McKenny v. McKenny, 2015 BCSC 1345

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: McKenny v. McKenny, 2015 BCSC 1345 Date: 20150702 Docket: E133473 Registry: Vancouver Between: Brian Arnold McKenny Claimant And Patricia Rae McKenny also known as Patricia Rae Maxwell also known as Patricia Rae Brennan Respondent And Brimac Holdings Ltd., Fasteel Industries Ltd., and McKenny Family Trust Respondents by Counterclaim Before: The Honourable Mr. Justice Fitch Oral Reasons for Judgment In Chambers Counsel for Claimant: Kelly R. Doyle Counsel for Respondent Patricia McKenny: Irene A. Pietrow Place and Dates of Hearing: Vancouver, B.C.

June 29-30, 2015 Place and Date of Judgment: Vancouver, B.C. July 2, 2015 [ 1 ] THE COURT: The claimant, Brian McKenny, and the respondent, Patricia McKenny, began cohabiting in 1987 and were married in 1988. Both parties were divorced when they met. Both brought children from previous relationships into the union. The claimant adopted the respondent's children, and the parties had a child together. All of the children are now adults. [ 2 ] The parties separated in 2000.

Even though both of them re-partnered after separation, they continued to have a close and supportive relationship. [ 3 ] The parties entered into a post-separation agreement with respect to spousal support. The respondent currently receives $9,600 per month in spousal support payments from the claimant. Unfortunately, the identification and division of family property has never been resolved and is highly contentious. [ 4 ] The claimant wants to marry his current partner. [ 5 ] The notice of family claim was filed in December 2013 and served on the respondent in February 2014.

The claim only sought an order for divorce. The respondent filed her response in March 2014. [ 6 ] In June 2014, the respondent filed a counterclaim seeking an order for permanent spousal support and an unequal division of family property on the grounds set out in ss. 95(2) (a), (

c) and (

i) of the Family Law Act , S.B.C. 2011, c. 25 ( FLA ). In conjunction with the filing of the counterclaim, the respondent made a without notice application for a broadly-framed restraining order prohibiting the claimant from disposing of any of his property or causing the two corporate entities he controls, Fasteel Industries Ltd. ("Fasteel") and Brimac Holdings Ltd. ("Brimac"), from disposing of, encumbering, transferring, converting or exchanging into another form any corporately held property without the consent of the respondent or further order of the Court.

In addition, the respondent sought an order prohibiting the claimant, in his capacity as trustee of the McKenny Family Trust, from encumbering or disposing of property held by the trust without the consent of the respondent or further order of the Court. [ 7 ] On June 12, 2014, the respondent appeared before Master Scarth and obtained an order prohibiting the claimant from disposing

of, encumbering, transferring, converting or exchanging into another form property in which the respondent may have an interest without the written consent of the respondent or further order of the Court. [ 8 ] On June 13, 2014, the respondent filed an amended counterclaim adding as respondents by counterclaim Brimac, Fasteel and the McKenny Family Trust. [ 9 ] Fasteel is a company incorporated in British Columbia by the claimant in 1979. Brimac is a company incorporated in British Columbia by the claimant in 2004, four years after separation.

Fasteel operates its business from commercial premises on land in Surrey, British Columbia, which was purchased by Brimac in 2004. The two companies are closely related. Fasteel provided an interest-free loan to Brimac for the entirety of the down payment needed to purchase the Surrey land and guaranteed the mortgage loan made by the Business Development Bank to Brimac to enable Brimac to acquire the property.

Fasteel is Brimac's only tenant and the rent Fasteel pays appears to be Brimac's only source of income. [ 10 ] The claimant is the sole officer and director of both corporate entities. [ 11 ] The issues before me can be resolved without engaging in a detailed review of the affidavit evidence put before me on these applications.

To the extent that reference is made to the evidence to put in context the positions of the parties on these applications, I wish to be clear that I make no factual findings. [ 12 ] Briefly stated, the respondent is concerned that the claimant has and will continue to deplete the value of Fasteel while accumulating equity in Brimac.

The respondent notes that Brimac's retained earnings are rising and that while the claimant has drawn a salary and dividends from Fasteel and has redeemed Fasteel preferred shares in the amount of about $2 million since 2007, he has taken no salary or dividends out of Brimac, nor has he redeemed any of Brimac's preferred shares. [ 13 ] The McKenny Family Trust was created in 2007. The claimant is the trustee of the trust. The respondent was never a named beneficiary under the trust.

