NEWMARKET COURT FILE NO.: FC-18-56373-00

DATE: 20190205

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Linda Mishayev, Applicant AND: Dani Mishayev, Respondent

BEFORE: The Honourable Mr. Justice D.A. Jarvis

COUNSEL: R. Heft, Counsel for the Applicant J. M. Straitman, Counsel for the Respondent Alla Koren, Counsel for Eliyahu Mishayev

HEARD: October 31, 2018 and January 16, 2019

ruling on Motion

1The applicant (“the wife”) seeks a broad range of financial and related relief against the respondent (“the husband”), his father, and their companies. Also claimed are interim disbursements, a preservation Order, and an Order to preserve electronic records.

2Before the start of argument, counsel advised that their clients consented to an Order in accordance with paragraphs #6, #7, #15 (excluding business records), #16, and #17, as set out in the wife’s Notice of Motion.

3The balance of the relief requested in the wife’s motion claims;

(a) temporary child support in the amount of $12,888 monthly, effective February 1, 2018, pursuant to the Child Support Guidelines (“CSG”) based on an income of $800,000 imputed to the husband;

(b) temporary spousal support in the amount of $15,616 monthly, effective April 1, 2018, in accordance with mid-range support based on the Spousal Support Advisory Guidelines (“SSAG”);

(c) a temporary Order requiring the husband to be responsible for the monthly mortgage payments on the matrimonial home;

(d) a temporary Order that the parties be equally responsible for the matrimonial home mortgage and line of credit registered on title to that property, property taxes, and home insurance from and after April 1, 2018, and that the wife assume sole responsibility for the utilities after that date;

(e) an Order adding the husband’s father (“the father”) and his company as parties to this proceeding;

(f) an Order that the father produce his personal income tax information for the last three years;

(g) an Order that the father and the parties’ company (“the parties’ company”) provide copies of all bank statements for the father’s company since its inception, on or about June 27, 2018;

(h) an Order that all cheques written on any bank account owned by the parties’ company or the father’s company require the wife’s signature, and that she approve all transfers of funds from those companies’ business accounts;

(i) an Order that the husband provide from HSBC Bank Canada and any other national or international financial institution where he has personal or business accounts, a detailed listing of all accounts, open or closed, for the past seven years with current balances;

(j) interim disbursements of $60,000;

(k) a temporary injunction and preservation Order with respect to six companies or business entities (which number includes the parties’ company and that of his father);

(l) an Order preserving electronic records;

(m) an Order requiring the husband to preserve all potentially relevant documents;

(n) an Order directing that the husband and his father preserve all documents stored at the husband’s office and the father’s home;

(o) a temporary Order requiring the husband to provide to the wife all business online banking passwords, restraining the husband from changing those passwords without consent from the wife;

(p) a temporary Order restraining the husband from interfering with and/or cancelling the wife’s access rights to the bank accounts for the parties’ company and reinstating her banking privileges to those accounts;

(q) granting the wife leave to amend her pleadings to include oppression remedies pursuant to the Ontario Business Corporations Act.

4The wife estimated thirty minutes for her motion and advised the court when confirming that it was proceeding that the husband estimated that he needed sixty minutes, a combined time in excess of the one hour permitted for regular motions. This did not include any time estimate for the father. He had been served with the wife’s motion and had retained counsel. Quite apart from the husband’s response, it is, and should have been, quite clear from the relief claimed that the motion should have been scheduled as a long motion in accordance with the Consolidated Practice Direction Concerning Family Cases in this region. The wife’s non-compliance was noted when the court’s daily list was reviewed. As events transpired, the parties well exceeded the time allotted for a regular motion (which this was not).

5My Ruling was reserved following argument. Shortly before its’ intended release, counsel for the wife contacted the court wishing to tender what she indicated was recently discovered evidence critically relevant to her client’s motion. The husband opposed the wife’s request, contending that the proposed evidence was neither new nor, if admitted, would change the result. Since the evidence related to the parties’ financial circumstances, in particular the imminent insolvencies of the husband and the parties’ company, and the husband was given the opportunity to respond to the wife’s further evidence, I decided to admit the evidence. Counsel re-attended before me on January 16, 2019, to make further submissions. The husband had earlier brought a motion for access, returnable on that day in any event, a motion which he subsequently withdrew.

