Court File and Parties
COURT FILE NO.: FS-19-13520 DATE: 20231024 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Barbara Lang-Newlands, Applicant AND: Ian Gordon Newlands and Stuart Lang, Respondents
BEFORE: W.D. Black J.
COUNSEL: Karon Bales and Pia Hundal, for the Proposed Third Parties (moving parties) Harold Niman, Daryl Gelgoot, Jen-Yii Liew and Timothy Youdan for the Respondent Ian Newlands (responding party on the motion) Martha McCarthy, for the Applicant Christopher Caruana, for the Respondent Stuart Lang
HEARD: October 19, 2023
Endorsement
Overview
1The moving parties are the four adult children (the “children) of the parties.
2They seek to be added as third parties to this application on the basis that their respective interests in Newlands Family Trust (NFT), in which they and their mother (the applicant Ms. Lang‑Newlands) are the five current beneficiaries, may be prejudiced by decisions that this Court could make in the upcoming trial in this matter.
3That trial is scheduled for six weeks, and for over a year has been scheduled to commence on November 27, 2023, just over a month from the hearing of this motion.
4This application has been ongoing for about four years.
5A determination of this motion requires:
(a) an assessment of the putative interest of the children in the NFT; (b) an assessment of the standing of the children to bring this motion; (c) an analysis of the explanation and impact of the children not bringing this motion until the eve of the trial; (d) consideration of the weight to be given to an affidavit from an individual other than one or more of the children in the absence of any direct evidence from any of the children.
Summary of Conclusions
6I have concluded that the children’s motion should be dismissed.
7There is no explanation offered, let alone a compelling one, for why this motion was not brought until the eve of trial in an application that has been proceeding for four years and about which the children appear to have been aware. The respondent Mr. Newlands argues that the relief, if granted, would necessitate procedural steps likely including disclosure and questioning, and would potentially delay and inevitably elongate the trial. The evidence in support of this contention is somewhat thin, but it is not unreasonable to expect that adding four parties and their counsel will tend to expand the scope of the proceedings and trial.
8In such circumstances, authorities have cautioned that the addition of parties should be allowed “sparingly” and only where the Court is convinced that the participation of the would‑be third parties is necessary for the just determination of the litigation.
9In this case, even if the children have standing to bring this motion – which is contentious – it appears that the putative interest they seek to protect may not yet give rise to a cause of action. As Justice Gillese said in the Court of Appeal for Ontario’s decision in Spencer v. Riesberry, 2012 ONCA 418, “unless the terms of the trust expressly provide otherwise, a beneficiary has no property interest in any specific asset of the trust, prior to or absent an appropriation of such asset to the beneficiary by the trustee”.
10The combination of the lateness of the request, the lack of explanation for this lateness, the lack of direct evidence from the children at all, the uncertainty of their standing to bring the motion, and the prematurity inherent in the putative interest they purport to protect, leads to my conclusion.
11The children, or some of them, are expected to testify at trial, such that in any event the trial judge will be able to assess their evidence and determine if any provision is required relative to the putative interest the children assert.
Background
A. The Marriage and Separation
12The parties were married on August 21, 1987. There is a dispute about the date of separation – Ms. Lang-Newlands says it was July 31, 2019, and Mr. Newlands says it was August 27, 2018. While the trial judge will have to decide that dispute, it does not impact my determination of this motion.
B. Status of the Application
13Ms. Lang-Newlands, commenced this application in November of 2019.
14In addition to her ex‑husband Mr. Newlands, Ms. Lang-Newlands’ brother, Stuart Lang, is an added respondent, in his capacity as one of the three trustees of the NFT (Ms. Lang-Newlands is also a trustee of the NFT, as is her brother Donald Lang, who is not a party to the application).
15The parties have each retained various experts, and have delivered and updated opinions from these experts throughout the proceedings.
16The parties have also completed extensive questioning.