She was, however, an alternate trustee until the trust deed was amended on the claimant's instructions after the commencement of these proceedings. [ 14 ] An estate freeze took place in 2007, resulting in the following alterations to the share capital structure. First, the old Fasteel and Brimac shares were redeemed for $4.3 and $1.4 million respectively. Preferred shares were subsequently issued to and purchased by the claimant. The Brimac preferred shares have a redemption value of $1.4 million. The Fasteel preferred shares have a redemption value of $4.3 million.

At the same time, common shares in Fasteel and Brimac were issued to the McKenny Family Trust.

While the claimant and respondent were on amicable terms at the time, the respondent says she received no independent legal advice about this restructuring. [ 15 ] The essence of the respondent's position at trial will be that all the property now held or controlled by the claimant, including his interest in Brimac and the common shares held in the McKenny Family Trust, is property derived from family property existing on the date of separation. [ 16 ] In October 2014, the action was set down for a 10-day trial commencing November 23, 2015. [ 17 ] In November 2014, the claimant filed an amended notice of family claim seeking an unequal division of family property on the grounds set out in s. 95(2) (a), (b), (c), (

f) and (

i) of the FLA . [ 18 ] At a Judicial Case Conference held April 8, 2015, Fenlon J. (as she then was) made an order on consent that Ron Hooge be appointed a joint expert to value the shares of Fasteel and Brimac as of March 6, 2007, the date of the estate freeze when all of the claimant's shares in Fasteel and Brimac were redeemed and new shares were issued, and currently. It was also agreed that Mr. Hooge would quantify withdrawals and benefits from Fasteel and Brimac received by both parties from the date of separation to the current date. There was, however, no agreement about who would pay Mr.

Hooge's fees. [ 19 ] Against this background, I have before me a number of applications initiated by both the claimant and respondent. The applications are supported by a great volume of information, some of which was supplied to the Court on the hearing dates. All of the applications are time-sensitive, given the trial date fixed in this matter.

To expedite the hearing of his matter, my reasons for judgment in relation to the various applications before me will be relatively brief. [ 20 ] I will address first the applications made by the claimant. [ 21 ] In an application filed March 25, 2015, the claimant sought a declaration that the joinder of the respondents by counterclaim (Fasteel, Brimac and the McKenny Family Trust) through filing of the amended counterclaim on June 13, 2014, without the claimant's consent and in the absence of a court order, constitutes a nullity.

In support of his position on this point, the claimant relied on Rule 8-2 of the Supreme Court Family Rules . In addition, the claimant sought an order striking the amended counterclaim on grounds that it discloses no reasonable cause of action, as both Brimac and the McKenny Family Trust were established long after the separation.

In the alternative, the claimant sought an order that the respondent provide further and better particulars upon which the cause of action against the respondents by counterclaim is based, and an order that the deadline for filing the response to the amended counterclaim be extended to 21 days after the receipt of the particulars sought. [ 22 ] Since receiving the claimant's application filed March 25, 2015, the respondent prepared and served a second amended counterclaim.

If granted leave to file the second amended counterclaim, the respondent will, inter alia , assert that all property in the claimant's name, including property acquired by the claimant since the date of the separation, is family property within the meaning of

Part 5 of the FLA . Her claim includes a condominium unit on Castle Drive in Whistler that is in the claimant's name, a condominium unit in False Creek held jointly by the claimant and his new partner, and the Surrey property owned by Brimac. It also encompasses the claimant's interest in the shares held by the family trust, as well as all shares issued to the claimant in Fasteel and Brimac. In addition, the respondent will seek an unequal division of family property pursuant to s. 95(2) (a), (b), (c), (f), (g), (

h) and (

i) of the FLA . Further, the respondent will challenge the transference of corporate shares to the trust. In the alternative, she will assert that she made direct and

indirect contributions to the acquisition, maintenance, preservation and improvement of the above-noted property. She says that the claimant either expressly or impliedly agreed that all of his shares in the two corporate entities, and the property held by the family trust, would enure to the joint benefit of both the claimant and respondent, notwithstanding that title to any such property might be held in the name of the claimant or a corporate entity owned or controlled by him.