Background

6The following facts and evidence are relevant:

(a) the parties married on July 28, 2003, and separated on January 29, 2018;

(b) there are three children of the marriage ranging in ages from 6 to 13 years old. They reside with their mother in the matrimonial home;

(c) the husband left the matrimonial home on or about March 26, 2018;

(d) before the parties separated, the wife was a homemaker. She enjoyed an income paid by Mishay Solutions Inc. (“MSI”), a company whose shares were owned by the husband (51%), the wife (39%), and the husband's father (10%);

(e) the business of MSI involved the installation of new windows and repair of windows for high-rise projects;

(f) in late February 2018, after the parties separated but before the husband left the matrimonial home, he revoked the wife's bank account signing authority for MSI, demanded the return of a company vehicle, and “fired” her;

(g) the wife managed to withdraw $10,000 from the MSI business account after the husband left the matrimonial home;

(h) in April 2018, the wife managed to withdraw $35,000 from the business account. It was around this time that she said that she discovered that the husband had registered a $675,000 mortgage on the matrimonial home. She claimed that the signature on the mortgage purporting to be hers was not her signature. The husband’s lawyer confirmed that his client “signed [the wife’s] name to the necessary documents…” because the husband assumed “that he had [the wife’s] authority to do so…” On June 11, 2018, the husband’s lawyer corrected himself and wrote to advise that his client “did not sign [the wife’s name] to the mortgage. It was in fact signed by both her and my client”;

(i) the husband continued to fund expenses for the matrimonial home which approximated $9,917 monthly. This ended in mid-September 2018;

(j) in addition, the husband arranged to pay, or paid to the wife, $4,000 in May and $7,500 for each of the months of June to August 2018. On or about October 14, 2018, the father gave to the wife a personal cheque for $3,000. As of January 16, 2019, no further financial assistance has been provided to the wife and the parties’ children by the husband or anyone else;

(k) on or shortly after October 18, 2018, the husband produced two expert opinion reports: one report calculated the fair market value of the husband’s business interests as at January 18, 2018 (“the business valuation”); the other report calculated the husband’s income for support purposes for 2015 to 2017 (“the income analysis”). These reports were prepared by a Chartered Business Valuator;

(l) a Calculation Valuation Report provides the lowest level of assurance and is based on minimal review and analysis with little or no corroboration of relevant information. The business valuation produced by the husband valued his business interests at $347,001, his shareholder loans at $57,583, and the present value of his personal contingent taxes as being $59,000. Schedule 2-1 to the expert’s report recorded accounts receivable for MSI of $3,008,412 as at December 31, 2018 (almost double that of 2016), and current liabilities of $2,533,888;

(m) the income analysis opined that the husband’s qualifying income for support determination purposes was $186,000 (2015), $382,000 (2016) and $547,000 (2017). The 2017 income was adjusted to eliminate a non-recurring capital gain ($196,000) resulting in an income of $351,000. The husband acknowledged that the expert’s report did not include dividends attributable to the wife: she said that it was the husband’s practice to attribute income to her from MSI to reduce the family’s overall tax exposure. To emphasize the seriousness of her financial situation the wife said that she had received a $250,000 T5 statement from MSI and a demand for payment of $76,000 in taxes from Canada Revenue Agency which she said that she had no ability to pay;

(n) the husband acknowledged that 2017 was “an incredible year” for MSI. However as of April 2018, he said that business revenue “had diminished significantly”. For the first seven months of 2018, MSI showed pre-tax corporate losses in excess of $1,000,000. On or about October 19, 2018, the husband’s counsel advised that MSI was insolvent. When the motion was argued, the court was told, and shown a Certificate that MSI had filed on October 30, 2018 (the day before the wife’s motion was argued), representing a Notice of the company’s Intention to make a Proposal pursuant to the Bankruptcy and Insolvency Act;

(o) the husband filed a financial statement sworn October 26, 2018. He swore that he was earning nothing but that his yearly expenses for the family had been $411,624, or $34,302 monthly, and that he was not paying them. He lived with his parents. There is no evidence of any change in the husband’s circumstances as of January 16, 2019;

(p) shortly after the wife’s motion was argued on October 31, 2018, she came into possession of the husband’s personal bank account statement for the October 9, 2018 to November 6, 2018 period. That statement revealed that in a two-and-a-half-week period from October 17th to November 5th, the husband had deposited $83,200 to his account. Most of this money was deposited in the four days before the motion. As of November 6, 2018, only $88.89 remained in the account;

(q) the husband said that he used the funds to repay an unnamed creditor ($30,000), and that he collapsed two Registered Retirement Savings Plan accounts (“RRSP”) that had loans against them that required their payment;

(r) the husband acknowledged that it was he who informed the mortgagee on title to the matrimonial home (HSBC) that he would no longer pay the mortgage - the parties dispute whether that was done before or after the motion was argued on October 31st. On or shortly after November 13, 2018, the wife received a letter from the law firm representing HSBC addressed to both parties advising that as of November 7, 2018, the parties owed $1,917,402.15 for three accounts;

(s) on November 26, 2018, the husband filed a personal Notice of Intention to make a Proposal under the Bankruptcy and Insolvency Act. The list of creditors disclosed claims totalling $2,880,325 and included Canada Revenue Agency ($100,000), HSBC (about $2,000,000, some of which would be secured against title to the matrimonial home), credit card debt ($25,000), retailers and other service providers;

(t) in her affidavit sworn December 31, 2018 the wife said that HSBC had agreed to refrain from issuing a formal Power of Sale notice if she was proceeding to sell the matrimonial home, which she advised the court was being done. This is what the husband wanted in any event.

