COURT FILE NO.: FS-19-10975

DATE: 20200904

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Michael John

Applicant

– and –

Mercedes John

Respondent

Jaret Moldaver, Martine Ordon, Harvin Pitch and Rita Benjamin, for the Applicant

Harold Niman, Richard Niman, John Philpott and Madeline Russel, for the Respondent

HEARD: August 12, 2020

REASONS FOR ORDER

M. Kraft, J.

Nature of Motion

1The Respondent wife (“Mercedes”) has brought a motion for interim costs and disbursements in the amount of $500,000, pursuant to Rule 24(13) of the Family Law Rules (“FLRs”), as well as pursuant to ss.248(3) and 249(4) of the Ontario Business Corporations Act (“the OBCA”). Additionally, Mercedes seeks an order that the Applicant husband (“Mike”) pay her temporary spousal support in the sum of $30,000 a month, retroactive to January 1, 2020, and an order requiring Mike to answer his outstanding undertakings and refusals arising from his Questioning.¹

2There are two related disputes in these proceedings: 1) the family law proceeding arising out of the breakdown of Mercedes’ and Mike’s marriage; and 2) an oppression remedy claim in which Mercedes claims Mike’s conduct as a majority shareholder has been oppressive toward her, as a minority shareholder of two corporations Mike controls.

3Mercedes asserts that she has brought this motion because she cannot fund her ongoing participation in the litigation from her own resources. Without an order for costs/interim disbursements, Mercedes will not be able to advance her meritorious claims in either the family law or oppression proceeding.

4Specifically, Mercedes seeks the following orders:

i. An order for interim costs in the sum of $500,000 to be paid by 1446966 Ontario Limited (“966”) and 1591764 Ontario Incorporated (“764”), (collectively, the “John Corporations”) in her oppression claim brought by her against Mike. Alternatively, or in addition, she seeks an order for interim costs and disbursements from Mike, pursuant to Rule 24(18) of the FLRs and section 131 of the Courts of Justice Act (“CJA”), in the sum of $500,000;

ii. In addition to or, in the alternative to i. above, an order that:

(a) 966 and 764 advance to Mercedes $500,000, with the amount of the Advance to be credited against the total value of Mercedes’ shareholdings for the purpose of legal costs and disbursements in this matter;

(b) 966 and 794 be jointly and severally liable for the Advance; and

(c) The Advance is made “without prejudice” to any interim or final costs award which Mercedes may seek and be awarded in this matter.

iii. An order that Mike pay her interim spousal support in the sum of $33,197 a month, retroactive to July 1, 2019, plus interest, without prejudice to her right to seek retroactive spousal support to the date of separation at trial;

iv. An order that Mike produce all of the disclosure that would be required of him if here a payor referred to in section 21 of the Child Support Guidelines, for 2018 and 2019, “without prejudice” to any request that may be made by Mercedes or Rudson Valuation Group (”RVG”), to enable RVG to produce an income report for Mike for those years;

v. An Order that Mike answer undertakings given and proper questions he refused to answer at the Questioning of Mike held on January 15th and 17th, 2010, as set out in the undertakings and refusals chart, attached as Schedule “A” to this Order, within 30 days, pursuant to Rules 1.04, 2.03, 30.02, 30.04, 30.06, 31.06, 31.07, 34.15, 25 and 37.01(10) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.;

vi. An Order compelling the John Corporations and Mike to produce all relevant documents and provide a further and better Affidavit of Documents.

5Mike resists all of the relief sought by Mercedes and seeks an Order dismissing her motion, with costs.

6In support of the motion, Mercedes relies on the following material:

i. Her Notice of Motion, dated July 17, 2020;

ii. Her affidavit, sworn on July 17, 2020;

iii. Her reply affidavit, sworn on August 5, 2020;

iv. Her financial statement, sworn on July 17, 2020;

v. The transcript of John’s Questioning, taken on January 15, 2020;

vi. Her Factum, dated August 7, 2020; and

vii. Her Compendium.

7In response to the motion, Mike relies on the following material:

i. His affidavit, sworn on July 31, 2020;

ii. His Factum, dated August 7, 2020; and

iii. His Compendium.

Procedural History

8Upon the parties’ separation in 2015, the parties retained Ricki Harris as a mediator, to resolve the outstanding issues arising from the breakdown of their marriage. They spent a number of years trying to resolve the case, including attending at least two mediation sessions in 2019.

9During the mediation process, each party had retained chartered business valuators, to determine Mike’s income for support purposes and to value their respective interests in 1591764 Ontario Incorporated (“764”) and 961446966 Ontario Limited (“996”). Mercedes retained Wayne Rudson of the Rudson Valuation Group (“RVG”). Mike retained Martin Pont of ap Valuations Inc. (“AP”). In January 2019, both valuators produced calculations of Mike’s income for 2015, 2016 and 2017 for purposes of the mediation and valuations of 764 and 966 as at the date of separation and as at the date of the mediation in early 2019.

10On May 7, 2018, the parties entered into a partial separation agreement,² which provided, among other things, as follows:

i. Mercedes was to transfer her 50% interest in the parties’ matrimonial home, located at 16 Leighland Drive, Unionville, ON, to Mike;

ii. Mike was to assign his interest in the purchase and sale agreement with respect to the condominium located at 55 Merchants’ Wharf, Suite 1226, Toronto ON (the “Aqualina Condominium”), to Mercedes and she will take title to this condominium in her name alone;

iii. The parties were to execute a Trust agreement which detailed that mike was holding in Trust for Mercedes his interest in the Aquafina Condominium while the property was under construction. The parties agreed that Mike’s then current interest in the Aqualina Condominium was being held as as Bare Trustee for the benefit of Mercedes;

iv. To fund the closing of the Aqualina Condominium, Mike was to liquidate the securities held by 966 and 966 and the companies would loan these proceeds to the John Bead Corporation Limited (“John Bead”). John Bead was to pay out the Shareholder Loan which was due to Mike, such that John Bead was replacing its shareholder loan liability to Mike with an intercompany loan liability, which John Bead would then owe 966; and

v. All of the above transactions were to be effected, “without prejudice” to each party’ rights with respect to property and accounting issues.

The parties complied with the above terms.

11On July 4, 2019, Mike started this Application for Divorce and filed a sworn Financial Statement, along with a Certificate of Financial Disclosure.

12On September 20, 2019, Mercedes filed an Answer and Financial Statement.

13On October 2, 2019, the parties attended a case conference before Diamond, J., at which the following consent order was entered into:

i. Mike was to deliver a Reply by October 25, 2019;

ii. Mercedes was to deliver an Affidavit of Documents by November 8, 2019;

iii. Mike was to deliver an Affidavit of Document by November 22, 2019;

iv. 764 and 966 were added as parties to the family law case;

v. The Questioning of both parties was to be completed by December 31, 2019; and

vi. A settlement conference was to be scheduled before Diamond, J. on February 3, 2020, at 2:30 p.m. for 2 hours

14On December 12, 2019, the parties had a teleconference before Diamond, J. The Endorsement of Diamond, J. indicates that the parties were attempting to resolve the outstanding issues between them. The Questioning was to proceed, as scheduled on January 15-17, 2020. Mercedes was granted leave to bring a disclosure motion, if the parties are unable to resolve their issues.

15Mike was Questioned on January 15 and 17, 2020. Mercedes was Questioned on January 17, 2020.

16On February 3, 2020, the parties attended the settlement conference before Diamond, J. The Endorsement of Diamond, J. indicates that a settlement conference was held; a long motion for interim disbursements, interim support and disclosure was scheduled for May 21, 2020, for a full-day hearing; and a further settlement conference was scheduled to return before Diamond, J. on August 12, 2020 at 10:00 a.m.

17The full-day long motion did not proceed on May 21, 2020, due to the suspension of regular Court operations as a result of the Covid-19 health crisis.

18On July 6, 2020, the parties attended the Return to Operations Court, at which Shore J. ordered the long motion to proceed before me on August 12, 2020, for a full-day, and scheduled the Settlement Conference before Diamond, J. to take place on September 30, 2020, for 2 hours.

19On July 17, 2020, Mercedes brought the within motion and filed her Notice of Motion and updated Financial Statement on that same date. Between July 17, 2020 and August 5, 2020, the parties exchanged affidavits, Facta and Compendiums.

20I heard the long motion on August 12, 2020. I reserved my decision. My decision on the motion is referred to in paragraph [8] and the reasons for it are found below.

Facts

21Mercedes and Mike were married on July 5, 1980. They separated after 35 years of marriage, on January 15, 2015. They have two adult children, Daniel John and Melissa John. Mike is 65 years of age and Mercedes is 62.

22During the marriage, Mercedes did not work outside of the home. Mike worked for the John Bead Corporation (again, “John Bead”). John Bead is a family-run corporation that manufactures, distributes and is a wholesaler of beads. John Bead was incorporated by Mike’s father, Fitz John, in 1954. John Bead is owned directly by a holding company, John Bead Holdings Limited (“JBHL”) and Fribe Holdings Ltd. (“Fribe”). Mike continues to work for John Bead along with Daniel.

23In or about 2012-2013, John Bead carried out an estate freeze, as follows:

i. The common shares of John Bead are owned by the holding company, JBHL;

ii. The common shares of JBHL are owned by Daniel, who has, as a result of the estate freeze, become the owner of John Bead;

iii. Mike owns the Class B voting shares of JBHL; and

iv. 966 owns 100 Class G shares of JBHL.

24According to Mike, the purpose of the estate freeze was to enable Daniel to receive the future growth of John Bead and his plan was that Melissa, would inherit his Class A shares in 966.³

25As explained above, JBHL owns the common shares of John Bead. Fribe Holdings Inc. (again, “Fribe”) owns 100% of the voting Class A shares of John Bead and 100% of the Class B shares of John Bead. Mike directly owns 27% of the voting Class A shares of Fribe, but Fribe is controlled by his mother, Betty John, through the Estate of Mike’s late father.

26Mike and 966 own special shares in JBHL (Mike owns Class B shares and 966 owns Class G shares). According to Mike, no money is held in JBHL. JBHL has no assets. All of the money and profit is contained within John Bead.

The 2013 Transaction that Led to Both Parties Owning 764 and 966:

27966 was incorporated in 2000. Until 2013, Mike owned 1 common share in 966 and 3 million preference Class A shares with a fixed value of $1 per share in 966.

28764 was incorporated in 2003. Until 2013, Mike was the sole shareholder, officer and director of 764.

29On February 7, 2013, Mercedes and Mike had a meeting with the corporate lawyer, Mark Prager, during which Mercedes learned that she was not a shareholder of either 966 or 764. Mercedes submits that she was devastated to learn that she was not a shareholder of the John Corporations. Both parties agree that Mercedes insisted on becoming a shareholder of both 764 and 966.

30As a result, the parties entered into a share transfer transaction (“the 2013 Transaction”), in which:

i. Mike transferred his 1 common share in 966 to Mercedes. He retained his Class A preference shares, which were fixed in value, and his voting control in 966; and

ii. Mike transferred 49% of the shares he owned in 764 to Mercedes, retaining 51% of the shares in 764.

31The reporting letter from Mark Prager, dated October 21, 2013, confirms the above-described 2013 Transaction and also clarifies that, “notwithstanding Mercedes’ ownership of the new shares, any dividends paid thereon will continue to be attributed to [Mike]”.⁴

32Accordingly, currently Mike is a 51% shareholder and Mercedes is a 49% shareholder in 966 and 764, collectively referred to, again, as “the John Corporations”. Mike has continued to manage the affairs of 764 since the 2013 Transaction and submits that he has done so without payment or compensation.

33The 2013 Transaction is critical to the issues before the Court. The import of the 2013 Transaction is that the lion’s share of the value in 966 was an asset of Mercedes on the valuation date, such that the net family property of Mercedes is, according to Mike, higher than the net family property of Mike, such that she will owe Mike an equalization payment. Also, Mike’s interest in 966 is fixed in value, whereas the value of Mercedes’ 49% interest in 966 has increased in value substantially since the 2013 Transaction. In 2019, Mercedes has brought a claim for oppression under the OBCA, Mike believes, to force him to purchase her share interests in the John Corporations because under the Family Law Act, such relief is not available to her.

The February 7, 2013 Meeting before the 2013 Transaction Occurred:

34Again, on February 7, 2013, Mercedes attended a meeting with Mike and his corporate lawyer, Mike Praeger where she learned, for the first time, that she was not a shareholder of the John Corporations. Mercedes asserts that she was devastated to learn that she was not a shareholder. Again, as described above, in 2013, Mercedes became a shareholder of 966 and 764 as a result of the 2013 Transaction.

35On February 7, 2013, at 8:45 a.m. Mr. Prager sent an email to Mike,⁵ in which he stated:

“I decided that you couldn’t have an intelligent conversation with Mercedes until I determined whether you were family-law protected on your shares of John Bead. It looks to me like you are NOT since you always bought your shares from treasury for cash as reflected on the attached resolutions and there were not acquired by way of gift. In view of the foregoing, Mercedes is, in fact, entitled to half of everything if something bad ever occurred in your marriage. As a result, I think it might actually be best (for everyone’s piece of mind) to make her a 49% direct shareholder. A statement by you that she entitled to 50% of everything in the event of a marriage breakdown really adds nothing since she is so entitled anyway.”

36According to Mercedes, she communicated to Mike and Mr. Prager at the February 7, 2013, meeting that she was concerned about her retirement and lack of savings. She asked Mike to transfer corporate interests to her. This is reflected in Mercedes’ notes, which she made contemporaneously at the meeting.⁶

37She deposes that she did not have independent legal advice in connection with the 2013 Transaction and that Mike’s interests were represented by Mr. Prager. Mercedes asserts that this critical 2013 Transaction was orchestrated by Mr. Prager at Mike’s direction.

