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Court File No.

CV-18-606163-00CL

ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
B E T W E E N:

FRANK STRONACH and ELFRIEDE STRONACH


Plaintiffs

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BELINDA STRONACH IN HER PERSONAL CAPACITY AND IN HER


CAPACITY AS TRUSTEE OF THE BELINDA STRONACH 445 FAMILY
TRUST, THE ANDREW STRONACH 445 FAMILY TRUST AND THE 445327
TRUST; ALON OSSIP IN HIS PERSONAL CAPACITY AND IN HIS
CAPACITY AS TRUSTEE OF THE ANDREW STRONACH 445 FAMILY
TRUST AND THE 445327 TRUST; FRANK WALKER IN HIS CAPACITY AS
TRUSTEE OF THE BELINDA STRONACH 445 FAMILY TRUST AND THE
ANDREW STRONACH 445 FAMILY TRUST; NICOLE WALKER IN HER
CAPACITY AS TRUSTEE OF THE BELINDA STRONACH 445 FAMILY
TRUST AND THE ANDREW STRONACH 445 FAMILY TRUST and
STRONACH CONSULTING CORP.
Defendants

STATEMENT OF DEFENCE OF
FRANK WALKER AND NICOLE WALKER

1. The Defendants, Frank Walker (“Frank W.”) and Nicole Walker (“Nicole”), admit the

allegations contained in the following paragraphs of the Statement of Claim:

(a) paragraphs 2-3;

(b) with respect to paragraph 9, that Frank Stronach (“Frank Sr.”) is the founder and

former CEO and Chairman of Magna International Inc. (“Magna”);

(c) paragraph 12;


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(d) paragraph 14;

(e) paragraphs 17-18;

(f) with respect to paragraph 20, that Stronach Consulting Corp. is the business entity

that owns and operates a number of assets of The Stronach Group, either directly or

indirectly;

(g) paragraph 30;

(h) with respect to paragraph 31, that Frank Sr. settled the Stronach Trust in February

1991, transferred his common shares of 445327 Ontario Limited (“445327 Co.”) to

that trust, and that the beneficiaries of the Stronach Trust were Frank Sr., his wife

Elfriede Stronach (“Elfriede”) and their issue;

(i) paragraph 52;

(j) the first sentence of paragraph 53;

(k) paragraph 54, other than the last sentence of that paragraph;

(l) paragraph 86;

(m) the first sentence of paragraph 87;

(n) paragraph 88;

(o) paragraph 91;

(p) paragraphs 93-94; and


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(q) paragraph 97.

2. As this Statement of Defence will address only those factual allegations and claims which

are made against Frank W. and Nicole in their capacities as trustees, for purposes of this pleading,

Frank W. and Nicole have no knowledge in respect of the allegations contained in paragraphs 10,

11, 21-24, 26-28, 39-51, 70-71, 73 and 125 of the Statement of Claim.

3. Except as otherwise admitted herein, Frank W. and Nicole deny all other allegations

contained in the Statement of Claim and put the plaintiffs, Frank Sr. and his wife Elfriede, to the

strict proof of each of them. Frank W. and Nicole deny that the Plaintiffs are entitled to any of the

relief claimed in paragraph 1 of the Statement of Claim.

The Stronach Group and the Parties

4. The Stronach Group is not a specific corporate entity but is a privately-owned group of

companies operating various businesses that are primarily divided into two main areas: racing and

gaming operations, and non-racing and gaming operations. The Stronach Group of companies was

established in or about 2011.

5. The racing and gaming division is the core of The Stronach Group’s business. Through this

division, The Stronach Group owns and manages horse racetracks in the United States,

thoroughbred training centres and owns or operates various technologies relating to horseracing,

including pari-mutuel betting terminals, online and telephone wagering capabilities and a digital

online HD horse racing network.

6. The non-racing and gaming division is, or has recently been, comprised of, among other

things, an agricultural business, restaurants, real estate developments in Canada and the United
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States, the Adena Golf and Country Club located in Ocala, Florida, horse breeding operations,

horse retirement programs, an electronic bike business and a casino/racetrack and real estate in

Austria. The non-racing and gaming division represents the non-core assets of The Stronach

Group’s business and many elements of this division have been under-performing in recent years,

including the agricultural business which was established in or about 2008.

7. Adena Farms is the main component of The Stronach Group’s agricultural business. Adena

Farms is a “farm to table” food company with a focus on American grass-fed beef. As part of the

agricultural business, The Stronach Group owns, among other things, 90,000 acres of farm land in

Ocala, Florida where grass-fed cattle are raised and also owns a slaughter house and beef

distribution facility.

8. Frank Sr. was the principle advocate and promoter of the agricultural business and many of

the other underperforming businesses in the non-racing and gaming division of The Stronach

Group.

9. Following the establishment of The Stronach Group, Frank Sr. was given the title of

Founder and Honorary Chairman, but was not a director or officer of the company. Instead, Frank

Sr.’s daughter, Belinda Stronach (“Belinda”), was appointed as Chairman and President, while

Alon Ossip (“Alon”) was appointed as Chief Executive Officer.

