Minami v. Chu, 2024 BCSC 40

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Minami v. Chu, 2024 BCSC 40 Date: 20240110 Docket: E220223 Registry: Vancouver Between: Wakako Minami Claimant And Ricky Martin Chu Respondent Before: The Honourable Justice Branch Reasons for Judgment Counsel for Claimant: I. Hayward Counsel for Respondent: R. Basham, K.C. T. Minhas (Articled Student) Place and Date of Hearing: Vancouver, B.C. October 31, 2023 and November 3, 2023 Place and Date of Judgment: Vancouver, B.C. January 10, 2024 Table of Contents I. INTRODUCTION .. 3 II. BACKGROUND .. 3 A. The Family . 3 B.

The Alleged Secret Family and Separation .. 3 C. The Family Home . 5 D. Other Properties Held by Individuals . 6 E. Trusts and Corporations . 7 F. Vehicles . 11 G. Payments to the Claimant Since Separation .. 11 H. Expenses . 12 I. The Respondent’s Overall Financial Situation . 13 J. The Restraining Order 15 III. ISSUES .. 18 IV. ANALYSIS .. 18 A. Going Forward Support 18

B. Retroactive Support 25 C. Restraining Order 27 D. Residual Issues . 29 a. Special and Extraordinary Expenses . 29 b. Other Relief 30 V. CONCLUSION .. 30 I. INTRODUCTION [ 1 ] The claimant faces a difficult situation. The respondent has arranged his affairs in such a complex fashion that ascertaining his actual financial position is extremely challenging. In such a situation, how should the Court establish a reasonable level of interim support, and to what extent should the Court impose controls on the respondent’s business activities? II.

BACKGROUND [ 2 ] This factual review will be more detailed than usual for an interim support application, but this is unavoidable in light of the above-mentioned complexity. A. The Family [ 3 ] The respondent was born on September 24, 1973, and the claimant was born on August 25, 1981. The claimant and the respondent commenced cohabitation in July 2007 and married on July 14, 2008. They have three children between the ages of 11 and 15. [ 4 ] The parties lived a very lavish lifestyle during their marriage. However, it is difficult to derive precisely where the funds came from to support that lifestyle.

The claimant did not work during the marriage. The respondent has a history of criminal convictions relating to drug trafficking and possession of prohibited weapons. However, the last time he was incarcerated was in 2004. He was pardoned in November 2020. The respondent claims that since 2009, he has only worked as a property developer and a lender “with financial assistance from [his mother, Marianna Chu] and for her benefit.” B. The Alleged Secret Family and Separation [ 5 ] The respondent says he separated from the claimant on April 1, 2012.

At that time, the parties lived in a home purchased in 2011 at 105 Peveril Avenue, Vancouver, BC (the “Family Home”). The respondent alleges that from separation until 2021, the parties agreed to carry on a façade for the benefit of the children. He says he left the Family Home after the children went to bed and returned in the morning before they woke up. The respondent admits to starting a common law relationship with Yuriko Satoh-Rajewski (“YSR”). The respondent and YSR now have a son. [ 6 ] The claimant disagrees with the 2012 separation date.

She accepts that there were nights the respondent did not come home, but she assumed he was working late. She says that intimacy did continue. She asserts that they only separated on November 5, 2021, after she found out about his relationship with YSR. [ 7 ] The parties are not seeking a declaration of the separation date for the present application. [ 8 ] On November 5, 2021, the claimant left their Family Home with their children.

She moved into a leased townhouse. [ 9 ] Later in 2021, the respondent moved with YSR and their child into an apartment registered in the respondent’s name at 3306 - 1111 Richards Street, Vancouver, BC (the "Richards Property"). [ 10 ] This claimant commenced this claim on February 18, 2022. [ 11 ] In August 2022, the respondent moved with YSR into a property at 6338 Angus Drive, Vancouver, BC (the “Angus Property”). The Angus Property is registered in the claimant’s name, but the respondent says she holds no equitable interest. The Angus Property was purchased in 2020.

The respondent says that it was bought to enable their children to attend the school in the catchment area and that it was only put in the claimant’s name because she was the parent who put in the application at the school. [ 12 ] BlueShore Financial provided a loan to assist with this purchase (“BlueShore Loan”). The assessed value of the Angus Property is about $6 million. The respondent has continued to do renovations on this home since separation.

He says these renovations were “in the normal course of his business of developing properties for resale.” [ 13 ] YSR started her own family claim against the respondent on May 10, 2023. The respondent says that he and YSR are now separated and reside on different floors of the Angus Property. The claimant casts doubt on the legitimacy of this separation, noting that the respondent and his companies have paid for some of YSR’s legal fees.

[ 14 ] The claimant’s townhouse lease ended on September 30, 2023. As this deadline approached, she advanced an application for exclusive possession of the Family Home. The application hearing began on September 14, 2023, but was not concluded. It has been set down for a continuation on February 9, 2024. Since October 1, 2023, the claimant has been residing in a friend's basement suite with the children. [ 15 ] The trial of this matter is set for July 15, 2024. C. The Family Home [ 16 ] As mentioned above, in March 2011, the claimant and respondent purchased the Family Home.

However, even such a normally routine transaction was arranged in a painfully complex manner. The offer to purchase was made in the claimant's name alone. Then, at closing, the respondent's mother, Marianna Chu, was added as a registered owner in joint tenancy with the claimant. Ms. Chu alleges that she put up $328,000 from selling another property she owned and arranged for a further $123,000 from her bank. Concurrent with title registration, Ms. Chu signed two trust agreements. The first indicates that she holds her legal interest in trust for the claimant.

The second suggests that she holds her legal interest in trust for the respondent. Ms. Chu explains these machinations as follows. She says she agreed to help fund the purchase of the Family Home on the condition that the property would be hers during her lifetime and would only go to the respondent on her death. She signed the various documents because the respondent said he and the claimant needed to be seen as beneficial owners to secure financing based on their property ownership.

