).
[14] With the exception of the wife herself, all of the above witnesses were brief in their testimony at trial.
[15] I heard from 7 witnesses on behalf of the husband:
(i) Himself;
(ii) Shirley Chalmers [who worked for Majestic from 2007 to 2011 and who testified about the payment-handling procedures at the business premises under various scenarios, including (a) the landscaping customer paying cash at the garden centre in a sealed envelope and with an invoice available to review, (b) cash in an unsealed envelope and with an invoice available to review, and (c) a cash payment without any invoice available];
(iii) Angela Duck (who worked for Majestic from 2009 to 2011 and who testified about the payment-handling procedures at the business premises);
(iv) Marianne Lynch [who worked for Majestic from 1995 to 2000 and then again from 2005 to 2011 and who testified about (a) the payment-handling procedures at the business premises, (b) her contact with the parties after their separation in August 2011, and (c) over the last couple of years of Majestic’s operations, the wife’s alleged obsession with getting revenge on Mr. Berberich for his infidelity, which issue was not properly put to the wife when she testified and, thus, notwithstanding the absence of any objection raised by counsel for the wife, I have taken that evidence from Ms. Lynch with a grain of salt in that it was elicited in violation of the rule in Browne v. Dunn];
(v) Brian Weber (the husband’s life-long and close friend who testified about the bartering arrangement that he and his electrical business had with Mr. Berberich and Majestic, and who stated that Randy Fritz paid him $19,000.00 for work done by Mr. Weber for Randy and his brothers and his parents many years earlier, which evidence was contrary to that of the Fritzs);
(vi) Daniel Zondervan (who worked for Majestic in 2010 and 2011 and who testified about the payment-handling procedures at the business premises and the fact that he agreed with the husband to exchange services provided by Mr. Zondervan in relation to Majestic’s website for plants and supplies obtained by him from Majestic); and
(vii) Pauline Sargeant (who worked for Majestic in 2010 and 2011 and who testified about the payment-handling procedures at the business premises).
[16] With the exception of the husband himself, all of those witnesses were brief in their testimony at trial.
II. The Issues and the Positions of the Parties
[17] To their credit, the parties settled, before trial, all of the issues between them except for the wife’s claims raised in her amended Answer.
[18] The wife has the burden of proving those claims on a balance of probabilities.
[19] Did Paul Berberich misappropriate funds from Majestic? Specifically, did he keep for himself monies paid by customers of Majestic, to the detriment of his wife and partner in the business?
[20] Those are the questions that this Court has been tasked to determine.
[21] This is a case that turns very much on credibility. Of course, I may accept all, some or none of what any given witness has told me.
[22] It should be noted that none of the collateral witnesses called by the wife, (ii) to (xviii) above, was seriously challenged in cross-examination. Some were not cross-examined at all. Others were cross-examined very, very briefly.
[23] Other than (i) a challenge to Ms. Vail’s qualifications as an expert, which challenge I rejected, (ii) a few questions of substance to Randy Fritz about whether he owed money to Brian Weber (the person to whom the husband allegedly told Mr. Fritz to make the money order payable), which suggestion was adamantly denied by Mr. Fritz, (iii) a few questions to the wife’s father, Irvin Wand, to confirm that his discovery of the husband’s alleged extra-marital affair was what effectively ended the tenancy relationship between Irvin and Majestic, which was admitted by the witness, and (iv) some questions of clarification posed to Mr. Henderson, the evidence of the wife’s collateral witnesses went largely unchallenged.
[24] The rationale for that became clearer to me once the husband testified at trial. He flatly denied taking any money for himself that rightfully belonged to Majestic. Except for the following items, however, Mr. Berberich took no issue with what the wife’s witnesses testified to. First, his evidence contradicted that of the Fritzs in that Mr. Berberich denied that they paid anything for the work done at their property. Second, he disagreed with some minor details offered by other customers (such as where they made their cash payments but not whether the payments were in fact made). Third, he denied that certain handwriting is his, specifically the Fritz invoice dated March 25, 2012 and, in particular, the writing on that document that says “PAID $19,000”. Fourth, he denied that he ever told Mrs. Grein that he would dispute receiving payment from them if it went to court, and he denied that he ever told Mr. Osborn to lie about having done business with the husband. Fifth and finally, he denied receiving any cash from Jerry Reid at Mr. Reid’s house.
