COURT FILE NO.: FS-13-78874-00
DATE: 2022 06 20
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Robert F. Carducci v. Victoria L. Carducci
BEFORE: RSJ RICCHETTI
COUNSEL: K. Woods and B. Shulakewych for the Applicant
N. Tourgis and S. Zucker for the Respondent
HEARD: May 25, 2022
ENDORSEMENT
The Motions
[1] There are competing motions.
[2] The Applicant, Robert F. Carducci (Mr. Carducci) seeks:
a) To set aside the “Life Insurance” paragraph of the Minutes of Settlement dated January 10, 2019 (Minutes of Settlement) and replace it with either para 2 or 3 of the Notice of Motion.
b) An order that the Respondent, Victoria L. Carducci (Mrs. Carducci) execute a Transfer and Share Transfer Agreement in a specified form (Schedule A to the Notice of Motion),
c) An order permitting Mr. Carducci to attend Mrs. Carducci’s home to review the Snowmobiles and Trailers in 10 days and, then provide his “plan and notice to remove the Snowmobiles/Trailers within 14 days thereafter”.
[3] Mrs. Carducci brings a motion seeking:
a) An order enforcing the Minutes of Settlement;
b) An order which provides that Mr. Carducci receive 50% of the cash surrender value as of January 3, 2013 as per the Minutes of Settlement; and
c) That the Snowmobiles and Trailer be removed forthwith.
[4] It is important to note that neither party seeks nor wants to set aside the entire Minutes of Settlement that were executed on the eve of trial. This position is reasonable in that various terms of the Minutes of Settlement have already been implemented/complied with by both parties such as transfers of property and money.
[5] Essentially, both parties seek to have the courts deal with the three terms in dispute.
Overview of the Facts
[6] There are cases where, despite the separation and even a final resolution, the parties continue to engage in litigation for the sake of litigating against their former partner. This is one of those cases.
[7] After a 42-year marriage, the parties separated in early 2013. Family Law proceedings commenced. It took 6 years for the parties to get to the eve of trial in January 2019.
[8] At the “exit pre-trial”, the parties entered into Minutes of Settlement dated January 10, 2019. Both were represented by counsel. All issues were intended to be resolved on a final basis.
[9] But NO; 3 ½ years later, the litigation continues with respect to the Minutes of Settlement, and another proceeding which is irrelevant for this motion’s determination. And, as will discussed below, both parties take unreasonable positions.
[10] There are 3 issues to be determined:
a) The Snowmobiles and Trailer;
b) The Share Transfer; and
c) The Life Insurance policy.
The Minutes of Settlement
[11] Before I set out the provisions at issue, it is important to note that, like most settlements, there was considerable give and take in achieving the “eve of trial” settlement. The parties agreed on values, and equalization payment, a lump sum support payment, repayment of money from a joint bank account, transfer of property ownership and so forth.
[12] Trying to set aside one paragraph of the Minutes of Settlement (and replacing it with another) would clearly upset the balance the parties (with the benefit of counsel) agreed upon. It would, in my view, result in the court revising, not interpreting nor enforcing, the Minutes of Settlement. In addition, to set aside one paragraph and replacing it with another entirely different paragraph is even more troubling legally where the parties have already complied with the other terms in the Minutes of Settlement.
[13] These are the terms of the Minutes of Settlement at issue:
The Snowmobiles/Trailer Paragraph
Each party will retain any contents/assets pursuant to its title and ownership of the Polaris snowmobiles …
The Share Transfer Paragraph
Victoria will transfer her shares in Northeast to Robert, or as he directs, together with a resignation of any and all positions and Robert will provide Victoria with a statutory declaration that all statutory deductions and/or payments by Northeast are current and shall indemnify Victoria should any such claims be made against her. Such documents shall be in standard form, in a form satisfactory to counsel acting reasonably.
The Life Insurance Policy Paragraph
The Insurance Policy will be cancelled, and Robert will receive 50% of the funds as at the date of separation, being January 3, 2013. The remaining 50%, plus any amounts thereafter shall be refunded to Victoria. For certainty, the parties will engage in an accounting of the funds in the insurance policy account to affect the intent of this paragraph.
Analysis and Conclusion
The Snowmobiles/Trailers
[14] These snowmobiles and trailer have been on Mrs. Carducci’s property since 2013. What condition? Who knows? Do they have any value? Who knows? How difficult will it be to remove them? Who knows? Yet, there is litigation over these 9 to 10-year-old snowmobiles and trailer.
[15] Mr. Carducci was to remove the snowmobiles and trailer by May 31, 2019. He did not do so.