10. The operation of The Stronach Group, particularly the racing and gaming division, has

been left to Belinda, Alon and the other directors and officers of The Stronach Group. Frank Sr.

has not had control over or otherwise been actively involved in the operations and decisions of The

Stronach Group’s core businesses. With respect to The Stronach Group’s food/restaurant and

agricultural business, any authority that Frank Sr. had in connection with these businesses was
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limited and at all times remained subject to the control that Belinda exerted over The Stronach

Group more generally.

11. Andrew Stronach (“Andrew”), Frank Sr.’s son and Belinda’s brother, has not been

significantly involved in any of The Stronach Group’s businesses. Andrew is not a party to the

within action.

12. Frank W. is Belinda’s son and since his graduation from Wilfred Laurier University in

2013 with an Honours BBA International Business degree, he has been involved in The Stronach

Group. Frank W. is, or has been, a director, officer or trustee of various corporations and trusts

within The Stronach Group and has, at various times since 2013, been involved in the agricultural

business (including overall business strategy and concepts for retail stores), the restaurants at

Gulfstream Park, real estate development, the electronic bike business and racing and gaming.

13. Nicole is Belinda’s daughter and following her graduation from Wilfred Laurier University

in 2014 with a Bachelor of Arts degree (with a concentration in Business Administration and

Environmental Studies) she, too, became involved in The Stronach Group, particularly with

respect to the racing and gaming division of the business. Nicole is, or has been, a director, officer

or trustee of various corporations and trusts within The Stronach Group and in October 2017,

Nicole was appointed as Vice-President of The Stronach Group.

The 445327 Trust, The Andrew Family Trust and The Belinda Family Trust

14. 445327 Co., through its subsidiary Stronach Consulting Corp. (a defendant in this

proceeding), owns and operates The Stronach Group’s principal assets. Prior to October 31, 2013,

445327 Co. was controlled by the 445327 Trust (the “445327 Trust”).
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15. Elfriede was the original trustee of the 445327 Trust. Belinda was also appointed as a

trustee on February 14, 2012, resigned this position prior to the distributions that were done in

October 2013 as described in paragraphs 19 and 20 below, and was re-appointed as a trustee on

January 1, 2015 along with Alon. The beneficiaries of that trust are Elfriede, Belinda, Andrew,

Selena Stronach (“Selena”) (Andrew’s daughter), Frank W. and Nicole.

16. Frank Sr. is neither a beneficiary nor a trustee of the 445327 Trust.

17. In or about 2011 and 2012, the trustees of the 445327 Trust and various Stronach family

members began considering how the assets held by 445327 Co. were to be allocated among

Elfriede, Belinda, Frank W., Nicole, Andrew and Selena. The trustees of the 445327 Trust

ultimately determined that the allocation was to be effected through a distribution of the shares of

445327 Co. currently held by the 445327 Trust to a new trust established for Belinda and her

family (the Belinda Stronach 445 Family Trust (the “Belinda Trust”)), a new trust established for

Andrew and his family (the Andrew Stronach 445 Family Trust (the “Andrew Trust”)) and

leaving some shares of 445327 Co. in the 445327 Trust for the benefit of Elfriede and her children.

18. The Belinda Trust and Andrew Trust are discretionary trusts that were settled on October

29, 2013 pursuant to Trust Indentures dated the same date (the “Trust Indentures”). The material

provisions of the Trust Indentures for the Belinda Trust and Andrew Trust are generally identical,

except for the identity of the beneficiaries under each trust.

19. To avoid any potential conflict of interest, Belinda resigned as a trustee of the 445327 Trust

on October 30, 2013 before these distributions were made, leaving Elfriede as the sole trustee of

that trust. Elfriede obtained independent legal advice with respect to this distribution and after

conferring with family members and professional advisors, ultimately approved the distribution.
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20. Following the reorganization described in paragraph 17 above, which was effected on

October 31, 2013, the assets of the 445327 Trust are held in the following manner:

(a) 67.4% of the common shares in 445327 Co. are held indirectly by the newly created

Belinda Trust through a separate wholly-owned holding company;

(b) 23.1% of the common shares in 445327 Co. are held indirectly by the newly

created Andrew Trust through a separate wholly-owned holding company;

(c) the remaining 9.5% of the common shares in 445327 Co. are held indirectly by the

445327 Trust through a separate wholly-owned holding company;

(the Andrew Trust, Belinda Trust and 445327 Trust are collectively referred to herein as the “445

Trusts”.)

21. While further changes to the overall trust and corporate structure have occurred since 2013,

the 445 Trusts continue to hold the common shares of 445327 Co. in the manner described in

paragraph 20 above.

