COURT FILE NO.: FS-22-103476-0000
DATE: 20231110
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Sherif Gerges, Applicant
AND:
Sandra Gerges, Respondent
BEFORE: The Honourable Justice Tzimas
COUNSEL: Geoffrey Wells, for the Applicant
Kristen Normandin, for the Respondent
HEARD: October 3, 2023
E N D O R S E M E N T
OVERVIEW
[1] The court heard two motions. The first motion, brought by the Respondent was for child support, spousal support, payment of retroactive section 7 expenses, and for authority to determine and authorize the sale of the matrimonial home without the Applicant’s participation. The Applicant opposed the motion but offered to pay a modest sum of child support and the private school tuition for the youngest child. He also proposed that post-secondary expenses for the two children studying pharmacy abroad be fixed at $87,500 each and be shared equally with the Respondent.
[2] The second motion was brought by the Applicant for a variation of the Preservation Order of November 21, 2022, issued by the court, on the consent of the parties. The Respondent opposed the variation.
[3] For the reasons that followed, both motions are dismissed, though on specific terms and conditions.
ANALYSIS
[4] The starting point for both motions is the Preservation Order issued by this court, on the consent of the parties on November 21, 2022. As I noted at paragraphs 10 and 11 of my endorsement of May 1, 2023, both parties, through their consent, represented to the court that they would be bound by the terms of that order, the underlying principles of sections 12 and 40 of the Family Law Act, R.S.O. c.F.3, as well as the guiding principles to those sections, as outlined by the court in Wright-Minnie v. Minnie, 2020 ONSC 5573.
[5] For the reasons discussed in my endorsement of May 1, 2023, the Applicant’s motion to vary the preservation order was denied. Since then, although the Applicant made some marginal efforts to address the court’s concerns, it is most disconcerting to observe the: i. the apparent weaponization of the order by both parties; ii. Troubling indicators that the Applicant may be defying the Order; and iii. entrenchment by both parties, with minimal regard for the deficiencies in their respective evidentiary records, even if that results in financial ruin for both parties. On the “support motion”, the court received little more than “expert dump” of competing reports, with little to no explanation for their corresponding analyses and conclusions. On the motion for the variation of the preservation order, the Applicant’s submissions amounted to little more than an argument that the court had to ”lift the order because it is wreaking havoc”, but without any regard for either the reasons for the preservation order or its alleged defiance. I will proceed to review the specific concerns with each motion.
a. Respondent’s motion for support
[6] The Respondent advanced very substantial claims for child and spousal support based on a very simplistic assessment of the parties’ income. Both the Respondent and the Applicant attached to their respective affidavits, complex income and asset valuations. They then neglected to engage in any discussion or substantial analysis of the differences in the two valuations, as well as the various implications and findings contained therein. In the result, neither party offered any explanation on why the court ought to prefer the evidence of its own expert over that of the opponent. That fundamental shortcoming made it impossible for the court to undertake any analysis to make its findings.
[7] The only thing that the filing of the expert reports accomplished was to alert the court that the determination of child and spousal support for the Respondent could not be based simply on an alleged income of $1,660,000 for the Applicant for the year 2021 and zero for the Respondent, as the Respondent would have the court believe. Instead, they revealed concerns about the following issues:
a. the implications of the very intricate and complex nature of the commercial arrangements / income splitting arrangements between the two parties on their respective income positions both before and after the marital breakdown;
b. the implications of the breakdown of the parties’ commercial relationship a year following their marital breakdown, on their respective incomes;
c. the Respondent’s entitlement to spousal support as a result of the marital breakdown and then the commercial breakdown;
d. how the court ought to account for the parties’ use S & S Pharmacy Management Inc. as their primary vehicle for the payment of their personal expenses during the marriage;
e. the parties’ difficulties with cashflow before their separation and the possible underlying question of whether they were living beyond their means during their marriage;
f. the treatment of the non-recurring income in the years 2021 and 2022 for both parties and what that would mean for the determination of support payments; and
g. a full analysis of the Respondent’s income and / or a response to the Applicant’s evidence that suggested an income of $1.2 million for the Respondent, for the year 2021.
