COURT FILE NO.: FS-21-00100378-00 DATE: 2022 04 12 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SARAH MICHELLE MARCOTULLIO v. MICHAEL NICHOLLS, ARIKKA PASSMORE and N2 FOODSERVICE INC, formerly 2377865 ONTARIO LTD.

BEFORE: RSJ RICCHETTI

COUNSEL: M. Chilco, for the Applicant. J. Cox, for the Respondent, Michael Nicholls. G. Joseph, for the Respondent, Arikka Passmore. D. Willer, for the Respondent, N2 Foodservice Inc.

HEARD: March 28, 2022 (by Zoom).

ENDORSEMENT

THE ISSUES

[1] There were two matters to be decided today:

a) Whether these proceedings should be consolidated or tried one after the other? b) Whether these proceedings should be case managed?

[2] The remaining issue, disclosure, will be dealt with on a subsequent hearing date to be scheduled after the release of the decision on these two preliminary issues.

THE PARTIES IN THE THREE PROCEEDINGS

[3] Sarah Michelle Marcotullio (Marcotullio) is the Applicant in the Family Law Proceeding. She is also an employee of Halton Indoor Climate Systems Ltd. (Halton).

[4] Michael Nicholls (Nicholls) is the Respondent in the Family Law Proceeding and the former married spouse of Marcotullio. Nicholls is also a defendant in the Halton Proceeding and a defendant in the Solution Foodservice Group (Solution) Proceeding. Nicholls is an employee of N2 Foodservice Inc., formerly 2377865 Ontario LTD., (N2) and in a common law relationship with Arikka Passmore (Passmore).

[5] Passmore is a defendant in the Family Law Proceeding and a defendant in the Solution Proceeding. Passmore is the 100% shareholder of N2.

[6] N2 is a corporate defendant in the Family Law Proceeding, a defendant in the Halton Proceeding and a defendant in the Solution Proceeding.

[7] Halton provides indoor climate solutions to corporate clients.

[8] Solution provides food services and products and was/is the exclusive external sales representative for Halton products in Ontario and Quebec.

THE PROCEEDINGS

[9] There are three proceedings described below. The Family Law Proceeding was commenced in Brampton. The two Civil Proceedings were commenced in Toronto.

Family Law Proceeding (FS-21-100378 Brampton)

[10] Marcotullio and Nicholls were married on September 12, 2009. Marcotullio and Nicholls separated on May 10, 2013. They executed a Separation Agreement on June 24, 2015. They were divorced on December 18, 2015.

[11] There is one child of the marriage, namely Tripp Griffin Nicholls, born December 25, 2010 (“Tripp”). Marcotullio and Nicholls share equal parenting time with Tripp.

[12] Marcotullio brought this Amended Application issued on April 30, 2021. Marcotullio named, as Respondents, Nicholls, Passmore (his common law spouse), and N2.

[13] Marcotullio claims:

a) Child support (table and non-table amount); b) Equalization of Net Family Properties; c) Freezing of assets; d) Setting aside various paragraphs in the Separation Agreement relating to child and spousal support, and property or equalization (and an order to extend the time for equalization of Net Family Property and Spousal support); e) As against Mr. Nicholl, damages for failure to produce full financial disclosure; f) Requiring all Respondents to provide financial disclosure; and g) An order for interim costs and disbursements.

[14] At the center of Marcotullio’s are the following factual allegations:

a) Nicholls received commissions, commencing in 2013, from Solutions, paid to him by Passmore and/or N2 which income were not disclosed to Marcotullio prior to or during the negotiations of the 2015 Separation Agreement. The commissions continued to be received by Nicholls up to 2020 and were not disclosed to Marcotullio; b) Nicholls received $2,700,000 over the years indirectly from Halton/Solution none of which was disclosed to Marcotullio; and c) There may be assets or other financial income not disclosed by Nicholls.

[15] Nicholls’ Answer seeks the dismissal of the Application in its entirety. Nicholls denies that there was a “plan” to “hide” money or assets and alleges that the first payments from Solution were in November 2015 (after the separation and the Separation Agreement). As for child support, Nicholls does not deny that he received money from Solution. Nor does he specifically admit doing so. He submits that Line 150 from his Income Tax returns should be used, which returns were disclosed each year to Marcotullio.

[16] By adding Passmore and N2, Marcotullio clearly intends to go into the issues of whether and the amount of commissions paid by Halton/Solution to or through Passmore and N2 to Nicholls.

