Court File and Parties
COURT FILE NO.: CV-20-00652251-00ES DATE: 20230524 SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF THE ESTATE OF AGHDAS JAVID RE: Ladan Javid, as Estate Trustee of the Estate of Aghdas Javid, Applicant AND: Richard Keith Watson, Richard K. Watson Professional Corporation, Respondents
BEFORE: C. Gilmore, J.
COUNSEL: Marshall A. Swadron, Counsel for the Applicant Richard K. Watson, Counsel for the Respondents
HEARD: May 15, 2023
Endorsement on Contempt Motion
Introduction
1The Applicant moves for a finding that the Respondents are in contempt of the judgment of Dietrich J. dated December 7, 2022 (the “Dietrich Judgment”). This is the first step in the contempt process with the Applicant seeking only liability at this stage with a penalty hearing to follow if liability is found.
2The Respondents defend the motion taking the position that they are not in contempt and have taken steps to fulfill all terms of the Dietrich Judgment. Mr. Watson represented both Respondents. He was not gowned and did not file a factum as required by the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”).
3Ms. Jasmine Javid (“Jasmine”) attended the hearing as well. She requested permission to make submissions on the motion. Her request was denied for three reasons. First, she is not a party to these proceedings. She is a residual beneficiary of her father’s Estate and therefore has an interest in the outcome of this proceeding but otherwise has no standing. Second, the motion was scheduled for only one hour which means there is rarely sufficient time to make all submissions on even the most straightforward of motions. And finally, Ms. Javid filed an affidavit in this motion sworn on May 9, 2023. While she was not cross-examined on that affidavit, her position on the motion was made known to the Court through that affidavit.
Background Facts
4The Applicant is the Estate Trustee of the Estate of her father, the late Aghdas Javid who died on September 28, 2018.
5Initially the Applicant retained the Respondent Richard Keith Watson (“Mr. Watson”) to advise her with respect to her role as Estate Trustee. The Applicant discharged Mr. Watson on October 22, 2020, when she attempted to recover Estate assets in his control.
6In the spring of 2020 Mr. Watson befriended the Applicant’s sister Jasmine Javid. Jasmine is on Ontario Disability Support Plan Benefits (“ODSP”) and the Applicant considers her sister to be a vulnerable person.
7On July 17, 2020, and unbeknownst to the Applicant, Mr. Watson created the Jasmine Javid Trust (“the Trust”) to receive Jasmine’s entitlement as a beneficiary of her father’s Estate. Mr. Watson named Richard K. Watson Professional Corporation (“RKWPC”) as the Trustee of the Trust and named himself the residuary beneficiary of the Trust. Mr. Watson is the sole officer and director of RKWPC.
8In July 2020 Jasmine owned a condominium located at 7 King Street East, Suite 1709, Toronto (“the King condo”) in trust for the Estate. On July 30, 2020, without the knowledge of the Applicant, Mr. Watson transferred the King condo to RKWPC. On September 14, 2020, Mr. Watson, through RKWPC borrowed $300,000 from Sarina Loy, Kelsey Ng and Eli-Pharm Inc. which he secured by way of a high interest mortgage against the King condo. Mr. Watson personally guaranteed the mortgage (“the King mortgage”).
9Mr. Watson then lent the proceeds of the King mortgage to his client Curtis Petersen secured against a commercial property located at 12 Lewis Street in Toronto (“the Lewis mortgage”). The Lewis mortgage is held by 2486199 Ontario Inc. (“248”). Mr. Watson is the sole officer and director of 248. 248 conveyed beneficial ownership of the Lewis mortgage to the Trust.
10The Applicant commenced the within Application November 2020. The Applicant sought a declaration that the Trust was invalid and an order to recover Estate assets and assets transferred into the Jasmine trust by Mr. Watson. Specifically, the applicant was seeking to recover the King condo.
11On December 8, 2020, the Respondents were ordered to provide a full accounting with respect to the King mortgage, and any proceeds or income earned from it by December 23, 2020. On January 7, 2021, the Respondents were ordered to provide full particulars and copies of documents related to the King mortgage by January 8, 2021. On January 20, 2021, I ordered that the Respondents were to provide an accounting of the King mortgage including an explanation of transactions, and copies of appraisals, title searches, mortgage documents, certificates of Independent Legal Advice and information related to mortgages in priority by January 29, 2021.