To the extent that in her motion, the Respondent was silent on these issues, it suggested that the Respondent may have been overly ambitious in her efforts to simplify her position for the court’s consideration. I would hope that the obscuring of the questions raised was not a deliberate attempt to mislead the court.
[8] Separate and apart from these very substantial concerns, the Respondent offered no explanation on how, in the face of the existing Preservation Order, the Applicant would pay for the very substantial support obligations and retroactive payments that in all likelihood would exceed the monthly income he may be earning. The Respondent expressly put before the court her reasons for believing that the Applicant was depleting his existing assets by taking out loans against various pharmacies to support his own extravagant lifestyle. But given the tenor of her submissions, it was not clear if her concern lay with her perception of the Applicant’s asset depletion generally and the effects on the parties’ overall wealth and financial position, or with her view that the Applicant is using the depleted funds to support his own lavish lifestyle either at the expense of his support to her and the family, or without regard for their needs. The Respondent seemed to imply that she would not be troubled by the asset depletion were it to be directed towards the support of herself and the children.
[9] The Respondent’s perceptions of the Applicant’s payment for his expenses might actually reflect the way the parties’ managed their cashflow and lavish expenses when they were together. However, in the face of the existing Preservation Order, that kind of “asset management” is not permitted, no matter what the purpose. That is a reality that the Respondent seemed to ignore. In the result, at no time in either her written or oral submissions did the Respondent engage with the prospect of having to vary the terms of the Preservation Order to allow for the monthly spousal support in the approximate sum of $46,300 and monthly child support for three children, in the sum of approximately $16,300, to say nothing of the very substantial section 7 expenses for the two children studying abroad.
[10] In a nutshell, given the way the parties supported their lifestyles prior to the marital and commercial breakdowns, there will necessarily be a symbiotic inverse relationship between any support orders and the terms of the preservation order. In other words, the orders sought by the Respondent will not be able to coexist with her refusal to vary the terms of the Preservation Order. Given the Respondent’s own estimate of an annual budget of $2.7 million to cover spousal and child support, housing costs, costs for the investment properties, and section 7 expenses, for a court order to be meaningful and enforceable, the Respondent could not very well continue to oppose the variation of the Preservation Order, as she did.
[11] Leaving aside for a moment the relationship between the two motions, by putting forward a proposed budget of $2.7 million and making the submission that this estimate was in line with the parties’ lifestyle throughout the marriage and prior to separation, the Respondent put into question, the levels of income for both parties, their expenditures, and their debt loads. If the Applicant’s income were to be imputed at $1.6 million, as the Respondent asked the court to do, what other sources of income would account for the approximately $1.1 million difference in her proposed budget? Might that difference align itself with the Applicant’s view that the Respondent’s income for 2021 was $1.2 million? Moreover, if the Respondent’s proposed budget reflected the parties’ actual lifestyle prior to separation, might that explain the Applicant’s current financial difficulties? Ignoring for a moment the Respondent’s numerous complaints about the Applicant’s threats to destroy her financially, is it possible that the parties were on a financial collision course that came to a head with the marital separation?
[12] These are just some of the unanswered questions that arise from the Respondent’s own evidence that render a ruling on the requested supports and payments, even if on an interim basis, impossible to make. What is required to make the requested determinations is a comprehensive evidentiary record supported by rigorous and robust cross-examinations of the parties and their experts, that can only occur at a trial.
