Court File and Parties

Court File Nos.: FS-20-20649 Date: 2023-06-26 Superior Court of Justice - Ontario

Re: Galit Altman, Applicant And: Yoel Altman, Respondent

Before: M. D. Faieta J.

Counsel: Julie K. Hannaford & Angela Pagano, for the Applicant Kira Beck, for the Respondent

Heard: June 22, 2023

Endorsement

Faieta J.

[1] The Applicant mother brings this motion for the following orders:

(a) On a temporary basis, and until further Order of the Court, the Registrar of this Court shall seal and treat as confidential all documents filed in connection with this motion (and the corresponding long motion to be heard July 18, 2023) only, pursuant to s. 137(2) of the Courts of Justice Act, R.S.O. 1990, c. 43 (“CJA”)

(b) On a temporary basis, and until further Order of the Court, pursuant to s. 135 of the CJA, no person shall publish or make public information that has the effect of identifying the nature and particulars of the relief sought in connection with this motion (and the corresponding long motion to be heard July 18, 2023) only.

(c) Pursuant to s. 135 of the CJA, members of the public shall be excluded from the above-noted proceedings.

(d) The within case shall be initialized, such that all references to the parties be made by way of initials, so that the Applicant, Galit Altman, is referred to as GA; the Respondent, Yoel Altman, is referred to as YA; the child Shelly Gabrielle Altman (dob May 17, 2006), is referred to as SA; the child Liam Hai Altman (dob March 29, 2009) is referred to as LA; and the child Maya Hanna Altman is referred to as MA.

[2] The Applicant states that the Respondent has refused to take any responsibility for failing to file tax returns and creating a tax liability in a company in which she is shareholder. The Applicant states that she has a brought a motion, returnable July 18, 2023, to compel an advance in a sufficient amount to “deal with the situation”.

[3] In her Factum, the Applicant states:

The Applicant mother (Galit”) seeks a temporary sealing order to allow her to take remedial steps (including applying to the Canada Revenue Agency’s Voluntary Disclosure Program (“VDP”)). These steps are necessary to mitigate the serious financial harm that the Respondent father has created. Yoel’s financial actions during the marriage exposed Galit to a multi-million-dollar income tax liability, all without her knowledge. Galit has been advised that she should make a voluntary disclosure to the [Canada Revenue Agency (“CRA”)] to mitigate the tax liability. A voluntary disclosure would be jeopardized if these proceedings were part of the public record. If the CRA does not accept Galit’s participation in the VDP, it could result in the unnecessary loss of millions of dollars of family wealth to interest and penalty-related costs, affecting Galit, and by extension, the children. Galit submits that the granting of a temporary sealing order is warranted because it is in the children’s best interests (and a matter of superordinate importance) to protect their future financial well-being.

[4] The Respondent father consents to this motion being granted. Nevertheless, the Respondent filed a short, unhelpful responding affidavit in which he states that his consent does not constitute an admission of the evidence in the Applicant’s affidavit. Without identifying the objectionable aspects of the Applicant’s evidence, the Respondent states that he contests many of the facts that she relies upon and that some of her evidence is “patently false”.

Background

[5] The parties began cohabiting in about August 2001, were married in June 2003 and separated in July 2019. There are three children of the marriage ages 17, 14 and 11. The children reside with the Applicant mother in the matrimonial home in Toronto and she is their primary caregiver. After their separation, the Respondent father moved away from Canada and now lives in Florida and sees the children intermittently.

[6] During their marriage, the parties enjoyed an affluent lifestyle which included a matrimonial home in Forest Hill, a nanny, private schools for the children, exclusive club memberships, private air travel, high-end clothing and shopping experiences, and deluxe spa and beauty treatments: See Altman v. Altman, 2022 ONSC 4479, para. 4.

[7] The Respondent is an entrepreneur that has financed high growth companies in biotechnology, technology, e-sports and real estate.

[8] The Applicant states that during their marriage, she allowed the Respondent to create corporations and investment accounts in her name through which he would conduct business and move assets around.

