Lynch v. Segal et al., (2006) 219 O.A.C. 1 (CA)

• Judge: Doherty, Blair and LaForme, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: December 19, 2006
• Jurisdiction: Ontario
• Citations: (2006), 219 O.A.C. 1 (CA)

Lynch v. Segal (2006), 219 O.A.C. 1 (CA)

MLB headnote and full text

Temp. Cite: [2006] O.A.C. TBEd. DE.050

Cynthia Lynch (respondent/applicant) v. Moses Segal, Idyllic Acres Holdings Inc., and Ashoe High Speed Solutions Inc. (appellants/respondents)

(C43572)

Indexed As: Lynch v. Segal et al.

Ontario Court of Appeal

Doherty, Blair and LaForme, JJ.A.

December 19, 2006.

Summary:

A wife sued her husband for spousal and child support and other monetary relief. She also sought declarations that the husband was the beneficial owner of the shares and/or properties of two corporations which owned development properties in Ontario and a vesting order respecting those shares and/or properties.

The Ontario Superior Court awarded the wife $8,350,747 as lump sum child and spousal support, $378,135.77 for arrears of child and spousal support, $1,445,664.99 in respect of a debt owed to the wife, and $963,084 in respect of monies promised the wife on the sale of the parties' home in the Bahamas. The court also found that the corporations and the husband were one and the same and that the husband was the beneficial owner of the property. The court ordered that the lands be vested in the wife in satisfaction of the above monetary claims and costs. The corporations appealed.

The Ontario Court of Appeal dismissed the appeal.

Editor's Note: for related cases involving these parties see 219 O.A.C. 19 (C.A.) and [2004] O.T.C. Uned. 834 (S.C.).

Company Law - Topic 311

Nature of corporations - Lifting the corporate veil - One person company - [See second Family Law - Topic 2539 ].

Family Law - Topic 2539

Maintenance of wives and children - Enforcement of orders - Transfer of assets - Vesting order - The Ontario Court of Appeal discussed the court's jurisdiction to make a vesting order - The court declined to categorize the types of circumstances in which a vesting order might issue in family law proceedings - The court had a broad discretion, and whether such an order would or would not be granted depended upon the circumstances of the particular case - The onus was on the person seeking such an order to establish that it was appropriate - As a vesting order, in the family law context at least, was in the nature of an enforcement order, the court would need to be satisfied that the previous conduct of the person obliged to pay, and his or her reasonably anticipated future behaviour, indicated that the payment order would not likely be complied with in the absence of more intrusive provisions - Thus, the spouse seeking the vesting order would have already established a payment liability on the part of the other spouse and the amount of that liability, and would need to persuade the court that the vesting order was necessary to ensure compliance with the obligation - The court should also be satisfied that there was some reasonable relationship between the value of the asset to be transferred and the amount of the targeted spouse's liability - The interests of any competing execution creditors or encumbrancers with exigible claims against the specific property in question were not an impediment to the granting of a vesting order - The court would not go so far as to say that the onus to satisfy the court on these matters was at all times on the person seeking the order - See paragraphs 27 to 33.

Family Law - Topic 2539

Maintenance of wives and children - Enforcement of orders - Transfer of assets - Vesting order - A wife obtained a judgment against her husband for over $11 Million, including $8.35 Million as lump sum child and spousal support - The husband had disguised his ownership of any assets - The wife discovered two properties in Ontario owned by two corporations (purchased for over $4.2 Million) - The trial judge found that there was no distinction in law between the corporations and the husband and that the husband was the beneficial owner of the properties - The trial judge directed that the properties be transferred to, and vested in, the wife to ensure that the lump sum spousal and child support awards were paid - The Ontario Court of Appeal dismissed the corporations' appeal - There was ample evidence the husband and the corporations were "one and the same" and that he was the beneficial owner of the corporations' shares and the properties - Piercing the corporate veil and finding that shares and the properties were beneficially owned by the husband was an essential mechanism for ensuring that the wife and the children of the marriage received the financial support to which, by law, they were entitled - See paragraphs 34 to 38.

Family Law - Topic 2539

Maintenance of wives and children - Enforcement of orders - Transfer of assets - Vesting order - A wife obtained a judgment against her husband for over $11 Million, including $8.35 Million as lump sum child and spousal support - The husband had disguised his ownership of any assets - The wife discovered two properties in Ontario owned by two corporations (purchased for over $4.2 Million) - The trial judge found that there was no distinction in law between the corporations and the husband and that the husband was the beneficial owner of the properties - The trial judge directed that the properties be transferred to, and vested in, the wife to ensure that the lump sum spousal and child support awards were paid - The corporations appealed, arguing that the trial judge should only have ordered the vesting of the shares of the corporations (not the properties) - The Ontario Court of Appeal rejected the argument - The trial judge concluded that the husband, or the corporations, which he equated with the husband, was in a position to defray whatever personal tax obligations might arise from the transfer of the properties (i.e., capital gains tax) - See paragraphs 40 to 47.