38As mentioned above, Mercedes has her own notes from the meeting with Mr. Prager on February 7, 2013. Her notes indicate that she was concerned about her finances, as she was getting older and approaching retirement. She said she wanted one voting right and the opportunity to receive dividends. She had reasonable expectations based on her meeting with Mike and Mr. Praeger that once the 2013 Transaction was completed, she would have a voting right or some control with respect to her corporate interests in both 764 and 966.

39Mercedes asserts that, instead, while she owns her interests in 764 and 966, these corporations are completely controlled by Mike. Mercedes deposes that it was her reasonable expectation that after the 2013 Transaction she would be able to access her share of the value in these two corporations, if necessary.

Corporate Structure of 764 and 966:

40764 and 966 own the following assets:

i. The sole asset of 764 is a 35% share of two industrial buildings, which are 2 separate buildings with 2 separate addresses but share one registered title, more particularly described as:

(a) 20 Bertrand Avenue (“Bertrand”), the industrial building out of which John Bean operates; and

(b) 6 Crockford Blvd. (“Crockford”), a commercial building, which is rented by an unrelated third party.

ii. 764 has no bank account. It finances its operations through 966, which company charges 764 a management fee of 5% of the gross rent it receives. These arrangements, according to Mike, have been in place since the incorporation of both 764 and 966, well before the 2013 Transaction took place.

iii. 966 owns revenue-producing real estate, more particularly described as follows:

(a) 45% of the two industrial buildings described in subparagraph (i) above. Mike personally owns 20% of Bertrand and Crockford;

(b) 75% of 4259 Sherwoodtowne Blvd. Mississauga (“Sherwoodtowne”), a rented condominium. The balance of Sherwoodtowne is owned by Mike’s brother. 966 receives its proportionate sharing of the rental income from a tenant;

(c) 33.3% interest in the shares of BBM Watertown Inc. (“BBM”). BBM owns 3 revenue-producing properties. Daniel and his wife own 16.66% of these properties and the balance is owned by arm’s-length third parties. As a result, 966 is a minority shareholder of BBM and BBM’s affairs are governed by a Shareholder’s Agreement; and

(d) 1000 Class C shares in JBHL, which were created as part of an estate plan. Again, JBHL has no assets.

41BBM, of which 966 owns a 33.3% interest and Daniel and his wife own 16.66%, owns the following revenue-producing real estate, which is leased to arm’s-length parties, more particularly described as follows:

i. 19 Waterman Avenue;

ii. 12 Cranfield Road; and

iii. 161 Bartley Drive.

42966 is the more valuable company of the John Corporations. When it was incorporated in 2000, Mike owned 2,954,115 Class A shares, with a fixed total value of $1 per share. He also owned the one common share until it was transferred to Mercedes in 2013. Mike has always been, and continues to be, the sole officer and director of 966. Mike has voting control of 966 through his Class A shares.

43966 was valued at approximately $15,109,000 according to Mercedes’ expert, RVG, with Mercedes’ one common share being valued at approximately $9,973,000, based on a draft report and the value of Mikes’ preferential shares of 966 being capped at $2,954,115.

44764 is valued at $2,541,000 according to RVG. Mercedes’ 49% share is valued at approximately $1,245,000. In total, Mercedes’ shareholdings in both 764 and 966 were worth $11,218,000 as at the date of separation, according to the RVG draft report.

45The two properties owned by 764, 966, and Mike personally, namely, Bertrand and Crockburn, have been appraised at $10,500,000.⁷ Thus, as I will maintain below, Mike alone has the right to determine what happens to these properties.

46Since Mike personally owns 20% of the Bertrand and Crockburn properties, he personally receives 20% of the rent from both buildings which, he deposes, he then places in 764 and 966 by way of a shareholder loan.⁸

47In addition to Mike’s interests in 764, 966 and JBHL, Mike also owns 7,600 Class A shares in Fribe, which are redeemable/retractable at $1 a share and which are voting shares.⁹ Fribe appears to be owned by Mike, along with the Betty John Family Trust (which holds 410,400 Class B shares) and the Estate of Fritz John (which holds 20,400 Class A shares and 1,1001,600 Class B shares). Mike’s position is that his interest in Fribe is excluded from his net family property under the Family Law Act because it was gifted to him after the date of marriage.

48Mercedes submits that the costs she seeks of $500,000 are significantly less than the value of her shares in 764 and 966, $11,218,000 according to RVG as at the date of separation. Mercedes asserts that, despite the value of her property, her financial circumstances are particularly unfair because she has considerable financial resources “on paper” as a shareholder of 764 and 966 but she is unable to access the value she holds in either corporation for purposes of funding this litigation. Further, Mike alone controls what monies Mercedes receives from 764 and 966.

49In these proceedings, both parties have retained various experts, as follows:

i. As mentioned above, Mercedes retained RVG to assess Mike’s income for spousal support purposes and to value both her and Mike’s corporate interests. Mike retained Martin Pont of AP to fulfil the same function;

ii. Mike retained Colliers International to provide valuations in respect of the real property held by the John Corporations. Mercedes retained D. Bottero & Associates Limited for the same purpose;

iii. Due to environmental issues at one of the corporately-owned properties, Mike retained S2S Environmental Inc. (“S2S”) to provide its opinion in respect of the environmental issues and their impact of these issues on the fair market value and/or marketability of the property owned by 966.???

50To date, Mercedes’ evidence is that she has spent over $360,000 in expert’s fees with RVG. During her Questioning, Mercedes’ evidence suggests that she has spent in excess of $600,000 overall on legal and experts’ fees in total as of January 17, 2020. On this motion, she seeks the sum of $500,000 in costs, interim disbursements or a combination of them in order to complete the work that will have to be done by Mr. Niman (her family counsel), Mr. Philpott (her corporate counsel) and RVG in order to prepare for and attend at the balance on the conferences in this case and at trial.

51If the case does not settle at the September 30th Settlement Conference, it appears that the parties should be ready to proceed to trial after Mike complies with the Orders, I have made below respecting the provision of answers to questions asked of him during his Questioning and her valuator can then finalize his income and property related reports.

Parties’ Current Financial Circumstances:

52As arranged by Mike long before the separation, Mike and Mercedes each receives a salary from John Bead. Mike receives $82,000 a year and Mercedes receives approximately $80,000 a year, as an income-splitting measure. According to Mike, John Bead cannot afford to pay either of them more income.

53Additionally, again arranged by Mike long ago, Mike and Mercedes each receives $5,000 a month by way of repayment of their respective Shareholder Loans, tax-free. Mike further deposes that 966 cannot afford to make payments to either of them in excess of $5,000 a month.

54Mike does not dispute that he, alone, determined the amounts that would be paid to each of the parties after they separated and during the five years since then while they have attempted to resolve the issues between them.

55Even though Mercedes is a significant shareholder of both 966 and 764, she submits that she has no control over the corporations. Mike has the voting control and is the sole Officer and Director of both corporations. The distribution of any funds to Mercedes from 764, 966, and the expenditure of any funds that Mike causes 966 and 764 to receive is at Mike’s sole discretion. Transfers if funds between 764 and 966 and other assets in which Mike has an interest but Mercedes does not is within Mike’s sole control.

56As a way to access some of the value of her corporate interests, Mercedes has suggested that 966 call on its related corporations, such as 764, John Bead, JBHL and BBM, to repay the loans that are owed to 966, as shown on the 966 Balance Sheet contained in the unaudited financial statements of 966 for the year-ending December 31, 2019.¹⁰ Mike deposes that these loans are not collectible for the following reasons:

i. The Amounts due from BBM, totalling $1,379,659, reflects the investment made by 966 when it advanced its share of the funds BBM used to purchase its real estate assets. 966 cannot compel BBM to pay that loan back as the majority shareholders would refuse to do so. Mike deposes that those “loans” represent long-term investments that 966 and the other shareholders made in BBM.

ii. 764 owes 966 the amount of $910,942. Mike deposes that 764 does not have any cash to pay 966 this loan;

iii. Amounts due from JBHL, totalling $1,300,000. Mike deposes that this debt was created as part of the 2013 Estate Freeze. Mike deposes that this was a “non-cash adjustment” and that “JBHL has no liquid assets.

iv. Amounts due from John Bead, totalling $1,306,296. Mike deposes that the loan from John Bead to 966 of $1,306,296 was created in 2018 in order to fulfill the terms of the parties’ partial separation agreement, that is, to enable Mercedes to complete the purchase of the Aqualina Condominium (and the transfer of her interest in the matrimonial home to Mike personally). Mike deposes that John Bead is in no position to repay this loan because its assets are pledged to the bank as security. Mike further deposes that, as a result of the Covid-19 pandemic, John Bead has almost no new business and has had to secure an additional line of credit with Export Development Canada of $600,000, which was personally guaranteed by Mike and Daniel. Finally, Mike deposes that John Bead owed its suppliers $900,000 as of April 2020.

57Similarly, Mike deposes that it would be “difficult it not impossible, for the John Corporations to incur further debt to obtain bank financing to pay Mercedes the sum of $500,000”, for the following reasons:

i. 966 receives the majority of its rental revenue from John Bead and Sherwoodtowne. As at December 31, 2019, 966 received revenue in the total sum of $354,918 in 2019, of which $296,767 came from John Bead and Sherwoodtowne. This is problematic because:

(a) John Bead is operating at limited capacity since the Covid-19 pandemic because it is an importer and reseller of beads. As a result, John Bead is behind three months in its rental payments of $22,000 a month; and

(b) Sherwoodtowne is a commercial condominium and its tenants are not paying rent. 966 is therefore, in serious financial difficulties. Sherwoodtowne pays 966 a normalized gross revenue of $9,000 a month.

58Mercedes asserts that she does not have sufficient cash flow to meet her expenses. Further, she asserts that she is unable to access the funds that she requires to respond to Mike’s Application and to proceed to assert her own claims in this case at trial. Again, she seeks $500,000 to be able to do so.

59Mercedes deposes that she is in significant debt, a significant portion of which relates to outstanding legal and accounting bills. She deposes that she still owes her family and corporate counsel a total of $115,025.37 (which form part of the overall amount of costs she has incurred in excess of $600,000). She does not know how she will pay these amounts. Mercedes’ credit card debt totals $65,263.10 and her credit cards are maxed out.

60Mercedes further deposes that she tried to mortgage the Aqualina Condominium to raise the funds she needs to proceed to trial, but she was not approved for a mortgage. Mike, however, deposes that Mercedes can easily obtain a mortgage from CIBC and/or a “second tier” mortgage lender.

61More specifically, Mercedes deposes that she was advised that she would not be able to obtain financing, if she did not pay off her credit card debt of $65,263.10; she may not qualify for a mortgage, given her $80,000 income; and it would be difficult for her to service a mortgage given that her income is already less than her expenses.

62Mike deposes that he contacted his banker at CIBC to determine if Mercedes could obtain a line of credit or mortgage her Aqualina condominium. In response, he received an email from his bank manager confirming that the Bank would provide Mercedes with a $300,000 mortgage to be registered on title to her condominium, provided that she had no credit card debt or other liabilities. Additionally, Mike deposes that his counsel contacted a lawyer who arranges first mortgages, (unrelated to Mike’s lawyers), to determine the availability of financing for Mercedes. Mike asserts that he was advised that this lawyer (Melvyn Eisen) could provide Mercedes with a first mortgage of $550,000, including pre-paid interest on the Aqualina Condominium but a collateral mortgage would also have to be registered on her rental property.

63During her Questioning, Mercedes was asked why she did not accept an offer Mike had made in November 2019, to personally guarantee or cause 764 and 966 to guarantee a mortgage registered on title to the Aqualina Condominium. Counsel for Mercedes wrote to Mr. Moldaver in response to this proposal in December 2019, advising that Mercedes would be willing to use her Aqualina Condominium as collateral for a mortgage, if Mike personally guaranteed the mortgage or if he caused the John Corporations to guarantee the mortgage and provided that he service the mortgage payments and agree to pay off the mortgage when this case concluded. Mike did not respond to Mercedes’ counsel’s letter.

Mercedes’ Position on Costs/Interim Disbursements; Temporary Spousal Support and Mike’s Undertakings and Refusals:

(a) Costs/Interim Disbursements:

64Mercedes seeks an order for costs from 764 and 966, pursuant to the OBCA; an order for interim disbursements from Mike, pursuant to the FLRs and CJA; or a combination of both, which results in the receipt by her of the sum of $500,000. In her Factum, at paragraph 60, Mercedes breaks down the costs she seeks, as follows:

i. For the family law proceedings, an estimated sum of $283,900 to bring the family proceedings to a close, and $33,195.22 to address her current account receivable;

ii. For the oppression proceeding, an estimated sum of $199,875 to bring the oppression proceedings to a close, and $81,830.15 to address her current account receivable;

iii. An estimated $40,000 to $70,000 to retain a valuator to 1) produce updated trial-ready reports; 2) trace an asset Mercedes received during the marriage 3) conduct a forensic valuation of Mike’s assets; and 4) produce an updated income report for Mike; and

iv. An estimated $6,000, to produce responding environmental appraisal reports on the properties owned by 966 and 764.

65Mercedes submits that she is, in practical terms, financially destitute as a result of the significant legal and accounting fees she has had to incur to date in these proceedings in order to determine Mike’s income for support purposes and the value of the John Corporations as at the date of separation. Both issues require her to untangle the web of corporate transactions that she believes Mike orchestrated both before and after he arranged the Estate Freeze of John Bead in 2012/2013, by which Mike transferred the common shares of John Bead to JBHL, such that Mike’s interest in John Bead was fixed as if that point.

