COURT FILE NO.: FS-21-21488

DATE: 2022-11-28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BRANKA BRKLJAC, Applicant

AND:

MARKO TODOROVIC, Respondent

BEFORE: M.D. Faieta J.

COUNSEL: Gary S. Joseph and Meghann Melito, for the Applicant

Jeff Rechtshaffen, for the Respondent

HEARD: November 24, 2022

ENDORSEMENT

[1] The background facts are set out in Brkljac v. Todorovic, 2022 ONSC 5051.

[2] Paragraph 1 of the Order granted by Justice Pinto on June 23, 2022 on a consent and without prejudice basis (“Preservation Order”) states:

Pending further Order or written agreement between the parties, the Respondent, Marko Todorovic (“the Respondent”) shall not deplete, dispose of or encumber and he shall preserve the properties known as:

a. 20 Thomas Riley Road, Suite 1402, Toronto, more particularly described as UNIT 2, LEVEL 14, TORONTO STANDARD CONDOMINIUM PLAN NO. 2703 AND ITS APPURTENANT INTEREST; SUBJECT TO AND TOGETHER WITH EASEMENTS AS SET OUT IN SCHEDULE A AS IN AT5073819; TOGETHER WITH AN EASEMENT OVER PARTS 4,7,8,10,12,13,14,18,22,30,36,56,62,65,68 66R31936 AS IN AT5777539; CITY OF TORONTO;

b. 2 Gibbs Road, Unit 437, Etobicoke, Ontario M9B 6L6 (not yet registered in the parcel registry system);

[3] In 2018, the Respondent entered a pre-construction agreement to purchase the Gibbs Road condominium for $379,000.00 (“the APS”). This purchase must close by December 8, 2022. The Respondent has paid $77,400.00 in deposits thus far. To complete this purchase, it is his intention to make a further payment of $101,600.00 and to finance the balance of $200,000.00 by way of a mortgage. The Respondent states that he has been unable to arrange for a mortgage on the Gibbs Road property given that he is not permitted to encumber that property under the Preservation Order.

[4] The Respondent states that he will be unable to close the purchase of the Gibbs Road condominium if he is unable to secure a mortgage for $200,000.00 and, as a result, he will lose his deposits and the builder will be able to re-sell the condominium at fair market value which is likely much greater than the contracted price. The Respondent obtained an appraisal which shows that this one-bedroom condominium, being 517 square feet, had a fair market value of $500,000 as of March 1, 2020 (assuming that the unit had been built).

[5] The Respondent husband brings this motion for an Order varying the Preservation Order on of any of the following terms:

(a) Paragraph 1 of the Preservation Order shall be set aside; or alternatively,

(b) Paragraph 1(b) of the Preservation Order shall be set aside; or alternatively,

(c) Paragraph 1 of the Preservation Order shall be varied to read as follows:

1. The Respondent, Marko Todorovic (“the Respondent”), shall be permitted to take out a mortgage of no more than $200,000 to close the purchase of the property municipally known 26 Gibbs Road, Unit 437, Etobicoke, Ontario, M9B 6L6 (“the Gibbs Road property”).

2. Subject to Paragraph 1, pending further Order or written agreement between the parties, the Respondent shall not deplete, dispose of or further encumber and he shall preserve the Gibbs Road property.

3. Pending further Order or written agreement between the parties, the Respondent shall not deplete, dispose of or further encumber and he shall preserve the property municipally known as 20 Thomas Riley Road, Suite 1402, Etobicoke, Ontario, M9B 0C3.

ANALYSIS

[6] Under s. 12 of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”), where a party claims an equalization payment, the court may, if it considers it necessary for the protection of the other spouse’s interests under this FLA, make an order,

(a) restraining the depletion of a spouse’s property; and

(b) for the possession, delivering up, safekeeping and preservation of the property.