[9] The Applicant states that the Respondent established Sababa Consulting Inc. (“Sababa”) in 2009. She owns a 50% interest in the company. The remaining 50% interest is owned by Izhak Hinitz (“Hinitz”), who the Applicant states is the Applicant’s former friend. The Applicant states that the Respondent conducted business through Sababa and that she was at all times a passive signatory to any Sababa related documents placed before her by the Respondent. The Applicant states that the Respondent set up another company, Ateed, that was equally owned by the Applicant and Hinitz.

[10] In June 2018, the Quebec Superior Court stayed charges that had been laid by the Quebec securities regulator, Autorité des marchés financiers, against the Respondent and others (including Sababa) in relation to a $4.9 billion takeover of the parent company of online gambling website, PokerStars, by Amaya Inc. The Respondent was alleged to have been an adviser to Amaya and faced six charges of insider trading and attempting to influence the market price of the purchaser’s securities. See Altman v. Altman, 2022 ONSC 4479, para.3. The Applicant believes that the Respondent made an enormous amount of money on trading in the shares that he held in Amaya and other related companies.

[11] Several months prior to their separation, the Applicant gave the Respondent a power of attorney so that he would no longer need her signature to effect transactions. The Continuing Power of Attorney, signed on December 20, 2018, appoints the Respondent as the Applicant’s attorney for property and all investments, and she authorizes the Respondent “… to do, on my behalf, any and all acts, which I can do by law, except make a Will, subject to any conditions and restrictions contained herein”.

[12] The Applicant states that after their separation, the Respondent abandoned all responsibility for the corporations and accounts that he had created in her name and left her to deal with the consequences of the transactions that he had run through them during the marriage.

[13] The Applicant states that in or about 2017, the Hinitz and the Respondent decided to wind up Sababa. The Respondent directed the company to sell its shares in Amaya and JackpotJoy so that the Respondent and Hinitz could divide the proceeds between them. Hinitz’s share of the proceeds went into his company, Eyes Videos. The Respondent directed that his share of the proceeds (almost $ 6 million) be placed into a brokerage account in the Applicant’s name that the Respondent had opened with Mandeville Private Client Inc. The transaction was recorded in Sababa’s books as an “advance to shareholders”. The Applicant states that she knew nothing about any of this at that time.

[14] In the Fall of 2020, about 18 months following the date of separation, Hinitz contacted the Applicant about liquidating/splitting up Sababa and Ateed. In reviewing the terms proposed by Hinitz with an advisor, the Applicant learned that Sababa had not filed an income tax return since 2011 and that Sababa owed significant income tax ($3,737,988 plus interest and penalties) to the CRA in connection with Sababa’s sale of assets in 2017.

[15] The Applicant states that the 2017 asset sale created an income tax liability for Sababa as well as a personal income tax liability for the Applicant given that the transfer of about $6 million to the Applicant’ account with Mandeville would be treated as income to the Applicant.

[16] The Applicant states that her income tax lawyer, Ian Morris, has advised her that:

“Unless remedial steps are taken right away, the income tax liability that I am facing could be as high as $5,322,574 (plus interest), with an additional potential liability of $1,635,453 (my understanding is that this amount is in addition to other penalties and consequences that may arise if matters are not dealt with immediately”

[17] The Applicant states that the VDP has a few conditions.

[18] First, the CRA must not have taken any formal action in respect of the outstanding taxes. The Applicant states that Mr. Morris provided her with the following advice:

“While I have learned that at some point in the past, the CRA did issue a form letter to Sababa with such a request (intercepted by Yoel, who did not disclose it to the shareholders), and that this may render Sababa ineligible for the VDP, I understand that it is still better to apply on the change the CRA may decline to apply a gross negligence penalty associated with the late filing”.

[19] Second, the estimated taxes owing to the CRA should be delivered at the time that th VDP application is filed. The Applicant states that the $6 million “advance to shareholder” that was deposited in the Mandeville account in the Applicant’ name should be repaid to Sababa at the same time to lessen the chance of the funds being included in the Applicant’s income and taxed accordingly with interest and penalties. The Applicant states that she does not have the funds to repay the amount required to proceed with the VDP application. The Applicant has brought a motion to seek an advance on the equalization payment owed to her so that she can proceed with the VDP application. This motion is scheduled to be heard on July 18, 2023.