66Mercedes asserts that Mike’s refusal to provide proper and orderly financial disclosure throughout this case has been egregious, in that:

i. He filed a deficient Affidavit of Documents on November 21, 2019.

ii. Under the threat of motion and given the deficiencies in the original Affidavit of Documents, he filed a Supplementary Affidavit of Documents on January 17, 2020, containing many documents that were relevant and ought to have been contained in his first Affidavit of Documents;

iii. He failed to update his financial statement for this long motion, despite his obligation to do so under the FLRs and the undertaking he gave to do so at his Questioning;

iv. His financial statement, sworn on July 2019, was replete with errors and inconsistencies and was wholly inadequate. This is the only financial statement Mike has filed since the case started a year ago;

v. He failed to disclose his interest as a beneficiary in the Betty John Family Trust in his July 2019 sworn financial statement;

vi. As of the date of this motion, he had outstanding undertakings that he had given in January 2020; and

vii. During the course of this Questioning, he gave blanket refusals to relevant questions asked of him, which he must answer in order for Mercedes to be able to advance her case.

67As a 49% shareholder of 764 and the owner of the sole common share of 966, Mercedes submits that her legal rights have been disrespected and disregarded by Mike in his role as the sole Officer and Director of these companies and having sole voting control over the companies, for the following reasons:

i. His complete lack of corporate governance over 966 and 764, most particularly once she and Mike separated;

ii. By the various intercompany loans, which Mike has caused to take place between 764 and 966 and other John Corporations in which Mercedes does not have an interest but Mike does; and

iii. By the personal benefits he has been and is thus is able to extract from 764 and 966 when he has wanted or wants to, but which Mercedes cannot access to any extent due to Mike’s absolute control over 764 and 966.

68Mercedes asserts that the corporate structure itself was designed to give Mike absolute control over 764 and 966, notwithstanding her obvious desire in 2013 to be given a level of independence and feeling of security, with the result that she finds herself “paper rich” and “cash poor” with no ability to control or access the value of her corporate interests now or for a very long time to come, given Mike’s evidence on this motion.

69When Mercedes insisted that steps be taken to provide her with financial security, which resulted in her becoming an owner of 764 and 966 pursuant to the 2013 Transaction, she expected that:

i. Mike would continue to look out for her interests as a shareholder, given heir common financial interests as husband and wife;

ii. Her individual financial interests would be protected through her ownership of the shares which, if necessary, would be purchased by Mike or could be sold at fair market value;

iii. As a shareholder, she would be entitled to benefit from the corporations to the same extent that Mike would; and

iv. There would be a way to extract the value of shares, if she lost her trust in Mike and his ability to run the corporation for her benefit.¹¹

70For all of these reasons, Mercedes submits that her corporate interests have been oppressed by John, thereby entitling her to the order for costs she seeks under the OBCA and/or for interim disbursements under the FLRs and CJA.

(b) Temporary Spousal Support:

71Mercedes has asserted claims for relief under the Divorce Act and Family Law Act. Her claims require that she be in a position to seek orders for relief to which she is reasonably and fairly entitled and that she be able to respond to Mike’s position regarding the income over which he has reasonable access and control for support purposes and the value of their respective assets and debts for equalization purposes. She is also pursuing relief under s.10 of the Family Law Act as a result of Mike’s position, in effect, that he remain in complete control indefinitely of the most significant assets she owns.

72In her Notice of Motion, Mercedes is seeking temporary spousal support in the sum of $33,197 a month, retroactive to July 1, 2019. However, during the oral submissions made on the motion, Mercedes clarified that she is seeking $30,000 a month in temporary spousal support. It is her position that Mike ought to be paying spousal support at the high range of the SSAGS, based on an imputed income to Mike of $730,000 a year, which she deposes is the best evidence available to the Court at this time.

73Mercedes asserts that she has a compensatory-based entitlement to spousal support. The parties were married for 35 years and she did not work outside of the home. She fulfilled the roles of being a stay-at-home mother and running the parties’ household. This enabled Mike to pursue his career at John Bead and manage the corporate interests in the other John Corporations.

74Mercedes submits that she suffered an economic disadvantage by virtue of the roles she and Mike each played during the marriage. During the marriage, the parties lived a luxurious lifestyle with international travel including properties they owned in Barbados. Without spousal support, Mercedes cannot maintain the lifestyle to which she became accustomed during the parties’ lengthy marriage.

75Although the current financial arrangements have been in place since the parties’ separation, Mercedes submits that this “holding” pattern that Mike put into place and about which she did not have the knowledge that enabled to now challenge until her valuator completed a significant part of his work, should not take away from her entitlement to spousal support on a temporary basis. She deposes that upon separation, Mike agreed to maintain the financial status quo, which he did. After some time, he cut off her credit cards and paid inconsistent amounts to her, which she submits came out of her shareholder loan account.

(c) Undertakings/Refusals:

76Mercedes’ position regarding the importance of Mike providing the answers to the undertaking he gave in January 2020, and the questions he did not answer is addressed in paragraph [139] below.

Mike’s Position on Costs/Interim Disbursements; Temporary Spousal Support and Mike’s Undertakings/Refusals:

(a) Costs/Interim Disbursements:

77It is Mike’s position that Mercedes’ requests for costs and/or interim disbursements has no merit. It his position that she has sufficient resources to fund her litigation and, therefore, does not meet the test for an interim disbursement order under the FLRs, the Rules of Civil Procedure, the CJA, or the OBCA for the following reasons:

(1) According to Mike, Mercedes’ net family property (“NFP”) is higher than his, which means that she will owe him an equalization payment. In these circumstances, it would be unreasonable for her to expend a further $500,000.

(2) The John Corporation structure was in place well before the 2013 Transaction and well before the parties’ separation. Mercedes cannot claim that the corporate structure of the John Corporations is oppressive, within the meaning of that term in the OBCA. She asked for the 2013 Transaction to occur and was aware of the effect of the transaction that is, that he alone would control the affairs of the John Corporations.

(3) Mercedes unilaterally withdrew more than $588,000 from the parties’ joint accounts without Mike’s consent after the parties’ separation in 2015 and has had access to these funds, half of which belonged to Mike, with which she can continue to fund or has funded her litigation;

(b) Temporary Spousal Support:

(4) It is Mike’s position, effectively, that given the extent of her personal assets and nominal debt, together with the payments he has caused her to receive by way of salary from John Bead and repayment to her of out of her Shareholder’s Loan account in 966, that Mercedes does not have a viable claim for temporary spousal support.

(5) Mercedes has relatively liquid assets of $3.1 million over and above her corporate interests. In particular, she owns two condominiums, free of encumbrances, and RRSPs of $750,000 according, to her financial statement sworn on July 17, 2020. According to Mike, her debt is nominal. With respect to Mercedes’ request for temporary spousal support in the sum of $30,000 a month, retroactive to January 1, 2020, Mike asserts that he and Mercedes each receive the same monthly amount through salary and draws from the John Corporations, which is a long-standing arrangement that had been in place for over ten year before the parties separated and did not change after the parties separated five years ago. Mike submits that if he were to become the sole owner of 764 and 966, Mercedes might have entitlement to spousal support. At this time, she does not have a prima facie entitlement to spousal support.

(6) With respect to Mercedes’ request for temporary spousal support in the sum of $30,000 a month, retroactive to January 1, 2020, it is Mike’s position that the receipt of a salary and draws against her Shareholder’s Loan account is an arrangement that had been in place for more than 10 years before the parties separated and did not change after the parties separated five years ago. Mike submits that if he were to become the sole owner of 764 and 966, Mercedes might have entitlement to spousal support. However, at this time, she does not have even a prima facie entitlement to spousal support.

(c) Undertakings/Refusals:

(7) Further, he states that his financial disclosure is complete and was provided to Mercedes and her expert, RVG, without delay. Mercedes has spent in excess of $360,000 to date with RVG and still does not have “trial ready” reports. Mercedes request for any further disclosure is disproportionate and amounts to a fishing expedition; and

(8) Mike’s position in respect to Mercedes’ request that he provide the answers to the undertakings he gave in January (7 months ago) and to answer questions he was asked during his Questioning but refused to answer is set out in paragraph [140] below.

Analysis

78The three issues before me on this motion are:

i. Whether Mercedes is entitled to receive an order for costs and/or interim disbursements in the amount of $500,000, which must be paid by Mike personally, the John Corporations, or both in particular amounts.

ii. Whether Mercedes is entitled to an order for temporary spousal support, if so, whether an order should be made; and if so, what amount of spousal support should Mike pay; and

iii. Whether Mike’s financial disclosure is complete, whether Mike has answered the Undertakings he gave during his Questioning, which took place on January 15th and 17th, 2020, and whether Mike was and is now obliged to answer questions he was asked during the Questioning but refused to answer.

Issue 1- Mercedes’ Request for Costs and/or Interim Disbursements:

Is Mercedes entitled to an order for interim costs in the context of her oppression action, pursuant to s.249(4) of the OBCA?

79Section 249(4) of the OBCA¹² states as follows:

In an application made or an action brought or intervened in under this Part, the court may at any time order the corporation or its affiliate to pay to the complainant interim costs, including reasonable legal fees and disbursements, for which interim costs the complainant may be held accountable to the corporation or its affiliate upon final disposition of the application or action.

80In Alles v. Maurice¹³, Blair, J., as he then was, articulated the test a shareholder must meet in order to obtain an interim costs order:

i. There is a case of sufficient merit to warrant pursuit; and

ii. The complainant shareholder is genuinely in financial circumstances which, but for an order under s.249(4), would preclude the claim from being pursued.¹⁴

81As set out in Hames v. Greenberg, 2014 ONSC 245¹⁵, the Alles test is a low bar to meet and does not require the complainant shareholder to make out a prima facie case of oppression. Rather, a judge must be “satisfied that the claims advanced are well over the “frivolous and vexatious” marker – after all, money is being asked for – but without the need of establishing a claim on a balance of probabilities.¹⁶

82The first stage of the test may be satisfied even where the parties have put forward conflicting evidence on the merits of the oppression claim. The question is simply whether the complainant shareholder has established a case of sufficient merit to warrant pursuit.¹⁷

83The complainant shareholder must lack the financial resources to fund the litigation in order for interim costs to be awarded. However, impecuniosity is not a pre-condition to obtaining an order. A complainant shareholder is not required to sell his/her home, de-register RRSPs, or unreasonably reduce his/her standard of living in order to fund the litigation. Further, a complainant shareholder may qualify for interim costs because he/she is unable to fund litigation for the reason that his/her financial resources are tied up in the company that is the subject of the litigation.¹⁸

84In Hames, the court awarded interim costs to a complainant even though he had approximately $300,000 in assets, some of which were RRIFs. The complainant had not made any efforts to borrow money or mortgage his property to fund the litigation, but the court concluded that it was doubtful that he had the ability to raise the funds being requested on the motion. The applicant was elderly, did not have employment income, and had previously drawn down a line of credit. His legal fees were an obstacle to him bringing forward his meritorious oppression claim, so an award of interim costs was warranted.¹⁹

85When granting an order for interim costs, the Court is to consider the value of the complainant shareholder’s shares. In other words, the Court may consider the fact that, should the complainant shareholder fail to make out his/her case, the amount of interim costs awarded could be applied against the value of the complainant shareholder’s shareholdings.²⁰

86Mercedes has advanced a claim in the oppression action. Specifically, she seeks relief under section 248(1) of the OBCA, which states as follows:

i. (1) A complainant... may apply to the court for an order under this section.

ii. (2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,

a. any act or omission of the corporation or any of its affiliates, effects or threatens to affect a result;

b. the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

c. the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of²¹.

87Conduct will be in breach of s. 248 if: (a) that conduct breaches the reasonable expectations of the complainant shareholder; and (b) this breach amounts to oppression, unfair prejudice, or an unfair disregard of a relevant interest.

88The determination of whether an expectation is reasonable is a fact-specific, contextual inquiry, based on the facts of the case, the relationships at issue, and the entire context. Some of the factors that are useful in determining whether a reasonable expectation exists include: the nature of the corporation; relationships; past practice; preventative steps; representations and agreements; and fair resolution of conflicting interests.

89Where closely-held corporations are set up to manage the wealth of a family business, shareholders have a reasonable expectation that their shares will ultimately allow them to benefit from family wealth and provide them with financial security, even when they are not actively involved in the business²².

90In 820099 Ontario Inc. v Harold E. Ballard Ltd.,²³ the court considered the reasonable expectations of non-controlling shareholders in the context of an estate freeze (a corporation structured like 966, in which a non-controlling shareholder is gifted common shares with the potential for growth and a controlling shareholder is issued preferred shares with a fixed value, such that all appreciation in value accrues to the common shareholder). The court held that, in this context, the common shareholder’s reasonable expectations are not static and might evolve as the value of their common shares increases. The recipient of the gifted shares is not required to remain “eternally grateful no matter what the conduct of the donor,” and the donor does not have “carte blanche to run roughshod.” The directors of a corporation with this structure are required to consider the interests of the common shareholders, who have substantial equity in the company. ²⁴

91Generally, where the reasonable expectations of shareholders in a closely-held family corporation are breached and the non-controlling shareholders no longer trust the controlling shareholder to manage their interest in the corporation, it is equitable to allow the minority shareholders to extricate themselves.²⁵

92Further, in any context, there is an assumption that shareholders reasonably expect an equal share in the profits of the corporation and certain minimum standards of corporate governance.

