Court File and Parties

Court File No.: FS-22-29253 Date: 2024-01-02 Ontario Superior Court of Justice Superior Court of Justice - Ontario

Re: Hugh Kuang, Applicant (Moving Party) And: Diana Young, Shawn Yeung, Theodore Wang, Gracia Wall, 2174112 Ontario Inc., 2394049 Ontario Inc., 2690212 Ontario Inc., 2305969 Ontario Inc., Diana Young Professional Corporation, Respondents (Responding Parties)

Before: Kristjanson J.

Counsel: Ken Dekker, Karen Law, Counsel for the Applicant Patrick Summers, counsel for Shawn Yeung, Theodore Wang, Gracia Wall, 2174112 Ontario Inc., 2394049 Ontario Inc., 2690212 Ontario Inc., 2305969 Ontario Inc. and Diana Young Professional Corporation Michael J. Stangarone, counsel for Diana Young

Heard: In writing

Endorsement

Kristjanson, J

[1] This decision deals with the costs of a Preservation Motion reported at Kuang v. Young, 2023 ONSC 4857. It also deals with the costs of the unreported August 25, 2022 Interim Preservation Motion before Justice Horkins and other appearances for which costs were reserved. I also award costs for some attendances where costs were not reserved but are so close in time, necessary and inextricably linked to the two preservation motions on which the Applicant was successful that I award costs under Family Law Rule 17(18).

[2] The Applicant seeks costs of $302, 215.33, including HST. I award costs on a substantial recovery basis of $200,000.00, including HST.

General Framework

[3] Costs orders are in the discretion of the court under section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43. The Court of Appeal in Mattina v. Mattina, 2018 ONCA 867 at para. 10 held that family cost rules are designed for the fundamental purposes of: (1) partially indemnifying successful litigants; (2) encouraging settlement, (3) discouraging and sanctioning inappropriate behaviour by litigants, and (4) ensuring, in accordance with Rule 2(2), that cases are dealt with justly. Reasonableness and proportionality are the touchstone considerations to be applied in fixing costs.

[4] Rule 24(1) creates a presumption of costs in favour of the successful party on a motion, An award of costs is subject to the factors listed in Rule 24(12). Factors include the importance and complexity of the issues, the reasonableness of each party’s behaviour in the case, the lawyer’s rates, the time properly spent on the case, the expenses, and any other relevant matter. Other factors include Rule 24(8) (bad faith), Rule 18(14) (offers to settle) and the reasonableness of the costs sought by the successful party: Mattina para. 12-13; Berta v. Berta, 2015 ONCA 918 at para. 94. The Family Law Rules only expressly contemplate full recovery costs where a party has behaved in bad faith, or has bested an offer to settle under r. 18(14).

[5] Ultimately, reasonableness and proportionality are the touchstone considerations in setting costs, not the fees charged by solicitors. Setting costs is a matter of discretion, not a mechanical exercise. The overall goal is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances of the case: Boucher v. Public Accountants Council for the Province of Ontario, (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291; 2004 14579 (ON CA).

[6] On both the Interim Preservation Motion and the Preservation Motion, the court found that the conduct of the Respondents – particularly in flouting court orders for delivery of materials and disclosure – is unacceptable, unreasonable, and has no doubt increased the Applicant’s costs. Their conduct warrants sanction by the Court. This is a complex case involving both family and corporate law disputes over a real estate empire worth more than $100 million. Information about the web of corporate interrelationships, share ownership issues, and movement of money and property, is critical. In a case involving the alleged dissipation of assets by multiple corporations, the corporations still had not delivered any balance sheets, annual financial statements, or tax returns for the Corporate Respondents by August 2023 when the Preservation Motion was argued, ten months after the disclosure was ordered. That is shocking.

[7] The late disclosure, failure to disclose, and lack of preparedness of the Respondents caused significant delay and increased costs. I found on the Preservation Motion that after separation, Ms. Young—the wife of the Applicant, and the directing mind of the Corporate Respondents—transferred a property worth an estimated $27 million from a company in which Mr. Kuang claims an ownership interest to another company in which he has no interest. I found there was a serious issue to be tried regarding dissipation of assets. The urgency of bringing the matter on, with proper disclosure, has been identified by many judges involved in the case since the first To Be Spoken To (“TBST”) appearance in June 2022. But the Respondents have consistently failed to respond in a manner consistent with the primary objective of the Family Law Rules.

[8] Given that the Respondents refused to provide disclosure and transparency into the businesses, they effectively forced Mr. Kuang to bring the Preservation Motion on an urgent basis. Mr. Kuang had to prepare his materials without the benefit of full disclosure, which was in the Respondents’ possession. Mr. Kuang was also put to further and additional time and expense because of the number of last-minute adjournments requested by the Respondents, and late delivery of affidavits which always drives up costs.

[9] As Pazaratz, J. held in Benzeroual v. Issa and Farag, 2017 ONSC 6225, at para. 32, breaches of disclosure obligations should always lead to costs sanctions, and the failure to meet disclosure obligations can constitute “bad faith” warranting heightened costs consequences. And as Sherr J. held in Jones v. Hugo, 2012 ONCJ 381 at para. 28, forcing parties to chase disclosure works to “create onerous and unfair burdens on opposing counsel, and threaten the integrity of our family law system.” Many of the burdens noted by Sherr, J. are evident here: finding out the financial information was time-intensive; evidence was provided in increments; the case required constant review to stay on top of new revelations; and continual analysis had to be conducted by counsel to “put together the financial puzzle pieces.”

