Supreme Court

Heron v. Heron, 2014 NWTSC 16
Date:  2014 02 12
Docket:  S-1-DV-2011-104099

IN THE SUPREME COURT OF THE NORTHWEST TERRITORIES

BETWEEN:

BARKLEY STEPHEN HERON
Petitioner
-and-

ANN MARIE HERON
also known as ANN MARIE LEPINE
Respondent

MEMORANDUM OF JUDGMENT


[1]	Ms. Lepine brings an application for a preservation order under s. 43 of the Family Law Act, S.N.W.T. 1997, c. 18.
BACKGROUND
[2]	The parties are in the midst of a dispute over matrimonial property.  The trial is set to be heard at the beginning of June, 2014.
[3]	The parties have many significant assets between them, including homes, vehicles, jewelry and businesses.  A key asset in the dispute is 5069 NWT Ltd., operating as the Rapid Corner Store, in which Mr. Heron owns 100% of the shares.  The store has a full-time manager and staff, but Mr. Heron is intimately involved its operations:  he checks daily receipts, makes the bank deposits and deals with suppliers and creditors, including negotiating account payments.  He has been in this role since the parties separated in 2009.  Mr. Heron derives his income solely from the store.
[4]	Ms. Lepine proposes that she be permitted to take over its operations until such time as the property issues are resolved.
[5]	Ms. Lepine contends that Mr. Heron is mismanaging the store and thereby jeopardizing its viability and its value as a family asset.  In particular, she says daily receipts are not deposited at the bank and that what is deposited does not accord with what the daily receipts have been; utility, telephone and supplier accounts are unpaid; a large number of cheques have been dishonoured; and the store owes money to the Town of Fort Smith for land taxes, water and garbage bins.  She is also concerned that she has not been able to complete the financial statements for the 2013 year end.  She has attempted to complete them, but Mr. Heron has not provided her with certain information required to do this.
[6]	Ms. Lepine presented documentary evidence to support some, but not all of these concerns.  Unfortunately, the respective sources of information for many of the statements she made in her affidavit were not included in it.
[7]	There is a history of controversy in these proceedings about the way the store is managed.  According to Ms. Lepine, the records have been in a state of disarray since before they separated.  She does not blame Mr. Heron entirely for this.  Rather, she says that once the parties won the lottery, they were not as careful about caring for their assets and discharging their obligations as they should have been.
[8]	Earlier in these proceedings it came to light that the store failed to remit income tax deductions to the Canada Revenue Agency.  Not surprisingly, the CRA took steps to realize on this debt, which was approximately $250,000.00, and the store’s assets were at risk of seizure.  Early in 2012, Mr. Heron obtained an order allowing him to access monies currently held in trust in this action to pay the CRA.
[9]	Subsequently, Ms. Lepine made a loan to the store of approximately $45,000.00 to bring employee tax remittances into good standing and to pay an accounting firm for bookkeeping.
[10]	In the summer of 2013, Ms. Lepine brought an application for, among other things, an order permitting her to operate the store.  Some of the concerns she raises before the Court in this application were brought forward then, including unpaid suppliers and tax arrears.  She also indicated that no financial statements had been prepared since 2008.
[11]	On July 4, 2013, the Court issued an order directing that Ms. Lepine would have co-management responsibilities for the store, in conjunction with Mr. Heron.  Specifically, the Court ordered that there would be no transfer of funds from the store or payment of suppliers without the express written consent of Ms. Lepine.  Mr. Heron was also restrained from disposing of any of his assets.
[12]	It appears that this has been an ineffective arrangement which has been honoured sporadically.  Mr. Heron has obtained Ms. Lepine’s consent to pay some accounts and make some fund transfers, but not others.  Of particular concern is that Ms. Lepine has not been consulted, nor her consent sought, with respect to wages or other remuneration that Mr. Heron pays to himself personally from the store.  Ms. Lepine is also concerned that Mr. Heron does not share all of the invoices and other mail with her, so she is uncertain as to the financial status of the store.
[13]	For his part, Mr. Heron says that Ms. Lepine travels frequently and so it is difficult to reach her and arrange to have invoices signed off.  Ms. Lepine acknowledges that she has travelled from time to time, but she has left her sisters or mother as her agent.  Ms. Lepine now has full-time employment so she does not plan to travel in the foreseeable future.  It may be that the parties require further direction from the Court on how this arrangement should work.  That is not before me now, however
[14]	Mr. Heron is opposed to having Ms. Lepine run the store.  He denies that he is mismanaging the store and says that he has always run it this way.  While he acknowledges there are outstanding debts and that a number of cheques have been dishonoured, he argues he is running the store to the best of his ability at a time when business is slow.  He says that as the store is able to pay creditors and suppliers, they are paid.  Sometimes cheques are dishonoured because they are post-dated and by the time they are cashed, there are insufficient funds in the store’s account.  He does not make deposits every day because he is trying to save bank fees.
[15]	Mr. Heron provided evidence to establish that certain creditors, which Ms. Lepine thought were unpaid, have recently had their accounts brought into good standing.  He also provided evidence about bank deposits he made in January.  Many, but not all of these, match the daily receipts from the store for the same period.
[16]	A further concern for Mr. Heron is that if Ms. Lepine was to take over, she would face the same dilemmas that he does in meeting the store’s obligations.  Unlike him, however, she would not have the advantage of his connections with the store’s suppliers, nor the consequent ability to negotiate grace periods and extensions effectively.
[17]	Finally, Mr. Heron is concerned that he will lose his only source of income should Ms. Lepine take over operations.
LEGAL FRAMEWORK
[18]	Ms. Lepine’s counsel referred the Court to Bronfman v. Bronfman, 2000 OJ 4591; 51 OR (3d) 336, in which the Ontario Superior Court of Justice considered a provision of the Ontario Family Law Act, R.S.O. 1990, F-3 identical to s. 43 of the Northwest Territories Family Law Act.  That case sets out a useful analytical framework for the Court to use in determining whether it is appropriate to grant a preservation order which is, in effect, a form of injunctive relief to be granted at the court’s discretion.
[19]	Sachs, J. noted (at paras. 26 and 27) that while the court’s discretion to grant the relief should not be usurped by the imposition of specific criteria, the considerations that courts have traditionally used to determine if injunctive relief should be granted are useful in this context:
[28] 	In dealing with interim or interlocutory injunctions, the courts have developed a checklist of factors they consider. They are:
	(a)	The relative strength of the plaintiff's case;
	(b)	The balance of convenience (or inconvenience); and
	(c)	Irreparable harm.

