Court File and Parties

COURT FILE NO.: FS-22-29253 DATE: 20230825

ONTARIO SUPERIOR COURT OF JUSTICE SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Hugh Kuang, Applicant (Moving Party) AND: Diana Young, Shawn Yeung, Theodore Wang, Gracia Wall, 2174112 Ontario Inc., 2394049 Ontario Inc., 2690212 Ontario Inc., 2305969 Ontario Inc., Diana Young Professional Corporation, Respondents (Responding Parties)

BEFORE: Kristjanson J.

COUNSEL: Ken Dekker, Karen S.K. Law, Counsel for the Applicant Patrick Summers, Star Deak, counsel for Shawn Yeung, Theodore Wang, Gracia Wall Dylan Fisher, Ted Evangelidis, Counsel for 2174112 Ontario Inc., 2394049 Ontario Inc., and 2690212 Ontario Inc. Ovais Khan, Agent for Diana Young

HEARD: At Toronto by videoconference April 25, 2023

Endorsement[^1]

Kristjanson, J

[1] This is a long motion brought by the applicant to require the corporate and individual respondents to preserve assets pending trial. The background to the motion is set out in the interim preservation motion endorsement in Kuang v Young, 2023 ONSC 2429.

[2] The applicant husband, Hugh Kuang, claims to have built a real estate portfolio and private mortgage fund worth hundreds of millions of dollars, owned through several respondent corporations legally or beneficially owned by him, which he ran, managed, and funded. In this family proceeding, Mr. Kuang seeks equalization, child support, spousal support, and parenting time/decision-making responsibility. He also seeks a declaration that he is the legal/beneficial owner of most of the corporate respondents, either solely or together with his wife, the respondent Diana Young. In addition to the family law remedies, he seeks oppression remedies under the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”), including rectification of the share registers for several of the corporate respondents. This motion is brought to preserve the corporate assets pending determination of the ownership and related issues, and to prevent the respondents from depleting the corporate assets.

[3] The respondent wife, Ms. Young, denies the claims about ownership of the corporations. She asserts that the respondent corporations are owned by her mother, the respondent Shawn Yeung, except for two corporations which Ms. Young owns (her legal professional corporation, Diana Young Professional Corporation and 2305969 Ontario Inc). Ms. Young also relies on a domestic contract to exclude the equalization and spousal support claims made by Mr. Kuang. The other individual respondents assert that Shawn Yeung, Diana Young’s mother, owns the respondent corporations except for the two owned by Ms. Young.

[4] The applicant relies on both the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”) and the Rules of Civil Procedure, RRO 1990, Reg 194. Section 12 of the FLA provides that, where equalization of net family property is sought, or there is a dispute as to ownership of property between spouses, the court may make an interim or final order restraining the depletion of a spouse’s property, and for the possession, delivering up, safekeeping and preservation of the property. Rule 45.01 of the Rules of Civil Procedure similarly provides for the interim preservation of “any property in question in a proceeding or relevant to an issue in a proceeding.” I make a preservation order pursuant to Rule 45.01.

The Respondent Corporations

[5] It is not necessary to set out the complex financial affairs of all the corporate respondents: they were described in the interim preservation motion endorsement. The corporate respondents are 2174112 Ontario Inc. (“217”), 2394049 Ontario Inc. (“239”), 2690712 Ontario Inc. (“269”), 2435982 Ontario Inc. (“982”), 2691181 Ontario Inc. (“181”), Diana Young Professional Corporation (“DYPC”) and 2305969 Ontario Inc. (“230”), Some corporations (217, 982, 239/181 and 230) own or manage commercial properties, including freehold commercial buildings, commercial condominiums, and a parkade, that earn rental income, and bring in property management fees. The other main activity is a mortgage lending business, now run through 269. 239 holds some private mortgages which are involved in litigation; the others were assigned to 269 before the family application was issued.

The Individual Respondents

[6] The respondent Diana Young is the wife of the applicant Mr. Kuang. She is a lawyer, practicing through DYPC. Through DYPC, Ms. Young acts as the corporate and real estate lawyer for the corporate respondents and she receives compensation for this work. She also receives property management fees through 230 from some of the other corporate respondents.

[7] The individual respondents, Gracia Wall (“Gracia”), Shawn Yeung (“Shawn”) and Theodore Wang (“Wang”) are Ms. Young’s sister, mother, and father. Gracia holds a Continuing Power of Attorney for Shawn and Wang, although Shawn and Wang are both capable and are not represented by a litigation guardian in these proceedings. Neither Shawn nor Wang filed affidavits on this motion. Shawn is presently recorded as the legal owner of the shares of 181, 217, 239, 269, and 982. That said, Mr. Kuang claims legal and beneficial ownership of those corporations, and seeks orders under s.248(2) of the OBCA, including rectification of the corporate profile and the share registers for the corporate respondents (except DYPC and 230) to properly reflect Mr. Kuang's ownership.

