REASONS FOR DECISION – GARNISHMENT HEARING

[1] I conducted a garnishment hearing under r. 60.08(16) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] In her Amended Notice of Motion, Ms. Benzacar sought the following orders:

(a) an order declaring that 604402 NB Ltd. and 4106971 Canada Inc. (collectively, the "Garnishee Companies") are liable for the payment of the outstanding sum due under the judgment issued by Peacock J. of the Quebec Superior Court pursuant to r. 60.08(17);

(b) an order for the garnishment of 60 percent of Ira Terk's wages;

(d) an Order compelling the directors of 6990371 Canada Inc., 604402 NB Ltd., 4106971 Canada Inc., and Ego Capital Corp. (the "Corporate Respondents") to attend an examination in aid of execution and/or produce documentation related to the Garnishee Companies.

Key Events Leading to the Garnishment Hearing

[3] This enforcement proceeding arises in the context of a highly acrimonious divorce of the applicant and respondent that occurred many years ago in Quebec.

[4] On May 24, 2011, Peacock J., of the Cour supérieure du Québec/Quebec Superior Court rendered judgment ("2011 Peacock Judgment") ordering the Respondent, Mr. Terk, to pay the Applicant, Ms. Benzacar, the following:

(a) Child support payments;

(b) Alimentary support in the amount of $125,000 payable in forty monthly installments; and

(c) The sum of $130,000 for Ms. Benzacar's remaining share of the proceeds of the sale of their home, with interest accruing at the legal rate beginning on May 1, 2004, to which legal indemnity was added as of May 24, 2011, and up until full payment.

[5] Mr. Terk paid the child support payments and the alimentary support in the amount of $125,000. However, he failed to pay the sum of $130,000 plus interest and has made no payments to Ms. Benzacar since in or around 2016.

[6] Ms. Benzacar then brought this application in 2016 to enforce the 2011 Peacock Judgment in Ontario where, she contended, Mr. Terk conducted business and received a salary.

[7] On March 8, 2017, Chiappetta J. rendered judgment ("Chiappetta Enforcement Judgment") and ordered that Mr. Terk pay the amount then outstanding under the 2011 Peacock Judgment in the sum of $227,097.70, plus prejudgment interest in the sum of $8,965.70, and costs in the amount of $4,000. Postjudgment interest was fixed payable at the rate of 11 percent per year commencing on March 8, 2017.

[8] On May 3, 2017, Mr. Terk was examined in aid of execution.

[9] On or about October 10, 2017, Notices of Garnishment were issued by Ms. Benzacar to 604402 NB Ltd. carrying on business as BTV+ and also carrying on business as Canadian Business Television ("604 Ltd.") and to 4106971 Canada Inc. ("410 Inc.").

[10] The Notices of Garnishment requires these Garnishee Companies to:

(a) Within 10 days after the notice is served, pay all debts then payable to the debtor (Mr. Terk); and

(b) Within 10 days after they become payable, pay all debts that become payable to the debtor within six years after this notice is served on the Garnishee Companies,

subject to the exemptions provided by s. 7 of the Wages Act, R.S.O. 1990, c. W.1., to the sheriff on behalf of the judgment creditor, Ms. Benzacar.

[11] The Notices of Garnishment state that the total debt due is $256,143.49 less $10.00 for the Garnishee Companies' respective costs of making each required payment.

[12] The Notices of Garnishment contain the usual warning that if the Garnishee Companies fail to make the requisite payments, the court may make and enforce an order against them for payment of the stated debt. Furthermore, it warns that if the Garnishee Companies make a payment required under the Notices to anyone other than the sheriff, they may be liable to pay that amount again.

[13] Furthermore, the Notices of Garnishment contain the usual direction that if the total amount of $256,143.49 less $10.00 per payment is not made within 10 days after the Notices are served, then the Garnishee Companies must each file a Garnishee's Statement in the prescribed form attached to the Notices.

[14] Each of the Garnishee Companies filed the standard Garnishee's Statement dated respectively, November 6, 2017. They were filled in and signed by Mr. Terk as the respective companies' representative.