Who are the Participants?

[10] The Applicant is Mr. Hugh Kuang. There are several respondents. Mr. Kuang’s wife, Diana Young, is a respondent, as are two corporations owned by her: Diana Young Professional Corporation and 2305969 Ontario Inc. (collectively, the Diana Young Parties). Diana Young’s mother Shawn Yeung, her father Theodore Wang, and her sister Gracia Wall, are referred to collectively as the “Individual Respondents.” The Preservation Motion involved three main corporations - 2174112 Ontario Inc. (“217”), 2394049 Ontario Inc. (“239), and 2690212 Ontario Inc. (“269)—collectively referred to as the Corporate Respondents.

Which Costs are Included?

[11] The Application was issued in April 2022. At a TBST attendance on June 20, 2022, Justice Kraft set July 7 as the date to argue the Preservation Motion. The Applicant served his affidavit and factum for the motion. On July 7, the motion date scheduled before Justice O’Brien, the Respondents sought an adjournment on the basis that counsel were only recently retained and did not have sufficient time to obtain instructions and prepare materials. While the adjournment was ultimately granted on consent to August 25, on a without prejudice basis, Justice O'Brien made several interim-interim orders aimed at preserving the various properties, companies, and assets and restraining the Respondents from depleting them. Costs were reserved to the long motion judge.

[12] The parties attended a case conference before Justice Boucher on July 18. A timetable was reached on consent. The Respondents were to file their responding affidavits by August 12, with the Applicant’s reply affidavit August 19. Instead of meeting the consent deadline of August 19, on August 23 Gracia Wall filed a lengthy affidavit regarding the alleged incapacity of her mother, Shawn Yeung. The Applicant scrambled to file a 298-page reply affidavit to Ms. Wall’s affidavit on August 24. And the Respondents did not file their 170-page responding affidavit on the preservation issues until August 24 —the day before the motion. The Applicant did not have the opportunity to reply to this affidavit, because it was served well after the court-ordered deadline.

[13] Two days before the long motion, on August 23, the parties attended before Justice Diamond. Counsel for the Respondent Shawn Yeung sought to adjourn the long motion again, this time on the grounds of incapacity. Justice Diamond noted that no affidavit evidence was submitted on behalf of Shawn, and although the request for the adjournment was supported by the remaining Respondents, none of them had delivered responding motion materials in accordance with the deadline set out in the consent Order originally adjourning the long motion. Justice Diamond declined to adjourn the long motion, directed that the matters be raised before Justice Horkins, and reserved costs to the long motion judge.

[14] The long Interim Preservation motion was scheduled to be heard before Justice Horkins on August 25, 2022. That motion was adjourned, solely on the grounds of the alleged incapacity of Shawn Yeung. In her unpublished reasons on the Interim Preservation motion, Justice Horkins held:

[12] Aside from the respondent Shawn (accepting the incapacity concerns for the purpose of this adjournment only), the failure of the rest of the respondents to comply with Justice Boucher's order is unacceptable. They have had the husband's motion material since late June.

[13] The wife's excuses for non-compliance are thin and suspect. She says that she broke her foot on August 2, 2022. No medical evidence was produced. She says that she was helping her mother, Shawn, locate documents and was explaining them to her. However, if Shawn's mental capacity is limited as she suggests, then why would she be involved in helping her to locate documents and explaining them. Lastly the wife says that she was busy as of August 7 looking after her son who had COVID. However, evidence from the husband shows that the son was with him from August 9-12.

[15] Justice Horkins adjourned the motion, on terms of a strengthened interim preservation order and a lengthy disclosure order. Costs were reserved to the long motion judge.

[16] The issue of incapacity of both Shawn Yeung and Theodore Wang was the subject of a motion heard by Justice Myers in April 2023. Justice Myers dismissed the motion as incapacity was not established.

[17] The costs of the following were specifically reserved to the long motion judge hearing this Preservation Motion: July 7, 2022 Justice O’Brien; To Be Spoken To (“TBST”) August 22 Justice Diamond; August 25, 2022 Interim Preservation Motion Justice Horkins.

[18] The Applicant also seeks costs of the June 20, 2022 TBST Justice Kraft; July 18 Case Conference Justice Boucher; and November 4, November 21 and December 2 Case Management attendances with Justice Diamond. None of these judges reserved costs to the long motion judge. Under Rule 17(18), conference costs are to be dealt with at a conference, although Rule 17(18.1) provides that “Subrule (18) does not prevent the court from awarding costs in relation to the case conference at a later stage in the case, if costs are not awarded at the conference.”

[19] In considering whether to award costs of the conferences, and the TBST attendance where costs were not specifically dealt with or reserved to the long motion judge, I apply Justice Mackinnon’s holding in I.S. v. T.C., 2020 ONSC 5411 at para. 23 where she awarded costs of conferences having found that:

[T]he case conferences were directed almost entirely to preparing the motion by ordering necessary productions, organizing and narrowing materials to be used and setting the timetable. Some consents were reached and endorsed, for counselling and for an assessment. In my view costs for these three events, so closely connected to the motion in which the applicant was successful can and should be considered at this time when costs of the motion are determined.

