COURT FILE NO.: FS-22-29253-0000 DATE: 2025-01-02 SUPERIOR COURT OF JUSTICE - ONTARIO RE: Hugh Kuang Applicant AND: Diana Young, Diana Young Professional Corporation, 2305969 Ontario Inc., Xiang Qin Yang, Hong Feng Wang, 2174112 Ontario Inc., 2394049 Ontario Inc., 2691181 Ontario Inc., 2435982 Ontario Inc. and 2690712 Ontario Inc. Respondents BEFORE: Diamond J. COUNSEL: Shaun Laubman, Ken Dekker, Christopher A. Mamo, Jaylene Olson, Ardita Sinojmeri and Karen S.K. Law, for the Applicant Answer Farooq, Shivani Balcharan and Lanxin Yang, for the Respondents Diana Young, Diana Young Professional Corporation and 2305969 Ontario Inc. Andrew Jia and Victor Li for the Respondents Xiang Qin Yang and Hong Feng Wang Andrew Jia, Victor Li, Jonathan Mesiano-Crookston and Ye Yuan, for the Respondents 2174112 Ontario Inc., 2394049 Ontario Inc., 2691181 Ontario Inc., 2435982 Ontario Inc. and 2690712 Ontario Inc. HEARD: December 20, 2024 ENDORSEMENT [ 1 ] On December 20, 2024, the second of (now) three days set aside for various long motions in this proceeding, I heard submissions from counsel for the parties with respect to the applicant’s motion seeking: (a) an Order pursuant to sections 247, 248(3) and 249(4) of the Ontario Business Corporations Act (“OBCA”) requiring the respondents 2174112 Ontario Inc. (“217”), 2394049 Ontario Inc. (“239”), 2690712 Ontario Inc. (“269”), 2691181 Ontario Inc. (“181”) and 2435982 Ontario Inc. (“243”) (collectively “the respondent corporations”) to remit payment to the applicant of the sum o f $ 4,110,000.00 as an advance towards the applicant’s legal costs and disbursements needed to take this matter to trial scheduled to commence in October 2025; and (b) in addition or in the alternative to (a), an Order requiring the respondent Diana Young to advance $ 4,110,000.00 to the applicant for interim costs and disbursements pursuant to Rule 24(13) of the Family Law Rules. [ 2 ] At the conclusion of the full day hearing on December 20, 2024, I took my decision under reserve. These are my Reasons. Governing Legal Principles [ 3 ] The applicant is seeking similar orders in both tranches of relief detailed above. The applicable tests for each request, while similar, are not the same. [ 4 ] Section 249(4) of the OBCA permits the Court to order a corporation to pay to a complainant “interim costs, including reasonable legal fees and disbursements, for which interim costs the complainant may be held accountable to the corporation or its affiliate upon final disposition of the application or action ”. This section bestows the Court with a broad discretion in situations where a complainant shareholder seeks relief pursuant to alleged oppressive conduct (which is the case here). [ 5 ] In Stefaniak et al v. Perry Murphy et al 2010 ONSC 971 (Div. Ct.), the test for determining whether an award of interim costs is justified under the OBCA was described as follows: a) is the applicant in financial difficulty? b) is the applicant’s financial difficulty connected to the alleged oppressive conduct, and does the financial difficulty arise from the pursuit of the legal proceeding? c) but for an interim costs award, could the applicant not pursue his legal proceeding? d) has the applicant established a case of sufficient merit to warrant the interim costs award? [ 6 ] Of note, the level of “sufficient merit” to satisfy requirement (d) is based upon the moving party’s claims being “well over the frivolous and vexatious mark”, but without the need of establishing the claim on a balance of probabilities. [ 7 ] Rule 24(12) of the Family Law Rules permits the Court to make an order that a party pay an amount a money to cover a part or all of the expenses of carrying on the case, including a lawyer’s fees. [ 8 ] In Ludmer v. Ludmer 2012 ONSC 4478 , Justice Mesbur provided the following helpful summary of the principles to be considered and applied by the Court in determining whether an Order under Rule 24(12) is warranted: The law concerning orders for interim disbursements or interim fees and costs in family law cases has evolved over the years. Here, the relevant rule is rule 24(12) of the Family Law Rules, which deals with orders for interim fees and costs in family law cases. It simply says: “The court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees.” One of the primary themes of the case law is that orders may be required in order to “level the playing field” between the litigants. The jurisprudence surrounding rule 24(12) was neatly summarized by Rodgers J in Stuart v. Stuart and has been followed in many cases since then. Simply put, when considering a request for interim disbursements under the Family Law Rules , it is no longer necessary to find exceptional circumstances in order to make an order. The order is a discretionary one. In exercising discretion under the rule, the court must ensure the primary objective of fairness under the Family Law Rules is met. As the court said in Stuart , The discretion should be exercised to ensure all parties can equally provide or test disclosure, make or consider offers or possible [sic] go to trial. Simply described the award should be made to level the playing field. An order under section 24(12) should not immunise a party from cost awards. The order is to allow the case