22. The beneficiaries of the Belinda Trust are Belinda, Frank W. and Nicole. Any trusts created

for the benefit of Elfriede, Andrew and Selena are also beneficiaries of the Belinda Trust (as are

any corporations the shares of which are owned by any such trust), but no income or capital

distributions can be made to these entities unless Frank Sr. is a trustee of the Belinda Trust at the

time of the distribution. The original trustees of the Belinda Trust were Frank Sr., Belinda and

Alon, but as described below, Frank Sr. ceased being a trustee of the Belinda Trust as at November

29, 2013.
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23. With respect to the Andrew Trust, the beneficiaries of that trust are Andrew and Selena.

Any trusts created for the benefit of Belinda, Frank W. and Nicole are also beneficiaries of the

Andrew Trust (as are any corporations the shares of which are owned by any such trust), but no

income or capital distributions can be made to these entities unless Frank Sr. is a trustee of the

Andrew Trust at the time of the distribution. The original trustees of the Andrew Trust were Frank

Sr., Belinda, Elfriede and Alon, but as described below, Frank Sr. ceased being a trustee of the

Andrew Trust as at November 29, 2013.

24. As a result of the distribution described in paragraphs 17 and 20 above, Belinda and her

children (Frank W. and Nicole) had, and continue to have, a controlling interest in 445327 Co.

through the Belinda Trust.

25. Contrary to the Plaintiffs’ suggestion at paragraphs 80 and 92 of the Statement of Claim,

this distribution of assets as between the 445327 Trust, the Belinda Trust and the Andrew Trust

was not intended to be conditional, temporary or revocable in any manner. Having transferred

control of 445327 Co. to the Belinda Trust, there was never any intention, agreement or

expectation that the shares of 445327 Co. would be, or could be, distributed any differently as

between the Belinda Trust, the Andrew Trust and the 445327 Trust or that such distribution

remained subject to the exercise by Frank Sr., in his sole and absolute discretion, of a

“redistribution power”.

26. The Trust Indentures do not confer on Frank Sr. the ability to redistribute some or all of the

assets of 445327 Co. as between the Belinda Trust, the Andrew Trust and the 445327 Trust.

27. Sections 4.1 and 4.3 of the Trust Indentures provide that the trustees of the Belinda Trust

and Andrew Trust are entitled to make income and/or capital distributions to the respective
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beneficiaries of each trust in such proportion as the trustees see fit. At its highest, these provisions

enable Frank Sr., during only that period when he is a trustee (which he has not been since

November 29, 2013), to determine the amount distributed from each of the Belinda Trust and the

Andrew Trust to each trust’s respective beneficiaries. This power only applies to the distribution of

assets within each trust itself; it does not contemplate the transfer of assets between the Belinda

Trust and Andrew Trust.

Frank Sr.’s Resignation as Trustee and Appointment of Frank W. and Nicole as Trustees

28. As set out at paragraph 95 of the Statement of Claim, in pursuit of his desire to run for

office in Austria, Frank Sr. was elected as a member of the Austrian legislature in September 2013.

Following his election, Frank Sr. was advised by his Austrian lawyers and other advisors to resign

as a trustee of the Belinda Trust and Andrew Trust so as to comply with Austrian laws applicable

to members of the Austrian legislature and to minimize the extent of the disclosure that he would

have had to make to the Austrian government. There was no connection between the October 2013

distributions from the 445327 Trust to the Andrew Trust and Belinda Trust on the one hand, and

Frank’s resignation as trustee in November 2013 on the other hand. The resignations were as a

result of Frank’s election to the Austrian legislature and the need to comply with Austrian laws.

29. Although John Campbell from Miller Thomson LLP, counsel to The Stronach Group at

that time, suggested that Frank Sr. may not want to resign as a trustee of the Belinda Trust or

Andrew Trust since these trusts held most of the shares in 445327 Co., on November 29, 2013,

Frank Sr. did in fact resign as trustees of these trusts (as well as various other trusts within The

Stronach Group) so as to limit the amount of disclosure required to be made to the Austrian

government. Frank Sr. resigned with full knowledge and acceptance of the consequences thereof.
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30. Pursuant to section 9.7(b) of the Trust Indentures, where Frank Sr. ceases to be a trustee of

the Belinda Trust or Andrew Trust, Frank W. and Nicole are to be appointed as trustees in his

place. Accordingly, immediately following Frank Sr.’s resignation, Frank W. and Nicole were

appointed as trustees of the Belinda Trust and Andrew Trust on November 29, 2013.

31. Contrary to the Plaintiffs’ assertion at paragraph 19 of the Statement of Claim, there was

nothing temporary about the appointment of Frank W. and Nicole as trustees. Instead, as a result of

Frank Sr.’s decision to pursue his political ambitions, Frank W. and Nicole were appointed as

trustees of the Belinda Trust and Andrew Trust indefinitely. As of the date of this pleading, Frank

W. and Nicole remain trustees of the Belinda Trust and Andrew Trust and continue to act in their

roles as trustees of the Belinda Trust and Andrew Trust.

32. Contrary to the allegations at paragraph 98 of the Statement of Claim, at the time Frank Sr.

resigned as trustee and Frank W. and Nicole were appointed as trustees in his place, there was no

agreement, intention or understanding among the parties that during his resignation, Frank Sr.

would maintain de facto control of The Stronach Group on an informal basis, or that Frank Sr.

would be able to formally resume his role as trustee of the Belinda Trust and Andrew Trust when

he chose to do so or that the family would assist him in resuming this role. Frank Sr. understood

that his obligation and decision to resign was not a mere formality and would result in his loss of

influence as a trustee.

