



COURT OF APPEAL FOR ONTARIO

CITATION: Leitch v. Novac, 2020 ONCA 257

DATE: 20200417

DOCKET: C66681

Lauwers, Hourigan and Thorburn
    JJ.A.

BETWEEN

Jennifer Ann Leitch

Applicant (Appellant)

and

Anthony Charles James Novac,
    Michael Novac, Nelly Novac, Sonco Group Inc., The Novac 2011 Family Trust, The
    Novac Family Trust (2013)
, John McClure and David
    Tam

Respondents (
Respondents
)

Linda Rothstein, Dan Rosenbluth, Ilana
    Zylberman Dembo, Sheila Gibb and Stephanie Romano, for the appellant

Avra Rosen and Kelly Eckert, for the
    respondent, Anthony Novac

Bryan Smith, Lindsey Love-Forester and
    Cynthia Kuehl, for the respondents, Michael Novac, Nelly Novac, Sonco Group
    Inc., The Novac 2011 Family Trust and The Novac Family Trust (2013)

Heard: February 26, 2020

On appeal from the summary judgment order
    of Justice Cory A. Gilmore of the Superior Court of Justice, dated January 31,
    2019, reported at 2019 ONSC 794, the costs award dated March 7, 2019, reported
    at 2019 ONSC 1534, and the order for security for costs and preservation of
    assets dated April 30, 2019, reported at 2019 ONSC 1541.

Hourigan J.A.:


I.

Overview

[1]

The appellant, Jennifer Leitch, commenced an
    application seeking a divorce and corollary relief from her husband, the
    respondent, Anthony Novac. She later amended her application to seek damages in
    conspiracy from Anthony
[1]
,
    his father Michael Novac, his mother Nelly Novac, certain family trusts, and a
    related corporation, Sonco Group Inc. (Sonco). Jennifer alleged that the respondents
    had conspired to keep money out of Anthonys hands specifically for the purpose
    of reducing her family law entitlements.

[2]

The respondents to the conspiracy claim (apart
    from Anthony) brought a motion for partial summary judgment. In her responding
    motion, Jennifer requested summary judgment on the conspiracy claim declaring
    the existence of the conspiracy and that damages be assessed at trial. The
    hearing lasted nine days. Partial summary judgment was granted, dismissing
    Jennifers conspiracy claim as not raising a genuine issue requiring trial. The
    motion judge concluded that while the appellant could not succeed in her
    conspiracy claim, she could still pursue at trial a claim to impute additional income
    to Anthony for the purpose of determining support.

[3]

Jennifer appeals from the order granting partial
    summary judgment, as well as the costs award and an order for security for
    costs and the preservation of assets.

[4]

These reasons explain why I would allow the
    appeal. In summary, the motion judge erred in law by bifurcating the issues and
    in her analysis of the tort of conspiracy. She also made a palpable and
    overriding error of fact about critical evidence that Jennifer relied on in support
    of her conspiracy claim and did not advert to other important evidence in her
    analysis.

[5]

The motion judges costs orders, including the order
    for security for costs and related relief, result from her partial summary
    judgment order and accordingly cannot stand.


II.

Facts

(a)

Background

[6]

This is a factually complex case with multiple
    allegations. Recognizing that I would order a trial and it will be for the
    trial judge to make factual findings, the following very brief factual summary
    is offered to provide context for the issues to be determined on the appeal.

[7]

Jennifer and Anthony cohabited for 17 years. They
    married on May 10, 1997, and separated on September 29, 2012. They have 15-year-old
    twins. Jennifer was a litigator for nine years of the marriage. After Anthony
    sold an on-line gaming platform for $11.5 million, Jennifer left litigation to
    pursue a graduate legal education. She then began to teach law part-time at
    Osgoode Hall and the University of Toronto. Since then, her annual income has
    typically been less than $30,000.

[8]

Anthony is an entrepreneur who has been working
    in the casino and gaming industry for over 20 years. He has experience managing
    casinos and casino resorts. From 2009 to date, Anthony has done paid work for
    Sonco and its related corporations. Michael incorporated Sonco and it holds various
    real estate and gaming businesses. Anthony occupies senior positions with Sonco
    and other related entities.

