Court File and Parties
COURT FILE NO.: FS-16-0256-00
DATE: 2018 06 15
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: GORDON TOZER, Applicant
AND:
RITA TASSONE, Respondent
BEFORE: Justice Irving André
COUNSEL: J.K. Hannford, for the Applicant
T. Roll, for the Respondent
HEARD: March 14, 2018
ENDORSEMENT
[1] The respondent Rita Tassone (“Ms. Tassone”) brings a motion for summary judgment against the applicant, Gordon Tozer (“Mr. Tozer”) while Mr. Tozer has brought a motion of his own seeking to consolidate two different proceedings.
BACKGROUND FACTS
[2] The parties, who were never married, were in a long-term intimate relationship from 1991 to September 7, 2007. They have two children, Natalie, age 23 and Matthew age 21.
[3] In August 2008, Mr. Tozer initiated family law proceedings against Ms. Tassone.
[4] The parties attended a case conference on July 6, 2010. Each launched a trust claim in relation to the other’s business interests.
[5] Following their separation, the parties attended mediation with Stephen Grant on June 26, 2012. Both were represented by counsel. Both filed mediation briefs.
[6] The parties signed a Separation Agreement (‘the Agreement”) in October 2012.
[7] It provided inter alia, that:
7.1 In full and final satisfaction of all property claims, including any claims based on constructive and/or resulting trusts and/or claims based on a joint family venture, Gord will pay to Rita, the sum of $3,500,000 no later than December 31, 2015, subject only to the following in the interim:
a) if the property municipally known as 2 Manchester Court, Bolton, Ontario, sells in advance of December 31, 2015, Gord shall pay Rita the sum of $500,000 on closing of the sale, with credit to him of $500,000 against the total amount of $3,500,000.
b) if the property municipally known as 18859 Horseshoe Hill Road in Caledon sells in advance of December 31, 2015, then Gord shall pay to Rita the entire amount of $3,500,000 (with credit to him for any partial payment made by him up to that date).
10.10 Gord and Rita have sufficiently disclosed their income, assets and other liabilities existing at separation and the date of this Agreement.
10.13
(a) Gord and Rita have both had independent legal advice, Gord from Harold Niman / AJ Jakubowska and Rita from Tilda M. Roll.
(b) Gord and Rita:
(i) understand his or her rights and obligations under this Agreement and its nature and consequences;
(ii) acknowledge that this Agreement is fair and reasonable;
(iii) acknowledge that they are not under any undue influence or duress; and
(iv) acknowledge that both are signing this Agreement voluntarily.
POST-AGREEMENT CONDUCT
[8] In accordance with section 7.3 of the Agreement, Mr. Tozer signed the collateral mortgage for $3,500,000.00 on December 4, 2012 which was duly registered. The collateral mortgage was second to a Scotiabank charge in the amount of $1,275,000.00, and an execution in the amount of $458,796.14.
[9] In breach of the Agreement Mr. Tozer sold 2 Manchester Court in Bolton on April 15, 2013 for $5,250,000.00 without paying Ms. Tassone $500,000.00 required by paragraph 7.1(a) of the Agreement. The registered mortgage was $2,000,000.00, so there was money available from the sale for Mr. Tozer to pay Ms. Tassone.
[10] When Mr. Tozer refinanced his first mortgage against the Caledon property, Ms. Tassone agreed to postpone, and Mr. Tozer agreed to make a $500,000.00 payment against the $3,500,000.00 owing. This deal was not done through counsel. Ms. Tassone postponed her mortgage, and Mr. Tozer only made payment of $378,491.00.
[11] Mr. Tozer failed to pay the balance owing on the $3,500,000.00 pursuant to the Agreement. Ms. Tassone retained counsel to commence enforcement of the mortgage after the due date. Her counsel’s demand letter is dated August 18, 2016.
[12] Thereafter, Mr. Tozer served a Statement of Claim (CV-16-3758-00), issued August 24, 2016, seeking to set aside the Agreement.
[13] The application in this proceeding was issued on October 28, 2016.
