Janis v. Janis

2013 BCSC 116 Janis v. Janis

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Janis v. Janis, 2013 BCSC 116 Date: 20130128 Docket: E038105 Registry: New Westminster Between: Nancy Anne Janis Claimant And Peter Lawrence Janis Respondent Before: Master Caldwell Reasons for Judgment Counsel for Claimant: M.A.J. Smyth Counsel for Respondent: G.K. Thomas Place and Date of Hearing: New Westminster, B.C. December 21, 2012 Place and Date of Judgment: New Westminster, B.C. January 28, 2013 [1] The claimant in this family action brings two applications. In the first she seeks leave to introduce the report of certified business valuator Ron Hooge at trial; in the second she seeks various additional document production and orders directing an updated business valuation by the original joint expert, Patti Daum, or by Mr. Hooge and an expert report on the issue of Guideline income for support purposes by Ms. Daum or by an expert of the claimant's choosing. [2] The parties herein cohabited from September 1989, married in December of 2000 and separated in February of 2011. The claimant is a teacher who is currently on leave of absence; the respondent is the prime if not sole force and operational figure behind two very successful businesses. The parties agree that he "is" the business and that he possesses unique talents and connections which have led to the continuing success of those businesses. [3] The parties agreed

at their Judicial Case Conference ("JCC") in November of 2011 that Patti Daum would be retained as a joint expert to value the businesses and arrangements were made for the setting of a ten day trial to occur in December of 2012. A s. 57 declaration was also made at the JCC. [4] The trial was adjourned at a Trial Management Conference and is now set for twelve days in April of 2013. [5] Ms. Daum was provided with a variety of documents which were required in order for her to prepare her report. Those documents included the internal financial records and balance sheets for both companies for the year ending December 31, 2011, projections for the year ending December 31, 2011 and ultimately the unaudited financial statements for the year ending December 31, 2011. [6] A first draft valuation was produced for the parties review in February of 2012 and a second draft in March. The unaudited financial statements became available sometime between March and September and the final version was delivered to counsel for the parties in mid September of 2012 and valued the companies at between $3.1 million and $3.3 million as at December 31, 2011. [7] Counsel for the claimant retained Mr. Hooge to review and critique the Daum report; he agreed with much of the report but disagreed on the issue of the compensation reasonably paid or to be paid to Mr. Janis and the issue of retained earnings.

His calculations would put the value of the companies approximately $1 million higher than that determined by Ms. Daum. [8] The claimant now says that the report is stale and should be updated by Ms. Daum or Mr. Hooge to year ended December 31, 2012. She also wishes to retain the right to have Mr. Hooge prepare a report for use at trial in any event and to have a report prepared to determine what Guideline income should be attributed to Mr. Janis. In anticipation of such update she seeks additional financial disclosure from the companies for 2012. [9] The respondent says that, as has been the historical practice, the final unaudited financial statements for the companies will not be available until May or June of this year. He has provided the internal financial records and balance sheets for the companies to September of 2012 but resists further disclosure. The claimant is content to adjourn the trial to get a 2012 value; the respondent is not and suggests that the claimant is simply seeking to delay in hopes that the value of the companies will continue to increase. [10] The questions to be addressed may be summarized as follows: 1. should there be a joint update to the Daum report; 2. if so, should it be done by Ms. Daum or Mr. Hooge; 3. if so, what additional documents should be produced; 4. even if not, what if any additional documents should be produced; 5. in any event,

should the claimant be entitled to tender at trial a non- joint report by Mr. Hooge on the issue of business valuation; 6. does the claimant require leave in order to obtain and tender an expert report on the issue of Guideline income to be attributed to Mr. Janis? [11] The issue of joint experts on financial matters in family actions is dealt with by Family Rules 13-3, 13-4, 13-5, 13-6 and 13-7. Briefly stated, Rule 13-3 provides that if there is to be expert evidence tendered at trial on a financial matter, it must be tendered by way of a joint expert unless otherwise ordered by the court. This requirement was fully canvassed by N. Smith J. in the case of Aquilini v. Aquilini, 2012 BCSC 1616. In that decision, at paras. 9 and 10, Smith J. highlighted the difference between the civil and family rule provisions regarding experts and the policy behind that difference as follows; [9] Jointly appointed experts are now referred to in both the Family Rules and the Supreme Court Civil Rules [Civil Rules], but with a significant difference between those two sets of rules. Under the Civil Rules, a joint expert may be appointed by agreement or by order of the court at a case planning conference (R. 11-3). In the absence of such an agreement or order, the parties are free to each appoint their own experts in the traditional way. Under the Family Rules, the procedure is reversed in

respect of financial experts. Opinion evidence can only come from jointly appointed experts unless there is an agreement or court order authorizing a departure from that procedure. [10] In making those Family Rules, the Lieutenant Governor in Council has stated a strong policy preference for the use of jointly appointed financial experts in family cases. That policy decision responds to common features of family cases that are not necessarily present in other kinds of litigation. These include: a) The central importance of the division of family assets and the corresponding need for valuation or accounting evidence; b) The cost of obtaining such expert evidence in many cases; c) The fact that the parties frequently do not have equal ability and resources to retain experts; d) The fact that while separately appointed valuation or accounting experts may disagree on some matters, they frequently find a great deal of common ground, resulting in needless duplication of costs (this, of course, assumes that all experts, whether jointly or separately appointed, have proper regard to their duty to assist the court and not act as advocates for either party); and e) The overly adversarial nature of some family cases, which can put in issue matters on which the parties should be able to agree. [12] Rule 13-4 addresses the process to be followed in applying to court for an order authorizing