[9]

By the time the parties separated, their wealth
    had been significantly depleted. Jennifer sold the matrimonial home, which she
    owned, and she retained the net sale proceeds from the house in the amount of
    $1,066,361.

[10]

As the matrimonial litigation unfolded, Anthony
    disclosed an income of $120,000 per year plus $5,000 per year for director
    fees. Jennifers position was that Anthony had undisclosed additional income or
    an undisclosed ownership interest in the casino business.

(b)

Alleged Conspiracies

[11]

Jennifer alleged six separate tortious
    conspiracies. On the appeal, she focuses her submissions on the alleged conspiracy
    related to the management of the River Cree Casino. The background of that
    project is as follows.

[12]

In 2013, Michael was approached to manage the
    River Cree Casino in Alberta. The River Cree Casino is owned by the Enoch Cree
    Nation. Michael incorporated Sonco Gaming Management Inc. and, with Anthony's
    assistance, entered into a five-year contract with River Cree Casino. Michael
    and Anthony had an informal oral agreement that Anthony would be the project manager
    and receive 40% of the management fees that were to be paid to Sonco Gaming
    Management Inc. over the life of the contract. In 2015, the Enoch Cree Nation
    decided to buy out the contract and manage the casino itself. It paid Sonco
    $5.75 million as part of the transaction (the buyout).

[13]

There are two disputed events that Jennifer
    alleges are at the heart of the River Cree Casino conspiracy.

[14]

The first is Michaels decision to keep all of
    the proceeds from the buyout. The buyout price represented the net present
    value of Sonco Gaming Management Inc.s fees. Jennifer argues that, had the
    contract been carried out, Anthony would have received 40% of those fees.
    However, Anthony apparently received none of the proceeds of the buyout.
    Jennifers position is that Anthony had equal control over this project with
    his father and was integral in negotiating and structuring the buyout.

[15]

Jennifer asserts that Anthony should have been
    paid at least 40% of the buyout. She pleads that the respondents conspired to
    temporarily divert Anthonys share of the proceeds so that she would receive
    less in support payments. Three documents are critical to this theory.

[16]

The first two documents are memos to file
    drafted by Soncos external accountant, Keith MacIntyre. Both memos were dated
    June 22, 2015, and are marked DRAFT, with the reference line Sonco Alta Sale.
    They were copied to MacIntyres partner at Grant Thornton LLP, John Roy.

[17]

Memo #1 lists steps. Number eight is this:

8. Michael Novac takes his tax free proceeds
    and lends to Antony [
sic
] his portion as a loan that will be forgiven when
    Anthonys divorce is final.

[18]

Seven more steps are listed under the heading Alta
    and Estate. Numbers six and seven are as follows:

6.  Michael Novac takes his tax free proceeds
    and lends to Antony [
sic
] his portion as a loan that will be forgiven
    when Anthony's divorce is final;

This reduces Michael Novacs estate tax.

7. Michael Novac takes his tax free proceeds
    and lends to Antony [
sic
] his portion as a loan that will be forgiven
    when Anthonys divorce is final;

[19]

Memo #2 is similar to the second part of Memo #1,
    with a few changes and additions. It was addressed to the Chief Financial
    Officer of Sonco, Richard Landzatt, and copied to Michael Novac. Numbers four
    and five read as follows:

4. Michael Novac takes his tax free proceeds
    and lends to Antony [
sic
] his portion as a loan that will be forgiven
    when Anthonys divorce is final;

This reduces Michael Novacs estate tax;

This keeps income out of Anthonys hands;

5.  Michael Novac takes his tax free proceeds
    and lends to Antony [
sic
] his portion as a loan that will be forgiven
    when Anthonys divorce is final;

Again this prevents income from being shown in
    Anthonys hands.

[20]

The third critical document regarding this
    alleged conspiracy is an email from Landzatt to MacIntyre and Kelsi Campbell, a
    colleague of MacIntyres. It is dated August 18, 2015, which was shortly after
    the closing of the buyout on August 14, 2015 (the August 18 Email). In that
    email, Landzatt states:

So based on this model the complete after tax
    cash flow, both corporate and personal, will be $5,030,772? This will be the
    cash available personally for distribution between Michael and Anthony?