12Mr. Watson’s motion to remove the Applicant’s counsel from the record because of an alleged conflict of interest was dismissed by me on November 18, 2021. I further ordered on that date that the Respondents were to answer all questions and produce all documents in Mr. Swadron’s August 3, 2021 letter within 30 days and that the Respondents were to provide an up-to-date accounting of the Trust, the King mortgage and the Lewis mortgage within 15 days. Mr. Watson sought leave to appeal my November 18, 2021 decision to the Divisional Court. Leave was denied on March 14, 2022.
13On March 16, 2022, Cavanagh J. ordered the Respondents to make best efforts to produce all documents in the January 14, 2022 letter from Mr. Swadron, produce particulars of the renewal of the King mortgage within 15 days, and that Mr. Watson was to attend to be cross-examined on May 3, 2022.
14Mr. Watson was cross-examined on May 3 and May 18, 2022. He refused to answer many questions and gave undertakings to answer others. Many of these undertakings remain outstanding.
15The hearing of the Application took place on September 23, 2022 before Dietrich J. Her reasons were released on December 7, 2022. Justice Dietrich ruled that the Trust was invalid. She ordered Mr. Watson to discharge the King mortgage and convey the King condo to the Applicant before December 31, 2022, provide an accounting and all funds in the Trust to the Applicant within 15 days, comply with all previous outstanding Orders requiring him to account in respect of the Estate, the Trust, and the proceeds of the King mortgage, and comply with all undertakings and answer all refusals as set out in Mr. Swadron’s July 15, 2022 letter. He was also required to provide responses to Mr. Swadron’s letters of August 3, 2021 and January 14, 2022 as previously ordered. Finally, Dietrich J. ordered Mr. Watson to pay costs of $168,286.72.
16Justice Dietrich also ordered that if the Respondents were unable or unwilling to enforce the loan to Mr. Petersen, the Applicant was entitled to pursue this remedy in their place.
17The Applicant brings this motion because she submits that Mr. Watson has not complied with the judgment. Mr. Watson disagrees. He submits that he is in substantial compliance with the Dietrich Judgment. Where he is not in compliance, he is willing to comply and there is no urgency to the request for compliance.
18The King mortgage came due on January 24, 2023. The Applicant is not aware that any steps have been taken to discharge it. As of January 30, 2023 the tenant at the King condo continued to pay rent which is paid to Mr. Watson as landlord.
The Court’s Jurisdiction to Enforce a Judgment
19Rule 60 of the Rules permits the Court to issue a contempt Order to enforce an Order requiring a person to do an act, other than the payment of money.
[20] The test for civil contempt in the context of breaching an order is as follows: (a) The order alleged to have been breached must state clearly and unequivocally what should and should not be done; (b) The party alleged to have breached the order must have had actual knowledge of it; and (c) The party allegedly in breach must have intentionally done the act that the order prohibits or intentionally failed to do the act the order compels.
[21] In Carey v. Laiken, 2015 SCC 17, [2015] 2 S.C.R. 79, the Court held the following regarding civil contempt proceedings: a. Contempt must be proven in accordance with the criminal standard of beyond a reasonable doubt; b. Contempt proceedings must take place in two stages. At the first stage, the Court determines liability. If liability is found, a further hearing must take place with respect to the penalty portion of the contempt;
Compliance with the December 7, 2022 Judgment
22The Applicant focused on paragraphs two to four of the Dietrich Judgment in submissions. Those paragraphs set out as follows:
THIS COURT ORDERS AND ADJUDGES that the respondents shall remit to the applicant, as estate trustee for the Estate of Aghdas Javid, all funds held to the credit of the Jasmine Javid Trust within 15 days.
THIS COURT ORDERS AND ADJUDGES that the respondents shall discharge the mortgage in favour of Sarina Loy, Kelsey Ng, and Eli-Pharm Inc. registered against 7 King Street East, Suite 1709, Toronto, Ontario, (the "King Condominium") as instrument number AT5518523 on September 15, 2020 at the respondents' expense on or before December 31, 2022.