[14] Mr. Tozer brought his application seemingly in response to the mortgage enforcement proceedings, and not as a result of Mr. Tozer’s “discoveries”. The application was brought to stall the mortgage proceedings four years after the Agreement was signed.
MR. TOZER’S ALLEGATIONS REGARDING NON-DISCLOSURE
[15] Mr. Tozer maintains that in December 2015 he discovered that Ms. Tassone had not disclosed all her business interests. He later discovered that various land development projects had not been disclosed to him at the time of the mediation. Mr. Tozer alleges that Ms. Tassone failed to disclose an interest in her company, GMNR. During questioning of Ms. Tassone on January 10, 2018, Mr. Tozer determined that Ms. Tassone had not revealed the financial statements for GMNR for 2011 and 2012 and that disclosure of these statements would have materially affected how the case would have been resolved had the parties’ proceeded to trial.
MS. TASSONE’S RESPONSE TO ALLEGATIONS OF MATERIAL NON-DISCLOSURE
[16] Ms. Tassone submits that Mr. Tozer has not provided any evidence of material non-disclosure and that there was insufficient corporate disclosure of the business interests of both parties when they signed the Agreement. Ms. Tassone maintains that the business earnings are not material to the settlement, which dealt primarily with issues relating to child and spousal support, and Ms. Tassone’s trust claim in Mr. Tozer’s properties.
GOVERNING PRINCIPLES
[17] Section 56(4) of the Family Law Act, R.S.O. 1990, c. F.3, provides that:
A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
[18] The Family Law rules, O.Reg. 114/99, provides as follows:
12(5) If it would be more convenient to hear two or more cases, claims or issues together or to split a case into two or more separate cases, claims or issues, the court may, on motion, order accordingly.
16(1) After the respondent has served an answer or after the time for serving an answer has expired, a party may make a motion for summary judgment for a final order without a trial on all or part of any claim made or any defence presented in the case.
16(4) The party making the motion shall serve an affidavit or other evidence that sets out specific facts showing that there is no genuine issue requiring a trial.
[19] The Court of Appeal noted in Virc v. Blair, 2014 ONCA 392, 119 O.R. (3d) 721, at paras. 52, 65, 66, that:
52 In LeVan, at para. 51, this court held that s. 56(4) comprises a two-stage analysis:
(i) Can the party seeking to set aside the agreement demonstrate that one or more of the s. 56(4) circumstances is engaged?
(ii) If so, is it appropriate for the court to exercise its discretion to set aside the agreement?
65 In Brandsema, [Rick v. Brandsema, 2009 SCC 10] the Supreme Court of Canada considered the implications of the deliberate failure of a spouse to provide all the relevant financial information in negotiations for the division of assets. The trial judge in that case concluded that the husband knowingly presented misleading financial information to his wife and that this ultimately culminated in both parties entering into an agreement based "on what he alone knew to be erroneous financial information" (Brandsema, at para. 28).
66 The Supreme Court held that the deliberate failure to make full and honest disclosure of all relevant financial information may render the agreement vulnerable to judicial intervention where the result is a negotiated settlement that is substantially at variance from the objectives of the governing legislation. The decision concluded that whether a court will actually intervene will depend on the circumstances of each case, including the extent of the defective disclosure and the degree to which it is found to have been deliberately generated (Brandsema, at para. 49).
SUMMARY JUDGMENT
[20] Rule 16(1) of the Family Law Rules O.Reg. 144/99, provides that “a party may make a motion for summary judgment for a final order without a trial on all or part of any claim made or any defence presented in the case.”
[21] Rule 16(4) provides that the moving party must serve and file evidence that sets out specific facts showing that there is no genuine issue requiring a trial.
[22] Rule 16(4.1) provides that the responding party or parties may not rest on mere allegations or denials, but must set out, in an affidavit or other evidence, specific facts showing that there is a genuine issue for trial.
[23] Pursuant to Rule 16(6), the court shall make a final order where there is no genuine issue requiring a trial of a claim or defence.
