Endorsement

DATE: 20240614 SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: DOUG MIDDLETON AND: DIRECT BROADCAST SATELLITE COMMUNICATIONS CORP., THE BENEFITS GROUP INC. and MARK BER

JDM GROUP LTD. and JASON MIDDLETON AND: DIRECT BROADCAST SATELLITE COMMUNICATIONS CORP., THE BENEFITS GROUP INC. and MARK BER

DIRECT BROADCASTING SATELLITE COMMUNICATIONS CORP., THE PRODUCERS GROUP LTD. and MARK BER AND: JDM GROUP LTD., PRODUCERS PLANNING GROUP INC., THE BENEFITS GROUP INC., THORNBRIDGE CAPITAL GROUP INC., DOUG MIDDLETON and JASON MIDDLETON

BEFORE: KIMMEL J.

COUNSEL: Harvey Chaiton & Laura Culleton, for the Sales Officer B. Riley Farber Advisory Inc. Howard Borlack & Ben Tustain, for Doug Middleton, Jason Middleton, and JDM Group Ltd. Kevin MacDonald & Jamie Sanderson, for Direct Broadcast Satellite Communications Corp., Mark Ber, The Producers Group Ltd., Thornbridge Capital Inc., and Producers Planning Group Ltd.

HEARD: May 6, 2024

ENDORSEMENT (sales officer’s motion for advice and directions: sale plan)

Introduction

[1] These three oppression remedy applications resulted in an order of this court dated December 30, 2022 [1] appointing a B. Riley Farber Advisory Inc. as the Sales Officer to wind up and sell the business and assets of Producer’s Planning Group Ltd. (“PPG” or the “Planning Group”) and The Benefits Group Inc. (“TBG” or “Benefits Group”). These two closely held companies carried on business as insurance brokerages with a focus on group benefits and life insurance. Mark Ber and Jason Middleton are equal shareholders of the Planning Group. Mark, Jason and Doug Middleton are equal shareholders of the Benefits Group.

[2] The Sales Officer has been unable to fulfill its mandate under the December 30, 2022 Appointment Order because of ongoing disputes between Mark, Jason and Doug. This motion is about the latest dispute concerning 789 insurance policies that were held by the Planning Group when the Sales Officer was appointed but were later transferred to Mark’s company, The Producer’s Group Ltd. (“PG”). These 789 policies now held by PG (the “PG Transferred Policies”) generate estimated annual renewal commissions of $338,506.

[3] These PG Transferred Policies were included by all parties in their estimates of the value of the Planning Group that were part of the evidentiary record on the oppression remedy applications. The Sales Officer considers the value of the PG Transferred Policies to be material.

[4] After discovering that the PG Transferred Policies are now held by PG, the Sales Officer brought this motion in February 2024. The Sales Officer seeks directions from the court to determine whether the PG Transferred Policies (or any of the other insurance policies transferred out of the Planning Group or the Benefits Group to any other entity on and after January 1, 2021) should be included in the Property of the Planning Group and the Benefits Group (the “Companies”) that the Sales Officer is mandated to sell under the Appointment Order.

[5] Jason and Doug contend that the PG Transferred Policies and any other policies that have been transferred out of the Companies since January 1, 2021 should be included in the Property to be sold by the Sales Officer.

[6] Mark contends that the PG Transferred Policies should not be included in the Property to be sold by the Sales Officer. Mark defends his actions that led to the transfer of the PG Transferred Policies to his company, PG. Mark says that certain of the PG Transferred Policies (“PG Originating Policies”) were always beneficially owned by PG and should not be included in the Property to be sold by the Sales Officer. Mark further maintains that any other policies that have been transferred out of the Companies since January 2021 (whether to PG or elsewhere) were transferred at the request of the clients and no longer are owned by the Companies and cannot be sold by the Sales Officer.

Summary of Outcome

[7] For the reasons that follow, I find that the PG Transferred Policies are part of the Property that the Sales Officer was appointed to sell and should be included in the Sale Plan. These policies were part of the Property of the Companies at the time of the Appointment Order. Mark has improperly caused the PG Originating Policies to be transferred to PG. Mark also orchestrated the circumstances that led clients to request that other policies be transferred to PG.

[8] Mark and PG shall co-operate in facilitating the sale of the PG Transferred Policies by the Sales Officer and the sale proceeds shall be paid to, and held by, the Sales Officer in accordance with paragraph 27 of the Appointment Order.

[9] These directions are provided based upon the court’s determination that the required factual findings are capable of being made based on a written record, consistent with the practice of the Commercial List in these types of matters. The issues to be decided on this motion are within the jurisdiction of this court to decide without ordering a trial of an issue. I dismiss the request of Mark and PG that a trial of issues be ordered.

Background

The Appointment Order and Status of Contemplated Steps

[10] The Appointment Order appointed the Sales Officer effective March 28, 2023. The Appointment Order arises out of three oppression remedy applications in which the parties were seeking shareholder remedies and related relief involving the Planning Group and the Benefits Group. [2]

[11] Cavanagh J. found (at para. 15 of his reasons for making the Appointment order) that the shareholders of the Companies “are hopelessly deadlocked and unable to continue to carry on the businesses of PPG [the “Planning Group] and TBG [the Benefits Group] with each other as shareholders on an ongoing basis.”