At a minimum, reasonable expectations must be presumed to include expectations that directors and officers will fulfill their statutory duties of good faith and loyalty to the corporation, that shareholders will share the profits of the company in proportion to their ownership of a given class of shares, and that distributions of equity of the company will only be made to shareholders.²⁶

93In Caughlin v. Canadian Payroll Systems Inc. (Caughlin),²⁷ the Manitoba Court of Appeal held that a shareholder was entitled to relief under the oppression remedy where a controlling shareholder had, among other things, 1) diverted a corporation’s income and profits into another entity in which the non-controlling shareholder had no interest; and 2) used the corporation to pay for its legal expenses in the oppression proceedings.

94In Caughlin, the court also found that the unfair conduct was exacerbated by the defendant’s failure to adhere with corporate governance requirements. The court reasoned as follows:

“Small, closely held companies are often less than formal in adherence to requirements of the Act. However, when problems started to arise, Caughlin had a reasonable expectation that there would be compliance with the Act with respect to financial and corporate records, shareholders' meetings and shareholders' approval of the decision to waive audited financial statements. Caughlin had to use this court process to obtain financial records of CPS to obtain a clearer understanding of the improper conduct of Lyle. The fact that the financial statements that he did obtain were not-audited left Caughlin to rely on statements which were based solely on information which Lyle provided to the accountant. Caughlin has been unable to inspect any of the records of CPS upon which the financial statements are based to determine the extent of Lyle's conduct and how it affected his interests. The only shareholders' meeting that was held occurred during the litigation and was improperly called. Moreover, all of the decisions to divert income and profits to Canpay from CPS were made without directors' resolutions. Not only were these decisions prejudicial and in disregard of Caughlin's interests, they were contrary to the Act.²⁸

Corporate Governance

95Mercedes submits that Mike has shown a total disregard for her legal rights and corporate interests, as follows:

i. He never held any shareholder meetings, annually or otherwise, as required under the OBCA;²⁹

ii. He never prepared audited financial statements for either 966 or 764, as required under the by laws of both corporations and under the OBCA;

iii. He has never been validly appointed as a director, thereby putting into question the authority under which he purports to act;

iv. The Shareholder’s Resolutions by which Mike was appointed as the sole Director of 764 and 966 were signed solely by Mike and not Mercedes;

v. The Shareholder’s Resolutions that exempt 764 and 966 from appointing an auditor required by the OBCA which require the consent of all shareholders, were signed solely by Mike and not by Mercedes³⁰;

vi. In his capacity as the sole Officer and Director of both 764 and 966, he failed to hold an annual shareholder’s meeting as required by the OBCA; and

vii. He failed to list Mercedes as a shareholder on the T2 forms filed for both 764 and 966 with Canada Revenue Agency for the years 2014-2018.

96In terms of corporate governance, Mike responds as follows:

i. Audited financial statements are not needed for small corporations, like the John Corporations. It is more typical and normal for companies of this size to have unaudited financial statements,

ii. Mercedes did not sign the Shareholder Resolutions that exempted 764 and 966 from filing audited financial statements because he thought she would refuse to do so,

iii. Mercedes acquiesced to Mike being the Officer and Director of both 966 and 764, and

iv. Mercedes was not named as a shareholder in a number of tax filings, but this was an oversight.

97Therefore, Mike submits that Mercedes did not become a shareholder of either 966 of 764 until 2013. She cannot, therefore, claim that the corporate structure itself is oppressive, given that it existed before the 2013 Transaction. Mike asserts that Mercedes received the $1 million tax-free from 966, as part of their partial separation agreement, to enable her to close the Aqualina condominium transaction.

98While this is a small family-run business and some may argue that some of these corporate governance requirements can be overlooked in these circumstances, that logic only applies when there is trust between the family members and shareholders. In the context of Mercedes’ shareholdings in 764 and 966, there simply is no longer any trust between Mercedes and Mike.

99Mike completely disregarded the following core rights of shareholders after the parties separated: 1) the right to a general meeting; and 2) the right to receive audited financial statements.

100The evidence is clear that Mike did not actively take steps to ensure that the Shareholder Resolutions were signed by Mercedes. He claims that it was an oversight that Mercedes was not listed as a Shareholder in tax filings.

101Mercedes has asked Mike for audited financial statements, given the serious questions raised by the books and financial statements. In response, he stated that if Mercedes wanted audited statements, she should pay for them as they are “something special”, ignoring his statutory obligation under the OBCA to have them prepared.³¹

102Particularly following separation, Mike ought to have taken steps to ensure that he followed the applicable corporate governance rules; he did not do so. In matters of corporate governance, Mike simply did not treat Mercedes as an owner of 764 and 966.

Intercompany Loans

103The evidence with respect to the intercompany loans between 764 and 966 and other John Corporations³² is the following:

i. Mike views 764, 966 and other John Corporations as interrelated.³³

ii. Mike runs 764, 966 and other John Corporations with the intention of maximizing value in the corporations as a whole, as opposed to being specifically concerned with maximizing the value of 764 and 966;³⁴

iii. The general ledgers for both 764 and 966 refer to an agreed “intercompany balance”;³⁵

iv. 764 and 966 are owed significant sums of money from the other John Corporations in which Mike has an interest and Mercedes does not and which Mike deposes are not collectible;³⁶

v. The financial statements for 764 and 966 show that funds are moved between the John Corporations through intercompany loans and management fees;³⁷

vi. It appears that no loan agreements or management fee arrangements exist;³⁸

vii. 966 has loaned monies to BBM (a corporation in which Mercedes has no interest) to purchase buildings (the current value of the loan to BBM is $1,379,659 as set out in the 2019 unaudited financial statement for 966). There is no written loan agreement with respect to the loan and in 2017, 966 stopped charging interest on it;³⁹and

viii. Mr. Prager, the corporate lawyer, and Jeff Sugar, the corporate accountant, are relied on by Mike to establish the accounting procedures to maintain the intercompany balance between 764 and 966 and the other John Corporations.⁴⁰

104During his Questioning, Mike was asked several questions about the loans and managements fees from 764 and 966 to other John Corporations. He purported not to know the answers to questions relating to the purpose of the intercompany loans or how they benefitted 764 or 966. In answer to questions about the structure of the intercompany balance; loan agreements and management fees, Mike repeatedly answered that he relied on Mr. Sugar for this information.⁴¹ When asked to undertake to produce the entirety of Mr. Prager’s and Mr. Sugar’s files, which would have enabled Mercedes to understand and assess the impact of the intercompany loans between 764 and 966 and the other John Corporations on her, Mike refused. It is of serious concern to this Court that Mike has refused to provide such information to her.

105Notwithstanding the parties’ separation, Mike has continued to run the entire group of John Corporations with either no appreciation of or an utter disregard for his accountability to Mercedes as a shareholder of 764 and 966, let alone his disclosure obligations to her as a separated spouse and as a family law litigant. While this may not be problematic for Mike, given that he has interests in the other John Corporations, the intercompany balance and loans between 764 and 966 and the other John Corporations is highly relevant to Mercedes’ ability to access the value of her shareholdings because the loans are allegedly not capable of being repaid.

Personal Benefits Mike Extracts from 764/966

106The evidence demonstrates that Mike has been able to extract personal benefits from 966 as follows:

i. He drew on his 966 shareholder loan at times to pay car payments, taxes, legal fees and valuators. In particular, in 2019, Mike was able to access $39,125.75 from 966 by way of shareholder loan to pay his legal fees; and

ii. He has not been forthcoming about what expenses he had put through other John Corporations and has refused to produce documentation related to the John Corporations. For example, in Mike’s July 31st affidavit, he deposes that other than the $39,125.75 amount referred to in (i) above, he has used his own resources to fund his legal fees. However, his shareholder loan account from 966 shows that he accessed $11,152.59 to pay Teplitsky Colson in 2015.

107Mercedes is unable to access any funds at all from these corporations unless Mike decides that she should receive them.

108Mike was asked for the following information and documents during his Questioning, which he refused to give:

i. To provide an expense report for purchases he made on the corporate credit cards;

ii. To provide copies of the corporate credit card statements from the John Bead Corporation; and

iii. To provide the details of the benefits he received by way of shareholder loans, legal payments and rent received.

109His evidence during the Questioning proves that at no time will Mercedes be capable of confirming that the value of her interests in 764 and 966 are not being diluted as a result of the choices Mike makes for himself and other members of the family. To further discourage her from pursuing her rightful entitlement respecting 764 and 966 at this time, Mike has gone so far as to try to intimidate her into backing off by accusing her of putting her own interests ahead of her own child (Daniel).

110Mike is in control of all of the information and the decisions that are made in relation to 764 and 966. By contrast, Mercedes has no access to any personal benefits or access to the value of her corporate interests. Mike’s lack of documentary disclosure in connection with the personal benefits he extracts from 764 and 966 is potentially linked to Mercedes’ oppression claims at Mike’s hands because Mercedes is entitled to the documents that Mike refuses to give.

111To summarize, Mercedes is the owner of corporate assets, valued at approximately $11,218,000; yet, she cannot access any funds from these assets, directly or indirectly, to proceed with her case, which includes claims under the OBCA.

112The evidence appears to be that the only John Corporation that has marketable liquid assets, at this time, is John Bead. John Bead operates out of Bertrand, one of the two buildings owned by 966, 764 and Mike personally. Mike’s evidence is clear that, when creating the Estate Freeze that gave Daniel the John Bead business, he intended that the business would operate indefinitely out of the Bertrand property. It is obvious that Mike does not intend to take any steps to change the business succession arrangements he made in 2013. Notwithstanding that on February 3, 2020, Mike knew that Mercedes intended to bring a motion on May 21, 2020, for funds to enable her to proceed with her claims. Mike personally guaranteed an additional line of credit with Export Development Canada of $600,000 purportedly due to the negative impact of the Covid-19 health crisis on John Bead. No documentation was provided in support of the need to have guaranteed that loan. He asserts, as well, that John Bead’s assets are pledged to the Bank as security. No evidence of this obligation was produced. In 2018, the company was able to borrow $1,376,718 as part of the arrangements made to finance the closing of the purchase of the Aqualina Condominium. After having liquidated the marketable securities in 966 to fund the closing of the Aqualina Condominium, at which time Mercedes transferred her 50% interest in the matrimonial home to Mike, Mike now takes the position that John Bead simply cannot repay the loan to 966; yet, the only marketable securities are held by John Bead.

113Based on the above, Mercedes has more than met the threshold test under s.249(4) of the OBCA and is entitled to interim costs as a complainant shareholder. On the evidence before this Court on this motion, Mercedes’ oppression claim is far from frivolous or vexatious and it has sufficient merit to warrant pursuit. As of this time, there is ample value in her one common share in 966 and minority interest in 764 such that Mercedes will be in a position to repay funds that Mike causes the companies to advance to her an amount of interim costs to her to assist her in pursuing her claims.

114When funds were required in order to enable the parties to effect the transfer of the matrimonial home and the purchase of the Aqualina Condominium Mike was able to make the arrangements to accomplish that goal. When funds were allegedly required to assist Daniel in his business Mike was able to accomplish that goal. Mercedes’ interests in 764 and 966 is worth about $11 million in total. I am satisfied that as the sole Officer and Director of the companies, Mike will be able to raise the sum of $250,000 within a reasonable period of time. This will allow Mercedes to pay her off her credit card debt, pay off her outstanding debt to her counsel and apply for mortgage financing which, on the evidence before me, I am satisfied that she will be able to obtain.

115I find Mike’s position respecting Mercedes’ request for $500,000 to complete this case to be disingenuous. Mike’s own evidence is that he has incurred a) legal fees for Mr. Moldaver and Mr. Pitch totalling $393,257.94, of which he currently owes $40,000; b) real estate appraisal fees of $20,000; and c) accounting fees for AP of $50,829.03 (not including WIP). During oral argument, much was made of the fact that Mercedes had paid over $360,000 in expert accounting fees to RVG, which Mr. Moldaver referred to as “nine times more” than Mike had paid to AP, and RVG had not yet completed trial-ready reports, unlike AP. Regardless of the allocation of the funds each party has spent on legal and experts’ fees, as of the date he swore his affidavit (July 31, 2020) Mike, himself, had paid $424,086.97 in legal, accounting and real estate fees and owed a further $40,000 in legal fees and WIP to AP. While Mercedes may have spent over $600,000 in fees relating to this matter over the last five years, as compared to the $464,086.97 amount of fees Mike has spent, Mercedes has clearly had to incur substantial costs to obtain disclosure from Mike. It is not surprising that his fees are less than hers. The shock expressed at the level of Mercedes’ fees is disingenuous. Of the amount Mercedes is seeking in interim costs and/or disbursements, the sum requested to permit her valuator, RVG, to complete his reports for trial is relatively small ($40,000 to $70,000) in relation to the amount requested for purposes of paying her outstanding accounts to her counsel ($112,000) and funding the work counsel will be required to do to prepare for and attend trial. Both parties have retained senior family and corporate counsel and valuators. Mike undoubtedly is aware of the costs that Mercedes will have to incur to proceed to trial.