[15] On or about August 18, 2018, Ms. Benzacar brought a motion to compel Mr. Terk to answer undertakings and refusals arising from his examination in aid of execution. Master Sugunasiri, as she then was, ordered production of documents including 6990371 Canada Inc.'s ("699 Inc.") Minutes of the Board of Directors meeting held on November 18, 2010, which stated that Mr. Terk was entitled to an annual salary of $220,000 and an annual automobile allowance of $9,000. At that time, Mr. Terk was identified as the Executive Chairman of the Board of Directors and there are other directors. Furthermore, according to Ms. Benzacar's evidence, Mr. Terk advised the court that he had received $55,000 from 604 Ltd. after being served with the Ontario enforcement proceedings in 2016, but before the Notices of Garnishment were served in late 2017. Costs were deferred to the motion judge hearing this motion (See Endorsement dated September 24, 2018). Mr. Terk was ordered to pay costs on a partial indemnity basis in the sum of $8,000 (See Endorsement on Costs released April 29, 2019).

[16] In or around August 2018, Ms. Benzacar requested the sheriff to seize Mr. Terk's Class C shares in 699 Inc. but the sheriff advised that the following corporate information was required in order to carry out this seizure:

(a) A copy of the charter of the company;

(b) A list of all other shareholders of the company; and

[17] On or about September 24, 2018, Ms. Benzacar brought a further motion before Master Sugunasiri for an order compelling the examination of directors of 699 Inc., 604 Ltd., 410 Inc and Ego Capital, and/or for production of documents from those companies. The motion was dismissed without prejudice to Ms. Benzacar bringing a further motion once she exhausted her attempts to obtain this information through Mr. Terk.

[18] On August 15, 2019, Mr. Terk was examined again in aid of execution. Many questions relating to questions suggested by Master Sugunasiri in her endorsement dated December 24, 2018 were taken under advisement.

[19] On April 29, 2019, a further motion was brought before Master Sugunasiri to compel answers to refusals given by Mr. Terk related to production of financial information. Master Sugunasiri ordered costs payable on a substantial indemnity basis against Mr. Terk in the sum of $13,472.58. Master Sugunasiri also made some negative comments about Mr. Terk's behaviour during the course of this litigation, including taking unreasonable positions and requiring Ms. Benzacar to "unnecessarily spend significant money to achieve the result".

[20] On November 2, 2019, Ms. Benzacar and Mr. Terk entered into a settlement agreement to resolve the 2011 Peacock Judgment. Mr. Terk agreed, inter alia, to pay the principal sum of $130,000, all inclusive, less any sums received after November 1, 2019, under the Notices of Garnishment, by January 31, 2020 "in full settlement of the 2011 Peacock Judgment" and the Chiappetta Enforcement Judgment in Ontario.

[21] Mr. Terk did not pay any amount towards this settlement agreement. Instead he brought a motion to enforce the settlement agreement. He took the position that the settlement agreement required Ms. Benzacar to deliver a full and final release before he had to pay anything. On March 25, 2021, Mayer J. of the Quebec Superior Court dismissed his motion and held that the settlement agreement was at an end due to Mr. Terk's repudiation of the contract. Justice Mayer also made some unflattering observations about Mr. Terk's behaviour since the 2011 Peacock Judgment and Chiappetta Enforcement Judgment, including efforts to evade payment by seeking "shelter in this court from the long arms of justice in Ontario". Justice Mayer held that Mr. Terk's application was "abusive" and "excessive and unreasonable" causing Ms. Benzacar "prejudice". At para. 148, Mayer J. awarded punitive damages against Mr. Terk in the sum of $5,000.

[22] This garnishment hearing was scheduled to be heard by me on September 20, 2021. However, it was adjourned as a result of the corporate responding parties having filed their responding record on September 14, 2021, which was well past the deadline imposed by Stewart J.

[23] The matter was adjourned to April 25, 2022, with terms. One of the terms proposed by Ms. Benzacar was that the cost awards by Chiappetta J. and Master Sugunasiri were to be paid by Mr. Terk. I took this proposed term under reserve, and granted leave to Mr. Terk to file a supplementary affidavit to respond to the issue of his financial ability to pay those cost awards (see, Endorsement released September 20, 2021).

[24] I then released a further endorsement directing that Mr. Terk was to pay the two outstanding cost awards within 10 days of the return of the garnishment hearing. In the event Mr. Terk failed to do so, I ordered that this court would not receive any evidence tendered by him in response to the garnishment hearing (see Endorsement released October 25, 2021). This provided Mr. Terk with six months within which to pay the two awards.

[25] On April 25, 2022, this motion proceeded. Having been advised that Mr. Terk made no effort to pay the outstanding costs awards, or even a part thereof, I declined to receive any evidence from him. The matter proceeded on the basis of the evidentiary materials filed by Ms. Benzacar and the responding corporate parties (including the two Garnishee Companies).