She asserts that the claimant holds an undivided one-half interest in the two corporate entities and family trust, and an undivided one-half interest in the property held by the two corporate entities and family trust in trust for her pursuant to an express, resulting and/or constructive trust. [ 23 ] The power to permit amendments to pleadings, including by adding parties to a proceeding, engages a discretion that must be exercised judicially against the overriding test of what is just and convenient. Delay is a relevant consideration, as are the reasons for the delay and prejudice to the opposing party.

The moving party is not obliged to adduce evidence to demonstrate that the amendment sought can be proved. The application proceeds on the assumption the parties seeking to amend can prove the allegations made. At any stage of the proceedings the Court can order that a party be added if the participation of that party in the proceedings is necessary to ensure that all matters that can reasonably be foreseen as arising in the litigation will be adjudicated upon: J.M.W. v.

R.C.H. , 2003 BCSC 134 at paras. 6 to 8 . [ 24 ] Although the respondent emphasizes she need not prove the merits of the claims set out in the further amended pleading she proposes filing, she emphasized three documents in her submission: 1) A joint application for life insurance made November 22, 2005, five years post-separation, in which the parties asserted that they were both employed by Fasteel and that they had a net worth of $17,800,000; 2) An email dated March 21, 2012, sent by the claimant to the respondent in which he assured her that, "You will alone will be the inheritor of Fasteel when I kick off for your disposal only", "Fasteel will always be here for you, and I have never wanted you to feel you were never a part of the success we have had up to 2008 when the recession hit", and "You are part of Fasteel and me and I don't want you thinking your [sic] not"; and 3) An email dated March 5, 2014, sent by the claimant to the respondent in which he said, "Let me emphasize that you are still a trustee along with one of the children of the trust, which in the end all goes to our family".

Shortly after this email was sent, the claimant amended the trust deed to remove the respondent as an alternate trustee.

The respondent relies on these documents and other evidence in support of the pleadings in her second amended counterclaim and her assertion that it was always understood she had at least a beneficial interest in the assets identified and trusted the claimant to protect her interests, or, as she puts it, to honour his commitment to her. [ 25 ] In oral argument, counsel for the claimant clarified that while he was not consenting to the amendment or the granting of leave to the respondent to file and serve the second amended counterclaim, neither was he opposing the granting of these orders. [ 26 ] In the circumstances of this case, I am satisfied that it is just and convenient to permit the amendments sought, including the addition of the two corporate entities and the McKenny Family Trust as respondents by counterclaim.

In particular, I am satisfied that permitting the respondent to amend her pleadings and add the above-noted respondents by counterclaim will cause no undue prejudice to the claimant.

As between the respondent and the proposed respondents by counterclaim, there exist issues relating to or connected with the relief the respondent seeks which make it just and convenient that the respondents by counterclaim be added as parties. [ 27 ] Consequently, I grant leave to the respondent to file and serve the second amended counterclaim on or before July 3, 2015. [ 28 ] The claimant shall have until August 7, 2015, to file and serve a response to the second amended counterclaim. [ 29 ] By notice of application filed May 22, 2015, the claimant seeks an order of divorce under s. 12 of the Divorce Act , R.S.C., 1985, c. 3 (2nd Supp.) and Rule 11-3 of the Supreme Court Family Rules pertaining to

summary trial applications. In addition, he seeks an order that spousal support payments he has been making to the respondent cease and be replaced by monthly payments by him to the respondent in an equal amount as an interim distribution of family property. The respondent, who holds dual Canadian and American citizenship, opposes the granting of a divorce at this time because of concerns that complications and additional tax burdens may arise if the divorce is granted before assets the respondent is found to have an interest in are divided. These concerns appear to be grounded in the evidence before me.

Counsel for the claimant, who obtained late notice of the nature of the respondent's concerns in relation to this issue, has not had an opportunity to obtain advice to evaluate the merits of the respondent's position on this point. As a consequence, and at the request of counsel for the claimant, this application is adjourned generally. [ 30 ] By notice of application filed May 25, 2015, the claimant seeks an order compelling the respondent to produce a new list of documents and make available copies of all documents so listed.

At the request of counsel for the claimant, this application is also adjourned generally. [ 31 ] By notice of application filed May 29, 2015, the claimant seeks orders relating to the appointment and compensation of joint experts to appraise: 1) The Surrey property owned by Brimac; 2) The claimant's condo unit he holds jointly with his current partner on False Creek in Vancouver; and 3) A residence located on 9209 Lakeshore Drive in Whistler, British Columbia, registered in the name of the respondent. [ 32 ] In addition, he seeks an order respecting the compensation of Mr.