[25] In cross-examination, however, it was revealed that Mr. Berberich has not always been so agreeable with the suggestion that he did, on occasion, accept cash payments from customers of Majestic. In the past, the husband, under oath, flatly denied that (more than once).
[26] By the time of closing arguments, the wife’s position was summarized by her counsel, in writing and orally, as follows.
[27] First, the husband owes to the wife $122,340.22 as an equalization payment regarding Majestic (see Exhibit 48, with the correction noted to the value of Majestic shown on page 2 – it should be $212,000.00 rather than $215,000.00).
[28] That figure is arrived at by placing the full value of Majestic, agreed by the parties to be $212,000.00, on the husband’s side of the ledger of the Net Family Property Statement. Why? Because he essentially took Majestic in the spring of 2012, the wife argues. As of March or April 2012, the valuation date, the husband owned all of Majestic. Or, alternatively, the wife relies upon an unequal division of net family property under subsection 5(6) of the Family Law Act, R.S.O. 1990, c. F.3, as amended (“FLA”). Or, further in the alternative, the wife relies upon the oppression remedy and a court order under subsection 248(3)(j) of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended (“OBCA”).
[29] Second, the husband owes to Majestic the sum of $109,125.00 (the missing money). Why? Because he took that money for himself. Majestic would then remit to the revenue authorities HST on those unreported sales. The balance would be kept by the wife (it is argued that giving half of the balance to the husband, as an equal shareholder of the corporation, would be absurd in the face of a finding that he took the money improperly to begin with).
[30] Third and finally, the husband owes punitive damages to the wife for misappropriating Majestic’s money: subsection 248(3)(j) of the OBCA.
[31] In his closing submissions, both in writing and verbally, Mr. Greaves outlined the husband’s position as follows.
[32] First, the husband owes to the wife $12,732.99 as an equalization payment regarding Majestic (see Exhibit 63, with the following corrections noted on page 2: the removal of the $8,248.98 figure from the wife’s side of the ledger of the Net Family Property Statement; and a value of $82,000.00 for Majestic on each side of the ledger). The husband denies, on any of the three bases suggested by the wife, that the value of the business ought to be placed entirely on his side of the ledger.
[33] Second, the husband denies that he owes anything to Majestic for the missing money because he is not in any way responsible for that. In cross-examination at trial, Mr. Berberich did acknowledge that there is missing money.
[34] Third, for the same reason, the husband denies that he owes any punitive damages to the wife.
III. Analysis
Majestic’s Procedures for Handling Cash Payments on Landscaping Jobs
[35] First, it is indisputable that Majestic had less than ideal procedures in place for handling cash payments by landscaping customers.
[36] The evidence in totality reveals the following. If a landscaping customer attended at the business premises to make a payment in cash, the first step would have been to find Majestic’s copy of the invoice in the invoice book and mark it paid. The problem is that the invoice book may not be on the premises – it might be at the Berberichs’ home. The second problem is that the cash would not even be counted to make sure the amount is correct, unless the envelope was unsealed. The third difficulty is that the customer would get no receipt unless s/he had her/his own copy of the invoice that could be marked paid. The fourth problem is that cash payments would sometimes be left in the cash register drawer, under the tray, and other times would be taken to the cash box in the office upstairs, a cash box that could be accessed by anyone who knew that the key to the locked cupboard that contained it was readily available near the cash registers at the front of the building. Fifth, there was no agreement among the witnesses who testified about what exactly would be written on the envelope containing the cash or the sticky note affixed to the cash to ensure that it was properly tracked. For example, Ms. Chalmers spoke about recording the name of the customer on the envelope; Ms. Duck mentioned recording the name, invoice number and the amount of money; Ms. Lynch stated that the name, date and the amount of money would be recorded; Mr. Zondervan mentioned recording the customer’s name and the invoice number; Ms. Sargeant spoke more generically about ensuring that something was recorded to denote that job for that customer. Finally, there was no agreement among the witnesses who testified about what significance the message book had in recording cash payments for landscaping jobs. Ms. Lynch gave the impression that the message book was truly a “back-up system” for all cash payments, whether the invoice could be located or not. Others, like Ms. Chalmers, gave the impression that a cash payment would be recorded in the message book only if Majestic’s copy of the invoice could not be found in order to mark it paid.