Issues

[26] The issues to be decided are:

(a) Should the statutory 80 percent exemption that applies to garnishment of income under the Wages Act be reduced as against Mr. Terk, and if so, what is the appropriate exemption?

(b) Has Mr. Terk and/or the Garnishee companies (and/or Ego Capital and 699 Inc.) concealed Mr. Terk's income or caused it to be deferred so as to evade garnishment?

(c) Should the Garnishee Companies be required to pay all or any part of the Chiappetta Enforcement Judgment? Did the Garnishee Companies pay sums to Ego Capital that they knew were for Mr. Terk's benefit?

(d) Did the Garnishee Companies file false or incomplete garnishee statements ? If so, what is the appropriate remedy against them?

(e) Should the corporate respondents be compelled to produce further documents and/or attend an examination pursuant to rr. 60.18(2) and (6)?

Issue #1: Should the exemption under the Wages Act be reduced and, if so, what is the appropriate exemption?

[27] I find that in these circumstances, it is just that the exemption under the Wages Act in relation to Mr. Terk's income be decreased to 60 percent.

[28] Section 7(2) of the Wages Act provides that 80 percent of a person's wages are exempt from seizure or garnishment. Wages, in turn, are defined to exclude any amount that an employer is required by law to deduct from the wages.

[29] Furthermore, pursuant to s. 7(4) of the Act, a judge of this court may reduce the statutory exemption prescribed under s. 7(2) "if the judge is satisfied that it is just to do so, having regard to the nature of the debt owed to the creditor, the person's financial circumstances and any other matter the judge considers relevant" (Gumps v. Grant (2000), 2000 22396 (ON SC), 49 O.R. (3d) 649 (S.C.), at paras. 62-63). This is a discretionary order.

[30] The burden is on Ms. Benzacar to establish, with evidence, that it would be just to reduce the statutory exemption of net income for garnishment purposes having regard to the factors identified in s. 7(4) of the Act.

[31] The Garnishee Companies made detailed submissions in support of Mr. Terk's position that the existing statutory exemption of 80 percent of his net income is appropriate and just. Neither Mr. Terk nor the Garnishee Companies had the benefit of Mr. Terk's affidavits in light of my ruling striking the affidavits for failure to pay long standing cost awards or make any part payment or proposal to pay.

[32] In Dhaliwal v. Ontario (Ministry of health and long term care), 2002 7799 (S.C.), Cullity J. held that the conduct of a debtor towards his creditors will sometimes be relevant. His Honour went on to state, at paras. 11-12 that it is not the function of the court, in exercising its discretion under s. 7(4) of the Wages Act to punish a debtor for his past conduct. Rather, the purpose of the Wages Act is to "protect a debtor from his creditors by enabling him to pay his debts without destroying his ability to earn a livelihood: Jantunen et al v. Ross et al (1991), 1991 7141 (ON SC), 5 O.R. (3d) 433 (Div. Ct.)". The past conduct of the debtor was found, by Cullity J. at para. 15, to be as a measure of the debtor's veracity and reasonableness in depicting his personal financial circumstances. In Dhaliwal, Cullity J. was particularly concerned, at para. 16, about the "present dire financial situation" of Dr. Dhaliwal's family should the statutory exemption be reduced.

[33] In Dhaliwal, the exemption was reduced to 60 percent of the OHIP payments that were at issue.

[34] I am satisfied on the evidence that Mr. Terk's conduct throughout this litigation and the proceedings before Mayer J. demonstrate an intent not to pay anything further towards the 2011 Peacock Judgment irrespective of his personal financial circumstances. He took an unreasonable position before Mayer J. and his maneuver had the effect of causing the Garnishee Companies to not make any garnishment payments pending Mayer's J. determination. He has unduly prolonged Ms. Benzacar's efforts since 2016 to collect amounts he owes as observed by the comments of Mayer J. of the Quebec Superior Court and Master Sugunasiri of this court.

[35] It is noteworthy that prior to the issuance of the Notices of Garnishment, Mr. Terk was earning approximately $220,000 per year plus an automobile allowance. Furthermore, Mr. Terk's company, Ego Capital, of which he is the sole shareholder, officer and director, has received approximately $12,000 per year by way of "management fees" from 604 Ltd., apparently made on behalf of 699 Inc. (as it does not have a bank account) and this continued after the issuance of Notices of Garnishment in 2019, 2020 and 2021. While Mr. Terk stopped receiving the full $220,000 per year plus automobile allowance due to circumstances that will be discussed later, he resumed receiving some income from 604 Ltd. in 2019. Mr. Terk also holds Class C non-voting shares in 699 Inc. In the event 699 Inc. is sold, and meets a minimum financial threshold price, then Mr. Terk will be entitled to receive some money from those shares.