[20] The TBST June 20, 2022, was necessary given the failure of the Respondents to respond to disclosure requests, and urgency given concerns of dissipation of assets which have been substantiated. Further dissipation was prevented starting with the July 7 interim-interim preservation order. The Case Conference July 18, 2022, dealt with the scheduling and timetabling of the Interim Preservation Motion—and the Respondents failed to comply with the consent timetable. Although these costs were not specifically reserved, they are so close in time, necessary, and inextricably linked to the interim and final preservation motions on which the Applicant was successful, and the conduct of the Respondents of such concern, that I also award costs claimed in respect of these attendances. I exclude consideration of the Case management attendances before Justice Diamond on November 4, November 21, and December 2, all of which related to the Interpretation Motion. Costs for the Interpretation Motion heard in February 2023 and reported at Kuang v. Young, 2023 ONSC 2429 have been excluded, as those costs have already been awarded: Kuang v. Young, 2023 ONSC 5235.

[21] Finally, I must set the costs of the Preservation Motion, on which I found that there was a serious risk of dissipation of the assets to avoid judgment if the order is not granted, and indeed, assets had already been removed from companies to which Mr. Kuang has a claim to companies in which he does not have a claim: para. 37.

[22] The costs of the Respondents cannot be determined on the materials filed, as discussed below.

The Justice Horkins Order and Preceding Steps

[23] Justice Kraft found that the case was urgent. Yet the Respondents failed to respond urgently, and disregarded court-ordered deadlines and disclosure obligations under court orders and the Family Law Rules. For the interim preservation motion and preceding steps, the Applicant seeks full recovery costs on the grounds of bad faith, summarized as:

a. Deliberate and repeated refusals to provide disclosure, despite the courts repeatedly emphasizing the importance of full and prompt financial disclosure, hence Justice Horkins’ stern admonitions,

b. Repeated eleventh-hour requests for adjournments of Mr. Kuang’s motion, which was deemed urgent by Justice Kraft on June 20,

c. Their poorly explained or unexplained breaches of the July 18 consent Order by late—delivering affidavit evidence. Less than 24 hours before the long motion, well past the Respondent’s deadline, Ms. Young served a 171-page affidavit with 19 pages of single-spaced narrative and 31 separate exhibits, many of which contained new evidence never disclosed. This affidavit was the only affidavit on the Preservation Motion issues,

d. The concerns about Ms. Shawn Yeung’s alleged incapacity were concealed until the day the Respondents’ materials were due (August 12), when the Respondents asked for an adjournment with no evidence. Although only Shawn was alleged to be incapacitated, the Diana Young Parties, the Individual Respondents and the Corporate Respondents did not deliver any materials by the deadlines established in the July 18 consent Order.

e. When the Trial Coordinator contacted counsel on August 10 to ask if the long motion was going ahead, Respondents’ counsel said nothing even when Mr. Kuang confirmed the motion,

f. Late retainers of counsel leading to adjournments,

g. Ms. Young provided “thin and suspect” excuses for failing to comply with the July 18 Order.

[24] I find the conduct to be unreasonable, and warranting of sanctions.

Interim Preservation Motion and Related Attendances

[25] Ms. Young’s Bill of Costs submitted at the Interim Preservation Motion was $25,925.00 on a full recovery basis. The Individual Respondents provided a Bill of Costs leading to the Interim Preservation Motion in the amount of $31,004.00 on a full recovery basis. The Corporate Respondents did not attend and were not represented. The Diana Young Parties and the Individual Respondents argue that steps leading to the Interim Preservation Motion should be excluded from recovery. I find the Bills of Costs submitted by Blaney, McMurtry does not truly reflect costs incurred, since there is no mention in the dockets of drafting or reviewing the 170-page affidavit submitted by Ms. Young the day before the motion. That affidavit was the Respondents’ evidence for the Interim Preservation Motion.

[26] The participating Respondents argue that they are entitled to costs of the July 7, 2022 attendance before the Honourable Justice O’Brien fixed in the amount of $5,000. They argue no costs should be awarded in relation to the August 22, 2022, TBST attendance before the Honourable Justice Diamond. Finally, they argue that success on the Interim Preservation Motion was divided, so all parties ought to bear their own costs.

[27] I do not agree that the Respondents were successful on the motion before Justice O’Brien. The Respondents required an adjournment. They simply were not ready to proceed. They failed to file evidence or factums, although the Applicant had done so. The date had been fixed following the TBST. Justice O’Brien’s interim-interim preservation order issued on consent pending the hearing of the long motion, but terms were inevitable given their failure to comply with the Rules. While Offers to Settle were served, the Respondents did not beat their offer—particularly on the key element ordered by Justice O’Brien that mortgage discharge proceeds be held in trust. In any event, the motion was necessary, and the adjournment was caused by the failure of the Respondents to comply with the Rules.

[28] I do not agree that success was divided on the motion before Justice Horkins, which was ultimately adjourned because of late—raised concerns about the capacity of one of the Respondents. The Applicant obtained an interim preservation order, and significant disclosure orders, as a term of adjournment. The Respondents clearly resisted disclosure. In her reasons, Justice Horkins found:

[16] The parties could not agree on the terms of the adjournment. The husband seeks to continue the terms in Justice O’Brien’s order and add terms that primarily deal with disclosure. Such terms will require the disclosure process to start. The respondents argue that no further terms should be added, aside from some limited disclosure that they have agreed to provide.