116Given the order I have made today under the OBCA, Mercedes will be in a position to raise the remainder of the monies she requires by way of mortgage financing. Mercedes concedes that around the time of separation, she withdrew approximately $588,000 from the parties’ joint bank accounts. Her evidence is that she has used most of it to assist with the professional fees to which she has referred on this motion. One-half of the amount in the joint accounts from which Mercedes apparently withdrew from the funds was presumptively Mike’s money. Given the order of costs of $250,000 that I am making under the OBCA and given that the evidence of the parties satisfies me that Mercedes will be able to raise at least $300,000 by way of mortgage financing if she discharges her debts out of the $250,000 in costs and if Mike guarantees the mortgage she takes, if her proposed lender requires him to sign as guarantor. Accordingly, it is not necessary for me to address Mercedes’ request for interim disbursements from Mike under the FLRs and CJA in relation to the family law claims any further than to state that I am satisfied that an order requiring Mike to guarantee a first mortgage that Mercedes places on the Aqualina Condominium is justified under the FLRs and s.131 of the CJA. Without the $300,000 amount, she will not be in a position to fund her future costs. It would be extremely unfair, if Mercedes were required to incur the substantial income tax repercussions of liquidating RRSPs in a case where the minimization of income taxes has been an essential objective in the management of the family affairs in the past.

Issue #2: Is Mercedes Entitled to Temporary Spousal Support?

117In determining whether an order should be made for temporary support, I turn to s.15.2(2) of the Divorce Act, which requires a Court to consider the conditions, means and needs and other circumstances of the parties; the length of time the parties have been spouses; and any arrangements relating to spousal support.

118I must also consider the factors and objectives contained in ss.15.2(4) and (6). At the current time, Mercedes regularly receives approximately the same funds on which to live as Mike does for spousal support. More or less she receives the same funds as Mike does a month. Contrary to her evidence, the parties’ tax returns indicate that the critical care insurance payments are made by John Bead over and above the parties’ salaries. She owns two condominiums. She has no mortgage.

119Mercedes seeks temporary spousal support on both a compensatory and needs basis for the following reasons:

(1) The parties were married for 35 years;

(2) The parties led a lifestyle during the marriage to which she became accustomed. The parties had two properties in Barbados. The parties drove luxury cars, vacationed often and ate out of the home regularly.

(3) Mike earned about $730,000 a year in 2015, 2016 and 2017.

(4) Given Mike’s failure to provide income valuations for 2018 or 2019, an updated sworn financial statement and continued failure to answer the proper questions he was asked during his Questioning almost eight months ago, Mr. Rudson’s most recent estimate of Mike’s annual income for spousal support should be imputed at $730,000.

(5) Mercedes has had need. She could not pay her legal and accounting fees, even with the access to funds she has had. She maxes out her credit cards and has been carrying debt of $65,000; and

(6) On an income of $730,000, John has the ability to pay temporary spousal support.

120For 35 years, Mercedes was a homemaker. Mike worked in John Bead, the family’s bead company. He continues to be involved in John Bead and has ben mainly, if not solely, responsible for managing assets that were acquired during the marriage. After the parties’ separation, he caused the John Corporations to ensure that he receives $5,000 a month on account of repayment of a shareholder loan, as does Mercedes. Each party is paid a salary of between $80,000 and $82,000 a year.

121While Mercedes will certainly have the better ability to contribute meaningfully to her own support once the property issues between the parties are resolved, at the moment, she is entirely dependent on Mike for her support. There is no reason why should not have been in receipt of one-half of the of income over which Mike has had reasonable access and control since the separation.

122In Damaschin-Zamifirescu v. Damaschin-Zamifirescu,⁴² additional principles for the Court to consider on temporary spousal support motions were set out as follows:

(1) The party claiming temporary spousal support has the onus of establishing that there is a triable (prima facie) case, both with respect to entitlement and quantum. The merits of the case in its entirety are to be dealt with at trial.

(2) In the event a spousal support claimant cannot establish an arguable case for entitlement to spousal support, the motion for temporary relief should be dismissed, even if the claimant has a need and the other party has ability to pay.

(3) The court is not required to carry out a complete and detailed inquiry into all aspects and details of the case or to determine the extent to which either party suffered economic advantage or disadvantage because of the relationship or its breakdown. That task is for the trial judge.

(4) The primary goal of interim spousal support is to provide income for dependent spouses from the time the proceedings are commenced until trial. Interim support is meant to be a “holding pattern” to, in so much as possible, maintain the accustomed lifestyle pending trial.

(5) If a triable case exists, interim support is to be based primarily on the motion judge’s assessment of the parties’ means and needs. The objective of encouraging self-sufficiency is of less importance.

123There is no doubt in my mind that Mercedes has a prima facie case for spousal support based on the length of the parties’ marriage (35 years) and on the economic disadvantage she suffered as a result of the role she played during the marriage. While Mike has caused the parties to receive about equal amounts of monies from the John Corporations, this “holding” pattern does not detract from Mercedes’ entitlement to temporary spousal support.

124If Mike and Mercedes had resolved the property issues in this case before Mercedes brought a motion for temporary spousal support, the support issues might well have been different than they were at the time that the motion was brought and heard. To my knowledge, Mercedes continues to own one common share in 966 and 49% of 764.

125Simply put, while Mike relies on Mercedes’ substantial wealth (including the value of her interest in 966 and 764, which he himself asserts is in excess of $10,000,000) on this motion in his attempt to challenge Mercedes’ right to an order for any interim costs and disbursements and her entitlement to spousal support, her complete lack of control over her interests in 966 and 764 and Mike’s complete control over her holdings in the two companies and other corporate holdings between which monies are transferred for one reason or another, has caused her to be entirely dependent on Mike for support, but for about $440 in net, after-tax rental income she receives from leasing the Riverside condominium per month. [In fact, Mercedes deposes that she has recently had to reduce the rent being paid by the tenant by about $150 after-tax.] The implication of Mike’s position that Mercedes does not have a prima facie entitlement to support suggests that she is not financially dependent on him for her support. To the contrary, arrangements that Mike made while the family lived together and which he more or less left in place after the parties separated themselves demonstrate that Mercedes is dependent on Mike for her support. Given his complete control over the monthly payments she receives, it is disingenuous for him to suggest that she has not been financially dependent on him since the separation and is not entitled to support.

126While I agree with Mike’s assertion that he has caused amounts to be paid to each of them in equal amounts, this does not mean that he has caused all of the income that is available for their income available for their support to be paid out to them in equal amounts. As held in Brophy v. Brophy.⁴³ the principles contained in the Child Support Guidelines are applicable to a spousal-support analysis.

127In January 2020, RVG produced an income analysis that was not “trial ready”; AP produced a “trial ready” report. During oral submissions, Mr. Moldaver stated that about $40,000 to $60,000 remains in both 966 and 764 a year, beyond what Mike has caused each of the parties receives to receive monthly. It is primarily in accordance with s .18(1) of the Child Support Guidelines that I am imputing income to Mike for spousal support purposes. AP and RVG each considered the imputation-of-income issue and came to different conclusions. RVG treats all of the funds as available for the payment of support; AP takes the position that it would be imprudent for all of the funds to be imputed for spousal support purposes. RVG’s and AP’s reports deal with income in the years 2015 – 2017 only. According to RVG’s income analysis, Mike’s income in 2017 for support purposes should be imputed at $730,000; according to AP, it should be $471,000. The differences in the RVG and AP approaches should, in my opinion, be dealt with at trial. On the basis of AP’s valuation report, Mercedes would have known that she would have been entitled to support that would have yielded her a greater NDI, if the parties’ NDIs were equalized, had disclosure been provided by Mike in a fair and reasonable way such that RVG could have provided her with an opinion respecting this issue much earlier. Notwithstanding the fact that Mike knew in early February 2020 that Mercedes did not accept that the amounts she was receiving were sufficient to fund her support, particularly in light of the income reports, Mike did not take any steps to have his valuator calculate the income over which he had had reasonable access and control for spousal support purposes in either 2018 or 2019. Further, he did not file an updated, sworn financial statement in response to Mercedes’ motion.

128According to a Divorcemate SSAGS calculation that Mike produced, the current arrangements result in Mercedes having net disposable income (“NDI”) monthly of $10,866 a month. However, the calculation imputed rental income to her of $1,200 a month. Mercedes’s evidence had initially been that she nets only $440 a month after the rent-related expenses are paid, which amounts to $5,280 instead of $14,400 in yearly rental income. If one applies an average tax rate of 20% to Mercedes to the rental income, Mercedes has been netting about $10,268 a month in NDI, and not the $10,866 that Mike calculated.

129Mike’s failure to provide an up-to-date analysis of his income for support purposes in 2018 or 2019 has deprived the Court of a more meaningful starting point than the end of 2017 for purposes of considering the impact of the Covid-19 pandemic on Mike’s current available income for support purposes. Further, given the outstanding financial disclosure and the lack of any documentary proof that would support Mike’s very general evidence about the impact of the pandemic on the income he has for support purposes, the best evidence the Court currently has is the income that Mike’s own expert put forward - $471,000 in 2017. I am satisfied that $471,000 is the best and fairest amount with which to impute to Mike for support purposes .

130On Mike’s imputed income of $471,000, at the high range of the SSAGs, according to Mike’s Divorcemate calculations, $19,406 a month in gross spousal support results in Mercedes being left with $11,966 a month in NDI. However, the Divorcemate calculation did not include any rental income from the Riverside condominium. Even if her net rental income were still $440 a month, if one were to apply a 20% average tax rate to it, this would result in Mercedes having NDI of about $11,644 a month. Thus, on the AP calculation of Mike’s income and including her rental income in the calculation of her support entitlement at the high range of support under the SSAGS, Mercedes would have about $1,376 more in NDI monthly than she currently has.

131To be clear then, had Mike equally shared the income for support purposes that his expert has concluded that he had - $471,000 – a support order in the high range of the SSAGs would have required that he pay $19,406 a month to her (by way of an agreement or court order), and Mercedes would have had a greater NDI monthly than she has had, even without considering her evidence regarding the reduction of her rental income recently.

132Again, Mike has had six months since the settlement conference in February to update his income report, had he wished to. Mike provided an undertaking on his Questioning in January 2020 to file an up-to-date financial statement. He also had a legal obligation to do this under Rule 13(16), in response to Mercedes’s motion. He has outright refused to provide answers to fair questions that he was asked during his Questioning. He also decided that he would not provide answer fair questions that he was asked during the Questioning. In the end, any evidence respecting his 2019 or relevant evidence is not reliable or credible.

133Contrary to Mike’s stated concern that it was only “potentially” possible that his income in 2017 was $471,000 for support purposes because he could not take the funds out of the John Corporations that AP referred to, the AP report itself considered the amount that Mike could reasonably take when it arrived at the $471,000 income number. Furthermore, while Mike deposes that the 2019 Financial Statement of John Bead shows that $200,000 only can be withdrawn from the corporation and that his cash flow cannot support the payment of support that Mercedes seeks, he failed to provide a report to support that position. It is simply unfair to Mercedes for Mike to now pick and choose documents to support his evidence in the absence of a full picture. This evidence is meaningless in the context of this case.

134While Mercedes takes the position that she has not received the amount of support to which she is reasonably entitled, she did not take serious issue with the manner in which she has received payments to date. Mercedes should immediately begin to receive temporary spousal support that equalizes the parties’ incomes, even if the current arrangements have been in place for a significant period of time. It was only in January that the experts’ opinions were produced. She advised Mike as early as in February 2020 that she would be bringing a motion for temporary spousal support.

135In my opinion, based on the evidence before me, Mercedes should receive temporary spousal support over and above the amounts that Mike has put in place, in an amount that equalizes their NDIs. If Mike pays Mercedes temporary spousal support in the amount of $3,000.00 a month, over and above the payments that he currently causes her to receive, she will receive an equal share of the income that is available for support purposes.

136Mike has impeded the Court’s ability to determine his up-to-date income. In addition to the amounts that Mike has caused Mercedes to receive, Mike shall pay Mercedes temporary spousal support of $3,000 a month, commencing on September 1st, 2020, and on the first day of each following month pending further order of this Court or agreement of the parties. While he may have put arrangements in place years ago respecting the amount that would be drawn out of the John Corporations, Mercedes has had no say in the matter and no ability to question the reasonableness of the monthly amount she has received. Given the ages of the parties, the length of the marriage, the roles performed by the parties during the marriage, and Mercedes’ current dependency on Mike for support, an equal sharing of the parties’ incomes is fair, appropriate and in all likelihood the nature of the order that a court would have put into place long ago, had Mercedes had the knowledge she has had since January 2020.

Issue #3 - Undertakings, Under Advisements and Refusals

137Mercedes seeks an order compelling Mike to answer the undertakings he gave and proper questions he refused to answer at Mike’s Questioning, as set out by her in the undertakings and refusals chart attached as Schedule “A” to her notice of motion within 30 days. She also seeks an order compelling Mike to produce all relevant documents and provide a further and better Affidavit of Documents, along with the information under s.21 of the Child Support Guidelines to enable RVG to determine Mike’s 2018, 2019 and his current income for support purposes.

138Mercedes claims that Mike has provided disorganized financial production and that while he has produced some relevant financial production, there is much outstanding that is needed by her to advance her family law and oppression remedy case. In particular, Mike relies heavily on the advice of the accountant, Jeff Sugar, and the corporate lawyer, Mark Prager, in answering questions during Mike’s Questioning. However, when asked to produce copies of Mr. Sugar’s or Mr. Prager’s file, he refused. Mercedes submits that the answers to the outstanding undertakings need to be delivered and produced forthwith.

139With respect to the outstanding undertakings and refusals arising from Mike’s Questioning, Mike submits that his financial disclosure is complete and that he delivered his productions without delay. Mike submits that there are no documents outstanding that RVG has requested that have not been provided. According to Mike, the corporate respondents, being 966 and 764, have provided all relevant and proportionate disclosure requested. Mike asserts that Mercedes is on a fishing expedition and that her disclosure is not complete.