Hooge, who, as was noted earlier, was appointed a joint expert at the Judicial Case Conference before Justice Fenlon to value the shares of Fasteel and Brimac as of March 6, 2007 and now, and quantify withdrawals from Fasteel and Brimac for the benefit of either party from the date of separation to the current date.

[ 33 ] The parties have agreed that Edward Landry of Keenleyside Appraisals be appointed as an independent joint expert to appraise the Surrey property and the False Creek condo unit. [ 34 ] Further, the parties have agreed that David Matthews of Walton Appraisals be appointed as an independent joint expert to appraise the Lakeshore Drive property in Whistler. If the parties agree that it is also necessary to obtain an appraisal of the Castle Drive property in Whistler, that appraisal will also be undertaken by Mr. Matthews. [ 35 ] On consent, I make orders appointing Mr. Landry and Mr.

Matthews as joint experts to appraise the above-noted properties. [ 36 ] The appointment of Ron Hooge as a joint expert to value the shares of Fasteel and Brimac and quantify withdrawals from Fasteel and Brimac to the benefit of either party is confirmed. I am hopeful that Mr. Hooge will be able to complete and deliver his report on or before August 31, 2015, but I have not been apprised of Mr. Hooge's

schedule and I make no order in this regard. [ 37 ] By agreement, costs associated with the appointment of these joint experts along with mediation fees, if any, and any other expert fees or disbursements agreed upon between the parties, will be paid for out of a $77,000 tax refund for the taxation year 2014 recently received by the claimant. This initial allocation of cost is without prejudice to the ultimate determination of responsibility for payment of these expenses by the trial judge or by agreement between the parties.

I will also address this amount later in these reasons, as these funds lie outside the ambit of the more detailed restraining order that will be imposed in this case to replace the order made by Master Scarth on June 12, 2014. [ 38 ] By the same notice of application filed May 29, 2015, the claimant seeks a declaration that the without notice order of Master Scarth made June 12, 2014, does not prohibit him from disposing of, encumbering, transferring, converting or exchanging in another form, his jointly owned residence on False Creek acquired after separation, his shares in Brimac acquired after separation, or from carrying on the business of Brimac and Fasteel and disposing of their assets in the normal course of business, all without prejudice to the claims of the respondent.

In the alternative, the claimant seeks an order that the without notice order of Master Scarth be varied to authorize the claimant to borrow up to $200,000 from Brimac and to encumber his False Creek property for his personal use, including the payment of legal fees and disbursements related to this action, and to carry on the business of Brimac and Fasteel and dispose of their assets in the normal course of business without prejudice to the claims of the respondent. [ 39 ] Further, the claimant says that any restraining order should bind both parties. [ 40 ] The claimant's position on this issue was modified somewhat in the oral hearing, and I will address that momentarily. [ 41 ] In her application response, the respondent consented to the alternative remedy sought by the claimant, provided that satisfactory terms were put in place for an interim distribution of property to her pursuant to her application for this relief. [ 42 ] As the respondent also seeks, in her applications, a restraining order under s. 91 of the FLA and an order for the interim distribution of family property under s. 89 of the FLA to her in the amount of $200,000, it is convenient to deal with the claims of both parties on these issues together. [ 43 ] In doing so, I am mindful that the tests governing the interim distribution of family property and the imposition of a restraining order are quite different.

I have not linked the two applications in this respect. [ 44 ] The respondent seeks a broad-ranging restraining order enjoining the claimant from encumbering or disposing of virtually all of his property. The authority to make such an order is found in s. 91 of the FLA . The order must be made unless the other spouse establishes that a claim for property division will not be defeated or adversely affected by the disposal of the property. [ 45 ] The respondent alleges that since the separation the claimant has been withdrawing substantial amounts from Fasteel.

She notes the claimant's acknowledgement that his income is not derived from a regular salary but reflected in the income, available to him from Fasteel. The respondent notes that since separation the claimant has received approximately $10.8 million from Fasteel in employment income, dividends and by redeeming Fasteel shares. Of this amount, it appears that approximately $3.4 million has been paid to the respondent as spousal support or otherwise. [ 46 ] The claimant's total income in 2014 was $812,000.