33. At the time of Frank Sr.’s resignation as a trustee of the Belinda Trust and Andrew Trust,

Alon considered that in the event that something should happen to Belinda which might prevent

her from continuing as trustee of these trusts, he wanted to be able to re-appoint Frank Sr. in place

of Belinda as one of the trustees of these trusts given his close working relationship with Frank Sr..
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34. Accordingly, in or about December 2013, Frank W. and Nicole executed, but did not date,

instruments purporting to resign their positions as trustees of the Belinda Trust and Andrew Trust.

Belinda, Elfriede and Alon also executed, but did not date, an instrument providing for the

appointment of Frank Sr. as co-trustee of the Andrew Trust and Belinda Trust in the place of Frank

W. and Nicole.

35. The Plaintiffs are entirely incorrect in their suggestion that the purpose of executing these

resignation and re-appointment instruments was for the benefit of Frank Sr. to be used by him in

his sole discretion to resume his role as trustee whenever he chose to do so.

36. Upon their execution, these undated resignation and re-appointment documents were held

by Alon pending the following conditions: 1) the resignation of Belinda as a trustee or an inability

or incapacity on the part of Belinda to continue as a trustee; and 2) upon Belinda’s resignation or

incapacity, the decision by Alon to replace her with Frank Sr..

37. Alon transferred the undated resignation and re-appointment documents to John Campbell

to hold under the same conditions and until authorized by Alon to release. As of the date of this

pleading, John Campbell continues to hold these documents. Alon has not authorized John

Campbell to release these documents and none of the conditions for releasing them have occurred.

Frank Sr. Returns to The Stronach Group, But Is Not a Trustee of the Belinda Trust or
Andrew Trust

38. In January 2014, Frank Sr. gave up his seat in the Austrian Parliament. At this time,

contrary to the Plaintiffs’ assertions at paragraphs 102 and 103 of the Statement of Claim, Frank

did not exercise de facto control over The Stronach Group business, nor was there any

understanding or reasonable expectations among Frank Sr., Elfriede, Belinda, Nicole or Frank W.
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that the undated documents that were prepared in November 2013 were somehow automatically

effective upon Frank Sr.’s return to The Stronach Group. At no time did Nicole or Frank W. lead

Frank Sr. to believe that he was a trustee of the Belinda Trust or Andrew Trust following his

resignation in November 2013.

39. Instead, Belinda and her children (Frank W. and Nicole) controlled The Stronach Group

through the Belinda Trust’s controlling interest in 445327 Co.. Frank Sr.’s involvement in The

Stronach Group was limited to the restaurant/food and agricultural business.

40. The Plaintiffs assert that that the undated trustee resignation and appointment documents

were effective upon Frank Sr.’s return to the Stronach Group in January 2014, or alternatively,

were effective as at January 9, 2017, when, in their assertion, Frank Sr. formally re-appointed

himself as trustee by unilaterally dating the instruments that provided for his re-appointment as

trustee of the Belinda Trust and Andrew Trust. Frank W. and Nicole expressly deny that the

undated trustee resignation and appointment documents were effective upon Frank Sr.’s return to

the Stronach Group in January 2014, as at January 9, 2017 or at any time at all.

41. First, the undated trustee resignation and appointment instruments are currently held by

John Campbell pending authorization from Alon to release the documents and the occurrence of

the conditions noted in paragraph 36 above. As these conditions have not occurred, Frank Sr.’s

unilateral attempt to purportedly activate these documents for his own benefit has no legal effect

whatsoever.

42. Second, there is no basis in law or in fact to support the assertion that these undated

documents were somehow automatically effective upon Frank Sr.’s return to The Stronach Group

in January 2014. As the Plaintiffs acknowledge at paragraph 103 of the Statement of Claim, Frank
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Sr. did not take any steps at this time to formally effect Frank W. and Nicole’s resignation or his

own re-appointment as trustee.

43. Third, on December 23, 2016, Belinda unconditionally revoked the undated instrument

re-appointing Frank Sr. as a trustee in respect of both the Andrew Trust and Belinda Trust and thus

these re-appointments were no longer effective as of January 9, 2017 when Frank Sr. attempted to

accept them.

44. Fourth, in the alternative, even if Belinda’s revocation of the undated re-appointment

instrument was invalid (which is denied), Frank Sr.’s attempt to effect his own re-appointment by

dating the re-appointment instruments on January 9, 2017 was nonetheless ineffective for the

following reasons:

(a) The instruments which provided for the resignation of Frank W. and Nicole as

trustees remained undated and thus ineffective. There is no basis in law or in fact

for the Plaintiffs’ assertion at paragraph 112 of the Statement of Claim that Frank

Sr.’s execution of his re-appointment documents somehow also had the purpose

and intended legal effect of automatically terminating the involvement of Nicole

and Frank W. as trustees. Furthermore, if the Plaintiffs’ position was correct, then

Belinda and Frank Sr. would have been the only trustees of the Belinda Trust,

which is contrary to section 9.6 of the Trust Indentures which requires at least three

trustees at any given time.

