COURT FILE NO.: FS-10-32777-00

DATE: 2021 04 28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Delia Joan Berta, Applicant

AND:

Raymond Louis Berta, Respondent

BEFORE: Doi J.

COUNSEL: Michael Zalev, for the Applicant (Moving Party)

Peter Callahan, for the Respondent (Responding Party) James Smith, for the Non-Party, 911184 Ontario Ltd.

HEARD: November 10, 2020, with additional submissions on December 28, 2020, January

11 and 14, 2021, and March 8 and 18, 2021

ENDORSEMENT

Overview

[1] This is a motion by the Applicant to have the net sale proceeds of two (2) cottage properties paid to the Family Responsibility Office (“FRO”) for her benefit and credited against the spousal support arrears and outstanding costs that the Respondent owes her. The Respondent personally owned the first cottage property, and the second cottage property was owed by his closely-held company, 911184 Ontario Limited (“911”). The sale proceeds are being held in trust.

[2] The Respondent opposes the motion on two (2) grounds. First, he claims that his income has declined significantly which warrants an adjustment of his spousal support obligation to the Applicant. To this end, the Respondent has brought a fresh motion to change spousal support that he submits will result in a finding that he owes no support arrears to the Applicant, and possibly a finding that a support overpayment is owed to him. In addition, he claims that the net proceeds of sale for the second property belong to 911 which is not obliged to pay his personal debts.

[3] As explained below, I am satisfied that the net proceeds of sale for both properties should be paid to FRO and credited against the amounts that the Respondent owes the Applicant. In my view, the Respondent has not shown that these amounts are not owed or should be varied. I also find that this is a proper case for piercing the corporate veil to allow the Applicant to access funds held by 911 to recover amounts that the Respondent owes her.

The Proceedings

[4] Regrettably, this litigation has been lengthy and protracted.[^1]

[5] After a nine (9) day trial in 2013 and 2014,[^2] an appeal in 2015,[^3] a re-hearing in 2016,[^4] and a further appeal in 2017, the Court of Appeal made a final order on November 16, 2017 for the Respondent to pay $13,759.00 in monthly spousal support to the Applicant on an indefinite basis.[^5] Thereafter, the Respondent resisted making his spousal support payments which have fallen into substantial arrears.

[6] On December 9, 2016, the Respondent brought his first motion to change spousal support after the re-hearing decision was released on September 13, 2016 and before the Court of Appeal heard an appeal from that decision on October 16, 2017. His motion to change did not state the amount or period of support that he sought to pay, or otherwise reveal the reduced income that he claimed to be earning. Instead, his motion cryptically stated that he sought to reduce his support payments to “TBD” per month, retroactive to “TBD”, based on an income of “TBD.” On October 12, 2017, Woollcombe J. ordered the Respondent to provide particulars and evidence of his income for his motion to change. The Respondent was dilatory in giving the particulars and disclosure.[^6]

[7] On September 27, 2018, the Respondent delivered an expert report to particularize the motion to change. When questioned about the report on November 27, 2018, the Respondent gave no undertakings, refused forty-five requests for production, and took twenty-four requests under advisement. He did not cooperate in scheduling the Applicant’s refusals motion, and was dilatory in providing the information that Conlan J. ordered him to disclose.^7

[8] On January 18, 2019, Kurz J. dismissed the Respondent’s motion for an interim variation of the final spousal support order made by the Court of Appeal on November 16, 2017.[^8] On April

26, 2019, Kurz J. ordered the Respondent to pay the Applicant $65,288.55 in costs for his failed interim variation motion.[^9] These costs remain unpaid.

[9] On March 12, 2019, the parties attended a settlement conference when, among other things, Chozik J., made an interim preservation order under Rules 17(8)(b.1)(i) and (ii) for:

a) the Respondent to designate the Applicant as the irrevocable beneficiary of two (2) life insurance policies with Manulife, with “face values” of

$427,500.00 and $953,325.30, respectively, subject to further court order; and

b) any sale proceeds of the subject cottages (i.e., the one owned by the Respondent personally, and the other owned by 911) to be held in trust until further order of the court.

[10] On March 26, 2019, the Respondent withdrew his motion to change the final spousal support order. However, despite withdrawing his motion to change, the Respondent continued to not pay spousal support.