The respondent says the claimant withdrew $356,000 from Fasteel in January and February 2015 in salary and share redemption. The respondent also notes that in October 2014 the claimant increased his gross monthly income from Fasteel from $35,715 to $156,000. The respondent notes that, based on a share valuation of Fasteel done in 2007, it was determined that a fair salary for the claimant would be $150,000.

Even allowing for a significant upward adjustment of this amount, the respondent asserts that the recent large increase in the claimant's salary is an attempt to circumvent the restraining order made June 12, 2014. [ 47 ] The respondent agrees that the restraining order should be a reciprocal one that binds both parties. [ 48 ] The claimant submits that if the terms of the restraining order are expanded, the order should contain a reasonable carve-out for his legal fees and disbursements in relation to this action. [ 49 ] I am satisfied that, subject to defined exceptions, mutual restraining orders are appropriate.

But the case is unusual in that 15 years have passed since the date of separation. Both parties, particularly the claimant, have acquired substantial property interests since.

I have taken this into account in crafting the terms of the mutual restraining orders. [ 50 ] Subject to the exceptions noted below, including the provision made herein and addressed later in these reasons for the interim distribution of property, the claimant shall, in his personal capacity, in his capacity as an officer and director of Fasteel and Brimac, and in his capacity as trustee of the McKenny Family Trust, be restrained from disposing of, encumbering, transferring, converting or exchanging into another form any and all of the following property:

1) Any and all shares in Fasteel held by the claimant in his personal name; 2) Any and all shares in Brimac held by the claimant in his personal name; 3) Any and all shareholder loans due to the claimant from Fasteel and/or Brimac; 4) The land owned by Brimac, more particularly described in paragraph 7 of the respondent's notice of application dated May 28, 2015; 5) Any real estate in which the claimant has an interest, including his interest in:

a) the real property situate at #204 -2222 Castle Drive, Whistler, British Columbia, more particularly described in paragraph 7 of the respondent's notice of application dated May 28, 2015; and

b) the real property at 2308 – 1408 Strathmore Mews, Vancouver, British Columbia, more particularly described in para. 7 of the respondent's notice of application dated May 28, 2015; 6) All chattels in the Castle Drive property in respect of which the respondent may have an interest; 7) The claimant's RRSPs; 8) The claimant's life insurance policies, including Sun Life Policy #L1-R544,135-4 and Sun Life Policy #L1-R755,637-5; 9) The joint life insurance policy of the claimant and respondent, namely, Industrial Alliance Policy #0494842785; and 10) The assets held by the McKenny Family Trust. [ 51 ] Subject to further order of this Court, or the written agreement of the parties, the restraining order in relation to the claimant is subject to the following exceptions.

The claimant shall be authorized to: 1) Retain an amount equal to the deposit to Fasteel Industries Ltd. of his 2014 personal income tax refund of approximately $77,032.83 on account of his shareholder loan account, or to segregate and hold an amount up to the amount of these proceeds, and to use such funds solely to pay for joint experts retained for the purposes of this family law proceeding, including a business valuator, property appraisers and any equipment appraiser or valuator required by the business valuator, together with a family law mediator, all subject to further order or agreement of the parties with respect to the timing and terms of repayment of this amount, and without prejudice to the rights and claims of the parties in respect of the sharing of any income tax burdens in making these funds available; 2) Borrow up to a cumulative total of $200,000 personally on his own unsecured credit, or to further encumber his jointly owned residence located at 2308 – 1408 Strathmore Mews, Vancouver, or to borrow by way of shareholder loan from Brimac Holdings Ltd. for his personal use for payment of legal fees and disbursements relating to this family law proceeding; and 3) To carry on the business of Brimac Holdings Ltd. and Fasteel Industries Ltd. and dispose of their assets in the normal course of the corporations' businesses, provided that his monthly income from Fasteel Industries be limited to $40,000 per month and that any shareholder loan account be used only for the purposes contemplated herein. [ 52 ] In light of the claimant's overall assets, I am satisfied that the respondent's claim for property division will not be defeated or adversely affected by these exemptions from the restraining order. [ 53 ] Subject to the exceptions below, a reciprocal order shall be made against the respondent in favour of the claimant restraining her from disposing of, encumbering, transferring, converting or exchanging into another form any of the following property: 1) The real estate situated at 9209 Lakeshore Drive, Whistler, British Columbia; 2) Any life insurance policy in her name; and 3) The joint life insurance policy of the claimant and respondent, namely, Industrial Alliance Policy #0494842785. [ 54 ] For clarity, the restraining order against the respondent does not prevent her from drawing on her line of credit or cashing in RRSPs she holds. [ 55 ] Subject to further order of this Court or the written agreement of the parties, the restraining order in relation to the respondent is subject to the following exception: the respondent shall be authorized to borrow up to a cumulative total of $200,000 by further encumbering her interest in the property located on 9209 Lakeshore Drive, Whistler, British Columbia, for her personal use for payment of legal fees and disbursements relating to this family law proceeding. [ 56 ] With respect to the claim for an interim distribution of family property, the authority for such an order may be found in s. 89 of the FLA .