Test for Interim Preservation in This Case

[8] Rule 45.01(1) of the Rules of Civil Procedure provides:

The court may make an interim order for the custody or preservation of any property in question in a proceeding or relevant to an issue in a proceeding, and for that purpose may authorize entry on or into any property in the possession of a party or of a person not a party.

[9] The precondition for a preservation order under Rule 45.01 is that the property is “in question in a proceeding or relevant to an issue in a proceeding.” The Court of Appeal in BMW Canada Inc. v. Autoport Ltd, 2021 ONCA 42, has held that there is no single test to be applied, given the many circumstances in which interim preservation of property order may be sought. Rather, a court must consider the evidence on the motion and make the order that best responds to the circumstances.

[10] Along with family law claims based on trust principles, Mr. Kuang advances claims pursuant to s. 248 of the OBCA (oppression), as well as an order under s.207 of the OBCA to wind up the corporate respondents. He also seeks orders under s.248(2) of the OBCA, including to rectify the corporate profile and the share registers for the corporate respondents to properly reflect Mr. Kuang's ownership of the corporate respondents.

[11] The precondition for preservation or custody is that the property is “in question in a proceeding or relevant to an issue in a proceeding”. In this case, the three-part test established in Taribo Holdings Ltd. v. Storage Access Technologies, [2002] OJ No 3886 (SCJ) at para 5 is appropriate, and the party seeking the preservation order must establish:

a. The asset sought to be preserved constitutes the subject matter of the dispute

b. There is a serious issue to be tried regarding the applicant’s claim to that asset, and

c. The balance of convenience favours granting the relief sought.

[12] The Taribo three-part test is appropriate on this Rule 45.01 motion, because the moving party seeks to preserve property that the moving party is claiming in the litigation, and to limit or constrain what the responding party may do with property that is in its possession: see BMW Canada Inc. v. Autoport Limited, 2021 ONCA 42 at para 43. Here, there is a specific proprietary claim to the shares of the corporations, and the underlying assets and funds of the corporations, and the property is all in the possession of some of the respondents.

[13] The respondents argue that the Mareva injunction test is appropriate, rather than the Rule 45.01 preservation test. I do not agree. In any event, I would have found that the applicant met the requirements of the stricter Mareva injunction test in any event, and has given an undertaking as to damages.

Application of Rule 45.01 Test

#1: Assets/Funds are Subject Matter of Dispute

[14] The first prong of the test is met. The respondents concede that the assets or funds of the corporate respondents sought to be preserved constitute the very subject matter of the dispute. They submit that Mr. Kuang has failed to satisfy the second and third prongs of the test.

#2: Serious Issue to be Tried

[15] Is there a serious issue to be tried regarding Mr. Kuang’s argument that he legally or beneficially owns some or all of the shares of the corporate respondents? The “serious issue to be tried” for a Rule 45.01 claim is a relatively low threshold, based on a judge’s preliminary assessment of the case that the claim is not frivolous or vexatious. The Mareva injunction threshold is a strong prima facie case. I find that on either standard, the applicant meets the second prong of the test.

The Main Corporation: 217

[16] The main corporation has always been 217. Mr. Kuang claims legal and beneficial ownership, and seeks relief under both the OBCA and the Family Law Act in relation to his ownership claims. The original key asset of 217 was commercial condominiums owned at the Agincourt Commercial Centre. I am satisfied that Mr. Kuang contributed to the original purchase in 2008 of the commercial condominiums, rather than all the funds being provided by Shawn as argued by the respondents. Mr. Kuang funded some of the purchase price, partly through mortgaging of the matrimonial home held in his sole name at the time, and he personally guaranteed the mortgages that financed purchase. In July 2008, Mr. Kuang personally guaranteed a $7.8 million credit facility from Meridian to 217, which constituted the bulk of funds used for the Agincourt purchase. The respondents contest whether Mr. Kuang contributed the $250,000 cash deposit. But I find that Mr. Kuang contributed through the guarantee of 217’s $7.8 million credit facility, as well as personally guaranteeing the vendor takeback mortgage. I further find that he would not solely guarantee a credit facility of $7.8 million without an ownership interest (or as a mere employee as argued by the respondents).