They want to move some of the money now and I
    want to be certain that they have all the tax amounts set aside so they dont
    spend/invest it.

[21]

The second part of the alleged River Cree Casino
    conspiracy is Anthony's decision to conceal management fees owing to him for the
    month of May 2015. In June 2015, Anthony directed Sonco employees not to
    distribute the May 2015 management fees due to him under his agreement with
    Michael. Anthony delayed disclosing the May 2015 fees as income to Jennifer.
    She did not discover the existence of these undisclosed fees until over two
    years later.

[22]

Jennifer alleges that Anthonys failure to
    disclose his income was compounded by a series of misleading or inaccurate
    disclosures by Anthony, Michael, and Sonco. Anthony concedes that he directed
    Sonco employees to hold back his May 2015 payment. However, he asserts that he
    did not conspire with any party to hide this income.


III.

Decision below

[23]

The motion judge held that the conspiracy claim
    was appropriate for partial summary judgment. In addition to the extensive
    record before her, there had been five days of cross-examination on Michael and
    Anthony's evidence. She found that all parties have put their best foot
    forward and that summary judgment would allow streamlining of the remaining
    issues for trial.

[24]

The motion judge then set out the elements of
    the tort of conspiracy and referred to
Frame v. Smith
,

[1987] 2
    S.C.R. 99, in which the Supreme Court ruled that the tort did not apply in the
    context of custody or access claims. She went on to state that the same policy concerns
    from
Frame
applied to the support context and that the comprehensive
    legislation and guidelines contained in the
Divorce Act
,
R.S.C., 1985, c. 3 (2nd Supp.),

Family Law Act
, R.S.O. 1990, c. F.3,
Federal

Child Support Guidelines
,
SOR/97-175, and the Spousal Support Advisory Guidelines applied and provided a comprehensive
    code for dealing with support issues relating to both spouses and children.

[25]

Ultimately, the motion judge concluded that
    there was no unlawful conspiracy on the facts of the case and made the
    following findings:

a.

There is no evidence of an agreement;

b.

Inaccurate representations by Anthony about his income were not made
    in concert with Michael;

c.

The steps taken by Michael were not intended either actually or
    foreseeably to harm Jennifer; and

d.

None of the actions of Michael or Anthony were wrong at law.

[26]

The motion judge also concluded that Jennifer is
    unable to establish damages, at para. 313:

While Anthony is a trustee of the 2013 Trust,
    Jennifer is unable to establish that this entitled him to any portion of the
    River Cree buyout proceeds.  Notwithstanding the two memos drafted by [Keith
    MacIntyre], there is insufficient evidence to show that any steps were taken
    with the intent of harming Jennifer.  In fact, there is evidence that advice
    which might have been interpreted as an agreement to keep money away from
    Jennifer was never acted upon nor was it even considered by Michael.  Michael
    decided to retain the proceeds, as it was his company that entered into the
    agreement with the Nation.  He had the right to act in that manner.

[27]

Regarding costs, the motion judge awarded $300,000
    to Anthony for the costs of the summary judgment motion and the variation
    motion he brought to reduce his support payments, of which half would be
    enforceable as fees related to the payment/collection of support. She also
    awarded $40,000 in costs to Anthony to offset a costs award made against him for
    a November 2017 disclosure motion. The motion judge awarded $900,000 to the
    remaining respondents for the costs of the summary judgment motion.

[28]

After the motion judge released her ruling on
    the summary judgment motion, but before she issued her decision on costs,
    Anthony brought a motion for a preservation and non-dissipation order under ss.
    12 and 40 of the
Family Law Act
. The remaining respondents also
    brought a motion for security for costs seeking an order that Jennifer preserve
    her assets. The motion judge released her ruling on these motions one day after
    she released her decision on costs, granting an order that Jennifer preserve
    all of her assets as security for costs. This order effectively freezes all of
    Jennifers assets. In so ruling, the motion judge relied on rule 24(13)(2) of
    the
Family Law Rules
, R.S.O. 1990, c. C.43, which allows an order for
    security for costs if [a] party has an order against the other party for costs
    that remains unpaid, in the same case or another case.