C. Representation by Ms. Lang-Newlands During Questioning
17Significantly, when Ms. Lang-Newlands was questioned over two years ago, on August 23, 2021, she specifically confirmed that the children would not be participants in the application, saying “As far as I’m concerned, the children are not in this divorce proceeding”, and she repeatedly affirmed that the proceeding was only between Mr. Newlands and Ms. Lang-Newlands. She went further, confirming her understanding that whatever the decision of the judge at the conclusion of trial, that decision would not impact the children.
18While a lay party’s understanding of a legal position or its import is not determinative of the issue (or binding on a non-party), there has been no correction nor equivocation by counsel of Ms. Lang-Newlands’ specific affirmation that the outcome of the litigation would not impact nor involve her children. As such the statement is fairly understood as the applicant’s position on this issue. That means that Mr. Newlands fairly assumed, until receiving the children’s motion, and a draft pleading from them on October 11, 2023 (less than two weeks before the hearing of this motion), that the case would proceed to the long-scheduled trial on that basis.
19The children’s position, at least as articulated in an October 17, 2023 reply affidavit from Andrew Butler, the president of the family office that oversees the Lang family’s financial affairs, is that Ms. Lang-Newlands’ “initial position” regarding the involvement of the children is “irrelevant” inasmuch as Ms. Lang-Newlands is now “consenting to the relief sought by the Newlands Children to be added as parties to this proceeding”.
20I do not agree. Changes in significant positions by a party to a proceeding, particularly on the eve of trial and particularly when a change in turn changes the landscape of the litigation, are not irrelevant. As here, they may have considerable consequences.
D. The Children’s Evidence on this Motion
21In addition to his reply affidavit, Mr. Butler provided an earlier affidavit dated August 23, 2023. These two affidavits comprise the only evidence delivered on behalf of the children for purposes of this motion.
22As noted, Mr. Butler deposes that he is the President of the Samson Family Office, from which he manages “the Lang family’s affairs”. He says that he has been working with the Lang family and the children as a consultant since late October 2019, and assumed his full-time current role (in the Family Office) in the spring of 2020.
23Mr. Butler’s initial affidavit describes the complex series of corporate and trust entities through which the sizeable assets of the Lang family have been held, distributed and re-distributed since an original trust (the Barbara Joan Lang Trust) was settled in September of 1977.
E. Relevant Aspects of Underlying Transactions
24I will not recite here all of these various entities, distributions and re-distributions. It is important for current purposes, however, that the NFT was settled by the applicant’s father, Gordon Lang, on August 22, 2001, naming Ms. Lang-Newlands and Donald and Stuart Lang as the trustees, and naming Ms. Lang-Newlands and the children as discretionary beneficiaries. About a month later, on September 24, 2001, Ms. Lang-Newlands “engaged in tax planning in the form of an estate freeze”.
25Following that estate freeze, the NFT subscribed for 100 common shares in WSHJ Holdings Ltd., a company incorporated by Ms. Lang-Newlands on August 27, 2001, named after the children (Wesley, Spencer, Harrison and Jordon).
26From the date of the estate freeze, September 24, 2001, Mr. Butler deposes that “the future growth in the value of WSHJ Holdings Ltd. accrued to the common shares of the company, owned by the NFT”.
27On July 11, 2003, WSHJ Holdings Ltd. was renamed “4 MYKIDZ Inc.”.
28On May 9, 2022, Stuart Lang settled another trust called the BJL 2043 Trust (2043 Trust). The children are the beneficiaries of the 2043 Trust. Ms. Lang-Newlands, Donald Lang, two of the children, Harrison and Spencer Newlands and Mr. Butler are the trustees.
29On May 24, 2022, in its own tax-driven freeze transaction, 4 MYKIDZ Inc. reorganized its capital, with the NFT exchanging the existing common shares of 4 MYKIDZ Inc. for fixed value preference shares. After this freeze, any future growth in the value of 4 MYKIDZ Inc. would accrue to the Class B common shares of the company, owned by the 2043 Trust.