[11] On June 6, 2019, I heard the Applicant’s motion to address the consequences of the Respondent’s withdrawal of his motion to change and his substantial support arrears. After hearing the motion, I ordered a continuation of Chozik J.’s order of March 12, 2019 on an interim-interim without prejudice basis, directed the Respondent to confirm details of the insurance policies and cottage properties in Chozik J.’s order, adjourned the balance of the motion to be heard by Kurz J. before July 31, 2019, and ordered the Respondent to pay $1,500.00 in costs to the Applicant for the attendance. The Respondent has not paid this costs order.

[12] On July 30, 2019, Kurz J. granted the Applicant’s motion by: a) directing the Respondent to name the Applicant as the sole beneficiary of the Manulife insurance policies; b) directing the Respondent to keep the insurance policies in good standing and preserve them; c) restraining Manulife from changing the beneficiary of the insurance policies without the Applicant’s consent or a court order; d) requiring any motion to vary the foregoing to be brought on notice to the Applicant; and e) granting the Applicant leave to amend her response to the motion to change in order to add claims to secure the Respondent’s support obligations through the Manulife insurance policies and a vesting order with respect to three properties.[^10]

[13] On October 17, 2019, Kurz J. ordered the Respondent to pay the Applicant $13,850.00 in costs for the July motion, as well as $23,950.00 in costs for his withdrawn motion to change.[^11] In awarding costs, Kurz J. found that the Respondent had engaged in a course of unreasonable and bad faith conduct. I am advised that these costs remain unpaid.

[14] On August 31, 2020, the Applicant bought this motion to obtain the proceeds of sale for the cottage properties. Thereafter, on October 28, 2020, the Respondent brought a second motion to change the Court of Appeal’s final spousal support order dated November 16, 2017. Like his first motion to change, the Respondent’s second motion to change does not disclose his income for changing the final support order. His new motion claims that his income decreased materially due to declining business revenue that purportedly fell from $7.2 million to $4.5 million. However, without disclosing his actual income, which is vaguely stated as “TBD” in the motion, his new motion simply states that he cannot afford to pay $13,579.00 in monthly spousal support which the Court of Appeal ordered after imputing his annual income to be $644,172.00. His new motion to change also alleges that he was medically unable to work at times that pre-date the appeal for which the Court of Appeal made its final spousal support order.

[15] When this motion was argued on November 10, 2020, the Respondent owed the Applicant almost $480,000.00 in unpaid spousal support and costs.[^12] Despite having withdrawn his first motion to change spousal support on March 26, 2019, the Respondent did not voluntarily make any payments to the Family Responsibility Office (“FRO”) apart from an $8,000.00 payment on April 1, 2019 as a term of a refraining order to maintain his drivers licence which the Director of FRO had threatened to suspend due to payment arrears. Although FRO collected other limited amounts from the Respondent, it did so only by garnishment.

Background

[16] Last summer, the Respondent sold a personally-owned cottage property that resulted in

$86,718.63 in net proceeds of sale. As well, 911 sold its adjacent cottage property which generated

$180,206.76 in net proceeds. Pursuant to Gibson J.’s order dated July 22, 2020, the combined net proceeds of $266,925.39 are being held in trust by the Respondent’s solicitor.

[17] The Respondent is the sole owner, director and officer of 911, which is a wholly-owned subsidiary of Applied Consumer & Clinical Evaluations Inc. (“ACCE”). ACCE is another closely- held company that is owned by the Respondent who solely controls and runs both corporations.

[18] The Applicant asked the Respondent to release the net sale proceeds to FRO as a credit against the support arrears and costs that he owes her. The Respondent declined to do so.

[19] Before the cottage properties were sold, the Applicant registered Gibson J.’s order of July 22, 2020 on title to both properties. She also registered the Court of Appeal’s spousal support order of November 16, 2017 on title to the Respondent’s personally-owned cottage. In doing so, she undertook to remove the orders from title within a reasonable period after the sale of both properties closed. However, despite exchanges in August and September of 2020, the parties were unable to agree on the form and content of a consent order to remove the instruments from title. For greater clarity, the Applicant had sought to include a paragraph in the consent order that the net sale proceeds would remain held in trust pending further court order or agreement of the parties. The Respondent objected to the Applicant’s proposed term by claiming that it was redundant in light of the preservation order of Gibson J. dated July 22, 2020, and insisted on removing that term from any consent order. The matter of discharging the instruments from title to both properties came before me on this motion.

