Court File and Parties

KINGSTON COURT FILE NO.: 352/12 DATE: 20160613 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Heidi Springer-Koven, Applicant AND Adam Spencer Koven, Respondent

BEFORE: Mr. Justice Timothy Minnema

COUNSEL: Harold Niman, for the Applicant Lanny S. Kamin, for the Respondent Michael D. Swindley, for Rosen Energy Group Inc. (Respondent on motion)

HEARD: June 10, 2016

Endorsement

Nature of the Hearing/Issue

[1] Although there were four motions before me relating to what is the rather long and drawn out disclosure history in this file, the parties agreed that the only issue to determine was whether the request by the applicant for production from the non-parties Rosen Energy Group Inc. (“REG Inc.”) and the Bank of Montreal (“BMO”) should be granted. The respondent and bank took no position. REG Inc. opposes production of its records including those in the possession of BMO.

Background Facts

[2] The parties married in 2005, separated in October of 2009, and the application for spousal support and equalization (among other relief) was started in June of 2012. On the date of separation the respondent was the President of REG Inc. After separation, on April 18, 2013, the respondent was terminated from his position with the company by his mother, its sole shareholder. He now works as a real estate agent.

[3] The applicant indicates that it was clear to her during the marriage that the respondent had an ownership interest in the company. During these proceedings she sees more indications. First there is an application for insurance on behalf of the company wherein just over a year before separation the respondent indicated that he had 60 percent “ownership or control” of REG Inc. He does not deny signing the application, nor does he suggest that anything was added afterward. Rather he indicates that he remembers “very little about signing the policy” and contends that someone else filled in the printed portions.

[4] The second piece of evidence is a form signed by the respondent on December 4, 2008, less than a year before separation. He was applying for admission into an elite program designed for Canada’s most promising entrepreneurs called Quantum Shift. In his application, he indicated that he was “a majority shareholder” in “Rosen Tri-Heat Anglin.” As context, Rosen Fuels Limited was owned by the respondent’s mother. In 2008, it acquired Tri-Heat Anglin Energy Supply Company Inc. and a related numbered company. REG Inc. came into existence later as an amalgamation of those three companies.

[5] Somewhat similar to his explanation regarding the insurance policy, the respondent indicates that he does not recall seeing that part of the application when he signed, although there is no suggestion that content was added afterwards. He believes that the accounting firm KPMG LLP incorrectly filled it in. KPMG has provided auditing and accounting services for Rosen companies for more than 30 years.

[6] Still with respect to the Quantum Shift application, the respondent denies that he is “a majority shareholder in Rosen Tri-Heat Anglin” and an accountant from KMPG who “had involvement in the Rosen files for approximately 15 years” added that “[b]ased on my review of our files, it appears that not only was Adam not a majority shareholder in any Rosen related company … but he also was not a minority shareholder.” This has not satisfied the applicant. In reference to use of the word “shareholder”, she is clear that she is not suggesting that the respondent’s alleged ownership interest is reflected in the official Shareholder’s Register. Whatever weaknesses there are with the respondent’s and accountant’s evidence, it needs to be noted that the respondent’s mother is unequivocal where she indicates that her son has never had an “ownership interest” in REG Inc.

[7] The third piece of evidence is an ‘Undertaking and Agreement’ to BMO dated February 8, 2008 signed by the respondent and his mother. There is no way to read this document other than as a personal guarantee by the respondent to inject equity into two of the companies that were amalgamated into REG Inc. under certain conditions. The respondent’s mother claims that her son signed on behalf of the company, and not in his personal capacity. However, that is not indicated on the document. The applicant queries why an employee with no ownership interest would give a personal guarantee.

[8] As a last piece of documentary evidence, the applicant has confirmed that a Draft Shareholder’s Agreement was prepared by his father before he died. It was never executed, and may no longer exist. The respondent’s mother when questioned indicated she was unaware of it. The applicant makes the assumption that, as the sole owner of the company it must have been discussed with the respondent’s mother, and therefore her evidence cannot be believed. I am not in a good position to assess credibility, and in any event I fail to see how an unexecuted plan to transfer wealth from parents to children is probative of the respondent actually having a beneficial interest, regardless of whether the respondent’s mother was aware of it.

