Lamoureux v. Hedquist

2022 BCSC 1178 Lamoureux v. Hedquist IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Lamoureux v. Hedquist, 2022 BCSC 1178 Date: 20220714 Docket: E45608 Registry: Penticton Between: Leanne Lorraine Lamoureux Claimant And Thomas Donald Hedquist and 0867873 B.C. Ltd. Respondents And Robyn Gibson Respondent by Counterclaim Before: The Honourable Madam Justice Hardwick Oral Reasons for Judgment In Chambers Counsel for the Claimant: D.L. Polley Counsel for the Respondent T.D. Hedquist: L.M. Bosdet No other appearances Place and Date of Trial/Hearing: Kelowna, B.C. July 12, 2022 Place and Date of Judgment: Kelowna, B.C. July 14, 2022 [1] THE COURT: These are my oral reasons for judgment in respect of the notice of application filed by the respondent, Thomas Donald Hedquist, on June 24, 2022. I heard this matter on Tuesday, July 12, 2022. I have elected to give oral reasons for judgment in this matter as I am satisfied that the facts and issues in this case render it appropriate for me to do so and because there is some time sensitivity to the matter. As I am providing oral reasons for judgment shortly after the conclusion of the hearing, I will not repeat in detail the evidence provided, but that evidence is presumably fresh in the mind of counsel and is, in any event, contained in the application record binder. I will instead focus on the key limited evidence which is material to reaching the conclusions necessary to address the relief sought. [2] I have also concluded, as alluded to above, that it is more important for these parties to receive judgment in a timely way than for the judgment to be finely wordsmithed as, even with such wordsmithing, the outcome would be the same. In this regard, as these are oral reasons for judgment, if a transcript is ordered, I reserve my right to edit these reasons for grammar and style, to include full citations or caselaw referred and, to the extent not done so in these oral reasons, to include the full text of such caselaw or other statutes or material cited. However, I again stress the substance of my decision will not change. Overview [3] As a starting point, the matter proceeded on appropriate notice and both counsel filed materials. As such, paragraph 1 of the notice of application which sought to abridge the time requirements under the Supreme Court Family Rules was abandoned. [4] The remaining relief is as follows: 2. An order that the claimant will not disclose any information related to Darlorn Septic Services ("Darlorn") to any person except for her accountants and legal advisors. 3. A declaration that the proposed purchase by the respondent's business, Superior Septic Services of Darlorn is done in the ordinary course of business and not a breach of a mutual section 91 property restraining order made by consent on May 12, 2021 (the "Property Restraining Order"). 4. In the alternative, an order varying the Property Restraining Order to specifically allow the respondent's company, Superior Septic Services Ltd. to purchase Darlorn. 5. A declaration that the sale of the property under construction located at 404-13415 Lakeshore Drive in Summerland, BC, in what is known as the Oasis Development (the "Oasis Property") is done in the ordinary course of business and not a breach of the Property Restraining Order. 6. In the alternative, an order varying the Property Restraining Order to specifically allow the respondent or the respondent's company 0867873 B.C. Ltd. ("086") to sell the Oasis Property and apply the net sale proceeds to: a) Repay the loan advanced by Brian Martin for the first deposit; b) Repay Trademark Industries ("Trademark") for funds advanced for the purchase to date; c) Pay any taxes triggered by the sale; and d) Fund this litigation, if necessary. [5] There are also two basket clauses at paragraph 7 and 8 which seek "such further and other relief as this Honourable Court may deem just", and "costs". [6] In her application response, the claimant, Leanne Lorraine Lamoureux, opposes the relief sought, except that she consents to paragraph 6, being the sale of the "Oasis Property", on the basis that the proceeds be held in her counsel's trust account and not be distributed without her consent or further order of the court. In submissions, counsel for the claimant also did not make substantive submissions as to paragraph 2 of the notice of application and I infer from that that this order is not strenuously opposed. Further, that order seems appropriate in the circumstances given that Darlorn is a third party and does have relevant confidentiality interests. [7] I shall thus make the order at paragraph 2 of the notice of application. To be clear, this is not a sealing order as that would prevent the parties from e-filing documents and unduly complicate matters. It is also not necessary. The order as sought simply adds some additional safeguards to the implied undertaking that exists already. Issues in Dispute [8] The core of the disputed issues between the parties on this interim application can best be summarized as follows: (a) Should the proposed purchase of Darlorn Septic Services by Superior Septic Services be approved in light of the "Property Restraining Order" made by consent on May 12, 2021? (b) Given that the parties agree with the sale of the Oasis Property, what should occur with the net sale proceeds upon a sale of the property? Background Information [9] The parties were in a marriage-like relationship for approximately five years. The exact length of the relationship is slightly disputed, but is immaterial for the purposes of this application. Clearly it was approximately five years in duration and a relatively short relationship. They separated almost exactly two years ago in July of 2020. They have children from prior relationships, but no children together. They were not married. [10] The respondent is the sole director and shareholder of Superior Septic Services Inc. and Trademark and 086, the companies defined above in the notice of application. 086 owns a commercial building located at 150 Commercial Place in Penticton, B.C. (the "Commercial Place property"), which Superior Septic primarily operates out of. The Commercial Place property was owned by the personal respondent prior to his relationship with the complainant. IN 2018, during his relationship with the claimant, 086, which is effectively a real estate holding company, purchased a 13-unit apartment building located at 4031-1st Avenue in Prince George, British Columbia. [11] In or around December of 2000, which is in close proximity to the parties' separation, the respondent entered into a contract of purchase and sale to purchase a condominium that was not yet constructed. This is the Oasis Property. The purchase price of the Oasis Property was $1,449,900. The claimant leads evidence as to the fact that he received a loan from his friend and business associate, Brian Martin, with respect to a portion of the funds that were advanced towards the deposit on the Oasis Property. The construction of the structure on the Oasis Property is not yet complete. [12] The respondent has owned and operated Superior since approximately 2002. It was initially a proprietorship, then acquired Trademark, and then became a separately-incorporated company on or about December 19, 2017. Superior operates a septic maintenance and rental business. Trademark is a company that was incorporated in January of 2004. The evidence indicates Trademark is mostly concerned with marine dock construction, but does do some operation of cranes, sales of boat lifts, and marina maintenance, amongst other things. [13] There was at lease one judicial case conference in this matter. At the May 1 judicial case conference, it was ordered that the valuations of 986, Superior, and Trademark were to be conducted as of May 1, 2015, being historical valuation dates, and a current fair market valuation. Ultimately, the parties retained Derek Sanders of Spence Valuations to complete the valuations, both the current and historical. I have in evidence before me the draft valuations of Derek Sanders, but the final valuations have not yet been completed. I will come back to this point later. [14] The evidence indicates this matter has been scheduled for a nine-day trial in April of 2023. Apart from the sale of the Oasis Property, which, again, is not contested other than as to what will occur with the net sale proceeds, the primary crux of this application arises from the fact that the respondent entered into a letter of intent to purchase Darlorn in mid-February 2022. Darlorn, described loosely, a competitor company to Superior which operates in the South Okanagan. The sole operating mind of that company is a Mr. Mills. Mr. Mills, the evidence indicates, is some 73 years old and wishes to sell the business and, presumably, retire. The Property Restraining Order [15] The order in question, as indicated, is a consent order made on May 12, 2021, which provides as follows: 1. BY CONSENT, the Claimant and Respondents are hereby restrained from disposing of, transferring, conveying, converting, or exchanging into another form, any property in which either party may have an interest pending final determination of this family law case without the consent in writing of the other party or further Court Order. 2. BY CONSENT, notwithstanding paragraph 1 of this Order, the Claimant and the Respondent may use their funds to pay their reasonable living expenses, and legal costs including disbursements to obtain information or evidence for this proceeding or family dispute resolution. [16] The order then says, paragraph 5, which I assume is a typo and should be paragraph 3: 5. BY CONSENT, the Respondent, Thomas Donald Hedquist is restrained from authorizing or causing the following companies to dispose of, transfer, convey, convert or exchange into any other form, any of their assets except in the ordinary course of business: (a) Trademark Industries Ltd., (b) 0867873 B.C. Ltd., (c) Superior Septic Ltd. (collectively defined as "the Companies"), without the consent in writing of the Claimant, or without further Court Order. Evidentiary Objection [17] Both counsel objected to certain portions of the other party's affidavit materials at the hearing. As it relates to the objection from Mr. Hedquist's counsel to information regarding an alleged