7The father was employed by MSI. In June 27, 2018, he incorporated Mishay Construction Inc. (“MCI”). The wife alleged, and the husband denied, that the husband transferred MSI’s business to MCI. The husband says that he has no business interest in MCI and that it is an unrelated company. Unlike MSI, which purchased windows, MCI only installs them. And at a significantly lower level of profit. MCI conducts business from the MSI offices. No affidavit was filed by the father.

8Accompanying the wife’s affidavit sworn October 22, 2018, were copies of recent emails from the husband and between an Olamide Akinkugbe (“Akinkgube”) and business clients. The wife obtained these documents before the husband had changed the passwords of the email accounts of MSI. The contents of these emails may be summarized as follows:

(a) an October 15, 2018 Purchase Order from Akinkgube as Project Manager for MCI to a client (Quatela). The letterhead has “Solutions” redacted in favour of “Construction”;

(b) an October 17, 2018 quote from the husband, as President of MCI, to a property management company about a Window replacement project identified as being 1-26 Linda Way, Markham;

(c) attached to (b) was a draft contract between MCI and an unidentified owner. The contracted work was to commence on May 1, 2019 and be substantially performed by December 31, 2019. The husband is identified as President and having signing authority;

(d) an email exchange between Akinkgube and a representative of the property management company dated October 17, 2018 (email copied to the husband), asking for a timely review of the quote sent by the husband. Akinkgube is identified as a Project Coordinator for MSI. Akinkgube’s email address and the email address for the husband show MSI;

(e) an email exchange between Akinkgube and the husband later on October 17, 2018, referencing the business representative in (a) above and in which the husband notes to Akinkgube “Not good MISHAY construction inc.”;

(f) a copy of an invoice dated October 18, 2018, on MSI letterhead, to Wall-Tech Restoration Inc. for $287,015.20. The husband’s email address at MSI is noted on the invoice;

(g) an email from Akinkgube dated October 18, 2018 to a customer (Hannover) identifying Akinkgube as MSI’s Project Coordinator and noting “See attached for Hannover. Dani’s requested that we get a cheque tomorrow October 19th” and an email dated October 19, 2018, from the husband at his MSI address to the customer “Good morning Doug this invoice it’s for 100% less holdback please see what you can do we really need to collect payment today thank you in advance and have a nice day”. Also included was a summary of eight outstanding Hannover payments for $282,217.50, the earliest of which was dated June 30, 2017;

(h) an October 18, 2018 quote by the husband, who is identified as the President of MCI, to the same property management company in (a) above but for a different project. This is sent by email from Akinkgube as Project Coordinator for MSI from a MSI internet address and copied to the husband at his MSI email address. The quote includes supplies and services beyond mere window installation.

9The husband filed an affidavit from Mr. Akinkgube sworn October 26, 2018. Mr. Akinkgube swore that he was formerly employed by MSI as a project coordinator/manager but now only employed by MCI, and that he reported only to the father. He explained that he had confused references to the two companies, and to the husband’s status as President of MCI, when dealing with clients because MSI and MCI shared office space and computers. In his affidavit sworn October 26, 2018, the husband observed that Akinkgube was either careless or confused in the documents referenced in paragraphs [8] (a) to (h) above. The husband did not address why he and Akinkgube were dealing with MSI account collections pre-dating, by a year, the incorporation of MCI.

10The husband said in his affidavit sworn on January 10, 2019, that the reason why he paid $30,000 to a creditor, instead of those funds to his wife for the support of her and their children, was because he thought that his share of equity in the matrimonial home might be transferred to her on account of child support.

