COURT FILE NO.: FS-19-00096622-0000
DATE: 2023 01 30
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Micheline BOUTIN
Robert M. Halpern and Victoria Varro, for the Applicant
Applicant
- and -
Victor BOUTIN
Gary S. Joseph and Aria MacEachern, for the Respondent
Respondent
JSVB Holdings Ltd. and Juan Speck Added Parties
Rohit R. Kumar
HEARD: January 24, 2023
ENDORSEMENT
RSJ RICCHETTI
[1] This hearing was scheduled by me at the December 29, 2022 attendance to deal with specific issues and any urgent issues.
[2] There were a number of issues heard this day.
VESTING ORDER
[3] It was contemplated by this court that, when the 8 properties were ordered sold by Mrs. Boutin pursuant to my August 29, 2022 Order, if a vesting order was necessary, one could be obtained. The typical vesting order grants title to a purchaser at closing where necessary due to the circumstances of the case.
[4] Given the lack of trust between the parties, at one point, Mrs. Boutin sought a vesting order placing the properties in her name to defeat any obstruction she feared from Mr. Boutin regarding the sale of the properties.
[5] After both parties obtained taxation advice, it now appears that by vesting the properties before the sale to the third party, a disposition is triggered and additional land transfer tax.
[6] The parties have now agreed not to proceed with the proposed vesting orders suggested by Mrs. Boutin. Mrs. Boutin wants a process in place to deal with any obstruction by Mr. Boutin.
[7] Mr. Boutin’s counsel advises that Mr. Boutin will cooperate with the sale of the properties ordered by the court.
[8] I am satisfied that some mechanism must be put into place to permit Mrs. Boutin to obtain a vesting order directly to the third-party purchaser should there be difficulties or issues in the closing of the transaction.
[9] In the event there are difficulties or issues completing any sales of the properties by Mrs. Boutin, Mrs. Boutin may seek, on an urgent motion before me, a vesting order, vesting the property to be sold to the third-party purchaser. To obtain this order, this court will require the following be complied with:
a) the motion be on notice to Mr. Boutin, short notice if necessary;
b) an up to date Abstract and Execution Search for the specific property to ascertain if there are any other registered encumbrancers effected by the vesting order. And if there are any known encumbrancers, whether registered or not, they should be put on notice regarding the motion for a vesting order; and
c) an affidavit from the real estate lawyer acting for Mrs. Boutin setting out the Agreement of Purchase and Sale, Statement of Adjustments, confirmation that the transaction is ready to close by both parties, and any other pertinent information or issues regarding the proposed closing.
[10] This resolution was on consent of both Mr. and Mrs. Boutin.
ENCUMBRACERS and Third-PARTY CLAIMS
[11] Clearly, as set out above, all encumbrancers and parties with an interest in the sale of the property (or any of them) should be put on notice if there is a disagreement between Mr. and Mrs. Boutin regarding whether that encumbrancer should be paid out on closing.
[12] One such disputed encumbrance has been identified.
[13] Audrey Boutin, the wife of Jimmy Boutin, has two mortgages on 94, 96, 98 and 100 Railroad Street, Brampton (Railroad Property) and 412 Country Road 2, Leeds and the Thousand Islands, Gananoque (Gananoque Property).
[14] Mrs. Boutin takes issue regarding the validity of these mortgages as Mrs. Boutin does not have evidence that Audrey Boutin actually loaned money to Boutin Holdings Limited – the underlying indebtedness secured by these mortgages. As set out in my Contempt reasons, these related party transactions require disclosure of all supporting and relevant documentation and an explanation of the transaction by the parties involved.
[15] Perhaps the Receivers investigation, now that $100,000 will be paid (having settled and signed the December 29, 2022 Order) may obtain and produce documentation that will permit this identified issue to be resolved prior to the sale of the properties. It might not.
[16] The Railroad Property is scheduled to close in the spring of 2023. As a result, the issue of whether the mortgage should be paid out immediately or paid into court until final determination needs to be addressed expeditiously.
[17] I agree with Mrs. Boutin that the amount allegedly owing to pay off these mortgages (approximately $2.2 million) should not be paid until the validity of the indebtedness and security has been established.
[18] The Gananoque Property has yet to be sold.
