CITATION: Plese v. Herjavec, 2017 ONSC 5316

COURT FILE NO.: FS-15-401094

DATE: 20170907

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Diane Plese, Applicant

AND:

Robert Herjavec, Respondent

BEFORE: Kiteley J.

COUNSEL: Stephen M. Grant, Erin K. Crawford, for the Applicant

Bryan Smith, for the Respondent

HEARD: September 5, 2017

ENDORSEMENT AT SETTLEMENT CONFERENCE AND TRIAL MANAGEMENT CONFERENCE

[1] The parties married in 1990 and have three children born 1993, 1996 and 1998. The spouses separated in July 2014 and this application was issued on March 2, 2015.

[2] On November 10, 2015 I heard the applicant’s motion for temporary child support and temporary spousal support and released an endorsement dated December 3, 2015[^1] in which I ordered the respondent to pay spousal support in the amount of $124,115 per month and child support in the amount of $44,992 per month. At paragraph 52 of that endorsement I indicated that I intended the order “to be in effect for months not for years”.

[3] In an endorsement dated March 23, 2016[^2] I ordered the Respondent to pay costs of the motion in the amount of $19,199.

[4] As I had directed, on April 1, 2016 counsel and the parties attended for a case conference to establish a timetable for all events leading up to the trial “with the objective of starting the trial in 2016”. I established a timetable to ensure preparedness for the trial which I scheduled for the week of November 14, 2016 estimated at 15 days, provided that the date would be confirmed at the settlement conference on September 9, 2016 at which counsel were required to provide a list of witnesses and time estimates.

[5] On June 21, 2016 I heard submissions on the applicant’s motion for a restraining order and released an endorsement dated June 22, 2016[^3] in which I dismissed the motion pursuant to s. 12 and s. 40 and ordered the applicant to pay costs in the amount of $9500.

[6] Counsel and the parties attended on September 9, 2016 for the settlement conference. As that endorsement indicates, there were “vast differences between the parties on the value of the respondent’s income and assets” which meant the settlement conference was premature. I observed that much remained to be done if the trial proceeded on November 14. I declined to confirm it and indicated that the date remained tentative. I scheduled a conference call with counsel on September 14 for a status report on readiness for trial.

[7] On September 14, counsel advised that they had made considerable progress in agreeing to a timetable to address delivery of form 13.1, questioning, valuation reports and a combined TMC/SC. Counsel also agreed to a timetable to allow the applicant to amend her application so as to allege that she had a trust interest in certain assets. As of September 14, 2016 the list of witnesses remained to be finalized and accordingly, the trial date remained tentative. I scheduled a combined TMC/SC for October 27.

[8] On October 27, 2016 the parties and their family law counsel attended as well as Peter Roy, acting on behalf of the beneficiaries of The Robert Herjavec Family Trust (established 1996) and David Chernos, acting on behalf of the respondent in his capacity as sole Trustee of the Trust. The beneficiaries of the Trust are the applicant and the children of the applicant and respondent. There were two children at the time the trust was established and the younger child was born later. There is an issue as to whether the third child is also a beneficiary, which I need not address now and, for purposes of this endorsement, I assume that all three children are beneficiaries. All of them have reached the age of majority.

[9] As the endorsement indicates, counsel agreed that the passing of accounts ought to be heard with the family law trial and they estimated that the trial would be 20 days: allocating 5 days to the passing of accounts by the Trustee and 15 days for the family law trial. On consent I vacated the trial date of November 14, 2016 and replaced it tentatively with the week of October 2, 2017 and estimated at 20 days. I directed the parties to attend a case conference on December 22, 2016 to establish a timetable to ensure readiness for trial.

[10] On December 22, 2016 family law counsel and trust counsel attended. They had agreed to most of the procedural steps. By that point, family law counsel for the applicant had advised that his client would not amend her application to assert a trust claim. Instead, it was agreed that by April 30, 2017 the respondent would commence an Application to pass the accounts with respect to the Trust and by May 31, 2017 the applicant (respondent in that Application) would deliver a Notice of Objection on behalf of all beneficiaries. The consent order indicated that the Trust proceeding would be joined with the family law application or heard one after the other as the trial judge directed. The order also set deadlines for delivery of income reports by the applicant and the respondent as well as questioning. I scheduled a combined Settlement Conference/Trial Management Conference for September 5, 2017 from 11 to 4:00 at which time the trial date would be confirmed or vacated.

[11] On June 15, 2017 the respondent brought a motion with respect to the Fisher Island property in Florida and related relief. Harvison Young J. issued a consent order on terms.