Analysis and law

11The most important issues for the wife involve support for the children and her and ensuring that her financial interests are protected pending trial. While the husband sought to have the court impute income to the wife, that relief is typically unavailable at a temporary motion stage. In Knowles v. Lindstrom¹ Penny J. summarized the general principles governing the exercise of the court’s discretion when dealing with support pending trial,

[8] It is well-established that interim support motions are not intended to involve a detailed examination of the merits of the case. Nor is the court required to determine the extent to which either party suffered economic advantage or disadvantage as a result of the relationship or its breakdown. These tasks are for the trial judge. Orders for interim support are based on a triable or prima facie case. An order for interim support is in the nature of a “holding order” for the purpose of maintaining the accustomed lifestyle pending trial, Jarzebinski v. Jarzebinski, 2004 CarswellOnt 4600 (ONSC) at para. 36; Damaschin-Zamfirescu v. Damaschin-Zamfirescu, 2012 ONSC 6689, 2012 CarswellOnt 14841 (ONSC) at para. 24.

12While Knowles dealt with interim spousal support, Penny J.'s observations apply equally to claims for temporary child support. Given the consequential nature of an interim order, and evidence of a dramatic change to this family’s accustomed lifestyle, it is incumbent on each party to put their best foot forward. This is especially important where (as here) the wife seeks to impute an $800,000 income to the husband in circumstances where he says that the business, that has been the source of the family’s income, and him personally, have recently become insolvent and made proposals in bankruptcy.

13There is a considerable conflict in the parties’ evidence. While ordinarily, assessment of credibility is best left to a more robust testing at trial, the court can still sift the conflicting allegations to make a temporary Order that will provide a reasonably acceptable solution until further evidence becomes available. The following evidence, and reasonable inferences from that evidence, are relevant;

(a) there is no question that the parties enjoyed a comfortable lifestyle before their separation. They estimated that their matrimonial home was worth anywhere between $2,500,000 and $3,000,000 and was subject to a mortgage of about $1,950,000. The husband gifted a Maserati automobile to the wife (which appears to have been partly financed);

(b) despite the husband’s suggestions otherwise, he was the primary breadwinner for the family and the guiding mind of MSI. Accepting both parties’ evidence, their combined 2017 income, or cash flow, through MSI ranged between $500,000 and $750,000;

(c) MSI appears to have been a profitable company. Its fiscal year end is December 31st. It had been operating for about 10 years before the parties separated in late January 2018. The prior 2017 fiscal year saw revenue double and retained earnings quadruple, but within three months of the parties’ separation, in April 2018, MSI was in a perilous financial state and within nine months insolvent;

(d) the wife contended that the husband’s evidence about his sudden impecuniosity and that of MSI should be viewed with suspicion. For example, in 2016, the husband was charged with falsely reporting her Maserati as having been stolen when, according to the wife, the husband had driven it when inebriated and abandoned the car after it was too damaged to operate. The wife said that the car cost about $100,000 to replace. The charges involved public mischief, insurance fraud, uttering forged documents (to the insurance company), and failing to remain at the scene of an accident. The husband chose not to respond to this evidence except to acknowledge that he was only convicted of failing to remain;

(e) none of the impugned Akinkgube emails makes any reference to the father in any capacity. Mr. Akinkgube said that it was his understanding that the father was MCI’s president;

(f) it is surprising that three to four months after MCI was incorporated and began operations, that Mr. Akinkgube did not appear to know who was the president of MCI, even though MSI and MCI operated out of the same offices and he was project manager for both. Or that, as he and the husband contended, he was still confused and mistaken after that passage of time;

(g) the husband had no substantive explanation for MSI’s reversal of fortune except to say that he wasn’t as successful in securing work as before and that the company had taken on more work than it could handle. The valuator provided a more fulsome explanation to the effect that MSI had changed its business plan in early 2017, and that had not proven as successful as hoped. The husband was the sole source of this information.

14The wife alleged, and the husband denied, that he told her on many occasions that he would adopt what may be described as a scorched earth policy - he would hide his money, declare bankruptcy, and ensure that the wife ended up with nothing. In the year since the parties separated, all the evidence suggests that there is merit to the wife’s allegations. The change in this family’s financial circumstances has been catastrophic. Given what the husband represented to the court were the perilous financial circumstances of MSI and him personally, so perilous in fact that proposals in bankruptcy had already been made, in the case of MSI on October 30, 2018, and in his case, would be made within a month, the husband knew, or ought reasonably to have known, that paying a creditor and the bank over $80,000, meant that none of those funds would be available for his lawful, and primary responsibility, to support his family, a responsibility which the husband now claims he is unable to discharge. But he is the architect of that failure. The email exchanges between the husband and Akinkgube amplify, they don’t diminish, this court’s suspicions about the integrity of the husband’s evidence and his conduct.