[13] The Respondent’s motion is therefore dismissed, subject to certain specific payments outlined below and to the requirement that the matter proceed to trial as soon as possible.
b. Applicant’s motion to lift the Preservation Order of November 21, 2023
[14] Turning to the Applicant’s motion, his submissions and supporting evidence came nowhere near his obligations to satisfy his onus to prove to the court that the preservation order, to which he consented about a year ago, may be varied. To begin with, I am very concerned by the Applicant’s failure to respond to any of the Respondent’s allegations concerning his alleged “willful breach” of the Preservation Order of November 21, 2022, three days following the release of my endorsement of May 1, 2023. Litigants cannot be permitted to pick and choose the court orders they will follow. They simply lose all credibility with the court.
[15] To situate my broader concerns with the Applicant’s motion, my endorsement of May 1, 2023, disallowed the variation of the Preservation Order of November 21, 2023 that would have permitted the buying and selling of five pharmacies. In her affidavit of August 1, 2023, at paragraphs 26-29 and Exhibit “D”, the Respondent alleged that through his corporate counsel, the Applicant sought to transfer the full operation of the two pharmacies he intended to sell to the intended purchaser, Mr. Vora. In return, Mr. Vora would permit the Applicant to “obtain the shareholder refunds as soon as possible, instead of at the closing of the respective transactions.” Absent any other details, that proposal is perilously close to resembling a practical workaround the intended purchase transaction.
[16] The Respondent also alleged that the Applicant removed approximately $500,000 at the beginning of May 2023 from Goreway Total Health Inc. by way of a loan refund to shareholders, and $200,000 from Peel Drugs Inc. and Goreway Total Health Inc. through the creation of certified cheques made out to his personal account, without the consent of his partners. Furthermore, the Respondent alleged that the Applicant unilaterally changed the bank account information for Goreway Total Health, so as to remove deposited funds without the consent of his partners. Might those transactions be in lieu of the proposed sale pf the two pharmacies?
[17] Finally, the Respondent advanced very substantial allegations about the Applicant using pharmacy bank accounts to pay down personal credit cards, taking out federal loans against some of his companies, in the range of $50,000 to $100,000, directly in contravention of the Preservation Order of November 21, 2022, stripping all cash from the Goreway Total Health Inc and Peel Drugs Inc. bank accounts without the consent of his partners, refusing to make payments to the jointly owned Medical Arts Pharmacy in Ottawa, resulting in the inability of the pharmacy to function, withdrawing management fee payments of $40,000 from the same pharmacy, and failing to make payments of $150,000 towards two pharmacies, jointly owned with the Respondent.
[18] To be clear, none of the Respondent’s alleged transactions were proven. For many of the noted allegations, the Respondent relied on hearsay evidence. Although she purported to obtain the information from parties, such as Mr. Vora, who would be implicated in the suggested transactions, the Respondent could have obtained affidavits from those individuals to substantiate her claims. She did not do so. In the absence of cross-examinations on the affidavit filed or the production of affidavits from those individuals who provided the Respondent with the pertinent communications, it is difficult to find that these transactions actually occurred. To that concern, I will also add that although the Respondent produced a letter from the Applicant’s corporate counsel, proposing the transfer of operations to Mr. Vora, she was silent on whether Mr. Vora accepted that proposal. If the parties did not follow through with that proposal, then to cast aspersions on the Applicant’s conduct is disingenuous and highly problematic.
[19] At the same time, the Applicant’s provocative challenge that the Respondent bring a contempt motion if she were so certain of her allegations against the Applicant was unhelpful to the court and did nothing to allay the concerns that neither party is coming to this court with clean hands. Knowing that the Applicant has the onus to satisfy the court that it would be appropriate to vary the Preservation Order of November 21, 2023, I cannot explain why he would not go out of his own way to dispute the Respondent’s very substantial allegations. He certainly had no difficulty challenging the allegation that a plaintiff obtained default judgment against him and that such a judgment would be registered against the matrimonial home. If even some of the Respondent’s allegations were to be proven, they would be contrary to the existing terms of the Preservation Order and would compromise the Applicant’s credibility very significantly. Against such a prospect, the Applicant’s deafening silence left the court with serious doubt over his credibility and respect of the court proceedings.