to proceed fairly and should not be such that a party feels a license to litigate. … The claimant must clearly demonstrate that the disbursements are necessary and reasonable given the needs of the case and the funds available … The claimant must demonstrate that he or she is incapable of funding the requested amounts. The claim or claims being advance in the case must be meritorious as far as can be determined on the balance of probabilities at the time of the request for disbursements. Thus, the wife’s evidentiary burden includes establishing the necessity and reasonableness of the fees and disbursements, given the nature of the case and the funds available. She must also show she is incapable of funding the fees and disbursements herself. Last, she must show that her claims are meritorious. Preliminary Issue [ 9 ] Prior to embarking upon an analysis of whether the applicant has satisfied either of the above governing tests, it is necessary to address a substantive, preliminary issue which arose during argument of the applicant’s motion. This preliminary issue is due to the fact that this was not the first time that the applicant had brought a motion for interim costs under both the OBCA and the Family Law Rules in this proceeding . [ 10 ] On November 3, 2023, the applicant served a motion (argument of which was set to proceed as a long motion on December 18, 2023) setting out various heads of relief. Included in his prayer for relief were identical Orders to those sought on the applicant’s motion before this Court. [ 11 ] The only difference between the identical orders was the amount of the interim costs sought. In late 2023, when the trial was scheduled to commence in October 2024, the applicant was asking for $1,725,870.00 as interim costs. [ 12 ] In support of his original motion, the applicant swore a lengthy affidavit. The applicant’s motion was opposed by the respondents, who filed a lengthy responding affidavit of Diana Young. [ 13 ] Argument of that motion never proceeded, as the parties resolved the relief sought by the applicant. The terms of their agreement were codified in the Order dated December 18, 2023, of Justice Kristjanson (“the Kristjanson Order”). The salient terms of the Kristjanson Order were as follows: • The corporate respondent 217 would pay the applicant the sum of $1,000,000.00 in three stages: $200,000.00 by January 30, 2024, $400,000.00 by May 30, 2024, and $400,000.00 by September 15, 2024. • The payments would be made directly to the applicant’s counsel to be used solely for the use of paying the applicant’s legal fees and disbursements, or disbursing payments to the applicant’s other lawyers and/or experts for the purpose of this litigation. • The payments would be categorized as a personal loan to the applicant as a related party in 217’s accounting records confirming the loan was for the purpose of the applicant funding this litigation. • The payment was to be made without prejudice to: (a) any of the parties’ claims for costs in this proceeding to be apportioned by the trial judge, (b) 217’s claims in respect of the payments, whether as a cost of the proceeding to be apportioned by the trial judge, for interest in respect to the loan and any repayment thereof, and (c) the applicant’s right to bring a motion for further interim costs or disbursements at any stage of this proceeding, subject to the pre-condition that the applicant demonstrate that the payments were exhausted in accordance with the terms of the Kristjanson Order or would be exhausted prior to the completion of a major step in the proceeding. [ 14 ] As the Kristjanson Order was on consent of the parties, the applicant takes the position that the terms of the Kristjanson Order operate to estop the respondents from attempting to re-litigate the issues raised in his original 2023 motion. The applicant argues that the same evidence was tendered on both the 2023 motion and this motion, with the only differences being the amount sought on each motion and the fact that the trial has now been adjourned for an additional year with more interim steps to complete between now and October 2025. [ 15 ] The respondents take their position that the terms of the Kristjanson Order do not result in any form of estoppel, as those terms simply “kicked the substantive issues down the road”. The respondents argue that a plain reading of those terms results in the substantive issues having to be litigated “from scratch” as the $1,000,000.00 payment was made without prejudice to the applicant’s “right to bring a motion”. [ 16 ] Despite the very able arguments of Messrs. Jia and Farooq, I agree with counsel for the applicant and find, for the following reasons, that the terms of the Kristjanson Order (a) resolved the issue of whether the applicant has met the governing test(s) for entitlement to interim costs and (b) reserved only the issue of whether additional funding (i.e. quantum) would be necessary in the event the $1,000,000.00 payment was exhausted in accordance with the terms of the Kristjanson Order. [ 17 ] It is trite to state that while a consent Order may not amount to a judicial determination on the merits of a case, a consent Order is still a formal, enforceable Order of the Court. As recently held by the Court of Appeal for