(b) Frank Sr. also failed to comply with the express terms of the re-appointment

instrument as he failed to deliver his purported acceptance of the re-appointment to


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all the trustees of the Belinda Trust and Andrew Trust, which not only include

Belinda and Elfriede, but also include Alon, Frank W. and Nicole.

45. Finally, in the further alternative, even if Frank Sr.’s re-appointment as a trustee of the

Belinda Trust and Andrew Trust was effective as at January 9, 2017 (which is expressly denied),

then he resigned as trustee of those trusts effective as at January 15, 2017. Pursuant to Section 9.3

of the Trust Indentures, the trustees may request the resignation of a trustee at any time and the

trustee shall be deemed to have resigned on the date on which the request states that the resignation

is to be effective. On or about January 15, 2017, Belinda, Frank W. and Nicole, as the trustees of

the Belinda Trust, delivered to Frank Sr. a resignation request in accordance with Section 9.3 of

the Trust Indenture, which resignation was stated to be effective as at January 15, 2017.

46. Accordingly, there is no basis for the Plaintiffs’ assertions that from and after January 9,

2017, Nicole and Frank W. ceased being trustees of the Belinda Trust and Andrew Trust and that,

in their place, Frank Sr. had resumed his role as trustee. At no time since Frank Sr.’s resignation as

a trustee of the Andrew Trust and the Belinda Trust has Frank Sr. been held out as a trustee of these

trusts, been asked to execute documents as a trustee of these trusts or been considered to be a

trustee of these trusts.

47. The current trustees of the Belinda Trust are Belinda, Frank W., Nicole and Glen A. Huber.

(Mr. Huber was appointed as a trustee of the Belinda Trust as at December 14, 2018.) The current

trustees of the Andrew Trust are Elfriede, Belinda, Alon, Frank W. and Nicole.
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No Breach of Trust or Breach of Fiduciary Duty

48. The Plaintiffs’ claims against Frank W. and Nicole are only in respect of their roles as

trustees of the Belinda Trust and the Andrew Trust. The primary beneficiaries of these trusts are

Belinda, Frank W. and Nicole (in respect of the Belinda Trust) and Andrew and Selena (in respect

of the Andrew Trust). None of these beneficiaries are plaintiffs in this claim.

49. Frank Sr. is not a beneficiary of either the Belinda Trust or the Andrew Trust, and thus has

no standing to assert any claims, including claims for breach of trust, unjust enrichment or

fraudulent concealment as against Frank W. or Nicole as trustees of those trusts. Frank W. and

Nicole deny that they owe any duties at all to Frank Sr..

50. As for Elfriede, for the reasons set out below, there is no basis in law or in fact for any

claims by her against Nicole or Frank W. for breach of trust or breach of fiduciary duty.

Frank W. and Nicole Acted Honestly and In Good Faith

51. Although the Plaintiffs (at paragraphs 153 and 154 of the Statement of Claim) make

various allegations regarding the endangerment of trust property, the presence of potential and

actual conflicts of interests, the failure to maintain proper financial controls and the failure to

provide information relating to the business and financial affairs of The Stronach Group and the

445 Trusts, no such allegations are made as against Frank W. and Nicole.

52. Instead, as set out at paragraph 156 of the Statement of Claim, the claims for breach of trust

as against Frank W. and Nicole are grounded in allegations that Nicole and Frank W. left the

handling of trust property to the discretion of Alon and Belinda and that Frank W. and Nicole did

not prevent any breaches of fiduciary duty or breaches of trust committed by Alon and Belinda.
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Nicole and Frank W. expressly deny the occurrence of any breach of trust or breach of fiduciary

duty.

53. In discharging their duties as trustees, Frank W. and Nicole acted in accordance with their

obligations under the Trust Indentures. They acted in accordance with any duty of loyalty and

acted honestly, in good faith and with ordinary care, skill and prudence in accordance with the

standard of care of a reasonable person administering his or her own affairs.

54. Frank W. and Nicole did not abdicate their responsibilities as trustees or blindly and

passively acquiesce in Alon and Belinda’s handling of trust property. Instead, Frank W. and Nicole

were actively involved in the affairs and decisions of the administration of the Andrew Trust and

Belinda Trust, made reasonable inquiries and took steps to inform themselves of decisions made

with respect to the administration of the property of the trusts.