[37] Frankly, the whole “system” for cash payments on landscaping jobs was ripe for abuse or, at least, uncertainty. And we know that things went awry. Without using the cash registers for the cash payments on landscaping jobs, and without having in place a better method to track those cash payments, money went missing. Or maybe it went missing regardless of those issues; perhaps it went missing because Mr. Berberich kept it for himself. The wife alleges the latter. The husband denies that allegation.
The Missing Money
[38] Almost all of the trial time was spent on this issue, thus, it garners the most attention in these Reasons.
[39] That money went missing is not in contention. The BDO Canada LLP (Mr. Clarke McLeod) Forensic Accounting Report (“BDO Report”), Exhibit 9, tendered on consent by both parties at the commencement of the trial, establishes that fact. And Mr. Berberich admitted that in cross-examination at trial.
[40] I did not find Mr. Berberich to be a credible or reliable witness. These are my reasons for so finding.
[41] First, the husband has been inconsistent in his evidence on some key points. For example, he was adamant at trial that he fully believed, right up until April 2, 2012, that Majestic would be operated as normal starting in April 2012, despite the parties’ separation, however, that is directly in conflict with his sworn Affidavit in November 2012, at paragraph 20, when he deposed that it was apparent to him, by the end of February 2012, that running Majestic would not work (thus, he started to explore purchasing another property to live in and to operate a new business from).
[42] In my view, at trial, the husband was trying to avoid the impression that he took steps well before April 2, 2012 to effectively move the Majestic business over to a new property and run it himself.
[43] As another example, although he readily admitted at trial to having accepted cash payments from some landscaping customers of Majestic, he flatly denied that at subparagraph 27(b) of that same November 2012 Affidavit: “[a]t no time have I been paid cash by customers of Majestic”. Mr. Berberich attempted to explain that direct contradiction by saying that, in his Affidavit, he meant that he did not accept cash payments in his personal capacity. That explanation, with respect, is absurd. There would have been no reason for the husband to have been dealing with these persons except on behalf of Majestic.
[44] Further, although he readily admitted at trial to having accepted at least two cash payments from customers at the job site (Osborn and Widdes), he flatly denied that during his questioning under oath prior to the start of the trial: Q 103 – “[d]id you ever receive cash at the job site?”; A – “[a]t the job site, no”. Again, Mr. Berberich attempted to explain that direct contradiction by saying that, during the questioning, he meant that he did not receive cash payments from customers at the job site in his personal capacity. Again, respectfully, that explanation is ridiculous. The very next question during the out-of-court examination dealt with the husband having accepted cheques from customers at the job site; he admitted that he had. That admission proves unequivocally that Mr. Berberich understood that the questions were dealing with him having accepted payments on behalf of Majestic.
[45] It seems to me that, confronted at trial with a string of credible witnesses called by the wife who gave evidence that they had indeed paid their bills in cash, Mr. Berberich changed his stance.
[46] As yet another example, in his sworn Affidavit in March 2013, at paragraph 44, the husband deposed that it was always standard operating procedure to provide a receipt to everyone who paid a landscaping bill. That is completely at odds with his trial testimony, wherein he indicated, repeatedly, that a customer who paid by cash at the business premises would not get a receipt but rather might have his/her invoice marked paid if he/she had it at the time of payment.
[47] In my view, the husband was attempting, before trial, to paint a picture that Majestic’s record-keeping for cash payments received from landscaping customers was better than it actually was.
[48] Further, Mr. Berberich was steadfast in his evidence at trial that he was not running a garden centre at his new property, located between Hanover and Walkerton, in the year 2012. Yet he advertised that very thing in the Hanover Post in April 2012. And his General Ledger for the new business clearly shows garden centre sales throughout May-November 2012.
[49] It was obvious to me that the husband was tailoring his evidence so as to not run afoul of the municipal zoning laws which prohibited him from operating a garden centre from that new property in 2012.
[50] In addition, Mr. Berberich testified at trial that the couple’s daughter never accompanied him to the Fritz property; that testimony directly conflicts with the husband’s Response to Request to Admit (Exhibit 6), number 146.