[20] Moving from the Respondent’s allegations, I agree with the Applicant that the court received into evidence some reliable evidence on what the Applicant’s exposure is likely to be on equalization. Even if the Respondent’s equalization figure of $4,313,888.95 were to be preferred over the Applicant’s figure of $3,324,514.00, and even if the said figures were to be further impacted by the outstanding valuations of some ten pharmacies, the court now has a few goal posts to be able to gauge the anticipated order of magnitude for that payment. I would therefore be inclined to agree with the Applicant that with even a low-end value of $18 million for matrimonial mansion (home), the Applicant ought to be able to satisfy his equalization obligations towards the Respondent. Furthermore, if this were the Applicant’s only likely exposure, it would make sense to revisit the terms of the Preservation Order. However, the following very serious obstacles that stand in the way of such a conclusion.
[21] First, the Applicant faces significant exposure for child support for at least 3 if not all 4 of his children, significant retroactive section 7 expenses, and very substantial spousal support. Even if at this point in time, on the evidence before the court, it is impossible to pronounce on the magnitude of a spousal support entitlement, there can be little doubt that it is not as simple as saying that the Applicant will not face such exposure. For the reasons already discussed, the parties had a very complicated personal and commercial relationship that will necessarily make an ultimate determination of their respective obligations equally complex. On the suggested figures, I am far from certain the equity in the matrimonial home would be sufficient to meet the Applicant’s obligations to the Respondent.
[22] Second, the ability to satisfy the Applicant’s obligations against the anticipated realization on the matrimonial home, presupposes that even at an estimated value of $18 million, the matrimonial home is unencumbered and will be available to the parties to pay for the anticipated obligations. But even that assumption is far from certain, and that in and of itself is deeply troubling. By all accounts, the mortgage on the property is in default, the bank is preparing to foreclose, the insurance has lapsed, and the property is actually uninsurable. These circumstances put into serious doubt the Applicant’s representation that there is more than enough value in the matrimonial home to allow him to meet his anticipated equalization and support obligations towards the Respondent.
[23] Third, the issue of the General Security Agreement with CWB, which figured very prominently in my endorsement of May 1, 2022, has yet to be cleared up. The Applicant produced what he described in his affidavit a “revised GSA for SSMJ Drugs Ltd”, which purported to remove the reference to the matrimonial home (2275 Doulton Drive), from the security. However, in my review of the revised document, I cannot tell if the Applicant merely marked up the original on his own and attached it to his affidavit, or if CWB issued an updated formal amendment. There is no arms-length acknowledgment by CWB, anywhere in the document to confirm that the matrimonial home has not been put up as security for the Applicant’s transactions. Even more troubling is the continuing indication in the CWB that the Applicant’s liability on behalf of SSMJ Drugs Ltd. is continuing, absolute and unconditional. Whoever amended the CWB GSA, likely did an incomplete job or did not appreciate that the Applicant’s unconditional liability under the terms of the GSA is far more problematic to the Applicant’s position than the reference to the address associated with the matrimonial home.
[24] The Applicant could easily clear this issue with the direction to Chris Lowry of CWB that he produces the complete file to the Respondent, as she originally requested. The concern could also be cleared up with either a letter from CWB or some form of confirmation that the strike-out of the matrimonial home from the GSA document was bona fides, and not something the Applicant amended unilaterally. But nothing has been produced by the Applicant to clarify what was meant by the sentence “Their security is the existing GSA and personal guarantees”. The personal guarantees are joint and several amongst the partners. The concerns I raised at paragraphs 21 through 25 of my endorsement of May 1, 2023, stand. The Applicant is nowhere further in his reassurances concerning his financial exposure and liabilities that may impede his ability to satisfy his anticipated obligations towards the Respondent.