[12] The Sales Officer’s mandate was to carry out a process for the sale of the shares and/or the business and assets of the Companies (collectively, the “Property”). Among other things, the Sales Officer was empowered and authorized by paragraph 6 of the Appointment Order to

(a) prepare a plan for the sale of the Property for approval by this Court (the “Sale Plan”);

(b) prepare a plan for winding up the Companies at a time to be directed by further Order of this Court;

(d) review all of the Property and make inquiries as to any security, rights, claims or other interests asserted in, to or against any of the Property; and

(g) have full and complete access to the Property, including the premises, employees, consultants and advisors, books, records, data, including data in electronic form, and other financial documents of the Companies, wherever located, to the extent that is necessary or desirable to perform the Sales Officer’s duties arising under this Order.

[13] The Sales Officer was not empowered to, and did not, take or maintain possession or control of the businesses or Property. As a practical matter, since neither Jason nor Doug was still involved in the management or operation of the Companies at or after the time of the Appointment Order, Mark remained in possession and control of the Companies and their businesses and Property.

[14] The Companies were not ordered to be wound-up immediately. It is clear from the court’s December 30, 2022 reasons and the agreed upon terms of the Appointment Order that the Sales Officer was to come up with a Sale Plan for the sale of the business and Property of the Companies. The parties were precluded from participating in the Sale Plan; rather, it was contemplated that the business would be sold to a third party or third parties. Proceeds generated by the Sale Plan are to be held by the Sales Officer in trust and shall not be distributed pending further order of the court. It is only after the Sale Plan has been completed that the Appointment Order allows for any interested party to apply for a court order winding up the Companies, if deemed necessary.

[15] Nor have the Companies been dissolved. They may never be.

[16] Mark is the only one of the three shareholders who has had continuous access and control of the Companies and their businesses and records regarding the business that was held and continued to be serviced in the Companies since January 2021. While Mark argues that Jason also had access to and control over the Companies’ records and business, the procedural history in these related matters suggests otherwise. Since the litigation commenced, Mark has been the one in control of the records and the business of the Companies.

[17] It has taken some time and effort for the Sales Officer to obtain the information and records that it needs from Mark. Now that it has received some of the necessary information and records, the Sales Officer has been stalled in its efforts to identify and collect the Property of the Companies to be sold, with the result that it has not yet been able to present its Sale Plan to the court for approval.

The Policies At Issue

[18] Based on redacted documents and information provided by Mark following a production order dated October 30, 2023, the Sales Officer has accounted for 1,961 life and group policies being held by the Companies as of January 1, 2021 with estimated annual renewal commissions of $570,077. Only 124 of those policies with estimated annual renewal commissions of $76,247 remain with the Companies as of February 2024 (the “Current Policies”). [3]

[19] According to Mark, 1,837 policies with estimated annual renewal commissions of $493,830 have been transferred out of the Planning Group since January 1, 2021 (the “Transferred Policies”).

[20] After the Appointment Order was made, 1,000 of the Transferred Policies with total estimated annual renewal commissions of $58,970 were transferred to Richardson Wealth pursuant to a settlement that was reached between the Sales Officer and Richardson Wealth. This settlement was the subject of a claim under a Distribution Agreement between Richardson Wealth and the Planning Group that the Sales Officer was authorized to pursue and settle. The claim and settlement was for a contract termination fee that the Sales Officer is now holding in trust and will be subject to distribution in the course of these proceedings.

[21] Of the 837 other Transferred Policies that Mark has disclosed to the Sales Officer, the vast majority (789 of them) with estimated annual renewal commissions of $338,506, are now with PG (they are the PG Transferred Policies). The remainder of the disclosed Transferred Policies were either terminated by the clients or have been transferred to as of yet unknown or undisclosed recipients. It is the PG Transferred Policies that are at issue on this motion.

[22] Mark says that the PG Transferred Policies fall into two categories:

a. Clients whose policies Mark claims were beneficially owned by PG throughout the entire time that they were with the Planning Group, whose ownership was transferred to the Planning Group in 2014 due to a clerical error that he corrected to transfer them “back” to PG in the fall of 2023 (the “PG Originating Policies”); and

b. “Orphaned” clients who Mark says asked to move their policies to PG from the Planning Group after Mark moved his licence and brokerage services from the Planning Group to PG leaving the Planning Group and Benefits Group without a licenced insurance broker (“PG Orphaned Policies”).

The Issues to be Decided on this Motion

[23] The outcome of this motion depends upon the court’s determination of the following issues about the PG Transferred Policies:

a. Who owned the PG Transferred Policies, the Planning Group or PG (the “Ownership Issue”)?

b. Even if the PG Transferred Policies were owned by PG, are they part of the Property to be sold by the Sales Officer under the Appointment Order (the “Inclusion Issue”)?

[24] The Ownership Issue involves consideration of the terms and implementation of arrangements between Mark and Jason regarding the ownership of the PG Originating Policies before their relationship broke down. It will also involve consideration of Mark’s conduct when he purported to unilaterally transfer these polices “back” to PG to correct what he says was a clerical or administrative error that resulted in them being transferred to the Planning Group in 2014.

[25] The Inclusion Issue involves consideration of the (i) the terms and scope of the Appointment Order with respect to the PG Originating Policies and (ii) Mark’s role in the circumstances leading up to, and the implementation of, the transfer of the Transferred Policies after the Appointment Order became effective on March 28, 2023. This latter issue includes Mark’s role in the decision of some clients to transfer their policies (PG Orphaned Policies) from the Planning Group or the Benefits Group to PG after the Sales Officer was appointed.