Ontario in Johnston v. McLean 2024 ONCA 791 , consent orders ought to be interpreted according to the principles of contractual interpretation because they are a species of contract: Thus, it is the contractual nature of consent judgments that distinguishes them from regular judgments and drives the requirement to determine the intention of the parties. Therefore, there is no principled reason why the analytical approach to them should differ from other contracts. The court should read consent orders as a “whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”. [ 18 ] Regrettably, there is essentially no evidence filed by the parties on this motion to assist the Court with the circumstances surrounding the parties agreeing to the terms of the Kristjanson Order, and as such the Court is not in a strong position to assess the intention of the parties at that time. The task at hand is to interpret the Kristjanson Order as a whole, given the words used in their ordinary and grammatical meaning. [ 19 ] In reviewing the Kristjanson Order, I note that the $1,000,000.00 payment was not characterized as “without prejudice payment” itself (i.e. without prejudice to all the parties’ rights, claims, and interests in this proceeding). Rather, the payment was made without prejudice to specific rights and interests of the parties. [ 20 ] The key wording for the Court’s interpretation is found in paragraph 4(3) of the Kristjanson Order which describes the $1,000,000 payment without prejudice to the “applicant’s right to bring a motion for further interim costs or disbursements at any stage of this proceeding”. While the respondents focused their submissions upon the words “right to bring a motion”, the respondents seemingly ignored the balance of that term, namely the applicant’s right to bring a motion for further interim costs or disbursements at any stage of this proceeding. [ 21 ] The wording chosen by the parties contemplated a possible future motion for further interim costs and disbursements. This wording cannot be reconciled with the respondents’ argument that the entire issue of interim costs was reserved to be “argued from scratch”. The use of the word “further” contemplates that a possible future attendance was a “part two” (if necessary) to the applicant’s original motion for interim costs. In other words, in the event that the $1,000,000.00 payment was insufficient to fund the applicant until the trial of this proceeding, the applicant’s request for additional funding would be revisited by the parties on the condition that the applicant prove the $1,000,000.00 payment was exhausted (or about to be exhausted by in the face of a major step in the proceeding) in accordance with the terms of the Kristjanson Order. [ 22 ] The respondents rely upon decision of Curran Farm Equipment v. John Deere Limited, 2010 ONSC 3048 , in which Justice James was asked to dissolve an injunction which was consented to by a defendant, and included a provision that the injunction would be in place pending a “further court order”. In rejecting the plaintiff’s argument that the defendant, having consented to the injunction, now only had a limited ability to move against it, Justice James found that the purpose for which the injunction was obtained had run its course. This is clearly not the case before this Court, as the purpose of interim costs has clearly not run its course, and was in fact specifically contemplated in paragraph 4(3) of the Kristjanson Order. Further, the terms of the injunction specifically rendered it to remain in place pending further court order. Such a term is akin to the entire injunction being granted on a without a prejudice basis. Again, this is not the case before this Court, and I find the Curran Farm Equipment case to be distinguishable on its facts. [ 23 ] In my view, the issue of whether the applicant has satisfied the governing tests under either the OBCA or the Family Law Rules has been foreclosed by the terms of the Kristjanson Order. What remains outstanding for this Court’s determination is (a) whether the applicant has complied with the terms of the Kristjanson Order, and (b) if the answer to (a) is yes, what quantum, if any, should be awarded to the applicant for further interim costs. Has the applicant complied with the terms of the Kristjanson Order? [ 24 ] The applicant’s right to bring a motion for further interim costs is subject to a pre-condition that he must demonstrate that the $1,000,000.00 payment was exhausted in accordance with the obligation to use the payment solely for the purpose of paying his legal fees/disbursements. [ 25 ] In support of his motion, the applicant filed his affidavit sworn November 21, 2024. The applicant was not cross-examined upon that affidavit. [ 26 ] As the case management judge for this proceeding, I have overseen and been privy to most if not all of the litigation events which have taken place over the last two and half years. While I leave the ultimate fact-finding task to the trial judge, this Court and other judges who have touched this file have repeatedly noted the “scorched earth” approach employed by the respondents. That approach includes the retainer and then termination of retainers of an extensive carousel of lawyers, and the maintenance of obstinate and