IV.

analysis

1.

Did the motion judge err in law in awarding
    partial summary judgment?

[29]

Partial summary judgment is reserved for issues
    that may appropriately be bifurcated without creating a material risk of
    inconsistent outcomes, and that may be dealt with expeditiously and
    cost-effectively: see
Butera v. Chown, Ciarns LLP
, 2017 ONCA 783, 137
    O.R. (3d) 561, at paras. 27-34.

[30]

The motion judges analysis of this cases
    suitability for summary judgment spans four short paragraphs. That analysis opens
    with the statement, Not much needs to be said on whether this case is suitable
    for summary judgment. She then refers to the extensive documentary evidence as
    well as the oral evidence of Anthony and Michael and states, There is more
    than enough material on which the court may rely in order to make findings of
    fact and credibility. The motion judge also comments that dealing with the
    conspiracy claim by summary judgment will allow for a streamlining of any
    remaining issues for trial, clear the way for settlement of issues put on hold until
    determination of the conspiracy issue, and would support the policy and principles
    articulated in
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, as
    well as rule 2(3) of the
Family Law Rules
, of saving expense and time
    and dealing with cases fairly and justly and in a manner appropriate to their
    complexity and importance.

[31]

At no point does the motion judge engage with
    the question of whether bifurcating the issues is appropriate. Specifically,
    the reasons are conspicuously silent as to whether there is an inherent risk
    here of inconsistent findings. I appreciate that the parties both took the
    position before her that partial summary judgment was appropriate. However, the
    motion judge was still required to turn her mind to the possibility of a
    material risk of inconsistent outcomes.

[32]

Jennifer asserts that the risk of inconsistent
    outcomes here is genuine because the factual footprint of the conspiracy claim
    is substantially the same as the support issues that remain for trial. Her submission
    is that, by finding that Michael had the right to allocate to himself the
    entire proceeds of the buyout, but also that it was open to a trial judge to
    impute to Anthony part of those proceeds as a remedy for the artificiality of
    Michaels allocation to himself, the motion judge created a material risk of
    inconsistent results.

[33]

I agree with that submission.

[34]

For Jennifer to convince a court that it is
    appropriate to attribute or impute additional income to Anthony, she would need
    evidence of Sonco's earnings as well as proof that Anthony had indirectly
    received some of it, would have received a portion of it but for the divorce,
    and/or would be receiving it in the future. All of this was precisely what
    Jennifer alleged the respondents were complicit in concealing from her.
    Notably, despite Jennifers requests, Anthony did not disclose Soncos business
    records when requested as part of the family law proceedings. It was only after
    Michael and Sonco were named in her conspiracy claim that she received the
    information that could form the basis of an assertion that additional income
    should be attributed to Anthony.

[35]

Section 18(1) of the
Federal

Child
    Support Guidelines
provides:

Where a spouse is a shareholder,
    director or officer of a corporation and the court is of the opinion that the amount
    of the spouses annual income as determined under section 16 [the Total
    income in the T1 General form issued by the Canada Revenue Agency] does not
    fairly reflect all the money available to the spouse for the payment of child
    support, the court may consider the  situations described in section 17
    [Pattern of income] and determine the spouses annual income to include

(a)     All or part of the
    pre-tax income of the corporation, and of any corporation that is related to
    that corporation, for the most recent taxation year; or

(b)     An amount commensurate
    with the services that the spouse provides to the corporation, provided that
    the amount does not exceed the corporations pre-tax income.

[36]

Attribution of income under s. 18 of the
Federal

Child Support Guidelines
can depend on the degree of control exercised
    by the spouse over a corporation. Corporate income attribution may be
    appropriate even where the spouse does not control the corporation but where,
    for example, control is held by a cooperative relative, and there is a past
    practice of the spouse receiving compensation: see
Potzus v Potzus
,
    2017 SKCA 15, at paras.19, 56. Thus, the very same evidence brought in support
    of the conspiracy allegation would be relevant to a request to attribute additional
    income for support purposes.