[24] In Hryniak v. Maudlin, 2014 SCC 7, Boutros v. Kanaan, 2018 ONSC 2805, at para. 13, the court set out the following about whether a motions judge can reach a fair and just determination on the merits:
(a) First, the motions judge should take a liberal approach only on the evidence before her, without using the new fact-finding powers under the second part of this test. If the summary judgment process provides the motions judge with the evidence required to justly determine the motion, it will be held that there is no genuine issue requiring a trial; and
(b) Second, if there appears to be a genuine issue requiring a trial, the motions judge is entitled, at his discretion, to weigh evidence, evaluate credibility, and draw reasonable inferences, in order to determine if the need for a trial can be avoided by using these new tools to come to a fair and just result.
ANALYSIS
[25] The motions before me raise the following issues:
(1) Should the Separation Agreement be set aside for failure to disclose significant assets?
(2) Should the Agreement be set aside because the Applicant did not understand its nature or consequences?
(3) Should this court set aside the Agreement for any other reason or reasons?
(4) Should summary judgment be granted?
(5) Should the family and civil actions be consolidated?
(1) Should the Agreement be set aside for failure to disclose significant assets?
[26] Section 56(4)(1) of the Family Law Act provides that a court may set aside a domestic contract, or a provision in it, “if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made.”
[27] In Quinn v. Epstein Cole LLP, 2007 CanLII 45714 (ON SC), 87 O.R. (3d) 184 (S.C.), the court noted at para. 47 that:
(i) First, the party seeking to set aside the agreement must demonstrate that the other party failed to discharge its duty to disclose significant assets. The failure to disclose significant assets includes the making of a material misrepresentation about the true value of assets, and the failure to disclose changes in income. The significance of an asset is assessed by measuring the value of the asset against a party's disclosed net assets. To conclude that a party has failed to disclose a significant asset, there must be some evidence to verify the value or extent of the party's assets either at the date of marriage or the date of the agreement;
(ii) If a court finds that a party has failed to disclose a significant asset, the court must determine, in light of the facts of each case, whether it should exercise its discretion to rescind the domestic contract. The burden of proof lies on the party seeking to set aside the contract to persuade the court to exercise its discretion in its favour. The court will take into account a variety of factors in exercising its discretion:
i. whether the party who did not make full disclosure was asked or refused to do so; whether that party misrepresented or concealed financial facts; whether the other party had full financial information in any event; and, whether the other party would have signed the contract even if the disclosure had occurred;
ii. whether the party relied on the non-disclosure or misrepresentations in entering into the separation [page198] agreement in the sense that the party would not have entered the agreement had she known the true value of the assets;
iii. whether a party consented to incomplete disclosure, or was otherwise aware of the asset and had the means to ascertain its value;
iv. whether one party took benefits under the contract and then moved to set it aside; and
v. whether there had been duress, or unconscionable circumstances; whether the petitioning party neglected to pursue full legal disclosure; whether she moved expeditiously to have the agreement set aside; and whether the other party had fulfilled his obligations under the agreement.
In considering these factors, a court should not narrowly construe the obligation of spouses to make full disclosure because the Family Law Act imposes a positive duty on both parties to disclose.
(footnotes omitted)
[28] The court further noted at para. 48:
Finally, formal disclosure by way of sworn financial statements prior to executing an agreement is not necessary to meet the obligation to disclose. A general awareness of the assets of the other party may be sufficient to avoid setting aside an agreement. Parties are expected to use due diligence in ascertaining the facts underlying their agreements; a party cannot fail to ask the correct questions and then rely on a lack of disclosure. One must inquire whether the responding party withheld information [page199] or whether the information was available to the party seeking to set aside the agreement.
(footnotes omitted)
[29] Mr. Tozer’s counsel submits that Ms. Tassone’s failure to disclose the following financial information justifies the setting aside of the Agreement:
(a) an arrangement her company GNMR had with a company owned by her family about a joint housing project called the Riverwalk Project;
(b) the acquisition of a new project known as the Northglen link and other land development projects, including Whitby Pringle Creek, Harmony Village and Honey Hill projects, between GNMR and Ms. Tassone’s family;
(c) cash received by Ms. Tassone from upgrades to homes in the Master’s Creek project in Orangeville.