[17] The primary factual issues in the Family Law Proceeding, as they relate to the alleged undisclosed commissions received or entitled to by Nicholls, are:

a) Did Nicholls (as opposed to N2) receive, or was entitled to receive, any of the commissions Solution received from 2013 to 2015 or fail to include assets in his financial disclosure in 2013-2015? More broadly put, is there undisclosed income of Nicholls for support purposes or assets, affecting the validity of the Separation Agreement or the amount of support paid or payable to Marcotullio and Tripp? b) In addition to the alleged undisclosed commissions, were there undisclosed assets by Nicholls? Should the Separation Agreement be set aside? If so, what is Marcotullio entitled for equalization and/or support? c) How much in commissions did Nicholls receive or was entitled to receive from Solution from 2015 to date? What amount that should have been paid for Tripp’s Child support since 2013 based on the alleged undisclosed income. If the Separation Agreement is set aside, is spousal support payable, and if so, how much? d) If commissions were received, what portion was received or for the benefit of Nicholls as opposed to the entitlement of N2 or Passmore?

The Halton Action (CV-20-648376 Toronto)

[18] This action was commenced in September 2020 by Halton against Nicholls and N2. Halton claims:

a) Damages of $6,000,000 for unjust enrichments, breach of fiduciary duty, equitable fraud and conspiracy; and b) Damages for breach of confidentiality.

[19] Halton alleges that:

a) Nicholls was Halton’s sales manager entitled only to a salary and bonus on total sales; b) Solution was Halton’s exclusive sales representative entitled to a fixed commission rate; c) Solution was part of Nicholls managerial responsibilities; d) N2 was a “Passmore” company that improperly or fraudulently received a portion of the commissions that Solution was otherwise entitled to in Halton’s agreement with Solution; and e) As a result of Nicholls actions, Halton suffered damages.

[20] At the core of Halton’s claim is that N2 “improperly received funds that were unlawfully diverted from Halton by virtue of a fraudulent scheme designed and implemented by Nicholls”. Halton alleges this was a “long-standing scheme” to which the “full extent is not known” to Halton but has so far determined the amount diverted was $750,000. In addition, there are other claims by Halton unrelated to the commission issue such as Nicholls being employed by a competitor after leaving Halton, misuse of confidential information and so on.

[21] The central issues in the Halton Proceeding, as it relates to the commissions, will be to determine:

a) Whether Nicholls and/or N2 received any commission monies that should have gone to Solution? If so, what amount? b) If so, when Nicholls and/or N2 received the commissions? c) Whether the commission monies were fraudulently or improperly taken by Nicholls and/or N2? d) If so, by whom?

The Solution Action (CV-20-649480 Toronto)

[22] This action was commenced in October 2020 by Solution against Nicholls, Passmore and N2. Solution claims:

a) Damages in the amount of $2,700,000 for negligent misrepresentation, fraudulent misrepresentation, unjust enrichment, restitution, fraudulent concealment, fraud, civil conspiracy, breach of contract, intentional interference with economic relations, and misappropriation of funds; b) Nicholls had Solution fraudulently sign an agreement whereby Solutions was to get 10% of the Halton commissions rather than the 15% of the Halton commissions; c) As part of the fraudulent scheme, Solutions agreed to pay to Nicholls “special” commissions which Nicholls directed be paid to N2; and d) The amounts allegedly diverted are unknown: “it is suspected that the damages could be as high as $2,700,000 over the court of the” agreement.

[23] The central issues in the Solution Proceeding, as it relates to the commissions, are:

a) Was Solution entitled to commissions above the 10%? Were these received fraudulently or improperly by the Defendants? b) If so, what is the amount of commissions received by Nicholls/ N2? c) If so, as between Nicholls and N2, what amount did each receive? d) If so, when were they received?

CONSOLIDATION OF THE TWO TORONTO PROCEEDINGS

[24] The parties to the Halton Proceeding and the Solution Proceeding have agreed that the two Civil Proceedings are to have common productions, examinations for discovery, and trial.

THE POSITION OF THE PARTIES

[25] Nicholls, Passmore and N2 seek a consolidation or trial one after the other, because of the prime underlying issues of whether, the nature of, when and the amount of commissions Nicholls allegedly fraudulently received indirectly from Solutions.

[26] Marcotullio, Halton and Solutions oppose consolidation on the basis that a consolidation will delay, increase litigation expense and that there is no real likelihood of inconsistent findings of fact.

THE LAW

[27] Section 138 of the Courts of Justice Act provides:

As far as possible, multiplicity of legal proceedings shall be avoided.