[26] The respondents (Mark and his affiliates, Direct Broadcast Satellite Communications Corp., PG and Thornbridge) also raise a third procedural issue about whether a trial of an issue is required for the court to decide the first two substantive issues. They contend that the court does not have the jurisdiction to decide the issues raised on this motion based on the written record because the issues require findings to be made that are predicated on disputed facts (the “Jurisdiction Issue”).

Analysis

[27] The issues will each be addressed in turn.

The Ownership Issue

[28] The standard of proof of ownership is on a balance of probabilities. See Familymat Laundromat Inc. v. The Laundry Lounge Inc., 2018 ONSC 5867, at para. 56.

[29] The ownership of the PG Orphaned Policies at the time of the Appointment Order is not in issue. PG owned them. The PG Orphaned Policies only are engaged under the Inclusion Issue.

[30] The PG Originating Policies are engaged under both the Ownership and Inclusion Issues. Ownership of the PG Originating Polices is addressed in this section and inclusion is addressed for both types of PG Transferred Policies in the next section.

The Position of the Parties Regarding the Ownership of the PG Originating Policies

[31] The Ownership Issue is primarily a dispute between Mark and Jason. The positions and arguments are summarized as theirs for simplicity, although it should be understood that they, in turn, speak for the other parties to these proceedings with whom they are aligned.

[32] Mark contends that these PG Originating Policies were always owned by PG and were transferred into the name of the Planning Group in September 2014 due to a clerical or administrative error long made before this litigation. Mark relies upon one of the documents signed in 2014, a direction to pay, that states that the commissions were being assigned to the Planning Group, but not the ownership of the policies themselves.

[33] Mark says he caused the PG Originating Policies to be transferred back to PG because he believed they always belonged to PG. Mark says that he did not need to notify or seek the approval or consent of the Sales Officer, Jason, Doug or the court for these transfers because PG Originating Policies were never the Property of either of the Companies.

[34] Mark also claims that Jason has admitted that these policies always belonged to PG because he stated, during an earlier attempt to resolve their disputes, that the PG Originating Policies would be transferred back to PG upon the dissolution of the Planning Group.

[35] Jason maintains that the PG Originating Policies were transferred to the Planning Group in 2014 and are part of the Property that the Sales Officer has been authorized to sell. The evidence of Jason and the Companies’ accountant, Jeff Goldberg, is that Goldberg recommended, and Jason and Mark agreed, to transfer the PG Originating Policies to the Planning Group in 2014, after Jason’s earn-in/buy-in period had been completed.

[36] Jason claims that the transfer of the PG Originating Policies to the Planning Group was effected through the contemporaneous documents, specifically transfer agreements that were executed by both the Planning Group and PG at the time. This transfer was intentional and had a legitimate business purpose.

[37] According to Jason, his prior affidavit indicating his agreement to return these PG Originating Policies to PG upon dissolution of the Planning Group was part of a proposed global resolution of Jason and Mark’s dispute that was never implemented. It was also specifically tied to a dissolution of the Planning Group, which was not ordered under the Appointment Order and has not occurred. Jason maintains that his statement about the return of the PG Originating Policies was not a free-standing acknowledgement regarding the ownership of the PG Originating Policies as Mark now suggests.

[38] The Sales Officer seeks the court’s advice and directions. It questions Mark’s evidence regarding the clerical or administrative error he claims to have made in 2014 that resulted in the PG Originating Policies being transferred from PG to the Producers Group in 2014, in the face of the contemporaneous records documenting the transfer of those policies to the Planning Group and the evidence of Jason and the Companies’ accountant, Goldberg about the rationale for the transfer at the time. The Sales Officer also notes that all parties treated the PG Transferred Policies (including the PG Originating Policies) as part of the Planning Group’s Property in the valuations that they presented to the court on the oppression remedy applications in which the Appointment Order was made.

The Contractual Context – the USA

[39] Mark has been in the insurance business since 1993. Prior to the establishment of the Companies, Mark operated an independent brokerage business through his company PG. PG provided services to and represented insurance carriers. Mark is a shareholder and director of PG.

[40] Jason had been working in the insurance industry prior to joining Mark and forming the Planning Group in 2010. The Planning Group was incorporated by Mark and Jason as a joint venture insurance brokerage business. When the Planning Group was incorporated, Jason was working at Transamerica Insurance and Mark was operating as an insurance broker through his company PG.

[41] Later, the Benefits Group was established by Mark, Jason and Doug to hold and administer the group benefits side of their business for the benefit of all three of them. The Planning Group continued to hold and administer the life insurance policies for Mark and Jason’s benefit.

[42] Jason began working full time at the Planning Group in or about September 2010.

[43] On September 1, 2011, Mark and Jason, along with their respective holding corporations, entered into a Unanimous Shareholders’ Agreement (the “USA”). It was agreed that

a. any renewals of existing Group insurance business within PG were to be renewed within PG until August 31, 2014 and thereafter to be renewed in the Planning Group (s. 3.01);

b. all new Non-Group Insurance (life, disability, illness, health and long term care insurance) would be placed through the Planning Group, but any Non-Group Insurance business existing within PG would remain within PG and PG would be eligible for any renewal income from such business in perpetuity (s. 3.02);

c. Jason would be entitled to receive a monthly salary from PG equal to fifty percent (50%) of all renewal income commencing on October 15, 2014 and in respect of renewal income received by Producers Group in and after September 2014 (s. 3.03); and

d. Mark was precluded from selling any shares of PG or selling its book of business, without Jason’s written consent (s. 9.03).