THIS COURT ORDERS AND ADJUDGES that the respondents shall convey the King Condominium to the applicant as estate trustee of the Estate of Aghdas Javid, free of encumbrances, at the respondents' expense, on or before December 31, 2022.
23In addition, paragraph 10 of the Dietrich Judgment requires Mr. Watson to comply with the undertakings and answer the refusals given at the examinations on May 3, 2022 and May 18, 2022, provide responses to Mr. Swadron’s letters dated August 3, 2021 and January 14, 2022 and account with respect to the King mortgage as set out below:
- THIS COURT ORDERS AND ADJUDGES that the respondent Mr. Watson shall comply with all outstanding orders requiring him to account in respect of the proceeds of the King Mortgage, that he provide responses to the August 3, 2021 and January 14, 2022 letters from Mr. Swadron, and that the respondent comply with the undertakings and answer the questions refused at his cross-examination held May 3, 2022 and May 18, 2022 as set out in Mr. Swadron's July 15, 2022 letter.
24The Applicant submits that the Respondents have not remitted the Trust funds, discharged the King mortgage, conveyed the King condo free of encumbrances by the required date or provided any of the documents referred to in paragraph 10 of the Dietrich Judgment and are therefore in contempt of that judgment.
25The Respondents submit that they have done their best to discharge the King mortgage, but their efforts have proven to be futile. As such, conveying the King condo to the Applicant as Estate Trustee would be of no benefit as the Estate which would then be indebted on the King mortgage. Further, the Respondents submit they cannot be found in contempt with respect to discharging the King mortgage as the discharge is a payment of money and exempt from contempt as per r. 60.05. Finally, paragraph 5 of the Dietrich Judgment provides its own remedy as it orders that if Mr. Watson is unwilling or unable to enforce the Lewis mortgage, the Applicant can pursue enforcement on her own.
26The Applicant disagrees that the Respondents are exempt from contempt and submits that the discharge of the mortgage is in the nature of the return of an asset and that r. 60.05 would not apply. There is evidence beyond a reasonable doubt that Mr. Watson has failed to discharge the King condo when those circumstances were entirely within his control.
27The Applicant is concerned that Mr. Watson has not taken steps to enforce the Lewis mortgage. It was due on September 15, 2021. Further the mortgage in priority to the Lewis mortgage which began with a face value of $1.215M a year ago and has now ballooned to $1.5M as of May 2022. More recently there is evidence that the mortgage in priority has increased to $1.8M. The Applicant is concerned that the amount required to refinance the Lewis Street mortgages is now over $2M when the Lewis mortgage is added on to the balance of the first mortgage.
28Mr. Watson submit that this is a non-issue. The Lewis Street property has been valued at close to $4M. There is plenty of equity to satisfy the Lewis mortgage and the mortgage in priority. Mr. Watson is unable to refinance the Lewis mortgage from his personal resources. Further, as the Estate place a Certificate of Pending Litigation on the King condo, mortgage refinancing rates are higher. Finally, as the mortgage is a debt owed to him, it is the payment of money and cannot be used to found a contempt proceeding. In any event, as the Applicant is able to enforce the mortgage on her own according to the Dietrich Judgment, this proceeding is entirely unnecessary.
29In his cross-examination which took place in May 2022, Mr. Watson confirmed that the King mortgage had been extended for six months to March 1, 2023. Mr. Watson was asked about a reference to Minutes of Settlement and consent to a default judgment in relation to the King mortgage. Mr. Watson confirmed he had a copy of the Minutes and the default judgment and would send them to Mr. Swadron. To date he has failed to send those documents. Further, there is no evidence that the King mortgage was renewed after March 1, 2023.
30Pursuant to paragraph 10 of the Dietrich Judgment, Mr. Watson was required to answer all of the undertakings and refusals arising from his cross-examination. The Applicant also refers to the six previous orders which require the Respondents to produce information and documents.
31The information requested is critical and includes contact information for the parties to the Lewis mortgage, copies of loan applications, appraisals and agreements related to the Lewis mortgage and important documentation related to the King mortgage.
32The Applicant submits that she requires this information in order to enforce on the Lewis mortgage and permit the Applicant to fulfil her duties to report to the beneficiaries of the Estate. The Applicant submits that there can be no doubt that Mr. Watson is aware of all of the previous Orders and the Dietrich Judgment, yet he has not complied.