55. In making decisions with respect to the administration of the trust property, Frank W. and

Nicole at all times acted prudently, honestly and in good faith on the advice and information

obtained from qualified professional advisors. They received advice in relation to the investment

of trust property and were permitted to rely on this advice as a prudent investor would have done in

comparable circumstances. In this regard, Nicole and Frank W. plead and rely on sections 27(7)

and (8) of the Trustee Act which preclude a claim for breach of trust arising out of reliance on such

advice in these circumstances. The terms of the Trust Indentures also expressly protect Frank W.

and Nicole from any liability for these decisions. As set out in section 7.11 of the Trust Indentures:

“[T]he Trustees may: (a) act on the advice of or information


obtained from any lawyer, accountant, valuator, financial advisor,
auctioneer, surveyor or other experts and professional persons and
the Trustees shall not be responsible for any loss, depreciation, or
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damage occasioned by acting or not acting on such advice provided


that the Trustees have acted honestly and in good faith […]”

56. Moreover, there are express exoneration clauses contained in the Trust Indentures which

relieve Frank W. and Nicole from any liability, all of which Nicole and Frank W. rely on herein.

Section 8.13 of the Trust Indentures provides that:

“The Trustees shall not be liable for any loss that may happen to the
Trust Property or be suffered by any Beneficiary hereunder
resulting from the exercise by the Trustee of any discretion given to
them by this Trust or law which is exercised honestly and in good
faith. […] [T]he Settlor acknowledges that the Trust Property
comprises or may comprise assets that are subject to significant
business risk, and therefore directs that this Trust shall be
interpreted so as to prevent the Trustees from, in effect, becoming
insurers of the Trust Property. So long as the Trustees have acted in
good faith, the risk of the loss or diminution in value of all or any
part of the Trust Property shall belong solely to the Beneficiaries. In
particular, the Settlor directs that the provisions of this Trust shall
not be interpreted so as in effect to second guess the propriety of any
act or omission of the Trustees without there being a wilfully
dishonest or wrongful act or default on their part.” (emphasis added)

57. In addition, Section 8.14 of the Trust Indentures provides that:

“No Trustee shall be liable for [….] any loss occasioned by error in
judgment or oversight on the part of the Trustee, or for any other
loss, damage or misfortune which may happen in the execution of
the duties of the office of the Trustee, or in relation thereto, unless
the same shall happen by or through the Trustee’s own wilfully
dishonest or wrongful act or default.”

58. These provisions, taken together, foreclose any liability being imposed on Frank W. or

Nicole for any losses in trust property as a result of decisions that were made honestly and in good

faith. The Statement of Claim does not assert that either Nicole or Frank W. have acted dishonestly

or in bad faith, and there in fact has not been any bad faith or dishonest conduct by either of them in

the course of exercising their duties as trustees.


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59. In addition, Frank W. and Nicole expressly plead and rely on section 35(1) of the Trustee

Act which relieves them from any liability in connection with actions undertaken in respect of trust

property (to the extent those actions are not related to the investment of trust property) because

they acted honestly and reasonably and ought fairly to be excused for any breach of trust.

Frank W. and Nicole Are Not Liable for Any Misconduct of Co-Trustees

60. Frank W. and Nicole deny that Alon or Belinda committed any breaches of trust or

breaches of fiduciary duty. Alon and Belinda at all times acted honestly, in good faith and in

accordance with the standard of care expected of them in the circumstances. With respect to the

allegations at paragraphs 138-140 of the Statement of Claim that Belinda engaged in a pattern of

self-dealing transactions, Nicole and Frank W. expressly deny that Belinda wrongfully

appropriated funds from The Stronach Group for her personal benefit or for the benefit of Frank

W. or Nicole.

61. Even if Alon or Belinda committed breaches (which is expressly denied), neither Frank W.

nor Nicole is personally responsible or bears any fault for the actions committed by Alon or

Belinda. Those actions (or inactions) which are the basis of any misconduct or breaches are

independent actions by Belinda and Alon for which Frank W. and Nicole are not responsible. No

action or inaction on the part of either Frank W. or Nicole was the direct or indirect cause of any

such breaches or losses.

62. Nicole and Frank W. rely on section 8.14 of the Trust Indentures which expressly provides

that:

“No Trustee shall be liable for the acts, omissions, receipts, neglects
or defaults of any other Trustee [….] Without limiting the generality
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of the foregoing, each Trustee shall be responsible only for so much


money or assets as such Trustee shall actually receive, and such
Trustee shall not be answerable for […] the acts or defaults of any
other Trustee.” (emphasis added)

63. In addition, for any decisions made by a majority of the trustees in which Nicole and Frank

W. did not participate, Nicole and Frank W. expressly rely on the terms of section 8.10(b) of the

Trust Indentures which provides that “[a]ny trustee who acts in good faith and does not form part

of any majority decision shall not be personally liable for any loss suffered by this Trust by reason

of the acts or omissions which result from such majority decision”.

Frank W. and Nicole, as Trustees, Are Not Responsible for the Management of Stronach
Consulting Corp.

64. The heart of the Plaintiffs’ complaint relates to the manner in which Belinda, as Chairman

and President of Stronach Consulting Corp., and Alon, as CEO of Stronach Consulting Corp., ran

and managed The Stronach Group business which forms part of the property of the Belinda Trust

and the Andrew Trust.