[17] Moreover, Mr. Kuang continued to personally guarantee the mortgages/lines of credit held by 217, and 217 represented to a bank that Mr. Kuang was the 100% owner on all banking documents for financing and refinancing purposes from 2010 to 2017. 217’s legal counsel was DYPC Professional Corporation and Diana Young at all material times. In 2010, Mr. Kuang secured a $1.2 million line of credit with CIBC for 217, (“CIBC Line of Credit”), which was gradually increased to $6.75 million in 2017. To obtain the CIBC Line of Credit, Ms. Yeung submitted under her firm letterhead, DYPC, a Certificate of Corporate Status that included original bylaws for 217 showing Mr. Kuang as its sole shareholder. In 2010, 217 obtained mortgage financing from CIBC through applications where Mr. Kuang was listed as 100% owner of the borrower, 217, and Mr. Kuang signed as owner of the borrowing entity. The documents were prepared by Ms. Young and DYPC as lawyer for 217.

[18] So, Ms. Young and DYPC, as lawyer for 217, made representations on behalf of 217 to the lender CIBC that Mr. Kuang was the sole owner of 217, even though Ms. Young now claims that Shawn, her mother, was the owner at all material times times. As late as January 2017 when the credit facility was renewed, the respondent DYPC Professional Corporation and Diana Young submitted a letter and supporting materials to CIBC with respect to the line of credit stating that Mr. Kuang Kuang was 100% shareholder of 217, and the sole director.

[19] As the lawyer for 217, Ms. Young made representations to a bank where she confirmed that Mr. Kuang was the owner, although today she claims her mother was the owner at the time. The statements made to the CIBC that Mr. Kuang was the 100% beneficial owner of 217 must be given great weight. As a lawyer, Ms. Young would have known that making a false statement about ownership of shares to a financial institution to secure a line of credit could be a criminal matter. Section 362 of the Criminal Code, R.S.C. 1985, c. C-46, provides that it is an offence to obtain credit by false pretence or by fraud. And any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation survives bankruptcy: Bankruptcy and Insolvency Act, R.S.C., 1985, c B-3, s. 178.

[20] There are significant concerns about the integrity and validity of documents regarding shareholders, and I find that they cannot be relied on by the respondents to establish that Mr. Kuang has and had no ownership interest in 217. Ms. Young states that she shredded all original corporate minute books. On the evidence provided by Ms. Young, Mr. Kuang owned ten shares of 217 on August 21, 2008, then 100 shares on November 24, 2010 before transferring them all to Diana in November 2010. But it makes no sense that if Mr. Kuang transferred all his shares to Diana in 2010, that he also held them beneficially for Diana as of October 20, 2014 and January 20, 2017, as she also alleges. I accept the other concerns outlined by Mr. Kuang in his November 3, 2022 affidavit, para. 118. Of note, the only evidence on this motion as to shareholdings comes from Ms. Young.

[21] Ms. Young and the individual respondents contend that Shawn owns all the companies. Yet Ms. Young and Gracia Wall have provided no evidence that Shawn had significant financial resources when she came to Canada and, as Ms. Young now alleges, immediately purchased nine residential properties in Canada upon her arrival in 1996.

[22] In fact, Shawn’s landing records from September 28, 1995, state that the money in her possession is “NIL.” Diana's letter to Citizenship and Immigration Canada dated September 14, 1994, explains her income is now sufficient to support her parents, implying that they did not have assets sufficient to support themselves. Shawn and Wang applied for Guaranteed Income Security in late 2008 and early 2009, and resided in Toronto Community Housing for several years, including in 2012, when the companies were earning significant income. Shawn’s Notices of Assessment from 1995 to 2007 show income ranging from hundreds of dollars to $16,000 dollars. Shawn’s Notices of Assessment from 2008 to 2010 report income of $279 for all three years. There is no direct evidence that Shawn originated the companies from her significant savings as a successful businesswoman in China, merely statements from her daughter. The cheques funding part of the original purchase of 217 are from an account jointly owned with Diana Young, her daughter, to which Mr. Kuang also says he contributed. The brief excerpts from an account purporting to belong to Shawn, either solely or jointly, (without showing where the money came from) do not establish that Shawn had the financial resources to fund the companies.

[23] Shawn did not file any affidavit in these proceedings. The only evidence comes from her daughter, Diana Young, who claims that her mother accumulated significant savings as a businesswoman in China prior to immigrating to Canada and these savings funded the businesses. There is no explanation for Shawn’s failure to provide evidence about the accumulated savings she had when arriving from China, or the inconsistency with the landing record stating her savings were nil, or the lack of any investment or other income on Shawn’s tax returns throughout the period. Diana’s assertions as to her mother’s wealth conflict with the documentary evidence. I prefer Mr. Kuang’s evidence which is consistent with the documentary evidence. I accept, based on Mr. Kuang’s evidence, the contemporaneous documents, and Shawn’s failure to provide direct evidence to the contrary, that Shawn was essentially a figurehead, without the financial resources to amass the real estate empire here.

[24] The main source of funding for all of the corporate respondents except DYPC and 230 has historically been 217’s $7 million CIBC line of credit secured against the Agincourt Property, which is in the sole name of Mr. Kuang.

