Judge Sets Aside Spousal Support Provisions In A Marriage Contract

The decision in McCain v. McCain, 2012, ONSC 7344 was released on December 27, 2012. The parties in this high profile family law case had both retained business valuators to assess the husband’s net worth and income. The husband is currently the President and CEO of Maple Leaf Foods Inc., a family business established by his late father, Wallace McCain. The parties had a long-term marriage of nearly 30 years and had 5 children. They had a lavish lifestyle. The wife had not worked during the last 25 years and had been very supportive of the husband working hard to build the business.

A marriage contract was signed by the wife after 15 years of marriage. Both parties agreed that if the contract was not signed, the husband would have been disinherited by his father. The wife received independent legal advice prior to signing the contract. Under the contract, the wife waived her entitlements to an equalization of net family property at separation and spousal support. The wife was to receive title to the matrimonial home upon execution of the contract. On the second anniversary of having signed the contract, the wife was to receive $300,000 and in the event of separation after January 1, 1998, she was to receive $7 million within 12 months of separation.

The Husband claimed that there was no duress placed on the wife in signing the agreement. The Court disagreed, stating that… “the duress was subtle and psychological, in that she appeared to be the key to the Husband remaining as one of his father’s heirs. Of course the Husband did not say ‘you must sign this or I will divorce you,’ but that was the underlying stake in it all.”

The Court took into account that there were no projections of what the husband would be earning in the future, or lifestyle changes (which took place as years went on). Furthermore, the Court considered that at separation, the husband’s net worth was approximately $500 million, whereas the wife had approximately $5 million in liquid assets plus 3 properties, all of which had been mortgaged. The Court stated that even if the wife invested all the money she had, at a 2% interest rate, she would only earn approximately $10,000 per month. While this would cover property taxes, insurance and utilities, the Court decided that it would not leave anything for even the basic necessities of life.

The Court reviewed the circumstances regarding the execution of the contract, the resulting financial implications on the wife and the extent of the husband’s current wealth in arriving at the decision to set aside the spousal support provisions of the contract.

After analyzing the wife’s budget, the judge decided that an appropriate amount for interim/temporary spousal support was $175,000 per month.

I asked Dani Frodis, a family law lawyer operating a boutique family law firm in Toronto, to comment on the case. His comment is as follows:

Justice Greer has once again demonstrated the courage and common sense for which she is well known in arriving at her decision in this rather unusual case.

In the face of a spousal support release contained in a marriage contract, Justice Greer made an interim (or “temporary”) order for spousal support, and has set aside the support provisions contained in the marriage contract. Equally interesting is Justice Greer’s decision to make the support award retroactive to the date of the parties’ separation which predates the start of the action by nearly six months.

In these circumstances, the amount of support – a staggering $175,000 a month – is much less important, but will undoubtedly be the “sound bite” that receives the most attention.

The case is a sobering reminder that in family law, people should strive to treat their spouses fairly, and failure to do so could have unanticipated, and potentially very expensive results. On further reflection, perhaps the results in this case are not so surprising after all.

-Dani Z. Frodis

Dani Z. Frodis Barristers
100 Sheppard Avenue East, Suite 501
Toronto ON M2N 6N5
http://www.frodislaw.ca
T: 416-218-8888
F: 416-218-0333

Appeal Court Awards Bonuses To Dismissed Executive

The May 11, 2012 issue of The Lawyers Weekly reported that in the case of Mady Development Corp. v. Rossetto [2012] O.J. No 145, the Court of Appeal ruled that an executive fired for diverting labour and materials and using company funds to renovate his house should still be entitled to bonuses owed to him.

As vice-president of Mady Development Corp., Mr. Rossetto was an officer of the company and consequently a fiduciary duty was owed to the company. Despite the breach of fiduciary duty, the Court of Appeal recognized that in this case, the bonuses were “significant and non-discretionary” and agreed with the original arbitrator that they were “an integral part of Mr. Rossetto’s compensation under the employment contract. He was just as entitled to the bonus component of his compensation as he was to his regular salary.”

Mr. Gregory Sidlofsky, counsel for Mr. Rossetto, was quoted in The Lawyers Weekly: “Simply because an employee breached a fiduciary duty to his employer does not automatically disentitle the employee to compensation that is owed to him during the period of his wrongdoing”.

Bruce Roher, CA • IFA, CBV, CFE
President
Fuller Landau Valuations Inc.
151 Bloor Street West 12th Floor
Toronto Ontario M5S 1S4
broher@fullerlandau.com
416.645.6526 Direct
416.645.6500 General
416.645.6501 Fax

Determining The Valuation Date Of Shares Owned By A Terminated Employee

I noticed an interesting article in the July 6, 2012 issue of The Lawyers Weekly authored by Mr. Michael Wright regarding the buy back of a terminated employee’s shares.

Mr. Wright states that without specific language that alters the usual presumption that where shares would otherwise vest during the employee’s notice period, the employee would be permitted to exercise the option to purchase such shares or would be granted the restricted shares or other form of equity. The key issue is whether the valuation date should be the date on which the employee was provided with the notice of termination or the end of a reasonable notice period. The valuation can vary significantly depending on the date used.