[19] This judicial determination could be done at trial. Or it could be done as a trial of an issue involving all interested parties to the trial. Both methods would result in a final determination of the validity of the encumbrance. Clearly, the trial of an issue could be heard sooner and allow funds to be paid or transferred as appropriate.
[20] It was decided that Mrs. Boutin will serve her notice of this trial of an issue on Audrey Boutin (and any other alleged related party encumbrancer) as soon as possible. While I recognize that Audrey Boutin appears to have counsel (Mr. Barris), it is not clear if this would be Audrey Boutin’s counsel at the trial or trial of an issue. Audrey Boutin will have to be personally served or Mr. Barris can agree to accept service on behalf of Audrey Boutin.
[21] Once Audrey Boutin (and any other alleged related party encumbrancer) has been served, assuming their counsel want the issue dealt with expeditiously, there will be convened another conference to deal with procedural matters such as defining the issue, timetabling, scheduling the hearing and any other required details.
mr. boutin request for release of $200,000
[22] Mr. Boutin’s counsel candidly acknowledges that court ordered monies payable to Mrs. Boutin should be paid before any monies are released to Mr. Boutin.
[23] Mrs. Boutin’s position appears to be that, if any amount is paid out to Mr. Boutin, a similar amount should be paid out to her.
[24] I remain of the view, any payment to Mr. Boutin or additional payment to Mrs. Boutin, should await until there are excess funds from the sale of the properties. This will permit the court to deal with other expenses which may arise such as receivership fees or tax liabilities.
[25] This issue is adjourned.
DECEMBER 29, 2022 ORDER
[26] The parties could not agree on the form of the order. Both parties provided me with their draft orders. I reviewed the draft orders. Thereafter, I released the December 29, 2022 Order duly signed.
TAX WITHHOLDING FROM PROCEEDS OF SALE
[27] Both parties recognize that the sale of any of the 8 properties ordered to be sold will likely result in tax liability to the registered owner. Both recognize the need to withhold some of the proceeds of sale to satisfy the tax liability.
[28] Expert evidence was filed by both parties. An issue was raised concerning Mr. Boutin’s expert as not being impartial – I need not decide that issue.
[29] In my view, the experts were not that far apart. Both recognize that the gains may be taxed as capital gains or as income. The difference between the two is very significant - from $5.8 million to $9.6 million for the 4 properties already sold according to one accountant. How the profit from the sale of each property can only be ascertained after CRA assesses or re-assesses (and any appeals).
[30] Mrs. Boutin wants the least amount held back for potential taxes. Mr. Boutin wants the full extent of the potential tax liability be held back.
[31] The current order requires that the net proceeds of sale of the properties, after payment of the court ordered amounts to Mrs. Boutin, be paid into court until further order of the court.
[32] At this point only one property (the Norfolk property closed on December 15, 2022) has been sold and closed. Pursuant to my December 29, 2022 Order, an amount was set aside for the expected tax liability.
[33] Quite frankly, I am not certain why this is an issue now. There are no other net proceeds of sale in court. More importantly, the party’s tax experts should attempt to agree upon tax filing relating to the disposition of the specific property before it closes.
[34] The parties pre-suppose further payouts before this matter gets to trial. That may or may not be ordered. However, I will state that, subject to the circumstances relating to each specific property and corporate circumstances, paying out the lowest possible potential tax creates a significant exposure to the registered owner, and if it is a company and the monies are paid out, there is potential liability to the officers, directors and the recipients of those monies.
[35] There appears to be agreement that the corporate taxes arising from the sale of the properties be withheld at the income level – which appears to be he highest. However, the problem is not resolved with that apparent consensus. The total tax payable is or may be dependent on the treatment of how the net proceeds of sale flow to the shareholder – as a capital dividend or as a repayment of shareholder loan. The parties have a mutual interest in minimizing taxes.
[36] The parties will have to deal with this issue sooner rather than later if funds are to be paid out to the parties. Trying to characterize them after the payment has been made may be more challenging.
[37] The parties should try to resolve this issue. If the parties cannot resolve this issue, this will have to be decided by motion. However, I will require the parties to produce legal authorities that the court has jurisdiction, absent an oppression remedy or winding up or a Companies’ Creditors Arrangement Act (CCAA) or similar proceeding, to direct the company how to distribute the income to the shareholder or parties.
varying the properties ordered to be sold
[38] I now turn to Mr. Boutin’s motion to vary my order to sell the 8 properties ordered sold. Mr. Boutin seeks to stop Mrs. Boutin from continuing to sell any of the remaining 8 properties which have not already been sold or are the subject of an agreement of purchase and sale with a bona fide third party purchaser (Unsold Properties).