33Mr. Watson submits that Jasmine is without counsel because her sister, the Applicant, has stripped the Estate of its assets. Mr. Watson advised the Court that Jasmine understood from her sisters that she was to receive the King condo, its rental income, and another condo in Concorde. He submits that because of the connivance of the Applicant, Jasmine now has nothing and is at risk of losing her ODSP eligibility. Further, if the Estate takes back the condo, there will be taxable capital gains in the range of $300,000. It would be completely unfair if Jasmine was required to pay the tax from her only remaining Estate asset, the King condo.
34As for the allegedly missing information, Mr. Watson submitted that he has no intention of avoiding his obligations. His attention has been focused on refinancing the Lewis mortgage. He fails to see the urgency in providing the requested documents given that the Applicant has not provided an accounting of Estate assets and liabilities despite being requested to do so for three years.
Analysis and Orders
35There is no doubt that Mr. Watson is fully aware of the six previous Orders requiring him to provide disclosure and the terms of Justice Dietrich’s judgment. In terms of meeting the test in Carey v. Laiken, there was no dispute by Mr. Watson that he was not aware of the prior Order or that he did not understand them. Indeed, he referred to them in his submissions.
36The question for this Court is whether Mr. Watson intentionally breached the terms of the Dietrich Judgment. If he did, can he be found in contempt for failing to discharge the mortgage given the exemption in r. 60.05.?
37With respect to paragraph 10 of the Dietrich Judgment, there is proof beyond a reasonable doubt that Mr. Watson has failed to provide the undertakings or answer the refusals given at his May 2022 examinations. The proof was contained in the evidence of the Applicant (who was not cross-examined) and in the admission of Mr. Watson himself during submissions. His attitude on this point was essentially, “what’s the hurry?” He says he has all of the requested documents but cannot seem to understand the pressing need for them.
38The need is clear. The Applicant, as Estate Trustee, must account to the beneficiaries. She cannot do so when many of the transactions undertaken by Mr. Watson remain unknown to her. All of the documents related to both the King mortgage and the Lewis mortgage are necessary to understand the extent of the Estate’s assets and liabilities. Further, the Dietrich Judgment dates back to early December 2022. Mr. Watson has failed to provide any form of chart or in fact any evidence of his efforts to comply with paragraph 10 of the Dietrich Judgment.
39Inaction can ground a finding of contempt. In LLS America LLC (Trustee of) v. Dill, 2018 BCSC 2316, the Court lays out the evidence, “establishing beyond a reasonable doubt that the defendant is in contempt of court for failure to comply with the order of Master Tokarek” [at para. 57], as follows:
[57] The evidence is also clear that the defendant has wilfully failed to comply with Master Tokarek’s order […] The evidence of wilful compliance includes the following: i) The defendant testified at his examination in aid that he has a personal bank account at RBC, yet he has not taken any steps towards producing the account records required by Master Tokarek’s order beyond dialling a 1-800 number. ii) Although Master Tokarek’s order requires the defendant to produce all bank statements of any account he controls, the defendant has refused to produce, or even answer questions about, Cascadia’s accounts despite acknowledging that he controls those accounts. iii) The defendant also refuses to produce any records of investment income or losses incurred by Cascadia, despite the term of Master Tokarek’s order requiring him to do so.
60In sum, the evidence adduced on the contempt application demonstrates beyond a reasonable doubt that the defendant has consistently and wilfully failed to comply with the order of Master Tokarek. Documents covered by the order clearly exist, are within the defendant’s possession and control, and have not been produced.
40Given all of the above, I find that there is sufficient evidence to find that Mr. Watson has wilfully failed to comply with paragraph 10 of the Dietrich judgment beyond a reasonable doubt and that he is therefore in contempt of paragraph 10 of the Dietrich Judgment. The fact that he intends to comply at some future date is irrelevant given the amount of time he has had to comply and the previous outstanding orders for production which he has ignored.