[16] The parties retained lawyers to deal with the snowmobiles. Eventually, Mr. Carducci’s lawyer confirmed Mr. Carducci would pick up (or arrange to pick up) the snowmobiles/trailer on October 28, 2021, at 11 am. Mr. Carducci didn’t show up. Nor did anyone on his behalf.
[17] Further discussions. But no agreement as to the pickup of the snowmobiles/trailers.
[18] Then there was the “statement” by Mr. Carducci’s counsel that the snowmobiles/trailer would be removed by March 10, 2022. That never materialized.
[19] Now there is litigation over how the snowmobiles/trailer.
[20] Mr. Carducci submits he should have 14 days to attend to inspect the snowmobiles/trailers and thereafter provide a “plan” to Mrs. Carducci and if he doesn’t, then he forfeits his ownership rights to the snowmobile/trailers. I am concerned that Mr. Carducci’s plan may include abandoning the snowmobiles/trailer if he determines they have minimal value or there is significant expense to remove them.
[21] Mrs. Carducci wants them “gone” from her property within 10 days.
[22] It is frustrating that this court must deal with these types of issues when the parties cannot deal with this issue reasonably having agree that the snowmobiles/trailers belong to Mr. Carducci.
[23] Mr. Carducci has now had 2 ½ years to remove the snowmobile/trailers. He has failed to do so despite several promises/agreements to do so. Now, it appears that he recognizes the issue that the removal may be difficult and there may or may not be any value in the equipment.
[24] This court orders that Mr. Carducci must remove the snowmobiles/trailers by June 30, 2022. He can do so personally. He can hire someone to remove them. This is to be done at Mr. Carducci’s expense. If Mr. Carducci fails to do so, Mrs. Carducci can arrange to have them removed and seek a judgment against Mr. Carducci before me on motion for the reasonable costs of removing the snowmobiles/trailers from her property.
Share Transfer
[25] What should have been a very simply transfer of shares has turned into a litigious issue between the parties. In addition to each party retaining counsel, counsel then retained other counsel/experts to opine on “share transfers” and what was “standard form”.
[26] Mrs. Carducci has already signed the share transfer. Mrs. Carducci has delivered her resignation. The disputed issue is a “share transfer agreement”.
[27] It is clear from the Minutes of Settlement that the document will “be in standard form, in a form satisfactory to counsel acting reasonably.” I stress “counsel acting reasonably”. “Reasonably” must mean reasonably in the circumstances.
[28] The last version of the share transfer agreements between counsel was not a simple share transfer. It was a complete, detailed share transfer agreement one would expect to receive from an arm’s length transaction, where significant value was at issue, rather than from the former spouse transferring shares where the former spouse has had not involvement in the business for 9 years.
[29] The parties agreed that the date of the share transfer to a date just before the separation in 2013 (January 2013). That makes sense given the circumstances.
[30] The central issue in dispute are the representations and warranties sought and the indemnity sought.
[31] This is what is sought by Mr. Carducci:
- Representations and Warranties of Vendor.
Vendor hereby represents and warrants to Purchaser as follows:
(a) This Agreement has been duly executed and delivered by Vendor and (assuming due execution and delivery by Purchaser) constitutes Vendor's legal, valid and binding obligation, enforceable against Vendor in accordance with its terms.
(b) The Shares have been duly authorized, are validly issued, fully paid and non-assessable, and the Vendor is the registered and beneficial owner thereof, free and clear of all liens, pledges, security interests, charges, adverse claims, encumbrances, agreements, options, voting trusts, proxies and other arrangements or restrictions of any kind (the "Encumbrances"). Upon consummation of the transactions contemplated by this Agreement, Purchaser shall own the Shares, free and clear of all Encumbrances.
(c) The execution, delivery and performance by Vendor of this Agreement do not conflict with, violate or result in the breach of, or create any Encumbrance on the Shares pursuant to, any agreement, instrument, order, judgment, decree, law or governmental regulation to which Vendor is a party or is subject or by which the Shares are bound.
(d) No governmental, administrative or other third-party consents or approvals are required by or with respect to Vendor in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.
(e) There are no actions, suits, claims, investigations or other legal proceedings pending or, to the knowledge of Vendor, threatened against or by Vendor that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
- Indemnification.
Vendor shall indemnify Purchaser and hold Purchaser harmless against and in respect of any, and all, losses, liabilities, damages, obligations, claims, Encumbrances, costs and expenses (including, without limitation, reasonable legal fees, disbursements and charges) incurred by Purchaser resulting from any breach of any representation, warranty, covenant or agreement made by Vendor herein or in any instrument or document delivered to Purchaser pursuant hereto.