[20] The Applicant is concerned that the possibility of participating in the VDP will be lost if the CRA becomes aware of the outstanding taxes owed by Sababa as a result of the information contained in the public record in this case and will commence formal action thereby prejudicing her intended VDP application.

Applicant’s Position

[21] The Applicant submits:

The circumstances underlying Galit’s request for a temporary sealing order justify engaging the Court’s discretionary limits on openness, as contemplated in Sherman Estate. Should these proceedings proceed on the public record, Galit could lose the opportunity to attempt to remedy in good faith the situation that Yoel recklessly created (and for which he now refuses to take any responsibility). It would not be in the public interest, particularly in a family law proceeding, to allow the open court principle to jeopardize one party’s potential remedy to a significant fiduciary breach wilfully caused by the other. Neither Galit nor the children are the orchestrators of the income tax liability in question, but they will be the ones to bear the consequences if millions of dollars of additional interest and penalties become payable because of Yoel’s actions during the marriage. The temporary sealing order is necessary to prevent the jeopardy that a public hearing would create vis-à-vis Galit (or any other similarly placed family law litigants)’s ability to participate in the VDP process – and there are no reasonable alternative measures available to protect the potential remedy (other than a temporary sealing order). Finally, Galit’s request is reasonable and proportional in that she is only seeking a time-limited sealing order to help prevent significant detrimental consequences on the children’s financial future. … It is in the best interests of the children (who are innocents in these proceedings) that the family’s property be protected and preserved to the fullest extent possible to safeguard their future financial well-being.

Analysis

[22] In Sherman Estate v Donovan, 2021 SCC 25, at paras. 1-3, the importance and scope of the open court principle was explained by Kasirer J. as follows:

1 This Court has been resolute in recognizing that the open court principle is protected by the constitutionally-entrenched right of freedom of expression and, as such, it represents a central feature of a liberal democracy. As a general rule, the public can attend hearings and consult court files and the press — the eyes and ears of the public — is left free to inquire and comment on the workings of the courts, all of which helps make the justice system fair and accountable.

2 Accordingly, there is a strong presumption in favour of open courts. It is understood that this allows for public scrutiny which can be the source of inconvenience and even embarrassment to those who feel that their engagement in the justice system brings intrusion into their private lives. But this discomfort is not, as a general matter, enough to overturn the strong presumption that the public can attend hearings and that court files can be consulted and reported upon by the free press.

3 Notwithstanding this presumption, exceptional circumstances do arise where competing interests justify a restriction on the open court principle. Where a discretionary court order limiting constitutionally-protected openness is sought — for example, a sealing order, a publication ban, an order excluding the public from a hearing, or a redaction order — the applicant must demonstrate, as a threshold requirement, that openness presents a serious risk to a competing interest of public importance. That this requirement is considered a high bar serves to maintain the strong presumption of open courts. Moreover, the protection of open courts does not stop there. The applicant must still show that the order is necessary to prevent the risk and that, as a matter of proportionality, the benefits of that order restricting openness outweigh its negative effects.

[23] The open court principle is engaged by all judicial proceedings including family law cases. The open court principle is reflected in sections 135 (open court hearings), section 137 (public access to any document in a court file) of the CJA and section 70(1) (access to a court file) and section 70(2) (publication ban on identifying any person named in a document) the Children’s Law Reform Act, R.S.O. 1990, c. C.12. The open court principle also informs the exercise of discretion afforded by these statutory provisions.

[24] A request for a court order that places limits on the open court principle must satisfy the following three-part test described in Sherman Estate, at para 38:

… In order to succeed, the person asking a court to exercise discretion in a way that limits the open court presumption must establish that:

(1) court openness poses a serious risk to an important public interest;

(2) the order sought is necessary to prevent this serious risk to the identified interest because reasonably alternative measures will not prevent this risk; and,

(3) as a matter of proportionality, the benefits of the order outweigh its negative effects.