30Mr. Butler deposes that, as a result of the NFT exchanging the common shares in 4 MYKIDZ Inc. for fixed value preference shares in the company, the value of the NFT was fixed on May 24, 2022 at $596,600,000.00 (subject to future reductions in value by way of subsequent distributions from the trust). There were partial distributions from the NFT between 2008 and 2019, to Ms. Lang-Newlands and the children.
31On August 22, 2022, triggered by NFT’s 21-year anniversary and a pending deemed disposition date, and following the reorganization of the capital of 4 MYKIDZ Inc., there were distributions to the children, primarily in non-cash fixed value preference shares.
32The overall capital distributions to the beneficiaries of the NFT since 2020 total just shy of $40 million to Ms. Lang-Newlands, just over $100 million to each of Spencer, Harrison and Jordon Newlands, and just over $3 million to Wesley Newlands (Mr. Butler deposes that a distribution to Wesley Newlands in keeping with the distributions to her siblings is expected once certain “considerations regarding her personal tax situation are resolved”).
33After summarizing these various steps (and others that I have not touched on here), Mr. Butler states the conclusion that “Any decision or court order that relates to Barbara’s interest in the NF Trust impacts the other beneficiaries of the Trust, namely the Newlands Children.” This conclusion is not explained, nor linked to any evidence. Rather, is merely asserted.
F. Mr. Butler’s Purported Conclusion on Impact of Trial
34In his reply affidavit, with respect to the impact on the children, Mr. Butler essentially repeats the conclusory statement in his initial affidavit. He says “Halting distributions from the NF Trust would directly impact the Newlands Children, as they are discretionary beneficiaries who are entitled to distributions from the NF Trust.”
First Issue: The Children Do Not Yet Have a Cause of Action
35The parties to this motion agree that, inasmuch as the NFT is a discretionary trust, the trustees decide whether or not to award all or a portion of the assets of the trust to the beneficiaries. Subject to a decision of the trustees to award assets of the trust to the beneficiaries, the beneficiaries, characterized as “discretionary beneficiaries” do not have a right to the trust assets.
36The children’s motion is said to be precipitated by Mr. Newlands’ claim in the application, that Ms. Lang-Newlands’ interest in the NFT should be included in her Net Family Property (NFP) for equalization purposes.
37Ms. Lang-Newlands, on the other hand, contends that the NFT, and any assets into which it can be traced, is excluded property and that she is not the sole beneficiary of the NFT.
38The children assert that they will be prejudiced in the event that Mr. Newlands is successful in his argument, that over $300,000,000.00 potentially payable to them may be subject to an order made by this Court, and that the outcome of the pending trial may also prejudice their entitlement to future distributions from the trust.
39In summary terms, the children say (in their factum) that “Since this Honorable Court will be making decisions that affect the Newlands Children’s current and future entitlements, they ought to be afforded the opportunity to present evidence and make submissions on the trust issues at trial.”
40There is a pronounced disconnect between the characterization of the children’s claim by the children on one hand, and that of Mr. Newlands on the other.
41In their draft Answer and Claim delivered on October 11, 2023, the children seek to dismiss several of Mr. Newlands’ claims, including what they say is Mr. Newlands’ claim or claims against NFT and his claim to trace assets from the NFT.
42Mr. Newlands confirms, in his material responding to this motion, that he has made no claims against NFT, no claims seeking a tracing of the assets from the NFT, and no claims against the children, the 2043 Trust, or the children’s respective corporations. He also confirms that he has made no claims regarding the distributions made to the children following the separation. Apart from these items, Mr. Newlands notes that the balance of the children’s proposed claims “mirror [Ms. Lang-Newlands’] position”; specifically they assert that the value of the NFT should not form part of Ms. Lang-Newlands’ NFP, and that Ms. Lang‑Newlands did not improperly transfer assets into trusts or corporations.
43I find, based on this evidence and the guidance provided by the Court of Appeal for Ontario in Spencer v. Riesberry, that the children do not yet have a cause of action.
Second Issue: The Children May Not Have Standing
44Mr. Newlands argues that the children have no standing to make these claims.
45He relies on sections 4(1) and 5(1) of the Family Law Act, which confirm, he argues, that only a “spouse” has standing to make or contest equalization claims.