140Mike’s Questioning took place on January 15, and 17, 2020, and was conducted by Harold Niman, family law counsel and John Philpott, corporate counsel. At Mike’s Questioning, counsel agreed that Mike would answer further written questions by John Philpott, corporate counsel, which questions would be treated as if they were questions that had been asked at the Questioning (referred to as “W.Q.”).

141Mercedes has grouped the undertakings and refusals charts into the following subject areas:

i. Questions relating to Mike’s pleadings or affidavit;

ii. Questions relating to Mike’s credibility;

iii. Questions relating to Mike’s conduct and corporate governance of 764 and/or 966 and/or questions relating to intercompany loans between 764/966 and other John Corporations;

iv. Questions relating to Mike’s lack of respect for Mercedes’ financial interests as a shareholder of 764 and 966;

v. Questions relating to the production of financial documentation from other John Corporations; and

vi. Questions relating to Mike’s charging of personal expenses to 966/764.

142My rulings with respect to the undertakings/refusals in every category enumerated by Mercedes is attached as Schedule “A” to these Reasons for Order.

Order:

143Accordingly, this Court orders as follows:

(1) Michael John shall immediately take all reasonable steps to cause 1591764 Ontario Incorporated and 1446966 Ontario Limited to pay Mercedes John interim costs in the amount of $250,000, pursuant to s. 249(4) of the OBCA as follows:

i. Within 45 days, 966 and 764 shall advance $250,000 to Mercedes John, the amount of the Advance to be credited against the total value of Mercedes John’s shareholdings in 966 and 764, for the purpose of contributing to her legal costs and disbursements in relation the claims she has brought under the OBCA;

ii. 966 and 764 be jointly and severally liable for the Advance; and

iii. The Advance shall be made “without prejudice” to any interim or final costs award that Mercedes John may seek and be awarded at trial.

(2) Upon the request of Mercedes John, Mike John shall take all reasonable steps to guarantee a first mortgage to be registered on title to Mercedes John’s condominium, municipally known as 55 Merchants’ Wharf, Suite 1226, Toronto ON, M5A 1B6 (“the Aqualina Condominium”) in the principal sum of $300,000.

(3) Pending further agreement or court order, Michael John shall continue to cause Mercedes John to receive the monthly amounts referred to in the Divorcemate calculation attached at Exhibit “N” to his affidavit, sworn on July 31, 2020 (found on page 178 of 268 of Michael John’s Compendium).

(4) Commencing September 1, 2020 and on the first day of each following month, Michael John shall pay to Mercedes John temporary spousal support in the sum of $3,000 a month, pending further agreement or court order.

(5) Michael John shall within 21 days of this Order provide full and complete answers the undertakings that he gave and fully and completely answer questions he refused to answer at his Questioning held on January 15th and 17th, 2020, that are set out in Schedule “A” attached to these Reasons;

(6) Michael John shall produce a further and better Affidavit of Documents within 30 days of this Order;

(7) Michael John shall produce all disclosure required of him under section 21 of the Child Support Guidelines for 2018, 2019 and up to the date of trial, without prejudice to any request that Mercedes John or Rudson Valuation Group (”RVG”) makes, to enable RVG to produce a trial-ready report for Michael John’s income for 2015-2017, inclusive and an income report for Michael John for 2018 and 2019 and a 2020 report prior to trial if she deems it advisable.

(8) Michael John shall serve and file an updated sworn financial statement within 15 days of this order.

(9) If the parties cannot agree on costs, a party seeking costs shall provide written submissions of no more than three pages, exclusive of any offers to settle, dockets and bill of costs by September 25, 2020. The party responding to a request for costs shall do so in similar form within 7 days of receipt of costs submissions. Reply, if any, to responding costs submissions shall be no more 1 page and provided within 5 days of receipt of responding submissions.

(10) This Endorsement is an Order of the Court enforceable by law from the moment it is released.

M. Kraft, J.

Released: September 4, 2020

SCHEDULE "A"

Reasons for Order of M. Kraft, J. release September 4, 2020

M. Kraft, J.’s Ruling on the Undertakings/Refusals given by Mike during his Questioning taken on January 15th and 17th, 2020:

Issue 1: Questions relating to the issues raised in Mike’s pleadings or affidavit

144Mr. Niman asked Mike a number of questions to assess his credibility and, particularly, his involvement of third parties in his decision-making in this case and to provide clarity or information about Mike’s income or net family property. In particular, Mike refused to answer the following questions during his Questioning on the basis that the question asked was a legal question:

(1) Q26, P10: “To advise if Mike understands that any documents that are produced during the course of litigation are not to be distributed to third parties, if there’s a privilege associate with it.”;

Ruling: Mike shall answer this question.

(2) Q29, P11: “To advise if Mike has breached the Implied Undertaking Rule”;

Ruling: Mike shall answer this question.

(3) Q: 159-160, P34-35: “To provide proof of where Mike received the Fribe shares from”;

Ruling: This information is highly relevant to Mike’s net family property and it is his obligation to trace any exclusions he claims under the FLA. Mike shall answer this question and provide supporting documentation to trace his receipt of the Fribe shares.

(4) Q: 365, P75: “To advise whether Prager informed Mike that the shares of 966 were not excluded for family law purposes”;

Ruling: This is a question related to a legal concept and is appropriate refused.

(5) Q409, P85: “To agree that there is no basis for the $2 million exclusion on the gifted shares”;

Ruling: This information is relevant to the exclusion from the calculation of Mike’s net family property and, as a result, Mike shall answer this question.

(6) Q411-412, P86: “To ask Prager whether, when he said, “it looks like you are not family law protected since you always brought your shares from treasury for cash, not by gift”, if he was giving Mike legal advice, that Mike wanted to know if his shares were protected before transferring shares.”;

Ruling: The answer to this question is relevant to the 2013 Transaction and, in particular, to the effect of the Transaction on the family law issues. Mike shall answer this question.

(7) Q365-366, P 76: “To provide authority to speak to Mr. Prager”;

Ruling: As set out in my Reasons for Order, Mr. Prager is corporate counsel for both 764 and 966, in which both parties have an interest. The Estate Freeze that took place in 2013 along with the 2013 Transaction, both of which involved Mr. Prager are at the crux of this matter. Accordingly, Mike shall provide authority to allow Mercedes’ counsel to speak with Mr. Prager, provided counsel for both parties are present when this occurs and provided Mr. Prager consents to speak with counsel for both parties. If Mr. Prager does not consent to speak to both counsel, he shall provide a written explanation setting out the reasons he will not speak to both parties and counsel can then arrange a conference call with me to discuss next steps in this regard.

145Mike refused to answer the following questions on the basis that the questions were not relevant and that he has no beneficial interest in the Betty John Trust, as per documentation he had already provided:

(1) Q: 192-193, P40: “To provide an inventory and statement of all assets in the trust from establishment in 2002 to today. All assets, dispositions and changes in value, etc.

Ruling: Mike is a beneficiary of the Betty John Trust regardless of his assertions that he has no beneficial interest in this Trust. As a result, he shall answer this question.

(2) Q: 194, P40-41; “To provide the documents referenced in Exhibit 1 (letter from Prager dated October 1, 2002) which references a number of transactions including the gifting of shares and transfers”;

Ruling: Mike shall answer this question as the documents referenced in the letter from Mr. Prager to him, dated October 1, 2002, relate directly to an exclusion he is claiming which impacts the calculation of his net family property.

(3) Q234-236, P48-49; “Is Mike’s mother’s home in the Trust?”

Ruling: Mike shall answer this question as it relates to the assets owned by the Betty John Trust, of which Mike is a beneficiary and is tied to the value of his beneficial interest for net family property purposes.

(4) Q240, P50: “Is the income shown by Mike’s mother on her tax returns related to the trust?”

Ruling: Mike shall answer this question as it relates to the question of whether the Betty John Trust distributes income to its beneficiaries which is tied not only to Mike’s net family property but also to the calculation of Mike’s income for spousal support purposes.

(5) Q241, P45: “Does Mike receive income from the trust?”

Ruling: Mike shall answer this question as it is tied directly to his income for spousal support purposes and to the value of his beneficial interest in the Trust.

(6) Q242, P50-51: “What income that is shown on the 2014, 2015 and 2016 tax documents are income of Mike’s mother in relationship to her as a beneficiary of the trust?”

Ruling: Mike shall answer this question as it is tied to Mike’s beneficial interest in the Betty John Trust.

(7) Q243-244, P51: “What income that is shown on the 2017, 2018 and 2019 tax documents are income of Mike’s mother in relationship to her as a beneficiary of the trust?”

Ruling: Mike shall answer this question as it is tied to Mike’s beneficial interest in the Betty John Trust.

(8) Q277, P58: “To provide evidence of the source of the money that was advanced to Mike’s brother for the purchase of a home”;

Ruling: Mike shall answer this question as it is tied to the ability of the Betty John Trust to make distributions to its beneficiaries, one of which Mike is.

(9) Q278, P58, “If any money has come from the trust at any point in time and been distributed, to provide evidence of those distributions”;

Ruling: Mike shall answer this question as it is tied to whether Mike has received any distributions from the Betty John Trust which can affect his income for support purposes and potentially his net family property.

Issue 2: Questions asked of Mike regarding his credibility:

146Mike refused to answer the following questions asked of him regarding litigation that had occurred between him and an individual named Mr. Soni, who was a shareholder, on the basis that the questions asked are not relevant:

(1) Q455, P97: “Was Mike in litigation with Mr. Soni?”;

See below for Ruling.

(2) Q456, P97: “Was the gentlemen Mike was involved in litigation with named Paul Soni?”

See below for Ruling.

(3) Q457-458, P98: “Is Mr. Soni Mike’s brother in law”;

See below for Ruling.

(4) Q459, P98: “Was Mike involved in three legal proceedings with Mr. Soni?”;

See below for Ruling.

(5) Q466, P99: “Did Mike have three pieces of litigation with Mr. Soni?”;

See below for Ruling.

(6) Q467, P99-100; “Was there an issue in the litigation about back-dating of documents, trust documents, things of that nature?”;

See below for Ruling.

(7) Q469, P100: “Did Mike cause criminal charges to laid against Mr. Soni?”

See below for Ruling.

(8) Q473, P101: “Does Mike remember reading the decision of Master Brott?”

See below for Ruling.

(9) Q480-482, P102-103: “Was Mr. Soni married to Brigit?”

See below for Ruling.

(10) Q486-488, P103-104: “To advise if Mike remembers whether there was a trust agreement that was purportedly dated April 13th, 1984, and criminal charges laid against Paul Soni?”

See below for Ruling.

(11) Q491, P105: “To advise if Mike testified at a preliminary hearing related to the litigation with Mr. Soni?”

See below for Ruling.

(12) Q491, P105: “To advise what Soni’s interest in John Bead was?”

See below for Ruling.

(13) Q493, P105: “To advise if Mike remembers the name of the lawyer representing the company or him at the time of his legal proceedings with Mr. Soni, Scott Kugler?”;

See below for Ruling.

(14) Q494, P105: “To produce the entirety of the file in the litigation Mike had with Mr. Soni.”

Ruling: Mike shall not answer this question. This amounts to a fishing expedition on a collateral issue.

(15) Q498, P106: “To produce a transcript of the evidence at a preliminary hearing that is referenced in the decision of Master Brott, dated April 10, 2002”;

Ruling: Mike shall not be obliged to answer this question which, in my view, are in the nature of a fishing expedition.

(16) Q299, P107: Does Mike remember how the Soni litigation was resolved?”; and

See below for Ruling.

(17) Q500, P107: “For Mike to identify whether the document marked as Exhibit “A” is a document that settles the action of the litigation involving Paul and Brigit?”.

Ruling: Other than Q494 and Q498, referenced above in sub paraphs (14) and (15), the nature of all questions listed in Issue 2 relate to Mike’s credibility. Credibility is an issue in the case. Mike shall answer these questions but, in my view, it may impact on Mercedes’ ability to then further cross-examine Mike on these issues at trial given their collateral nature.

Issue 3: Questions relating to Mike’s conduct and corporate governance of 764 and/or 966 and/or questions relating to loans between 764/966 and other John Corporations.

147Mike refused to answer this question on the basis that it was not relevant:

(1) Q:23, P10: “To produce copies of all emails related to this proceeding that Mike has forwarded to his son, Daniel”;

Ruling: Mike shall answer this question. Mercedes claims that Mike has taken steps to limit her rights as a shareholder in 764 and in 966 and that he has done so seemingly to the benefit of John Bead. As a result, this information is relevant to enable Mercedes to determine the extent to which Mike has involved Daniel in that process, and in particular, how Mike has involved Daniel, against Mercedes in this proceeding.

148Mike has acknowledged the relevance of these questions/issues but has refused to answer these questions fully, stating that all relevant documents have been produced and is limiting the scope of his response on the ground that the questions or productions being sought are not proportionate in relation to the issues:

(1) Q376, P78: “To produce Prager’s file from when Mike retained him until today”.

Ruling: Mike shall produce the entirety of Mr. Prager’s file. Counsel for Mercedes has indicated a willingness to attend at Mr. Prager’s office to review the file which is a reasonable way to address this. Mike has already produced parts of the Prager file and Mercedes is entitled to the entirety of the file.

(2) Q417, P89: “To advise if Mike intends to call Mr. Prager as a witness at trial”;

Ruling: Mike shall answer this in accordance with the FLRs when his witness list is required to be disclosed.

(3) Q430-431, P93: “To produce the entirety of Sugar’s (the corporate accountant) file for any files – personal and corporate (notes and documents) from the date those files began”;

Ruling: Mike shall produce the entirety of Mr. Sugar’s file provided Mr. Sugar consents. If Mr. Sugar does not consent, he shall provide a letter detailing the reasons he will not consent. If that occurs, then counsel shall arrange a conference call with me to discuss next steps. If Mr. Sugar consents to produce the entirety of his file, then counsel for Mercedes shall attend at Mr. Sugar’s office and indicate which documents he/she requires to be copied.