[30] I am not persuaded that Ms. Tassone did not disclose the above information to Mr. Tozer. Regarding the Riverwalk Project, Ms. Tassone disclosed that this project was named the Castlemore Village Phase III project in 2010 in her financial statement of that year, which was fully disclosed to Mr. Tozer.
[31] Further, Ms. Tassone did not have an interest in the Northglen Link, which was purchased by a numbered company, 2265719 Ontario Ltd. (2265719) which is owned by one of her brothers. Her company purchased lots from 2265719.
[32] Regarding the other projects mentioned by Mr. Tozer, Ms. Tassone maintains that Mr. Tozer had personal knowledge of the Brampton-Lundy Village project the moreso given that this project was funded by a loan from Mr. Tozer. As for the Whitby Pringle Creek and Oshawa Harmony Village projects, Ms. Tassone has deposed that her father and brother own these projects and that she had no involvement in them. Finally, GNMR’s involvement in the Honey Hill project goes back to December 2015, which post-dated the Agreement and could therefore not be disclosed.
[33] Regarding cash receipts from the Orangeville project, Mr. Tozer concedes that along with GNMR, he was a “joint venture” in the project. Ms. Tassone deposed in her October 31, 2017 affidavit at para. 32, that she did receive “upgrade cash” from home buyers while Mr. Tozer and herself were together. She spent his share on the couple’s children. While the amount of cash was significantly less than the couple’s monthly household expenses, Mr. Tozer knew how Ms. Tassone spent his share of the upgrades and voiced no opposition to it. Finally, the cash proceeds were not received from 2008 to 2012 as Mr. Tozer suggests; indeed the project appeared in Ms. Tassone’s financial statement as “Orangeville” as early as January 31, 2005.
[34] There is another reason why I view Mr. Tozer’s claim about non-disclosure of Ms. Tassone’s development projects prior to mediation in June 2012, with great scepticism. In his affidavit dated December 6, 2017, Mr. Tozer states at para. 40 that:
I was under no legal obligation to provide a valuation of my various business interests at the time of mediation.
[35] Furthermore, while both parties received requests for more financial information; neither party complied with these requests. Indeed, Mr. Tozer’s Form 13 financial statement which was prepared for the mediation, indicated, regarding the value of his various business interests, “TBD” which meant “to be determined”. Finally, when questioned on January 10, 2018, about the value of his business Mr. Tozer replied: “[W]e didn’t have a business evaluation because to evaluate a business is quite an exercise.”
[36] It is therefore disingenuous for Mr. Tozer to now seek to justify setting aside the Agreement because of Ms. Tassone’s non-disclosure of her assets when he similarly failed to disclose the full value of his own assets prior to mediation on June 26, 2012.
[37] For the above reasons, I am not persuaded that the Agreement should be set aside on account of material non-disclosure of financial information. The names of the projects referred may have changed over time, but it appears that Mr. Tozer was very much a part of the projects and the income which GNMR derived from them. Mr. Tozer had a general awareness of Ms. Tassone’s assets. Based on the evidence before me, I cannot find that Ms. Tassone withheld any financial information concerning her assets from Mr. Tozer prior to the signing of the Agreement on October 30, 2012.
(2) Should the Agreement be set aside because Mr. Tozer did not understand its nature and consequences?
[38] Mr. Tozer maintains that he unknowingly entered into the Agreement without actual knowledge of Ms. Tassone’s assets.
[39] Mr. Tozer had the benefit of the advice of two lawyers before he signed the Agreement. It clearly states at paragraph 1.5 that: “The parties agree to be bound by this Agreement which settles all issues between them”. Paragraph 10.13 of the Agreement further indicates that:
10.13
(a) Gord and Rita have both had independent legal advice, Gord from Harold Niman / AJ Jakubowska and Rita from Tilda M. Roll.
(b) Gord and Rita:
(i) understand his or her rights and obligations under this Agreement and its nature and consequences;
(ii) acknowledge that this Agreement is fair and reasonable;
(iii) acknowledge that they are not under any undue influence or duress; and
(iv) acknowledge that both are signing this Agreement voluntarily.