[12] At the outset of this combined conference on September 5, 2017 I reviewed with counsel the materials that had been filed. The parties through their counsel had accomplished most of what had been ordered on consent on December 22, 2016. Valuators’ reports had been exchanged, including the last reply report the week before the conference. The respondent had attended for questioning on Friday September 1 and the morning of September 5 before the combined conference started. It was apparent that family law counsel, trust counsel, the parties and their experts had diligently attempted to comply with the ambitious schedule.

[13] There are many issues in this combined case. At this conference discussion focused on the significant difference in the valuations of the matrimonial home at valuation date; the even more significant difference in the valuations of the respondent’s shares in The Herjavec Group (THG); the accounts prepared on behalf of the Trustee; the extent to which funds held by the Trust were used by the Trustee for non-trust purposes and specifically the extent to which such funds were reflected in the value of the respondent’s shares in THG; the income of the respondent; and the duration and amount of spousal support and child support.

[14] Toward the conclusion of the combined conference I addressed the question of whether I would confirm or vacate the trial date. Family law and trust counsel for the applicant took the position that the trial date had to be vacated because the parties were not ready while family law and trust counsel for the respondent opposed an adjournment and insisted that both the Trust proceeding and the family law proceeding were trial ready.

[15] As is apparent from the foregoing, the complexity of this case has meant that I have managed the steps in the proceeding to focus on resolution either by trial or settlement. As a result of such case management I have an indepth appreciation for the complexity. I have provided feedback as warranted in the circumstances. The almost 6 hour combined conference skimmed the surface on some of the complexities.

[16] I am compelled to vacate the trial date for these reasons.

[17] First, if it were only the family law action, there would be no need to adjourn. However, as was clear from the discussion, the allegations of breach of trust could have a significant impact on the net family property: if the value of the shares of the corporation is reduced on account of the alleged wrongful payment to the corporation by the respondent out of trust funds, then it would reduce his net family property and would impact the calculation of the equalization payment including who pays who. Counsel for the Trustee has diligently prepared the accounts for passing within the timetable allowed. But all counsel and the parties need more time to assess the unique relationship between the value of the corporation for family law purposes and the alleged use of trust funds for non-trust purposes.

[18] Second, as of September 5, 2017 there has been no meaningful settlement conference. As indicated above, the settlement conference on September 9, 2016 was premature. And it is still premature. Counsel for the applicant confirmed that her last offer to settle was dated March 30, 2017 and it was withdrawn before accepted and has not been replaced or renewed. Counsel for the respondent confirmed that his client had served an offer to settle dated September 7, 2016 which was still outstanding as well as providing on February 9, 2017 a “framework for settlement”. Counsel for the applicant advised that his client would not accept the offer dated September 7, 2016. Neither party had served a formal written offer to settle all issues in the family law application and in the passing of accounts proceeding. In this combined conference the discussion focused on specific components of valuation of property or income (the trees) but given the stage they were at and the absence of offers to settle, it was well nigh impossible to discuss global settlement (the forest). In order to respect the primary objective in rule 2(2) the court must ensure the parties have had a productive settlement conference before having access to the significant judicial resources involved in a 20 day trial. In a case such as this counsel have to have the time to assess the strengths and weaknesses of their clients’ positions and develop best and worst case scenarios and that has not been possible.

[19] Third, rule 13(12) requires each party, before a settlement conference, to update the information in any financial statement that is more than 30 days old. Rule 13(13) permits questioning under rule 10 on a financial statement. Rule 23(1) directs that at least 30 days before the start of the trial the applicant shall serve and file a trial record containing, inter alia, financial statements completed not more than 30 days before the record is served. The applicant served her form 13.1 in the week preceding the combined conference. The last form 13.1 provided by the respondent is dated June 26, 2015. Counsel for the respondent has diligently prepared extensive reports on the respondent’s post separation income. But that does not eliminate compliance with rule 13(12), 13(13) and 23(1). There have been changes to his financial situation including that in 2016 he became a non-resident which attracts important income tax modifications. The trial judge must have the respondent’s evidence (supported by form 13.1) as to his current income, expenses, assets and liabilities.