(4) Q446-447, P95-96: “To advise if Sugar has given Mike any advice about this litigation?

Ruling. Mike shall answer this question as Mr. Sugar is the accountant for the John Corporations which are owned by both parties.

(5) Q994, P210-211: “To produce Mr. Prager’s file, including email correspondence, reporting letters, any corporate documents not yet produced, supporting documents regarding redemption of shares, any shareholder agreements regarding any company involved in this litigation that hasn’t been produced, any further corporate documents regarding any company involved in this litigation that already hasn’t been produced, minutes of the directors’ meetings, minutes of shareholders’ meetings, any notices of meetings to directors or shareholders, any shareholders resolutions and nay other relevant documents in Mr. Prager’s possession”.

Ruling: Mike shall produce the entirety of Mr. Prager’s file for the reasons set out above.

149Mike refused to answer the following questions, or stated that he did answer but would not identify where he did so in the transcript, or refused on the basis that the question(s) asked was/were “overly broad”:

(1) Q: 953, P199: “To advise if, since separation, Mike has stopped all corporate governance?”;

Ruling: Mike shall answer this question as it relates to Mercedes’ oppression claim set out in paragraph 66 of her Answer.

(2) Q: 957, P200: “For Mike to advise if he considers it part of his role to take corporate governance steps in regard to shareholders”;

Ruling: In March 2020, Mike stated that he answered this question. Mercedes responded in May 2020, asking him to identify where in the transcripts this question was answered by him. He did not do so. Mike shall answer this question as it relates to Mercedes’ oppression claims set out in paragraphs 66 of her Answer.

(3) Q992-993, P210: “To provide any other explanations for the lack of corporate governance, particularly since the separation”;

Ruling: In March 2020, Mike stated that he answered this question. Mercedes responded in May 2020, asking him to identify where in the transcripts this question was answered by him. He did not do so. Mike shall answer this question as it relates to Mercedes’ oppression claims set out in paragraph 66 of her Answer.

(4) Q1138, P247: “To advise whether the Net Worth Statement, dated July 4, 2014 (Exhibit 7) was completed on Mike’s instructions”;

Ruling: In March 2020, Mike stated that he answered this question. Mercedes responded in May 2020, asking him to identify where in the transcripts this question was answered by him. He did not do so. Mike shall answer this question as it relates to Mercedes’ oppression claims set out in paragraphs 66 -70 of her Answer.

(5) Q: 1139, P247: “Does Mike have any knowledge of someone else asking for the Net Worth Statements, dated July 4, 2013 (Exhibit 7) to be done?”

Ruling: In March 2020, Mike stated that he answered this question. Mercedes responded in May 2020, asking him to identify where in the transcripts this question was answered by him. He did not do so. Mike shall answer this question as it relates to Mercedes’ oppression claims set out in paragraphs 66-70 of her Answer.

(6) Q: 1(a), W.Q.: “To produce the correspondence and emails regarding the conduct and governance of 966, including emails with financial, accounting and legal advisors”;

Ruling: In March 2020, Mike refused to answer this question stating that it is “overly broad”. I disagree. Mike shall answer this question. The conduct and governance of 966 is a material issue in Mercedes oppression action. Correspondence and emails related to this material issue, including emails with third parties such as financial, accounting and legal advisors is relevant and necessary.

(7) Q2(A), W.Q.: “To produce the correspondence and emails regarding the conduct and governance of 764, including emails with financial, accounting and legal advisors”;

Ruling: In March 2020, Mike refused to answer this question stating that it is “overly broad”. I disagree. Mike shall answer this question. The conduct and governance of 764 is a material issue in Mercedes oppression action. Correspondence and emails related to this material issue, including emails with third parties such as financial, accounting and legal advisors is relevant and necessary.

(8) Q3(A), W.Q.: “To produce the correspondence and emails regarding the conduct and governance of BBM (including emails with financial, accounting and legal advisors and including emails with the other shareholders, officers and directors of BBM regarding future plans, long terms plans and projections for BBM.”

Ruling. In March 2020, Mike refused to answer this question stating that it is “overly broad”. I disagree. Mike shall answer this question and produce the documentation requests. The conduct and governance of BBM is clearly relevant. Mike has admitted that there is an intercompany balance between the John Corporations and BBM. The movement of funds from 966 and 764 to other corporations (including BBM) in which John has an interest and Mercedes does not is relevant.

(9) Q4(a), W.Q.: “To produce the correspondence and emails regarding the conduct and governance of JBC [John Bead] (Including emails with financial, accounting and legal advisors)”.

Ruling. In March 2020, Mike refused to answer this question stating that it is “overly broad”. I disagree. Mike shall answer this question. The conduct and governance of John Bead is clearly relevant. Mike has admitted that there is an intercompany balance between the John Corporations and John Bead.

(10) Q5(b), W.Q.: “To produce the JBHL correspondence and emails regarding the conduct and governance of the corporation (including emails with financial, accounting and legal advisors)”:

Ruling. In March 2020, Mike refused to answer this question stating that it is “overly broad”. I disagree. Mike shall answer this question. The conduct and governance of JBHL is clearly relevant. Mike has admitted that there is an intercompany balance between the John Corporations and JBHL.

(11) Q: 6(B), W.Q.: “To produce the Fribe correspondence and emails regarding the governance of the corporation (including emails with financial, accounting and legal advisors)”;

Ruling. In March 2020, Mike refused to answer this question stating that it is “overly broad”. I disagree. Mike shall answer this question. The conduct and governance of Fribe is clearly relevant. Mike has admitted that there is an intercompany balance between the John Corporations and Fribe.

Sub-Issue 3(b): Questions regarding loans between 966 and 764 and other John Corporations:

150Mike refused to answer the following questions:

(1) Q1224, P263-264: “To conduct a diligent search and produce all relevant documents regarding the funds owing to 966 from BBM including any loan documents, emails or notes of meeting:

Ruling: In March 2020, Mike advised that each shareholder contributed a similar amount to BBM to purchase properties and, thereafter, each shareholder is repaid on a monthly basis equally. Mike also answered that there is no loan agreement but that there is a shareholder agreement and that the 3 shareholders verbally agreed to equally fund BBM and equally receive fund repayments. In May 2020, Mercedes asked for confirmation that there is no written loan agreement. If there is no written loan agreement, Mercedes asked that all other relevant documents related to the loan, including any emails, notices at meetings and anything regarding terms be produced, such as emails, correspondence between the three shareholders with Mr. Sugar about the loan. In June 2020, Mike answered that there is no written loan agreement and that the balance of the request by Mercedes is disproportionate and unnecessary. I disagree. The question was to produce relevant documents that relate to material issues in the oppression claim. Mike shall answer the question and produce any documents as requested.

(2) Q3(d), W.Q.: “To provide an accounting to the shareholder loan set out in the BBM Financial Statements, which shall include an explanation of why the balance increased by approximately $1.6 M between 2013 and 2014;

Ruling. On March 17, 2020, Mike advised that he previously answered that the shareholders of BBM funded the purchase of the Bartley property. Mercedes responded in May 2020, that this answer is not a satisfactory response to the question asked. Mike was asked to provide an accounting of the referenced shareholder loan. Mike’s answer is non-responsive to the question asked. Mike shall answer the question.

(3) Q1242, P269: “To advise the purpose of the loan from 966 to 764, the benefit to 966 and to produce any relevant documents with regard tot his ongoing transaction, including fulsome particulars of the loan’s terms;

Ruling: In June 2020, Mike advised that the inter-company accounts on each set of books from 966 and 764 are constantly being reconciled and therefore, the general ledgers (which have already been provided) provide sufficient evidence of the loan activity. I disagree. The answer provided by Mike is non-responsive to the question asked. The undertaking was to produce relevant documents and they have not been produced. The purchase and benefit of the loan has also not been properly described. Mike shall answer the question.

(4) Q1258, P274: ‘To produce an accounting of the interest payments that have been made on the loan from 966 to 764;

Ruling: In June 2020, Mike advised that the management fee income charged by 966 to 764 from 2018 to 2014 is: $25,162; $25,162; $25,162; $24,449; $23,919. Mike explained that the management fee is calculated by determining 5% of the rental income earned in 764. Mercedes responded that the answer provided is non-responsive to the question asked. Mike shall answer the question. The answer is relevant to Mercedes’ oppression claim.

(5) Q1267, P275-276: “To confirm what debt the “interest income” entries on the 966 financial statements are referring to and to provide particulars of same.

Ruling: In March 2020, Mike advised that $79,231 of interest income was from BBM and that an additional $10,000 was generated from stock market investments. In May 2020, Mercedes advised that the undertaking provided at Q1267 was to confirm what the interest income entry was referring to with respect to the Financial Statements for each year. In June 2020, Mike attached a printout from a single account of the 966 2016 General Ledger advising that the interest earned from 764 is posted as a reduction of interest expense in 966. Mercedes has indicated that this answer is non-responsive to the question asked. Mike shall answer the question as to what the interest income was referring to in the financial statements from 2012 to 2016.

Issue 4: Issues relating to Mike’s lack of respect for Mercedes’ Financial Interests asked of Mike by John Philpot as W.Q.

151Mike has answered the following questions partially and refuses to provide the follow up questions arising from his answers:

(1) Q1(c ), W.Q.: “To advise as to the meaning, purpose, author and instruction party in regard to the notion in the 966 General ledger, which states “shares gifted to Mercedes, so 100% of dividend attributed to Mike John” means and who was instructed to write that;

Ruling: In March 2020, Mike advised that he had previously provided the Mr. Prager letter and provided it again. He was asked to them identify the Mark Prager letter referenced in his answer and the sections of Mr. Prager’s letter that answer the question. He did not do so. The answer provided is not responsive to the undertaking. Mike shall answer the question provide any other relevant information about the meaning, purpose, author and instructing party in regard to the referenced notation in the general ledger.

(2) Q2(f), W.Q.: “to advise as to the meaning, purpose, author and instructing party in regard to the notation in the 764 General ledger, which states “shares gifted to Mercedes, so 100% of dividend attributed to Mike “ means and who was instructed to write that”;

Ruling: On March 17, 2020, Mike answered that it is as per the Mark Prager letter previously provided by him. Again, Mike did not identify which Mark Prager letter or reference the sections in the letter that answer the question. Mike shall answer this question and provide any other relevant information about the meaning purpose, author and instructing party in relations to the referenced notation in the general ledger.

(3) Q1357, P302: “To produce any notes explaining the 966 and 764 financial statements, or any other financial statements that have been produced, whether or not those notes are part of the financial statement or some separate document”;

Ruling: In March 2020, Mike explained that the Notice to Reader financials do not typically require note disclosure and therefore none have been created. He explained that 966 charges 5% management fee to 764 based on the gross rental income 764 receives. The fee is on average $25 a year. 966 charges a management fee to reflect the extra efforts Mike makes for BBM. He advised that another shareholder of BBM also charges a similar management fee and that all management fees must have 100% shareholder approval. During Mike’s Questioning, Mike indicated at Q1354-1357, that he received additional explanatory notes from his accountant about the financial statements. In June 2020, Mike then states that there are no notes available. These answers do not answer the undertaking in full. The undertaking was to produce the notes Mike referenced in his Questioning and they have not been produced. No explanation has been given as to why “there are no notes available” in Mike’s most recent response. Mike shall answer this question and produce the notes and all documents he receives from his accountant about the financial statements, whether or not the notes were part of the financial statements are some separate document.

(4) Q987-988, P208: “To advise where the $2.5 M debt obligation references in the 1591764 Directors’ Resolution dated December 2017 is reported in the financial statements.

Ruling: In March 2020, Mike advised that BBM repays each shareholder loan an equal monthly amount which is adjusted from time to time based on all 3 shareholders’ agreeing. In March 2020, Mercedes explained that this answer was not responsive to the question as Mike was to advise where the $2.5 M debt obligation referenced in the 764 Director’s Resolution dated December 2017 is reported in the financial statements. In June 2020, Mike advised that the loan is reflected on the 966 books for simplicity sake and 20 Bertrand is in the 966 books. Mike advised that Mr. Sugar is unsure why the Resolution was for a higher amount and Mike advised that perhaps it related to the original mortgage. Mike attached a mortgage statements which accord with the financials issued. Mike has not answered why the debt obligation is not reported in the financial statement. Mike shall answer this question and advise where it is reflected on the books of 966 and provide a copy of same.

(5) Q4(f), W.Q.: “To produce a fulsome explanation and breakdown of the “Due to related parties on the balance sheet of JBC, including production of any document and any explanation of the terms of this or these loans”.

Ruling: On March 17, 2020, Mike explained that the financial statements for John Bead detail entities and balances and there had been no change in JBHL loan for years, and that intercompany and shareholder loan activity was previously provided. In May 2020, Mercedes asked Mike to produce any relevant document(s) with respect to these loans, including any correspondence with respect to the loans and if no such documentation exists to advise. Mike has not answered this question Mike shall answer the question.