[32] Mr. Carducci’s proposed draft share transfer agreement did provide representations and warranties that Mrs. Carducci was the owner of the shares and had not pledged or encumbered the shares as of the date of the transfer and subsequently. This draft share transfer agreement further provided for an indemnity should these representations and warranties be false.
[33] But it also required a further indemnity agreement to be executed in favour of the Corporation, not just Mr. Carducci.
(iv) Vendor shall have executed an indemnity and release in favour of the Corporation substantially in a form acceptable to Purchaser’s counsel;
[34] But it also required an indemnity for the representations and warranties in para. 4 (b) and (c) despite the fact the company has been entirely in control of Mr. Carducci for the past 9 years and Mrs. Carducci doesn’t know what has happened in the company since January 13, 2013.
[35] I have reviewed Mr. P. Gottschlich’s affidavit as to what he suggests is a “standard” share transfer agreement. I reject this as a reasonable share transfer agreement in these circumstances. This may be a share transfer agreement typically executed between third parties where representations and warranties are negotiated and are required. But those are not the circumstances in this case.
[36] The situation here is unusual. It is not a third-party transfer. The Minutes of Settlement provide that Mrs. Carducci is to transfer her shares to Mr. Carducci. To suggest a need for a closing agenda, remedial resolutions, director’s resolutions etc. is entirely unnecessary and unreasonable in these circumstances. Once the shares are transferred to Mr. Carducci, or to whomever Mr. Carducci wants, then Mr. Carducci can do whatever he wishes in terms of corporate documentation. I conclude Mr. Carducci’s draft share transfer agreement goes far beyond what is necessary in these circumstances and is unreasonable.
[37] I do accept that Mrs. Carducci should represent and warrant that she owned the shares at the date of transfer AND has the authority to transfer the shares as of the date of the transfer AND that Mrs. Carducci has not, to the date of transfer and to the date of the execution of the transfer, encumbered, pledged or otherwise dealt with the equitable or legal interest in the shares and is in a position to provide a free and clear transfer of her entire interests in the shares to Mr. Carducci or his designate.
[38] I am not persuaded that anything else is necessary, required or reasonable.
[39] If this representation and warranty is false, then Mrs. Carducci should indemnify Mr. Carducci.
[40] But Mrs. Carducci refuses to provide any indemnity. Mrs. Carducci’s position in this regard is totally unreasonable.
[41] I reject Mr. Doak’s opinion that a share transfer such as this, in these circumstances, could or should be done without an indemnity. It simply makes no sense for those same reasons.
[42] Mr. Carducci did not agree that he would receive Mrs. Carducci’s shares on an “as is where is basis” without the basic necessary representations and warranties described above. Otherwise, Mrs. Carducci could have completely encumbered or pledged the shares she transfers to Mr. Carducci.
[43] Both positions are unreasonable. I am satisfied that a “standard” form share transfer should comply with the above direction.
[44] Since both parties are represented by counsel and have retained corporate counsel, if the parties cannot resolve this issue, both parties can submit, within 2 weeks, a draft form of share transfer agreement with a three page (max) written submissions as to why their draft share transfer agreement complies with the above direction.
Life Insurance Policy
[45] The factual basis relied on by Mr. Carducci is that he discovered that Mrs. Carducci did not pay all the premiums on the Life Insurance policy after 2013. It is important to note that the Minutes of Settlement did not include a representation to this effect.
[46] Mr. Carducci’s entitlement of the cash surrender value in the 2019 Minutes of Settlement was fixed at 50% of the case surrender value as at January 3, 2013.
[47] Mr. Carducci made NO premium payments after 2013.
[48] In 2016, Mrs. Carducci, when the Life Insurance was in arrears in premium payments, paid $113,000 on account of the premiums.
[49] Mr. Carducci now realizes that the Life Insurance payout (i.e., the cash surrender value) to Mrs. Carducci has gone up significantly despite the fact that all premiums had not been paid. Hence, Mr. Carducci’s motion to set aside the paragraph in the Minutes of Settlement and impose a term that would grant him half of the Life Insurance payout.
[50] In this Life Insurance policy, when the premiums are not paid, because there is a cash surrender value, any unpaid premium was reflected as an interest bearing loan against the cash surrender value (i.e. it will be deducted from the final payout). But, Mr. Carducci’s payout is fixed at 50% of the cash surrender value on January 3, 2013. The amount Mr. Carducci is entitled to receive (i.e., 50% as of January 3, 2013) does NOT change whether the premiums were or were not paid by Mrs. Carducci. There is NO impact on Mr. Carducci’s entitlement under the Minutes of Settlement.
