Court File and Parties

COURT FILE NO.: FS-24-00042603-0000 DATE: 20240820 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: S.M., Applicant AND: H.R., Respondent

BEFORE: Mathen J.

COUNSEL: Brigitta Tseitlin, for the Applicant Jeff Rechtshaffen / Keith Davis, for the Respondent

HEARD: August 20, 2024

ENDORSEMENT

ENDORSEMENT

[1] This is my decision on the motion heard on July 18, 2024.

[2] The parties, who are married, jointly own a property municipally known as 508 St. Germain Avenue, Toronto (“St Germain”). There are three mortgages registered on title, one to Scotiabank, and two to private lenders.

[3] All three mortgages are in arrears. Each party blames the other for taking funds from the joint account and failing to pay the mortgages. The private mortgagees have commenced powers of sale.

[4] Initially, the Applicant wife brought this urgent motion to avoid the powers of sale. The Respondent then brought a cross-motion. Each party is seeking relief from the other.

[5] The wife states the following issues:

a. Should the Respondent be required to preserve St. Germain under section 12 of the Family Law Act, R.S.O. 1990, c.F.3 (“Family Law Act”)?

b. Should the Respondent be required to make uncharacterized payments to the Applicant in the sum of $6,000 per month?

[6] The husband states the following issues:

a. Which party should be responsible for bringing the three St. Germain mortgages into good standing?

b. Should the Applicant return $157,547.83 to the parties’ joint TD account ending in *7896 (“*7896”, “joint account”) so that these funds may be used for the purpose for which they were intended?

[7] The prior endorsements of Justice Nakonechny (June 17 and July 4) and Justice Shore (July 11, 2024) focused on the outstanding mortgages which was to be argued by way of this regular, one-hour motion.

[8] In their sworn affidavits, the parties volleyed numerous accusations at each other. Each filed documents intended to show the other had misappropriated funds intended for their joint real estate and business ventures.

BRIEF CONCLUSION

[9] The parties are joint owners of St. Germain. They each bear responsibility for the mortgages being in default.

[10] Accordingly, the Applicant wife shall return the sum of $50,000 which she unilaterally withdrew from the parties’ joint account on April 25, 2024. The Respondent husband shall make good on the remaining outstanding mortgage payments.

[11] For clarity, I decline at this stage to order the Applicant to reimburse the sum equivalent to her commission cheque ($41,999.27) which she withdrew from a business account on May 1, 2024. The Respondent mentioned this withdrawal but excluded it from his calculations. I am not persuaded that the Applicant taking back her commission after the parties separated was a misappropriation of joint funds.

[12] Subject to further order of this Court, or on consent of the parties, the Applicant and the Respondent shall hereafter be jointly responsible for maintaining the mortgages registered on title for St. Germain in good standing.

[13] The Applicant’s claim for a preservation order is dismissed without prejudice. The legal test for interim relief is not met. The preliminary stage of the record makes it impossible to determine the strength of the Applicant’s case including the likelihood that she is owed an equalization payment.

[14] The Applicant wife’s request for $6000 a month in uncharacterized support is dismissed without prejudice. This claim relates to the Applicant’s eviction from her apartment by a third party, who did not appear, whom the Applicant alleges is colluding with the Respondent. These allegations require testing through a separate motion or at trial. Alternatively, the Applicant’s interim support request could be addressed at the parties’ upcoming case conference in September.

[15] The Respondent’s request that the Applicant return monies intended for construction purposes which she misappropriated is granted in part. This claim is only tangentially related to the outstanding mortgage payments. As stated above, I will order the Applicant to return the $50,000 which she withdrew on April 25, 2024. The remainder of the Respondent’s allegations are denied by the Applicant and require greater testing than was possible before me. This is an issue for trial.

[16] The Respondent’s request that the Applicant refrain from making withdrawals from the parties’ joint account *7896 is dismissed. The parties have made completing claims about the misappropriation of funds in *7896. It would be inappropriate to make an order against only one of them.

[17] The Applicant has requested that, within thirty days, the Respondent provide a full written accounting with supporting invoices and proof of payments for all monies paid towards construction costs and carrying costs of the St. Germain Property is granted. This request shall be granted.

BACKGROUND

[18] The Applicant, M.S. (“Applicant”), and the Respondent, H,R, (“Respondent”) are originally from Iran. They married in Toronto in 2013 and have a six-year-old daughter.

[19] The Respondent owns a business named Ideal Plumbing and Drain (“Ideal Plumbing”).