46He also argues, as noted, that the children have no cause of action. Inasmuch as the NFT is a discretionary trust and the children are discretionary beneficiaries, they have no property interest in any asset of the trust “prior to or absent an appropriation of such asset to the beneficiary by the trustee”.
47He says there is no evidence to confirm that the trial decision will impact the children in any way, and that in any event since it is contemplated that one or more of the children will testify, they can put their position(s) before the Court without the need to make them parties.
48Mr. Newlands points out that the children would not even satisfy the test for intervenor status, since, at least relative to the live issues in the case, they simply mirror Ms. Lang-Newlands’ positions.
49I am not persuaded that the standing issue is as absolute as Mr. Newlands argues. That is, I can imagine a scenario in which a third party’s interests are clearly and unequivocally impacted by an issue to be decided at a pending trial, and that in those circumstances those third parties may indeed have a proper basis to be added to the proceeding, at least to play a limited role. I would go no further than to find here that it is uncertain whether or not the children could in certain circumstances have limited standing. Given the rest of my conclusions here, while I have doubts as to the children’s standing to bring the motion, I need not definitively decide that issue.
Third Issue: The Evidence Offered by the Children is Not the “Best Evidence”
50In addition to these various substantive arguments, Mr. Newlands also makes the arguments about the quality of the children’s evidence, and procedural fairness.
51He points out, fairly, that Mr. Butler’s evidence about the children’s positions is by definition second-hand, and not the “best evidence,” as required. He notes that even still, Mr. Butler provides no explanation for why the children’s motion was not brought before now.
52Mr. Butler, in his reply affidavit, and counsel for the children in argument suggested that since the children were not served with materials because they were not parties, “it is speculative to state what they did or did not know about the details of the proceedings”.
53I have two difficulties with this evidence and submission.
54First, I find it difficult to believe that, given their parents’ acrimonious high-stakes litigation, the children did not know at least something about the details of the dispute. It has been contemplated since at least January of 2023, that one or more of the children would testify at the trial, and again I would lean to believe that, in anticipation of that role, the children would inquire – assuming for sake of argument that they did not already know – about the details of the dispute.
55I note in passing as well that the pleadings in this proceeding, in which Mr. Newlands’ position that the NFT should form part of Ms. Lang-Newlands’ NFP is apparent, are available in the public record and could have been obtained and read by or on behalf of the children.
56Ms. McCarthy (counsel to Ms. Lang-Newlands) pointed out that the TSEF endorsement from the conference at which the plan for the trial was discussed and agreed, merely says that “Jordon or Spencer” would testify, and would give evidence relative to the date of separation and post‑separation events.
57While this point is fair and well-taken, in my view it is also somewhat speculative. That is, the high-level summary of the topics to be addressed in the evidence of one or the other or both of Jordon and Spencer does not show that their information about the details of the proceeding was limited to those topics.
Fourth Issue: The Children Have Provided No Explanation for Lateness
58Moreover the timing and extent of the children’s information and knowledge remains speculative because – and this is my second and overriding difficulty with the position on behalf of the children about what they knew and when – the children provided no direct evidence on this topic or at all.
59I find it disingenuous for the children to argue, in relation to a topic and information that is specifically and uniquely within their knowledge, and about which they could have provided direct and definitive evidence, that conclusions on that topic are necessarily speculative. It is speculative only because they have made it so. In the absence of direct evidence from the children that was within their power to provide, I infer that their evidence on this score would not assist them.
Further Discussion of the Test for Adding Parties Late in the Proceeding
60The parties agree that the Court’s discretion to add parties at a late stage in the proceedings is to be used sparingly.
61In my view, it goes hand in hand with that sparing discretion that in order to persuade the Court to exercise such discretion, a would‑be party must be forthcoming and transparent about the reasons why the motion is brought so late in the day, about the state of the party or parties’ knowledge, and about the unique and important evidence and perspective the party or parties will bring to the trial if added.