She understood that regardless of the documents, the property was hers. [ 17 ] The respondent says that his uncle moved into the Family Home in mid-2022, in part to avoid the empty homes tax. The uncle did not pay rent. [ 18 ] On February 1, 2023, the claimant discovered that the respondent had made an empty homes tax declaration in her name, indicating that the Family Home was tenanted to his uncle. The claimant disputes that the respondent’s uncle was living in the Family Home, as she says the respondent’s uncle had his own property.

On a visit to the home, the claimant found that it had no furniture to speak of, but there were many boxes and bins of the parties’ remaining belongings. Nobody was at the premises, and no third-party clothing was on site. [ 19 ] The respondent alleges that on May 11, 2023, his mother, Ms. Chu, entered into a sublease agreement with his uncle whereby Ms. Chu would live in the Family Home. This lease is said to be for $700 per month. [ 20 ] The respondent’s present position is that his mother owns half of the Family Home, and the parties collectively own the other half. [ 21 ] But that is not the end of the story.

YSR now claims that this property is a family property in her relationship with the respondent and has put a certificate of pending litigation (“CPL”) on it. [ 22 ] The Family Home has an assessed value of $4,464,000. D. Other Properties Held by Individuals [ 23 ] The Richards Property discussed above was purchased in the summer of 2021 by the respondent and YSR, but was put in the respondent’s name alone. It has an assessed value of $2,810,200.

The equity in the Richards Property is about $1.1 million, as VWR Capital Corporation (“VWR”) holds a mortgage of approximately $1.8 million against the property (“VWR Loan”). The respondent says he is personally responsible for this loan. The monthly mortgage payments are about $14,000 , and strata fees are about $12,000 (presumably annually, although the respondent’s evidence suggests it is monthly). [ 24 ] YSR also asserts that the Richards Property is family property in her relationship with the respondent.

As noted, the respondent and YSR lived in the Richards Property for a period, but it is currently vacant. [ 25 ] The respondent had an interest in a property in Silverdale, Mission (“Silverdale”). This property was owned by 1024283 B.C. Ltd. (“102”). Silverdale was sold in February 2021 for approximately $1 million. This amount went to paying off part of the BlueShore Loan, except for $95,000, which went to YSR. [ 26 ] There is a further Canadian-held property at 312 - 2528 Maple Street, Vancouver (“Maple”). The claimant claims this is family property, but the respondent asserts it belongs to Linda Choy. Ms.

Choy was the respondent’s girlfriend when they were teenagers. Ms. Choy signed a trust document in the respondent’s favour, allegedly only so that the respondent could use it as security when applying for loans. Ms. Choy asserts that she retains the beneficial ownership. [ 27 ] The parties used a property in Hong Kong during their relationship (the “Hong Kong Property”). This property was held in Ms. Chu’s name, but she executed a trust agreement stating that she was holding the property for her son. The claimant says that, without notice to her, the Hong Kong Property was sold for roughly $4,164,456.

The net sale proceeds were transferred to an individual in Taiwan, Mr. Chen Chun-Hao (“Mr. Chen”). The respondent says that this payment was made on account of a $5.4 million October 31, 2019 loan provided by Mr. Chen (the “Chen Loan”) to help pay out a mortgage that was in default. To complicate matters further, the Chen Loan was in the claimant’s name and signed by her. The claimant obtained a Mareva injunction over the sale proceeds from the Hong Kong Property, but she recovered nothing, as the proceeds had already been diverted to Mr. Chen. E.

Trusts and Corporations [ 28 ] The respondent is involved with several interlocking corporations and trusts, including Second Wind Holdings Ltd. (“Second

Wind”), Raichu Development Ltd. (“Raichu”), 0972782 B.C. Ltd. (“097”), 1064762 B.C. Ltd. (“106”), 102 and the Chu

(2013) Family Trust (the “Chu Trust”). These entities' beneficial ownership and financial status are (not surprisingly) hopelessly complex. For some, the respondent disclaims any equitable interest. For others, he argues they have no present value or are producing no income. For still others, he says they are effectively tied up in litigation. For example, with respect to the real property discussed above, none of these corporate interests provide a direct or unencumbered path to the respondent.

The claimant would argue that that is precisely the point of the respondent's efforts. [ 29 ] The respondent legally owns 097 as trustee of its shareholder, the Chu Trust. The discretionary beneficiaries of the Chu Trust are the respondent, his father (now deceased), his mother and his brother. 097 in turn controls Second Wind. Second Wind purchased a property used by the parties in Tokyo, Japan (the “Tokyo Property”). In October 2022, without notifying the claimant, the respondent sold the Tokyo Property and transferred the net proceeds to Mr.

Chen to reduce the amount of the outstanding Chen Loan. [ 30 ] 097 is also the sole shareholder of Raichu. Raichu is an operating property development company run by the respondent. In his written argument, the respondent describes Raichu’s operations as follows: Raichu's business model is predicated on developing high-density residential accommodation, using the equity available in real estate owned by himself and family members to leverage financing from financial institutions. [The claimant’s] approach has been to encumber as many properties as possible to secure a blanket or inter alia mortgage.

The inter alia mortgage is secured against more than one property… He has avoided putting properties in his name because of his past. He involved [the claimant] in name for financing purposes. [ 31 ] The respondent says that Raichu was launched with funds and assets belonging to his mother. He alleges that Raichu is operated (at least in part) for her benefit. [ 32 ] In terms of Raichu’s active projects, the most significant is referred to as the “Cambie Property”, a 38-unit complex at 7638 Cambie Street, Vancouver. The respondent’s position is that the Cambie Property is currently not generating any cash flow.