[44] During Jason’s four year earn-in/buy-in period (from September 2010 to September 2014), he was not paid a salary by PG for work he did in respect of the administration of any insurance policies that originated with and remained in PG. After Jason’s earn-in/buy-in period, pursuant to the USA, Jason was to be paid a salary by PG equal to half of the annual renewal commissions for insurance policies that continued to be held in PG.

The Events in 2014

[45] Notwithstanding ss. 3.02 and 3.03 of the USA, effective September 1, 2014, the Non-Group insurance business that was then existing within PG did not remain in PG and Jason did not start to receive a monthly salary from PG. Instead, the Non-Group insurance policies that were then existing within PG were transferred to the Planning Group (these are the PG Originating Policies). Transfer agreements were signed in August 2014 authorizing a block assignment of business from PG to the Planning Group, effective September 1, 2014.

[46] Mark signed the transfer agreements, which state that he, on behalf of PG, was releasing the policies to the Planning Group for service and commissions and that he and PG were to be discharged from all responsibilities related to lapses or commission chargebacks and bonuses of policies presently in force. Mark also signed the corresponding acceptance of responsibility by the Planning Group and a promise by the Planning Group to pay all funds that may become due in regards to the policies sold by the ceding agent before the date of the transfer.

[47] Mark also signed directions to pay in August 2014 that were effective on September 1, 2014 directing that all remuneration, commissions or override formerly payable to PG under the terms of its agreements (“Remuneration”) be paid to the Planning Group. This standard form direction to pay contains a statement at the top that it is to be used when changing the payee of the cheque only, and that in those circumstances, all rights, ownership and liability remain with the contracted Agent (which would be PG). The examples provided indicate (by their dates) that the directions to pay were signed after the policies had already been transferred to the Planning Group.

[48] There are conflicting versions of events about why these documents were signed and their intended purpose and effect (as described above). Mark says only the Remuneration, and not the ownership, of the PG Originating Policies was supposed to be transferred to the Planning Group and the assignment of the ownership was done in error.

[49] Jason says that the ownership of the PG Originating Policies was transferred to the Planning Group, including the right to receive the Remuneration. Jason says this was in accordance with the intention of the parties that, after Jason’s earn-in/buy-in period, Mark and Jason would benefit equally from the renewal commissions generated by those PG Originating Policies as well as the renewal commissions on any new business written by the Companies.

[50] Jason’s evidence is corroborated by the evidence of the accountant for the Companies, Jeff Goldberg. Mr. Goldberg testified that he met with Mark and Jason at the time of the transfer in 2014 to discuss a more efficient way to administratively deal with Jason’s entitlement to 50% of the renewal commissions under s. 3.03 of the USA. He explained that this transfer was effected to eliminate the expense and administrative time required to operate two brokerage firms to manage policy renewals that Mark and Jason were entitled to an equal share of starting in October 2014.

[51] According to Goldberg, the financial statements prepared for the Companies after the transfer of the PG Originating Policies to the Planning Group are consistent with this explanation: The Companies’ financial statements included the annual commission renewals from the PG Originating Policies; PG’s financial statements did not. None of the financial statements refer to any trust arrangement concerning the PG Transferred Policies.

[52] Mark disagrees that there was ever an intention to transfer the ownership of these policies to the Planning Group. Rather, he asserts that the right to receive renewal commissions associated with the PG Originating Policies was only to be assigned to the Planning Group while the Planning Group continued to operate, not in perpetuity.

[53] Mark objects to Goldberg’s evidence. Much of the objection has to do with outlines of testimony from Goldberg in an email he sent to Jason and that Jason appended to his affidavit on this motion, and with a draft affidavit Goldberg was asked by Jason’s lawyer to sign on this motion but declined to do so (a copy of which Mark requested but has not been produced). These do not undermine Goldberg’s evidence given when he was examined as a witness on this motion. The contents of the email were adopted by Goldberg on his examination under oath. The draft affidavit was superseded by Goldberg’s sworn testimony on his examination and is irrelevant.

[54] There is no substantive or procedural basis for challenging Goldberg’s evidence, except Mark’s disagreement with it in his own testimony. Mark had a full opportunity to cross-examine Goldberg, during which Goldberg’s evidence on the relevant topics for this motion was not undermined. He stuck to what he had knowledge of and acknowledged what he had not been told, but did not change his explanation about the rationale for the transfer of the PG Originating Policies to the Planning Group or the accounting of them in the financial statements that followed. That is the evidence from Goldberg that I consider to be relevant to this motion and rely upon.

[55] To the extent that the evidence of Goldberg aligns with what Jason has testified to and differs from Mark’s account of the events, Goldberg’s evidence is objective and more reliable. There is no evidence that he was influenced or threatened to say anything that he did not consider to be true. His evidence on the points referenced in this endorsement is accepted.

[56] Mark is right that Goldberg did not testify that the assignment of the PG Originating Policies to the Planning Group was, or was intended to be, in perpetuity. Goldberg is not a lawyer and his evidence is directed to the business rationale for the transfer and the accounting treatment that followed.