[36] As stated, Mr. Terk has made no effort whatsoever to pay down the 2017 and 2019 cost awards of Chiappetta J. and Master Sugunasiri, respectively.

[37] The nature of the debt owed arises from a divorce proceeding and specifically from the sale proceeds of the matrimonial home. Mr. Terk has had the benefit of those proceeds for many years.

[38] It appears to me that it is more than a coincidence that Mr. Terk stopped receiving salary from 604 Ltd. upon being service with this Notice of Application in 2016, having received $55,000 in salary prior to the issuance of the Notices of Garnishment.

[39] I have considered Mr. Terk's financial circumstances insofar as the evidence before me permits. I note in particular that Mr. Terk was able to raise the $130,000 called for under the failed settlement agreement and arranged to have it paid into the Garnishee Companies' lawyer's trust account, but then withdrew it. This would have resolved the whole litigation and avoided the costs that have been incurred by Ms. Benzacar since then and the current garnishment hearing altogether.

[40] On this latter point, Ms. Benzacar submitted that I should issue an order requiring the Garnishee Companies to pay the sum of $130,000 to the sheriff on her theory that the funds were procured from these companies as a debt owed to Mr. Terk. However, Ms. Benzacar presented no evidence to counter the direct evidence of 604 Ltd., 410 Inc and 699 Inc that the monies did not come from any of these companies, nor were they privy to the arrangements by which the funds were transferred into, or out of, the law firm's trust account.

[41] Ms. Benzacar seeks a reduction in the exemption to 40 percent so that she can garnish 60 percent of Mr. Terk's net income.

[42] In striking the balance between Mr. Terk's ability to live and Ms. Benzacar's right to have the debt paid in a timely manner and given the fact that this amount has been due since approximately 2011 and for the other reasons stated including Mr. Terk's conduct during the various proceedings to date which adversely reflects on his credibility, it is my view that reducing the exemption under the Wages Act to 60 percent strikes the right balance. Ms. Benzacar shall have the right to garnish 40 percent of Mr. Terk's net income.

Issue # 2 Has Mr. Terk, together with the Garnishee Companies, concealed or deferred income to avoid payment of his debt to Ms. Benzacar?

[43] Ms. Benzacar submits that Mr. Terk has money hidden in various companies: 604 Ltd., 410 Inc., 699 Inc., Ego Capital, BTV+ and Canadian Business Television Inc. ("CBTI") on the theory that Mr. Terk "controls" each of these companies and therefore when, if, and how much income he receives from each of these companies. Therefore, Mr. Terk is directing these companies to defer any payments owed to him, in order to avoid paying his judgment debt owed to her. She reasons that Mr. Terk pays rent for his apartment and leases an expensive car without the benefit of the automobile allowance from 604 Ltd. and therefore must have access to more income than he or the Garnishee Companies are disclosing.

[44] I disagree. Again, Ms. Benzacar has not proven that Mr. Terk or any of the responding corporate parties, including the Garnishee Companies, have concealed or deferred income or monies owed to him in order to avoid the judgment debt.

[45] The challenge for Ms. Benzacar, in part, is that she has not proven that Mr. Terk controls 604 Ltd., 410 Inc, BTV+ or CBTI. She has proven that Mr. Terk controls Ego Capital and that he is an officer, director and non-voting shareholder of 699 Inc.

[46] Based on the evidence, 699 Inc. wholly owns 604 Ltd. as its subsidiary. 699 Inc. is a holding company and does not conduct any independent active revenue generating business. It receives revenues from 604 Ltd.

[47] 604 Ltd, in turn, wholly owns 410 Inc and CBTI as its subsidiaries. 604 Ltd does not receive revenue from 410 Inc because the latter is no longer an active business and was not active as at the date of the Notice of Garnishment. 604 Ltd has voting shareholders and operates pursuant to a unanimous shareholders agreement.

[48] Mr. Terk does not own any shares in 604 Ltd., 410 Inc. or CBTI. He does own shares in 699 Inc. but, as I stated, these are non-voting shares.