Only where all three of these prerequisites have been met can a discretionary limit on openness — for example, a sealing order, a publication ban, an order excluding the public from a hearing, or a redaction order — properly be ordered. This test applies to all discretionary limits on court openness, subject only to valid legislative enactments …

[25] Given my findings, I will only address step 1 of the open court test, namely, does court openness poses a serious risk to an important public interest?

[26] The analysis at this step gives rise to two further questions:

• Does this case engage an “important public interest”?
• Is that interest at “serious risk” due to court openness?

Does this case engage an “important public interest”?

[27] There is an important public interest in protecting a person from a serious risk of physical harm: Sherman Estate, paras. 4, 72. There is also an important public interest in protecting a person from a threat to their dignity that results when intimate or personal details about their private lives is revealed: Sherman Estate, paras. 73, 75.

[28] The Applicant relies on K. (M.S.) v. T. (T.L.) [2002] O.J. No. 4179, rev’d , 2003 O.J. No. 352 (C.A.) for the principle that “the protection of children” has been recognized important public interest. However, that statement must be read in its context. In that case, the motions judge sealed part of the court file and the Ontario Court of Appeal ordered that the entire file be sealed as it found that there was an appreciable risk that a child would be kidnapped if information in the court file was made public.

[29] An important public interest in protecting a child from the serious risk of emotional or psychological harm has also been recognized. A risk of significant emotional harm and negative repercussions for particularly vulnerable children if their parents’ allegations were made public resulted in an order that the identities of the parties and their children be initialized and that parts of the court file that contain the triggering allegations be sealed: G. (C.M.) v. G. (R)., 2012 ONSC 2496. Similarly, the evidence of a psychotherapist that the Respondent’s three young daughters might suffer potentially psychologically damaging effects if they were to learn that the Applicant was alleged to be their older sister resulted in an order that the parties names be initialized however the court refused to seal the court file: M. (C.M.) v. C. (D.G.), 2014 ONSC 567.

[30] The Applicant’s reliance on cases involving serious risk of physical, emotional, or psychological harm is misplaced as there is no evidence that those risks are engaged in the circumstances of this case.

[31] The Applicant also submits that the “preventing financial harm to children” is a matter of superordinate importance that should supersede the openness of the courts. In this regard, the Applicant relies on Quinn v. Keiper, [2005] O.J. No. 5034, and Himel v. Greenberg, 2010 ONSC 2325.

[32] In Quinn, the Applicant sought an order to vary child support and the Respondent, an astute investor with a net worth of $150 million, sought an order that his financial information be sealed on the basis that public disclosure of his particular investments would affect market forces and might adversely impact his ability to provide child support. Karakatsanis J., as she then was, accepted this submission and stated, at para. 21:

I accept that it is in the best interests of the children that his ability to earn an income be safeguarded. His investments vary from time to time and this information is time sensitive. The financial statement, the income tax returns and attachments ordered above shall be sealed for 12 months. If disclosure of the information at that time would still be prejudicial to his ability to earn his income and support his children, he may apply to the Court.

[33] Quinn has not been subsequently considered on this point.

[34] Himel does not support the Applicant’s position. In Himel, the Applicant brought a motion for an order requiring the Respondent, or alternatively, an international real estate development company that he co-owned with his siblings, to provide certain financial disclosure. The Respondent and the company sought an order sealing the entire file and excluding the public from any hearing. The Respondent submitted that disclosure of the company’s financial information could adversely affect his income and thus impede his ability to continue to pay spousal and child support. The Company submitted that the disclosure of the company’s financial information would contravene a confidentiality clause. The court found the Respondent was prohibited by a confidentiality clause found in the Shareholders’ Agreement from disclosing company financial information unless ordered to do so by the court. In ordering the company to provide financial disclosure to the Applicant, the court ordered that a sealing order should be granted solely in respect of those documents to protect the broader public interest in the enforcement of confidentiality agreements. Given that the court granted the sealing order for the reasons given bv the company, it dismissed the Respondent’s submission that a sealing order should be granted as there was a public interest in his ability to earn an income so that he could continue to pay support.