[25] Mr. Kuang’s evidence is that he does not recall signing any share transfers, although he concedes he followed his wife’s legal advice, and signed what she told him to sign. His evidence is that:

Diana is a lawyer with her own firm: Diana Young Professional Corporation ("DYPC"). During our marriage, she acted for me and my companies on many real estate and corporate transactions. I trusted her as my wife and accepted her legal advice as my lawyer. Diana took advantage of my trust and convinced me to let her control the money, the corporate records, and the way my companies were structured. She convinced me to incorporate companies in her name and the names of her family members, which include the Respondents, her mother Shawn Yeung ("Shawn"), her father Theodore Wang, and her sister Gracia Wall ("Gracia"), telling me it was for credit proofing and other reasons. However, she made it clear that I was the sole beneficial owner of the companies.

[26] I am satisfied that the original purchase was largely funded through mortgages guaranteed by Mr. Kuang, with funds provided in part by their matrimonial home, and Mr. Kuang was an owner of all the shares of 217 and the sole director at the time of the purchase. Mr. Kuang was and remains the sole guarantor of the CIBC line of credit for 217, which is secured against property owned by 217. This is consistent with Mr. Kuang’s evidence that he was, and remains, the owner of the shares of 217.

[27] I find that there is a serious question to be tried, and strong prima facie case, regarding Mr. Kuang’s claims that he has an ownership interest in 217, and the share registry requires rectification. Notably, 217 consistently represented that Mr. Kuang was the sole owner of 217’s shares for the purposes of receiving credit from a financial institution.

239 and the ACC Parkade and Private Mortgage Fund

[28] 239 was incorporated to purchase the ACC parkade in 2013. 217, in which Mr. Kuang asserts an ownership interest, sent $262,000 to the DYPC trust account on December 30, 2013 to allow 239 to close on the purchase.

[29] Mr. Kuang’s evidence is that Ms. Young suggested to Mr. Kuang that 239 needed to be incorporated in someone else’s name for credit proofing because there could be a perceived conflict with other entities Mr. Kuang owned. She persuaded Mr. Kuang that her mother should be listed as the director for optics, but assured him he would be issued 100% of its shares. Mr. Kuang states he later discovered Ms. Young issued 100% ownership to Shawn without his knowledge or consent. Shawn contributed nothing to the parkade. Her only “involvement” was as a figurehead at Ms. Young’s suggestion. 239 later started a private mortgage lending business in 2016, using funds advanced under the 217 CIBC line of credit. Most of the mortgages were transferred to 269 before separation, and 269 is now the primary business carrying on mortgage lending.

[30] In February 2022, Ms. Young transferred the ACC parkade, worth an estimated $27 million, from 239 to 181; Mr. Kuang does not claim an ownership interest in 181. As discussed below, this raises a serious issue regarding dissipation of assets.

[31] I find that there is a serious issue to be tried, and a strong prima facie case, regarding Mr. Kuang’s claims that he has an ownership interest in 239 and 269.

982 and Silverland Centre/Midland Property and FPC Condominiums

[32] Mr. Kuang is claiming a 50% beneficial interest in 982. There is a long and complicated history behind this acquisition, including the settlement of a lawsuit and a $4 million vendor takeback mortgage discharged but allegedly not repaid to Mr. Kuang’s company. Mr. Kuang personally guaranteed $4 million in financing secured against the property, although he is not the registered legal owner.

[33] The units in FPC were acquired by Ms. Young and Mr. Kuang separately at various times, some with funds from 217. At Ms. Young’s behest, ownership of the units was transferred multiple times to various corporations. The latest consolidation of ownership was on September 15, 2020, when seventeen units were transferred from 2698760 Ontario Inc. to 982 for $2 each, on Ms. Young’s advice to consolidate expenses during the pandemic. I find a serious issue to be tried, and a strong prima facie case, with respect to Mr. Kuang’s ownership of 982.

Summary re Serious Issue/Strong Prima Facie Case

[34] I find there is a serious issue to be tried, and a strong prima facie case, regarding Mr. Kuang’s ownership (legal and beneficial) of the shares in 217, 982, 239 and 269 for reasons set out above. Legal ownership is not dispositive of beneficial ownership where the parties have “conduct[ed] themselves in this manner, that is having assets registered in one name but beneficially owned by others, for years and continue to do so”: Seferovic v. Seferovic, 2019 ONSC 5023 at para. 43. Ms. Young and Shawn have admitted Mr. Kuang ran all the businesses. It is simply not credible that Shawn legally and beneficially owns the respondent corporations to the exclusion of Mr. Kuang on the evidence before me.

#3: Balance of Convenience

[35] The dispute is over the preservation of assets of corporations claimed to be owned in whole or in part by Mr. Kuang. The third part of the test requires a consideration of the harm that will be caused by the preservation order when compared to the harm if the property at issue is not preserved, including whether the property is unique and whether damages claimed in the alternative would be an adequate remedy: BMW Canada Inc. v. Autoport Limited, 2021 ONCA 43.