[7] The purpose of an interim preservation order under the FLA is “… to ensure that there are sufficient assets available to satisfy any subsequent order for equalization of the net family property and to prevent one party from dealing with property in any manner that would frustrate the rights of the other spouse”: Gale v. Gale, 2008 MBCA 134, para. 23; Bronfman v. Bronfman (2000), 51 O.R. (3d) 336 (Ont. S.C.J.) at para. 19.

[8] The general principles applicable on a motion for an interlocutory injunction also apply to a motion under s. 12 of the FLA. Accordingly, a preservation order will be granted when:

(1) there is a “serious question to be tried”, in the sense that the motion is neither frivolous nor vexatious.

(2) the moving party will suffer irreparable harm if an injunction is refused. “Irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other: RJR — MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, para. 64.

(3) the moving party would suffer greater harm from the refusal of the interlocutory injunction pending a decision on the merits than the responding party would from the issuance of an interlocutory injunciton and thus the balance of convenience favours the issuance of the preservation order: R. v. Canadian Broadcasting Corp., 2018 SCC 5, para. 13; Chi v. Wang, 2010 ONSC 1366, para. 11.

[9] In Bronfman, at para. 31, Sachs J. stated:

… There are certain cases where the factual record, and the applicable legal principles, make it very clear that a spouse will be entitled to an equalization payment in a particular amount. In such cases, considerable weight will be given by the court to this factor when deciding an interim application under section 12, and perhaps less weight to the other factors. There are others, where the facts and the law are disputed and complicated. In addition, the record may not be fully developed, as both sides may not yet have been in a position to obtain their experts' reports on some of the more difficult valuation issues. Further, even if the reports have been obtained, if they differ substantially, it may be impossible for a court, on an interim motion, to assess with any degree of certainty, which expert's report will prevail at trial. In such cases, the court will want to go on and give serious consideration to the other factors, being the balance of convenience and the risk of dissipation prior to trial.

Is there a Serious Question to Be Tried?

[10] Whether there is a serious question to be tried in respect of a motion for a preservation order under the FLA turns on how likely it is that the claimant will receive an equalization payment.

[11] The Applicant states that the Respondent owes her an equalization payment of at least $661,171.27 whereas the Respondent claims that the Applicant owes him an equalization payment of $221.23. At the Respondent’s request, the Applicant signed a marriage contract. Although it does not preclude a division of net family property, it excludes various assets from the Respondent’s net family property and released trust claims. Amongst other things, the Applicant states that the Respondent significantly underreported his income and failed to disclose more than $1.4 million in business assets. The Respondent has sworn three financial statements: March 9, 2021, September 16, 2021 and May 31, 2022. On both 2021 Financial Statements that Respondent failed to disclose his bank accounts in Serbia, his real estate in Belgrade, his condominium at 20 Thomas Riley Road, Toronto, and his interest in a property at 2 Blaketon Road, Toronto. On his 2022 Financial Statement, the Respondent failed to disclose his bank accounts in Serbia and he claims to own a 100% interest in the Blaketon property contrary to his earlier statement.

[12] The Respondent states that his Chartered Business Valuator delivered a report in September 2022 which shows that no equalization payment is owed by the Respondent. This report was not delivered until recently and the Applicant has not had sufficient time to have her valuator review this report.

[13] For reasons described above and below, I have serious doubts regarding whether the Respondent has made full and frank financial disclosure which, as a result, undermines his valuator’s evidence regarding the amount of an equalization payment owed by the Respondent. On the other hand, I have no such concerns regarding the Applicant’s evidence.

[14] I find that the Applicant’s claim for an equalization payment of at least $661,171.27 raises a serious question to be tried.

Will the Party Seeking the Preservation Order Suffer Irreparable Harm if the Order is Refused?

[15] In addition to failing to provide full and frank disclosure in his Financial Statements, the following circumstances also cause concern that the Respondent will dissipate his assets prior to trial.

[16] During the marriage, the Respondent purchased a property at 100 Martin Grove Road using the net proceeds of sale from the sale of the matrimonial home. The Respondent admitted on questioning that as part of the process of obtaining mortgage financing for the Martin Grove property, he swore a false declaration stating that he was separated from the Applicant. On September 17, 2022, the Respondent sold the Martin Grove property for $3.2 million. The whereabouts of the net proceeds of sale are unknown.