65. Frank W. and Nicole are not directors or officers of Stronach Consulting Corp.. They are

being sued in this proceeding only in their capacities as trustees of the Belinda Trust and Andrew

Trust. In their roles as trustees, Frank W. and Nicole had no obligations to oversee Belinda and

Alon’s management of Stronach Consulting Corp. – which management was selected by Frank Sr.

– in the absence of knowledge of dishonesty or misappropriation.

66. Indeed, section 8.9 of the Trust Indentures, upon which Nicole and Frank W. rely,

expressly states that:

“The Trustees shall not be required to interfere in the management


of any corporation which the Trustees directly or indirectly control
nor in any subsidiary of it but may leave the management (including
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decisions regarding the payment of dividends), wholly to the


directors of the corporation so long as they have no notice of any
dishonesty or misappropriation of monies on the part of such
directors.”

At no time were Nicole or Frank W. aware of any dishonesty or misappropriation of funds by the

directors of 445327 Co. or Stronach Consulting Corp..

67. Similarly, since neither Nicole or Frank W. are directors, officers or employees of 445327

Co., section 7.22 of the Trust Indentures expressly state that they are not “required directly or

indirectly to oversee or account for the part of the Trust Property that is invested in such

corporation [445327 Co.]”.

68. The Plaintiffs’ claims in paragraphs 136, 137, 141 and 154 of the Statement of Claim

relating to Belinda and Alon’s conduct are not claims which impose any liability on Frank W. or

Nicole as trustees of the Andrew Trust or Belinda Trust.

Trustees Have Wide Discretion With Respect to Investments of Trust Property

69. Pursuant to Section 3.2 of the Trust Indentures, the trustees of the Belinda Trust and

Andrew Trust were required to accept the shares of 445327 Co. as an investment of the trust

property. As set out at paragraph 157 of the Statement of Claim, the harm which the Plaintiffs

claim that they suffered as a result of the alleged breaches is the diminished value of The Stronach

Group business (through the shares in 445327 Co.). Having been expressly required to invest the

trust property in 445327 Co. under the terms of the Trust Indentures, neither Frank W. nor Nicole

are liable for any losses that ensued as a consequence of this authorized investment.

70. In addition, pursuant to Section 7.6(a) and (d) of the Trust Indentures, Frank W. and Nicole

are granted wide authority to make any investments as they consider advisable and, in accordance
-21-

with those provisions, as the investment in 445327 Co. was made by them honestly and in good

faith, neither Frank W. nor Nicole can be liable for any loss that may happen to the trust property in

connection with any such investment. Frank W. and Nicole also expressly plead and rely on

section 28 of the Trustee Act to relieve them of liability for any losses to the trusts arising from the

investment of trust property.

71. Even if the Plaintiffs’ allegations were true that the affairs of The Stronach Group were

conducted in a manner which benefited Belinda and her family to the detriment of Elfriede,

Andrew and Selena (which is expressly denied), section 7.7 of the Trust Indenture provides that

trustees are not required to maintain an even hand between the beneficiaries, provided that all

decisions made by the Trustees with respect to the trust property are made by them honestly and in

good faith. As there has not been any bad faith or dishonest conduct by either Frank W. or Nicole

in the course of exercising their duties as trustees, and the Statement of Claim does not allege

otherwise, there can be no liability imposed on Frank W. or Nicole for any investments or other

decisions with respect to the trust property that were not equal as among the beneficiaries of the

Andrew Trust or the Belinda Trust.

Elfriede Has Consented To Actions of the Trustees Or is Otherwise Estopped From Alleging Any
Breach of Trust

72. Elfriede brings her claims against Nicole and Frank W. in her capacity as a beneficiary of

the Andrew Trust and, indirectly, a beneficiary of the Belinda Trust. However, in her role as a

director or officer of certain entities within The Stronach Group, including as an officer of 445327

Co., and as a trustee of the Andrew Trust, Elfriede has explicitly or implicitly consented to, or

acquiesced to:
-22-

(a) decisions made by the trustees of the Andrew Trust in respect of the trust property;

and/or

(b) certain decisions made by Belinda or Alon in respect of The Stronach Group

business,

and thus, she has released Nicole and Frank W. for any liability in respect of those decisions and/or

is otherwise estopped from asserting any claims in respect of those decisions.

The Plaintiffs Have Not Suffered Any Damages and Are Not Entitled to the Accounting or Tracing
Order Requested

73. Frank Stronach is not a beneficiary of either the Andrew Trust or the Belinda Trust and

thus cannot assert a claim for damages for breach of trust against either Nicole or Frank W. in their

capacities as trustees.

74. Neither of the Plaintiffs suffered any losses or damages caused by any breach of trust

committed by Nicole or Frank W. and moreover, the amount of damages claimed by the Plaintiffs

in paragraph 1(cc) of the Statement of Claim is remote and excessive.

75. Furthermore, the Plaintiffs have no basis for their request in paragraph 1(x)-(z) in the

Statement of Claim for an accounting and tracing order with respect to “all trusts, corporations or

other entities that comprise The Stronach Group”.