[20] At the conclusion of the November 10, 2020 hearing, I granted a consent order to remove and discharge the orders registered on title to both cottage properties. For clarity, and in light of Gibson J.’s order dated July 22, 2020, I directed the sale proceeds to remain held in trust pending further court order. I reserved my decision on the balance of the motion.

Issues

[21] There are two (2) central issues on this motion:

a. Should the net proceeds of sale from the cottage property that the Respondent personally owned be released to the credit of the Applicant? and

b. Should the net proceeds of sale from the cottage property that 911 owned be released to the credit of the Applicant?

Analysis

a. The Respondent’s Personally-Owned Cottage Property

[22] In my view, the $86,718.63 in net proceeds from the sale of the Respondent’s personally- owned cottage property should be released to FRO for the Applicant’s credit against the spousal support arrears and outstanding costs that he owes her. These arrears came to about $480,000.00 when this motion was argued on November 10, 2020.[^13] As set out below, I find that the Respondent has not shown that the Applicant should not have these proceeds.

[23] In opposing this motion, the Respondent effectively seeks to persuade the court that an interim variation of the underlying final spousal support order is warranted, which is a drastic remedy that requires a strong prima facie case: Berta v. Berta, 2019 ONSC 505 at paras 28 and 39-40, Hayes v. Hayes, 2010 ONSC 3650 at para 38; Clark v. Vanderhoeven, 2011 ONSC 2286 at para 67. However, from the limited record before the court, I am unable to find a prima facie case to justify varying his spousal support obligation. As such, I am not persuaded by his claim that releasing the net sale proceeds to FRO for the Applicant’s credit would prejudice his interests.

[24] The Respondent claims that he would be prejudiced by a release of the net sale proceeds because his new motion to change dated October 28, 2020 may possibly lead to a finding that he owes no support arrears or costs to the Applicant, or that he is entitled to a rebate due to an earlier overpayment of support. However, the Respondent has not provided meaningful information to support his position. His new motion to change conspicuously fails to disclose his income for changing support, and unhelpfully states that his income is “TBD.” Although his new motion to change asserts that his income “decreased materially” from the $644,172.00 of imputed income that the Court of Appeal applied in determining his spousal support obligation, the Respondent has not disclosed a current income figure to support his new motion to change the final spousal support order. In light of this, I find that the Respondent has not established a prima facie case to reduce his spousal support payments or arrears based on a change to his income.

[25] The Respondent seeks to reduce his spousal support obligation by alluding to personal health issues that pre-date the appeal which led the Court of Appeal to make its final spousal order for the Applicant. However, the Respondent has not provided any medical evidence to show why or how his health issues have impacted his ability to earn income.

[26] The Respondent further claims that he would be prejudiced if the sale proceeds are released for the Applicant’s credit because he is maintaining life insurance for her benefit. As explained earlier, Chozik J.’s interim order dated March 12, 2019 directed the Respondent to arrange for life insurance coverage with the Applicant as the named beneficiary, although he refused to comply. On July 30, 2019, Kurz J. ordered the Applicant to be named a beneficiary under the Respondent’s life insurance policies to secure spousal support for her. Although the Respondent now claims that he transferred the policies to the Applicant to settle his support arrears, the Applicant flatly denies this and states that the parties never agreed to vary any support or costs arrears or future support obligations that the Respondent owes her.[^14] Only one of the insurance policies is said to have a cash surrender value, which purported to be $1,523.49 although this is undocumented, and neither policy irrevocably designates the Applicant as the beneficiary. It follows that the Applicant will receive benefits under the policies only if the Respondent dies while the policies remains in force while she is a designated beneficiary. Although the Respondent referred to the death benefit value of both policies in arguing to offset their future potential value against his arrears on this motion, he cited no authority for the proposition that a death benefit to secure support may reduce ongoing support and arrears that an insured owes the beneficiary. Without more, I am not satisfied that the policies warrant a reduction of his arrears. In turn, I find that the Respondent has not shown that he will suffer prejudice if the net sale proceeds of his cottage property are released to FRO for the Applicant’s credit against what he owes her.

b. The Cottage Property Held by 911

[27] As set out below, I find that the corporate veil should be pierced to allow the Applicant to recover unpaid support and costs from the sale proceeds of the cottage property that was owned by 911, a private company that is closely-held by the Respondent.

[28] In appropriate cases, a court may pierce the corporate veil in family cases to allow a support recipient to collect payments from the support payor’s business:

[A]lthough 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. [Emphasis added]

Wildman v. Wildman, 2006 33540 (ONCA) at para 49.