[37]

The motion judge mentions several times that it
    will be open to Jennifer to ask the trial judge to attribute or impute more
    income to Anthony than he has declared. This is no more clearly stated than at
    para. 287 of her reasons:

While I agree that the buyout proceeds could
    be characterized as a lump sum of income derived from a future stream of
    payments, and that therefore Anthony may be entitled to a portion of it,
    conspiracy is too blunt an instrument to use to get at this for support
    purposes.  A trial judge may well find that a portion of the buyout proceeds
    should be characterized as income for support purposes and that income would
    form part of the retroactive calculation of support.  The
Family Law Rules
and the
Child Support Guidelines
have plenty of tools for the court to
    choose from to achieve those ends.

[38]

For Anthony to be entitled to a portion of the
    buyout directly contradicts the motion judges conclusion earlier in para. 287 on
    the conspiracy claim that Anthony had no ownership interest in the buyout
    contract. It also directly contradicts her conclusion at para. 313, already mentioned
    above, that, Michael decided to retain the proceeds, as it was his company
    that entered into the agreement with the Nation. He had the right to act in
    that manner.

[39]

The evidence about Anthonys interest in Sonco
    should have been considered alongside Jennifers claims for support. The risk
    of inconsistent findings actually materialized in the motion judges own
    inconsistent statements relating to the conspiracy claim and her assertions
    about avenues that remained open to Jennifer in her family law litigation.

[40]

In short, this was not an appropriate case for
    partial summary judgment. The motion judge erred in law by failing to consider
    the substantial risk of inconsistent outcomes before bifurcating the
    proceeding.

2.

Did the motion judge err in law in her analysis
    of the tort of conspiracy?

[41]

The motion judge articulated a concern about the
    far-reaching implications of extending the tort of conspiracy where family
    members are involved. She worried that if the damages Jennifer requested were
    permitted, policy concerns would arise about claims for damages in every case
    where a payor spouse, in conjunction with a new spouse/relative/business
    partner, did not fully disclose income, unreasonably deducted expenses, or
    received income in the form of cash or goods. Her concern was that conspiracy
    claims would become the new norm. She concluded that, given the existing
    mechanisms for recovery, damages for conspiracy would effectively be a form of
    punitive damages. According to the motion judge, any concerns about bad faith
    conduct can be remedied by imputing income to the payor for the purposes of calculating
    support obligations or through costs awards.

[42]

In rejecting the availability of the tort of
    conspiracy in the family law context, the motion judge was clearly motivated by
    the view that the family law statutory scheme creates a complete code for addressing
    all issues related to support and that there are sound policy reasons not to
    permit additional tort claims. In my view, it is not accurate to say, as the
    respondent does, that the trial judges analysis of the availability of the
    tort was
obiter
. In fact, it obviously motivated her analysis of
    whether the tort had been established. Despite her stated acceptance that the
    case law does not preclude the application of the tort of conspiracy in family
    cases, her approach was that all claims should be determined under the family
    law regime and this approach imbued her analysis of whether the tort had been
    established.

[43]

While the motion judge found that the tort had
    not been established on the facts even apart from any policy considerations, one
    of two reasons she provided for her conclusion that the facts of this case are
    not ripe for its application was her concern about the far-reaching
    implications of extending the tort of conspiracy where family members are
    involved. The motion judges statement that conspiracy is too blunt an
    instrument to use to get at [the buyout proceeds] for support purposes
    suggests that she went beyond a mere finding that the test for conspiracy could
    not be satisfied on these facts.

[44]

As the Supreme Court suggested in
Leskun v.
    Leskun
, 2006 SCC 25, [2006] 1 S.C.R. 920, at para. 34, nondisclosure is
    the cancer of family law. This is an apt metaphor. Nondisclosure metastasizes
    and impacts all participants in the family law process. Lawyers for recipients
    cannot adequately advise their clients, while lawyers for payors become
    unwitting participants in a fraud on the court. Judges cannot correctly guide
    the parties to a fair resolution at family law conferences and cannot make a
    proper decision at trial. Payees are forced to accept an arbitrary amount of
    support unilaterally determined by the payor. Children must make do with less.
    All this to avoid legal obligations, which have been calculated to be a fair
    quantification of the payor's required financial contribution. In sum,
    nondisclosure is antithetical to the policy animating the family law regime and
    to the processes that have been carefully designed to achieve those policy
    goals.