[17] The husband’s counsel has been asking the wife for disclosure since November 17, 2021. Requests for disclosure were made on November 17, 2021, January 25, May 12, 26, and 27, 2022. The wife ignored the requests except to say on November 17th that she was too busy to reply.

[18] The importance of full and prompt financial disclosure has been emphasized by appellate courts on numerous occasions. As stated recently in Beaudoin v Beaudoin, ONCA 598, “Financial disclosure is an essential pillar of matrimonial proceedings”.

[19] This is a very complex financial dispute involving numerous companies and properties. The evidence is that millions of dollars are involved. The husband retained Verity Valuation to assist him in this litigation. Based on a review of the pleadings Verity has provided three letters: one dated June 10, 2022, and two dated June 14, 2022. The June 10 letter sets out the documents that Verity requires from the wife to commence an analysis of the financial issues. One June 14 letter sets out what is required from Shawn and the second June 10 letter sets out what is required from Gracie, the wife’s sister…..

[23] The husband’s pleading confirms that the disclosure requested is relevant to his financial claims. His experts at Verity have provided letters setting out the disclosure that is needed to commence their analysis of the issues and the husband’s financial claims. There may well be additional disclosure requested after Verity reviews what is provided.

[26] The husband’s pleading describes the role that each party has played. He describes in detail, his wife’s deception during and after the marriage, and what she and/or the other respondents allegedly did to assume control and/or ownership of the assets. This includes removing the husband’s access to the financial information and refusing to provide the disclosure that is necessary for the husband to sufficiently preserve and particularize his claims. The husband’s affidavit June 28 2022 affidavit provides support for his pleading (see for example paras 50-56). This is reviewed in detail in his factum dated August 23, 2022.

[27] The respondents have demonstrated a lack of respect for court orders. This must stop. Orders are not suggestions. They must be followed. The husband is concerned that the respondents’ delay is a tactic that they are using against him. Whether it is a tactic or not it must stop.

[28] Disclosure should not be delayed and should start immediately. The respondents’ suggestion that disclosure be limited is contrary to appellate authority. Delayed disclosure benefits the respondents. It impedes the ability of the husband to understand what the respondents have done with the assets and to move this matter ahead. Furthermore, the failure to make full and fair disclosure will limit the ability of the court to fully and fairly assess the claims and bring this application to an end in a timely manner.

[30] The husband’s terms of the adjournment in the attached Appendix A are allowed. This version of the order takes into account the court’s concerns with the original request for terms. I highlight the following….

[34] Other concerns that the court expressed with the husband’s terms have been satisfactorily addressed in the husband’s draft order that was provided after the hearing of the motion. For example, the husband is not seeking a tracing order, at this time. It is best addressed on the return of the motion with the benefit of motion material that is filed on time.

[29] Justice Horkins also found that: “the failure of the rest of the Respondents to comply with Justice Boucher’s order is unacceptable,” and “the wife’s excuses for non-compliance are thin and suspect.”

[30] I find that the Applicant is entitled to the costs of these motions, as he was successful. I also must apply the findings of Justice Horkins in respect of the “unacceptable” conduct of the Respondents leading to the Interim Preservation motion. I also note that while the long motion was adjourned because of Shawn’s alleged incapacity, in April 2023 Justice Myers dismissed the motion as the incapacity of Shawn Yeung and Theodore Wang was not established. The decision is highly critical of the conduct of the Individual Respondents and Ms. Young.

Proportionality: Complexity of Issues, Similarity of Costs

[31] This is a complex matter given the sprawling nature of the multi-million-dollar real estate empire, the failure of the Respondents to make timely, complete disclosure, and the failure of the Respondents to comply with court orders.

[32] For the Preservation Motion, the Applicant relied on five affidavits sworn June 28, 2022, August 24, 2022, January 20, 2023, March 27, 2023, and April 12, 2023. The affidavit evidence comprised 1,057 pages, including exhibits. The Respondents relied on five affidavits sworn August 24, 2022, November 16, 2022, November 28, 2022, December 16, 2022, and January 27, 2023, comprised of 1,648 pages, including exhibits. The parties thus had to grapple with at least 2,705 pages of evidence plus multiple factums. The Applicant estimated that there were 5,000 pages of material before the long motion judge.

[33] Two lawyers argued for the Applicant on April 25, Ken Dekker, Karen S.K. Law. Three sets of lawyers argued for the Respondents on April 25: Patrick Summers/Star Deak for the Individual Respondents, Dylan Fisher/Ted Evangelidis for the Corporate Respondents, and Ms. Young’s counsel Ovais Khan. Collectively, the parties have both civil/commercial litigation teams and family lawyer teams. This is inevitable, given the complexity of the intertwined corporate and family issues in the file.

[34] All parties believed this to be a critical motion. The preservation order significantly restricts all of the Respondents. Mr. Kuang was successful.

[35] Diana Young’s conduct was the subject of significant criticism by Justice Horkins. Yet again, on the Preservation Motion Ms. Young was late in delivering affidavits. I ordered her final two affidavits excluded from the motion on the grounds of her delay, and her failure to comply with the court-ordered timetable. I note that Ms. Young is the affiant for all the Respondents on the preservation issues. In her costs submissions, Ms. Young argues that: “Diana's involvement into this motion is mainly as the current operator and director of the Corporate Respondents for their operation, right and interest under the Preservation Motion, not for Diana personally in this motion.” She concedes she is the directing mind of the Respondent Corporations.