[40] Paragraph 10.16 also provides that:
This Agreement was prepared jointly by both parties and their solicitors.
[41] Based on the above, Mr. Tozer provided no evidentiary basis to support a finding that Mr. Tozer did not understand the nature or consequences of the Agreement.
(3) Should this court exercise its discretion to set aside the agreement?
[42] There is no compelling reason for this court to set aside the Agreement. Mr. Tozer’s decision to enter into this Agreement was neither coerced nor precipitous. He had the benefit of legal advice from two lawyers. He signed the Agreement voluntarily. Prior to the Agreement, the parties participated in mediation. The Agreement specifically states in paragraph 7 that it was “in full and final satisfaction” of all outstanding claims between the two. Ms. Tassone did not withhold or fail to disclose any material information that would justify a setting aside of the Agreement.
[43] For the above reasons, I conclude that the Agreement is valid.
(4) Is summary judgment appropriate in this case?
[44] Ms. Tassone, who is seeking summary judgment against Mr. Tozer for the balance owing on the $3,500,000 he agreed to pay her pursuant to the Agreement, has complied with Rules 16(1) and (2) of the Family Law Rules. It now behooves the court to determine whether, pursuant to Rule 16(6), a final order is warranted if I conclude that there is no genuine issue requiring a trial of a claim or defence.
[45] Pursuant to Hryniak, I must first decide whether I can make such a determination only on the evidence before me, without resort to the expanded power of weighing the evidence granted under the second part of the test set out in Hryniak.
[46] The following facts are not in dispute:
The parties entered into a Separation Agreement on October 30, 2012.
The Agreement was in full and final settlement of all outstanding claims between the two.
Under the Agreement, Mr. Tozer undertook to pay Ms. Tassone the sum of $3,500,000 by December 31, 2015. The amount was secured against an asset known as the Caledon property.
To date, Mr. Tozer has only paid Ms. Tassone $378,491.
Mr. Tozer, pursuant to the terms of the Agreement, owes Ms. Tassone the sum of $3,121,509 plus interest.
[47] Mr. Tozer’s counsel submits that where there has been a material misrepresentation of assets by a party to a separation agreement, it would be inappropriate for a motion for summary judgment to be granted: see Virc v. Blair, 2014 ONCA 302, at para. 58.
[48] Given my conclusion that Ms. Tassone did not fail to disclose assets she owned at the time the parties signed the Agreement then Virc v. Blair does not apply in this case.
[49] Applying the first part of the test enunciated in Hryniak to the facts of this case, I conclude that there is no genuine issue requiring a trial.
[50] Assuming, for the purpose of analysis, that Mr. Tozer’s counsel is correct that the question of where Mr. Tozer knew of the Riverwalk Project or other projects is a genuine issue requiring a trial, I am entitled to evaluate the credibility of the parties and draw reasonable inferences to determine if the need for a trial can be avoided by using these new analytical tools to achieve a fair and just result.
[51] In assessing Mr. Tozer’s claims regarding his apparent lack of knowledge concerning GNMR’s various assets and earnings, I note the chronology of events that precipitated his application to set aside the Agreement which was signed on October 30, 2012.
[52] In accordance with the terms of the Agreement, Ms. Tassone registered a collateral mortgage for $3,500,000 with standard charge terms which was signed by Mr. Tozer on December 4, 2012 and registered against the Caledon property on December 21, 2012.
[53] Mr. Tozer sold the Bolton property on April 15, 2013 for $5,250,000. The registered mortgage on that property was $2,000,000. Contrary to the terms of the Agreement, Mr. Tozer failed to pay Ms. Tassone the $3,500,000 which he had agreed to do.
[54] On March 31, 2014, Ms. Tassone wrote to Mr. Tozer advising him of the breach. He did not respond neither did he pay the amount owed.
[55] Mr. Tozer refinanced his mortgage against the Caledon property and agreed to pay $500,000 against the $3,500,000 that he owed Ms. Tassone. He later paid her $378,491 of the amount owed.