[49] There is no evidence to suggest that Mr. Terk can unilaterally make significant decisions concerning his own payment (including timing, deferral, and amount) with respect to any of these companies other than Ego Capital.

[50] Ms. Benzacar has produced no evidence to dispute the evidence adduced in support of this corporate organization and structure, including Mr. Terk's role within these companies.

[51] Mr. Terk received approximately 50 percent of his salary from 604 Ltd. and the other 50 percent from CBTI up to 2017. Since 2017, he has only received salary from 604 Ltd. The evidence demonstrates that in 2017, CBTI's contract with its major client, GM Motors, ended and with it, CBTI shut down its operations.

[52] Furthermore, 410 Inc. does not carry on an active revenue generating business and has not for many years. Again, there is no evidence to the contrary, nor is there any evidence that it has ever paid any income or compensation to Mr. Terk.

[53] 699 Inc., 604 Ltd. and CBTI had credit facilities with the Royal Bank of Canada totalling approximately 1,500,000.00. In April 2016, RBC threatened to call in its loans. RBC did call in its loans, but these companies reached a restructuring agreement with RBC in January 2018. The board of directors, with the exception of Mr. Terk, resigned in 2017 as a result of this financial crisis, leaving Mr. Terk as the sole director on a temporary basis. This is why he filled out the Garnishee's Statement. A new board of directors has since been elected.

[54] I am satisfied that the evidence does not establish that Mr. Terk has concealed income in 699 Inc., 410 Inc., 604 Ltd., CBTI or Ego Capital, or that those companies have withheld payments of income to Mr. Terk in a conspiracy to assist him in avoiding his judgment debt obligation, and in the case of 410 Inc. and 604 Ltd., to avoid payments due under the Notices of Garnishment.

Issue #3: Should the Garnishee Companies be Ordered to Pay Any Funds Towards the Judgment Debt?

[55] For the reasons that follow, 604 Ltd. is required to pay the equivalent of the management fees paid to Ego Capital on behalf of Mr. Terk, since the service of the Notice of Garnishment on it, subject to the exemption under the Wages Act.

[56] If the Garnishee Companies, or either of them, paid money to Mr. Terk that should have been paid to the sheriff under the respective Notices of Garnishment, they are obliged to pay that amount to Ms. Benzacar, in addition to what they paid to Mr. Terk, subject to the exemption under the Wages Act.

[57] Ms. Benzacar's lawyer has cross examined Rikki Wright, Susan Gamble and Ian Gregoire on their respective affidavits. These cross examinations occurred on April 13, 2022. There were also earlier cross examinations.

[58] Mr. Gregoire has been a shareholder of 699 Inc. since December 2009 and a member of the board of directors since April 2021. He was also a director and Chief Financial Officer of 604 Ltd. from June 2009 to September 2014.

[59] Ms. Gamble has worked in the accounting department of 604 Ltd. since November 2017 and has been its Accounting Manager since July 2018. She reviewed the general expenses of 604 Ltd., including those expenses paid to 410 Inc. She also reviewed inter-company transfers between 604 Ltd. and 699 Inc.

[60] Mr. Wright has been working for 604 Ltd. in its accounting department since early 2017. By 2018 he also began supporting 604 Ltd.'s operations more generally, including payroll, the financial statements of 604 Ltd and its owner, 699 Inc, and 604 Ltd.'s subsidiary, 410 Inc., including inter-company transfers between 604 Ltd. and 699 Inc. and between 604 Ltd. and 410 Inc.

[61] The evidence establishes that the Garnishee Companies decided not to make any garnishment payments during the course of the failed settlement agreement on the basis of their understanding, derived from Mr. Terk, that the failed settlement agreement would have ended his judgment debt and therefore the garnishment obligations.

[62] It is questionable as to whether 604 Ltd. and 410 Inc. ought to have ignored their garnishment obligations. However, once they were advised that the settlement agreement had failed (following the decision of Mayer J.), 604 Ltd. paid arrears to the sheriff. This decision is particularly questionable because the settlement agreement provided that the debt outstanding under it was to be reduced by any payments subsequently made.

[63] In total, 604 Ltd. has paid just over $30,000 to the sheriff as particularized in the evidence, reflecting 20 percent of the amounts it paid to Mr. Terk from 2019 to 2021. The payment made on June 30, 2021 included the arrears that accrued during the currency of the failed settlement agreement in the sum of $8,441.25.