Respondents’ Bills of Costs are Incomplete, and Cannot be Relied Upon

[36] Regarding the Bills of Costs, I do not accept that the Bills put forward by the Respondents are complete, nor do they form the basis for a reasonable expectation of costs. All parties knew that this was expensive, no-holds-barred litigation. The Applicant relied on 5 affidavits, totalling 1,057 pages. All of the Respondents relied on the five affidavits prepared by Ms. Young, totalling 1,648 pages – although none of the legal bills before me reflect the time to prepare five lengthy and complicated affidavits with numerous exhibits.

[37] The Bill of Costs prepared by Chappell Partners LLP is for the Individual Respondents, who played a very minor role in the proceedings. They state that their Bill amounted to $30,305.85 on a partial indemnity basis on the Preservation Motion.

[38] But the Corporate Respondents did not even submit a Bill, stating only: “Counsel for the Corporate Respondents would have a similar Bill of Costs and time incurred.” I draw an adverse inference from the failure to produce a Bill of Costs. As stated by Chappel J. in Weber v. Weber, 2020 ONSC 6855 at para. 40: “Failure on their part to provide details regarding their own time spent and costs incurred is a factor that the court may take into account in considering the reasonable expectations of the losing party, and may entitle the court to draw an adverse inference (Smith Estate, at para. 50; Scipione at para. 126; 206637 Ontario Inc. (c.o.b. Balkan Construction) v. Catan Canada Inc., 2013 ONSC 5448 (S.C.J.), at para. 7).”

[39] There are no Bills of Costs from Pallett Valo LLP or Ovais Khan for Ms. Young.

[40] I cannot rely on the Bills presented as truly reflective of costs incurred.

[41] I also find that Mr. Kuang’s legal fees are high because of the failure of the Corporate Respondents (and Ms. Young, in her admitted role as directing mind), to comply with Justice Horkins’ interim preservation order, particularly the disclosure requirements.

Not Divided Success

[42] The respondents rely on divided success to seek a reduction of Mr. Kuang’s costs. I do not agree. While the Applicant did not get all the relief he sought, he was in my view overwhelmingly successful on the key issues on the motion, and is entitled to his costs.

[43] “Success” requires a contextual analysis, considering the importance of the issues that were litigated, and the time and expense devoted to the issues which required adjudication: Arthur v. Arthur, 2019 ONSC 938 at para. 14; Slongo v. Slongo, 2017 ONCA 687 at para. 3. Mr. Kuang was successful on the issues dealing with preservation of assets of the corporations. Mr. Kuang failed in respect of the preservation orders for the matrimonial property — the subject of minimal evidence, very little space in the factums, and almost no oral argument. The focus was clearly on the preservation of the assets of the corporation, and restrictions on the conduct of the individuals and corporations. The primary aim of the motion was to preserve the multi-million-dollar assets of the Respondent Corporations, and restrict the individuals from transferring shares or siphoning funds from the Respondent Corporations. The equity in the three residential properties pales in comparison.

[44] Mr. Kuang preserved, and strengthened, the terms of the interim preservation order. He obtained additional relief to preserve the assets of the corporations and compel reliable disclosure. This included a protocol for 269’s mortgage business, an order that the Respondent Corporations and Diana Young’s corporations retain external accountants to prepare financial statements and tax returns, and an order barring the Respondents from bringing any further motions until they comply with the disclosure terms of Justice Horkins’ order. He also obtained an Order that Ms. Young and her legal professional corporation cannot act as solicitors on the real-estate mortgage closings for the Respondent Corporations, another additional protection.

[45] The Individual Respondents argue that they were “almost wholly successful in resisting injunctive relief” such that no costs should be ordered against them. They note that no preservation order was made regarding their properties at Bonis Ave. and Midland Ave. But they opposed the motion, and the preservation order contains significant restrictions on their ability to sell shares, or property, and on the conduct of the businesses allegedly owned by Ms. Yeung.

[46] The Corporate Respondents argue that they were largely successful. They acknowledge that they opposed any order unduly restricting them in the private mortgage business, including restricting the transfer of funds between the corporations, and on this specific point, the Corporate Respondents failed. That said, the Corporate Respondents, and in particular 269, argue that they succeeded in ensuring that 269 could use funds from discharging prior and existing mortgages to fund and renew mortgages. The key issue on the motion, however, was preventing inter-corporate transfers including transfers to 269, and restricting 269 only to continuing in the mortgage business using its own funds and external, third-party funds. That should have been clear from the Interpretation Motion.

[47] Lest the Respondents fail to understand the preservation order, there can be no inter-corporate transfers of funds from the other companies to 269, even from discharged mortgages owned by other companies in the group. Each corporation must run in its own silo, and preserve funds in its own silo, as set out in the order. This was the heart of the matter, and the Corporate Respondents failed in this.

Offers to Settle

[48] None of the parties bested their offers to settle.