Family Law - Topic 2539

Maintenance of wives and children - Enforcement of orders - Transfer of assets - Vesting order - A wife obtained a judgment against her husband for over $11 Million, including $8.35 Million as lump sum child and spousal support - The husband had disguised his ownership of any assets - The wife discovered two properties in Ontario owned by two corporations (purchased for over $4.2 Million) - The trial judge found that there was no distinction in law between the corporations and the husband and that the husband was the beneficial owner of the properties - The trial judge directed that the properties be transferred to, and vested in, the wife to ensure that the lump sum spousal and child support awards were paid - The corporations appealed, arguing that the vesting order ought not to have been made without any valuation of the properties in order to ensure that their value was sufficient to satisfy and protect the interests of the children in terms of their lump sum support awards - The Ontario Court of Appeal rejected the argument - The corporations were in as good a position as the wife, if not better, to present evidence of the value of the properties - It was open to them to complain that there was no evidence of value in the circumstances of this case - In any event, the trial judge had some evidence of value - He was entitled to conclude that there was "no rational risk" that the lump sum payment claimed would be exceeded by the value of the property and that the vesting order was the only realistic way of ensuring the children would receive any recovery on the support order - See paragraphs 48 to 51.

Family Law - Topic 2539

Maintenance of wives and children - Enforcement of orders - Transfer of assets - Vesting order - A wife obtained a judgment against her husband for over $11 Million, including $8.35 Million as lump sum child and spousal support - The husband had disguised his ownership of any assets - The wife discovered two properties in Ontario owned by two corporations (purchased for over $4.2 Million) - The trial judge found that there was no distinction in law between the corporations and the husband and that the husband was the beneficial owner of the properties - The trial judge directed that the properties be transferred to, and vested in, the wife to ensure that the lump sum spousal and child support awards were paid - The corporations appealed, arguing that no vesting order should have issued without the husband's first wife being made a party in order to protect her Nevada judgments for spousal and child support - The Ontario Court of Appeal rejected the argument - At the time of trial, the first wife, who had been "well aware" of the action, was not an execution creditor of the husband in Ontario - It was not until a few days after oral argument on the appeal, when the first wife suddenly entered the fray, registered her foreign judgments, and unsuccessfully sought leave to intervene in the appeal - There was no requirement under the Family Law Act or the Courts of Justice Act for notice to be given to anyone in particular when a vesting order was sought - Whether such notice should be given in a particular case was a matter for a judge to determine - The court was not aware of any other statutory or legal prerequisite requiring the wife to give notice of the details of her claim to the first wife, an unregistered foreign judgment creditor - See paragraphs 52 to 62.

Family Law - Topic 2539

Maintenance of wives and children - Enforcement of orders - Transfer of assets - Vesting order - A wife obtained a judgment against her husband for over $11 Million, including $8.35 Million as lump sum child and spousal support - The husband had disguised his ownership of any assets - The wife discovered two properties in Ontario owned by two corporations (purchased for over $4.2 Million) - The trial judge found that there was no distinction in law between the corporations and the husband and that the husband was the beneficial owner of the properties - The trial judge directed that the properties be transferred to, and vested in, the wife to ensure that the lump sum spousal and child support awards were paid - The corporations appealed, arguing that the trial judge erred in failing to consider and impose alternative measures to the vesting order (i.e., vesting the corporate shares instead or granting a charging order against the shares or the properties instead) - The Ontario Court of Appeal rejected the argument - Once he found that the husband was the beneficial owner of the shares and of the properties, the decision whether to grant a vesting order pursuant to the Family Law Act or the Courts of Justice Act became a matter within the broad discretion of the trial judge - While he could have awarded a different remedy, the vesting order was well within the range of reasonable options at the trial judge's disposal - Ordering one of the other remedies, instead of a vesting order, would have left control of the corporations in the husband's hands - See paragraphs 63 to 69.

Cases Noticed:

Weslock v. Weslock et al., [2003] O.T.C. Uned. 884; 2003 CarswellOnt 4206 (Sup. Ct.), refd to. [para. 15].

Regal Constellation Hotel Ltd. (Receivership), Re (2004), 188 O.A.C. 97; 242 D.L.R.(4th) 689 (C.A.), refd to. [para. 30].

Kennedy v. Sinclair, [2001] O.T.C. Uned. 465; 18 R.F.L.(5th) 91 (Sup. Ct.), affd. [2003] O.A.C. Uned. 259; 42 R.F.L.(5th) 46 (C.A.), refd to. [para. 32].

Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.), refd to. [para. 35].

Wildman v. Wildman (2006), 215 O.A.C. 239 (C.A.), refd to. [para. 35].

Kosmopoulos et al. v. Constitution Insurance Co. of Canada et al., [1987] 1 S.C.R. 2; 74 N.R. 360; 21 O.A.C. 4, refd to. [para. 35].

Debora v. Debora (2006), 218 O.A.C. 237 (C.A.), refd to. [para. 35].

Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. et al. (1996), 2 O.T.C. 146; 28 O.R.(3d) 423 (Gen. Div.), affd. [1997] O.J. No. 3754 (C.A.), refd to. [para. 35].

642947 Ontario Ltd. v. Fleisher et al. (2001), 152 O.A.C. 313; 56 O.R.(3d) 417 (C.A.), refd to. [para. 35].

Maroukis v. Maroukis, [1984] 2 S.C.R. 137; 54 N.R. 268; 5 O.A.C. 182; 12 D.L.R.(4th) 321; 41 R.F.L.(2d) 131; 34 R.P.R. 328, refd to. [para. 46].

Authors and Works Noticed:

Gower, Laurence Cecil Bartlett, Principles of Modern Company Law (4th Ed. 1979), p. 112 [para. 35].

Counsel:

D. Smith, for the appellants;

Thomas G. Bastedo, Q.C., and Samantha Chousky, for the respondent.

This appeal was heard on June 6 and 7, 2006, before Doherty, Blair and LaForme, JJ.A., of the Ontario Court of Appeal. Blair, J.A., delivered the following judgment for the court on December 19, 2006.