He alleges that:

a) Ms. Chu initially owned the two plots of land where the project is being developed. She rolled the two properties into Raichu for a promissory note of $6.5 million. She then gave the respondent a promissory note of $6.5 million to prevent third-party claims against the property.

b) The property was developed in part using a $22 million loan from Atrium Mortgage Company (the “Atrium Loan”). The respondent says he is personally responsible for this loan. The company made a partial payment to bring down the Atrium Loan from the proceeds derived from the sale of the first 16 units of the Cambie Property. c) 22 of the 38 units in the Cambie Property remain unsold, leading to financial strain.

d) Ms. Chu has loaned monies to Raichu. Some of these loans have been repaid, and others have not. She loaned $200,000 to Raichu in November 2022, which Raichu repaid. On October 24, 2023, she loaned $140,000 to the respondent to partially pay the property taxes for the Cambie Property and the Surrey Properties discussed below.

e) Ms. Chu has asserted a claim as the beneficial owner of the Cambie Property in a civil proceeding commenced on November 22, 2022. [ 33 ] Beyond its interest in Raichu, 097 controls or controlled other properties, including: a) 3908 - 667 Howe Street, Vancouver (“Howe Street”): This was sold in February 2021 for $3,995,000. The net proceeds were applied to the purchase of the Angus Property. b) 1901 - 1499 W. Pender Street., Vancouver (the "Pender Property"): This property was owned by Second Wind, which is, in turn, owned by 097. The Pender Property was sold in April 2023 for $1.744 million.

The proceeds of sale went towards the BlueShore Loan, reducing its balance to about $3 million, with ongoing monthly payments required of $30,400.

c) The Grand Suite Property: This property in Japan was owned by 097 and sold in May 2021 for approximately $2 million. The proceeds of sale went to support the Surrey Properties.

d) The Grand Maison Japan: Second Wind owned this property. It was sold in October 2022 for about $2.6 million, and all proceeds went to Mr. Chen. e) 1956 West 5th Avenue, Vancouver (“5th Avenue”): This property has an assessed value of $1,730,000, but the BlueShore Loan is registered against this property, among others. There is also another mortgage registered against the property. f) 15510 and 15140 101 Avenue, Surrey (the "Surrey Properties"): These properties are held by 106.

The ownership structure of 106 is somewhat opaque, but it is clear that 097 has an interest in this company. (097’s investment in the Surrey Properties was funded by an increase in the Atrium Loan amount after the earlier partial payment discussed above. The balance owing on the Atrium Loan is now around $20 million, with monthly payments of about $200,000.) 097’s interest in the Surrey Properties is subject to the determination of the validity and enforcement of the purported $24.5 million sale of the property by an allegedly rogue director.

If the sale is enforced, 097 will receive its share of the proceeds, and about $18 million of the Atrium Loan can be repaid. If the sale is set aside, the respondent and his partner will continue to develop the property. The Court of Appeal has dealt with one aspect of the legal disputes involving these properties: Standard Group Projects Inc. v. 0972672 B.C. Ltd. , 2023 BCCA 205 . However, this matter has several outstanding issues that continue to be in litigation. F. Vehicles

[ 34 ] After separation, the respondent took possession of the many vehicles the parties used during the marriage, including a Mercedes SUV, an Audi RS6, a Porsche Boxster, an Aston Martin, Porsches, and a McLaren. [ 35 ] However, these vehicles are not generally registered in the parties’ names. The respondent contends that the Aston Martin is held in the name of a friend's used car dealership, Super Fast Motors (“Super Fast”). The respondent also transferred a BMW M3 and a Land Rover to Super Fast.

These transfers were allegedly done in exchange for the respondent’s use of the dealership cars on a rotating basis. The respondent says that he intended to go into business with Super Fast, but the terms of that association have not been concluded. [ 36 ] The respondent says that YSR actually owns the McLaren. [ 37 ] A Porsche is registered in the name of 0972717 B.C. Ltd., a company in which the claimant owns 50% of the shares and her family trust owns the other 50%. The claimant requested the sale of this vehicle so that the net sale proceeds could be dedicated to child support.

The respondent declined, claiming that the car actually belongs to his mother. He says that Ms. Chu has been driving the vehicle since its purchase. G. Payments to the Claimant Since Separation [ 38 ] Since separation, the respondent has paid no designated child or spousal support to the claimant. However, he has made or allowed certain undesignated lump sum payments as follows:

a) May 30, 2022: The respondent gave the claimant a cheque from Raichu for $50,000.

b) October 7, 2022: The respondent gave the claimant $20,000 cash in a brown paper bag left with their son.

c) October 20, 2022: The respondent issued a money order for $5,000 to the claimant.

d) September 2022: The respondent advised the claimant through counsel of $100,000 cash in a safety deposit box, which she withdrew. [ 39 ] The respondent says he has also paid directly for many of the children's expenses, including cell phones and electronics, Uber transportation, school supplies, books, toys, eczema treatment, food, shoes, clothing, toiletries, entertainment, blankets and bedding. He estimates that he contributed $16,000 from March to May 2023. H.

Expenses [ 40 ] In the claimant’s May 9, 2022 F8 financial statement, she claims expenses of $165,120 annually. [ 41 ] In the respondent’s March 3, 2023 F8 financial statement, he outlines annual expenses of $812,421.12. The respondent asserts that a substantial portion of this represents loan payments. He claims that the corporations discussed above largely took out the loans.

As such, it is not clear what portion of these expenses are properly viewed as his own personal expenses. [ 42 ] The respondent still appears to be living a reasonably comfortable lifestyle, notwithstanding his alleged financial difficulties. In the summer of 2022, the respondent purchased a new Tesla SUV. Around the same time, he threw a party for his one-year-old baby at a penthouse in the Cambie Property. Later that fall, he threw a catered birthday party for himself at the Angus Property.