Issue 5: Questions relating to the production of financial documentation from other John Corporations;

152Mike refused to answer, or only partially answered the following questions:

(1) Q4(b), W.Q.: “To produce the JBC [John Bead] General ledgers and banking statements, including (without limitation) in regard to inter-company loans, inter company transfers, and direct and indirect benefits received by Mike”;

Ruling. In March 2020, Mike refused to answer this question stating that it is “overly broad”. I disagree. Mike shall answer this question. The conduct and governance of John Bead is clearly relevant. Mike has admitted that there is an intercompany balance between the John Corporations and John Bead. The requested correspondence will provide information about the material issues in the oppression action, including the movement of funds from 966 and 764 to John Bead. in which John has an interest and Mercedes does not. Further, these productions may provide information about the benefits the Mike extracts from these related corporations and whether 966 and 764 are run for the benefit of their shareholders. Finally, this request is not overly broad because the general ledger and banking statements will contain information about the inter-company loans, inter-company transfers, and the benefits Mike has extracted from his control of the John Corporations. These documents relate to material issues in the oppression proceeding and are relevant.

(2) Q4(e), W.Q.: “To produce the 2016 JBC Financial Statement;

Ruling: On March 17, 2020, Mike answered “the financials for John Bead are done as a review engagement, which detail entities and balances for the related parties in the notes. There has been no change in the JBHL loan for years, intercompany and shareholder loan activity has previously been provided”. This, in my view, is not sufficient. Mike shall provide the 2016 John Bead financial statement. He has, in these proceedings, produced the John Bead financial statements for 2013, 2015, 2017 and 2018. The 2016 financial statement must be produced.

(3) Q5(a), W.Q.: “To produce the JBHL Banking Statements for 2012 to 2019;

Ruling: In March 2020, Mike refused to answer this question on the basis that it is “overly broad”. I disagree. Mike shall produce the JBHL banking statements are requested. The requested information is relevant and will provide information about the material issues in the oppression claim and in particular, the movement of funds from 966 and 764 to JBHL and the benefits Mike extracts from 966 and 764 and the movement of those funds.

(4) Q6(a), W.Q.: “To produce the Fribe Banking Statements”;

Ruling: In March 2020, Mike refused to answer this question on the basis that it is “overly broad”. I disagree. Mike shall produce the Fribe banking statements are requested. The requested information is relevant and will provide information about the material issues in the oppression claim and in particular, the movement of funds from 966 and 764 to the other John Corporations and the benefits Mike extracts from the entirety of the John Corporations and related entities.

(5) Q6( c), W.Q.: “To produce the Fribe unaudited financial statements”;

Ruling: In March 2020, Mike refused to answer this question on the basis that it is “overly broad”. I disagree. Mike shall produce the Fribe banking statements are requested. The requested information is relevant and will provide information about the material issues in the oppression claim and in particular, the movement of funds from 966 and 764 to the other John Corporations and the benefits Mike extracts from the entirety of the John Corporations and related entities.

(6) Q4(g), W.Q.: “To produce a fulsome explanation and breakdown of the “Advance from related parties” in JBC, including which related parties made these advances, for what purpose, produce any related documents and fully advise of the terms of these advances/loans”;

Ruling: On March 17, 2020, Mike said this question was “under advisement”. Mike shall answer this question and produce these unaudited financial statements as these relate to the material issues in Mercedes oppression claim.

(7) Q4(c), W.Q.: “To produce expense reports for JBC detailing reimbursement to Mike for purchases made on his credit card”;

Ruling: in March 2020, Mike refused to answer this question on the basis that it is “overly broad”. However, on December 11, 2019, Mr. Pitch advised that he obtain the expense reports if requested. Mike shall answer this question and produce the expense reports for JBC as it relates directly to the oppression claim and disregard Mercedes asserts Mike shows her as a result of Mike charging personal expenses to 966/764 as set out in paragraph 66 of her Answer.

(8) Q4(d), W.Q.: “To produce statements for the corporate credit card which Mike references in his evidence for JBC)”;

Ruling: in March 2020, Mike refused to answer this question on the basis that it is “overly broad”. I disagree. Mike shall produce the statements requested. The JBC corporate credit card statements will provide information about the material issues in Mercedes oppression action, including the movement of funds from 764 and 966 to John Bead and other related corporations and to the benefits Mike extracts from the John Corporations.

Issue 6: Questions relating to Mike’s charging of personal expenses to 966/764.

153Mike refused to fully answers the following questions:

(1) Q7(e), W.Q.: “To provide statements from Mike’s credit card which is for corporate use from 2013 to present;

Ruling: On March 17, 2020, Mike answered that this was already dealt with by AP. In May 2020, counsel for Mercedes advised that they did not have copies of the requested statements and that they were not provided as part of the valuation process. In June 2020, Mike answered that he would ask AP if they have copies. If this has not been done, then Mike shall ask AP if they have copies and direct AP to produce same to Mercedes. Either way, Mike shall produce these statements for 2013 to present as they are relevant to the issues in both the oppression and family law case.

(2) Q7(f), W.Q.: “To provide any supporting documents, beyond those that have already been produced for all benefits Mike received from 966, 764, BBM, JBC, JBHL or Fribe, including any documentation related to income, payment of expenses, company benefits, allocation of vehicles or other benefits:

Ruling: On March 17, 2020, Mike answered this question stating “none”. This answer is inconsistent with the documentary productions and Mike’s answers to Mr. Philpott’s written questions, particularly 1(d) and 7(g). Accordingly, Mike shall answer this question fully.

(3) Q7(g), W.Q.: “To advise as to which benefits were allocated to a shareholder loan”;

Ruling: On March 17, 2020, Mike answered that if there were personal expenses paid by the companies, they would have been allocated to a Shareholder loan. Expenses incurred to earn income were not reflected in a Shareholder Loan as they are not taxable as per the Income Tax Act of Canada. In May 2002, counsel for Mercedes advised that this answer is NOT responsive to the question asked. I agree. Mike shall provide details of his personal expenses that were allocated to a shareholder loan, including what the personal expenses were and the amounts of same.

(4) Q10, W.Q.: “To advise of all particulars of any payments made by 966, 764, BBM, JBC, JBHL, or Fribe in regard to this litigation, including full particulars and documents:

Ruling: On March 17, 2020, Mike advised that no legal fees have been paid by any of the companies. In May 2020, Mercedes responded that the answer provided in inaccurate since the general ledgers of 966 show ledger entries for payments made through 966 to Teplitsky Colson, Colliers International, Mark Prager, and AP. In June 2020, Mike advised that all payments made in regard to the litigation by 966 are covered/charged back to the shareholder draw of Mike. Mike shall answer whether any other ledger entries relate to this litigation and provide full particulars and documents with respect to these ledger entries. Mike shall also provide accurate information with respect to whether 976, BBM, John Bead, JBHL or Fribe have may any payments to professionals retained for the purposes of this litigation. If no such payments have been made, Mike shall confirm.

(5) Q8, W.Q.: “To produce supporting documentation regarding rent received by Mike, 966, 764 and BBM including particulars of the dates, amounts and how the amounts were calculated.

Ruling: On March 17, 2020 Mike advised that this had already been provided by him. In May 2020, Mercedes advised that all that had been provided was rent roll summaries for 764; Sherwoodtowne Blvd; 19 Waterman Avenue; 161 Bartley Drive and 12 Cranfield Avenue and some of the leases for the properties. Mike shall produce any other supporting documentation including particulars of the dates, amounts and how the amounts received were calculated.

COURT FILE NO.: FS-19-10975

DATE: 20200904

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Michael John

Applicant

– and –

Mercedes John

Respondent

REASONS FOR JUDGMENT

M. Kraft, J.

Footnotes

1. 1The Questioning of Michael John was held on January 15 and 17, 2020 (“Mike’s Questioning”).
2. 2The Partial Separation Agreement is attached as exhibit “R” to Mercedes’ affidavit sworn on July 17, 2020 (“Mercedes’ July 17th affidavit”).
3. 3Mike’s affidavit sworn on July 31, 2020, paragraph 78 (“Mike’s July 31st affidavit).
4. 4Reporting letter of M. Prager on the 2013 transaction is found as Exhibit “S” to Mike’s July 31st affidavit and at Tab 14 of Mike’s Compendium.
5. 5The email from Mr. Praeger to Mike dated February 7, 2013, is attached as Exhibit “R” to Mike’s July 31st affidavit, and at Tab 13 of Mike’s Compendium.
6. 6Mercedes’ handwritten notes of the February 7, 2013, meeting with Mr. Prager and Mike are attached as Exhibit “U” to Mercedes’ July 17th affidavit and at Tab 5 of her Compendium.
7. 7Exhibit “E” to Mercedes Affidavit, sworn on July 17, 2020.
8. 8Shareholder loans, in this context, means loans that Mike has made as a Shareholder to 764 and/or 966, which he asserts is different than a shareholder borrowing money from a company which is then added to that shareholder’s loan account. When a shareholder borrows money from a company, the monies are then taken into the calculation of a shareholder’s taxable income, if the shareholder does not repay the corporation within a year after the money was borrowed. By contrast, when a Shareholder loans money to a company, repayment of his/her loan by the company does not trigger any tax on the monies that are repaid to the Shareholder as a return of capital to the shareholder. In Mercedes’ Factum and oral submissions, this distinction was inadvertently confused.
9. 9See Michael John Corporate Organization Chart, attached as Exhibit “D” to Mercedes’ July 17th affidavit and at Tab 6 of Mercedes’ Compendium.
10. 10The John Bean unaudited financial statement for the year-ended October 31, 2019, is attached as Exhibit “HH” to Mike’s July 31st, 2020 affidavit.
11. 11Mercedes July 31st Affidavit, paragraphs 74 and 95; Mercedes Reply Affidavit, sworn on August 5, 2020, at paragraph 51.
12. 12Ontario Business Corporations Act, R.S.O. 1990, c.B.16, s.249(4).
13. 13Alles v. Maurice, 1992 CarswellOnt 132 (Ont. Gen. Div.)[“Alles”].
14. 14Alles, at para. 19.
15. 15Hames v. Greenberg, 2014 ONSC 245 (S.C.J.) [“Hames”].
16. 16Hames, at paragraph 22.
17. 17Alles, at para. 19; Hames, at paras 37-38 and 43; Giffin v. Sootiens, 2010 NSSC 438 [Giffin] at paras 44-45;
18. 18Alles, at para. 19, Giffin, at paras. 31, 34-37, 58 and 63.
19. 19Hames, para 62-85.
20. 20Hames, at para. 77.
21. 21OBCA, s. 248.
22. 22Runnalls v. Regent Holdings Ltd., 2008 BCSC 1073 [Runnalls], at para 31; Pavone Estate v. 603631 Ontario Ltd., 2013 ONSC 5172 [Pavone] at paras 27 and 30; Baxter v. Baxter, 2000 CanLII 22511 (ON SC) at para. 23.
23. 23820099 Ontario Inc. v Harold E. Ballard Ltd. 1991 CarswellOnt 142 (Ont. Gen. Div.)[ “Harold Ballard”].
24. 24“Harold Ballard, at paras 12-13, 16-117, 135-130, aff’d 1991 CarswellOnt 141 (Div. Crt.)
25. 25Runnalls, at para. 31.
26. 26Waxman v. Waxman, 2002 CarswellOnt 2308 (S.C.J.), at para. 1412, aff’d 2002 CanLII 45101 (ONCA).
27. 27Caughlin v. Canadian Payroll Systems Inc., 2020 MBCA 25 at paras 3, and 7-8.
28. 28Caughlin v. Canadian Payroll Systems Inc., 2019 MBQB, 6, at paras. 61-62, aff’d 2020 MBCA 25.
29. 29Transcripts of Mike’s Questionings, Q:866-916.
30. 30The Shareholder’s Resolutions for 764 and 966 dated April 29, 2013 and May 8, 2014 which exempted the company from having to appoint auditors, was not signed by Mercedes and is attached as Exhibit “V” to Mike’s affidavit, sworn on July 31, 2020, and at Tab 12 of Mike’s Compendium.
31. 31Mike’s transcripts, Q: 912: when Mike answers if she has the right to the audited financial statement then she should pay for the audited financials if she wants something “special”.
32. 32For clarity, the term “other John Corporations” means JBHL, John Bead, BBM, and Fribe.
33. 33Mercedes’ July 17th affidavit, para 80; Transcripts of Mike’s Questioning held January 15, 2020, pages 240-241, questions 1108 – 1114; page 251-274, questions 1162 – 1164; pages 286-287, questions 1315 – 131.
34. 34Mercedes’ July 17th Affidavit, para 80; Transcripts of Mike’s Questioning held January 15, 2020, pages 240-241, questions 1108 – 1114; page 251-274, questions 1162 – 1164; pages 286-287, questions 1315 – 1317.
35. 35Mercedes’ July 17th Affidavit, para 80; Transcripts of Mike’s Questioning held January 15, 2020, pages 240-241, questions 1108 – 1114; page 251-274, questions 1162 – 1164; pages 286-287, questions 1315 – 1317; and Exhibits “BB” and “CC” to Mercedes July 17th Affidavit.
36. 36Mercedes’ July 17th affidavit, paragraph 82; Transcripts of Mike’s Questioning held January 15, 2020, page 249-274, Q 1146-1164.
37. 37Exhibits “Z”, “AA” to Mercedes’ July 17 Affidavit.
38. 38Exhibit “X” to Mercedes’ July 17 Affidavit.
39. 39Exhibit “X” to Mercedes’ July 17th affidavit.
40. 40Mercedes’ July 17 affidavit, paragraph 66; Mercedes’ Reply affidavit, paragraphs 57-59.
41. 41Transcripts of Mike’s Questioning held January 15, 2020, Q: 1108-1114; Q1162-1164; and Q1315-1317.
42. 42Damaschin-Zamifirescu v. Damaschin-Zamifirescu, 2012 ONSC 6689 (Ont SCJ).
43. 43Brophy v. Brophy, 2002 CanLII 76706 (ON SC).