[64] Ms. Benzacar has not demonstrated with any evidence that the Garnishee Companies paid any amounts to Mr. Terk between 2017 and 2022 other than the amounts they have acknowledged and from which they have paid various amounts to the sheriff. Ms. Benzacar has relied on speculation and what she believes to be a common sense inference that Mr. Terk must have earned more money from these companies than he claimed, and that the companies he is associated with must have conspired with him to hide or defer payments otherwise due to him. This falls far short of discharging her burden of proof.

[65] Ms. Benzacar submits that when 604 Ltd. paid management fees to Ego Capital it knew that it was really paying the fees to Mr. Terk, as the sole owner of Ego Capital. Therefore, 604 Ltd. should now be obliged to pay the equivalent of the management fees paid to her towards the judgment debt (International Union of Painters and Allied Trades, Local 200 v. S & S Glass and Aluminum (1993) Ltd. (2004), 2004 12611 (ON CA), 185 O.A.C. 38 (C.A.), at para. 26).

[66] 604 Ltd. does not deny that it knew the monies it paid to Ego Capital were effectively going to Mr. Terk. However, it says that the fees were being paid by it on behalf of 699 Inc. which does not have a bank account. Therefore, it submits that the management fees were not a debt of 604 Ltd. but rather a debt of 699 Inc. (r. 60.08(11)). Further, it submits that the management fees were really a reimbursement of expenses paid by Mr. Terk and not income. Finally, as 699 Inc. was not served with a Notice of Garnishment no payments were obliged to be made to the sheriff reflecting 604 Ltd.'s payment of these fees.

[67] However, Mr. Wright, on cross examination, affirmed that these sums paid to Ego Capital were for "fees".

[68] In International Union of Painters, the Court of Appeal affirmed that a motions judge, in determining a garnishee's rights and liabilities under r. 60.08(16)(b) should consider the "realities" of the relationship between the debtor and companies he is involved with. It also affirmed that in exercising discretion under this subrule, "the court may therefore make whatever order it deems just in the particular circumstances of any given case" (at para. 20). Furthermore the "discretion vested in the court by subrule 60.08(16) has been exercised in a variety of circumstances" (at para. 25). In International Union of Painters, the court affirmed the exercise of the motion judge's discretion to refuse to allow the garnishee company to avoid its "clear" obligations to the make payments to the creditors by making a payment to a company that it knew was the alter ego for the debtor in question.

[69] In my view, having regard to the discretion I have under r. 60.08(16), it is fair and equitable that 604 Ltd. be liable to pay to Ms. Benzacar the sums due under the Notice of Garnishment. Furthermore, the Garnishee Companies should now pay the equivalent of the reduced exemption of 40%. This is because 604 Ltd. was well aware that it was subject to the obligations of the Notice of Garnishment and that Ego Capital was the alter ego of Mr. Terk. The fact that it claims to have been making these payments on behalf of 699 Inc. does not, in my view, alter the equities in this matter. I am not satisfied that 604 Ltd. was acting as a Trustee of 699 Inc. in relation to these payments. 604 Ltd. had power and control over these funds and paid them from its own resources. Furthermore, while Mr. Terk may not control 604 Ltd. it is apparent from the advocacy positions taken by the corporate responding parties in this hearing in support of Mr. Terk that they are sympathetic to Mr. Terk's plight and not to Ms. Benzacar's.

[70] I do not accept, however, that these fees should be construed as a debt as opposed to back wages captured under the Wages Act. The difference is that if these fees were characterized as debt, then 100 per cent would be payable. Furthermore, the characterization of these payments as fees as opposed to wages does not assist Ms. Benzacar. In Dhaliwal, OHIP billings paid to the debtor who was a medical doctor, were considered to be wages for purposes of the Wages Act. I find as a fact that these management fees were fees paid to Mr. Terk for services rendered for purposes of the Wages Act.

[71] Accordingly, 604 Ltd. is directed to pay 40 percent of the management fees that it paid to Ego Capital to the sheriff pursuant to the Notice of Garnishment for the period from November 6, 2017, to the date of these reasons.

[72] Ms. Benzacar also submits that funds paid by CBTI to Ego Capital, in the sum of $115,000, ostensibly for tax purposes, should be imputed as income to Mr. Terk for 2017 to 2018 and therefore should be an obligation captured by the Garnishment Notice. However, CBTI, a subsidiary of 604 Ltd. located in the United States, was never served with a Notice of Garnishment. It is a separate corporate entity from 604 Ltd. This is not the same situation as the management fees which were paid by 604 Ltd. which was served with the Notice of Garnishment. In addition, the evidence demonstrates that the majority of these funds were paid prior to the service of the Notices of Garnishment.