[29] The corporate veil may be pierced if those in control of the corporation expressly direct a wrongful thing to be done or use the company for improper conduct. A company need not have been created for an improper purpose to justify piercing the corporate veil; it is sufficient that the corporation is used for an improper purpose: Wildman at paras 37-38; 642947 Ontario Ltd. v. Fleischer, 2001 8623 (ONCA) at para 68; Yaiguaje v Chevron Corporation 2018 ONCA 472 at para 70. The separate legal personality of a corporation is an important principle, but it is not an absolute one: Wildman at para 23. Courts will not enforce the “separate entities” notion under corporate law if doing so “would yield a result too flagrantly opposed to justice:” Lynch v. Segal (2006), 2006 42240 (ON CA), 82 OR (3d) 641 (CA) at para 35. In the family law context, a more flexible or relaxed approach is taken in deciding whether to lift a corporate veil, particularly where the corporation at issue is entirely controlled by one spouse, for that spouse’s benefit, without third-party investors: Lynch at para 36; Wildman at para 31; Arsenault at para 25.

[30] The court generally looks to the following test for piercing the corporate veil:

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

b. 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.

c. The misconduct must be the reason for the third party’s injury or loss.

Wildman at paras 31 and 42.

Furthermore, in deciding whether to pierce the corporate veil, an important factor to consider is whether third party interests will be affected: Debora v. Debora, 2006 40663 (ON CA), [2006] OJ No 4826 (CA) at para 25; Wildman at para 33; Kosmopoulos v. Constitution Insurance Co., 1987 75 (SCC), [1987] 1 SCR 2 at para 14.

[31] In my view, the Applicant has met the Wildman test. As set out below, I find that it would be unjust to permit the Respondent to shield funds behind 911 and continue to defy court orders that require him to pay spousal support and costs to the Applicant.

[32] First, I find that the Respondent exercises complete control of 911’s finances, policy and practices. He is the sole officer and director of 911, which is a wholly-owned subsidiary of Applied Consumer & Clinical Evaluations Inc. (“ACCE”). Both are closely-held companies that he solely owns and fully controls. The Respondent regularly moved funds between these affiliated entities while using both to pay for his personal expenses.[^15] In fact, the Respondent incorporated 911 as a vehicle for removing funds from ACCE.[^16] More recently, he acted on behalf of 911 by consenting to the preservation order that Gibson J. made on July 22, 2020. As their affairs are subject to his full control, 911 and ACCE are imperceptible from the Respondent who has beneficial ownership of their underlying assets, including 911’s property, as their alter ego.

[33] Second, I am satisfied that the Respondent is wrongly using 911 to keep assets from the Applicant who is owed more than $480,000.00 in spousal support and costs. He continues to resist paying his obligations to her, and willingly paid only $8,000.00 to FRO on April 1, 2019 as a term of a refraining order to avoid losing his drivers’ licence due to his outstanding arrears.[^17] In the circumstances, I find that the Respondent’s use of 911 to hold the proceeds of sale for the cottage reflects an intention to preserve his funds by unjustly depriving the Applicant of money that she is entitled to have. In my view, this is precisely the type of wrongful conduct that justifies lifting the corporate veil to allow unpaid family law arrears to be recovered: Wildman at paras 42 and 49.

[34] Third, I accept that the Respondent’s misconduct has led the Applicant to be deprived of substantial payments that are long-overdue. A payor’s use of a company to defeat a recipient’s family law interests may constitute misconduct in a broad sense to justify lifting the corporate veil: Debora at para 28. In this case, it is clear that the Applicant has not received spousal support and costs arrears that several courts have ordered the Respondent to pay. As explained earlier, I am unconvinced by the Respondent’s unsupported assertions that his support and costs arrears to the Applicant should be reduced or extinguished.

[35] As 911 acquired the cottage property from the Applicant when she transferred it to the company on September 5, 2003, apparently for consideration, the Respondent and 911 assert that

there is nothing improper with how 911 obtained or sold the cottage property. They also assert that 911 is a separate legal entity that is not obliged to pay the Respondent’s personal debts. I recognize that this is not a case where 911 was used as front to divert income or conceal an asset. However, the focus of the analysis is not on how the subject asset was acquired but instead on how the company is being used: Debora at para 27. Although 911 has a legitimate independent existence as a business corporation, the rationale for lifting the corporate veil in this case is the Respondent’s use of 911’s corporate personality to defeat the Applicant’s interests by shielding funds that, in my view, should be applied to satisfy what he fairly owes her: O’Neill at para 153.