Law and Analysis

[9] This motion is made pursuant to Rule 19(1) and (11) of the Family Law Rules, the latter of which reads as follows:

DOCUMENT IN NON-PARTY’S CONTROL

19(11) If a document is in a non-party’s control, or is available only to the non-party, and is not protected by a legal privilege, and it would be unfair to a party to go on with the case without the document, the court may, on motion with notice served on every party and served on the non-party by special service,

(a) order the non-party to let the party examine the document and to supply the party with a copy at the legal aid rate; and

(b) order that a copy be prepared and used for all purposes of the case instead of the original. O. Reg. 114/99, r. 19 (11) .

[10] Rule 19(1) establishes that only documents relevant to an issue in the case must be produced. As there is no claim of privilege here, in summary I am required to consider whether the documents are relevant, and whether the request is necessary and fair to all parties.

Relevance

[11] If the respondent has any interest, present or future, vested or contingent, in REG Inc., that interest is obviously relevant to the property claims and to the respondent’s “means” in relation to spousal support. Simply put, the extent of the respondent’s current resources will clearly be a relevant issue at trial.

[12] REG Inc. argues that my decision should be directed by Santilli v. Piselli, 2010 ONSC 2874, where disclosure from the non-party corporation was not ordered. The facts are similar; the husband was employed by his mother’s corporation at the date of separation and there was no admitted ownership interest. While I agree with that decision, in my view it does not assist REG Inc. The court noted that the applicant wife “ appears to have concluded in her own mind, without the benefit of any evidence, that his source of funding is from his mother’s business” (paragraph 11). Here the applicant has some evidence, namely the first three documents noted, and in my view that goes beyond mere suspicion and conjecture. I do not accept that this evidence should be ignored simply because the respondent says that each document is deficient only in the places where it supports the applicant’s position. Further, the respondent’s mother’s denial of any ownership interest by her son is not determinative of the question in the face of those documents. The applicant believes that further evidence may be found in the records primarily related to Rosen Fuel Limited’s acquisition of Tri-Heat Anglin and the numbered company. Right or wrong, the documentation sought would assist in resolving the issue of whether the respondent had or has a beneficial interest in the company. In my view, it is relevant.

Necessity

[13] Necessity is established; the applicant has tried through the discovery process to obtain the documentation from the respondent but, as he is no longer an officer or director of REG Inc., it is not within his control. He indicates that he also wants to see the documents to resolve this ownership issue.

Fairness to the Moving Party

[14] The applicant has raised a serious issue as to whether her husband has undisclosed assets. It would be unfair to require her to proceed without access to documents that could shed light on this issue: see Marcoccia v. Marcoccia, 2009 ONCA 162 at paragraph 10. A court should be cautious about denying a party access to relevant information that would assist her at trial: Loeb v. Loeb, 2013 ONSC 1730 at paragraph 54.

Fairness to REG Inc.

[15] Courts have noted that non-parties whose interests are allied with the party opposing production should be more susceptible to a production order than a true “stranger” to the litigation: Ballard Estate v. Ontario (Attorney General) at paragraph 15. REG Inc. is not a true stranger, and the respondent is not opposing the production sought.

[16] REG Inc. argues that disclosure would be unfair and prejudicial because competitors and prospective interested purchasers of the company might get access to the information. In answer to that and other privacy concerns the applicant has consented to being ordered to enter into a confidentiality agreement. The respondent argued that the applicant cannot be trusted to abide her agreement given her adverse position. In my view the evidence before me does not establish a likely breach or an intent to harm the non-party.

Decision

[17] The specific order sought is not particularly broad or onerous, and its scope was not raised as an issue. I have considered all of the factors set out above and weighed the unfairness to REG Inc. and its principal, albeit with a confidentiality clause, against the unfairness to the applicant of conducting her case without the opportunity to fully explore the ownership issue. In view of the overall fairness, I order production from the non-parties as requested in the Notice of Motion at Tab 26. The applicant shall enter into a confidentiality agreement before the documents are released.

[18] The parties have now resolved all the outstanding disclosure issues except item “C” of the respondent’s Notice of Motion at Tab 29 which is adjourned on consent to the trial management conference on June 14, 2016, only to be spoken to. All the other claims in the Notices of Motion at Tabs 26, 27, 33, and 35, are withdrawn. A timeline for costs submissions can be spoken to as well at the trial management conference.

Mr. Justice Timothy Minnema Date: June 13, 2016