Mr. Wright refers to the case of Love v. Acuity Investment Management Inc., (2011) ONCA 130, where Justice Stephen Goudge in this case held that “the end of [Love’s] notice period represents the end point of his entitlement to compensation in lieu of notice not the end point of his employment. This decision relied on Veer v. Dover Corp. (Canada) Ltd., (1999) O.J. 1727.

Ontario Chapter Of Family Firm Institute Event – March 21, 2012

The Ontario Chapter of Family Firm Institute will be holding an event, “A Vintner’s Tale: From cellar hand to a wine producing power house” on March 21, 2012. Join Andrew von Teichman, co-founder (with Allan Jackson of Jackson Triggs) of Union Wines for a first-hand account of the personal and business journey that led to the creation of Union Wines, one of the top-selling vintages across the LCBO.

Andrew will also describe his family’s background in the wine industry, the issues and lessons learned surrounding the sale of their ownership position in Pelee Island Winery to their business partner, and the renewal of their innovation and equity participation in the Canadian wine business with Von Terra Enterprises, a licensed agent representing local and imported producers of premium wines.

When

Wednesday, March 21, 2012

From 5:30 pm to 7:30 pm

Where

Marsh Canada Limited
161 Bay Street
14th Floor
Toronto, ON M5J 2S1

Fees
FFI Members and Friends of ONC: Free
Guests and Non-Members: $75

To register click here.

How to be Successful in your Succession Planning

FFI Ontario Chapter Presents A Best Practices Breakfast:

How to be Successful in your Succession Planning

It’s a new year. And a successor has been chosen to lead the family-owned business into the future. Now what?

Here is a rare opportunity to learn from two seasoned experts about what steps need to be followed to prepare that person to
take over the top job. It’s a process that can involve several disciplines, some of which might surprise you. Find out about:

Defining what is required for the future success of the business.
Critically assessing the capability of the next generation leadership.
Creating and executing a development plan to close the gaps over a defined time

Anyone who advises family business owners is encouraged to attend.

Presented by:

Colleen Brydon and Bill White of CBW Associates are experienced corporate leaders who work with small to mid-sized companies to assess what is needed next in growing their business. Their combined experience spans business strategy, manufacturing, process improvement, organization design, capability planning, leadership and board effectiveness.

When
January 25, 2012
8:00 AM to 9:30 AM

Where
Marsh Canada Boardroom
Brookfield Place, 161 Bay Street, 14th Floor, Toronto, ON

Price
$30 for members and guests

Coffee, tea, juice and a light breakfast will be served. This event is hosted by Marsh Canada Limited.

Seating is limited. If you would like to attend, please send me an email at broher@fullerlandau.com so I can email you an invite.

Succession Planning Event–November 29, 2011

A long-term client of our firm, Salit Steel will present its amazing story of a century long business success on November 29, 2011 during a Family Firm Institute (FFI) Ontario Chapter Event.

You won’t want to miss Steve Cohen, fourth generation owner of 100-year-old Salit Steel, and Alan Litwack, partner in the Business Law Group of Miller Thomson, LLP, for a robust exploration of succession planning and what keeps Salit Steel resilient.

From scrap yard to steel company, Salit Steel has galvanized four generations to create a company with markets across Ontario – against better-capitalized competitors. Today the company continues to flourish with two primary divisions, Rebar and Steel Service Center, serving Southern Ontario in the traditions long ago proudly established by Myer Salit in 1905.

This is an unusual opportunity to hear first-hand what obstacles and opportunities confronted Myer Salit who started the company in Niagara Falls, ON with resolve, a vibrant work ethic, an idea – and little else. You’ll also learn of the strategies that kept subsequent generations not only engaged but also eager to build on the original dream.

The ‘nuts and bolts’ will be also discussed, ranging from an estate freeze to succession strategies that have contributed to the success of the business.

The event will take place on November 29, 2011, 5:30 PM to 7:30 PM at Ivey ING Direct Leadership Centre (130 King Street West, Ground Floor, Toronto, ON M5X 1A9). To register, please click here.

FFI is an international professional membership organization dedicated to providing interdisciplinary education and networking opportunities for family business and family wealth advisors, consultants, educators and researchers and to increasing public awareness about trends and developments in the family business and family wealth fields. Please visit the direct link to the Ontario Chapter at: http://ontario.ffi.org/.
For information on the Ontario Chapter, please contact Larry Klar, President, at klar@argosypartners.com or (416) 867-8090.

A Successful Succession

Just as moving into a new life stage requires careful preparation, transitioning your business into a new phase calls for thorough planning. Read more by clicking below:

Succession Planning Bakers Journal

Removing A Minority Shareholder From The Board Of Directors

An interesting Ontario case was recently decided where the court refused to restrain a defendant from holding a special shareholders’ meeting to remove his brother as a director of family corporations. The defendant owned 55 per cent of the shares and his brother, the plaintiff, owned the remaining shares. The court was not satisfied based on the evidence presented that holding a special meeting to elect new boards of directors would be unfairly prejudicial or oppressive to the rights of the minority shareholder. The court held that the issued could be revisited if after the change of directors, there was oppressive conduct. See Witiluk v. Witiluk, [2011] O.J. No. 613, Ont. S.C.J., Warkentin J., Jan. 31/11. Digest No. 3041-008.

Bruce Roher's Blog

Toronto Chartered Business Valuator