In September 2022, one of their children returned from the respondent’s home with a new laptop purchased for approximately $4,000. The respondent has paid $139,763 in legal fees through Raichu since September 16, 2022, including fees for YSR and his mother. Finally, the respondent is continuing to perform renovations on the Angus Property. I.

The Respondent’s Overall Financial Situation [ 43 ] The respondent claims that he does not have income or assets from which he could be expected to pay support. [ 44 ] However, as recently as April 9, 2020, the respondent appears to have signed a document for RBC Wealth Management declaring his assets to be $41,212,141 and his liabilities to be only $12,919,372, for a net worth of $28,292,769. [ 45 ] On or about June 19, 2020, Vancouver Structured Mortgage Capital Inc. (“VSM”) was provided an unsigned document purporting to describe the respondent’s financial situation.

This document indicates that the respondent had a net worth of $24,783,695, including assets of $36,675,000 and debts of $11,891,305. [ 46 ] His most recent tax returns do not explain how he could have built up such a fortune. The respondent’s income tax returns show a wildly variable income of only $20,210 in 2018, $21,003 in 2019, and $22,036 in 2020, but then $686,550 in 2021. No income tax return was provided for 2022. [ 47 ] The respondent agrees that the parties lived lavishly before they left the Family Home.

However, he says that this was always somewhat illusory in that he was not earning income at a level necessary to support that lifestyle. Rather, he says he was taking the loan proceeds provided to the companies for development work, and then using them for personal expenses. The Court queried how he could extract company funds without them being declared on his individual income tax returns as salary, benefits, dividends, or as a shareholder loan.

The respondent had no explanation, only heightening the mystery surrounding his finances. [ 48 ] In September 2021, the true purpose for the respondent's mysterious financial arrangements may have been revealed. The parties exchanged texts in which the respondent declared: Why are you suddenly asking about France and other countries and how many cars I have and asking about the envelope in the car? You

think I'm trying to hide money? That's the whole fuckin' point to hide money. [ 49 ] In his March 3, 2023, F8 financial statement, the respondent asserts that he has suffered a dramatic reversal of fortune. He deposes that he has no income but still reports the $812,421 in expenses. He also deposes that now, he only has $10,615,298 in assets, more than offset by an extraordinary $58 million in debt. The respondent explains the alleged shift in his financial situation as follows:

a) Further units have not been sold at the Cambie Property, cutting off his cash flow;

b) The value of the Surrey Properties is tied up in litigation;

c) He is being forced to spend large amounts servicing the various loans discussed above;

d) It is no longer possible to use the loans to finance his families’ lifestyle, as the available funds have largely been exhausted; and

e) He is only able to continue to pay legal fees because his mother has acquiesced to Raichu paying those fees. [ 50 ] As noted, the respondent asserts that he and the companies have numerous debts. The respondent says that:

a) He owes $14,391,305 to his mother. The largest of these is said to be an August 11, 2017 loan of $6,500,000. However, as noted, there is evidence of promissory notes going in both directions for the same amount, adding to the confusion;

b) Raichu borrowed $4.7 million from his business associate’s company, Bhatia Development, in June 2023;

c) Raichu or the respondent borrowed $708,000 from his business associate’s wife in April 2023, which was intended to assist him with the monthly payments under the Atrium, BlueShore and VWR Loans;

d) After the payment of all the monthly amounts owing on all of this business-related debt, his remaining expenses include only $4,732 per month towards his children's activities and $4,604 towards his personal expenses;

e) Since separating from the claimant, the respondent has been supported by YSR. The respondent has agreed to repay YSR when the remaining units in the Cambie Property are sold; and

f) He currently has only about $30,000 in cash. J. The Restraining Order [ 51 ] Shortly after the litigation commenced, the Court issued an order under s. 91 of the Family Law Act , S.B.C. 2011, c. 25 [ FLA ], that restrained the respondent in certain ways in terms of disposing of assets. This order was extended several times by consent. On February 24, 2023, the order was modified to remove the time limitation and include an express carve-out for the disposal of properties in the “ordinary course of business”. The material revised order terms state: 1.

BY CONSENT, subject to paragraph 2, the Respondent is restrained from disposing of, transferring, selling, converting, exchanging into another form or encumbering any family property or property in which the Claimant may have an interest without the consent in writing of the Claimant or further court order, including but not limited to, the following: a. his shares in 0972672 B.C. Ltd. and 1024284 B.C. Ltd. (the "Numbered Companies"); b. shares held by the Numbered Companies' subsidiary entities; and c. real estate, cash, investments and all other assets held by the Respondent personally or on his behalf. 2.

BY CONSENT, the Respondent will be at liberty to access all corporate and other accounts in order to pay his ordinary monthly expenses. 3. BY CONSENT, except in the ordinary course of business , the Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to dispose of, transfer, sell, convert, exchange into another form or encumber the following, without the consent in writing of the Claimant or further court order: a. the property located at 1901 -1499 W. Pender Street, Vancouver, B.C.; b. the property located at 1956 W. 5th Avenue, Vancouver, B.C.; c. the property located at 7638 Cambie Street, Vancouver; d. the property located at 11871 Hammersmith Way, Richmond, B.C.; e. the property located at 12408 Seux Road, Mission, B.C.; and f. any other real estate, cash, investments and all other assets held by the Chu

(2013) Family Trust, Minami

(2013) Family Trust, the Numbered Companies' and their subsidiary entities. 4. BY CONSENT, except in the ordinary course of business , the Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to withdraw any further monies from existing and new credit facilities, without the consent in writing of the Claimant or further court order.

5. BY CONSENT, the Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to pay the Respondent any monies, without the consent in writing of the Claimant or further court order, subject to paragraph 2. 6.

BY CONSENT, except in the ordinary course of business , the Respondent is restrained and enjoined from doing anything which has or may have the effect of depreciating or dissipating the value of assets which may be family property or in which the Claimant may have an interest, including any business or corporate assets, without the consent in writing of the Claimant or further order of this court. [Emphasis added.] [ 52 ] The claimant argues that the carve-out for transactions in the “ordinary course of business” should now be removed because the respondent can no longer show that the claimant’s claim for property division will not be adversely affected by the respondent’s continued property disposal.

