Dionne v. Masters

2017 BCSC 2332 Dionne v. Masters

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Dionne v. Masters, 2017 BCSC 2332 Date: 20171218 Docket: E133051 Registry: Vancouver Between: Lorri Marie Dionne Claimant And Todd Masters and MastersFX, Inc. Respondents Before: Master Muir Reasons for Judgment Counsel for the Claimant: H.B. Chiu Counsel for the Respondents: P. Sheppard Place and Dates of Hearing: Vancouver, B.C. December 4-5, 2017 Place and Date of Judgment: Vancouver, B.C. December 18, 2017 introduction [1] This was an application by the respondents for orders that a property jointly owned by the personal respondent, Todd Masters, and the claimant, Ms. Dionne, located at 3203 - 928 Richards Street, Vancouver, B.C. (the "Property") be sold and the proceeds be held in trust, that the respondents be permitted to deliver interrogatories to Ms. Dionne, and that the respondents be entitled to examine Ms. Dionne for discovery for an additional two hours. [2] The notice of application also sought changes to orders regarding interim spousal support, but that application was not proceeded with at the hearing. [3] The parties consented to an order appointing Neil Hahn, B.Com., AACI, P.App of Garnet Wilson Realty Advisors Ltd. as a jointly-retained expert to provide opinion evidence as to the fair market value of the Property and the fair market rental rate for the Property from 2013 to the present. The respondents will

be responsible for the costs of that opinion in the first instance, with liberty to apply. Background [4] Ms. Dionne, the claimant in this action (the "Family Action") alleges that she and Mr. Masters were in a marriage-like relationship from 2005 until 2013 and seeks division of assets and spousal support. [5] Mr. Masters denies that a marriage-like relationship existed. [6] Mr. Masters is a special effects artist and the sole shareholder of the corporate respondent, MastersFX, Inc. Mr. Masters also controls an American company by the same name, MastersFX, Inc. [7] A companion civil action was also commenced by the respondents to this action along with several other companies owned wholly or partly by Mr. Masters, being Vancouver Registry Action S153117 (the "Civil Action"). The defendants in the Civil Action are Ms. Dionne, her father, Al Dionne, and his company, Rovina Inc. [8] The notice of civil claim in the Civil Action alleges, amongst other things, breach of contract and fiduciary duty by Ms. Dionne. Ms. Dionne has counterclaimed in the Civil Action for wrongful dismissal. [9] An order has been granted, by consent, that the two actions be tried together and that evidence in one action stand as evidence in the other. [10] There is a 25-day trial scheduled to commence on February 13, 2018. Ms. Dionne is represented by different counsel in the Civil and Family Actions. The

Property Background [11] The Property was purchased by Mr. Masters in 2006. He paid $200,000 down and took a mortgage and line of credit to finance the balance. [12] In 2008, Ms. Dionne invested $200,000 in the Property by paying down the mortgage in that amount and, at that time, she was added as a joint tenant on title to the Property. [13] By consent order dated February 16, 2016, Mr. Masters is to pay the second mortgage and line of credit payments for the Property in the amount of $1,985.14 per month. [14] Ms. Dionne deposes that she has been paying the first mortgage on the Property in the amount of $3,600 per month since June 2013. In addition, she agreed in the February 16, 2016 order to pay $125 per month towards the line of credit. Although that payment fell into arrears, her evidence is that it has been brought current. [15] Ms. Dionne was given exclusive use and occupancy of the Property in the February 16, 2016 order, and it was ordered that Mr. Masters could not reset his application for the sale of the Property until the earlier of either September 1, 2016 or the trial of the two actions. The Positions of the Parties [16] The law is not in issue. As it is alleged the parties were spouses, the respondents submit that, by virtue of s. 104 of the Family Law Act, S.B.C. 2011, c. 25 ["FLA"], the FLA prevails over the Partition of Property Act, R.S.B.C. 1996, c.