[35] The interest asserted by the Applicant in this case does not relate to preserving the Respondent’s ability to earn an income so that he can continue to pay child support. Instead, she seeks a sealing order to hide information about her tax liability so that she may seek the benefit of VDP which, if granted, might preserve millions of dollars of wealth for the benefit of the Applicant, the Respondent and her children.

[36] Whether an interest constitutes an important public interest “…. transcends the interests of the parties to the dispute and provides significant flexibility to address harm to fundamental values in our society that unqualified openness could cause”: Sherman Estate, para. 43.

[37] In Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, at para. 55, Iacobucci J. stated:

Thus, a private company could not argue simply that the existence of a particular contract should not be made public because to do so would cause the company to lose business, thus harming its commercial interests. However, if, as in this case, exposure of information would cause a breach of a confidentiality agreement, then the commercial interest affected can be characterized more broadly as the general commercial interest of preserving confidential information. Simply put, if there is no general principle at stake, there can be no "important commercial interest" for the purposes of this test.

[38] The courts have recognized that there is an important public interest in the “protection of children” in the circumstances described above. While the list of important public interests for the purpose of the open court principle is not closed, a court must be cautious in expanding that list and alive to the fundamental importance of the open court principle: Sherman Estate, para. 42.

[39] While the determination of what is an important public interest is to be done in the abstract at a level that extends beyond the parties, the level of abstraction should not be almost entirely removed from the circumstances of the case. Under the guise of asking this court to recognize “the prevention of financial harm to children” as an important public interest, the Applicant asks this court to temporarily seal the court file, as well as other measures, so that her tax liability will be hidden from the CRA. A recognition that an important public interest exists to protect children from the financial harm that may result if their parent’s tax liability is not hidden from the CRA would be contrary to the policy of fostering public confidence in the administration of justice that informs the open court principle.

[40] Notwithstanding this finding, I will go on to consider the remainder of the test had I found that the “prevention of financial harm to children”, as advanced by the Applicant, is an important public interest.

Is that interest at “serious risk” due to court openness?

[41] A person that seeks to restrict court openness has the burden of showing that an important public interest is at serious risk in the circumstances of the case: Sherman Estate, paras. 42, 62.

[42] The Applicant did not provide the court with a copy of the CRA’s Information Circular that outlines the conditions and other requirements of the VDP. The Applicant did not provide the court with an affidavit from an accountant or tax lawyer that addresses the risks of having her application under the VDP approved if the relief sought is not granted. Instead, the Applicant relied solely on her own affidavit which identifies certain conditions of the VDP and provided hearsay evidence of certain tax advice that she received.

[43] The Applicant states that one of the conditions of a successful application under the VDP is that the CRA must not have taken any formal action to request that Sababa file an outstanding tax return. The Applicant is concerned that the materials filed on this motion, and the upcoming in July 2023, will come to the attention of the CRA who will then take “formal action” against Sababa.

[44] The presence of the Applicant’s motion materials in the court’s public file raises the risk that the CRA may access the materials and copy them. However, this risk is somewhat muted by the limitations and requirements found in Rule 1.3 of the Family Law Rules in relation to a non-party’s access to a court file.

[45] Further, the Applicant states that the CRA has sent a “form letter” to Sababa requesting that it file its outstanding tax returns. The Applicant states that she has received advice that although this letter may render Sababa ineligible for relief under the VDP, she should still apply on the chance that the CRA may decline to apply a gross negligence penalty associated with a late filing. Based on her own evidence, the likelihood of success under the VDP is doubtful even if the relief sought is granted.

Disposition

[46] I dismiss the Applicant’s motion. The relief sought (eg. sealing order, publication ban and closed hearings) is not justified in this case under the open court principle. I also dismiss the Applicant’s motion for the initialization of the names of the parties and their children, as their names have been publicized in other court materials, decisions and orders. While the impairment on the open court principle is minimal, there is nevertheless no justification for any impairment given that there is nothing in the materials, recently filed or otherwise, that engages an important public interest, including a privacy interest of the type described in Sherman Estate.

Order

[47] Order to go dismissing the Applicant’s motion.

Mr. Justice M. D. Faieta Released: June 26, 2023