The claimant seeks the following noted changes to the relevant orders: … 3. Except in the ordinary course of business, the The Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to dispose of, transfer, sell, convert, exchange into another form or encumber the following, without the consent in writing of the Claimant or further court order: a. the property located at 1901 -1499 W. Pender Street, Vancouver, B.C.; b. the property located at 1956 W. 5th Avenue, Vancouver, B.C.; c. the property located at 7638 Cambie Street, Vancouver; d. the property located at 11871 Hammersmith Way, Richmond, B.C.; e. the property located at 12408 Seux Road, Mission, B.C.; and f. any other real estate, cash, investments and all other assets held by the Chu

(2013) Family Trust, Minami

(2013) Family Trust, the Numbered Companies' and their subsidiary entities. 4. Except in the ordinary course of business, the The Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to withdraw any further monies from existing and new credit facilities, without the consent in writing of the Claimant or further court order. 5. The Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to pay the Respondent and/or any individuals who are not arm’s length to him, which will include but are not limited to his family members and other new or former spouse, any monies, without the consent in writing of the Claimant or further court order, subject to paragraph 2. 6.

Except in the ordinary course of business, the The Respondent is restrained and enjoined from doing anything which has or may have the effect of depreciating or dissipating the value of assets which may be family property or in which the Claimant may have an interest, including any business or corporate assets, without the consent in writing of the Claimant or further order of this court. 7. In the event that the Respondent is required to cause the Chu

(2013) Family Trust, the Numbered Companies and their subsidiary entities, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to dispose of company assets or pay out monies to any parties who are not arm’s length to the Respondent, he may do so after providing the Claimant with 30 days written notice of the particulars of the proposed sale and payout, and the Claimant will be at liberty to apply for directions. [ 53 ] The respondent opposes any change to the restraining order, stating: The proposed variation will render it impossible for [the respondent] to carry on his normal course of business.

He cannot raise funds to carry on his business of real estate development and investment without the use of the corporate assets. He cannot negotiate loans with lenders without the carve out provisions. The proposed amendments will only serve to harm the Cambie Property business. Long term, the proposed amendments will restrain business transactions and will reduce the value of the business in which Wakako claims an interest. It is reasonable to infer that if [the respondent] is unable to keep up the mortgage payments, the properties will stand to be foreclosed. III.

ISSUES [ 54 ] Faced with the complex manner in which the respondent has ordered his financial affairs and the existing s. 91 order, the Court is asked to determine:

a) The appropriate amount the claimant should receive as interim child and spousal support going forward;

b) Whether the claimant should receive retroactive support back to November 1, 2021; and

c) Whether the s. 91 order should be modified to remove the carve-out that allows property disposal in the ordinary course of business. IV. ANALYSIS

A. Going Forward Support [ 55 ] Sections 216 and 147 of the FLA authorize the court to make interim orders for child support in accordance with the Federal Child Support Guidelines , SOR/97-175 [ Guidelines ]. Sections 216 and 165 of the FLA authorize the court to make interim spousal support orders. [ 56 ] The principles that apply to interim support applications were summarized by Master Keighley in Robles v. Kuhn , 2009 BCSC 1163 at para. 12 : 1. On applications for interim support the applicant's needs and the Respondent's ability to pay assume greater significance. 2.

An interim support order should be sufficient to allow the applicant to continue living at the same standard of living enjoyed prior to separation if the payer's ability to pay warrants it. 3. On interim support applications the court does not embark on an in-depth analysis of the parties' circumstances which is better left to trial. The court achieves rough justice at best. 4. The courts should not unduly emphasize any one of the statutory considerations above others. 5. On interim applications the need to achieve economic self-sufficiency is often of less significance. 6.

Interim support should be ordered within the range suggested by the Spousal Support Advisory Guidelines unless exceptional circumstances indicate otherwise. 7. Interim support should only be ordered where it can be said a prima facie case for entitlement has been made out. [Citations omitted.] [ 57 ] There was little dispute as to the presence of a prima facie entitlement to spousal support.

Rather, the debate centred around the appropriate imputation of income to the respondent for support calculation purposes. [ 58 ] Per s. 19 of the Guidelines , a court may impute income to a spouse that it considers appropriate in the circumstances. Section 19(1) outlines numerous circumstances that justify imputation, including when the payor has diverted income or failed to provide income information when under a legal obligation to do so. The court’s discretion to impute income is broad and is not limited to the enumerated heads in s. 19: T.L.T. v. R.E.S , 2022 BCSC 598 , at para. 65 [ T.L.T. ].

The claimant bears the onus of showing that income should be imputed: Windle v. Windle , 2010 BCSC 18 at para. 88 . However, where the payor claims to earn a low income, but his spending pattern suggests a higher income, the onus is on the payor to present his affairs in an understandable manner: Sullivan v. Struck , 2015 BCCA 521 , at para. 57 .

The claimant argues that the Court should impute the respondent’s income because there has been inadequate financial disclosure, and his tax returns fail to capture his financial situation properly. [ 59 ] An imputation of income can be employed to prevent sophisticated payor spouses from reducing their support obligations by using deferred forms of compensation. The Court may consider a party’s assets, investments, and lifestyle, as well as his business acumen, contacts, and expertise: Motyka v. Motyka , 2001 BCCA 18 at paras. 6 , 16-19, Hathaway v.

Hathaway , 2015 BCSC 1485 at para. 59 and the authorities cited therein. Recently, in De Cotiis v. De Cotiis , 2023 BCSC 1436 at paras. 110-118 , the Court imputed income based on the potential income yield from trust assets ostensibly held for the benefit of the respondent despite no disclosure as to the value of the trust or the respondent’s entitlement. The Court inferred that the respondent was entitled to a substantial inheritance and that those assets would yield income that was properly included in the respondent’s attributed Guidelines income, particularly considering “M r.