assault and injuries arising therefrom, I agree that the objected-to portion of the affidavit should be struck. These issues form part of a separate legal proceeding between the parties and the s. 91 Property Restraining Order cannot be used to mitigate the risk associated with collecting upon any possible damage award that might possibly be made in that separate proceeding. [18] As it relates to the objection from Ms. Lamoureux's counsel, some of them are well founded, as well. Portions of the affidavit of Mr. Hedquist do definitely stray into opinion and speculation and thus are not admissible evidence. I have not considered substantially all of the objected to portions of his eighth affidavit. I do not agree, however, with all the objections. The statement, by way of example, that Darlorn and Superior are "well established household names with existing customers" is something that Mr. Hedquist can depose to as a fact. It is up to the court to determine whether they accept the evidence, but having regard to his longstanding involvement in the industry and the localized nature of those businesses, he can speak firsthand to his knowledge regarding these facts. Ordinary Course of Business [19] As noted, the Property Restraining Order does permit transactions which occur in the ordinary course of business. Counsel is in agreement in the law on this point which is cited in both the notice of application and the application response. I will not repeat it for the purposes of these oral reasons for judgment, but I reserve the right to insert the quote with respect to this from the notice of application if a transcript is ordered. The key point arising from that passage, though, is that this is a very fact-specific decision. [20] As I indicated to counsel at the hearing, the evidence simply does not support that either of these transactions are occurring in the ordinary course of business. One, it is acquiring a completely separate and new business. It is not, for example, buying an excavator because the previous one required for the operations of the business became inoperable or because its lease reached the end of its term. Similarly, although 086 is a real estate holding company, the sale of the Oasis Property is certainly not occurring in the ordinary course of business. It would constitute a disposal of substantially all or all the assets. As such, paragraph 3 of the notice of application and paragraph 5 of the notice of application are both dismissed. [21] That leaves us with the alternate option of varying the s. 91 order and, in particular, paragraph 4 of the notice of application. Burden of Proof for Variation of a s. 91 Order [22] It is well established that s. 91 creates a reverse onus. That is not contested. There seems to be little jurisprudence, however, on whether the reverse onus continues when a party applies to vary the Property Restraining Order under s. 91(4). In other words, the reverse onus clearly applies when a Property Restraining Order is sought at first instance, but it is not clear whether the reverse onus continues once an order already made is sought to be varied, particularly as the governing order, as is the norm, contains a specific provision allowing it to be varied by further court order, period, or, of course, by written agreement. [23] In Devathasan, v. Devathasan, 2017 BCSC 1010, the court seems to consider this point somewhat. In that case, the husband sought to set aside a Property Restraining Order that was in place, arguing that the value of their North American properties (they had a substantial amount of property worldwide) was enough to satisfy any claims that the wife may have had to the property and that the rest of the property should not be tied up by the Property Restraining Order. The court declined to do so and stated as follows: [61] In my view, considering the matter afresh, the Respondent's argument ignores that the Claimant has a property interest in all of the family property, Simply put, the valuation issues are such that I cannot be assured that the Claimant's claim may not be adversely affected by simply preserving the North American assets. The Respondent has not met his burden under the [Family Law Act], s. 91(1). [24] This would seem to suggest that the reverse onus would still apply on the variation application, although Devathasan is potentially distinguishable as it was an order to set aside, not vary. In any event, notwithstanding this potential controversy in the law, I have approached this application on the basis that the reverse onus would apply even on a variation application under s. 91(4). Acquisition of Darlorn [25] As it relates to the application to vary the asset restraining order to allow Superior to purchase Darlorn, this is a rather unusual application as, in the norm, applications to vary s. 91 orders are for the disposition of assets and not the acquisition of assets. In this case, however, I accept that the proposed acquisition of assets is being done for a bona fide reason. It would certainly have been preferable from an evidentiary perspective if there was a business valuation of Darlorn, even a rudimentary one, to give objective evidence for