This

section provides that a court may make an order for an interim distribution of family property if satisfied that it would not be harmful to the interests of the spouse and is necessary to provide money to fund family dispute resolution, all or part of a proceeding under the Act, or to obtain information or evidence in support of a family dispute, resolution or application to a court. [ 57 ] The claimant correctly notes that the order sought by the respondent is extraordinary in nature and must be assessed carefully.

The test governing interim distribution of family property has two components: 1) The applicant must show an advance is required to mount a challenge to the other spouse's position at trial; and

2) The applicant must show that the advance or payment on an interim distribution basis will not jeopardize the other spouse's position at trial. [ 58 ] The claimant advises that he is prepared to refinance the property in his name on Castle Drive in Whistler and divide the net mortgage loan proceeds equally with the respondent as a capital distribution, provided the respondent's certificate of pending litigation is released to allow for registration of security for the loan. [ 59 ] Independent of the claimant's position, I am satisfied that it is appropriate to make an interim distribution of family property in this case.

The action is complex, particularly now since leave has been granted to file the second amended counterclaim. The distribution is necessary to permit the parties to advance their respective cases on a relatively level playing field. [ 60 ] It is anticipated that the claimant will be able to borrow up to $300,000 on the Castle Drive property.

On this footing, and without prejudice to the claims and rights of either party, including those relating to the cost and interest burden of an interim distribution order, and costs relating to the maintenance of the Castle Drive property since separation, the claimant shall proceed to encumber the Castle Drive property held in his name and will, by July 31, 2015, direct disbursement to the respondent's counsel in trust from the total loan proceeds not less than $150,000.

The respondent will cause her certificate of pending litigation in this family law proceeding to be discharged to accommodate this borrowing on terms acceptable to her counsel. The claimant will take the remaining share of the net mortgage loan proceeds as an interim distribution of family property. He will direct the disbursement of these funds to his lawyer in trust.

Both parties will use these monies solely for the purposes enumerated in s. 89 of the Act. [ 61 ] In the event that mortgage proceeds from the further encumbrance of the Castle Drive property cannot be made available for distribution by July 31, 2015, the claimant shall make $150,000 available to the respondent from a further borrowing against his interest in the real property situate at 2308 – 1408 Strathmore Mews, Vancouver, and the restraining order will be amended to permit this borrowing. [ 62 ] The parties have leave to apply to amend any of the terms of this order.

Apart from any application that may be necessary to settle the terms of this order, I am not seized of any subsequent application made in connection with this matter. [ 63 ] The respondent made application for an order that the Castle Drive condo in Whistler be listed for sale with the parties having joint conduct of sale and the net proceeds of the sale held on terms fixed by the Court. In light of the order that has been made in relation to the Castle Drive property, this portion of the respondent's application filed May 28, 2015, is dismissed. [ 64 ] The respondent seeks an order that the trial be adjourned.

She submits it is unreasonable to suppose this action will be ready for trial by the end of November 2015. I am not satisfied that I should exercise my discretion in the circumstances before me to make that order at this stage. Having said this, it is desirable to bring some structure and order to these proceedings. [ 65 ] The following timetable will govern events between now and the date fixed for the commencement of trial: 1) The appraisals are to be completed on or before August 31, 2015. It is my hope that the business valuation being undertaken by Mr.

Hooge can also be completed on or before August 31, 2015; 2) All applications adjourned from today, and any additional applications of either party, are to be filed and served by September 11, 2015. Responses to those applications will be filed and served by September 18, 2015. Written replies shall be filed by September 23, 2015. All applications will be set down for hearing no later than September 30, 2015; 3) Discoveries will be completed on or before October 16, 2015; and 4) The trial management conference will be scheduled on or before October 23, 2015.