De Cotiis’ lack of disclosure, and in the absence of evidence to the contrary": para. 113. [ 60 ] Courts have imputed income by:

a) Using a grossed-up version of the payor's expenses: Akkor v. Roulston , 2009 BCSC 1584 at paras. 74 , 78; T.L.T. at para. 84 ;

b) Investigating the deposits into the payor's bank account: Van Deventer v. Van Deventer , 2000 BCCA 9 at paras. 12-15 ; Sorya v. Parmar , 2012 BCSC 129 at paras. 19-24 ;

c) Using evidence of lifestyle and spending patterns: Sullivan at paras. 56-73 .

d) Examining the payor's last known financial circumstances: L-L.W. v. L.K.W ., 2003 BCSC 1083 at para. 11 ;

e) Reviewing the parties’ respective means and needs: M.E.C. v. D.E.J ., 2006 BCSC 1802 at para. 21 ; Wilson v. Wilson , 2009 BCSC 1777 at paras. 5-10 . [ 61 ] In T.L.T. , the Court imputed income to the respondent father. The respondent was an entrepreneur who operated a winery and several other wine-related businesses. The respondent’s F8 financial statement disclosed a Guidelines income of $0, but expenses of $24,788 monthly. The respondent argued that this was explained by various losses he had suffered at the winery due to wildfires and the pandemic.

The Court explained its decision to impute income as follows: [80] In the present case, the respondent likewise appears to be delaying or deferring the opportunity to earn current income from his considerable capital assets while he focuses on rebuilding, improving and expanding the winery facilities. He has focused these past several years on future rewards expected from a new and significantly expanded winery operation, and has chosen to draw upon capital to pay living expenses. That does not excuse him from his obligation to contribute to the children’s current needs and expenses.

That includes their basic expenses, not just special and extraordinary ones…

… [84] In my view, the most compelling factor is the respondent’s self-reported pattern of spending at the $300,000 per annum since separation. The claimant argues that the expenses set out in the respondent’s Financial Statement are incomplete and the actual figure is even higher. She does not offer specifics. For the purposes of this interim application, this figure suffices as a rough indication of the ongoing level of capital the respondent has chosen to draw upon to meet living expenses, while deferring current income in favour of future opportunities.

The equivalent salary level the respondent would have to earn to generate net income of $300,000 is roughly $560,000, which is the level of income that I impute to him on an interim basis. [ 62 ] In this case, there is a basis for an imputation of income. The present case is similar to the situation in Motyka , where the Court stated: [17] Mr. Motyka contended on this appeal that his business ventures had not been successful in recent years, and that he has relied upon monies received as repayment of shareholder’s loans and other monies advanced to him by companies in which he has invested.

He gave affidavit evidence that his current work involves a real estate project in the United States that is in the early stages of development, and which requires “considerable” financial support. Therefore, it cannot be expected to produce any returns without further substantial work. The first phase of this project was not scheduled for completion before late 2000. [18] These arguments, in my respectful view, do not relieve Mr. Motyka of his obligation to provide appropriate financial support for his children. By pursuing real estate development in the way described, Mr.

Motyka is effectively deferring income until such time as the project is complete and producing revenue. It is his choice to work for future rewards, and to pay his present living expenses from capital and repayment of shareholder loans. His children, however, have present needs and expenses, and his obligation as a parent is to contribute to their support.

As a person with professional qualifications and experience he has the ability to meet that obligation. [ 63 ] In the present case, the respondent has structured his affairs in a manner that makes it extremely difficult to fix the appropriate income on an interim application. Indeed, I expect that this task will be a difficult challenge for the trial judge. Ultimately, the respondent’s evidence and arguments fail to adequately explain how the parties’ tremendous spending rate could have been sustained either in the past or presently. In particular, the respondent does not adequately explain:

a) How his net worth crashed so precipitously between 2020 and 2023;

b) How he has historically moved loan proceeds from his companies to his personal or family coffers without any recognition of those transfers on his personal income tax returns;

c) Why his financial statement includes loan payments that should presumably have been paid by the businesses and not by him personally;

d) How he can fund nearly $5,000 per month for the children’s expenses and almost $5,000 per month in personal expenses if there is, in fact, no money coming in, and the corporations are all in dire straits. I find it virtually impossible to accept that these are all being voluntarily covered by YSR, from whom he claims to be separated, or by his mother, who has launched litigation against him, presumably in good faith.

If, on the other hand, the litigation by YSR and his mother is a sham, that raises its own set of concerns. [ 64 ] I agree with the claimant that the “expense gross-up” approach in T.L.T. is a good starting point for the necessary imputation. However, I find that simply using the approach of simply attributing the respondent’s annual expenses as his current non-taxable income would be overly draconian. It would not properly accommodate the reality that the funds flowing into a development business such as the respondent’s will naturally swing from year to year.