[51] My view is that the husband’s trial testimony was an effort to discredit the Fritzs, who testified that the Berberichs’ daughter was present on the date that payment for the landscaping job was made (the $19,000.00 money order payable to Mr. Weber and given to Mr. Berberich).
[52] Second, some of Mr. Berberich’s evidence is simply too hard to believe. The clearest example is his testimony that, despite the municipal zoning restriction on him operating a business from his new property in 2012, some unnamed man from the municipality visited the property in 2012 and gave to the husband a sort of implied licence to violate the law and operate the landscaping side of the business, but not a garden centre, out of sight from the highway. That seems very unlikely to me. Mr. Berberich indicated in the witness box that he would endeavour to get the name of that man from the municipality, however, we never heard the name.
[53] As another example, the husband testified that Canada Post, even before April 2, 2012 (when Mr. Berberich was kicked-off Majestic’s property by the wife’s father), denied him access to Majestic’s mailbox because the wife directed Canada Post to do so. Again, that seems very unlikely to me. The husband would have been well-known to Canada Post as a partner in the business. I am not aware of Canada Post taking “directions” from one business partner to the detriment and exclusion of the other.
[54] Further, Mr. Berberich testified that he went to the bank several weeks before his new property deal closed (on April 2, 2012) because he needed financing for a house, and specifically not for a property that he might run a business from. Why in the world would someone buy a property for close to $400,000.00 on a massive lot, in the precarious circumstances that the husband was in at the time, unless it was with a view to running a new business from that property?
[55] I find the husband’s evidence on this point incredible. As indicated above, I think that the husband was attempting at trial to avoid the impression that he took steps well before April 2, 2012 to effectively move the Majestic business over to a new property and run it himself.
[56] In addition, the husband testified at trial that he thinks that the wife sued all of these customers of Majestic in Small Claims Court knowing that they in fact had paid their bills. That makes absolutely no common sense. Why would the wife expend time and money and risk angering past and potential future customers by suing them for payments that she knew they had made? It is a silly allegation for the husband to make.
[57] As yet another example, Mr. Berberich acknowledged in cross-examination at trial that his own review of Majestic’s records confirmed that there appeared to be missing money, but he chose to do nothing about it, and in fact he chose to support the customers who were sued by the wife in Small Claims Court, because his lawyer at the time told him to “just let it be”. With respect, that makes no sense. Half of the missing money belonged to Mr. Berberich, after all.
[58] Third, Mr. Berberich was rather sloppy and careless with his evidence. For example, in examination-in-chief at trial, the husband spoke about giving some of the cash payments from landscaping customers to the wife, a statement that he had made earlier in the proceeding as well. In cross-examination at trial, however, he stated that what he actually meant was that the wife would have eventually become aware of the cash payments and not necessarily that he had given any of them directly to her.
[59] Fourth and finally, Mr. Berberich’s evidence is in conflict with the evidence at trial given by other witnesses whose testimony I readily accept. For example, Mr. Berberich denies that the $19,000.00 money order from the Fritzs to Brian Weber had anything to do with the landscaping job done for the Fritzs by Majestic. I reject that evidence. I accept the testimony of the Fritzs that they issued that money order in payment of the landscaping job and at the husband’s request. Mr. Berberich wants this Court to believe that Mr. Weber did some generic work for the Fritz family and then, ten to twelve years later, Randy Fritz suddenly decided to finally pay Mr. Weber for that work, a payment that coincidentally was made at almost the identical time that Mr. Berberich wrote out a partially completed invoice to the Fritzs for the landscaping job, and a payment that coincidentally was for the exact same amount of money, $19,000.00, that appears on the Majestic invoice issued to the Fritzs. That is a story unworthy of belief. Even Mr. Weber undercut that story when he testified at trial that he had no idea where the Fritzs came up with the sum of $19,000.00.
[60] As another example, I accept the evidence of Mr. Osborn and Mrs. Grein that Mr. Berberich made the comments to them that those witnesses testified to at trial (that the husband told Mr. Osborn to lie about having done business with the husband, and that the husband told Mrs. Grein that he would dispute receiving the cash payment if it ever went to court). The husband’s denials of having made those comments are hollow. Those two witnesses have no reason or motive to fabricate. They showed no animus towards the husband at trial. They were embarrassed to even give that evidence.