[36] On the facts of this case, I find without hesitation that the Respondent’s control over 911 is being used to commit a wrong by unjustly depriving the Applicant of money that she is owed: Arsenault at para 24; Wildman at para 31. The Respondent has shown an unwillingness to make reasonable efforts to pay his debts to her and, in my view, has shown a disrespect of court orders and a pattern of wilful non-compliance with his family law obligations. He is using his absolute control over 911, a private closely-held corporation, to shield his funds. In the circumstances, I find that the Respondent’s use of 911 to keep funds out of the Applicant’s reach constitutes misconduct that justifies piercing the corporate veil: Debora at para 28. In arriving at this finding, I note that corporate law principles that enforce a corporate entity’s separate personality, which are fundamental but not absolute principles, are relaxed in family proceedings to allow a recipient to recover support arrears from the assets of a company that is fully controlled by the payor for their own benefit: Wildman at para 31; Lynch at para 36; O’Neill at para 149-150. This more flexible approach aligns with the underlying goal in family cases to avoid having corporate entities manipulated or exploited by payors seeking to evade financial obligations: O’Neill at para 153.

[37] In their submissions, the Respondent and 911 jointly opposed the Applicant’s motion to pierce the corporate veil by asserting a third-party interest by the Royal Bank of Canada (“RBC”) over 911’s asset arising from two (2) credit facilities that it provided to ACCE. As set out below, I am not persuaded by this submission.

[38] The Respondent and 911 rely on a term in the lending agreement between RBC and ACCE dated February 27, 2017 which gives RBC a first-ranking security interest in all of 911’s personal property. The term provides as follows:

Security

Security for the Borrowings and all other obligations of the Borrower to the Bank (collectively, the “Security”), shall include: …

(c) Guarantee and postponement of claim on the Bank’s form 812 in the amount of

$1,100,000.00 signed by 911184 Ontario Limited, supported by a general security agreement on the Bank’s form 924 constituting a first ranking security interest in all the personal property of 911184 Ontario Limited;

(d) Guarantee and postponement of claim on the Bank’s form 812 in the amount of

$1,100.000.00 signed by Raymond Berta. [Emphasis added]

[39] It follows that all of 911’s personal property was pledged in favour of RBC, which made a PPSA registration of its security interest on May 17, 2017. As the general security agreement covers the proceeds from the cottage property that 911 sold, the Respondent and 911 submit that RBC has a security interest in the net sale proceeds which prevents the funds from being disbursed to FRO in the Applicant’s favour, or to any party other than 911 or RBC.

[40] The lending agreement provided for two (2) credit facilities. The first was a $750,000.00 revolving demand facility on which ACCE may draw in $5,000.00 increments. The second was a

$191,666.71 non-revolving term facility, with monthly payments of $8,333.33, that was to have been repaid in full on January 4, 2019. There is no evidence to suggest that the non-revolving facility was not repaid by that date. The lending agreement also provided for a VISA business account with a maximum amount of $50,000.00, payable in monthly arrears.

[41] The Respondent and 911 filed an affidavit by Nilesh Bhatt, the accountant for ACCE and 911, who described the lending agreement, the PPSA registration for RBC’s security interest, and the above-mentioned security interests. Mr. Bhatt’s affidavit refers to a letter by John Morgan CPA, who states that RBC holds a security interest over 911’s assets.

[42] Originally, the Applicant brought this motion without notice to RBC. In opposing the motion, the Respondent and 911 heavily asserted RBC’s security interest as a third-party lender. In light of the responding arguments, I invited written submissions form the parties and 911 as to whether RBC should have notice of this motion and an opportunity to take a position. After

reviewing their submissions, I found that RBC should have notice of the motion and an opportunity to provide a response to the court.

[43] Initially, neither the Respondent nor 911 led any evidence of any ongoing indebtedness by ACCE or 911 to RBC. However, in making written submissions as to whether RBC should have notice of this motion, the Respondent swore a further affidavit in which he advised that ACCE was indebted to RBC for $650,000.00 as of December 29, 2020 under a credit facility guaranteed by 911.[^18] He then baldly asserted that ACCE could not repay this debt to RBC from other sources, although neither he nor 911 offered any explanation or evidence to corroborate this assertion which neither had made in responding to this motion earlier. In light of this, I find that little if any weight should be given to this uncorroborated and self-serving assertion. I add that neither the Respondent nor 911 gave any evidence to suggest that RBC holds a perfected security interest that has attached to the net sale proceeds of 911’s cottage property.