[36] The respondents argue, based on the Mareva injunction analysis, that there is an onus on the applicant to establish a real risk that the respondent is dissipating or disposing of assets in a manner clearly distinct from the usual course of business or living, or is removing/about to remove assets from the jurisdiction to avoid the possibility of a judgment, and that “Unless there is a genuine risk of disappearance of assets, either inside or outside the jurisdiction, the injunction will not issue”: Boutin v. Lucitt, 2021 ONSC 5594 at para 16, citing Aetna Financial Services Ltd. v. Feigelman, 1985 CanLII 55 (SCC) at para 26.

[37] Even applying the higher Mareva standard, I am satisfied that there is a serious risk of dissipation of the assets to avoid judgment if the order is not granted, and indeed, assets have already been removed from companies to which Mr. Kuang has a claim to companies in which he does not have a claim. Moreover, I find the harm to the applicant if the order is not granted is significantly higher than the harm to the respondents if the order is granted, particularly as they are permitted to conduct business in the ordinary and usual course.

[38] Since separation, corporate assets have been moved from companies in which Mr. Kuang has an ownership or trust claim (like 217) to companies where he does not have an ownership interest. Moreover, the primary affiant on the respondent’s side has not been truthful about the movement of assets. Thus, in her affidavit of August 24, 2022, Ms. Young swore that the parkade at the ACC was owned by 239, a company which Mr. Kuang claims an ownership interest. But it now appears that the parkade, worth over $27 million, was transferred to 2691181 Ontario Inc. (”181”) on February 2, 2022, six months prior to Ms. Young’s affidavit swearing otherwise. And 181 is a company to which Mr. Kuang has no claim.

[39] The corporate respondents continue to discharge mortgages after separation, and have not accounted for the proceeds. In November 2021, Ms. Young attempted to discharge a second mortgage of $2 million for a property in Markham. Mr. Kuang’s counsel intervened to have those funds paid into court, and there is an ongoing mortgage enforcement action with respect to those funds. Other mortgages, in the millions of dollars, have also been discharged post-separation without accounting. Since none of the respondent corporations have provided the disclosure including financial statements and general ledgers ordered 10 months ago, statements made by the only affiants (Ms. Young and her sister) cannot be tested. There is no independent evidence about the conduct of the corporations since separation.

[40] There are concerns that not all mortgages may be truly at arm’s length, particularly in relation to at least $10.1 million that has been loaned by 269 since November 1, 2021 under a complex series of mortgages to a former client of Ms. Young’s law firm, his wife, or to corporations associated with the client.

[41] Since separation, Ms. Young has caused the corporate respondents to lend out significant funds, and has caused the corporate respondent to pay significant income to Ms. Young and DYPC. Ms. Young has paid to herself at least millions from the corporate respondents (other than 230 and DYPC) since separation. Included in these payments are a total of $2,251,588.14 that, as of January 31, 2023, had been transferred from accounts held by 217, MTCC 1067, 982 and 269 to accounts owned by 230. 230 is wholly owned by Ms. Young. While Ms. Young states that these are management fees, and the corporate respondents state that these are property management fees or services by DYPC to the corporations, the only affiant providing such explanation is Ms. Young. The corporate respondents relied only on the evidence of Ms. Young. The corporate respondents no longer have external accounting assistance. Third party accountants were regularly retained to prepare the corporate respondents’ financial and tax records before separation. And since no financial statements or general ledgers have been provided, the only person attesting to the legitimacy of the payments to Ms. Young and her corporations is Ms. Young.

[42] Of greatest concern, the respondents have defied Justice Horkins’ disclosure order of August 25, 2022. There is no evidence about corporate conduct in the post-separation period except that put in by Ms. Young. This case requires financial statements completed with independent, third-party verification, together with the other disclosure ordered on August 25, 2022. I need not make another disclosure order, since the August 25, 2022 order continues. But the respondents are seriously delinquent in their disclosure. The only thing preventing this case from proceeding to a quick trial is the significant missing disclosure.

[43] The respondents were all prepared to agree that the four key properties would not be sold until further court order or agreement: the ACC properties owned by 217, the parkade now owned by 181, and the freehold commercial buildings and the condominiums owned by 982. While I accept that the respondents would prefer to make an undertaking rather than being subject to a court order, given the shifting ownership, concerns about the lack of independent oversight, and failure to comply with court orders, I make this part of the preservation order rather than relying on an undertaking.