[49] The Respondents argue that they did almost as well on the Preservation Motion as their Offer. I do not agree. They sought to be bound only by an undertaking not to dispose of some of the main commercial properties, rather than a preservation order. But as I held on the Preservation Motion, para. 43 : “While I accept that the respondents would prefer to make an undertaking rather than being subject to a court order, given the shifting ownership, concerns about the lack of independent oversight, and failure to comply with court orders, I make this part of the preservation order rather than relying on an undertaking.”

[50] In their draft Order filed on the Preservation Motion, the Respondents proposed that they could mortgage the properties, with the only restriction being that they could not mortgage more equity than what Hugh’s equalization entitlement would be, seeking a term that:

[T]he Corporate Respondents may mortgage, pledge, or otherwise encumber any of the Commercial Properties to a reasonable and safe extent, that is an amount that is in excess of the net value required to cover Hugh’s maximum equalization entitlement if he were successful in his claim for ownership and/or beneficial interest in all the Corporate Respondents.

[51] This term was not granted.

[52] The March 23, 2024 Offer to Settle by the Respondents also sought that the Applicant and the Respondents jointly retain a licensed property appraiser to provide updated appraisal reports of the main commercial properties, with costs apportioned 50% to the Applicant Mr. Kuang. The Court did not make this Order. Those costs remain the responsibilities of the Respondents.

[53] In their March 23, 2024 Offer to Settle, the Respondents also sought an Order varying the interim preservation order to “allow the Respondents the freedom of using the profits of the businesses and the discharge funds with limited ability to operate the private lending businesses” on conditions less restrictive than ultimately ordered by the Court.

[54] The Respondents did not best the Offer to Settle.

[55] The Applicant did not best any Offer to Settle.

Costs Sought Against Individual Respondents, Not Corporations

[56] The Applicant seeks an Order that only the Individual Respondents and Diana Young should pay costs, with Ms. Young being personally responsible for 50%, and the Individual Respondents being jointly and severally liable for the remainder, both without recourse to the Respondent Corporations’ assets. The Applicant states that such an Order is appropriate here, given the role of the Individual Respondents and Ms. Young in directing the Corporate Respondents. He argues that Ms. Young (the sole affiant for the Respondent Corporations), bears responsibility given her many roles here as a party, directing mind of multiple corporations, and lawyer advising the corporations. Mr. Kuang also argues that given the strong prima facie case that Mr. Kuang owns the Respondent Corporations, an Order letting them pay their own costs will likely amount to paying Mr. Kuang with his own money, which is contrary to the preservation order.

[57] Ms. Young argues that no costs award should be made against her. She argues that she has claimed no interest in many of the Corporate Respondents and, with respect to the Corporate Respondents subject to the Preservation Motion, has claimed ownership only in 2305969 Ontario Inc. as her property management company and in Diana Young Professional Corporation. No preservation order was made with respect to the matrimonial home, which is in Ms. Young's name. She also argues that there was no substantial dispute about the operations of 2305969 Ontario Inc. or Diana Young Professional Corporation between the Applicant and Respondents. That is not consistent with my decision. I found:

Since separation, Ms. Young has caused the corporate respondents to lend out significant funds, and has caused the corporate respondent to pay significant income to Ms. Young and DYPC. Ms. Young has paid to herself at least millions from the corporate respondents (other than 230 and DYPC) since separation. Included in these payments are a total of $2,251,588.14 that, as of January 31, 2023, had been transferred from accounts held by 217, MTCC 1067, 982 and 269 to accounts owned by 230. 230 is wholly owned by Ms. Young. While Ms. Young states that these are management fees, and the corporate respondents state that these are property management fees or services by DYPC to the corporations, the only affiant providing such explanation is Ms. Young. The corporate respondents relied only on the evidence of Ms. Young. The corporate respondents no longer have external accounting assistance. Third party accountants were regularly retained to prepare the corporate respondents' financial and tax records before separation. And since no financial statements or general ledgers have been provided, the only person attesting to the legitimacy of the payments to Ms. Young and her corporations is Ms. Young.

[58] It is in part for these reasons that I made orders directing DYPC and 230 to retain external accountants to prepare financial statements and tax filings. And the failure of the Respondent Corporations to provide the financial statements, trial balances, tax returns, and other documents ordered by Justice Horkins falls squarely on Ms. Young’s shoulders, given her concession that: “Diana's involvement into this motion is mainly as the current operator and director of the Corporate Respondents for their operation, right and interest under the Preservation Motion, not for Diana personally in this motion.”

[59] The Applicant is essentially seeking to pierce the corporate veil in the costs award. Zarnett, J.A. for the Court recently summarized the test for piercing the corporate veil in FNF Enterprises Inc. v. Wag and Train Inc., 2023 ONCA 92 at paras. 18-21:

[18] The test for piercing the corporate veil in Ontario is that set out in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), aff’d [1997] O.J. No. 3754 (C.A.). That case set out a two-part test, at pp. 433-34: “courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct.” See also Yaiguaje v. Chevron Corporation, 2018 ONCA 472, 141 O.R. (3d) 1, at paras. 36, 65-71.

[19] In Yaiguaje, at para. 70, the majority stated:

The Transamerica test is consistent with the principle reflected in the various business corporation statutes in Canada that corporate separateness is the rule. Where the corporate form is being abused to the point that the corporation is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct, the law recognizes an exception to this rule.