[44] At my direction, the Applicant served RBC with a copy of the full record on this motion and asked whether it intended to take a position on the release of proceeds from the sale of 911’s cottage given its security interest over the company’s property. On March 1, 2021, RBC provided the following response through its counsel:

I can confirm that as of the date of this response and for the purposes of your motion, Royal Bank is not asserting any priority interest over those amounts being held in trust. Accordingly, Royal Bank is not taking any position on your client’s motion and the relief sought.

Please note that Royal Bank reserves all of its rights in the future to take whatever steps and seek whatever remedies are available to it if circumstances change, but it will not be exercising on any security at this time. [Emphasis added][^19]

[45] The interests of a third party, including those of a third-party lender, are to be considered in deciding whether to pierce a corporate veil: Wildman at para 33. However, the mere fact that a third-party lender may hold a security interest does not, without more, necessarily preclude the court from piercing the veil. Otherwise, an owner of a closely-held corporation could evade their family law obligations by simply executing a loan agreement with a third-party security interest without necessarily implicating the security. A limited third-party security interest of this sort would be quite artificial and not offer a principled basis to not pierce the corporate veil where a

recipient seeks to access funds from a payor’s closely-held company to realize a family law obligation.

[46] Writing for the Alberta Court of Appeal in Aubin v. Petrone, Antonio J.A. raised a concern with limited third-party interests being asserted to preclude the lifting of a corporate veil in a family matter. In that appeal, which considered third-party shareholder interests, Antonio J.A. found that the mere presence of shareholders without more should not foreclose the corporate veil from being lifted where a family law recipient seeks to access funds from the payor’s closely-held company:

[58] I do not accept Quantiam’s suggestion that the presence of shareholders prohibits the lifting of the corporate veil in the family law context. Such a rule would invite abuse, in that the owner of a company could avoid his or her legal obligations merely by issuing one share to a third-party shareholder, whether or not in exchange for bona fide value.

[59] At risk of oversimplification, protection of shareholders is the reason for the corporate veil. It is therefore obvious that the presence of other shareholders is an important factor to be considered in deciding whether to lift it. It will also be relevant to consider the nature of the company (for example, family business versus publicly traded corporation), the reasonable expectations of the shareholders about how the company will be used by its principals, whether the shareholders were bona fide purchasers for value, and any other relevant factors. [Emphasis added]

Aubin v. Petrone, 2020 ABCA 13 at paras 58-59, leave to appeal denied 2020 41796 (SCC); WHG Investments Ltd. v. Unterschultz, 2020 ABQB 621 at para 44.

[47] On this motion, the court should exercise caution and be alive to RBC’s rights as a third- party lender in considering whether to pierce the corporate veil. At the same time, the court should not enforce a corporation’s separate legal personality if doing so will lead to an unjust result. In deciding whether to pierce the corporate veil, the court must take a contextual approach as there is no all-encompassing rule for when piercing is appropriate: Debora at para 24; Fleischer at para

69. Speaking for the Court of Appeal for Ontario in Debora, Weiler J.A. held that “[a] court will not enforce the “separate entities” principle when it would yield a result too flagrantly opposed to justice:” Debora at para 24; Kosmopoulos at para 12; Fleischer at para 69; Wildman at para 37.

[48] In light of the foregoing, I am satisfied that it is open for the court to pierce the corporate veil in cases where a third-party holds a security interest over an indebted borrower if piercing

would be a fair and just remedy in view of the various competing interests; Aubin at paras 58-59;

Debora at para 24; Wildman at para 37.