[39] 4 of the properties have been sold while 4 remain unsold. However, they have been listed and are in the process of being sold.
[40] I will not repeat my reasons for ordering that the various properties be sold. See Boutin v. Boutin, 2022 ONSC 4776.
[41] Mr. Boutin states that the sale of the Unsold Properties is no longer required to pay the court ordered amounts to Mrs. Boutin. He states all the properties have increased in value.
[42] I agree that it appears the sale of all the properties will result in excess funds in court beyond that which is needed to pay Mrs. Boutin the court ordered amounts. However, what remains uncertain are the costs of the Receivership appointed – one of the purposes for the sale of the properties. (see para. 115 of Boutin v. Boutin, 2022 ONSC 4776). What remains uncertain is the potential tax liability – as Mr. Boutin wants the maximum potential tax liability to be withheld. Accordingly, the amount that will be left after payment to Mrs. Boutin, and a holdback for taxes is not known.
[43] I see no rational or reasonable basis to vary the order. It was made. It was not appealed. Even Mr. Boutin had finally relented and agreed to sell a number of properties.
[44] Mr. Boutin states he can raise the necessary money (millions of dollars) through financing. This is the same party who stated to this court that he had an unknown net worth, if any, and didn’t have any money to rent a residence so much that the had to sleep in his office. Now, Mr. Boutin can raise “millions of dollars”. Where was this ability to finance when order after order was made against him to pay Mrs. Boutin, which orders went unpaid in August – and have still not been paid. And if future orders are made, must this court have to go through motion after motion (close to 40 motions in about 2 years)?
[45] Even if Mr. Boutin’s submission had merit, I would not exercise my discretion to vary the order. The obstructive conduct of Mr. Boutin continues. There was obstruction to the sale of the properties (set out in the December 2022 motion) by Mr. Boutin unilaterally listing the properties despite this court’s order that Mrs. Boutin was to proceed to sell the properties. There was the attempt to enter into a Joint Venture where $0 would be generated to the Boutin company yet there would be a transfer of a property. There was Mr. Boutin’s long time real estate agent/broker, Mr. Camara, submitting an offer. This is the same agent Mr. Boutin had unilaterally listed the 8 properties for sale despite my August 2022 Order. There was the attempt by Mr. Boutin after my August 2022 Order, through Mr. Camara, listing 3 properties where Mrs. Boutin was a joint owner – WITHOUT her knowledge or permission.
[46] There is a potential issue with the sale of one of the 8 properties, the Lot 26 Heritage Road, Caledon property as it abuts another Boutin Holdings Limited and the sale of one contravenes the Planning Act unless there is a severance or variance. This may abort the sale or certainly delay the sale of this property. This may eliminate the sale of this property and hence reduce the net proceeds from the sale of the properties.
[47] And then there is the Metrolinx issue. While not before me to deal with – it demonstrates Mr. Boutin’s continued disregard for court orders. As set out in my prior reasons, I made a preservation/non-dissipation Order in December 2021. That was followed by a further direct Order from J. Van Melle on February 1, 2022 that Mr. Boutin not to dispose of or sell any assets. I won’t repeat the sale of the Halton Hills property the same day as my Order by Mr. Boutin nor the subsequent attempt by Mr. Boutin to not disclose the fact it had been sold. The court was very critical of this conduct.
[48] Metrolinx approached Mr. Boutin with respect to compensation for a portion of one of his properties (one of the properties this court ordered to be sold!) Mr. Boutin executed a document transferring to Metrolinx a portion of the land for an alleged approximately $52,000. Was Mrs. Boutin advised of this before it occurred? No. The portion of the property is now sold and this will no doubt become yet another motion in this proceeding.
[49] There will be an equalization payable to Mrs. Boutin even if the trial judge was to accept Mr. Boutin’s Chartered Business Valuator (CBV) valuation that his net worth is $20 million rather than the $77 million set out in his Net Worth Statement just months before the separation. The only question is how much. The same can be said for Mrs. Boutin’s claim for spousal support. Given Mr. Boutin’s actions to date, a lump sum payment is not out of the question.