[73] Accordingly, I am not prepared to order that CBTI pay any sum to Ms. Benzacar towards the judgment debt of Mr. Terk. Indeed, CBTI is not even before the court on this motion.

Issue #4: Did the Garnishee Companies Fail to File Proper Garnishee's Statements?

[74] Ms. Benzacar seeks judgment for the entire amount of the outstanding judgment debt of Mr. Terk against the two Garnishee Companies pursuant to r. 60.08(17).

[75] Furthermore, Ms. Benzacar submits that any back wages owed by 604 Ltd. and/or 410 Inc. ought to be treated as a "debt" and not "wages" such that the exemption under the Wages Act would not apply. In other words, she seeks 100 percent of any allegedly deferred back wages to be paid to the sheriff. She offers no authority for this proposition.

[76] Ms. Benzacar further submits that I have broad discretion to make any award I deem fit, having regard to the "realities" of the relationship between Mr. Terk and the Garnishee Companies (r. 60.08(16)(b); Tribecca Finance Corporation v. Tabrizi, 2018 ONSC 486, 145 W.C.B. (2d) 247, at para. 103, International Union of Painters, at paras. 20-21).

[77] Ms. Benzacar submits that the garnishee statements filed by 604 Ltd. and 410 Inc., respectively, were incomplete and therefore ought to be treated as if they were never filed. This would justify payment of the entire judgment debt by these companies, in her submission.

[78] I reject this submission.

[79] Rule 60.08(17) provides that where a garnishee fails to pay to the sheriff the amount set out in the notice of garnishment as owing by the garnishee to the debtor and does not serve and file a garnishee's statement, then the creditor is entitled on motion and on notice to make an order against the garnishee for payment of the amount that is found was payable to the debtor by the garnishee or the amount set out in the notice, whichever is less.

[80] The Garnishee's Statements were filled out by Mr. Terk in 2017. The explanation, supported by the evidence, is that he was the only director of the companies at that time as this was, it will be recalled, when RBC called in its loan prompting the other directors to resign.

[81] Item 1 of the Garnishee's Statement requires the Garnishee to indicate how much it owes or will owe to the debtor. This was left blank on both Statements. The explanation is that nothing was owed by either 604 Ltd. or 410 Inc. to Mr. Terk as of the date of the Statements (November 2017) and nothing was at that time anticipated to be owed. This again reflected the position of these Garnishee Companies that 410 Inc. was already no longer operating, and 604 Ltd. was in a financial crisis due to the RBC loan call.

[82] Item 2 of the Garnishee's Statement asks for an explanation if the garnishee is taking the position that it does not owe the debtor any money, including any other information that will explain its financial relationship with the debtor. The explanation filled out on behalf of 604 Ltd. states that it is insolvent, its bank has called in its loans and no alternative sources of funding have been found. It also states that the debtor, Mr. Terk, "is not taking salary".

[83] Item 2 of 410 Inc.'s Garnishee's Statement states that it is a shell corporation with no assets, activity or employees.

[84] While the fact that these Statements were filled out by Mr. Terk, thereby suggesting that they were inaccurate self-serving statements made on his behalf, the evidence before me has not borne out this assertion.

[85] I do not find the failure to fill out Item 1 to render these Garnishee's Statements to be null and void. The explanations provided in answer to Item 2 explains that there is no debt owed to Mr. Terk. No authority was cited by Ms. Benzacar to support her position that the failure to complete item one results in a null and void statement.

[86] Ms. Benzacar makes the further submission that there was an obligation on the Garnishee Companies to amend the respective Garnishee's Statements. However, there was no legal authority cited for this proposition.

[87] The evidence is that 410 Inc. has not, and does not, owe any monies to Mr. Terk as it is not operating any business.

[88] With respect to 604 Ltd., as indicated above, it has made payments to the sheriff pursuant to the Garnishment Notice, which became due subsequent to the filing of the Garnishee's Statement. This reflects the common practice.

[89] Accordingly, I find that there is no basis upon which to exercise the discretion I have to order that the Garnishee Companies should pay the entire outstanding judgment debt of Mr. Terk.

Issue #5: Is an Order to compel the Garnishee Companies and 699 Inc to produce documents and/or attend on an examination in aid of execution warranted?

[90] A limited production order against 699 Inc is warranted.