[57] In summary, and having regard to the contemporaneous documents and the witness testimony, I make the following findings:

a. There was a sound business rationale for transferring the PG Originating Policies to the Planning Group in 2014.

b. The signed transfer documents came first, which assigned ownership of the PG Originating Policies to the Planning Group without any limitation or restriction.

c. The financial statements from 2014 to 2020 are consistent with an assignment of ownership of the PG Originating Policies to the Planning Group (annual revenues from renewal commissions increased in the Planning Group and decreased in PG). The fact that the financial statements for 2021 onwards were not finalized, after the parties were already in litigation, does not detract from what is reflected in the earlier years’ financial statements from 2014 to 2020.

d. The recording of revenues in the Planning Group for renewal commissions associated with the PG Originating Policies might also be consistent with an assignment of revenues, however there is no note or explanation to that effect in the financial statements for the relevant years from and after 2014 and nothing to indicate any trust arrangements having been put in place regarding the ownership of the policies.

e. The forms directions to pay that assigned the Remuneration (but not ownership) were signed after the ownership had already been transferred. That sequencing is legally inconsistent with Mark’s position now that the assignment of ownership was in error. No reasonable person could have understood that signing a direction to pay with an assignment of Remuneration could override a previous erroneous transfer of ownership. It is more likely that the assignment of Remuneration was done as an administrative belt and suspenders afterwards, to make sure that the renewal commissions were properly redirected by the insurance companies after the ownership of the polices had been transferred to the Planning Group.

f. Mark’s failure to disclose that he was “correcting” this administrative error after the Appointment Order (he did not bring it to the attention of Jason and the Sales Officer and the court or seek any direction), suggests that it was not an obvious and straightforward administrative fix. If it was, Mark would not have hidden it or been reluctant to disclose what he was doing.

g. The ownership of the PG Originating Policies was transferred to the Planning Group in August 2014.

Prior Evidence in these Proceedings

[58] There are two instances of prior evidence that the parties have directed the court to:

a. The expert valuations of the Companies filed in these oppression remedy applications;

b. The evidence of Jason contained in paragraph 6 of his February 24, 2021 affidavit filed in an earlier proceeding.

[59] The prior evidence does not detract from or change the court’s findings regarding the ownership of the PG Originating Policies.

[60] The first instance of prior testimony comes from expert reports filed in connection with the oppression remedy applications. Mark’s expert valued the Planning Group’s book of business between $3,690,423 and $4,305,494 and the Benefits Group’s book of business between $214,443 and $257,332. According to Mark’s expert, the commissions for the fiscal year ended February 28, 2021 for the Planning Group were $1,230,141 and the commissions for the fiscal year ended February 28, 2021 for the Benefits Group were $180,413. Experts for Jason and Doug came up with different valuation numbers.

[61] Goldberg’s evidence confirmed that after the 2014 transfer of the PG Originating Policies to the Planning Group, the financial statements for the Planning Group included in revenue the commissions from the PG Originating Policies.

[62] The last financial statements approved by both Mark and Jason are for the fiscal year ended February 29, 2020. The financial statements for the Planning Group report commissions earned in the amount of $1,251,849 for the year ended February 29, 2020. The financial statements for the Benefits Group report commissions earned in the amount of $287,299 for the year ended February 29, 2020. Jason and Mark had both started selling new insurance business outside of the Companies by January 2021, but the Companies continued to service their existing business (generating primarily renewal commissions).

[63] Financial statements were prepared for Companies and reviewed by both Mark and Jason as at February 2021, but they were never finalized, nor have any of the subsequent year’s financial statements for the Companies been finalized. They were prepared on a consistent basis as the prior year's (approved) financial statements. It does not matter for purposes of this motion that the financial statements for 2021 and going forward were not finalized.

[64] The financial statements that included the commission revenues from the PG Originating Policies in the Planning Group (and not in PG) after 2014 were relied upon by the valuation experts on the oppression applications. There is some disagreement about the expert valuations. For example, Mark asserts now that the Companies should be valued on a liquidation rather than on a going concern basis. However, the Companies do not need to be valued (on either methodology) for the court to decide the Ownership Issue. What is important about all of the valuations that were done by the experts for both sides at the time of the Appointment Order is that the value estimates for the Planning Group are based on assumptions about anticipated future revenues that include the annual renewal commissions from the PG Originating Policies into the future. Those valuations assume that these PG Originating Policies would be included in the Property of the Planning Group that was being valued for sale.

[65] Turning to the second instance of prior evidence, Jason stated in his affidavit affirmed February 4, 2021 filed in an earlier proceeding commenced prior to the oppression remedy applications, at paragraph 6 (the “Statement”):

6. It was also agreed at the time PPG was established that if PPG was ever dissolved, any life renewals prior to the formation of PPG, which are attributable to Mark’s business from PG, would revert back to him. Although no list or inventory was ever done to identify Mark’s pre-existing business from PG, I am willing to abide by that agreement once Mark produces a list of all policies dated prior to the formation of PPG.

[66] Jason says this Statement was made in the context of a proposal to resolve the dispute that was predicated on the dissolution of the Companies. His simple answer to it now is that the Statement is not relevant in any other context.