[20] Fourth, I still cannot confirm the duration of the trial. This was scheduled as a combined conference but there was no detailed discussion about the witnesses to be called, whether agreed statements of fact might materially reduce the oral evidence, whether some evidence might be presented in examination in chief by affidavit, and whether the many reports by the valuators would be admitted into evidence. I could not finalize part 1 and part 2 of the Trial Scheduling Endorsement reflecting the issues and the evidence for the trial, including the relationship between the evidence on the Trust proceeding and the family law proceeding. This may be a case for a “stop watch trial” where, assuming 20 days at 5 hours per day (100 hours) the applicant who is also respondent in the Trust proceeding is allocated 50 hours and the respondent who is also the applicant in the Trust proceeding is allocated 50 hours. That discussion could not and did not take place.

[21] Fifth, the prejudice to which counsel for the respondent refers is not of the sort that would be a barrier to postponing the trial. Counsel argues that the delay will cause the respondent to incur continuing significant expert reports as to his income. The expert reports provided to date do not touch on 2017 and if the trial is adjourned to 2018, then the 4th quarter of the corporate fiscal year will be completed. As indicated above, considerable effort has been made by the respondent’s counsel and his expert valuator to fulfill the legal obligation on him to prove his income. As a condition of the adjournment sought on behalf of the applicant, I will not require that he provide an expert report as of the year ended December 2017 although that will leave open the possibility that the trial judge may be asked to draw a negative inference against the respondent.

[22] Another aspect of prejudice is that there will be delay in setting a new trial date. As indicated above, the date of October 2, 2017 was set by me on October 27, 2016 and the date was a function of the need to make many professionals as well as the parties available. As indicated in the endorsement dated October 27, 2016 it was also the respondent’s schedule that required accommodation. He is a well-known entrepreneur which means he has many demands on his time. He has to establish priorities.

[23] As I pointed out above, almost 2 years ago I made an order for temporary spousal and child support for what was anticipated to be months not years. It will be more than 2 years by the time the trial begins. I raised that with counsel for the applicant in the context of whether his client would acquiesce in some modification particularly with respect to the older daughter. As was the case on September 9, 2016 counsel and valuators remain millions of dollars apart on the respondent’s income although the discussion about some of the elements of his income may lead to modification of positions. In any event, I am optimistic that counsel will address this issue but I leave open whether I will permit any motion to be brought with respect to variation of the temporary order given the delay in the trial.

[24] In conclusion, adjourning the second trial date is essential to ensure that the parties are prepared and that they use limited judicial resources efficiently. This is a complex case and the source of the complexity rests largely with the affairs of the respondent. He ought not to be heard objecting to the request by the applicant to be prepared to address such complex issues.

ORDER TO GO AS FOLLOWS:

[25] Trial set for the week of October 2, 2017 is vacated.

[26] All counsel shall participate in a telephone case conference with me on Monday, September 11, 2017 at 2:00 p.m. with the following agenda:

(a) with respect to the family law application and the passing of accounts, set a date for trial in 2018, with court availability beginning in March, 2018. So long as the trial can be concluded by June 29, 2018, with the approval of the Family Law Team Leader this may be a situation in which the 20 day trial will be scheduled for 10 days followed by a break and a resumption of 10 days. If counsel are unable to agree, I will set a date. In any event, the date will be peremptory to all parties;

(b) set a date for a case conference at which the following will be considered:

(i) decide which, if any motions will be allowed pending the trial and whether they will be in writing or on attendance;

(ii) establish a timetable to ensure readiness for trial that includes the following: compliance with undertakings; process for resolution of refusals; delivery of requests to admit and preparation of agreed statements of fact; delivery of affidavits of documents, if any; delivery of all expert reports; delivery of final form 13.1 and final comparative net family property statement; trial record; books of documents; opening trial statements; draft order sought; and offers to settle;

(iii) set a date for the final settlement conference/trial management conference including delivery of settlement conference briefs in both the family law application and in the Trust proceeding; and including counsel agreeing on the contents of parts 1 and 2 of the trial scheduling endorsement listing in detail the issues for trial; the witnesses with estimates of time in examination-in-chief, cross-examination, re-examination and in reply; the ordering of witnesses that takes into account the burden each party has to prove her/his net family property, the burden on the applicant to prove entitlement to spousal support together with duration and amount, the burden on the respondent to prove his income; and the identification of motions before the trial judge such as the admissibility issue discussed at this conference.

[27] Family law counsel shall forward a confirmation form no later than Friday September 8, 2017 at noon in which they indicate the dates on which they suggest that the trial commence and continue.

[28] The respondent is not required to provide an expert report as to his income for the year ending December 2017.

[29] Costs of this combined conference are reserved to the trial judge.

Kiteley J.

Date: September 7. 2017

[^1]: 2015 ONSC 7572 [^2]: 2016 ONSC 2035 [^3]: 2016 ONSC 4138