[50] There is no basis in law or equity for this court to vary its order regarding the sale of the properties ordered in Boutin v. Boutin, 2022 ONSC 4776.
[51] Mr. Boutin suggests that the properties are being sold by Mrs. Boutin at “fire sale” prices. Yet, there is no convincing evidence of this. Mr. Boutin stating there is another property close which Mr. Boutin says was sold for more money is not convincing evidence.
[52] And, as I stated before, Mr. Boutin is free to obtain appraisals and make a claim against Mrs. Boutin for improvident sale(s) which claim, if successful, can be considering in determining the equalization payment at the trial.
[53] Motion dismissed.
RELEASE OF BALANCE OF FUNDS TO JSVB
[54] Once again JSVB Holdings Ltd. (JSVB) seeks the release of the balance held from the sale of the Halton Hills property.
[55] Mr. Boutin, on behalf of JSVB, entered into an agreement to sell the Halton Hills lands on December 21, 2022, the same day as my preservation/non dissipation order. The sale closed in 2022 after attempts were made by Mr. Boutin not to disclose the sale.
[56] Now, JSVB says it’s a separate entity (of which Mr. Boutin is a 50% shareholder and one of the two directors) that JSVB needs the monies for its development.
[57] JSVB has undertaken to this court certain conditions regarding the release of funds, conditions to ensure the funds do not directly or indirectly go to Mr. Boutin.
[58] While I appreciate the JSVB development may benefit Mr. and Mrs. Boutin, it was Mr. Boutin who created this problem by selling the property. Mr. Boutin now hides behind a separate corporate entity, which he controls, to use those net proceeds.
[59] It is inequitable to permit Mr. Boutin to have created this situation, unilaterally sell the land, not pay Mrs. Boutin’s court ordered payments, but have his separate corporate entity ask this court that the monies be paid to JSVB, ahead of the court ordered payments to Mrs. Boutin.
[60] The order would essentially permit Mr. Boutin to carry on business as usual and put one more hurdle in Mrs. Boutin’s ability to recover any equalization payment ordered.
[61] As I set out in my December 29, 2022 Reasons, I would not consider or order that the funds be released to JSVB until Mrs. Boutin was fully paid the court ordered monies.
[62] I advised counsel at the hearing that my Order was that I would not grant the order that JSVB sought. Once Mrs. Boutin has been paid the court ordered amounts, she does not oppose the payment out to JSVB. See para. 73 Mrs. Boutin’s affidavit of December 21, 2022. Of course, such a payment would be subject to JSVB’s undertakings to this court that no monies can be paid out to Mr. Boutin or his companies directly or indirectly and subject to an accounting that the payments are made to bona fide third parties for the completion of the development.
metrolinx
[63] I make no order with respect to the Metrolinx dispute, neither what occurs with the monies paid/to be paid nor the documentation. What is clear is that Mr. Boutin proceeded to deal with a transfer of a portion of land from the properties ordered to be sold.
[64] This was disclosed to Mrs. Boutin in November 2022 AFTER Mr. Boutin had accepted the Metrolinx offer on September 12, 2022 granting Metrolinx ownership of a portion of the Concession 10 property. See Mr. Boutin’s affidavit of January 11, 2023 at para. 11 where this transaction is admitted.
[65] Mr. Boutin says it was not an Agreement of Purchase and Sale, rather, it was an Offer of Compensation for the land to be acquired by Metrolinx. I do not see a distinction as it relates to the failure to comply with my December 2021 Order for preservation nor J. Van Melle’s February 1, 2022 non depletion Order by executing a document to transfer part of the property. Especially, when it was part of one of the properties this court had ordered sold just one month earlier.
[66] Unless this is resolved between the parties, I await any motion that either party may seek to bring with a full record before dealing with this issue.
COSTS
[67] Either party seeking costs must deliver written submissions within 2 weeks, with a page limit of 3 pages PLUS Offers, Bill of Costs and authorities.
[68] The responding party to a claim of costs must deliver written submissions within 2 weeks thereafter, with a page limit of 3 pages plus Offers and authorities.
[69] There will be no reply.
Released: January 30, 2023 RSJ Ricchetti
COURT FILE NO.: FS-19-00096622-0000
DATE: 2023 01 30
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Micheline BOUTIN
Applicant
--and –
Victor BOUTIN
Respondent
ENDORSEMENT
RSJ Ricchetti
Released: January 30, 2023