Simply grossing up the latest expenses does not reflect the evidence that there has been a recent reversal of fortune here. Further, this approach does not adequately account for the fact that the respondent appears to be recognizing business expenses as personal expenses. [ 65 ] I find that the most appropriate method to establish the respondent’s attributed income would be to:

a) Begin with the T.L.T. “expense gross-up” approach;

b) Combine the application of the three-year averaging principles set out in s. 17 of the Guidelines ; and

c) Allow for a further deduction to account for the fact that the respondent’s reported expenses appear to (arguably mistakenly) include corporate business expenses. [ 66 ] I find that a reasonable approach is to:

a) Use the respondent’s claimed expenses of $812,421 to impute his income level for the two prior years; and

b) Accept for present purposes that the respondent’s income for the present year should be treated as $0 given the problems he is having extracting funds from the Cambie and Surrey Properties; [ 67 ] This three-year trend approach yields a non-taxable income average of $541,614. [ 68 ] I would then adjust that figure downwards to account for the fact that the respondent’s reported expenses appear to include business expenses that would normally be incurred by the corporations rather than being on his personal financial statement. Although admittedly “rough and ready,” I adjust the figure downward by using the midpoint between (

i) the $541,614 derived above, and (ii) the accepted personal expenses incurred for himself and his children of $112,032 annually. [1] [ 69 ] This approach yields an attributed, average, and adjusted non-taxable income of $ 326,823 . By my calculation, grossing up this amount through the DivorceMate software yields $679,205 for the annual Guidelines income, and child support of $9,850 per month. I

find that this figure is appropriate, and so order on a going forward basis. [ 70 ] In terms of spousal support, the claimant was prepared to run the calculation at the low end of the Support Advisory Guidelines’ [ SSAG ] range. Using the income figures above, the low-end yields spousal support of $7,012 per month, which I find is reasonable in the circumstances. Other cases where the payor's taxable income is above the SSAG $350,000 ceiling have ordered spousal support at the low end of the range . See, for example, the authorities cited at para. 111 of R.E.L. v. K.J.B.A ., 2023 BCSC 602 . [ 71 ] These are substantial monthly awards. However, I find them reasonable given that:

a) A payor in a business with substantial revenue variability should carefully plan in order to ensure that monies are set aside in the good years to support one’s family through any bad years. That is the principle behind the three-year averaging provision – i.e., it is appropriate to smooth out obligations and payments due from such payors rather than awarding very high support in some years and no support in others.

b) The respondent is the author of his own misfortune in certain respects in that: i. He does not appear to have put anything aside for a rainy day (or rainy years); and ii. He does not appear to have taken substantive steps to sell assets, capitalize future income streams, or resolve outstanding claims to ensure his family is properly supported through this slower period.

c) There is some evidence that the respondent has been hiding funds, particularly from the text exchange noted above.

d) The respondent appears to have engaged in inventive financial transactions that allowed him to extract substantial funds from his corporations in the past , but currently, he is not proposing anything helpful when it comes to ensuring that his family is properly supported now and in the future.

e) The respondent continues to live a comfortable lifestyle, suggesting he can access funds one way or another. [ 72 ] I note that the amounts yielded by the DivorceMate calculation do not change depending on the result of the marriage length debate between the parties. All that changes is the potential duration of spousal support.

While it is true that this case may already be past the shortest possible duration if one were to use the respondent’s shorter marriage length, I find that it is nonetheless appropriate to make an interim without prejudice order, given that (1) the likelihood of the trial court will find that the shortest duration is appropriate is not particularly high, and (2) it appears that there will be a property settlement of sufficient size to allow for an offsetting correction if necessary. [ 73 ] The respondent argued that rather than make an order against him that he would have difficulty satisfying, the Court should compel the claimant to apply to sell some of the properties, making further funds available to her.

There are several problems with this suggestion. In particular:

a) the Court cannot compel any party to bring a particular application; and

b) any entitlement to a capital distribution does not negate the children or claimant’s right to support. B. Retroactive Support [ 74 ] The claimant seeks support retroactive to November 1, 2021. [ 75 ] The court exercises discretion in determining whether to make a retroactive award. The applicable factors relevant to a retroactive award of child support include (1) the circumstances surrounding the delay in applying, (2) the payor parent's conduct, (3) the child's circumstances, and (4) any hardship that a retroactive award may cause: D.B.S. v. S.R.G., 2006 SCC 37 [ D.B.S. ] at paras. 95 , 100- 116; Colucci v.

Colucci , 2021 SCC 24 at paras. 38 , 79. The four D.B.S. factors are also relevant in deciding the suitability of a retroactive spousal support award: Legge v. Legge , 2021 BCCA 365 at para. 32 ; Kerr v. Baranow , 2011 SCC 10 at para. 207 . These factors, however, must be considered against the different legal principles and objectives underpinning spousal support compared to child support. Concerns about notice, delay and misconduct generally carry more weight in relation to claims for spousal support. [ 76 ] Turning to the present case, in terms of the delay factor:

a) The claimant’s original January 25, 2022 pleading asserted claims for child and spousal support, thereby putting the respondent on notice;

b) I find that the impenetrability of the respondent’s financial situation is a legitimate explanation for some delay on the claimant's

part in bringing on this interim application. The claimant has been seeking and obtaining disclosure orders throughout the litigation.

c) The claimant has actively sought and obtained orders to preserve and protect assets.

d) Regarding the appropriate time to advance the application, the first formal parenting time order (which could have affected the entitlement and amount of support if more parenting time had been allocated to the respondent) was not issued until April 12, 2023. [ 77 ] Regarding the respondent payor’s conduct, I have grave concerns that the respondent has been hiding funds and making his financial situation generally impenetrable. [ 78 ] Regarding the children’s circumstances, the respondent relies on Reid v.

Reid , 2017 BCCA 73 , where a parent sought $513,000 in retroactive child support covering a six-year period. The Court declined to award that large of an amount because there was little

evidence to support the conclusion that the condition, means and needs of the children were not being met. Here, the evidence is that the respondent has been directly paying substantial funds towards the children's expenses. There is also little evidence that the children's needs are not being met. [ 79 ] In terms of potential hardship to the payor, I do have some concerns.

The reality (at least on the surface) does seem to reflect that available funds are limited at present. [ 80 ] Considering the circumstances of the spousal support recipient, while there is some evidence of the claimant having to deal with a lowered standard of living since 2021, I am not convinced that this factor necessarily strongly supports a retroactive spousal support award. [ 81 ] The lump sum funds released or provided by the respondent also seriously complicate the retroactive analysis. The evidence is that the claimant has received at least $175,000 since separation.

