COURT FILE NO.: FS-19-42545

DATE: 2020-11-12

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nora Eileen JAMIESON, Applicant

AND:

David JAMIESON, Respondent

BEFORE: Kurz J.

COUNSEL: Andrew Morrison, Counsel for the Applicant

HEARD: August 18, 2020

ENDORSEMENT

Introduction

[1] On August 28, 2020, I released my decision in the uncontested trial of this proceeding (2020 ONSC 5173). These reasons supplement my previous endorsement and should be read in conjunction with it.

[2] At para. 18(e)-(g), I found that David had full control of the assets of a corporation, Anexxa Tech. I wrote:

e. David has full control of the assets of Anexxa Tech. They include the two Meridian bank accounts, the Edward Jones accounts and the eight real properties which Anexxa Tech owns. The Edward Jones statements and their reference to a Relationship Group shows that David treats the assets of Anexxa Tech as his own. So too does the fact that he runs personal expenses through Anexxa Tech's Meridian chequing account.

f. Together the real properties owned, debt-free by Anexxa Tech, total $2,243,700 in value. If they earn, say a cumulative 5% return as rental properties, they would bring $112,185 per year. That would not include any increase in value of the properties, which could be sold at any time. There is no evidence that David has paid any tax on this income as it comes through Anexxa Tech. If that amount were grossed up at, say a notional 33% rate for taxes, that $112,185 per year would, in itself total $149,206 per year.

g. In addition, David runs numerous personal expenses through the Anexxa Tech chequing account. Those expenses would be grossed up and attributed to him as well.

[3] At para. 32(e) of my previous endorsement, I requested further submissions on the issue of the piercing the corporate veil of Anexxa in order to allow Nora to enforce my order through the seizure of the assets of Anexxa Tech. I wrote:

1. Nora asks for various relief, which will have the effect of piercing the corporate veil of Anexxa Tech. The relief that she seeks would freeze its assets, including its savings, chequing and investment accounts and require a direct transfer of funds from those accounts to her in satisfaction of the amounts that I have ordered that he pay to her. I further reserve on that issue. I have requested that Nora's counsel provide me with his authorities and arguments in favour of that relief in writing. Once I review those submissions, I will decide whether I need to hear further from Mr. Morrison before I proceed on those requests.

[4] I have now received the submissions of her counsel. In those submissions, counsel framed and then answered my request for further submissions within the framework of following questions that he posed:

a. Whether the court can make an Order against a Corporation to which the Respondent is a majority or sole shareholder where the Corporation is not a party to the proceedings;

b. Whether the court may order a bank to transfer funds from accounts in satisfaction of an Order for equalization or spousal support if such relief is not pled;

c. Whether the court may make an Order for relief that is not pled but is necessary to facilitate an Order that is pled (i.e. partition and sale of joint properties); and

d. Whether the court can make an Order against a Corporation to which the Respondent is a majority or sole shareholder where the Corporation is not a party to the proceedings;

e. Whether the court may order a bank to transfer funds from accounts in satisfaction of an Order for equalization or spousal support if such relief is not pled;

f. Whether the court may make an Order for relief that is not pled but is necessary to facilitate an Order that is pled (i.e. partition and sale of joint properties); and

[5] While some of those questions repeat the essence of others, the answer that counsel offers is yes to each. Having reviewed those submissions and the authorities cited, I agree. The key reason that I do so is my finding that David treats Anexxa Tech as an extension of himself. He has placed all of the proceeds of sale of Anexxa Medical into Anexxa Tech, including assets that to which Nora is properly entitled. He pays himself or is paid through Anexxa Tech’s bank accounts. Likewise, he runs his personal expenses through Anexxa Tech’s bank accounts. In effect, the evidence discloses that Anexxa Tech is David’s alter ego.