[61] As a final example on this point, I accept the evidence of the handwriting expert, Ms. Vail, that Mr. Berberich wrote the invoice to the Fritzs. The husband’s testimony that he wrote only the top portion of the document makes no sense. Why would he write an invoice with just the name of the customer and the date? Ms. Vail has years of experience in the area of forensic document examination. I accept her opinion. And I must say that even my own eyes see the striking similarities between the husband’s known handwriting and that on the invoice in question.
[62] On the totality of the evidence at trial, I find it more probable than not that Mr. Berberich took for himself at least some of the missing money in question. These are my reasons for so finding.
[63] There is not a smidgeon of evidence that the wife may have misappropriated any money from Majestic. On the contrary, she has tried, relentlessly, to recover the money since first discovering the problem. The same cannot be said for Mr. Berberich.
[64] All of the Majestic employees who testified at trial denied taking any money from the business and denied ever suspecting that another employee may have been doing so. I believe them.
[65] In general, given the frailties in the credibility and reliability of the husband’s evidence, as summarized above, wherever the uncorroborated evidence of Mr. Berberich conflicts with that of a customer who testified at trial, I prefer the evidence of the customer.
[66] Specifically, I accept the evidence of the Fritzs and reject the evidence of the husband regarding the $19,000.00 money order payable to Mr. Weber. The only reasonable inference to draw is that Mr. Berberich directed the Fritzs to make the payment to Mr. Weber in order to avoid detection by the wife. I find that the husband failed to pay any of that $19,000.00 in to Majestic. He kept the money for himself. I accept the conclusion reached at clause 37 of the expert BDO Report that “$19,000 of Majestic Funds have been diverted by Mr. Paul Berberich”.
[67] I accept the evidence of Mr. Craig Osborn and reject the evidence of Mr. Berberich about whether the husband asked Mr. Osborn to lie about having purchased stone from Majestic. The only reasonable inference to draw is that Mr. Berberich wanted to conceal the $8017.00 cash payment that he received from Mr. Osborn. I find that the husband failed to pay any of that $8017.00 in to Majestic. He kept the money for himself.
[68] I accept the uncontradicted evidence of Mr. Robert Blackmore that he paid to the husband, at the job site, $11,400.00 in cash. I accept the conclusion reached at clause 33 of the expert BDO Report that Majestic’s records do not reflect the cash from the Blackmore transaction. I reject the evidence of Mr. Berberich that he placed the money in the metal box in the upstairs office of the business premises. He kept the money for himself.
[69] I accept the evidence of Mr. Edward King that he paid to the husband, at the job site, $11,000.00 in cash. I accept the conclusion reached at clause 51 of the expert BDO Report that Majestic’s records do not reflect that cash transaction. I reject the evidence of Mr. Berberich that the said payment was made at Majestic’s business premises, and I reject the evidence of the husband that he gave the money to another staff person (Marianne). He kept the money for himself.
[70] I accept the evidence of Ms. Cynthia Stevens that she paid $7750.00 in cash to the husband at the Majestic business premises. I accept the conclusion reached at clause 39 of the expert BDO Report that Majestic’s records do not reflect that cash transaction. I reject the evidence of Mr. Berberich that he placed the money in the metal box in the upstairs office. He kept the money for himself.
[71] I accept the evidence of Mr. Jerry King that he paid to the husband, at the job site, $3200.00 in cash. I accept the conclusion reached at clause 54 of the expert BDO Report that Majestic’s records do not reflect that cash transaction. I reject the evidence of Mr. Berberich that no such payment was made to him at Mr. King’s residence. I find that the husband kept the $3200.00 for himself.
[72] I accept the evidence of Mr. Rod Grein that he paid to the husband, at the job site, $3,000.00 in cash. I accept the conclusion reached at clause 60 of the expert BDO Report that Majestic’s records do not reflect that cash transaction. I reject the evidence of Mr. Berberich that the said payment may have been made at Majestic’s business premises, and that he may have given the money to another employee. He kept the money for himself.
[73] I accept the uncontradicted evidence of Ms. Carolynn Widdes that she paid to the husband, at the job site, $7500.00 in cash. I accept the conclusion reached at clause 53 of the expert BDO Report that Majestic’s records do not reflect that cash transaction. I reject the evidence of Mr. Berberich that he put the money in the metal box in the upstairs office of the business premises. He kept the money for himself.