347. See also Reilly v. Reilly (1992), No. 74 B.C.L.R. (2d) 101 (C.A.), at para. 33. [17] The respondents, thus, rely on Rule 15-8(1) of the Supreme Court Family Rules, B.C. Reg. 169/2009 ["SCFR"], which provides: (1) If in a family law case it appears necessary or expedient that property be sold, the court may order the sale and may order a person in possession of the property or in receipt of the rents, profits or income from it to join in the sale and transfer of the property and deliver up the possession or receipt to the purchaser or person designated by the court. [18] The respondents say the parties cannot afford to carry the expenses of the Property and it is necessary that it be sold. In the alternative, the respondents argue that, given the heavy financial obligations burdening the parties, that it is expeditious that the Property be sold. [19] It is accepted that "expeditious" for the purposes of Rule 15-8(1) means advantageous to both parties: See, for example para. 37 of Reilly. [20] The respondents say that the Property is the most valuable asset at issue in the Family Action and as the Property will have to be sold in any event, the sale of it will expedite the trial and may further settlement. Further, that it is important to sell the Property while the market is still good. [21] Mr. Masters has not valued his interest in the companies in his Form F8 Financial

Statement. He says the companies are not doing well and he has been forced to close the Los Angeles office. In support of their position, the respondents point to a draft corporate valuation that has been done, showing that the companies today are valued at only $120,000. That is an increase of only $80,000 since the claimant alleges the parties entered a spousal relationship. [22] The claimant, on the other hand, says there is no reason to sell the Property at this juncture, which is less than two months before the scheduled trial. She submits that the respondents have had the ability to bring an application for sale of the Property since September 1, 2016 and have not seen the need to do so. [23] The claimant asserts her intention to buy out Mr. Masters' interest in the Property. She says that although she may not be able to afford to do so personally, she will have the assistance of her parents, if necessary. [24] In addition, she argues that if she and Mr. Masters are found to have been spouses, she will be able to offset her interest in the corporate assets, her lump sum spousal support and perhaps retroactive spousal support against the amount owing to Mr. Masters for his share of the Property. [25] The claimant also disputes that the Property is the most significant asset here. In the claimant's Form F8 Financial Statement, she discloses financial assets of almost $1

million. [26] Although he questions whether they are recoverable, Mr. Masters has shareholder's loans to MastersFX Canada of $191,082.64 and to MastersFX U.S. of $155,050. [27] In addition, the claimant asserts that Mr. Masters has interests in MastersFx-Prosthetics, LLC, MastersFx-CharacterFx, LLC, MastersFx-International, LLC, M.A.D. Creators, LLC, Counterproductions Ltd., Ridgewood Energy W Fund LLC and Harrington Square Associates LLC. [28] The claimant questions the respondents' position that the companies are not doing well based on the fact that in 2016 the respondents won an Emmy Award for Outstanding Make-up for a Netflix Original TV movie and have ventured into the commercial retail market with a new product called ProGash. Further, she points to the opening in 2016 of a new 5,000 square foot corporate facility in Toronto. Analysis and Conclusion [29] Although the parties appear to have amassed some debt, it is clear to me that the sale of the Property is not necessary at this juncture. The Property is not wasting, there is nothing outstanding that makes foreclosure possible, and the trial is imminent. [30] The question then becomes is the sale of the Property expedient? [31] To order a sale would deprive the claimant of the ability to advance her position at trial that she be entitled to buy out Mr. Masters' interest in the Property. I cannot say that her aspirations

in that regard or the claims she advances in the actions are doomed to failure. To order a sale of the Property now would amount to pre-judging those issues. [32] It would clearly not be in the interest of the claimant to order the Property be sold. [33] Thus, there is nothing in the submissions of the respondents that convinces me that the sale of the Property is either necessary or expedient, and that aspect of the application is denied. Interrogatories Position of the Parties [34] Rule 9-3 of SCFR governs interrogatories. Subrule 9-3(1) provides: Party may serve interrogatories by consent or with leave (1) A party to a family law case may serve interrogatories in Form F22 on any other party, or on a director, officer, partner, agent, employee or external auditor of a party, if (a) the party to be examined consents, or (b) the court grants leave [35] Thus, although under the old rules, interrogatories could be served as of right, now interrogatories may only be served by consent or with leave of the court. [36] The respondents say that they have been seeking consent to serve interrogatories since August 2014. They say, at the time, the issue was broached by their former counsel, who suggested that proceeding with examinations for discovery would be inefficient without interrogatories to shed light on what the respondents allege are financial transactions that took place