Service on a Corporate Alter Ego

[6] In Wildman v Wildman, 2006 CanLII 33540 (ON CA), [2006] O.J. No. 3966 (Ont. C.A.), MacPherson J.A., writing for the court. found that in such circumstances, separate service on a corporate alter ego was not necessary. He wrote:

47 The appellant makes one other argument on the corporate veil issue. He contends that the trial judge erred by making orders against the appellant's companies because the companies were not named as parties and, therefore, had no notice of the matrimonial litigation.

48 I disagree. This is matrimonial litigation, not commercial litigation. Importantly, the record establishes that the appellant and his companies are one and the same. No third party has any interest in any of the companies. The appellant was given notice of the proceedings and thus, the companies, his alter ego, were also given notice.

49 In the end, although a business person is entitled to create corporate structures and relationships for valid business, tax and other reasons, the law must be vigilant to ensure that permissible corporate arrangements do not work an injustice in the realm of family law. In appropriate cases, piercing the corporate veil of one spouse's business enterprises may be an essential mechanism for ensuring that the other spouse and children of the marriage receive the financial support to which, by law, they are entitled. The trial judge was correct to recognize that this was such a case.

[Emphasis added]

[7] Further, in Lynch v. Segal (2006), 2006 CanLII 42240 (ON CA), 82 O.R. (3d) 641 (Ont. C.A.), a decision that follows and relies on the court’s decision in Wildman, Blair J.A. wrote for the court:

[61] There is no requirement under the Family Law Act or the Courts of Justice Act for notice to be given to anyone in particular when a vesting order is sought. Whether such notice should be given in a particular case is a matter for a judge to determine.

[8] Accordingly, I find that Anexxa Tech had notice of this proceeding.

Piercing of the Corporate Veil of Anexxa Tech

[9] With regard to the piercing of the corporate veil, MacPherson J.A. framed the issue as follows in Wildman:

[25] The crucial question in this appeal is whether the exception to the principle of separate legal personality for corporations set out in 642947 Ontario Ltd. v. Fleischer and Transamerica Life Insurance should be injected into family law. Should the courts in appropriate family law cases disregard the separate legal personality of a corporate entity where, in the words of Sharpe J. in the latter case, "it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct"? In my view, the answer to this question is a resounding 'Yes'.

[10] In doing so, MacPherson J.A. found that the three following factors must be proven before the corporate veil may be pierced:

1. The individual exercises complete control of finances, policy, and business practices of the company.

2. That control must have been used by the individual to commit a fraud or wrong that would unjustly deprive a claimant of his or her rights.

3. The misconduct must be the reason for the third party's injury or loss.

[11] In Wildman. Blair J.A. added that, rather than the rigid separation between corporation and individual in family law cases:

[36] A more flexible approach is appropriate in the family law context, particularly where -- as here -- the corporations in question are completely controlled by one spouse, for that spouse's benefit and no third parties are involved.

[12] Here, based on my previous findings, all three parts of the Wildman test are met because:

1. David exercises complete control of the company.

2. That control has been used to shield David from the claims of Nora and the parties’ daughter. That occurred when David placed the assets of the sale of Anexxa Medical into Anexxa Tech without regard to their right to a share of those proceeds. He then has been able to use the corporation to shield his assets from Nora’s claims in this proceeding. At para. 22 of my previous endorsement, I pointed to my findings regarding David’s behaviour, which warranted an order of lump sum support. I wrote:

22 Here, in light of David's disclosure refusal, his refusal to pay any support or even to contribute to the carrying costs of the jointly owned matrimonial home or the cottage, his refusal to pay Nora her share of the proceeds of the sale of Anexxa Medical, and his self-employed status (making collection by FRO difficult), I find that this is an appropriate case for lump sum support. Without such an order, there is a good chance that Nora will not be paid spousal support or that she will have to wait a great deal of time while FRO attempts to regularly collect the support payments.

[Emphasis added]

3. Nora has suffered a resulting loss and is in danger of suffering a further loss if the corporate structure that David had adopted prevents her from enforcing my order.