[28] The Rules of Civil Procedure provide:

6.01 (1) Where two or more proceedings are pending in the court and it appears to the court that,

(a) they have a question of law or fact in common; (b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or (c) for any other reason an order ought to be made under this rule,

the court may order that,

(d) the proceedings be consolidated, or heard at the same time or one immediately after the other; or (e) any of the proceedings be, (i) stayed until after the determination of any other of them, or (ii) asserted by way of counterclaim in any other of them.

(2) In the order, the court may give such directions as are just to avoid unnecessary costs or delay and, for that purpose, the court may dispense with service of a notice of listing for trial and abridge the time for placing an action on the trial list. R.R.O.

[29] The Family Law Rules provide:

s.1 (5) If a case in the court combines a family law case to which these rules apply with another matter to which these rules would not otherwise apply, the parties may agree or the court on motion may order that these rules apply to the combined case or part of it.

(6) When making an order, the court may impose conditions and give directions as appropriate.

(7) If these rules do not cover a matter adequately, the court may give directions, and the practice shall be decided by analogy to these rules, by reference to the Courts of Justice Act and the Act governing the case and, if the court considers it appropriate, by reference to the Rules of Civil Procedure.

R12(5) If it would be more convenient to hear two or more cases, claims or issues together or to split a case into two or more separate cases, claims or issues, the court may, on motion, order accordingly.

[30] The underlying principle in the above statute and the Rules is that multiplicity of proceedings with the same or similar issues should be avoided where a just, more expeditious, least expensive determination can be achieved.

[31] A just determination includes avoiding the potential for inconsistent factual findings, particularly where the same or similar facts are fundamental to the decision in each of the proceedings.

[32] A least expensive determination includes avoiding future actions whose genesis derives from a decision in current proceedings. In other words, where a consolidation will bring finality, it is a factor in favour of granting the order.

[33] The onus is on the party seeking consolidation.

ANALYSIS

General Comments

[34] Marcotullio expressly stated that she will not “wait for the commercial (Civil) matters to be resolved” before proceeding with her Family Law Proceeding.

[35] It is difficult to understand from Marcotullio’s perspective why she would oppose the consolidation. Her claim is based entirely on allegations made by Halton and Solution in the two Civil Proceedings. This is acknowledged at beginning of para. 13 of Marcotullio’s factum on this motion. As a result, Halton and Solution will have to play an integral part of the Family Law Proceeding to establish whether, when and the amount of commissions received or to which Nicholls was beneficially entitled to receive – the very basis for Marcotullio’s claim. Third party allegations (those of Halton and Solution) will not be sufficient to establish the claims advanced.

[36] If there is no consolidation/trial together, what if the amounts determined in the Family Law Proceeding are different from those later determined in the Civil Proceedings? Is there to be a further Family Law Proceeding to re-adjust based on the findings in the Civil Proceeding, potentially by either Marcotullio or Nicholls depending on the amount and timing of the factual findings in the Civil Proceedings?

[37] At first blush, it appears that Halton and Solution would be “dragged” into another proceeding. However, I am satisfied Halton and Solution do have an interest in the Family Law Proceeding, albeit an indirect one. If the court in the Family Law Proceeding finds, based on evidence from Halton and Solution in the Family Law Proceeding, that no money or a specific amount of money was fraudulently paid to N2 and then to Nicholls, will Halton or Solution be able to challenge that amount in the Civil Proceeding? They will not have standing in the Family Law Proceeding. If Halton or Solution do not agree on the amount found in the Family Law Proceeding, the same issue will have to be litigated again in the Civil Proceeding, subject of course to arguments of issue estoppel.

Common Key Factual Determination affecting all Three Proceedings

[38] I find that there are a number of key common factual determinations in all three proceedings:

a) Did Nicholls fraudulently or inappropriately receive (or was entitled to receive) any commissions and how much did he receive (or was entitled to receive) from Solutions through Passmore/N2 prior to 2015? How much, if any, was Passmore entitled to receive as opposed to Nicholls? The quantum and receipt of undisclosed commissions is fundamental to the damage claim in the both the Halton and Solution’s Proceedings. The receipt (or entitlement to receive some of the commissions) prior to 2015 is key to the liability claim and quantum assessment of Marcotullio’s claim in the Family Law Proceeding (i.e., to set aside the Separation Agreement for non-disclosure). b) The same can be said for any commissions paid or to which Nicholls was entitled to receive after 2015. How much of the commissions paid by Solutions were paid to or Nicholls was entitled to receive from 2015 to 2020? These amounts are fundamental to the Halton and Solution’s damage claims. The amounts paid to Nicholls (or entitled to receive) will form the basis of Marcotullio’s claim for increased Child support and her claim for Spousal support for various years, if she sets aside the Separation Agreement. c) Is Nicholls’ defence to the Halton and Solution Proceedings successful? If it is, then the commissions were received by N2 but not Nicholls. The question then is whether, for support purposes, Nicholls was entitled to any of that amount and for what years? If Nicholls’ defence to the Halton and Solution Proceeding is not successful, then a judgment may issue against Nicholls (for some unknown amount) or a judgment might issue solely against N2 or Passmore. At that point, there will have to be a reassessment of Nicholls’ support obligations based on the amounts so found. Unless consolidated/tried together, or the Family Law Proceeding is stayed until the Halton and Solution Proceeding are resolved, Nicholls will have to potentially bring a further Application to vary prior and prospective support to the amounts he received.

[39] Clearly, some of the key findings of fact as to when, the propriety of, to who and quantum of commissions paid or entitled to be received by Nicholls are interconnected in the three proceedings. Inconsistent findings are a very real likelihood.

Other Relevant Common Links

[40] And then there are other relevant common links between the two Civil Proceedings and the Family Proceedings:

a) Marcotullio has a link to Halton, she is Halton’s employee. Its not clear whether this has any relevance except that the timing of the Civil and Family claims appear to be connected. b) Marcotullio chose to add Passmore and N2 into the Family Proceeding broadening the scope of the Family Law Proceeding. Marcotullio seeks to “be given full, unredacted and unrestricted disclosure of all financial information relating to the respondents” – in other words all the dealings between Halton, Solution, N2, Passmore and Nicholls to establish her claims. She makes the dealings between Nicholls and Halton/Solution relevant. c) Marcotullio advance claims including, equalization, lack of disclosure of assets, and Spousal support as issues (Spousal support having an entitlement and quantum components) based entirely on the allegations of Halton and Solution in the Civil Proceedings. d) Marcotullio claims Nicholls received $2,700,000 in fraudulent commission but that is based on Solutions’ claim in which even Solution acknowledges doesn’t know the amount of commissions paid to N2. e) The connection between the Family Proceeding and the two Civil Proceeding becomes more apparent as it is clear that Marcotullio and Solution have been exchanging materials relating to the events. I make no comment whether this exchange was or was not improper. However, the fact that Marcotullio and Solution have exchanged information regarding Nicholls, Passmore, N2 and the commissions paid, underscores the factual nexus between evidence and factual findings in the three proceedings. The fact that the entire extent of this “collaboration” is not known, simply adds to the apparent nexus. f) There are issues regarding the accuracy and veracity of certain documents from Marcotullio/Solution which are key to Marcotullio’s claim that the improper commissions started in 2013. Solution will clearly be a significant participant in the Family Law Proceeding to respond to these allegations.

Common Witnesses

[41] I have no doubt that the majority of the witnesses would have to testify in the separate proceedings unless they were consolidated or heard together. Credibility will be key to the factual findings.

Avoiding Inconsistent Findings

[42] Having one trial judge will avoid inconsistent findings of common fact and a consistent, rational outcome in all three proceedings. It will also ensure that the evidence of the witnesses will be consistent and applied to all three proceedings, a particular factor given the allegations of falsified documentation.

No Delay to any Proceeding

[43] All three proceedings are at approximately the same stage. They are at the production stage. No examinations have yet occurred. No action will be delayed. In fact, having the three proceedings proceed together, under case management, will ensure the Three Proceedings will proceed appropriately.

More Efficient

[44] Witnesses testifying one time on all matters involving the “commissions” will be more efficient, less expensive.

Common Productions

[45] Common productions will provide a more complete and transparent review based on the productions from all parties.

No Prejudice

[46] I see no prejudice to any party to having these actions tried together by the same trial judge.

Duplication

[47] Any duplication or delay could easily be overcome with the appointment of case management and an order that there be common productions, examinations and one trial.

[48] No cogent reason was advanced why case management would not be appropriate or beneficial in this case, particularly, given the already significant number of motions and issues which have arisen. Case Management ordered.

CONCLUSION

[49] Based on all of the above, I am satisfied that it is in the interests of justice, to order that these Three Proceedings be tried together and that they be case managed. The Civil Proceedings will be transferred to Brampton.

[50] I will schedule the disclosure motion and advise counsel of who the case management judge will be, possibly including myself.

RSJ RICCHETTI Released: April 12, 2022