In fixing the date for the trial management conference, I recognize that counsel for the claimant is in a trial the week of October 19, 2015. Should it be necessary, I grant the claimant's counsel leave to appear on the trial management conference by telephone.

Further, I direct that if the trial management conference takes place during the week of October 19, 2015, it be scheduled at 9:15 a.m. to accommodate the competing trial obligations of counsel for the claimant. [ 66 ] The respondent also sought an order that the claimant produce a new list of documents addressing identified subject areas and make available copies of all documents contained on that list. As with the claimant's production of documents application, I adjourn generally this portion of the respondent's application dated May 28, 2015. The pleadings have not yet been finalized.

Disclosure is ongoing and Mr. Hooge's report will likely result in the listing of additional documents. In my view, it is premature to entertain this portion of the respondent's application. It should be brought back on in accordance with the above-noted timetable together with any production of documents application to be made on behalf of the claimant. [ 67 ] The respondent also sought in her application of May 28, 2015, an order that the claimant swear an updated financial statement with applicable attachments.

I understand this to have been done by the claimant in the intervening time between the filing of the application and the hearing dates of the matters before me. Accordingly, this portion of the respondent's application is dismissed. [ 68 ] Finally, the respondent, by notice of application dated May 28, 2015, sought orders that Legacy Tax & Trust Lawyers deliver to her their legal file containing information or instructions regarding the creation of any family trust, corporate reorganization, estate, wills and/or income tax planning.

The respondent seeks similar orders with respect to the legal file held by Kuhn & Company, the accounting file held by Donaldson Grassi, and the financial planning, estate, company reorganization and tax planning file held by BMO Nesbitt Burns. [ 69 ] The respondent contends that these files contain advice jointly given to her and the claimant for their mutual benefit and that any communication between either of them and the solicitors jointly retained by them is not privileged as against the other party because there is no expectation of confidentiality between them.

[ 70 ] The respondent also advances an argument that the claimant has, at least implicitly, waived solicitor/client privilege in relation to some of these files by: 1) Disclosing a portion of these communications; and 2) Voluntarily injecting into the proceeding his state of mind; specifically, his reliance on legal advice for steps taken by him, the motivation for and propriety of which are at issue in this action. [ 71 ] This application will be adjourned generally.

I make this order for a number of reasons: 1) The respondent's application raises complex and important issues regarding the scope of solicitor/client privilege. Insufficient time was allotted for the full and proper argument of this matter; 2) Counsel for the claimant has had very little opportunity to respond to this application, and no opportunity to address the authorities provided to the Court on the hearing of the application by counsel for the respondent; and 3) I am of the view that this application should not be dealt with until the pleadings have been settled and the issues have crystallized.

That will only be done after the claimant's response to the second amended counterclaim is filed. [ 72 ] Counsel, without inviting the re-argument of the applications, have I overlooked any matter that needs to be addressed? [ 73 ] MS. PIETROW: One matter is you've said that the claimant has prepared an affidavit verifying a list of documents. That has not happened. [ 74 ] THE COURT: I do not believe I said that. [ 75 ] MS. PIETROW: Well, I think that you were dismissing my client's application for disclosure and – [ 76 ] THE COURT: No, I adjourned the application for disclosure.

What I dismissed was an aspect of your application of May 28, 2015 that sought an order directing the claimant to file an updated financial statement. [ 77 ] MS. PIETROW: Pardon me. [ 78 ] THE COURT: That portion has been dismissed because, as I understand it, the claimant filed two in June. [ 79 ] MS. PIETROW: One was filed earlier in the year and one in, I believe, June. So that's correct. That was done. [ 80 ] THE COURT: So your production of documents application has simply been adjourned generally. [ 81 ] MS. PIETROW: Thank you.

And then is it correct that – [ 82 ] THE COURT: Because you are not here personally, Mr. Doyle, obviously I am reading from notes that I prepared over the weekend. It may assist for me to provide, on the undertaking that they not be used except as between counsel to settle the terms of the order, the paragraphs of my oral reasons that deal with the restraining order, the exceptions from the restraining order, and the orders made with respect to the interim distribution of family property. I am going to hand that to Ms. Pietrow now on those conditions. [ 83 ] MS. PIETROW: Yes. [ 84 ] MR.