Court’s Jurisdiction to Grant a Vesting Order

[13] With regard to my ability to grant a vesting order to enforce compliance with the other terms of my order, even though it had not been pleaded, I find both that I have the jurisdiction to issue a vesting order and that I may do so in the facts of this case.

[14] The court’s jurisdiction to grant a vesting order begins with s. 100 of the Courts of Justice Act, which reads as follows:

100. A court may by order vest in any person an interest in real or personal property that the court has the authority to order be disposed of, encumbered or conveyed.

[15] Under s. 9(1)(d) of the Family Law Act, the powers available to a court dealing with an application for an equalization payment include:

(d) That if appropriate to satisfy an obligation imposed by the order,

(i) property be transferred to or in trust for or vested in a spouse, whether absolutely, for life, or for a term of years…

[16] Similarly, under s. 34(1)(c) of the Family Law Act, in an application dealing with support, the court may make an interim or final order:

(c) requiring that property be transferred to or in trust for or vested in the dependant, whether absolutely, for life or for a term of years.

[17] As the Ontario Court of Appeal pointed out in Lynch v. Segalat para. 27, “[v]esting orders are discretionary and have their origins in the court's equitable jurisdiction.”

[18] The court went on to explain the rationale and describe the broad judicial power to impose a vesting order as follows:

[31] The rationale for the vesting power, therefore, is to permit the court to direct the parties to deal with property in accordance with the judgment of the court. The jurisdiction is quite elastic. Nothing in the language of either s. 100 of the Courts of Justice Act or s. 34(1)(c) of the Family Law Act operates to constrain the flexible discretionary nature of the power.

[19] The court added at para. 32 that “[t]he court has a broad discretion, and whether such an order will or will not be granted will depend upon the circumstances of the particular case.”

[20] At para. 32-33, the court set out the test for granting a vesting order as follows:

1. There must be a payment liability owed to the spouse seeking a vesting order by the spouse sought to be subject to that order.

2. The vesting order must be necessary to ensure compliance with the obligation.

3. There must be some reasonable relationship between the value of the asset to be transferred and the amount of the targeted spouse's liability and,

4. The interests of any competing execution creditors or encumbrancers with exigible claims against the specific property in question must not be an impediment to the granting of a vesting order.

[21] Here, the first three parts of the test are clearly met. No evidence has been brought to my attention regarding the fourth aspect of the test. Again that is in large part because of David’s lack of disclosure.

The Request for a Vesting Order Need not be Pleaded

[22] In Frick v. Frick, 2016 ONCA 799, Benotto J.A., writing for the Ontario Court of Appeal clarified that the rules for pleading in family proceedings, like the other provisions of the Family Law Rules (“FLR”), are distinct from those in the Rules of Civil Procedure (“RCP”). The FLR pleading rules unlike those in the RCP, do not require a concise statement of material facts. That is because parties lack full financial disclosure at the time of drafting of pleadings. So, the FLR contain “stringent” disclosure requirements. To require a RCP level of disclosure would be “contrary to the family rules and contrary to basic fairness.” (para. 16)

[23] The point is made in FLR r. 2(2), setting out that the primary objective of those rules is to “enable the court to deal with cases justly”. That goal is met in part through “ensuring that the procedure is fair to all parties” (r.2(3)(a)) and “dealing with the case in ways that are appropriate to its importance and complexity” (r.2(3)(c)).

[24] The point is further made in r.8, which deals with starting a case. While it refers to the use of specific forms, the method by which return dates are secured, and requirements for the service of an application, it does not refer to the specific contents of the originating pleading.

[25] Under FLR r. 1(9.2),

A party who is required by these rules to provide a form shall …

a. Follow the instructions set out in the form

b. Fully complete all portions of the form; and

c. Attach to the form any documents that the form requires.