[20] The Applicant is a CPA who worked full-time as an accountant until 2016. Either in 2016 (her evidence) or 2022 (Respondent’s evidence) she started working at Ideal Plumbing. She also works as a part-time real estate agent.

[21] In 2013, the parties purchased a property at 22 Windham Drive, Toronto (“the matrimonial home”).

[22] In 2017, the parties jointly purchased St. Germain as an investment property. The parties obtained a Scotiabank mortgage (M1) for approximately $1,300,000.

[23] In May 2023, the parties sold the matrimonial home netting $1,178,000. They invested approximately one-half of the proceeds into St. Germain which currently is undergoing extensive renovations.

[24] With the remaining proceeds they bought a second investment property located at 117 Yonge Blvd., Toronto (“117 Yonge”). This property is registered in the Applicant’s name, with the Respondent and another individual listed as non-titled partners.

[25] In September 2023, the parties obtained a construction mortgage (M2) on St. Germain from a private lender, N.H., in the amount of $1,300,000.

[26] In February 2024, the parties secured an additional construction mortgage (M3) from N.H. and another individual, W.H., in the amount of $500,000.

[27] The parties do not dispute that after the funds from M2 and M3 were deposited into their TD joint account, the Applicant transferred them into her sole TD Canada Trust savings account 2075 (“TD Savings”). She would then transfer the funds back into the joint account as needed. The parties disagree about how these funds were disbursed and where they are now.

[28] In sum, St. Germain has three registered mortgages:

a. M1 – Scotiabank for $9,076.96 per month – which has not been paid since June, 2024

b. M2 – N.H. for $10,833.33 per month – which has not been paid since March, 2024

c. M3 – N.H. and W.G. for $5,000 per month – which has not been paid since March, 2024

[29] As of July 18, 2024, the total payments outstanding on M1, M2 and M3 were $65,653.91.

[30] On April 15, 2024, the Applicant received a commission cheque for $41,999.27. She deposited this cheque into the Ideal Plumbing business account.

[31] The parties’ marriage deteriorated during March and April, 2024.

[32] On April 21, 2024, the Applicant says that the Respondent fired her. The Respondent says that the Applicant decided to quit some weeks earlier. There is no dispute that as of April 21, 2024, the Applicant no longer worked for Ideal Plumbing.

[33] The Applicant says the date of separation is April 21, 2024. The Respondent says that it is April 25, 2024. For the purpose of my analysis, I will use the Applicant’s date.

[34] On April 25, 2024, the Applicant transferred $50,000 from TD7896 into her TD Canada Trust Chequing Account (“TD Chequing”).

[35] On April 25 2024, the Applicant made a police complaint that the Respondent physically and sexually assaulted her on April 21, 2024.

[36] On May 1, 2024, the Applicant withdrew $41,999.27 from the Ideal Plumbing account.

[37] The two private mortgagees for St. Germain issued Notices of Sale on June 7, 2024. At the time of the hearing before me, Scotiabank had not issued a Notice of Sale.

PARTIES’ POSITIONS

Applicant

[38] The Applicant says that she withdrew $50,000 and $41,999.27 from the parties’ joint account and the business account because she was facing economic precarity after being fired and separating from the Respondent.

[39] The Applicant says that the two private mortgages are held by the Respondent’s friends who collude with him in various ways to avoid taxes. She claims that the private mortgagees issued the Notices of Sale in bad faith. She believes that the Respondent continues to pay the mortgages in cash.

[40] The Applicant argues that the Respondent has ample resources to pay the outstanding mortgage amounts. She thinks the Respondent is falsely pleading poverty and is also refusing to pay for the ongoing renovations at St. Germain to punish her.

[41] The Applicant further accuses the Respondent of converting to his own use at least $641,000 from the two construction mortgages.

[42] The Applicant states that she regularly transferred monies from her own account into the joint account, which the Respondent immediately withdrew. She says that she has no idea what happened to those funds.

[43] The Applicant says that on April 21, 2024, the balance in the joint account was $68,069.20. The Respondent withdrew an additional $10,000. The Applicant said the current balance was $59,947.20.

[44] The Applicant asks the Court for a preservation order against the Respondent under section 12 of the Family Law Act. Acknowledging the early stage of these proceedings and the undeveloped record, she urges the Court to seriously consider the risk of dissipation of an asset (St. Germain). She also cites section 40 of the Family Law Act permitting the Court to restrain a party from depleting property that could be required to settle a support claim.