[45]

There is a related malady that often works
    hand-in-hand with nondisclosure to deny justice in family law proceedings. The
    problem is what I will call invisible litigants. These are family members or
    friends of a family law litigant who insert themselves into the litigation
    process. They go beyond providing emotional support during a difficult time to
    become active participants in the litigation. Usually their intentions are
    good, and their interference makes no difference in the ultimate result.
    However, sometimes they introduce or reinforce a win-at-all-costs litigation
    mentality. These invisible litigants are willing to break both the spirit and letter
    of the family law legislation to achieve their desired result, including by
    facilitating the deliberate hiding of assets or income.

[46]

If we were to accept the analysis of the motion
    judge, co-conspirators who engage in such behaviour could do so with impunity.
    Contrary to the observation of the motion judge, conspiracy is not a blunt
    instrument to respond to this misconduct. It is a valuable tool in the
    judicial toolbox to ensure fairness in the process and achieve justice. If the
    tort of conspiracy is not available, then co-conspirators have no skin in the
    game. Their participation in hiding income or assets is a no-risk proposition.
    If their conduct is exposed, all that happens is that the payor will be forced
    to pay what is appropriately owing. If there is to be deterrence, there must be
    consequences for co-conspirators who are prepared to facilitate nondisclosure.

[47]

There is a further practical reason for
    permitting the use of the tort of conspiracy in family law claims. Where income
    or assets have been hidden with the assistance of a co-conspirator, often the
    family law litigant will be effectively judgment-proof. That, after all, is the
    whole purpose of the conspiracy. In those circumstances, the imputation of
    income or the inclusion of hidden assets into the net family property
    calculation will be a futile exercise, as the recipient cannot collect on what
    is owing. A judgment against a co-conspirator will often be the only means by
    which a recipient will be able to satisfy a judgment.

[48]

The motion judge also erred in law in finding
    that a damage claim in conspiracy would effectively be a form of punitive
    damages because the appellant would already have an imputation remedy under
    the family law framework. It would appear that the motion judges concern was
    that permitting multiple claims would necessarily result in double recovery.
    This concern is based on a misunderstanding of the law of damages.

[49]

Overlapping remedies arising out of the same
    loss are always subject to the limiting principle of double recovery. However,
    the risk of double recovery does not arise simply because there are two damages
    awards extant. It is only where a damages award is satisfied that the principle
    of double recovery operates to prevent recovery beyond the damages suffered:
    see
SFC Litigation Trust v. Chan
, 2019 ONCA 525, 147 O.R. (3d) 145, at
    para, 133. There was no risk of overcompensation on the facts of this case.

[50]

As noted, it is my view that this case should
    proceed to trial, and there is no reason why a claim in conspiracy cannot be
    asserted. It will be for the trial judge to decide if the appellant has
    established her claim on a balance of probabilities. That said, it is essential
    to clarify a further misconception of the law of conspiracy advanced by counsel
    for Michael that appears to have found favour with the motion judge.

[51]

Michaels lawyer argues that the tort was not
    established because there was no evidence that the parties acted on the alleged
    agreement. By that submission, he means that there was no evidence that any
    money flowed from Michael to Anthony. It will, of course, be up to the trial
    judge to determine on a full record what Michael did with the funds. However,
    to be clear, a transfer of funds by loan, gift, or otherwise, is not the only
    way that the alleged co-conspirators could have acted in furtherance of the
    conspiracy. If the trial judge is satisfied that Anthony had an entitlement to
    funds and that a co-conspirator withheld the transfer of funds to him as part
    of a conspiracy with the understanding that he would receive the money at some
    future date, the withholding of the funds may itself be an act in furtherance
    of the conspiracy. It is not necessary to establish more than an acted-upon
    conspiracy to conceal Anthonys entitlement.

3.

Did the motion judge make a palpable and
    overriding error of fact and fail to advert to important evidence?