These provisions are subject to r. 1(9.1), which allows the forms set out in the FLR to be “adjusted as needed to fit the situation.”

[26] The forms themselves for commencing a proceeding under r.8 (e.g. form 8, which was used to commence this application) have boxes that can be checked to signify the various relief that a party may seek. A vesting order is not one of them, although there is room for “Other” relief.

[27] At para. 32 of Lynch v. Segal, Blair J.A. pointed out that a family law vesting order is not a substantive one. Rather, it is in the nature of an enforcement order. That is why he did not attempt to categorize the circumstances in which such an order is available. He referred instead to the court’s broad discretion to order the remedy in the circumstances of each family law case.

[28] In Vetro v. Vetro. 2013 ONCA 303, the court granted a vesting order in even tough the request had first been raised at trial (paras. 11 and 14). The court relied on Lynch v. Segal to find that the trial judge had the jurisdiction to grant the vesting order despite the failure to plead for that relief.

[29] Further, in Frick, the appeal court considered an argument that an unequal division must not be considered when the request had not been specifically pleaded. The court rejected that argument, stating:

[39] This court has concurred with this approach. In Khamis v. Noormohamed, [2011] O.J. No. 667, 2011 ONCA 127, 91 R.F.L. (6th) 1, the husband argued on appeal that the trial judge erred in determining the wife's claim for unequal division because it was not pleaded. At para. 8, this court dismissed this ground of appeal because

the wife was clear in her answer to the husband's position; she sought an unequal division of assets. In the circumstances, nothing further was required. No one was taken by surprise at trial. The issues in dispute were known to the parties and fully canvassed. No unfairness was occasioned.

[40] Here, the wife's cause of action was for an equalization payment. Form 8 of the family rules requires a party to indicate if there will be a claim for "equalization". A specific reference to s. 5(6) is not required as long as the parties are aware that -- when the equalization payment is calculated -- the court will be asked to vary the usual share of net family properties. Once an equalization payment is calculated, the court has discretion to apply s. 5(6) if the conditions are met. While notice should be given to the other spouse so that he or she has a fair opportunity to meet the case, s. 5(6) does not need to be specifically pleaded.

[30] In considering all of these authorities, it is clear that the court has the discretion to allow a vesting order even when the request for that relief had not been pleaded. The remedy is available when: 1) it is clear that such an order is merited, and 2) that no prejudice would arise from the failure to plead the request for that relief.

[31] Here, David has chosen not to participate in these proceedings at all. He has refused to offer any disclosure. He has refused to meet any financial obligations towards Nora or their jointly-owned properties. If I allow Nora to first make her request for a vesting order at trial, I see no prejudice to David other than in having Nora enforce my earlier order.

[32] On the other hand, there would be real prejudice to Nora if I refuse to consider her request. In that event, it is unlikely that she will be able to enforce my order. As the Ontario Court of Appeal has clearly signalled the availability of the remedy, even when it is first requested at trial, I see no reason to refuse to grant it here.

[33] Accordingly, I order as follows:

1. The Meridian Credit Union shall within thirty (30) days of receipt of this Order liquidate and transfer the sum of $1,050,000 to the Applicant, Nora Jamieson, from the Meridian Account No. *****7 [actual order to include full account number] or any other account to which the Respondent, David Jamieson, or Anexxa Technologies Inc. has an interest in. The account to which the funds shall be transferred to shall be provided to Meridian under letterhead of the Applicant’s Solicitor of Record, Andrew Morrison, or directly by Nora Jamieson;

2. The accounts held by the Respondent, David Jamieson, or by his Corporation, Anexxa Technologies Inc., with Meridian Credit Union shall be frozen by the financial institution so as to disable the Respondent or his Corporation from withdrawing any funds until the transfer detailed above is facilitated.