[49] RBC did not oppose this motion or claim that it would face any prejudice if the relief sought is granted. Instead, it took no position on the motion, advised that it would not assert a priority interest over the sale proceeds being held in trust, and confirmed that it would not exercise any security at this time. Having regard to RBC’s submission, and despite ACCE’s indebtedness to RBC under a credit facility guaranteed by 911, I am satisfied that RBC’s security interest should not foreclose lifting the corporate veil in this case. To the extent that RBC’s interests with respect to 911 may be impacted, I am satisfied by RBC’s decision to not oppose this motion that any such impact to its interests should yield to the Applicant’s strong and compelling interest to recover her support and costs arrears, which are substantial and long overdue. The Respondent persistently has failed to pay his spousal support and costs arrears. His conduct reveals a clear and ongoing attempt to evade his financial obligations which are unlikely to ever be paid willingly. 911 is the alter ego of the Respondent who is seeking to keep funds behind its corporate veil to deprive the Applicant of money that she is lawfully entitled to have. Accordingly, I find that it is entirely appropriate and consistent with strong public policy considerations to lift the corporate veil and allow for a fair and just distribution of funds to the Applicant’s credit against her outstanding family law arrears: Wildman at para 41; O’Neill at para 150. To do justice to family law recipients, the court cannot condone efforts by a payor to evade financial obligations by exploiting corporate structures. In my view, allowing the Respondent to use 911 to keep assets out of the Applicant’s reach would lead to a result that is too flagrantly contrary to justice.

Outcome

[50] Accordingly, the motion is granted and I order the following:

a. the funds that the Respondent’s real estate solicitor, Dan Ferguson, is holding in trust pursuant to the Order of Justice Gibson dated July 22, 2020 from the sale of the properties identified in that order are to be paid to the Family Responsibility Office for the benefit of the Applicant, Delia Joan Berta, (FRO Case No. 0788500) and credited:

i. first, against the costs that are enforceable as support that the Respondent owes the Applicant pursuant to Justice Kurz’s Orders dated April 26, 2019, May 15, 2019, October 17, 2019, and October 25, 2019; and

ii. second, against the spousal support arrears that the Respondent owes the Applicant under the Court of Appeal’s Order dated November 16, 2017.

[51] Should the parties be unable to resolve costs for this motion, the Applicant may deliver brief written costs submissions of up to 3 pages (excluding any costs outline, authorities, or offer(s) to settle) within 15 days and the Respondent and 911 may deliver written costs submissions on the same terms within a further 15 days. Reply submissions may not be delivered without leave.

Doi J.

Date: April 28, 2021

[^1]: Kurz J. reviewed the prolonged history of this litigation in Berta v. Berta, 2019 ONSC 505 at paras 6-16, and Berta v. Berta, 2019 ONSC 5987 at paras 2-10. Recently, Pazaratz J. provided an overview of this case in Berta

v. Berta, [2021 ONSC 605](https://www.canlii.org/en/on/onsc/doc/2021/2021onsc605/2021onsc605.html).

[^2]: Berta v. Berta, 2014 ONSC 3919 and 2015 ONSC 1493.

[^3]: Berta v. Berta, 2015 ONCA 918.

[^4]: Berta v. Berta, 2016 ONSC 5723.

[^5]: Berta v. Berta, 2017 ONCA 874 at paras 57 and 66.

[^6]: Endorsement of Kurz J. dated April 26, 2019 at para 27.

[^8]: Berta v. Berta, 2019 ONSC 505.

[^9]: Berta v. Berta, 2019 ONSC 2632 at para 41.

[^10]: Berta v. Berta, 2019 ONSC 4527 at para 71.

[^11]: Berta v. Berta, 2019 ONSC 5987.

[^12]: As of October 8, 2020, the Statement of Arrears for this matter from the Family Responsibility Office (“FRO”) showed the Respondent’s arrears to the Applicant to be $467,014.15. As a further $13,759.00 monthly spousal support payment was due on November 1, 2020, the total amount of arrears (i.e., less $1,623.62 in credited amounts) brought the Respondent’s total arrears to $479,149.53 when the motion was argued on November 10, 2020. In his affidavit sworn October 28, 202, the Respondent claims that the Statement of Arrears is inaccurate because he alleges that a $322,125.70 award of costs that Harper J. ordered the Applicant to pay him in Berta v. Berta, 2016 ONSC 5723 at para 41 was not accounted for despite Gibson J.’s order in his Endorsement dated July 17, 2018, affirmed in Berta v. Berta, 2019 ONCA 218 at paras 5-7, for this figure, plus accumulated interest, to be set off against the Respondent’s arrears. However, FRO’s Statement of Arrears shows tandem entries made on September 20, 2018 to reduce the Respondent’s arrears by $298,482.96 (i.e., reflecting an adjustment of

$446,080.33 less $147,597.37 that the Respondent owed to the Applicant) which I accept was done pursuant to the order made by Gibson J. in his Endorsement of July 17, 2018 to adjust the Respondent’s support and costs arrears by setting off the costs and interests that the Applicant owed him. Following the September 20, 2018 adjustments, the Statement of Arrears shows a steady accrual of arrears as the Respondent did not pay the full monthly spousal support amounts that he owed the Applicant (i.e., after accounting for the limited funds that FRO garnished to partially enforce the arrears). Having regard to all this, I am not persuaded by the Respondent’s claim that the Statement of Arrears is materially inaccurate and I accept from the record that his support and costs arrears came to almost $480,000.00 when this motion was argued in November 2020.