[67] Taking the Statement in context, it is not inconsistent with Jason’s position on this motion that these PG Originating Policies were owned by the Planning Group at the time of the Appointed Order and should be included in the Property to be sold by the Sales Officer. If the Companies were being dissolved, and the assets distributed to the shareholders, Jason’s agreement and willingness to allow the PG Originating Policies to go back to PG can and should be understood in the context of a broader process for the division of all assets, with the expectation that other assets (policies) of equivalent value would be returned to Jason.

[68] The Statement is not about ownership. It is about how the policies within the Planning Group would be divided up between the two shareholders upon a proposed dissolution of the Companies that never happened.

[69] Understood in its proper context, the Statement is not a statement, made under oath, that constitutes an admission which is captured by r. 51. Jason does not require leave to withdraw it, as Mark contends, because the Statement need not be withdrawn. It is dealing with a different situation.

Findings Regarding Ownership of the PG Originating Policies

[70] I find that the PG Originating Policies were owned by the Planning Group as at January 1, 2021 and are part of the Property that the Sales Officer is to include in its Sale Plan.

The Inclusion Issue

[71] Ownership is not the only determining factor of what should be done about all of the PG Transferred Policies. The determination of whether the PG Originating Policies or the PG Orphaned Policies should be included in the Property to be sold by the Sales Officer are impacted by other considerations as well.

The PG Originating Policies

[72] Since it has been determined (in the preceding section of this endorsement) that the PG Originating Policies were transferred to and owned by the Planning Group at the time of the Appointment Order they should be included in the Property to be sold by the Sales Officer.

[73] If the court had found the PG Originating Policies were owned by PG rather than the Planning Group at the time of the Appointment Order, the court would have to determine whether they were considered to be part of the Property of the Companies for any other reason such that those policies should be included in the Property to be sold by the Sales Officer under the Sale Plan.

[74] This alternative argument turns on the interpretation of the Appointment Order. Having regard to the evidence before the court and the findings of the court when that order was made, I find that they are covered by the Property to be sold by the Sales Officer under the Appointment Order. The Appointment Order was made instead of an order that would have seen the ownership and operation of the business of the Companies being purchased and run by one side of the dispute.

[75] The parties were prepared when they argued the oppression remedy applications to have the court make a buy-out order based on the expert valuation reports that had been filed. Those values included the PG Originating Policies. The assets of the business that was to be purchased comprise the same Property that was ordered to be sold by the Sales Officer for the benefit of the parties. It would be entirely inconsistent at this late stage to now not include some of those assets from the Property and allow only one party, Mark, have the exclusive benefit of those assets.

[76] If Mark thought the PG Originating Policies should not be included he should have raised that at the time the oppression remedy applications were argued. The fact that he did not do so lends further support to the court’s primary determination that they were owned by the Planning Group.

Clients Who “Asked” to Change Brokers

[77] The PG Orphaned Policies were unquestionably owned by the Planning Group and included in its Property when Cavanagh J. released his decision directing the sale of the business of the companies on December 30, 2022.

[78] The PG Orphaned Policies were transferred to PG when Mark decided to no longer carry on his insurance brokerage business through PG and left the Planning Group without a licenced insurance broker. From the documents produced, it appears that this occurred between December 30, 2022 when the decision was released and March 28, 2023 when the Appointment Order was finally settled.

[79] The court must determine whether those PG Orphaned Policies now held by PG are part of the Property to be sold by the Sales Officer. This largely turns on the evidence regarding Mark’s conduct and his role in the events that led up to the transfer of the PG Orphaned Policies from the Planning Group to PG.

[80] Mark contends that he was not required to continue to operate the business of the Companies indefinitely after Jason and Doug left, although Mark did do so for a number of years. Jason and Doug had left the business before the oppression remedy applications were heard. The circumstances around Doug’s and Jason’s departures (in 2020 and 2021, respectively) were part of the oppression remedy claims that eventually led to the appointment of the Sales Officer. In the meantime, Mark continued to carry on the life and group benefits insurance business of the Companies.

[81] Mark later decided to stop providing life and group benefits insurance services through the Companies. He argues that he was entitled to do that and points to authority for the proposition that the USA could be treated as at an end after the Appointment Order as made and the winding-up of the Companies was contemplated. When a company is no longer carrying on business shareholders are relieved of their ongoing obligations under their shareholders agreement. See Clarfield v. Manley (1993), 14 B.L.R. (2d) 295 (Ont. Gen. Div.), at paras. 63 and 68.

[82] The criticism of Mark is not that he decided he no longer wished to carry on the business of the Companies, but is in relation to how he did it. Mark did not discuss his intention to stop providing his services as the registered insurance broker for the Companies with Jason or Doug or the Sales Officer. He did, however, communicate with clients of the Companies about this. The communications to the remaining clients of the Companies were similar. Below is an example of an email sent to one client in March 2023:

Effective immediately, Mark Ber will be providing benefit services under The Producers Group Ltd. [PG] Your renewal is scheduled to renew on April 1, 2023 and in order to ensure that Mark Ber can negotiate and act upon your behalf, please sign the attached Engagement letter authorizing The Producers Group Ltd. [PG] as your Benefits Advisor. We request that you print the attached letter on your letterhead, sign and return to me at your earliest convenience.

[83] The letters from clients in the form provided to them by PG are what Mark and PG now rely upon to evidence the “decisions” of clients to move their business from the Companies to PG.