DOYLE: Yes. [ 85 ] THE COURT: If there is some minor tinkering of language that is necessary and that the parties agree upon, I understand that. It should simply be brought to my attention in a letter that should be attached to the order when the order is submitted for entry so I am aware of the amendments that counsel have agreed on. I certainly expect that I would sign off on any amendments to the language I have used that counsel agree is more properly reflected in language you can agree on. I make that comment provided that the essence of the order remains the same. [ 86 ] MS.

PIETROW: The other thing is, the $40,000, that's a gross income, not net of tax? [ 87 ] THE COURT: Correct. [ 88 ] MS. PIETROW: And there's liberty to my client to apply for further interim distribution? [ 89 ] THE COURT: Correct. [ 90 ] MS. PIETROW: I think that's it. [ 91 ] THE COURT: Thank you, Ms. Pietrow. [ 92 ] MS. PIETROW: And then the assets of Brimac and Fasteel are not to be disposed of, except in the ordinary course of business as well, that's captured within there? [ 93 ] THE COURT: Correct. [ 94 ] MS. PIETROW: That's everything. Thank you for the detailed reasons. [ 95 ] MR.

DOYLE: My Lord, three small points. First of all, I assume that my client, as does the respondent, they have the

opportunity to apply for relief from the restraining order to free up more cash if they need it in order to bring this matter to trial? [ 96 ] THE COURT: I am going to give both parties leave to reapply, both with respect to the terms of the restraining order and in the event that a further interim distribution of family property is thought by either party to be necessary. I do not consider either of those two issues finally closed. [ 97 ] MR. DOYLE: Thank you. Secondly, My Lord, you were handing us the exceptions to the restraining order and some language on the interim distribution.

You also made some very specific and helpful directions with respect to case management going forward with dates, and I have been writing them down. Is it possible you can provide that as well, or otherwise I may be looking to the court reporter for some assistance in making sure I've got all these dates right. [ 98 ] MS. PIETROW: I have them written down, Kelly, but you could repeat them. I am pretty clear on them. [ 99 ] THE COURT: Let me just review them again. Appraisals, August 31, 2015. No order with respect to business valuation, but my hope, which I ask be extended to Mr.

Hooge, is that he can get the business valuation report also done by August 31. [ 100 ] MS. PIETROW: He indicated that's probably likely. I forgot to tell you that yesterday. [ 101 ] THE COURT: Thank you, Ms. Pietrow. That's good. All applications adjourned from today and any additional applications are to be filed and served September 11. Responses, September 18. Replies, September 23. Set down for hearing September 30. Discoveries, October 16. TMC, October 23. [ 102 ] MS. PIETROW: On or before, you said? [ 103 ] THE COURT: Those dates are on or before, those latter two dates. [ 104 ] MR. DOYLE: Thank you.

One last matter, My Lord. I am hopeful that my friend and I can actually craft this into orders and with whatever changes you've indicated, the protocol that we just cover those off in a letter. If for some reason we can't, and I hope that's not the case, I believe Your Lordship indicated that you were going to be in Edmonton next week. Will you be back in Vancouver sometime during July in the event we do need 20 minutes in front of you just to settle this order, because it is an important order obviously moving forward? [ 105 ] THE COURT: I am available the weeks of July 20 and 27.

I am unavailable the week of July 6, but can be made available to speak to this issue if need be sometime that week. I am not sure when, and that would have to be a discussion between scheduling, counsel and myself. I am not available the week of July 13. [ 106 ] MR. DOYLE: Thank you, My Lord. [ 107 ] MS. PIETROW: My Lord, just one thing.

I took another look at my amended counterclaim, and further to the submissions made the day before yesterday about setting aside the amendment to the family trust, there was a particular statement in making a removal of my client as a substitute trustee, and I propose to add also, because we have a problem with the entire amendment. So I would make only that change. I just took a more careful look last night. [ 108 ] THE COURT: I take it, Mr. Doyle, that revision to the proposed second amended counterclaim is not something you are going to take issue with? [ 109 ] MR.

DOYLE: No, My Lord. [ 110 ] THE COURT: Perfect. Thank you so much for your assistance. [ 111 ] MS. PIETROW: Thank you for all the detailed work, My Lord. [ 112 ] THE COURT: Thank you for your assistance, counsel. [ 113 ] MS. PIETROW: Thank you. [ 114 ] MR. DOYLE: Thank you. "FITCH J."