The trial judge may characterize these amounts as a combination of child and spousal support, potentially offsetting or negating any alleged retroactive obligation. Conversely, these funds may be characterized as a capital transfer, in which case the support obligations may stand unaffected. This issue will only be resolved at trial. [ 82 ] In all the circumstances, in my view, there is inadequate evidentiary basis to support a retroactive award at this time .

I would adjourn this aspect of the application to trial, where the court will be in a better position to assess all of the relevant factors and, most importantly, will determine the proper characterization of the funds that have already been provided to the claimant. The trial will also settle the separation date dispute, which could impact any retroactive award. However, if the trial does not proceed as scheduled, the claimant has leave to bring this aspect of the application back on for hearing. C. Restraining Order [ 83 ]

Section 91 of the FLA authorizes the court to enjoin a party from encumbering or disposing of their property. The order is mandatory and 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: McKenny v. McKenny , 2015 BCSC 1345 at para. 45 . [ 84 ] Subsection 91(4) provides that the court may change, suspend or terminate an order made under s. 91. It is unnecessary for the applicant to show a change in circumstances for the court to vary a s. 91 order: Hunt v.

Hunt , 2022 BCSC 1535 at para. 21 . [ 85 ] The claimant argues that the terms of the restraining order need to be tightened considering the continued risk of dissipation and the alleged rapid decline in the respondent’s net worth. [ 86 ] I accept that the respondent’s situation and conduct are sufficiently opaque and potentially prejudicial to the claimant that some further tightening of the language is justified. However, I find that more limited changes from those proposed are advisable.

The terms should allow greater scope for the respondent to attempt to work the various companies out of their present financial challenges. I find that it is more appropriate to put the onus on the claimant to apply for directions if a particular transaction is of concern, rather than preventing the respondent from exercising his best business judgment in the first instance. I also do not think it is appropriate to require notice in the case of lesser-value business transactions, as triggering notice at such levels would be an undue distraction to the respondent’s operations.

As such, I would not control all transactions in the ordinary course of business, but only those where the transaction value involves more than $20,000. Finally, I would provide for a relatively short notice period to ensure that the respondent can advise any third party that any period of uncertainty about the particular transaction will be of short duration. The modified terms will be as follows, with the changes from the claimant’s draft underlined: 3. Subject to paragraph 7, except in the ordinary course of business, the Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to dispose of, transfer, sell, convert, exchange into another form or encumber the following, without the consent in writing of the Claimant or further court order: a. the property located at 1901 -1499 W. Pender Street, Vancouver, B.C.; b. the property located at 1956 W. 5th Avenue, Vancouver, B.C.; c. the property located at 7638 Cambie Street, Vancouver; d. the property located at 11871 Hammersmith Way, Richmond, B.C.; e. the property located at 12408 Seux Road, Mission, B.C.; and f. any other real estate, cash, investments and all other assets held by the Chu

(2013) Family Trust, Minami

(2013) Family Trust, the Numbered Companies' and their subsidiary entities. 4. Subject to paragraph 7 , except in the ordinary course of business, the Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to withdraw any further monies from existing and new credit facilities, without the consent in writing of the Claimant or further court order. 5. Subject to paragraph 7 , except in the ordinary course of business, the Respondent is restrained from causing Chu

(2013) Family Trust, the Numbered Companies, Minami

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to pay the Respondent and/or any individuals who are not arm’s length to him, which will include but are not limited to his family members and other new or former spouse, any monies, without the consent in writing of the Claimant or further court order, subject to paragraph 2. 6. Subject to paragraph 7 , except in the ordinary course of business, the Respondent is restrained and enjoined from doing anything which has or may have the effect of depreciating or dissipating the value of assets which may be family property or in which the

Claimant may have an interest, including any business or corporate assets, without the consent in writing of the Claimant or further order of this court. New 7. If the Respondent decides to: a. personally, or b. cause the Chu

(2013) Family Trust, the Numbered Companies and their subsidiary entities, Minani

(2013) Family Trust, 1045158 B.C. Ltd. and Grun Labs, Inc. to, conduct a transaction in the ordinary course of business otherwise permitted by paragraphs 3-6, but where the value of such proposed transaction is greater than $20,000, the Respondent must give the Claimant at least nine business days’ written notice of the proposed transaction. D. Residual Issues a. Special and Extraordinary Expenses [ 87 ] The respondent consents to the equal sharing of the s. 7 expenses.

The claimant left the appropriate proportion to be determined by the Court. [ 88 ] On an interim basis, s. 7 expenses are typically divided based on the parties’ incomes. However, the court retains the discretion to divide the parents' obligation in some other fashion: L.H.M.K. v. B.P.K., 2012 BCSC 435 at para. 97 . [ 89 ] Given the high amount of going forward support I have awarded, the short period until trial, and the lack of evidence of any suffering on the part of the children, I make an order for equal sharing of these expenses, but this direction is obviously interim and without prejudice. b.

Other Relief [ 90 ] The claimant’s application in paragraphs 5 and 6 for an interim distribution for legal fees and the transfer of one of the automobiles was adjourned generally. Similarly, the application for the relief sought in paragraphs 7, 8, and 9 was also adjourned, as the issues raised in those paragraphs are being managed through other proceedings before this Court. V.

CONCLUSION [ 91 ] Subject to the parties advising of any mathematical issue with the Court’s calculations, the respondent shall pay $9,850 and $7,012 monthly in interim without prejudice child and spousal support on a going-forward basis. [ 92 ] The issue of entitlement to retroactive support arrears is adjourned to trial. [ 93 ] The restraining order will be amended as set out above. [ 94 ]

Section 7 expenses shall be split equally on an interim without prejudice basis. [ 95 ] If the parties cannot resolve the issue of costs, they may arrange a further one-hour hearing at 9 a.m. before me. “The Honourable Mr. Justice Branch”