[29] 	The first two factors are relevant to the determination of an application for a non-dissipation or restraining order under s. 12. Clearly, a court will want to consider how likely it is that the plaintiff or petitioner will receive an equalization payment. It will also want to consider the effect that granting, or not granting, such an order will have on the parties. Under s. 12, the agenda is to protect the spouse's interests under the Family Law Act, so that if a spouse is successful in obtaining relief under that Act, there are assets available to satisfy that relief. Relevant to this exercise is an assessment of the risk of dissipation of the assets in existence prior to trial.
ANALYSIS
[20]	I now turn to consideration of each of the factors above.
Relative Strength of Ms. Lepine’s Case
[21]	It is not disputed that the store is part of the collection of family assets.  Assuming Mr. Heron wishes to keep it as a going concern, it is very likely that Ms. Lepine will be entitled to an equalization payment in consideration of her interest in it.
The Balance of Convenience
[22]	The balance of convenience favours the status quo.
[23]	Putting Ms. Lepine in charge of the store is not without difficulties and it is an extraordinary step.  The mechanics, such as arranging for signing authority and access to bank accounts, are not insurmountable, but there are other, less tangible factors that affect her ability to take over and run the store.  These include the goodwill Mr. Heron has engendered, having been the person who has dealt with suppliers, creditors and customers, and the learning curve for Ms. Lepine.  There is little evidence about her experience in running the day to day operations of the store, such as how much inventory must be ordered and at what intervals.  There is also no evidence about when she proposes to run the store.  She deposes that she has accepted a full-time position with the Government of the Northwest Territories.  Presumably, then, she would not be available to run the store during her workday.
[24]	Ms. Lepine is not satisfied with the manner in which Mr. Heron has operated the store and this is likely exacerbated by the fact that Mr. Heron has been less than cooperative and forthcoming with disclosure throughout these proceedings.  The fact is, however, that he has been the party operating the store in the approximately five years since the parties separated and it continues to be a going concern.  The trial is mere months away.  There are other means by which the Court can ensure that this asset is not dissipated, such as amending the July 4, 2013 order to delineate more specifically how Ms. Lepine is to be involved in the operations.
Irreparable Harm
[25]	In this context, “irreparable harm” means that the asset is devalued to the point where the party entitled to the equalization payment or other compensation will not be able to realize on it.  As noted, the parties have a number of valuable assets.  If Mr. Heron does, in fact, mismanage the store to the point where its value is significantly diminished, then Ms. Lepine can be compensated through those other assets.
CONCLUSION
[26]	There is an insufficient basis for taking the drastic step of placing Ms. Lepine in charge of the Rapid Corner Store.  Accordingly, this application is dismissed.  The order of July 4, 2013 remains in place, however, and to be clear, this means that Mr. Heron must continue to seek Ms. Lepine’s approval before paying any suppliers or transferring any funds, whether through the bank or from the store directly. This includes any payments made to Mr. Heron.  If further clarification of that order is required, or if the parties wish to vary its terms, they may use the Case Management process to do so.
[27]	Costs shall be in the cause.



									K. Shaner												J.S.C.
Dated at Yellowknife, NT
this 12th day of February, 2014

							

									


Counsel for the Applicant, Ms. Lepine:  Baljindar Rattan
Counsel for the Respondent, Mr. Heron:  Trevor Kelly


S-1-DV-2011-104099


IN THE SUPREME COURT OF THE
NORTHWEST TERRITORIES


BETWEEN:

BARKLEY STEPHEN HERON
Petitioner
-and-

ANN MARIE HERON
also known as ANN MARIE LEPINE
Respondent





MEMORANDUM OF JUDGMENT OF
THE HONOURABLE JUSTICE K. SHANER