Reiss v. Garten, 2015 CarswellOnt 7859, [2015] W.D.F.L. 3286, 254 A.C.W.S. (3d) 393

This case considers the issue of whether the court can make an order on a pretrial motion for the immediate sale of a commercial property owned by a corporation of which the parties are the only shareholders and the sale is resisted by the majority shareholder.

Background

The Parties’ Dispute

The Applicant, Ms. Reiss, and the Respondent, Mr. Garten, were married over 35 years before separating in 2011.  During their marriage, the parties became the sole shareholders in a corporation known as Reiss Garten Investments Ltd. (RG), of which Ms. Reiss is a 49% shareholder and Mr. Garten is a 51% shareholder.  RG owns multiple properties, which are the subject of the parties’ dispute.

In addition to his shares in RG, Mr. Garten is also the sole shareholder in other corporations that own commercial properties.  Ms. Reiss has no significant assets in her name aside from title to the matrimonial home and her shares in RG.

Ms. Reiss’s position is that Mr. Garten holds 1% of his RG shares in trust for her and that she is also a 50% beneficial owner in the other corporations of which Mr. Garten is sole shareholder.  Further, Ms. Reiss is claiming an interest in other business interests, which Mr. Garten inherited from his late father, on the basis that Mr. Garten was unjustly enriched.

Ms. Reiss is also of the position that Mr. Garten owes her an equalization payment of approximately $13 million, whereas Mr. Garten view is that the amount is approximately $5.5 million.  Although the parties do not dispute that an equalization payment of some amount is owed, Mr. Garten made no advance payment or payment of prejudgment interest.

Ms. Reiss commenced family law proceedings in 2013 to seek equalization of the parties’ net family property, declarations of trust, and spousal support under the Family Law Act and Divorce Act.  Ms. Reiss also commenced civil law proceedings in 2013, to seek relief against oppression under the Ontario Business Corporations Act (OBCA).

The Motion for Immediate Sale of a Commercial Property

Ms. Reiss had been trying since 2013 to sell a particular commercial property owned by RG, located at 124 Merton Street, Toronto, and she brought this motion for the immediate sale of the Merton Street property.

The Merton Street property, which comprised at least half of the combined value of all of the corporate properties, generated approximately $850,000 annually in rental income and was described as “a boutique five storey, ± 60,000 square-foot office building located in the Yonge and Eglinton office node”.  Said property was highly marketable given its desirable location, onsite parking, 94% occupancy, and potential for conversion or redevelopment.

Ms. Reiss is an American citizen and she planned to relocate to New York City to be closer to her elderly mother.  At the time of this motion, the parties’ lengthy court proceedings had already been drawn out over two years and the parties were expected to be an additional year away from trial.  Ms. Reiss’s interest in the Merton Street property was tied up for approximately four years after separation due to Mr. Garten’s refusal to sell and she was concerned that the decline in the value of the Canadian dollar.

Mr. Garten’s position was that it would be unfair to force the sale of the Merton Street property as this would trigger significant disposition costs.

Analysis and Decision

The Court based its decision on the following considerations:

1. Mr. Garten had not paid Ms. Reiss any advance on equalization or prejudgment interest despite the fact that there was no doubt that an equalization payment, whatever the amount, was owed from Mr. Garten to Ms. Reiss.
2. Mr. Garten strongly resisted the sale of the Merton Street property despite the fact that it was one of the most valuable and marketable assets and it was one of the only assets to which Ms. Reiss had a direct interest.
3. Rule 2(2) of the Family Law Rules sets out the primary objective of the rules, which is to enable the court to deal with cases justly. Rule 2(3) lists the following as be is included in dealing with cases justly:

   • Ensuring that the procedure is fair to all parties

   • Saving expense and time;

   • Dealing with the case in ways that are appropriate to its importance and complexity, and

   • Giving appropriate court resources to the case while taking account of the need to give resources to other cases.

This means that courts must actively manage cases.

1. In this case, a trial decision will likely be over a year away, however, Ms. Reiss is in need of the funds from the Merton Street property now and she provided evidence that it would be just and convenient to sell the property now.
2. Ms. Reiss will likely be financially prejudiced if the sale of the Merton Street property is delayed until after trial.

Based on the above-mentioned considerations, the court granted Ms. Reiss’s motion and ordered the immediate sale of the Merton Street property.