[84] Mark argues that clients have the freedom to choose who they want as their insurance broker and if clients chose to move their policies to PG there is nothing wrong with that. See RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54, [2008] 3 S.C.R. 79, at para. 61. Mark asserts that clients were not only entitled to know that Mark was no longer an advisor at PPG, but clients were also entitled to choose who their advisor would be.

[85] No one is suggesting that the orphaned client insurance or benefits policies could or should have remained with the Companies after Mark decided to stop servicing them through the Companies and provide those services only through PG. Nor does anyone dispute that orphaned clients had the right to move their insurance and benefits policies to another broker of their choosing at any time. But the court can and should consider why they chose to move their policies to PG when they did. That decision did not happen in a vacuum. It was made after Mark announced to those clients that the Planning Group would no longer be able to hold and service their policies, and told them that he was available to do so at PG.

[86] After the order for the sale of the business of the Companies had been made, without telling Jason, Doug or the Sales Officers, Mark told the clients of his decision and at the same time told them that they could continue with Mark at PG. This is not about a breach of a non-solicitation or non-compete clause. This is about Mark taking steps that undermined the order that had been made by Cavanagh J. in his decision of December 30, 2022 for the Sales Officer to sell the Property of the Companies, including the policies that became orphaned after the order was made because of Mark’s unilateral actions.

[87] Once the Sales Officer and Jason and Doug learned that Mark had decided not to service clients through the Companies any longer and the Companies therefore no longer had active brokerage licence through which to operate, arrangements were made for those clients who had not already “chosen” to go with Mark to PG to be divided up between Jason and Mark. Those policies are being held by them on a without prejudice basis for administrative purposes pursuant to the court’s order of January 24, 2024, pending the implementation of the Sale Plan.

[88] No reason was offered for why similar arrangements could not have been made for the PG Orphaned Policies if Mark had disclosed what he was doing before he communicated with the clients and offered them the “choice” to move to PG. In these circumstances, I find that the PG Orphaned Policies should be treated as if those arrangements had been made and they too (along with the other orphaned policies being held by Mark and Jason pursuant to the January 24, 2024 order) are included in and shall form part of the Property to be sold by the Sales Officer under the Sale Plan.

The Jurisdiction Issue

[89] This issue entails consideration of the late breaking argument raised by Mark that a trial of an issue is required to decide the Ownership Issue and the Inclusion Issue.

[90] Relying upon cases dating back to the late 1990’s and early 2000’s, Mark (and his affiliates who are the respondents on this motion) make the following arguments:

a. It is beyond the proper role of an application judge to determine the credibility of a deponent to resolve material facts in dispute that may affect the result, other than the clearest of cases where the facts are in essence unopposed or the facts are so clear that there is no genuine issue to be tried (see Sandhu-Malwa Holdings Inc. v. Auto-Pak Ltd., 2011 ONSC 7363, at paras. 39–40, citing Newcastle Recycling Ltd. v. Clarington Municipality (2005), 204 O.A.C. 389 (C.A.) and Yoo v. Kang, [2002] O.J. 4041 (S.C.)); and

b. Even though the court generally has power to hear an application under r. 14.05 (3) where there are material facts in dispute, when faced with a dispute in the evidence about a fact material to an issue essential to the resolution of the subject matter of an application under r. 14.05, the judge must either direct a trial of an issue in respect to the fact in dispute or convert the application into an action (see Dicke v. Zucotto Wireless Inc., at para. 14).

[91] Mark argues that there are contested facts and issues of credibility that go to the heart of the substantive issues to be decided (the Ownership Issue and the Inclusion Issue) and the intended scope and effect of the Appointment Order, which have not been tested on cross-examination. On this basis, Mark asserts that the court does not have jurisdiction to make the findings of fact necessary to decide those issues based on a written record and must direct a trial of an issue.

[92] I disagree. The authorities relied upon by the respondents do not reflect the current state of the law nor the practical realities of motions and applications heard on the Commercial List, many of which involve contested facts and issues of credibility that are decided based on a written record. This case is not exceptional in that regard.

[93] This motion by the Sales Officer, brought in the context of the oppression remedy applications that led to its appointment, was scheduled in October 2023. The factual issues in dispute between Jason and Mark were generally known to the parties at that time. No concerns were raised by the respondents about the court’s jurisdiction to hear and decide this motion that will determine whether the PG Transferred Policies should be included in the Sales Plan. The evidence is not going to change if a trial of an issue is ordered.

[94] In addition to the sworn affidavits of Mark and Jason, there are contemporaneous documents that provide additional context to their evidence that the court can have regard to in making the necessary findings of fact. Cross-examinations were built into the pre-hearing timetable for this motion. The only reason why the contested facts have not been tested on cross-examination is because the parties elected not to cross-examine each other. The absence of cross-examinations is not a particularly compelling consideration at this late stage.