[20] The first element of the Transamerica test requires not just ownership or control of a corporation, but complete domination or abuse of the corporate form. The second element requires fraudulent or improper conduct, and contemplates that it is that conduct that has given rise to the liabilities the plaintiff seeks to enforce. Where those two elements are present, the corporate veil will be lifted to prevent the person who engaged in that conduct from asserting that the liabilities the fraudulent or improper conduct gave rise to are those of the corporation only.

[21] In 642947 Ontario Ltd. v. Fleischer (2001), 2001 8623 (ON CA), 56 O.R. (3d) 417 (C.A.), at para. 68, this court expanded on the meaning of “fraudulent or improper conduct”:

Typically, the corporate veil is pierced when the company is incorporated for an illegal, fraudulent or improper purpose. But it can also be pierced if when incorporated “those in control expressly direct a wrongful thing to be done”. [Citation omitted.]

See also Shoppers Drug Mart Inc. v. 6470360 Canada Inc. (Energyshop Consulting Inc./Powerhouse Energy Management Inc.), 2014 ONCA 85, 372 D.L.R. (4th) 90, at paras. 43-47, leave to appeal refused, [2014] S.C.C.A. No. 119.

[60] It is common, in the family context, for spouses to use corporations to hide financial interests: see, for example Wildman v. Wildman, (2006) 82 OR (3d) 401, 2006 33540 (ON CA). In my view, the updated test for piercing the corporate veil in family law is that stated by the Court of Appeal in FNF Enterprises Inc. v. Wag and Train Inc. These are fundamental principles of common law applicable in the civil realm. Family law is not a separate area, with separate tests relating to abuse of the corporate form and piercing the corporate veil.

[61] I do not have the basis, given the issues on the motions, to pierce the corporate veil for the purposes of costs alone to affix responsibility on Ms. Young. Whether Ms. Young, or some or all the other Individual Respondents, are completely dominating or abusing the corporate form to engage in fraudulent or improper conduct, was not the focus of the Preservation Motion or Interim Preservation Motion. Those issues can be the subject of evidence—including cross-examination —at trial.

[62] The Respondents argue that the Corporate Respondents may pay the costs as part of the existing Preservation Order. I do not agree. The Preservation Order provides:

e. All corporations named as respondents in this matter, including but not limited to 2174112 Ontario Inc ., 2394049 Ontario Inc ., 2690712 Ontario Inc ., 2691181 Ontario Inc ., 2435982 Ontario Inc ., 2305969 Ontario Inc., and Diana Young Professional Corporation are permitted to pay their respective legal fees in this application, the legal fees of each corporation's respective owner in this application, as well as legal fees incurred in the usual and ordinary course of operation of their respective businesses, including but not limited to transactional legal fees and mortgage enforcement as necessary, but excluding legal fees incurred in pursuing claims against the Applicant outside of this application.

[63] At its highest, 2174112 Ontario Inc., 2394049 Ontario Inc., 2690712 Ontario Inc., 2691181 Ontario Inc., 2435982 Ontario Inc. may pay their own legal fees and the legal fees of Ms. Shawn Yeung, the person they allege is the owner of these corporations. 2305969 Ontario Inc., and Diana Young Professional Corporation may pay their own legal fees and those of Ms. Diana Young (as owner of the corporations, not for personal matrimonial issues). But the Preservation Order does not extend to the payment of costs. The Preservation Order would have to be amended in that regard, by motion.

[64] The Corporate Respondents were not represented, and did not participate in, the Interim Preservation Motion and the other steps before the Interim Preservation Motion for which costs were awarded. No order is made against the Corporate Respondents in respect of those appearances.

Lawyer/Law Firm Time, Rates

[65] I accept that both civil and family advice is required by Mr. Kuang given the significant corporate law issues, and some duplication is necessary. Mr. Kuang is represented by Niman Mamo LLP and Affleck Greene McMurtry LLP. But given the amount of duplication, each of the law firms must rationalize the teams going forward. The Respondents allege that there is duplication, claims for unrelated tasks in the dockets, and many dockets are vague making it difficult to determine what event the task relates to. I accept much of the Applicant’s explanation for these, although I recommend keeping more detailed and descriptive dockets for future appearances.

[66] I discount the Bills for Niman Mamo where multiple lawyers (up to four lawyers) are consulting internally, or multiple lawyers appear to be doing the same or similar tasks (duplication). I also discount the bills where up to 4 lawyers docketed for attending appearances (even if only 2 or 3 appear on the endorsement).

[67] The hourly rates were not contested.

[68] The Respondents argue that the issues and documentation used in the Interpretation Motion substantially overlapped with those of the Preservation Motion. They state that four of the Applicant’s affidavits were used in both motions, and five of the Respondents’ affidavits were used in both motions. The Applicant filed two new Affidavits on the Preservation Motion. While the corporate structure and method of conducting business was the central issue in the Interpretation Motion, the Preservation Motion involved very different issues. The Applicant’s fees relating to the Interpretation Motion have excluded from the fees sought to be recovered on the Interim Preservation Motion and the Preservation Motion.