[45] The Applicant raised an urgent issue about her accommodation. The Applicant says that following the sale of the matrimonial home, the parties lived together in a house rented from the Respondent’s friend. No lease was ever signed, but the Applicant says that the Respondent and the owner agreed that the Respondent would do work equivalent to a monthly rent of $8000.

[46] On June 24, 2024, the Applicant says, she received a notice of eviction. She requests $6000 per month from the Respondent for replacement accommodation.

Respondent

[47] The Respondent says that this case is simple. Prior to the Applicant’s actions on April 25, all three mortgages were in good standing. After her actions, each mortgage has outstanding payments.

[48] The Respondent accuses the Applicant of orchestrating a plan to have him wrongfully arrested, so that she could then do the following:

a. Empty the parties’ safety deposit box of its contents including jewelry, watches, gold coins, gold bars, documents and a large amount of cash.

b. Empty the parties’ home safe which included approximately $37,000 designated to pay the parties’ drywaller.

c. Go to Ideal Plumbing (after she no longer worked there), disable the security camera and remove important financial documents from the bookkeeper’s office.

d. Withdraw $50,000 cash from the joint account and the equivalent of her commission cheque from the business account.

e. Wrongfully retain the following amounts designated for 508 St. Germain:

i. $123,201.74 which is the difference between the construction funds transferred into her account for 11 months ending in April 2024, and those deposited back into the joint account; and

ii. $100,000 reflecting the money withdrawn from Ideal Plumbing on March 4-5, 2024, that is still outstanding.

[49] The Respondent blames the Applicant for several unpaid trade invoices and states that her actions have put at risk their builder’s risk insurance.

ANALYSIS

[50] This motion is primarily about who is responsible for putting the mortgages registered on St. Germain back into good standing.

[51] The parties do not dispute that prior to their separation in April 2024, (regardless of which of their dates applies) the mortgages were up to date.

[52] Consequently, I find it unnecessary to make findings regarding the parties’ actions prior to April 21, 2024. The parties arranged their financial affairs in a highly complex manner. Over the course of at least a year, many tens of thousands of dollars regularly passed between them and from their joint to business to personal accounts. The nature of these transactions, as well as the competing claims of misappropriation, should be determined at a trial where the allegations may be properly tested including through cross-examination.

Preservation Order

[53] The Applicant seeks a preservation order under section 12 of the Family Law Act to make the Respondent solely responsible for the St Germain mortgages for a period of time.

[54] The Applicant correctly notes that this Court’s jurisdiction under section 12 extends to mandating a spouse to make ongoing mortgage payments: Proc v. Proc.

[55] As a species of interim or interlocutory relief, a preservation order is subject to the following considerations:

a. the relative strength of the moving party’s case;

b. the balance of convenience (or inconvenience); and

c. irreparable harm.

Bronfman v. Bronfman at para 28.

[56] Bronfman, supra, further states the following propositions:

a. Section 12 is intended to “protect the spouse’s interests under the Family Law Act, so that if a spouse is successful in obtaining relief under the Act, there are assets available to satisfy that relief”;

b. When considering “the relative strength of the plaintiff’s case” and the “balance of convenience (or inconvenience)” the court should consider the likelihood the moving party will receive an equalization payment and, if there is, any risk that the property will be dissipated prior to trial; and

c. Determining the relative weight of the moving party’s case “is a delicate matter which will vary depending upon the context and the circumstances”, as well as “the degree of predictability which the factual and legal issues allow”.

[57] At this stage, the relative strength of the Applicant’s case is impossible to determine. The wife’s allegations largely rest on assertions or beliefs that require testing through cross-examination. A number of them relate to the actions and motivations of third parties.

[58] In Bronfman, the Court found that (a) the applicant wife was likely to receive a substantial equalization payment and (b) the husband’s great wealth made him more than capable of preserving the property at minimal inconvenience to him. The Applicant cited another case, Cummings v. Cummings, 2020 ONSC 3093 for its reiteration for the test for a preservation order. I note, however, that in that case the Court was satisfied that the Respondent had breached a prior order to not encumber the property (para 4).

[59] This case is different. While it is possible that the Applicant will be owed equalization, the amount is far from clear. The parties are business partners. The Applicant’s Financial Statement indicates that she has current assets of approximately $233,000. However, no valuation is yet available for St. Germain or 117 Yonge on which she holds joint or sole title. The Respondent’s Financial Statement indicates more debts than assets.

[60] I agree that St. Germain is at risk of dissipation. This could qualify as irreparable harm but, as I explain below, the parties share the fault for this risk. I am not persuaded that it would be just to put the entire responsibility for that on the Respondent.

[61] I conclude that the record before me does not support making a preservation order.