[44] The corporate respondents also sought an order permitting them to mortgage, pledge, or otherwise encumber any of the commercial properties to a reasonable and safe extent, that is an amount that exceeds the net value required to cover Mr. Kuang's maximum equalization entitlement if he succeeded in his claim for ownership or beneficial interest in all the corporate respondents. That figure is impossible to determine, of course, since if Mr. Kuang owns the corporations, and the domestic contract is upheld, he would hold the entire interest.

[45] The corporate respondents specifically seek to continue the mortgage lending business through 269 using funds borrowed by the other corporations, and secured against the property of the other corporations. For the reasons set out in the interim preservation motion endorsement, I deny this relief. It improperly conflates the assets of separate corporations, placing them at undue risk. In part, this is because the mortgage business was run by Mr. Kuang, and it is unclear who is now making the decisions. The private mortgages are often second or later mortgages. Diana Young acknowledges the risk of the private lending business in her November 16 affidavit, where she states:

As secondary lenders involved in private lending, the risk profile for the Corporate Respondents is typically higher than that of a first-secured bank or traditional financial institution/lender, such that the rate of interest charged and associated lending and ancillary fees are greater than traditional mortgage financing to reflect the higher risk.

[46] I also find that the property is unique, and damages are insufficient. The property here includes shares, and property which has been carefully assembled into a stable, multi-million dollar real estate empire, with unique and high-earning commercial properties. Mr. Kuang’s claims are not limited to the value of equalization or support in the family litigation. His claims include ownership of the corporations and OBCA relief. I find the property preserved to be unique, and damages would not be an adequate remedy.

[47] I have made provision in the preservation order permitting expenditures in the ordinary and usual course of business. I do not find compelling evidence of serious financial harm to the responding parties. The balance of convenience favours an order preserving assets and protecting the status quo. The terms of the preservation order strike the best balance in terms of ensuring that the companies can continue to operate, but the assets are preserved pending trial.

Family Law Act Section 12 Order

[48] Mr. Kuang also seeks an order under section 12 of the Family Law Act to preserve Ms. Young’s property. Section 12 of the Family Law Act permits a court to make an order restraining the depletion of a spouse’s property to ensure that there are sufficient assets available to satisfy an equalization payment if it is determined one is owing. It is also available to ensure property is preserved pending a determination of title, when ownership of property is disputed under s. 10 of FLA.

[49] Mr. Kuang claim beneficial ownership of the matrimonial home. It was originally bought in both parties’ names, transferred to his sole name, then transferred to Ms. Young’s sole name, He has similar claims to a unit on Bonis Ave., as Mr. Kuang states he funded the purchase. Mr. Kuang also asserts a claim to a unit on Midland Ave. Gracia claims she purchased it at fair market value from Ms. Young on September 1, 2010, but the title search shows Ms. Young transferred title to Gracia for $2 on September 8, 2020, shortly before separation. Mr. Kuang believes this was a fraudulent transaction designed to defeat his family law claims against Ms. Young.

[50] As for these three properties, I decline to issue a preservation order. Even if I were to find that there is a serious issue to be tried with respect to equalization or ownership, notwithstanding the domestic contract, there is nothing unique asserted about these properties, and monetary damages would suffice if the properties were sold.

Other Issues

[51] For oral reasons given, I excluded Ms. Young’s late delivered affidavits of April 12 and April 17, as well as pages uploaded improperly to Caselines. I admitted Ms. Young’s late delivered factum.

[52] The applicant sought an order compelling disclosure already ordered by Justice Horkins in paragraphs 2-6 of the order of August 25, 2022. I decline to order what the respondents are already obliged to produce. The order may be enforced through Rule 1(8) or a contempt motion. The applicant must case conference Rule 1(8) relief and a contempt motion with the case management judge before a motion may be brought. The respondents may not bring motions until the disclosure order of August 25, 2022 is complied with, subject to the discretion of the case management judge.

[53] Until the respondents comply with the August 25, 2022 disclosure order, this case is stalled on issues including property, and income for spousal support and child support. It is imperative to continue moving this case to trial. Given my concerns with the delay to date, the dissipation of assets, and the failure of the respondents to comply with the August 25, 2022 order, I direct the respondents Diana Young Professional Corporation, 2305969 Ontario Inc., 2174112 Ontario Inc., 2394049 Ontario Inc., 2690712 Ontario Inc., and 2691181 Ontario Inc. to retain at their expense external accountants to prepare balance sheets, annual financial statements and to prepare and file tax returns for the corporate respondents, and to produce these to the applicant.