the court to rely upon to satisfy itself that the purchase price is or very close to the fair market value. However, I do accept that Mr. Hedquist is very experienced in this particular niche of business and in this same geographical region. It does not seem plausible that he would be acquiring, in an arm's length deal, a business simply to defeat the claims of Ms. Lamoureux. He clearly seems to be of the view that this is economically beneficial decision. The growth of Superior, leaving aside the dispute between the parties as to the contributions by Ms. Lamoureux while they were together, would support the conclusion that Mr. Hedquist is a prudent business owner. That is apparent from the draft business valuation of Mr. Sanders. I am also satisfied, considering the value of Superior and the other assets and the excluded property claims, that this acquisition does not materially prejudice Ms. Lamoureux. [26] As such, I will make the order as sought at paragraph 4 of the notice of application; however, for the purposes of drafting the order, it will not say, "in the alternative" given that I have already dismissed paragraph 3. [27] I was invited by counsel for Ms. Lamoureux, somewhat, to say that the value of Superior shall be as per the Spence Report to limit any possible prejudice to Ms. Lamoureux as a result of this being a potentially improvident or imprudent business decision by Mr. Hedquist. I am not prepared to do that. I say that because the report of Mr. Sanders is still in draft form. It is also watermarked such that portions of the report are not legible to this court. Most significantly, I am not prepared to bind the trial judge who might hear cross-examination upon that report or potentially receive a reply report, all of which are entirely possible given that the trial of this matter, as indicated, is not scheduled until April of 2023. [28] Of course, it is entirely open to Ms. Lamoureux to make an argument under s. 95 of the Family Law Act regarding unequal division if the circumstances support it, including but not limited to s. 95(2)(f) which speaks to where a spouse after the date of separation caused a significant decrease or increase in the value of family property or debt beyond market trends; subparagraph 95(2)(g), a spouse other than a spouse acting in good faith substantially reduced the value of family property; or 95(2)(i) any other factor other than the consideration referred to in ss. (3) that may lead to significant unfairness. [29] What I am saying here is, is that to the extent it is not already pled, as I do not have the benefit of the notice of family claim and counterclaim in the application record binder, if the concerns that counsel for Ms. Lamoureux has with respect to the providence of this transaction prove to be accurate, Ms. Lamoureux certainly reserves her right to to raise an unequal division argument under s. 95 of the Family Law Act. [30] This leaves, finally, the issue of the Oasis Property and, in particular, paragraph 6 of the notice of application. As indicated, the parties agree that the Oasis Property should be listed for sale. On this issue, I agree with counsel for Ms. Lamoureux. The sale of the property does appear to be prudent in current market conditions. However, I am not satisfied on the evidence before me that the funds should be applied in the manner sought by Mr. Hedquist. There is no evidence of any demand for the loan by Mr. Martin and the issues with respect to the intercompany loans between Trademark and so forth can be dealt with in due course. This does not preclude Mr. Hedquist from making a subsequent application once the property is sold and the sale proceeds are held in trust, to apply the proceeds in a certain fashion. I am simply concluding, on the basis of the evidence before me, that it does not satisfy me under s. 91 that the funds should be applied as sought in subparagraph 6(a) through (d) of the notice of application. [31] Accordingly, there will be an order by consent that the Property Restraining Order is varied to allow the respondent or 086 to sell the Oasis Property. There will be a subsequent order that the net sale proceeds after payment of real estate commission, legal fees, and other standard conveyancing adjustments will be paid into the trust account for counsel for Ms. Lamoureux and held there pending written agreement of the parties or further court order. [32] As it relates to costs, I consider that the parties had divided success with respect to this matter and the parties shall bear their own costs of this application. [33] For the purposes of drafting the order, do counsel have any questions with respect to what was allowed and what was dismissed? You are muted, Mr. Polley. [34] D. POLLEY: No questions. [35] L. BOSDET: No questions on my end, either, Justice. Thank you. [36] THE COURT: Thank you very much, counsel. [37] THE CLERK: Madam Justice, who will be drafting the order? [38] THE COURT: Well, it was Ms. Bosdet's application so I think, unless she volunteers, I am voluntolding [phonetic] her. [39] L. BOSDET: Yes, I'll draft the order. [40] THE CLERK: Thank you, Madam Justice. [41] THE COURT: Thank you. "Hardwick J."