[^13]: This figure includes the $13,759.00 monthly spousal support payment that the Respondent was required to pay the Applicant for the month of November 2020.

[^14]: There are two (2) policies of life insurance in this matter. The Respondent claims that he transferred the policies to the Applicant to resolve the spousal support issues. According to the Respondent, the first policy has a principal death benefit of $427,500.00 and a cash surrender value of $1,523.49, which he is maintaining by making premium payments of $1,523.49 per month. With respect to the second policy, which is said to have a death benefit of $949,991.00, the Respondent claims that he transferred 25% of the policy to the Applicant while continuing to maintain the policy by making premium payments of $3,379.80 per month (i.e., with $844.95 of the monthly payment covering her 25% share of the premium). Although the Applicant acknowledges that the policies were transferred to her as the Respondent has explained, she denies that they reached any settlement or agreement by which these transfers were to resolve, reduce or vary the Respondent’s spousal support obligations to her. She also claims that the parties did not reach an agreement with respect to security for the significant spousal support arrears and costs that the Respondent owes her, or for his prospective support obligations. The Applicant claims that neither life insurance policy has a cash surrender value, and states that she will only receive any benefit from the policies if the Respondent were to pass away while they are still in force when she is named as a beneficiary.

[^15]: See the Respondent’s income report by Steve Ranot dated September 12, 2013 at paras 11-14, 19 and 23: Exhibit “L” to the Applicant’s affidavit sworn October 30, 2020.

[^16]: Berta v Berta, 2015 ONCA 918 at para 7.

[^17]: Although FRO had been garnishing modest funds to enforce the Respondent’s support and costs arrears, his support payments have gone largely unpaid leaving the Applicant with substantial arrears that are long-overdue.

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[^18]: The Applicant objected to the Respondent’s new affidavit by claiming that it exceeded my direction for written submissions and improperly supplemented the record on this motion. However, I shall allow the Respondent’s affidavit to form part of the record as it provides relevant evidence of indebtedness under an operating loan that ACCE had with RBC around the time that the Applicant’s motion was heard, which was supported by an account statement confirming the $650,000.00 debt.

[^19]: On March 4, 2021, I invited the parties and 911 to make additional submissions after RBC advised of its position in this matter. On March 8, 2021, the Applicant delivered a relatively brief written submission. In turn, on March 18, 2021, 911 delivered its written submission. Subsequently, by 14B motion form dated March 23, 2021, the Applicant objected to 911’s submission and sought to strike portions of its submission for exceeding the scope of a proper submission in response to RBC’s position. 911 responded to the Applicant’s objection by filing an affidavit, sworn by its counsel, who argued that the Applicant’s use of the 14B motion form was improper as the subject of the motion was not a procedural, uncomplicated or unopposed matter. Although the Applicant had advised the Respondent and 911 of her objection and intention to correspond with me about it, the Respondent and 911 declined to give their consent for Applicant’s counsel to raise the objection with me, which necessitated the Applicant’s use of the 14B motion form to bring her objection to my attention. In the circumstances, I accept that the Applicant appropriately used the form to raise this procedural point. Although the Applicant properly noted that 911’s written submission largely repeated or revisited its earlier submissions without proffering new reasoning related to RBC’s stated position, I find that 911’s submissions were at least arguably relevant in responding to the Applicant’s brief and somewhat broadly stated argument to RBC’s position. Having regard to 911’s written submission, I am satisfied that 911 did not improperly split its case in responding to the Applicant’s submission on RBC’s position. In the circumstances, I decline to strike portions of 911’s submission dated March 18, 2021.

COURT FILE NO.: FS-10-32777-00

DATE: 2021 04 28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Delia Joan Berta, Applicant

AND:

Raymond Louis Berta, Respondent

BEFORE: DOI J.

COUNSEL: Michael Zalev, for the Applicant (Moving Party)

Peter Callahan, for the Respondent (Responding Party)

James Smith, for the Non-Party, 911184 Ontario Ltd.

ENDORSEMENT

Doi J.

DATE: April 28, 2021