[69] I accept that the Respondents’ last-minute filings and late adjournment requests escalated costs. For example, the Applicant filed factums for both the July 7, 2022, and August 25, 2022, motions, although both were adjourned on account of the Respondents. Yet Diana Young’s lawyer billed no time for preparation of any factum for either motion. The late delivery of the Gracia Wall’s affidavit two days before the Interim Preservation Motion caused a scramble to respond. On the Preservation Motion I excluded two last-minute affidavits of Ms. Young sought to be submitted by the Respondents after the deadline for materials. But the Applicant’s lawyers had to read the two affidavits, and draft arguments for their exclusion. The issues were urgent, as I found a serious risk of dissipation of the assets to avoid judgment if the order was not granted, and that assets had already been removed from companies to which Mr. Kuang has a claim to companies in which he does not have a claim. Moreover, I expressed significant concerns about Ms. Young’s evidence. Urgency always increases costs.

[70] There are some dockets which are not related or recoverable (April 18 Case Conference, docket re interim disbursements, for example), and those are excluded.

[71] The Respondents seek to exclude dockets relating to disclosure issues, stating that I declined to make an Order. I do not agree with this. The single most aggravating issue to date is the failure of the Respondents to make proper disclosure, in the fact of a binding disclosure Order. I declined to make another order restating disclosure obligations, because it is not the job of a judge to make the same orders, repeatedly. An Order is binding when issued, and remains binding even in the face of non-compliance.

[72] But I did grant new relief specifically because of the failure to comply with the existing disclosure orders.

[73] As I stated in para. 53 of my decision on the Preservation Motion:

Until the respondents comply with the October 7, 2022 disclosure order, this case is stalled on issues including property, and income for spousal support and child support. It is imperative to continue moving this case to trial. Given my concerns with the delay to date, the dissipation of assets, and the failure of the respondents to comply with the October 7, 2022 order, I direct the respondents Diana Young Professional Corporation, 2305969 Ontario Inc., 2174112 Ontario Inc., 2394049 Ontario Inc., 2690712 Ontario Inc., and 2691181 Ontario Inc. to retain at their expense external accountants to prepare balance sheets, annual financial statements and to prepare and file tax returns for the corporate respondents, and to produce these to the applicant.

[74] I accepted the disclosure concerns as aggravating, since the Preservation Motion Order contains three paragraphs specifically targeted to disclosure:

3. The Respondent Corporations 2174112 Ontario Inc., 2394049 Ontario Inc., 2690712 Ontario Inc., 2435982 Ontario Inc., 2691181 Ontario Inc., Diana Young Professional Corporation, and 2305969 Ontario Inc. shall within 30 days retain at their expense external accountants to prepare balance sheets, annual financial statements and to prepare and file tax returns for these Respondents and shall immediately provide to the Applicant the identity of the external accountant(s) who are retained as well as copies of any balance sheets, financial statements, and tax returns that have been prepared by the external accountants upon receipt.

4. The Applicant must case conference Rule 1(8) relief and a contempt motion regarding the failure of the respondents to comply with the October 7, 2022, order with the case management judge before any motion may be brought.

5. The Respondents may not bring motions until the disclosure order of October 7, 2022 is complied with, subject to the discretion of the case management judge after case conferencing with the case management judge.

[75] Paragraphs 1(h), (i), and (j) are also specifically targeted to corporate record and disclosure issues. I found that the Respondents have not complied with Justice Horkins’ disclosure order of October 7, 2022. And that failure to comply, in my view, explains in large part the costs incurred by Mr. Kuang on this Preservation Motion, the Interim Preservation Motion, and the steps leading to the two motions.

Conclusion

[76] Taking all these factors into account, I must make an order which is reasonable and proportionate for the unsuccessful parties to pay in the circumstances of the case. I find that the conduct of the Respondents has been unreasonable, throughout, designed to maintain a veil of secrecy over the operations of the Corporate Respondents including the movement of property and money, and secrecy over moneys paid to or for the benefit of the Individual Respondents and Diana Young Parties. I find the Respondents have driven up costs through defiance of Court orders and failure to disclose.

[77] The failure to obey Court orders warrants significant sanctions. At the same time, costs for some attendances are not awarded, and the fees of the Applicant have been discounted for the reasons set out above. The Applicant seeks substantial recovery costs of the Preservation Motion in the amount of $112,383.80; I award costs on a substantial recovery basis of $90,000, including HST. The Applicant seeks full indemnity costs for the August 25 Interim Preservation Motion and attendances leading to that motion in the amount of $189,831.53. I award costs on a substantial recovery basis of $110,000.00.

Order

1. This Court orders that the Respondents Diana Young, Diana Young Professional Corporation, 2305969 Ontario Inc., Shawn Yeung, Theodore Wang, Gracia Wall, 2174112 Ontario Inc., 2394049 Ontario Inc., and 2690212 Ontario Inc., are jointly and severally liable to pay to the Applicant costs of $90,000.00, inclusive of HST, for the Preservation Motion argued on April 25, 2023, payable within 30 days.

2. This Court orders that the Respondents Diana Young, Diana Young Professional Corporation, 2305969 Ontario Inc., Shawn Yeung, Theodore Wang and Gracia Wall are jointly and severally liable to pay to the Applicant Hugh Kuang costs of $110,000.00, inclusive of HST, for the June 20, 2022 To Be Spoken To attendance before Justice Kraft; the July 18 Case Conference before Justice Boucher; the July 7, 2022 motion before Justice O’Brien; the August 22, 2023 To Be Spoken To attendance before Justice Diamond; and the August 25, 2022 Interim Preservation Motion before Justice Horkins, payable within 30 days.

“Justice Kristjanson”

Released: February 2, 2024