unreasonable positions on many occasions. Surely, the respondents’ approach and conduct found by the Court would only serve to increase the standard, anticipated time and expense needed to prosecute this proceeding. [ 27 ] In paragraphs 51-55 of his affidavit, the applicant gave evidence of the various court attendances which have transpired since late 2023. In addition to what would typically be expected in the prosecution of a proceeding which has been found by the Court to be quite complex, the applicant has been forced to proceed with and/or respond to motions, 14B motions, long motions, nearly monthly case conferences, questioning, retainers of experts, and multiple disclosure requests. Again, this time and expenses are over and above the usual time spent in correspondence and negotiations. [ 28 ] The applicant has incurred legal fees and disbursements in excess of the $1,000,000.00 payment. I find that the conditions set out in paragraph 4(3) of the Kristjanson Order has been satisfied. What quantum, if any, of further interim funding/costs should be ordered? [ 29 ] This leaves the issue of whether any further interim costs or disbursements should be ordered. I note that in late 2023, the applicant was of the view that the sum of $1,725,870.00 would take him through the trial of this matter that was scheduled to commence in October 2024. Having spent $1,000,000.00 of his then-anticipated budget, now that the trial has been adjourned one further year away, the applicant submits that the additional issues requiring negotiation, determination or preparation will now cost him an additional $4,100,000.00 over and above the $1,000,000.00 spent to date. In other words, with an extra year of interim preparation and one extra week added to the length of trial, the applicant’s trial budget increased by over $3,000,000.00. [ 30 ] In my view, this new trial budget is excessive. While the respondents have certainly increased the applicant’s costs, the applicant has now retained the services of three, separate prominent Toronto law firms to represent his interests in this litigation. No doubt this litigation is complex. However, if $1,725,870.00 was sufficient in 2023 (when the applicant only retained two sets of law firms) to take this matter to trial, the additional of one trial week would not result in anticipated trial costs increasing by over $3,000,000.00. [ 31 ] The applicant has the right to retain as many lawyers as he wishes, but that right is not unfettered and always subject to the court’s lens of reasonableness. [ 32 ] I have reviewed the trial budgets prepared by counsel for the applicant, and cross-referenced those budgets with the budget prepared by Mr. Farooq’s firm on behalf of Diana Young, Diana Young Professional Corporation and 2305969 Ontario Inc. I do note that in terms of estimated hours, Mr. Farooq’s trial estimate is not that dissimilar from the trial estimates prepared by counsel for the applicant. [ 33 ] I rely upon the following comments made by Justice Kristjanson in her substantive Costs Endorsement rendered in this proceeding on February 2, 2024: “I accept that both civil and family advisors are 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.” [ 34 ] Again, at that time, there were only two law firms retained by the applicant. Justice Kristjanson advised the law firms to “rationalize the teams going forward” to ensure the applicant’s costs be streamlined and within the reasonable expectations of the parties. Instead, the number of teams being used by the applicant has expanded, which will no doubt create more duplication and require more stringent streamlining - something which was not readily apparent in the applicant’s trial budgets. [ 35 ] Having reviewed the applicant’s trial budgets in detail, I am of the opinion that a proportionate and reasonable amount to order for the purpose of funding the applicant’s admittedly substantive task of taking this matter to trial is the sum of $2,725,000.00. I am thus granting the applicant’s motion, and order the corporate respondents (or any of them) to pay the applicant the sum of $2,725,000.000 in the following four stages: • $500,000.00 by January 31, 2025. • $500,000.00 by March 31, 2025 • $750,000.00 by May 31, 2025 • $1,000,000.00 by July 31, 2025. Costs [ 36 ] If the parties are not able to agree on the costs of this motion, and I urge counsel for the parties to exert such efforts, they may serve and file written costs submissions (totaling no more than 5 pages including a Costs Outline) in accordance with the following schedule: a) Applicant’s cost submissions to be served and filed within 14 business days from the release of this Endorsement; and, b) Respondents’ written costs submissions to be served and filed within 14 business days of their receipt of the applicant’s written costs submissions. Diamond J. Date: January 2, 2025 COURT FILE NO.: FS-22-29253-0000 DATE: 2025-01-02 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Hugh Kuang Applicant – and – Diana Young, Diana Young Professional Corporation, 2305969 Ontario Inc., Xiang Qin Yang, Hong Feng Wang, 2174112 Ontario Inc., 2394049 Ontario Inc., 2691181 Ontario Inc., 2435982 Ontario Inc. and 2690712 Ontario Inc. Respondents ENDORSEMENT Diamond J. Released: January 2, 2025
minicounsel