Court File and Parties
COURT FILE NO.: 16-59770 DATE: May 19, 2020 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Richard Sherk and 2128445 Ontario Inc. Applicants
A N D:
Mark Sherk, Bent Nail Holdings (St. Catharines) Inc., Verge Insurance Brokers Limited, 1729628 Ontario Inc. and Marick Bros. Investments Inc. Respondents
BEFORE: Arrell, J. (in writing on consent)
COUNSEL: Stephen F. Gleave & Katelyn Ellins for the Respondents Matthew G. Moloci & David Thompson for the Applicant Richard Sherk
The Honourable Mr. Justice H.S. Arrell
Endorsement
Introduction
[1] The applicant Richard Sherk brings this motion seeking an interim payment out of court of funds currently being held to the credit of this action pursuant to the order of Turnbull J. dated November 30, 2015. The amount requested is $392,712.50. The matter was to go to trial at the long trial sittings in October 2016. At the request of counsel, and on the consent of all parties, the trial was adjourned with a new date set for the long trial sittings in March 2020. Due to COVID-19 and the Chief Justice’s order, all civil trials have been adjourned sine die until further notice.
[2] In October 2016 a similar motion was brought. I released my decision on that motion on November 28, 2016 (Richard Sherk et al v. Mark Sherk et al, 2016 ONSC 7772) whereby I ordered a payment out of court in favour of Richard in the amount of $632,448.29. Such payment was subsequently made by Mark who then appealed my order. The Divisional Court dismissed the appeal on November 8, 2017 (2128445 Ontario Inc. v. Sherk, 2017 ONSC 5996).
[3] A further payment was ordered by me on November 30, 2017 (Richard Sherk et al. v. Mark Sherk et al., 2017 ONSC 7177) after receiving written submissions. That motion was also opposed.
[4] Two subsequent motions were brought by Richard for payments out of court in 2018 and 2019. Mark consented to the payments out on both of those occasions. He has refused to consent on this occasion.
[5] The facts relevant to this motion have generally not changed on this long, protracted and expensive litigation. They are set out in the two decisions cited in para. 2 and will not be repeated here, although they are relied on as found in my earlier decision.
[6] The only new facts affecting this motion would appear to be that indeed the trial in 2016 did not proceed and the litigation remains outstanding. It is not clear, given the current pandemic, as to when this matter may be tried.
[7] The funds currently in court have been reduced as yearly payments of 10% of the original sum that Richard was entitled to under the MOU have been paid out.
[8] The balance remaining in court, if the above payment is made, will be approximately $910,000.00.
Position of the Parties
[9] The respondent argues that I must pay attention to the Turnbull J. obiter that these funds in court represented a “cushion” for any amounts owing to Mark from Richard in this litigation, and initially when that order was made those funds amounted to well over 2 million dollars. The respondent argues that that cushion is now significantly diminished and should not be reduced further to the prejudice of the respondent.
[10] The respondent further argues that the request for further payments unfairly prejudices and unfairly disregards Mark’s reasonable expectation that a sensible sum would be held by the Court to act as a “cushion” for his claims against Richard in his action against him for damages.
[11] The respondent relies on the oppression remedy under s. 248 of the OBCA that seeks to ensure fairness, defined by what is just and equitable in the circumstances of the particular case. He argues that a payment out now when it is unclear when the trial can take place, and further diminishing the funds available to pay any amounts owing to him, would be unfair.
Analysis
[12] In my view the respondent’s arguments today are no more valid now than they were when made before me in 2016 and 2017 and in front of the Divisional Court. Further the respondent has consented to two further payments, as he should have, for 2018 and 2019 knowing that the funds in court would then be reduced to approximately 1.2 million dollars. To argue now that a further diminution of these funds by approximately $400,000.00 makes all the difference in his claim for damages, rings hollow and is without merit.
[13] Likewise the respondent’s argument that his “reasonable expectations” of a reasonable sum remaining in court is now in doubt and is also without merit otherwise he would not have consented to the two payments out of court in 2018 and 2019.
[14] The respondent’s entire argument is predicated on the fact that this court should conclude, without hearing any evidence, that the odds of him being successful at trial and being awarded substantial damages is a foregone conclusion. That is mere speculation.
[15] The fact of the matter is that the applicant and the respondent entered into a MOU when the applicant retired, such that he was to be paid 50% of the value of his shares immediately, which he was, and the balance over 10 years of yearly equal payments. No logical reason has been given by the respondent as to why that was not the applicant’s “reasonable expectation”, other than this law suit.
[16] The respondent has produced no evidence that the applicant will be unable to pay any judgment that may be awarded against him. In fact, the applicant has received well over 6 million dollars from the respondent since his retirement, never mind what ever other assets he may have. It is difficult to think that he is impecunious.
[17] As I stated in my prior decision at para. 14 and which I conclude continues to be applicable on this motion;
I conclude that his formula for distribution was fair and reasonable to the parties. I also note that a further 10% payment becomes due and payable in 2017. It is reasonable and fair that Richard receives those funds now. There is no evidence before me that Richard would be unable to pay any judgment awarded in this matter, especially now that he received a substantial amount pursuant to the order of Turnbull J. No logical argument has been put to me that would deprive Richard of the funds that belong to him pursuant to the Turnbull formula. Should there be a judgment against him it can be enforced in the ordinary way if what remains in court is insufficient, as correctly pointed out by Turnbull J.
[18] The Divisional Court clearly felt the same as stated in its decision at para. 31 “…The order (Turnbull J.) clearly contemplated that Richard should receive annual payments towards the purchase price for his shares each year pending the trial, including 2016. As I will explain when I address the next issue, the terms of the SPA show that the parties understood and acknowledged this.”
[19] The Divisional Court stated in no uncertain terms, at paras. 30, 32, and 34 that the respondent had no right to the funds in court, he has sought no security of any kind and has never sought to create substantive rights to the funds in court under the Turnbull order. The Divisional Court was clear that it did not agree with the Turnbull obiter that these funds were some sort of cushion for any damages the applicant may owe the respondent. The court stated further about the respondent “… What he is not entitled to, and never was, is execution ahead of judgment.” See para. 32.
Conclusion
[20] It is ordered that there will be a payment out of court in the amount of $392,712.50 payable to Richard Sherk and 2128445 Ontario Inc. within 15 days of the release of this endorsement and such funds will be a credit for any amount still owing by Mark Sherk et al. on the agreed upon valuation of the shares at the completion of this litigation.
[21] If the parties are unable to agree upon costs, the applicant may file written submissions of no more than 3 pages double-spaced in addition to any relevant offers and draft bill of costs. The applicant shall file submissions by May 27, 2020 and the respondent may reply with a similar length by June 5, 2020.