[74] That amounts to a total of $70,867.00 in misappropriated money that Mr. Berberich owes to Majestic.
[75] Although I find that it is possible that Mr. Berberich took for himself the rest of the missing money as well, I am unable to conclude that on a balance of probabilities.
[76] The other missing payments are different than all of the above in that they cannot be placed directly in to the hands of Mr. Berberich while he was away from others at the business premises. It may be possible that the husband was bold enough to steal money from the metal box in the upstairs office or pocket the money right in front of another employee, however, I cannot safely determine that to the requisite civil standard of proof.
[77] Let me explain further. With Mr. John Chapin, the $10,000.00 in cash was given to the husband, with others around, and Mr. Berberich actually counted the money at the front area of the Majestic store. Although the expert BDO Report concludes at clause 38 that the said payment is unaccounted for, given the shortcomings in Majestic’s procedures for handling and tracking cash payments identified above in these Reasons, the BDO Report, alone, does not satisfy me that the husband took that money for himself.
[78] With Ms. Brenda Kaufman, the $1850.00 in cash was given to an unknown male (not Mr. Berberich) at the Majestic store. And the expert BDO Report, at clause 35, draws an uncertain conclusion about whether that money is accounted for.
[79] With Ms. Cynthia Stevens, her first payment of $7000.00 in cash was given to a female employee at the Majestic store. Although the expert BDO Report concludes at clause 39 that the said payment is unaccounted for, given the shortcomings in Majestic’s procedures for handling and tracking cash payments identified above in these Reasons, the BDO Report, alone, does not satisfy me that the husband stole that money.
[80] With Mr. Jerry King, the balance of the money that he owed (on top of the $3200.00 that he paid to the husband in cash) was paid in cash to a female employee at the Majestic store and then by cheque. Although the expert BDO Report concludes at clause 54 that the said payments are unaccounted for, given the shortcomings in Majestic’s procedures for handling and tracking cash payments identified above in these Reasons, the BDO Report, alone, does not satisfy me that the husband stole that money (the remaining $2000.00). With regard to the cheque, Mr. King was uncertain about its amount, and thus, I cannot place much reliance on his evidence that he made a third payment on his account by cheque.
[81] With Mr. Robert Beitz, there were two payments: $1000.00 in cash and $1500.00 by cheque. But the expert BDO Report, at clause 56, draws an uncertain conclusion about whether those payments were deposited appropriately. Thus, I am unable to safely conclude that Mr. Berberich took that money for himself.
[82] With Mr. James Durrer, the $9500.00 in cash was paid to a female employee at the Majestic store. Although the expert BDO Report concludes at clause 59 that the said payment is unaccounted for, given the shortcomings in Majestic’s procedures for handling and tracking cash payments identified above in these Reasons, the BDO Report, alone, does not satisfy me that the husband stole that money.
[83] Finally, to the sum of $70,867.00 we must add, on consent of Mr. Berberich, the amounts that he owes to Majestic for work done for two customers, the Elliotts and the Curries, which work was contracted for and performed by Majestic but the payments for which were collected by Mr. Berberich’s new company. The Elliott amount is $1,493.00. The Currie amount is $1,401.00. That brings the total amount of money owed by the husband to Majestic to $73,761.00.
[84] That leaves only the Reid account for $2,514.00. The husband disputes that the Reids fall into the same category as the Elliotts and the Curries. I disagree. Exhibit 21 (the General Ledger for Mr. Berberich’s new company), at page 9, shows a payment from the Reids to that company in the amount of $2,514.25, which is the exact same amount as the total of the two Majestic invoices rendered to the Reids (Exhibit 22). Clearly, Mr. Berberich’s new company collected money for work done by Majestic.
[85] Thus, the sum of $2,514.00 must be added to the figure of $73,761.00. On account of the missing money, Mr. Berberich owes to Majestic a total of $76,275.00.
[86] I agree with the wife that Mr. Berberich shall pay that money, forthwith, to Majestic; Majestic will then remit to the revenue authorities HST on those unreported sales; the balance will then be kept by the wife (none of it will go to Mr. Berberich as that would reward him for his misconduct). So ordered.