Order

1. The individual Respondents (Diana Young, Shawn Yeung, Theodore Wang, Gracia Wall) and the Respondent Corporations (2174112 Ontario Inc., 2394049 Ontario Inc., 2690712 Ontario Inc., 2435982 Ontario Inc., 2691181 Ontario Inc., Diana Young Professional Corporation, and 2305969 Ontario Inc) (collectively, the Respondents), shall preserve property as follows on a without prejudice basis pending further order of this court or an agreement between the parties, in writing:

a. The individual Respondents are restrained from directly or indirectly, dealing with, assigning, encumbering, disposing or otherwise transferring or issuing any shares or interest in any of the Respondent Corporations, or in any businesses or corporations in which any of the Respondents are registered shareholders or that are otherwise owned or controlled by the Applicant or any of the individual Respondents.

b. The individual Respondents are restrained from, directly or indirectly, causing the Respondent Corporations to make payments or incur any expenditures or liabilities except as required in the usual and ordinary course of the Respondent Corporations’ business. For 2174112 Ontario Inc., 2394049 Ontario Inc., 2435982 Ontario Inc., 2691181 Ontario Inc., Diana Young Professional Corporation and 2305969 Ontario Inc., and other corporate respondents which own, operate or manage commercial and other properties, the term “usual and ordinary course of business” includes the tasks necessary to run the day-to-day operations and manage the properties, including the negotiation of leases, collection of rents, payment of employees, suppliers, and contractors, and the general maintenance of the properties, in a manner consistent with pre-separation practices. It also includes retaining and paying professional advisors for tax, litigation, and corporate filing purposes, and for the Diana Young Professional Corporation, providing legal advice and legal services. The usual and ordinary course of business does not include selling or encumbering properties, or mortgaging or encumbering any assets for the purpose of transferring funds to any other persons, including to any of the individual Respondents or Respondent Corporations, or for the purpose of investing any funds in or through any other Respondent Corporation. For 2690712 Ontario Inc., the term “usual and ordinary course of business” includes the tasks necessary to run the day-to-day operations of the private mortgage lending business, including the collection of mortgage payments, payment of employees, suppliers, and contractors in a manner consistent with pre-separation practices. It also includes retaining and paying professional advisors for tax, litigation, and corporate filing purposes. 269 may use its own assets, including funds received from investors not subject to the preservation order, in the mortgage lending business.

c. The Respondents are restrained, directly or indirectly, from causing the Respondent Corporations to pay or remunerate the Respondents any monies including by salary, dividend, distribution, or shareholder loans or otherwise, except that Diana Young Professional Corporation may continue to pay to Diana and Gracia their normal and usual income or salary and business expenses consistent with their remunerations in 2020.

d. The Respondents are restrained from assigning, transferring, selling, discharging, or encumbering any of their assets except in the usual and ordinary course of business. The usual and ordinary course of business has the same meaning as set out in paragraph (b) above.

e. All corporations named as respondents in this matter, including but not limited to 2174112 Ontario Inc., 2394049 Ontario Inc., 2690712 Ontario Inc., 2691181 Ontario Inc., 2435982 Ontario Inc., 2305969 Ontario Inc., and Diana Young Professional Corporation are permitted to pay their respective legal fees in this application, the legal fees of each corporation’s respective owner in this application, as well as legal fees incurred in the usual and ordinary course of operation of their respective businesses, including but not limited to transactional legal fees and mortgage enforcement as necessary, but excluding legal fees incurred in pursuing claims against the Applicant outside of this application.

f. The Corporate Respondents are hereby restrained from assigning, transferring, or selling, any of their real properties listed as below (“Commercial Properties”), without consent from the Applicant, or court order:

(i) 91 condominium units at 4002 Sheppard Ave. E. and 2347 Kennedy Road, Toronto, owned by 2174112 Ontario Inc.;

(ii) 392 parking units at 4008 Sheppard Ave. E., Toronto, owned by 2691181 Ontario Inc.;

(iii) 2 freehold commercial buildings at 3320 and 3330 Midland Ave., Toronto, owned by 2435982 Ontario Inc.; and

(iv) 17 condominium units at 4168 Finch Ave. E., Toronto, owned by 2435982 Ontario Inc.

g. Notwithstanding the preceding provisions, if any of the Respondents seek to list for sale any real property other than the Commercial Properties, or discharge any mortgages held or owned by any of them, at least fourteen days’ notice must be given to the other parties of such transaction, that party must advise the other parties to this proceeding of the full details of such transactions, and the proceeds from the sale of any properties owned by any of the Respondents or from the discharge of any mortgages in favour of any of the Respondents must be held in trust by a solicitor agreed upon by all parties and be subject to terms of this order pending agreement of the parties or further order of the court. If there is no agreement as to the solicitor, the net proceeds must be paid into court to the Accountant of the Superior Court of Justice to the credit of this action.

h. Notwithstanding the restrictions in paragraph 1(d), the Respondent, 2690712 Ontario Inc. (“Lender”), shall be permitted to enter into mortgages with arm’s length borrowers, to use funds from the discharge of prior and existing mortgages to fund such mortgages, renew any existing mortgages, and discharge any existing mortgages, provided that:

(i) All borrowers shall be at arm’s length from the Respondents, or any of them;

(ii) Where a new mortgage or a mortgage renewal request is not originated through a broker, the Lender shall maintain a record of the source of the mortgage, including the name of the person who contacted the Lender, and copies of all correspondence relating to the origination including any correspondence relating to the negotiation of the mortgage terms;

(iii) 2690712 Ontario Inc. will issue a commitment letter for every new mortgage and every renewal of an existing mortgage. The Applicant will be provided with the following upon any commitment letter issued by the Lender as conditions for the Commitment letter become binding before closing:

a. A complete copy of the borrower’s mortgage application package, or, if the mortgage was originated by a broker, a complete copy of the broker’s mortgage application package;

b. Full particulars of the identity of the proposed borrower(s) and any proposed guarantor(s), the proposed source of the funds used to fund the mortgage and supporting documentation showing the source of the funds;

c. The contact information for the proposed borrower(s) and any guarantor(s). and permission to contact them to conduct underwriting interviews and investigations; and

d. At least one appraisal of the subject property conducted by a certified AACI appraiser, and where the property is not a residential home, the appraisal shall be in a full narrative report format.

(iv) Lender’s counsel shall provide Mr. Kuang with the following documents as they are prepared and executed with respect to any new mortgages:

a. Copies of the lender’s signed Form 9D;

b. Draft trust ledger from Lender’s counsel;

c. A copy of the final report to the Lender.

(v) Lender’s counsel shall provide Mr. Kuang with the following documents as they are prepared and executed with respect to the discharge of any existing mortgages:

a. A copy of the discharge request received;

b. A copy of the payout statement sent to the borrower, prepared by Lender’s counsel;

c. Draft trust ledger from Lender’s counsel;

d. A copy of the final report to the Lender.

(vi) Hugh Kuang shall be given advance notice of any proposed assignment of any mortgages held by parties covered by these terms;

(vii) Any disputes about compliance with these terms shall be determined on a motion to the court unless otherwise agreed in writing

(viii) 2690712 Ontario Inc. must appoint counsel to act as solicitor for the Lender in all future mortgage transactions, including the advancing, renewing, assigning or discharging of any mortgages, but the counsel shall not be a party to this proceeding.

i. These terms shall not be registered in any way, whether on title or under the Personal Property Security Act, R.S.O. 1990, c. P.10 to any subject properties or companies.

j. The Respondent Corporations must preserve and maintain all detailed business records including shareholder registers, corporate minute books, banking records, receipts, ledgers, and other financial documentation and business records of the Corporations (“Corporate Records”).

k. The Respondents must provide a copy of the Corporate Records or give access to the Applicant to the Corporate Records on the first of each month, commencing immediately. The Respondents must permit the Applicant to make reasonable financial inquiries of the corporations’ bookkeeper(s), accountant(s) and other financial advisors to clarify income and expense items.

2. None of the foregoing shall be deemed to create any legal or beneficial ownership of Diana Young Professional Corporation on the part of any party other than Diana Young, or apply to or bind the Respondent, Diana Young Professional Corporation, except in respect of monies belonging to the Respondent Corporations arising from the sale or encumbrance of any properties or discharge of any mortgages involving the Respondent Corporations.

3. The Respondent Corporations 2174112 Ontario Inc., 2394049 Ontario Inc., 2690712 Ontario Inc., 2435982 Ontario Inc., 2691181 Ontario Inc., Diana Young Professional Corporation, and 2305969 Ontario Inc. shall within 30 days retain at their expense external accountants to prepare balance sheets, annual financial statements and to prepare and file tax returns for these Respondents and shall immediately provide to the Applicant the identity of the external accountant(s) who are retained as well as copies of any balance sheets, financial statements, and tax returns that have been prepared by the external accountants upon receipt.

4. The Applicant must case conference Rule 1(8) relief and a contempt motion regarding the failure of the respondents to comply with the August 25, 2022, order with the case management judge before any motion may be brought.

5. The Respondents may not bring motions until the disclosure order of August 25, 2022 is complied with, subject to the discretion of the case management judge after case conferencing with the case management judge.

Costs

[54] The applicant has been successful, and is presumptively entitled to costs. The applicant must serve his costs submissions by September 8 (limited to six pages plus Bill of Costs plus Offers to Settle). The Respondents which filed factums and made oral submissions must file their responding costs submissions by September 22 (same limits). Reply, if necessary, limited to four pages, by September 28.

Kristjanson J.

Released: August 25, 2023

Corrected September 15, 2023: to insert the correct date of the Order of Justice Horkins as August 25, 2022, not October 7, 2022, which was the date of issuance.

[^1]: The Endorsement was corrected after release on September 15, 2023, to insert the correct date of Justice Horkins’ August 25, 2022 Order