Responsibility for Outstanding Mortgage Payments

[62] The current outstanding mortgage payments are at least in part due to the parties’ mutual animus. Because of their deeply troubled relationship, the Applicant and Respondent are both making decisions against their own joint interest which is to keep St. German in good standing and finish the attendant renovations.

[63] The Applicant admits that she withdrew $50,000 from the parties’ joint account post-separation. I am persuaded that this account was used primarily to fund the parties’ real estate ventures including the mortgages for St. Germain. I therefore find that the Applicant bears partial responsibility for the current payments outstanding on M1, M2 and M3; and shall order her to make good on those payments by reimbursing into the joint account the sum of $50,000.

[64] As a joint owner of St. Germain, the Respondent is also responsible for its mortgages. He has refused to use any of either his or the parties’ monies towards them. He seems to regard the matter as frozen until the Applicant returns the funds that he says she misappropriated. His position is untenable. I shall order the Respondent to ensure that the joint account has sufficient funds to put the three mortgages back into good standing.

[65] Once the outstanding payments have been settled, subject to further Order of this Court or on consent the parties shall bear equal responsibility for keeping the mortgages in good standing.

Additional requests

[66] The Respondent requests that the Applicant reimburse $157,547.83 that she allegedly siphoned from the parties’ joint account and the Ideal Plumbing business account. I have granted this order in part by requiring the Applicant to reimburse the $50,000 she withdrew from the joint account on April 25, 2024. With respect to the rest, both parties have made competing misappropriation claims. The material presented is insufficient for me to make a finding as to who is to blame and to what degree.

[67] The Applicant seeks $6000 per month in uncharacterized support to compensate for her impending eviction. I dismiss this claim for the following reasons:

[68] Rule 14(4) of the Family Law Rules, O. Reg. 114/99 (“Family Law Rules”) states: “No notice of motion or supporting evidence may be served and no motion may be heard before a conference dealing with the substantive issues in the case has been completed.” This subrule is subject to an exception “if the court is of the opinion that there is a situation of urgency or hardship or that a case conference is not required for some other reason in the interest of justice.”

[69] The parties have not yet conferenced on the issue of support. The material before me on this point consists of a sworn statement by the Applicant of (a) an impending eviction and (b) her lack of any income to qualify for rental accommodation.

[70] The Applicant has access to funds in excess of one hundred thousand dollars. While the Applicant’s may be difficult, I am not persuaded that it rises to the level of urgency or undue hardship required to apply the exception to Rule 14(4). The parties have a case conference scheduled for September. If they are unable to reach agreement on this issue, the Applicant can request leave to bring a separate motion.

[71] The Applicant’s claim for support is therefore dismissed without prejudice.

[72] The Applicant’s request that within thirty days the Respondent provide a full written accounting with supporting invoices and proof of payments for all monies paid towards construction costs and carrying costs of the St. Germain Property is granted.

[73] Both parties seek costs on a full indemnity basis. They have achieved divided success and shall bear their own costs.

ORDER

[74] In conclusion, I make the following order:

a. The Respondent’s request that the Applicant transfer the sum of $157,547.83 into the parties’ TD Joint Account ending *7896 is granted in part. Within seven days, the Applicant wife shall transfer to *7896 the sum of $50,000. This sum shall be put towards the outstanding mortgage payments due on the parties’ jointly owned property municipally known as 508 St. Germain Avenue, Toronto.

b. Within seven days, the Respondent husband shall ensure that there are sufficient funds in the parties’ TD Joint Account ending *7896 to cover the remainder of outstanding mortgage payments owing on the parties’ jointly owned property municipally known as 508 St. Germain Avenue, Toronto.

c. The Respondent’s request that the Applicant refrain from making further withdrawals from the parties’ joint account *7896 is dismissed without prejudice.

d. After the outstanding mortgage payments owing on 508 St. Germain have been settled, subject to further Order of this Court or on consent of the parties, the Applicant and Respondent shall be jointly responsible for maintaining in good standing the three mortgages registered on title for the property municipally known as 508 St. Germain Avenue, Toronto.

e. The Applicant’s request for a preservation order is dismissed without prejudice.

f. The Applicant’s request for uncharacterized payments of $6000 per month is dismissed without prejudice.

g. Within thirty days, the Respondent shall provide to the Applicant a full written accounting with supporting invoices and proof of payments for all monies paid towards the construction costs and carrying costs of the property municipally known as 508 St. Germain Avenue, Toronto.

h. The parties shall bear their own costs.

Mathen J. Date: August 20, 2024