without their knowledge. [37] At no time, however, prior to the service of the notice of application here, did the respondents disclose the extent of the interrogatories they sought. [38] The interrogatories now provided by the respondents seek particulars with respect to financial transactions detailed in various appendices to the interrogatories. [39] The first is the most extensive - it seeks the following particulars regarding approximately 3,600 individual credit card transactions of the claimant's, dated from December 2007 to December 2013 that are alleged to have been paid for by the companies: a) What was the transaction relate to? b) Whether it was a personal expense of Ms. Dionne, a personal expense of Mr. Masters, or a business expense, and why? c) How was the transaction recorded in the general ledger of MastersFX, Inc. and at whose direction? d) Whether it was paid by MastersFX Inc., Ms. Dionne, or Mr. Masters; and e) If Ms. Dionne asserts it was paid by Ms. Dionne or Mr. Masters, advise how that payment was made. [40] Thus, for that interrogatory alone, perhaps 18,000 answers are sought. Counsel for the respondents was unable to suggest any way that this could be pared down. [41] The additional interrogatories seek similar answers about several other, albeit shorter, schedules. [42] The problem, according to the respondents, is that the claimant had complete

control over the accounting for the companies and the parties personally, and in the course of that, is said to have improperly diverted funds to her own use. The counterclaim of the respondents includes claims for unjust enrichment and conversion. [43] They argue that the type of information sought is particularly suited to interrogatories, and refer to the decision of Plumrose Inc. v. A & A Foods Ltd., [1994] B.C.J. No. 2250 (S.C.), where Madam Justice Boyd noted at paras. 8, 13-15: [8] With respect to the proper scope of interrogatories, Melvin J. held that the rule in Kennedy v. Dodson [1895] l Ch. 334 that: "The legitimate use, and the only legitimate use, of interrogatories is to obtain from the party interrogated, admission of facts which it is necessary for the party interrogating to prove in order to establish its case; and if the party interrogating goes further, and seeks by his interrogatories to get from the other party matters which it is not incumbent on him to prove, although such matter may indirectly assist his case, the interrogatories ought not to be admitted." [13] Berger J. cited with approval a passage from the case of Olfman v. Westfair Foods [1974] 3 W.W.R. 359 (Man. C.A.), where the court held that the plaintiff's resort to interrogatories was justifiable in that the interrogatories and answers they produce had the potential to diminish the scope of

subsequent examinations for discovery, perhaps making them a "more orderly and useful proceedings than they might otherwise be" (at 325). [14] In Fraser & Horn, Conduct of Civil Litigation in B.C., Chapter 12: Interrogatories, at 338, the authors note that: "Where the information sought is formal and clerical in its nature, the written interrogatory can be superior to the oral examination for discovery in eliciting complete and accurate answers. For example, if the party has in his records exact information on a matter in question but that information is to be found in various and disconnected places in his records ─ say, through examining a combination of invoices, bank deposits, cheques and books of accounts ─ an interrogatory might well be far more effective than a combination of discovery of documents and oral examination in producing a compendious and concise admission." The authors cite the Dominion Bridge [v. Royal City Iron Works et al., 1978 CanLII 225] decision, as an example of that proposition in operation, and state, at 339, that: " the virtue of interrogatories ... is that they may call upon the party to whom they are directed to assemble a considerable amount of data and to compile that data and organize his answer according to the needs of the questioning party ..." subject to the court's discretion to disallow interrogatories that require the answering party to

undertake "tremendously burdensome and elaborate calculations which [the questioning party has] no intention of using as part of their proof" (Morrison-Knudsen Company Inc. v. B.C. Hydro, unreported, 18 September 1970 (B.C.S.C.)). [15] In McLachlan & Taylor, B.C. Practice, Chapter 29: Discovery by Interrogatories, the authors endorse the proposition set out above. At page 29-1, the authors noted that: "[Interrogatories] are a particularly appropriate means of [obtaining information or admissions] where the information or admissions sought are clerical, lengthy or technical. [Emphasis in original.] [44] The respondents argue that they require these admissions from the claimant in order to advance their case with respect to unjust enrichment and conversion. [45] The claimant resists the application. She says the application has not been brought in a timely way and it would be disruptive and onerous to order her to respond to these interrogatories so close to trial. [46] The claimant also says that she was not in control of the accounting. She says there were two other people involved in accounting for the companies. She says that one of those persons, Ms. Scofield, has acknowledged that she reviewed all the credit card statements at the time. [47] Further, the claimant says that all transactions were also authorized by Mr. Masters. [48] The claimant says the respondents have