Equalization of Majestic
[87] This is a simple issue to resolve. There is no need to resort to subsection 5(6) of the FLA or subsection 248(3)(j) of the OBCA.
[88] I accept the wife’s primary submission.
[89] The husband owes to the wife $122,340.22 as an equalization payment regarding Majestic. That shall be paid forthwith. So ordered.
[90] That figure is arrived at by placing the full value of Majestic, agreed by the parties to be $212,000.00, on the husband’s side of the ledger of the Net Family Property Statement.
[91] I agree with the wife that Mr. Berberich essentially took Majestic in the spring of 2012. As of April 2012, the valuation date, the husband owned all of Majestic. The following are just some of the items of evidence adduced at trial that point to that conclusion.
[92] One, Mr. Berberich’s own newspaper advertising in the spring of 2012 implied that he was effectively re-booting (my term) Majestic but from a new location and under a different name.
[93] Two, Mr. Berberich had not only offered to buy Majestic before April 2012, but his Court Application that was commenced that month sought to acquire everything from Majestic to run the business himself. Very shortly thereafter, he did, in fact, acquire much of Majestic’s equipment.
[94] Three, throughout 2012, from April onwards, Mr. Berberich ran the exact same business as Majestic, selling garden centre supplies and doing landscaping jobs, with many of the same employees from Majestic. His financials show that the new business did remarkably well in its very first year of operation. That is, in part, because Mr. Berberich himself is a talented man but also a consequence of the fact that this was not really a new business – it was Majestic being run from a new location.
[95] Four, in April 2012, Mr. Berberich transferred Majestic’s telephone and facsimile lines to his new location. And he had Majestic’s computer tower which stored information crucial to the landscaping jobs.
[96] Five, on April 2, 2012, the real estate deal for his new property closed. Even the husband’s principal financier and very close friend, Brian Weber, testified that running a business from that new location was very likely part of what spawned Mr. Berberich to investigate the market over the weeks prior to the closing date.
[97] In summary, as of April 2012, although not on paper, Mr. Berberich was, for all practical purposes, the sole owner of Majestic. Thus, the full value of the business must be attributed to the husband. To divide the amount equally between the parties, as suggested by Mr. Berberich, would distort reality on the ground as of April 2012.
Punitive Damages
[98] I decline to award to the wife anything for punitive damages.
[99] I agree with Mr. Humphrey, counsel for the wife, that punitive damages are generally awarded only where the misconduct in question would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of denunciation and deterrence. Whiten v. Pilot Insurance Co., 2002 SCC 18.
[100] Here, Mr. Berberich’s misconduct will be sufficiently denounced and deterred through the following: an Order that none of the balance of the $76,275.00 that he shall pay to Majestic on account of the missing money, after taxes are remitted, will be shared by the husband (even though he is an equal shareholder in Majestic); and an Order that the wife shall not be required to pay back to Majestic one cent from the $32,000.00 in US funds that she withdrew from Majestic’s account in April 2012 to pay for legitimate expenses incurred to track down and recover the missing money (which Order I make); and an Order for substantial indemnity costs in favour of the wife (which Order I am inclined to make, subject to receiving submissions from counsel).
[101] Those Orders will suffice. There is no need for punitive damages.
[102] The other consideration is that Mr. Berberich appears to be a good father. He is the primary parent to the couple’s daughter. I do not want to crush Mr. Berberich.
IV. Conclusion
[103] A Final Order shall issue in accordance with these Reasons. To summarize:
[104] Mr. Berberich owes to Majestic a total of $76,275.00 (the missing money).
[105] Mr. Berberich owes to the wife $122,340.22 (equalization).
[106] The wife’s claim for punitive damages is dismissed.
[107] The wife has been largely successful in the end result.
[108] If the parties cannot resolve the issue of costs between themselves (which I am inclined to award to the wife on a substantial indemnity scale), I will accept written submissions. The wife shall file within thirty days of the date of these Reasons (limited to two pages, excluding attachments such as offers to settle and dockets). The husband shall have fifteen days thereafter to file a response (limited to two pages, excluding attachments). No reply is permitted.
[109] Lastly, I want to acknowledge the professionalism and competence of both counsel throughout the trial.