[95] I agree with and adopt the observations of Papageorgiou J. in Parkland Corporation v. Caledon Fuels Inc., 2024 ONSC 2361 (at paras. 20–23) as applicable to the factual disputes raised on the motion before me, namely that:

a. In Dubblestyne et al v. Town of Oakville, 2021 ONSC 2678 at para. 8, the court agreed that enhanced fact-finding powers in r. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, are applicable to applications. [Parkland, para. 20].

b. This approach to hearing and determining applications is consistent with the Supreme Court’s direction in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, that fairness and justice do not require “painstaking” procedure and viva voce evidence in all cases, even those where there is some conflict in the evidence: at para. 28. The paramount consideration is whether the process employed can achieve a fair and just outcome. [Parkland, para. 21]

c. There is nothing magical about viva voce evidence and demeanor evidence that makes it a better way of assessing credibility than doing so by subjecting a witness’ story “to an examination of its consistency with the probabilities that surround the currently existing conditions,” particularly when there is a robust documentary record that sets out what the parties did and said at the relevant time: Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.), at p. 357. See also: R. v. Kiss, 2018 ONCA 184, at para. 30. [Parkland, para. 22]

d. While it is sometimes necessary to call viva voce evidence, because of the nature of the case, or the absence of contemporaneous documents, this is not always the case. Business disputes, where there are a raft of documents and written communications, are sometimes particularly suited to being resolved on a paper record. Suitability in each case will depend upon nature of the issue and record. [Parkland, para. 23]

[96] A fair and just outcome can be achieved on this motion based on the evidence that has been filed and findings of fact that the court has been able to make based on that evidence, as detailed in the preceding sections of this endorsement. No trial of an issue is required, and none is ordered. To do so at this stage, more than a year after the Appointment Order was finalized and almost a year and a half after the decision to appoint the Sales Officer to sell the Property would do an injustice to the parties.

Final Disposition

[97] The Sales Officer can now proceed to prepare its Sale Plan, which shall include the PG Transferred Policies. No order is made at this time with respect to any other policies that have been transferred out of the Companies since January 1, 2021 as the Sales Officer has not been able to verify the circumstances of any other transfers. If others have been transferred to Mark and his affiliates, they too should be included in the Property to be sold under the Sale Plan.

[98] Mark and the other parties aligned with him shall co-operate with the Sales Officer to facilitate the Sale Plan and preserve the PG Transferred Policies under their administration in the interim in the same manner and upon the same terms as the policies that are being held by Mark and PG pursuant to the January 24, 2024 order. They shall co-operate in the transfer of those policies once they have been sold by the Sales Officer and the sale proceeds shall be paid to and held by the Sales Officer in accordance with paragraph 27 of the Appointment Order.

[99] If there is a disproportionate administrative cost or burden on Mark and PG because of the number of policies they are holding pending the sale, that should be raised with the Sales Officer. The parties shall attempt to agree to reasonable commercial terms for the preservation of all policies that were owned by the Companies and form part of the Property to be sold, whether they are currently held by Mark, Jason or Doug.

Costs

[100] The Sales Officer is not seeking a separate award of its costs of this motion. It will seek to recover its costs of this motion as part of its fees and expenses under the Appointment Order. The Sales Officer views the lis or dispute arising from the issues on this motion to be primarily between Jason and Mark.

[101] The parties were instructed at the conclusion of the motion to exchange their costs outlines and upload them onto CaseLines. They are seeking costs from each other. Jason and Doug and their affiliates are also asking for an order that Mark and his affiliates pay the costs of the Sales Officer of this motion as payment under the Appointment Order would mean that both sides share equally in the costs of the Sales Officer for this motion.

[102] The costs outline submitted on behalf of Jason and Doug claims fees (inclusive of HST) on a partial indemnity scale (60% of actual) of $50,239.80, on a substantial indemnity scale (at 90% of actual) of $74,808.83, based on actual fees of $83,733.00 for 168 hours of lawyer time. The disbursements are $590.43 on top of the fees.

[103] Mark’s costs outline claims all-inclusive partial indemnity costs (at 60% of actual fees) of $57,332.81, which includes disbursements of $307.

[104] Now that the outcome is known, Jason and Doug’s position has clearly prevailed over Mark’s. That gives rise to a prima facie entitlement to costs on a partial indemnity scale. Given how close the costs amounts are in the parties’ respective costs outlines, I would not expect that there will be compelling grounds upon which to challenge the quantum. If the scale or other terms of costs cannot be agreed to by 28, 2024,

a. Jason and Doug may deliver a cost submission of no more than 3.5 pages double spaced setting out the basis for the scale and quantum and any terms of costs they seek by July 12, 2024;

b. Mark may deliver a responding cost submission of up to 5 pages double spaced by July 26, 2024.

c. Jason and Doug may deliver a reply cost submission of up to 1.5 pages double spaced, if needed, by August 2, 2024.

[105] Cost Outlines and authorities should be attached to the cost submissions. The court will thereafter in due course advise the parties if it requires any further submissions, or may in its discretion decide the issue of costs in due course based on the written materials filed. All materials relating to costs shall be sent to my assistant by email: linda.bunoza@ontario.ca and also shall be uploaded into the May 6, 2024 CaseLines bundle in the JDM Group v. Direct Broadcast proceeding.

Kimmel J. Date: June 14, 2024

[1] The December 30, 2022 Appointment Order was not settled until March 28, 2023. [2] Relief under the oppression remedy was also sought in respect of a third investment holding company owned by Mark and Jason, Thornbridge Capital Inc. (“Thornbridge”), that is not the subject of this motion. [3] For administrative purposes, because the Companies no longer have active brokerage licences, these Current Polices are being held by Jason and Mark on a without prejudice basis pursuant to the court’s order of January 24, 2024. The Sales Officer is not able to certify that this is a complete record of all policies of the Companies. These are the ones that have been identified from disclosures made by Mark as of this motion.