[51] Mr. Carducci alleges this increase was caused by Mrs. Carducci’s delay in cancelling the Life Insurance policy. I do not accept this submission. There are several problems:
[52] First, is there any documentation suggesting or asking Mrs. Carducci to cancel the Life Insurance policy – NO! Neither party appears to have been anxious to complete the Minutes of Settlement, some items having been completed as late as February 2022.
[53] Second, as described below, the delay was attributed to Mr. Carducci failing to execute the policy termination authorization document because he wanted further information from the Life Insurance company (which he or his counsel could/should have obtained BEFORE executing the Minutes of Settlement with regard to this term).
[54] Third, while Mr. Carducci states he expected to get the “payout” of the cash surrender value in 2019, that allegation has no merit. He was aware that the documentation cancelling the policy had been prepared in 2019 and awaited his signature.
[55] Mr. Carducci submits there was a “fundamental mistake”, a “mutual mistake”, a lack of “ad idem”, “hence there is no contract”. Here, Mr. Carducci seeks to rely on equity to advance its position to set aside the Life Insurance provision in the Minutes of Settlement and grant Mr. Carducci ½ of the Life Insurance proceeds. As stated above, the court should be extremely reluctant to set aside one paragraph of the Minutes of Settlement. Particularly, where many of the other terms have already been complied with.
[56] On the issue of unilateral mistake, the Court of Appeal in Deschenes stated:
[32] As noted by Côté J.A. in Radhakrishnan, a settlement agreement may also be rescinded on the basis of unilateral mistake. I will explain why I reject the appellants’ submission that the motion judge, after finding a “unilateral mistake by the Diocese”, erred in this case in rescinding the settlement agreement on this basis. The law on rescission for unilateral mistake is that a party may seek rescission of a contract for its own unilateral mistake only where the mistake goes to a material term of the contract, where the other party knows or ought to know of the mistake, and where it would be unconscionable for the second contracting party to rely on the contract: 256593 B.C. Ltd. v. 456795 B.C. Ltd. (1999), 1999 BCCA 137, 171 D.L.R. (4th) 470 (B.C.C.A.), at p. 479. See also Gerald H. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Thomson Reuters Canada Limited, 2011), at pp. 252-54; Toronto Transit Commission v. Gottardo Construction Limited et al. (2005), 2005 CanLII 31293 (ON CA), 257 D.L.R. (4th) 539 (Ont. C.A.), at para. 30, leave to appeal refused, [2005] S.C.C.A. No. 491….
[57] First, I am not persuaded that Mr. Carducci has established a “mistake” in law. In my view, this is a situation where a party now realizes they made a bad deal (at least on one term) and now wants the court to intervene. In any event, this was a unilateral mistake. I reject Mr. Carducci’s submission that he “did not have all of the details and amounts of the Life Insurance available”. Mr. Carducci was also a policy holder and could easily have ascertained the cash surrender value and the state of the unpaid premiums. I reject Mr. Carducci’s submission that if all the details and the amounts of the Life Insurance policy were known at the time of the negotiations of the Minutes of Settlement, that it “would have resulted in a different agreement”. That is hindsight and not a legal basis to overturn a term of an agreement.
[58] Second, for there to be a mutual mistake after the execution of an agreement, there must be evidence that establishes objectively, a mistake was made by both parties. Then, the court has the jurisdiction to set aside the agreement. While, the term “mutual mistake” is loosely used by Mr. Carducci’s counsel, there is no evidence that Mrs. Carducci was subject to the same alleged mistake.
[59] Mr. Carducci seeks to rely on the possible tax implication regarding the cancellation of the Life Insurance policy. Mr. Carducci alleges that when the Life Insurance policy is cancelled, Revenue Canada will allocate the tax liability equally, even though Mrs. Carducci will receive a much larger amount.
[60] I do not accept this submission:
a) There is a question whether the payout or parts of it will be taxable. See July 2, 2019 email (and prior emails) from Durham Sims.
b) As for the taxes payable on the payout amounts, Mrs. Carducci agrees that she will be liable for the taxes on the amount she receives. That is the objective reasonable expectation that each party would be responsible for the amount they receive from the cash surrender value. If the 2013 50% payout to Mr. Carducci in accordance with the Minutes of Settlement would have had no tax implications, then Mr. Carducci should pay not taxes. The taxes for the balance should be the responsibility of Mrs. Carducci.
c) I accept that it was “not Robert’s intention to pay the post-separation increase in taxes, if any, since he is not receiving the benefit of the increase after separation”. But that only applies if he had not tax liability for the payout he is to receive. Given Mrs. Carducci’s position on her obligation taxes (which will be incorporated into this court’s order), that should fully address this concern.