3. Edward Jones shall within thirty (30) days of receipt of this Order liquidate and transfer the sum of $150,000 to the Applicant, Nora Jamieson, from the Edward Jones Account No. *****-*-8 [actual order to include full account number] or any other account to which the Respondent, David Jamieson, or Anexxa Technologies Inc. has an interest in. The account to which the funds shall be transferred to shall be provided to Edward Jones under letterhead of the Applicant’s Solicitor of Record, Andrew Morrison, or directly by Nora Jamieson.

4. The accounts held by the Respondent, David Jamieson, or by his Corporation, Anexxa Technologies, with Edward Jones shall be frozen by Edward Jones, so as to disable the Respondent or Anexxa Technologies from withdrawing any funds until the transfer detailed above is facilitated.

5. Credential Securities shall within thirty (30) days of receipt of this Order liquidate and transfer the sum of $500,000 to the Applicant, Nora Jamieson, from the Credential Securities Accounts ending in Account No. ******- 1 [actual order to include full account number] and ******- 2 [actual order to include full account number] held by the Respondent David Jamieson, or any other account in which the Respondent, David Jamieson, or Anexxa Technologies Inc. has an interest. The account to which the funds shall be transferred to shall be provided to Credential Securities under letterhead of the Applicant’s Solicitor of Record, Andrew Morrison, or directly by Nora Jamieson.

6. The accounts held by the Respondent, David Jamieson, or by his Corporation, Anexxa Technologies, with Credential Securities shall be frozen by Credential Securities so as to disable the Respondent or Anexxa Technologies from withdrawing any funds until the transfer detailed above is facilitated.

7. The Respondent, David Jamieson, shall remove his possessions, including, but not limited to, vehicles, boats, and personal belongings that remain at either 203 Sheraton Court, Oakville, Ontario or 1504 Wigamog Road, Minden, Ontario prior to the closing date of the sale of each property.

8. In the event that the Respondent, David Jamieson, fails to remove his vehicles, boats, or other large items from 203 Sheraton Court, Oakville, Ontario or 1504 Wigamog Road, Minden, Ontario, the Applicant may dispose of such items at her discretion.

9. The Respondent, David Jamieson, shall pay to the Applicant, Nora Jamieson, the balance of the funds owing to the Applicant within ninety (90) days of the later of the closing of the sale of the parties’ matrimonial home or the closing of the sale of the parties’ cottage property.

Costs

[34] Nora seeks her costs of this application on a substantial indemnity basis, fixed at $21,449.35. This figure consists of $16,878.25 inclusive of H.S.T. in legal fees on a substantial indemnity (80%) basis and the balance in disbursements. That amount is based on Mr. Morrison’s hourly rate of $295 per hour, which I find to be reasonable for the quality of services provided. In support of the claim for enhanced costs, Nora cites the failure to make financial disclosure and refusal to engage in this litigation.

[35] In MC v MAC, 2020 ONSC 3845, 43 R.F.L. (8th) 145, at paras. 11-45, I set out my understanding of the relevant factors in the determination of costs in a proceeding such as this. I adopt and rely on those reasons here.

[36] Here I find that the request for costs is reasonable and appropriate. Nora was completely successful in this matter. It was both factually and legally complex. Nora and her counsel were forced to operate without any input, including disclosure, from David. A great deal of work had to go in to tracing his assets, particularly the assets of Anexxa Tech. Further, complex legal issues were raised, in some part from the questions that I requested counsel to answer. The case was well prepared, researched and presented. The manner in which David refused to both provide disclosure or participate in this proceeding represented, at the least, unreasonable conduct. His refusal to provide disclosure resulted in a great deal of extra work for Nora’s counsel. The issues were complex and important to the Applicant. The materials before me were well researched and prepared.

[37] Accordingly, I fix the costs of this proceeding at $21,449.35. For the reasons set out above, those costs may be enforced against the assets of Anexxa Tech.

“Marvin Kurz J.”

Electronic signature of Justice Marvin Kurz,

Original will be placed in court file

Date: November 12, 2020