15Consistent with these concerns is the husband’s claim that the wife should be responsible for any income tax exposure for the MSI dividend income recorded in MSI’s books. Apart from suggesting that he might work for his father, there is no evidence about the husband’s future employment plans, what he could earn, his prospects (if not working for MCI), or how, apart from selling the matrimonial home, and even then, the wife and children are to survive. The husband has a clear, unconditional obligation to support the wife and their children.

16I am not prepared, however, to impute to the husband the $800,000 income that the wife has asked: there is an insufficient evidentiary basis at this time to determine that issue. Nor am I prepared at this time to order a disbursement advance to the wife. While I have doubts about the husband’s real financial circumstances, I am not persuaded that there is a funding source for this request at this time. The stability of the wife and children is paramount in my view.

Disposition

17An Order shall issue as follows;

(a) on consent, in accordance with paragraphs #6, #7, #15 (excluding business records), #16 and #17 of the wife’s Notice of Motion;

(b) leave is granted to the wife to amend her pleadings to join Eliyahu Mishayev and Mishay Construction Inc. as parties to this proceeding, such amendment to be made, issued and served within thirty days of the release date of this Ruling;

(c) the husband shall pay to the wife for combined, unallocated child and spousal support, the amount of $7,500 a month, effective September 1, 2018. The proper allocation of this payment as between child and spousal support is reserved to trial. This amount is without prejudice to either party’s claims that the support should be greater or less than awarded;

(d) the husband shall be responsible for all mortgage payments in connection with the HSBC mortgage, in the amount of $675,000, registered on title to the matrimonial home at 43 Lavender Valley Road, King City, from and after January 28, 2018, without prejudice to the husband’s claim for contribution from the wife at trial;

(e) excepting the HSBC mortgage in (d) above, the parties shall be equally responsible for any other mortgage and line of credit expenses registered on title to the matrimonial home and home insurance, from and after December 8, 2015;

(f) the wife shall be responsible for all utility payments owing and incurred with respect to the matrimonial home, from and after April 1, 2018;

(g) the respondent shall, within thirty days of the date of release of this Ruling, provide to the wife a detailed listing of all accounts, open or closed, from and after January 1, 2015 for all domestic or foreign banking or other lending institutions where he has, or had, personal accounts solely, or jointly, owned by him or with any other person. This shall include any corporations or other business entities for which the husband has, or had, signing authority;

(h) an Order as per paragraph 14 of the wife’s Notice of Motion with respect to all of the companies or business entities identified therein, excluding Mishay Construction Inc;

(i) an Order as per paragraph 15 of the wife’s Notice of Motion dealing with MSI;

(j) an Order with respect to paragraph 18 of the wife’s Notice of Motion dealing with the husband (not Eliyahu Mishayev) and the described documents stored at 176 Rivermede Road, Unit 3, Concord, Ontario.

18I am not prepared, at this time, to make the Order otherwise requested by the wife in paragraphs 9 to 11 of her Notice of Motion dealing with the father and MCI until such time as those parties have filed their responding pleadings and Requests for Information have been exchanged. Nor am I prepared to make any Order as requested by the wife with respect to paragraphs 19 and 20 of her Notice of Motion dealing with her requests to preserve her password and business account privileges. Any failure of transparency by the husband may form part of the wife’s oppression claim: there was no evidence as to what privileges and access cards the wife had, and the reinstatement request for signing privileges to MSI’s bank accounts will likely only add to future conflict between the parties.

19A Support Deduction Order shall issue.

20In light of the Order amending pleadings and joining the father and MCI as parties, it is clear that a further Case Conference before McGee J. will be required.² The parties should obtain a conference date as soon as practical. In addition, the parties should exchange any further Requests for Information well before the date scheduled, answer the requests as best as possible and be prepared to deal with costs of any unanswered requests that the conference judge may decide should have been answered.

21If the parties are unable to resolve costs of this motion, they are directed to file their submissions as follows:

(a) the wife shall file her submissions by February 15, 2019;

(b) the husband and his father shall file their submissions by February 25, 2019;

(c) reply submissions by the wife (if any) shall be filed by March 1, 2019.

22The submissions shall be limited to five pages, double-spaced except for the reply submissions which shall be limited to two pages. All submissions shall be filed in the Continuing Record. Offers to Settle, Bills of Costs and any case law upon which the parties may wish to rely shall be filed by the deadline for filing their submissions but shall not for part of the Continuing Record. Counsel are to notify my judicial assistant (Meghan.Billings @ontario.ca) when they have filed their material.

Footnotes

1. 1Knowles v. Lindstrom, 2015 ONSC 1408.
2. 2An Urgent, but full, Case Conference was held on August 31, 2018. Reference was made in McGee J.’s endorsement that absent progress being made in resolving the outstanding issues and additional information being provided, a motion could proceed on October 31st.