[52]

The palpable and overriding error of fact made
    by the motion judge concerned the August 18 Email. The motion judges analysis
    of that document was limited to the following, at para. 180: 
He [Michael] denied any awareness of an
    email from Kelsi Campbell to RL [Landzatt] advising that the closing was upcoming,
    and money would be available to Michael and Anthony. He does not know who Kelsi
    Campbell is.

[53]

The email was not sent from Campbell to Landzatt,
    but from Landzatt to Campbell and MacIntyre. Nor could it have concerned the
    upcoming closing, as the email was sent days after the closing. At first
    glance, this may not seem like a significant error. However, this mistake
    coloured the motion judges analysis of this critical piece of evidence.
    Arguably, the email is consistent with Memo #1 and Memo #2 and suggests that,
    at the very least, there was an agreement that Anthony had an entitlement to a
    portion of the buyout proceeds. By misdescribing the August 18 Email as a communication
    from Campbell to Landzatt, the motion judge effectively minimized its
    importance. Implicit in her analysis was that Michael should not be expected to
    be aware of what an external accountant, who was unknown to him, had to say
    about the distribution of the buyout proceeds.

[54]

Had the motion judge correctly analyzed the
    August 18 Email, she would have had to consider why it appeared that Soncos
    CFO was suggesting immediately after the closing of the buyout that Anthony had
    an entitlement to a portion of the proceeds. She also would have been required
    to decide whether she should draw an adverse inference from the failure of
    Sonco to tender Landzatt as a witness.

[55]

This error was compounded by her failure to analyze
    in her reasons a later email, sent from Landzatt to MacIntyre and copied to Campbell,
    dated November 18, 2015, that included the following:

He's not using the house but we are hopeful it
    will sell sometime soon. I'll discuss the option with Michael but there are
    plans to take money out of the corp in 2016 to lend Anthony....so if we
    dividend out the entire amount this year and sell the house next year, there
    will still be an ability to reduce funds withdrawn next year. So maybe best to
    do it for 2015 as tax rates may go up?

[56]

This email is at least suggestive of an ongoing intention
    among the alleged co-conspirators to divert funds to Anthony. The motion judge
    was obliged to consider this significant piece of evidence in her reasons.

4.

Should the costs orders stand?

[57]

Given my conclusion that a new trial is needed,
    it is unnecessary to consider whether the motion judge erred in her costs award,
    or in ordering security for costs and making a preservation order. Those orders
    should be set aside. I would remit to the trial judge the issue of costs for the
    first trial.

[58]

Nothing in these reasons should be considered an
    approbation of the quantum of costs awarded or of the motion judges ancillary
    costs orders. There are aspects of these orders that are troubling. In
    particular, it is concerning that in making the order for security for costs
    and preservation of assets, the motion judge did not consider the justice of
    the case and whether Jennifer would be able to pursue her claims, including those
    on behalf of her children, in light of the order made.

[59]

As stated in
Yaiguaje v. Chevron Corporation
, 2017 ONCA 827, 138 O.R. (3d) 1, at para. 23, in a
    discussion of orders for security for costs
, 
Courts
must be vigilant to ensure an order
    that is designed to be protective in nature is not used as a litigation tactic
    to prevent a case from being heard on its merits. In considering an order for
    security for costs, the correct approach is for the court to consider the
    justness of the order holistically, examining all the circumstances of the case
    and guided by the overriding interests of justice to determine whether it is
    just that the order be
made: see
Yaiguaje
, at para. 25
.


V.

Disposition

[60]

I would allow the appeal, set aside the order
    granting partial summary judgment, and order that the case proceed to trial
    before a different judge of the Superior Court. In making that order, I would
    reserve the costs below to the trial judge.

[61]

As the appellant was entirely successful on this
    appeal, she is entitled to her costs of the appeal payable by the respondents
    on a joint and several basis. I would fix the amount of those appeal costs, in
    accordance with the agreement of the parties, in the all-inclusive amount of
    $50,000.

Released: P.L. April 17, 2020

C.W. Hourigan J.A.

I agree. P. Lauwers J.A.

I agree. Thorburn J.A.





[1]
For ease of reference, the parties will be referred to by their
    first names.