access to as much information regarding these accounts, if not more, than she does. She submits, for example, that they have equal access to the general ledger and the annotated credit card statements on which the payments were based. [49] Complicating things is the fact that, in the Civil Action, counsel for Ms. Dionne issued a demand for particulars on July 2, 2015. The plaintiffs in that action did not provide particulars until July 27, 2017 (the "Particulars"), after an application was served. The Particulars include exactly the same schedules as are now appended to the respondents' interrogatories in the Family Action. [50] Thus, Mr. Masters and his companies seek admissions in the Family Action arguably in support of particulars they have provided in the Civil Action. [51] The claimant submits this is abusive. First, she points out that her counsel in the Civil Action was not served and did not participate in this application. She submits that there is an obvious interest given the identity of the schedules. The claimant says that these interrogatories, if they are to be answered at all, must be addressed in the Civil Action. Analysis and Conclusion [52] The first question to consider is whether the interrogatories seek admissions necessary for the respondents to prove in order to establish their case. [53] Looking at the evidence provided in the Civil Action, the first

interrogatory deals with Appendix "B" (there is no Appendix "A" for some reason), and it is said to be a list of Ms. Dionne's personal credit card transactions paid for by MastersFX Canada. [54] To succeed in the unjust enrichment claim, the respondents will be required to prove that the claimant received a benefit, that the respondents suffered a corresponding loss, and that there was no juristic reason. [55] Presumably, the respondents can show that certain expenses from the claimant's credit cards were paid for by MastersFX Canada. The claimant's answer appears to be that it was the respondents' practice to run personal expenses through the company and that all expenses paid were approved by Mr. Masters. [56] The only common thread to those expenses, then, will be that everyone agreed to put them through the company, not that they are necessarily proper corporate expenses. [57] The claimant notes that her credit card statements with the annotations made at the time are available to the respondents and they know from those statements and the journal entries which of the line items on the statements were paid for by the company. [58] Thus, it seems that there will be of little assistance to the respondents in having the claimant go through each of the 3,600 entries to attempt to provide the answers sought. [59] The application must also be considered in light of the object of

the Supreme Court Civil Rules in promoting the just, speedy and inexpensive resolution of the action and doing so in a way that is proportionate to the issues. [60] The respondents had control over when this application was brought. Requiring the answer to such extensive interrogatories now, on the eve of trial, could well end up delaying the trial. To delay the trial is a prejudice to all, and not in keeping with the object of the Rules. [61] Considering the amount of work required, the proximity to trial and the proportionality of the amount of the work to the potential assistance to the respondents' case, I conclude that it would be an excessively burdensome exercise. [62] Appendix "D" is said to be a list of direct payments from MastersFX Canada to the claimant and Appendix "E" is said to be a list of debits recorded against Mr. Masters' "officer payable" account, although the work required would be more limited, the considerations are the same. I believe that MastersFX Canada has the records and these questions are sufficiently finite that they can be explored on examination for discovery in the Civil Action, if necessary. [63] Appendices "C" and "F" differ somewhat. [64] Appendix "C" is said to be a listing of amounts misappropriated by the claimant from the individual parties' joint accounts. The interrogatory questions proposed are: a) Whether Ms. Dionne withdrew or

caused the withdrawal of the funds; b) What were the funds withdrawn for? c) Where were the funds deposited or directed? and d) Whether the funds were recorded in MastersFX's general ledger, and if so, how and at whose direction. [65] As it is alleged these were withdrawals or payments directed by the claimant from personal accounts to her own use, it stands to reason that she will have the relevant evidence with respect to them. I note, as well, that these allegations are relevant to the issues that need to be determined in the Family Action with respect to the claim by the personal respondent for an unequal division of property due to the alleged substantial reduction in value or disposition of family property by the claimant. [66] Accordingly, the order will go permitting the interrogatory questions with respect to Appendix "C". [67] The allegation with respect to Appendix "F" is from para. 23(m) of the notice of civil claim in the Civil Action, which alleges that Ms. Dionne converted the assets that belong to the plaintiffs in that action by transferring them to her father, Al Dionne, or his company, Rovina Inc. Although the issues are obviously intertwined, it will be most efficient if the answers to questions regarding those transactions are dealt with in the Civil Action. [68] Accordingly, the order will go permitting the respondents to send interrogatories to the