62Here, there is no attempt to be forthcoming and transparent. Instead, the children ask the Court to exercise its sparing discretion on the basis of indirect evidence from Mr. Butler, and on the basis of conclusory opinions from Mr. Butler, without detailed or really any explanation as to how and why the children will be impacted. Again, the discretion is sought without even an attempt to explain why the motion was not brought before now.
63Coupled with the lack of any existing cause of action or interest to protect, and the uncertainty about their standing to assert the claims they wish to assert, I find that the children have not met the test to be added as parties at this late date.
64I take some comfort from the fact that the children, or some of them, can and will testify at the trial, and can in their evidence explain what they say is their interest and how the Court should protect that interest.
65I also believe that, in the event that the trial judge finds that Ms. Lang-Newlands’ interest in the NFT properly forms a part of her NFP subject to equalization, the children will not be precluded from at that stage, asserting their position about the value of Ms. Lang-Newlands’ interest (versus their purported interest) and/or claiming against the trustees.
Aspects of Relevant Caselaw
66The case law relative to adding parties late in the day is not uniform, but there is a consistent thread confirming that the Court’s discretion “should be used sparingly and only when necessary for the just determination of the litigation.” (Breen v. MacArthur, 2016 ONSC 2454).
67The British Columbia Superior Court decision in Dungate v. Dungate is particularly apposite to the motion before me. In that case, the wife sought to add adult children as third parties to the matrimonial proceeding, claiming that she held shares in a family company in trust for those adult children. The Court, in finding that the adult children had not satisfactorily established a cause of action, said:
“Ordinarily, we deal with the assets of the family on a family breakdown with only the spouses as parties to the lawsuit. We do not bring into the lawsuit all the parties who are shareholders in any company that is involved. When relief is sought against the company, the company would be a party.
Here, the question is, do either of the ex-husband or ex-wife own interest in Grandad’s [the company]? And if so, should there be any division of that and any adjustment between them? During that consideration the ex-wife can assert her position that she holds her interest in trust for the children, and that it is not an asset to be divided between the spouses… I am not satisfied that there is a cause of action involving the children.
I am going to quote some authoritative passages. These are quotations from Oosterhoff on Trusts: Text, Commentary and Materials, 7th ed. By A. H. Oosterhoff et al (Toronto: Carswell, 2009) pages 37-38. It says:
“The beneficiary can never go around the trustee and assert a claim to the trust property directly. Only the trustee, and not the beneficiary, has the right and duty to make claims against third parties who have interfered with or damaged trust property. The recourse of the beneficiaries… is to sue the trustee to require him to enforce his rights against the third parties… the beneficiaries can claim against third parties only through the trustee.
The problem with the ex-wife’s application to add the four children as parties is that she has not established that a cause of action exists between the four children and the parties to this lawsuit. (Dungate v. Dungate, 2015 BCSC 2225).
68The Court in Dungate also said, in circumstances where, as here, the motion to add the parties was brought at a late stage in the proceedings, when a trial had already been scheduled: “a Court must consider whether adding a proposed party would hijack the proceedings, by increasing the number of parties, issues and overall scope of the litigation with resulting costs and delays”.
69Ms. Bales on behalf of the moving parties argued before me that the Dungate decision is distinguishable from the case before me because in Dungate there was no express trust, and merely the ex-wife’s argument that she held assets in trust for the children.
70With respect, I do not read the Dungate decision as turning on that issue. Rather, it appears that the Court accepted for purposes of its decision that there was a trust, and, proceeding on that basis, noted the impediments to adding the adult children to assert their claims.
Motion Dismissed
71On this basis, and for the other reasons I have discussed, I am not prepared to add the children as parties, and I dismiss their motion.
Costs
72On a partial indemnity basis (60%), Mr. Newlands seeks his costs of this motion in the amount of $20,116.11 (including HST). This is considerably less than the amount set out in the bill of costs submitted by the children, and otherwise strikes me as entirely reasonable in the circumstances. I award costs to Mr. Newlands, payable by the children within 30 days, in the amount of $20,116.11.
W.D Black J.
Date: October 24, 2023