[91] Under r. 60.18(6), the court has the power to make any order against "any other person as is just" where the creditor is having difficulty enforcing the judgment debt (Penuvchev v. Crosslink Bridge Corp., 2012 ONSC 1954, at para. 28).

[92] It is clear that Mr. Terk owns Class C shares in 699 Inc. These shares will entitle the holder to a distribution of proceeds should the company be sold for a threshold amount.

[93] Ms. Benzacar instructed the sheriff to seize these shares. However, the sheriff responded that they require the following information:

(a) A copy of 699's charter;

(b) A list of the other shareholders;

[94] 699 Inc. resists this order on the basis that it is a company incorporated under the laws of Quebec, and that it carries on business in Quebec. It appears to claim that it has provided this information to Ms. Benzacar's counsel.

[95] In my view, Ms. Benzacar has established that Mr. Terk owns Class C shares and that these may have a value, if not now then down the road when and if 699 Inc. is sold.

[96] The fact that 699 Inc. is a Quebec company does not preclude this court from making the requisite order, if so warranted. 699 Inc. has attorned to this court's jurisdiction by having voluntarily appeared by counsel and making representations regarding this claim for relief by Ms. Benzacar.

[97] It may be that Ms. Benzacar will need an order from the Quebec Superior Court to enforce this order, but I express no view on this point.

[98] I am satisfied that it is just in the circumstances of this case, given the age of this debt, the apparent pattern of avoidance of payment of this debt by Mr. Terk, and the potential value of the Class C Shares at minimum when and if 699 Inc. is sold, that an order compelling 699 Inc. to provide the requested information and documents is just.

[99] Accordingly, 699 Inc. will produce to Ms. Benzacar a certified copy of its charter, a list of its other shareholders, and the approximate value of Mr. Terk's shares (including the formula for determination of that value and any shareholders' agreement that references these shares either directly and/or generically) forthwith. Of course, if Mr. Terk pays the entire outstanding judgment debt and outstanding costs awards against him, he might pre-empt the seizure of his shares.

[100] However, I am not satisfied that Ms. Benzacar has demonstrated that the broad order she is seeking against the Garnishee Companies and the other responding corporate parties is warranted. She is requesting production of all financial records, minute books, and shareholder agreements for all of these entities so that she can arrange to have a forensic accounting investigation conducted to determine whether or not any of these companies have paid undisclosed monies to Mr. Terk and/or are deferring payments otherwise due to Mr. Terk.

[101] Like Master Sugunasiri observed, this appears to be a fishing expedition. Despite now having had further cross examinations of representatives of the Garnishee Companies and 699 Inc., no new evidence has been procured by Ms. Benzacar to support her assertions.

DISPOSITION

[102] For the reasons stated above, the relief sought at this garnishment hearing is granted in part, and the balance is dismissed.

COSTS

[103] Ms. Benzacar shall have 10 business days within which to provide her cost outline and written submissions. Mr. Terk and the responding corporate parties will have 10 business days thereafter to provide their respective cost outlines and written submissions. These written submissions shall not exceed five double spaced typed pages each. Ms. Benzacar will then have five business days within which to provide a brief written reply not to exceed two double spaced typed pages.

Justice S. Vella

Released: November 10, 2022

COURT FILE NO.: CV-16-563748

DATE: 20221110

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ANOUK BENZACAR

Applicant/Moving Party

– and –

IRA TERK

Respondent/Responding Party

– and –

6990371 CANADA INC., 604402 NB LTD

AND 4106971 CANADA INC.

Responding Parties

REASONS FOR DECISION

Vella J.

Released: November 10, 2022

Benzacar v. Terk, et al., 2022 ONSC 6338

Case Summary

REASONS FOR DECISION – GARNISHMENT HEARING

Key Events Leading to the Garnishment Hearing

Issues

Issue #1: Should the exemption under the Wages Act be reduced and, if so, what is the appropriate exemption?

Issue # 2 Has Mr. Terk, together with the Garnishee Companies, concealed or deferred income to avoid payment of his debt to Ms. Benzacar?

Issue #3: Should the Garnishee Companies be Ordered to Pay Any Funds Towards the Judgment Debt?

Issue #4: Did the Garnishee Companies Fail to File Proper Garnishee's Statements?

Issue #5: Is an Order to compel the Garnishee Companies and 699 Inc to produce documents and/or attend on an examination in aid of execution warranted?

DISPOSITION

COSTS

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 5

Legal Tests 2

Legislation 2