the appointment of an additional expert if such person is required to ensure a fair trial. [13] Rule 13-5 deals with the appointment of an expert by the court on its own motion; that is not at issue in this application. [14] Rule 13-6 deals with delivery of the joint expert report, the issue of responsive reports and the requirement that the joint expert provide a supplementary report in the event that the expert's opinion changes. [15] The Daum report of September 2012 is a joint report on a financial issue as contemplated by Rule 13-3. It provides opinion evidence of business value as contemplated by the consent order and the retainer agreement. It provides that evidence as of the date contemplated by the consent order as further detailed by the agreement between the parties and Ms. Daum. [16] There is no evidence that Ms. Daum has changed her opinion as to the value of the companies as at December 31, 2011; such a change would be required in order for there to be a basis for a supplementary report. [17] The only thing which has changed is the date which the claimant now wishes to have used for the valuation. She argues that since the trial has now been adjourned for approximately four months a later valuation date should be used. [18] The practical problem with that position is that any report tendered at trial will be, to some extent, stale. With final financial statements

available in June, and a reasonable time for the expert to conclude the report/update and delivery at least 84 days before trial, it is likely that no trial could be set before November or December. The result would be that the numbers used and value determined would be 11 to 12 months old at the time of trial. In the current situation the numbers used and value determined by the expert report will be approximately 16 months old at the time of trial. [19] In the circumstances of this case I am unable to conclude that it is appropriate to order the preparation of an updated joint expert report by either Ms. Daum or Mr. Hooge. The intention of the Rules as written, the concept of proportionality and the policy considerations as listed by Smith J. in Aqualini mitigate against such an update; they also mitigate against allowing the claimant to tender her own, non-joint expert opinion at trial and I decline to make the order sought. Both of these decisions are however subject to further order of the trial judge in the event that he or she should determine that an adjournment for updated expert evidence is appropriate. [20] While I have determined that no update report is appropriate I have also considered the issue of whether the claimant is entitled to tender a responding report as contemplated by Rule 13-6(4) which reads as follows: 13-6(4) Unless the court otherwise orders, if a

party intends to introduce an expert's report at trial to respond to an expert witness whose report is served under subrule (3), the party must serve on every party, at least 42 days before the scheduled trial date, (a) the responding report, and (b) written notice that the responding report is being served under this rule. [21] I read this Rule as allowing any of the parties affected by a joint report to commission a purely responsive or rebuttal report which critiques the report of the joint expert. Further, I see nothing in the Rules or the authorities cited to me which requires that such purely responsive report or critique must be done by a jointly appointed expert or by an expert authorized by court order. If I am wrong on that point, I would grant leave to the claimant to commission and tender a purely responsive rebuttal report or critique of the Daum report. [22] The decision as to whether the tendered report is limited to response and critique will ultimately be a decision for the trial judge and the party tendering such report runs the very real risk that it may be excluded in whole or in part if it strays beyond such limited purpose. [23] The final issue dealing with expert reports is whether Ms. Daum or Mr. Hooge, or some other expert, may provide an expert report on the issue of Guideline income to be attributed to Mr. Janis. [24] In my respectful opinion, and as

submitted by Mr. Thomas on behalf of the respondent, the issue of Guideline income for purposes of support calculations is not a "financial issue" as that term is defined by Rule 13-3(1). Accordingly Rule 13-3(3) provides that the claimant is at liberty to retain an expert of her choice and to tender such evidence at trial subject to the normal rules and notice provisions regarding expert reports and evidence. [25] Dealing now with paras. 1, 2 and 3 of the claimant's application dated December 11, 2012 being her request for orders requiring production of material requested at the initial examination for discovery and the continuation of that discovery and for the internal financial statements for the two companies from September 30, 2012 to December 31, 2012. [26] Paragraph 1 of the application seeks "the outstanding disclosure requested at his Examination for Discovery conducted on November 23, 2012 as noted at Exhibit V of the Affidavit #3 of Ravina Sandhu sworn on December 11, 2012." Reference to that exhibit does reveal a letter which refers to certain listed requests and apparent partial compliance, however there is no copy of the requests themselves nor is there any indication as to how any of the apparent requests relate to a matter at issue in the litigation. Absent such material I have no alternative but to decline to order production of requested material about which

I know nothing. [27] Paragraph 2 of the application refers to outstanding requests, however this time attached exhibit Z to the affidavit does provide some detail of the requests regarding which responses are sought. [28] The first request seeks employment details for Annelies Stegen who I understand to be the in-house bookkeeper or accountant for the two companies. This request is too broad and general and I fail to see how it relates to a matter at issue in the litigation. [29] The second request seeks production of all email correspondence between Mr. and Mrs. Janis since separation. Again I find that request to be far too broad and more importantly to relate to material which is equally within the possession of the claimant who was herself a party to the emails sought to be produced. [30] The third request seeks "details of any other form of monetary spousal contribution". The request does not identify whose contribution is sought to be detailed nor does it identify what the contribution was related to; as worded, it could require the respondent to provide documents relating to the claimant having paid for a restaurant dinner on their third anniversary. [31] The final request is for "details on company's asset list and book value for items". Again I find the request to be too broad and uncertain and to also lack relevance given that the parties have spent considerable money

on a joint corporate share valuation. In light of such valuation I fail to see the relevance or the proportional propriety of ordering itemized details of asset book valuations. [32] I decline to order the relief sought in paras. 1 and 2 of the December 11 Notice of Application. [33] As to the internal financial statements of the companies for the months of October, November and December 2012, I am satisfied that those should be produced and I order that done within 21 days. The material contained in these statements may well be relevant to a responding report or critique and may also be of assistance in the cross-examination of, among others, Mr. Janis and the joint expert Ms. Daum. [34] The respondent has been substantially successful on these applications and accordingly he will have his costs of one application response in the cause. "Master Caldwell"