[61] I reject the submission that there was a “fundamental mistake” which “demonstrates that the parties did not have a meeting of the minds for the division of the tax implications”. This alleged mistake, fundamental or otherwise, is entirely contingent on Mr. Carducci’s position that he would have to pay tax on ½ of the total cash surrender proceeds which is negated by Mrs. Carducci’s position and this court’s order.
[62] Even if Mr. Carducci was mistaken, I do not find that it be unconscionable to enforce this paragraph of the Minutes of Settlement. This does not result in a windfall to Mrs. Carducci nor is the payout at the expense of Mr. Carducci since he made no premium payments after 2013 and will still receive the amounts he expected to receive. In fact, if necessary, I would find it was unconscionable to now permit Mr. Carducci to receive ½ the cash surrender payout as of 2022 when he has made no premium payments since 2013.
[63] In the alternative, Mr. Carducci seeks an order that Mrs. Carducci pay to Mr. Carducci, interest and costs, tax implication that he has “incurred as a result of her delay”.
[64] I reject the submission that Mr. Carducci could have used his portion of the cash surrender value from 2019 because he made no effort or requested that the Life Insurance policy by cashed immediately. More importantly, Mrs. Carducci was ready to cancel the Life Insurance policy shortly after the Minutes of Settlement were executed. Mr. Carducci refused or failed to execute the authorization to cancel the Life Insurance policy in early 2019. It was Mr. Carducci who delayed cancelling the Life Insurance policy since 2019 because he wanted further documentation from the Life Insurance company. This delay continued into late 2021. I reject Mr. Carducci’s allegation that he was ready to proceed to comply with the Minutes of Settlement immediately – the contrary is clear from the documents. To now suggest Mr. Carducci should receive the benefit of the delay in cancellation is entirely unfair.
[65] The evidence shows that neither party was in a hurry to complete the Minutes of Settlement having completed certain obligations as late as February 2022. That disposes of Mr. Carducci’s claim for “interest and costs” on the cash surrender amount he was to receive under the Minutes of Settlement.
[66] As for the tax implication on the delay in cancelling the Life Insurance policy, Mr. Carducci will pay any tax liability he would have had to pay for his 2013 50% payout interest as at the date of the Minutes of Settlement. If there is (or was) no tax liability on this amount, then Mr. Carducci has no tax liability. Mrs. Carducci will have the balance of the cash surrender value as of the date of cancellation and will be responsible for any tax liability associated with that amount, if any. Both parties will immediately execute the necessary documentation required to cancel the Life Insurance policy.
[67] To the extent that the respective tax liability described above does not occur because either the Life Insurance refuses to issue the tax documentation to effect the above OR that Revenue Canada taxes Mr. Carducci contrary to the above, then Mrs. Carducci will indemnify Mr. Carducci for his increased tax liability. This indemnity shall be included in my order.
[68] Manulife will be directed to issue any Revenue Canada distribution documentation to Mr. and Mrs. Carducci in the amount paid to each of the parties. As Manulife is not a party to this motion, should Manulife seek to set aside this part of the order on the basis they were not a party to the motion or had an opportunity to be heard or seek directions with respect to the documentation to be issued to Mr. and Mrs. Carducci upon cancellation of the Life Insurance policy, then that motion(s) must be brought forthwith before me.
COSTS
[69] Either party seeking costs, shall provide written submissions (uploaded to CaseLines), within 2 weeks from today’s date, limited to 5 pages (Rule 4 document standards) PLUS additional documents of a Bill of Costs, Offers, Authorities.
[70] The responding party shall provide written responding submissions (uploaded to CaseLines), within 4 weeks from today’s date, limited to 5 pages (Rule 4 document standards) PLUS additional documents of a Bill of Costs, Offers, Authorities.
RSJ RICCHETTI
Released: June 20, 2022
COURT FILE NO.: FS-13-0078874-00
DATE: 2022 06 20
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Robert F. Carducci v. Victoria L. Carducci
COUNSEL: K. Woods and B. Shulakewych for, the Applicant
N. Tourgis and S. Zucker for, the Respondent
ENDORSEMENT
RSJ RICCHETTI
Released: June 20, 2022