claimant in the form of question 2 of the draft interrogatories, referring to Appendix "C" attached to that draft. The application regarding the balance of the interrogatories is dismissed. Additional Examination for Discovery [69] The respondents have conducted two examinations for discovery of Ms. Dionne in the Family Action in April 2016 and May 2017 which have consumed most of the seven hours that the parties agreed to allow for examinations for discovery. That, of course, exceeds the five hours permitted under Rule 9-2(2) of the SCFR. The respondents have not conducted an examination for discovery of Ms. Dionne in the Civil Action, but would be permitted seven hours in that action. [70] Counsel for the respondents points out that amended lists of documents were provided by the claimant shortly in advance of each discovery and says that that impaired their ability to conduct a full examination. The claimant disputes this. [71] At the May 2017 examination for discovery, 37 requests were left on the record, many due to Ms. Dionne's inability to answer without informing herself. [72] In addition, since the May 2017 examination for discovery, the claimant has produced documents relating to her writing and publishing a book titled "Dying to Live" and, in particular, documents with respect to companies used by her in that effort, namely, Doubting Thomas LLP and Doubting Thomas

Productions Ltd. [73] In view of the complexity of the issues, the late production of documents and the number of outstanding requests, the respondents say they should be entitled to an additional two hours of discovery. [74] At the hearing of this application, the claimant consented to a further examination for discovery limited to issues raised by the documents produced regarding the Doubting Thomas companies and the sale of her book. [75] She resisted, however, any expansion of the examination for discovery beyond those issues, arguing that the respondents should avail themselves of the examination for discovery permitted in the Civil Action. [76] Rule 9-2 of the SCFR governs examinations for discovery in family cases. With respect to requests left on the record at an examination for discovery, subrules 9-2(18), (19) and (20) provide: Person must inform self (18) In order to comply with subrule (17), a person being examined for discovery may be required to inform himself or herself and the examination may be adjourned for that purpose. Response may be provided by letter If a person is required to inform himself or herself under subrule (18) in order to respond to one or more questions posed on the examination for discovery, the examining party may request the person to provide the responses by letter. If letter provided (20) If the examining party receives a letter under

subrule (19), (a) the questions set out in the letter and the answers given in response to those questions are deemed for all purposes to be questions asked and answers given under oath in the examination for discovery, and (b) the examining party may, subject to subrule (2), continue the examination for discovery. [77] As noted, subrule 9-2(2) is the rule limiting examination for discovery to five hours or as agreed. [78] The issues in this family action are much more complex than the typical family claim. There is a denial of the spousal relationship and there are various corporate interests and claims of conversion and unjust enrichment. [79] Numerous requests were left on the record at the 2017 examination for discovery that, but for the time limitation, the respondents would be entitled to pursue at a further examination. Additionally, there have been new documents produced by the claimant since her 2017 examination for discovery. [80] Although many issues will overlap with the Civil Action, there will be questions that particularly resonate in the Family Action. [81] In all of the circumstances, I conclude that a further two hours of examination for discovery of Ms. Dionne is appropriate. It will be limited, however, to matters arising from the requests left on the record at the 2017 examination for discovery of Ms. Dionne and those arising from the documents produced by

the claimant since her 2017 examination for discovery, including with respect to the Doubting Thomas companies and the sale of her book. Conclusion [82] In summary, the application is dealt with as follows: a) Paragraph 1 of the Mr. Masters' notice of application regarding spousal support is adjourned generally. b) Paragraphs 2 and 3 of the notice of application seeking orders for sale of the Property and disposition of the proceeds are dismissed. c) Paragraph 4 of the notice of application is allowed by consent as follows: Neil Hahn, B.Com., AACI, P.App of Garnet Wilson Realty Advisors Ltd. is to be appointed as a jointly-retained expert to provide opinion evidence as to the fair market value of the Property and the fair market rental rate for the Property from 2013 to the present. The respondents will be responsible for the costs of that opinion in the first instance, with liberty to apply. d) Paragraph 5 of the notice of application is allowed to the extent that the respondents are granted leave to send interrogatories to the claimant in the form of question 2 of the draft interrogatories, referring to Appendix "C" attached to that draft. The application regarding the balance of the interrogatories is dismissed. e) Paragraph 6 of the notice of application is allowed, however, the examination for discovery is to be limited to matters arising from the requests left on the record at the 2017 examination for discovery of Ms. Dionne and those arising from the documents produced by the claimant since her 2017 examination for discovery, including with respect to the Doubting Thomas companies and the sale of her book. [83] Given the mixed success here, costs will be in the cause. "Master Muir"