41As for the requirement to discharge the King mortgage and enforce the loan on the Lewis property, Mr. Watson has effectively thrown his hands in the air and said it simply cannot be done. He provides a Letter of Intent with respect to refinancing from Area Private Mortgages dated April 28, 2023. He was concerned about the interest rate of 11.99 percent which he blamed on current market uncertainties.
42The question here is whether one Letter of Intent obtained not long before the motion is enough to defend the allegation of contempt. A further question is whether the fact that Mr. Watson now concedes he is unable to refinance means that the remedy provided by Dietrich J. of the Applicant taking on the enforcement herself in paragraph 5 of her judgment is sufficient to avert a finding of contempt.
43The terms of paragraph five of the Dietrich Judgment are clear (my emphasis):
- THIS COURT ORDERS AND ADJUDGES that if Mr. Watson is unable or unwilling to enforce the loan to Curtis Petersen secured by the mortgage registered against 12 Lewis Street, Toronto, Ontario in favour of 2486199 Ontario Inc. as instrument number AT5318992 on December 13, 2019, which can be traced to the proceeds of the King Condominium Mortgage, then the applicant shall have the right to pursue this remedy, in his place.
44I do not find that Mr. Watson is in contempt of this provision of the judgment. His last minute attempts to refinance the Lewis mortgage and his late announcement that he was unable to do so will go to the issue of costs.
45I should add that I reject Mr. Watson’s submission that he cannot be found in contempt because the refinancing of the Lewis mortgage is a payment of money and therefore exempt from contempt under r. 60.05. Had I ruled differently on those issues, I would have found that Dietrich’s J. Orders with respect to enforcing the Lewis mortgage and discharging the King mortgage are in the form of mandatory Orders and relate to payments either owed from or to third parties. They are not debts as between the parties.
46As for the provision that he convey the King condo to the Applicant as Estate Trustee, I note that he has offered to do so. However, the offer is an empty one while the status of the King mortgage remains unresolved as it does not make sense for the Estate to assume that liability. Therefore, I do not find that Mr. Watson is in contempt of paragraph 4 of the Dietrich Judgment.
47As for remitting the funds held to the credit of the Jasmine Javid Trust, I note from Exhibit C of Mr. Watson’s affidavit sworn on May 9, 2023 that there remained a total of approximately $10 in the Trust’s bank account as of December 23, 2022. Mr. Watson must provide updated statements to confirm that no other funds remain in the account. I do not find that Mr. Watson is in contempt of paragraph 2 of the Dietrich Judgment so long as he provides a currently dated statement.
[48] Given all of the above, I make the following Orders: a. The Respondents are in contempt of paragraph 10 of the Dietrich Judgment dated December 7, 2022. b. The terms of the draft Order provided by Mr. Swadron are generally agreeable other than changing the finding of contempt to paragraph 10 only and any other changes needed to comply with this ruling. c. The Applicant may contact the Trial Coordinator to schedule a further one-hour appointment to afford the Respondents the opportunity to purge their contempt and determine any penalty for contempt that may be warranted. d. A copy of the revised draft Order to be provided to me directly for review and signature. The approval of the Order by the Respondents is not required.
Costs
49The Applicant seeks her full indemnity costs of $25,000. The Applicant has been mostly successful. It appeared from Mr. Watson’s submissions that he is content to allow the Estate to enforce payment of the Lewis mortgage as he was unable to do so. As I mentioned above, had this position been communicated sooner, some time and costs could have been avoided.
50As such, while the Applicant did not have complete success, her costs should not be significantly reduced.
51The Respondents seek full indemnity costs of $12,769 or alternatively, the sum of $10,000 in partial indemnity costs. Mr. Watson submits that this proceeding was entirely unnecessary. He is willing to provide the required documents and has taken steps to deal with the Lewis mortgage enforcement but was unfortunately unsuccessful.
52I do not agree that the motion was entirely unnecessary. Mr. Watson appears to have his own schedule for compliance with Court Orders. That schedule does not conform to what is actually in the Order. The history of this litigation (with which I am familiar) has become an expensive game of cat and mouse which must stop. Mr. Watson must provide all court-ordered documents to allow the Estate Trustee to do her job.
53Given all of the above, I order the Respondents to jointly and severally pay costs of this motion in the amount of $22,000 forthwith.
C. Gilmore, J.
Date: May 24, 2023