[25] Given the foregoing, the Applicant has failed to meet his onus of proving on a balance of probabilities that the Preservation Order issued last year on the consent of both parties may be varied, as requested. This motion must therefore also be dismissed.
[26] Against the dismissal of both motions, I am confronted with the reality of an impasse. That impasse exposes both to the risk of financial destruction. As I already noted above, preservation orders are intended to be temporary.
[27] Accordingly, while I am dismissing both motions, I do so on the following terms:
a. This case must go to trial as soon as possible. With the permission of RSJ Ricchetti, I am asking the trial office to add the case to the January 2024 trial blitz list. I do so with full awareness that counsel for the Respondent has another trial scheduled for the same period of time. Given that the trial blitz in January covers a period of 4-5 weeks, I will undertake to work with the trial office and counsel to ensure that this and the other matter do not overlap.
b. The alternative to an immediate trial is for the parties, in conjunction with their expert accountants, and likely tax lawyers and consultants, to work to identify ways of securing sufficient assets to satisfy all of the Applicant’s potential obligations to the Respondent. Such a figure ought to take into account the anticipated awards for equalization, child and spousal support, and section 7 obligations, both retroactive and future payments. While this by no means represents any kind of pronouncement on the prospects of the Respondent’s success on her claims, given the Applicant’s own indication that he is in financial trouble, such an arrangement must be credible and preserve sufficient funds that would satisfy all of the Respondent’s claims were she to be successful on all of them.
c. If the parties do reach an agreement on adequate security arrangements, then the Preservation Order could be varied and the trial for January 2024, could be moved to the May 2024 trial blitz.
d. In the meantime, having regard for the sum of $328,000 held in trust by Loopstra Nixon, such funds are to be released to pay for the accumulating debts related to matrimonial home. Since the parties have not provided the court with an up-to-date statement on the outstanding mortgage payments for the matrimonial home, other outstanding household expenses, and insurance costs, the said funds are to be applied as follows:
i. First, funds will be applied to bring the mortgage into good standing;
ii. Second, insurance coverage is to be reinstated;
iii. Third, other outstanding household expenses are to be satisfied; and
iv. Fourth, the reconciliation concerning these payments and how they attach to each party’s share of the funds, shall occur at a later point in time.
e. The Applicant shall direct Chris Lowry at CWB, or any other CWB representative who is managing or is connected with the Applicant’s portfolio there, to release the complete CWB file to the Respondent’s counsel, for her review. The Applicant shall also obtain from CWB and provide confirmation to the Respondent’s counsel of the Amended GSA and clarification concerning the existence of personal guarantees the Applicant may have extended.
f. The Applicant complains that he has never breached a support order and that he is eager to pay child support. He fails to acknowledge that nothing has stood in the way of such payments and that parties do not need court orders to pay child support. At no time has the Applicant indicated that he is not earning any income to explain his failure to pay any support to date. Accordingly, on an interim and without prejudice basis, the Applicant shall pay child support in the monthly sum of $4,000, effective January 1, 2023 for his youngest child, Anthony. He shall also pay the private school tuition fees for the academic year 2023-2024. If those fees were already paid by the Respondent, the Applicant shall reimburse her for that sum.
g. Child support and section 7 expenses for the two children studying abroad will be an issue for trial, unless the parties are able to reach an agreement.
h. The parties shall contact my office to arrange a trial management conference as soon as possible so that they are prepared for the trial in January.
[28] Finally, given the outcome of these motions, each party shall pay their own costs.
Tzimas J.
DATE: November 10, 2023
COURT FILE NO.: FS-22-103476-0000
DATE: 20231110
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Sherif Gerges, Applicant
AND
Sandra Gerges, Respondent
BEFORE: The Honourable Justice Tzimas
COUNSEL: Geoffrey Wells, for the Applicant
Kristen Normandin, for the Respondent
ENDORSEMENT
Tzimas J.
DATE: November 10, 2023