[17] The Respondent holds a Serbian passport and has an undisclosed bank account in Serbia. He owns property in Serbia that he has failed to disclose. On questioning, the Respondent admitted that he transferred $375,510 from Canada to Serbia between April 2020 and September 2021. He seemed surprised that the Applicant had this information:

Q. I have a list of monies that you have transferred to Serbia. Can we put it up on the screen, Meghann? So from April the 13th, 2020 through to September 24th, 2021, we say you have transferred $375,510 to Serbia. You do not dispute that number, do you, sir?

A. Who gave you this statement?

Q. Do you dispute this?

A. Who gave you the statement?

[18] The Applicant only learned of the Respondent’s interest in the Thomas Riley Road property through her own efforts as it was not disclosed in his financial statements.

[19] The parties estimate that the equity in that property to be about $175,000.00. The Applicant estimates the equity in the Gibbs Road condominium at $500,000.00. I note however that this estimate does not account for the fact that only about $77,000 has been paid towards the purchase price.

[20] The assessment of whether there is a serious risk of removal or dissipation of the Respondent’s assets prior to the final determination of this proceeding may be based on direct evidence as well as inference from the circumstances: Sibley & Associates LP v. Ross, 2011 ONSC 2951 para. 63. It is a reasonable inference from all the circumstances that the Respondent is likely to attempt to put his money out of the Applicant’s reach prior to trial and thus, the Applicant will be irreparably harmed if the preservation order is varied.

Balance of Convenience

[21] The Respondent submits that he will not be able to close the purchase of the Gibbs Road condominium if he does not obtain mortgage financing in the amount of $200,000.00. There is no evidence to support this bald assertion. In 2021, the Respondent’s income dropped by about $358,000 and the retained earnings of his solely owned company, MT Construction, increased by about $576,000 to almost $1.5 million. Similarly, MT Construction had cash of $932,985 in a bank account as of March 31, 2022 which was down from $1,205,790 one year earlier. Aside from the $375,510 that he has transferred to Serbia, I am satisfied that the Respondent has other assets that he could use or leverage to finance the purchase of the Gibbs Road condominium.

[22] Further, from the submissions at the hearing of this motion, it does not appear that in the five months since the issuance of the Preservation Order that the Respondent has explored the option of assigning his rights in accordance with paragraph 20 of the APS, as amended, as a means of extracting the equity that has accrued in this property. This approach, with the consent of the Applicant, could have resulted in the net proceeds of sale being held in trust pending the outcome of this proceeding.

[23] In addition, the parties estimate that the equity in that property to be about $175,000.00. The Applicant estimates the equity in the Gibbs Road condominium at $500,000.00. I note however that this estimate does not account for the fact that only about $77,000 has been paid towards the purchase price.

[24] I note that the two properties that are the subject of the Preservation Order may be insufficient to secure the minimum amount of the equalization payment that the Applicant claims. As a result, the continuation of the Preservation Order in this case does not offend the principle that a preservation order should be restricted to specific assets whose value is no more than the equalization payment that the moving party is likely to receive: Lasch v. Lasch, [1988] O.J. No. 488, para. 17.

[25] I find that the balance of convenience favours the Applicant.

CONCLUSIONS

[26] Having regard to all the circumstances, and particularly to the risk of dissipation and the balance of convenience, I dismiss the Respondent’s motion to vary the Preservation Order is dismissed.

[27] I ask that counsel make every reasonable effort to resolve the issue of costs failing which the Applicant shall deliver her costs submissions by December 5, 2022, the Respondent shall deliver his responding submissions by December 12, 2022 and the Applicant shall deliver her reply submissions by December 19, 2022. Each submission shall be no more than three pages exclusive of any offers to settle and an outline of costs.

Mr. Justice M.D. Faieta

Date: November 28, 2022