[56] On August 24, 2010, Ms. Tassone’s counsel sent a demand letter to Mr. Tozer with respect to the outstanding balance of the $3,500,000 owed.
[57] On September 21, 2016 Ms. Tassone issued a Statement of Claim to enforce her mortgage on the Caledon property after Mr. Tozer defaulted on payment.
[58] On October 28, 2016, almost four years after the Agreement, Mr. Tozer filed an application in which he pleaded that:
At the same time that Rita began to raise an issue with the mortgage and threatened enforcement proceedings, Gord learned that Rita … held various interests in development projects and corporations that were not properly disclosed at the time of mediation in June 2012 and when the parties entered into the Separation shortly thereafter.
[59] The timing of Mr. Tozer’s application to set aside the Agreement, in my view, raises questions about the credibility of his assertions that he did not know about the various developments or retained earnings of Ms. Tassone’s company. He raised those concerns only after Ms. Tassone initiated legal proceedings against him and after he reneged on the Agreement to pay her $3,500,000 following the sale of the Bolton property.
[60] Ms. Tassone provided GNMR’s financial statements for the years 2006, 2007, 2008, 2009 and 2010 prior to the mediation in July 2012. She did not give Mr. Tozer the company’s financial statements for 2011 and 2012. These statements have now been provided.
[61] A cursory review of the financial statements provided by Ms. Tassone to Mr. Tozer prior to mediation would have revealed that the 2011 and 2012 reports had not been disclosed. There were no requests at the time for the missing information. Mr. Tozer cannot fail to ask the proper questions and then rely on a lack of disclosure: see Quinn, at para. 48. Neither can he rely on a lack of understanding or knowledge. Indeed, in his “Mediation Brief” for the mediation on June 26, 2012, Mr. Tozer made reference on page 2 to his “astute negotiating skills”, and on page 4 noted that: “With the help of Mr. Tozer’s business acumen and expert negotiation skills”, Ms. Tassone and her family built successful businesses.
[62] Paragraph 5.1(c)(ii) of the Agreement also provides that:
For greater certainty, the parties acknowledge that
ii) they have had independent legal advice and all the disclosure they have requested and require to understand the nature and consequences of this Agreement, and to come to the conclusion, as they do, that the terms of this Agreement, including the release of all spousal support rights, reflects an equitable sharing of the economic consequences of their relationship and breakdown.
[63] Furthermore, subsequent comments by Mr. Tozer, raise concerns about the veracity of his claim that he lacked knowledge about the development projects of Ms. Tassone’s company. Following a case conference on July 28, 2017, he sent Ms. Tassone the following text message:
Hope you and Jimmy are ready for a long and expensive battle…
You should off never sent me that on my Birthday…
Remember im [sic] a winner
[64] At the very minimum, Mr. Tozer’s text message raises a reasonable inference that he is using the pretext of non-disclosure as a means of engaging Ms. Tassone in a protracted and expensive litigation to punish her for an aggrieved wrong.
[65] Additionally, Rule 16(4.1) requires Mr. Tozer to particularize his allegations regarding Ms. Tassone’s non-disclosure of “millions” of dollars of assets. His affidavit provides no evidence of this. He could not provide further details when questioned. Ms. Tassone’s counsel sent him a letter on March 9, 2018 for further particulars but he failed to provide the additional information.
[66] For all the above reasons, there is no genuine issue requiring a trial and accordingly, summary judgment, as requested, is granted.
(5) Should there be an order for consolidation of proceedings?
[67] Given my decision on Ms. Tassone’s motion for summary judgment, this issue is now moot.
ORDER
[68] The application brought by the applicant, Gordon Tozer, shall be dismissed given that there is no genuine issue requiring a trial. Summary Judgment is granted in favour of the Respondent, Rita Tassone.
COSTS
[69] The respondent shall send me by June 30, 2018, written submissions, not exceeding five pages, concerning costs. The applicant shall send me his submissions regarding costs by July 15, 2018.
André J.
Date: June 14, 2018