Law Times

January 21, 2019

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LAW TIMES COVERING ONTARIO'S LEGAL SCENE | JANUARY 21, 2019 3 BY AIDAN MACNAB For Law Times IN A successful motion made by the trustee of a bankrupt es- tate to access two properties held in a trust, the case turned on the testimony of a typology expert who showed the font used in the trust documents did not exist when the documents were alleg- edly prepared. In McGoey (Re) 2019 ONSC 80, trustees to the estate of for- mer telecommunications CEO Gerald McGoey were successful in gaining a declaration that two of McGoey's properties, which he said were in a trust for his children and his step-children, were accessible to creditors. The two properties, a farm in Caledon and a Muskoka cottage, were purchased in 2003 and 1994 respectively. McGoey said he created the trusts one year af- ter each purchase. The 1995 trust document for the cottage was written in the font Cambria, which was not available to the public until 2007, according to Thomas Phinney, an expert in design and typog- raphy who is frequently used in cases regarding allegedly forged documents in the U.S., the U.K. and Australia. The font used in the 2004 document concerning the Cale- don farm was Calibri, also un- available until 2007. "To the best of my knowledge, this is the first time a Canadian or Ontario court has found a docu- ment to be invalid based on the history or provenance of the font," says James Renihan, a partner at Lax O'Sullivan Lisus Gottlieb LLP, who acted for the trustee. Michael Kestenberg and Thomas Slahta of Kestenberg Siegal Lipkus LLP acted for Kathryn McGoey and Gerald McGoey acted on his own be- half. Both Kestenberg and Slahta said they did not want to com- ment on an ongoing case. Renihan says using font ex- perts is not standard operating procedure when dealing with crucial documents. He says sus- picions were raised when Mc- Goey produced the documents protecting his properties, based on his conduct in previous liti- gation, says Renihan. "[Gerald] McGoey had been found in previous decisions to be less than totally honest and so the creditors had suspicions about these trust documents and they came as quite a sur- prise. And so, they wanted to look into the font issue," he says. Gerald McGoey held se- nior executive positions at Bell Canada Inc. and other telecom- munications firms and became CEO of Look Communications Inc. in 2004. He was also CEO of Look's parent company Unique Broadband Systems Inc. and, additionally, vice-chairman of the board of directors. In 2008, Look was in financial trouble and began a court-supervised auction of assets, receiving $80 million for its licensed broad- band spectrum. The company's board then approved $20 mil- lion in compensation to direc- tors and officers, of which Mc- Goey was given $5.6 million. In 2009, UBS's shareholders reacted angrily to the deal and McGoey and other directors were removed from the board. McGoey resigned as CEO from both entities. In 2011, he was sued for breach of fiduciary duty, which included the issue that part of his compensation pack- age was justified on shares of the company being worth $.40 each, which they were "nowhere near," says Renihan. On June 1, 2017, a Superior Court found McGoey liable for $5,565,696, plus $200,000 for legal fees. McGoey then filed for bankruptcy. In the subsequent motion, heard Nov. 5, 2018 by Justice Michael Penny, the trustee in bankruptcy KSV Kofman Inc., applied under the Bankruptcy and Insolvency Act for a decla- ration that the cottage and farm were accessible to creditors. Pen- ny granted the trustee's declara- tions finding the "sham trusts" were "fraudulent conveyances, done with the intention to defeat creditors," he wrote in the deci- sion. But the finding concerning the date of the font's creation would not have been enough on its own, says Breanna Needham, associate at Lax O'Sullivan Lisus Gottlieb, who also acted for the trustee. There would still have been a window between 2007 and 2010, where the documents could be alleged to have been legitimately created but improp- erly dated and could have estab- lished a certainty of intention to create a trust, which could be sufficient, she says. Even though McGoey was not bankrupt until 2017, by 2010 he could foresee that, given his re- moval as CEO and board mem- ber and the litigation stemming from his compensation package, that he would be sued and be in financial trouble, meaning if he then tried to transfer his assets, it would be seen as an unjust con- veyance, Renihan says. "The issue is not when he be- comes bankrupt. . .The issue is, when did he recognize that he was in serious financial jeopardy and had a reason to try and squir- rel away assets and hide them from his creditors?" he says. "Be- cause the financial jeopardy he was in gives rise to an assumption or inference that any transfers are unjust preferences or conveyanc- es, permitting you to undo the transaction and bring them back to Mr. McGoey." Penny states in the decision that there were several other "red f lags" regarding McGoey's in- volvement with the properties, including that there was no re- cord of the trusts with the Bank of Montreal which financed the pur- chases, no registration of the trust on title, the money advanced by the bank was "co-mingled" with the McGoey's personal funds and "the only document establishing the existence of the trust is a sin- gle page created by Mr. McGoey without any input from lawyers or accountants, even though he had regularly used legal and fi- nancial professionals, including for the creation of other trusts." "Justice Penny found that the totality of the circumstances cou- pled with the, we'll say, less than credible evidence of Mr. McGo- ey, show that not only were the documents backdated or falsely dated, but the trusts, in any event, were shams," Needham says. McGoey can now appeal the decision. LT Phony documents revealed James Renihan says a recent ruling was 'the first time a Canadian or Ontario court has found a document to be invalid based on the history or provenance of the font.' NEWS Employee awarded $30,000 times over the years when either she or her children were sick. In 2017, managers told Simp- son they would not give her the midnight shift because she had called in sick without giving enough notice, the decision said. "The respondent's decision not to give the applicant the midnight shift was based upon an unreasonable expectation that she should have provided 48 hours of notice that she would be ill, or that she should have found a replacement for herself even though she became ill the night before a morning shift," said the decision. On May 23, 2017, Simp- son was fired, for "attendance, failure to follow instructions, conduct, creating disturbance, performance and work quality," according to the decision. Simpson was awarded the full $30,000 she had requested for the loss of the right to be free from discrimination, plus injury to dignity and self-respect. While Simpson's former em- ployer initially asked for, and was granted, an extension to file a response, the company ulti- mately did not participate in the hearing. Sandy Singh, a manag- er at the retirement home, said in an email to Law Times that the decision was "out of context." Another representative from the retirement home's manage- ment said the company plans to appeal the decision. For employers struggling to accommodate someone's fam- ily status, it's a reminder that these types of requests have to be treated in a way in line with other accommodation requests, says Neena Gupta, a partner with Gowling WLG (Canada) LLP, who works in the Toronto and Waterloo region offices. "Family status is newer than traditional grounds like race and religion but cannot be treated lightly," she says. Patrick Groom, a partner at McMillan LLP in Toronto, says the example of the sick leave policy cited in the decision is a reminder for employer is the need for clear policies that are written down and given to em- ployees. "It's clear that we have an em- ployer who, their first mistake, in my opinion, is that they weren't responding to her requests," he says. LT Continued from page 1 To learn more, call 1-800-410-1013 or visit Just like our New Home Program New Condo Select is quick and easy Selected new condominium developments in Ontario qualify for an easy title insurance 1 application process. • Prepopulated underwriting • Streamlined searches • Saves time and money ® Registered trademark of Lawyers' Professional Indemnity Company. © 2019 Lawyers' Professional Indemnity Company 250 Yonge Street, Suite 3101, P.O. Box 3, Toronto, ON M5B 2L7 1 The TitlePLUS policy is underwritten by Lawyers' Professional Indemnity Company (LAWPRO ® ). Please refer to the policy for full details, including actual terms and conditions. Untitled-3 1 2019-01-16 10:35 AM

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