76. The Plaintiffs (through their counsel) have already received significant information

relating to the Belinda Trust, the Andrew Trust and other entities within The Stronach Group,

including, among other things, summaries of historical trust distributions, financial statements, tax

returns and various trust documents. Moreover, the Plaintiffs’ request for an accounting in respect
-23-

of all of the entities that comprise The Stronach Group is not trust information which Frank W. and

Nicole, as trustees of the Belinda Trust or the Andrew Trust, are required to provide to the

Plaintiffs.

There Has Been No Fraudulent Concealment

77. Contrary to the allegations at paragraph 162 of the Statement of Claim, Nicole and Frank

W. expressly deny that they took steps to fraudulently conceal the existence of a cause of action or

that they aided the other Defendants in perpetuating any deceit. Indeed, nowhere in the Statement

of Claim do the Plaintiffs even allege that Nicole or Frank W. engaged in such fraudulent

activities.

No Unjust Enrichment

78. Contrary to the allegations contained at paragraphs 164 and 165 of the Statement of Claim,

Frank W. and Nicole specifically deny that either or both of them were unjustly enriched at the

expense of the Plaintiffs, deny that they obtained any “ill-gotten gains” and deny that the Plaintiffs

are entitled to an accounting or restitution in any amount.

79. As Frank Sr. is not a beneficiary of either the Belinda Trust or the Andrew Trust, he did not

suffer any deprivation and there was no enrichment that occurred at his expense. He cannot

complain about the use and investment of trust property that he has no entitlement to. In fact, if

anyone has been enriched at the expense of others, it has been Frank Sr.. The beneficiaries of the

Belinda Trust – Belinda, Frank W. and Nicole – have historically gifted or loaned substantial

amounts of money to Frank Sr. to repay expenses and advances that Frank Sr. incurred personally.
-24-

80. As for Elfriede Stronach, she did not suffer any deprivation nor were Frank W. and Nicole

enriched at her expense. As set out above, Frank W. and Nicole, as trustees of the Belinda Trust

and Andrew Trust, have at all times used and invested the trust property in a manner consistent

with the terms of the Trust Indentures. Any benefits which Nicole and Frank W. may have

received as beneficiaries of the Belinda Trust resulted from valid rights in the Trust Indentures,

which provide a juristic reason for any benefit which they may have received.

Additional Relief Sought by the Plaintiffs

81. The Plaintiffs seek various relief against Frank and Nicole W. in capacities other than as

trustees of the Belinda Trust and Andrew Trust, including:

(a) requiring that Frank W. and Nicole be removed as trustees, directors, officers,

managers or employees of any trusts, corporations or other entities that comprise

The Stronach Group (paragraph 1(j) of the Statement of Claim); and

(b) seeking a declaration that Nicole and Frank W. have breached their duties in their

capacities as trustees, directors, officers, managers or employees of trusts,

corporations and other entities that comprise The Stronach Group (paragraph 1(m)

of the Statement of Claim).

82. Nicole and Frank W. submit that this relief is not available to the Plaintiffs as they have

commenced this action against Nicole and Frank W. solely in their capacities as trustees of the

Andrew Trust and Belinda Trust and not in their capacities as trustees, directors, officers or

employees of any other entities within The Stronach Group. In any event, for all the reasons noted

above, Nicole and Frank W. have not breached any duties in their capacities as trustees, directors,
-25-

officers or employees of any of the entities with The Stronach Group, nor is there any basis

justifying the removal of Nicole and Frank W. from any such positions.

The Plaintiffs’ Claim is Statute Barred

83. Nicole and Frank W. plead and rely upon the Ontario Limitations Act, 2002 with respect to

any and all allegations of historical wrongdoing related to the performance of their duties as

trustees prior to October 2016 on the basis that any such claims are statute-barred.

84. Frank W. and Nicole ask that this action be dismissed with costs on a full indemnity basis.

January 21, 2019 GOODMANS LLP


Barristers & Solicitors
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, ON M5H 2S7

Alan Mark LSO#: 21772U


amark@goodmans.ca

Melanie Ouanounou LSO#: 55336S


mouanounou@goodmans.ca

Tel: 416.597.4204
Fax: 416.979.1234

Lawyers for the Defendants,


Frank Walker and Nicole Walker
-26-

TO: DAVIES WARD PHILLIPS & LENCZNER SLAGHT ROYCE


VINEBERG LLP SMITH GRIFFIN LLP
Barristers and Solicitors Barristers and Solicitors
155 Wellington Street West 130 Adelaide Street West
37th Floor Suite 2600
Toronto, ON M5V 3J7 Toronto, ON M5H 3P5

Kent Thomson LSO#: 24264J Tom Curry LSO#: 25740V


Tel: 416.863.5566 Tel: 416.865.3096
Fax: 416.863.0871 Fax: 416.865.9010
kentthomson@dwpv.com tcurry@litigate.com

James Doris LSO#: 33236P Paul-Eric Veel LSO#: 58167D


Tel: 416.367.6919 Tel: 416.865.2842
Fax: 416.863.0871 Fax: 416.865.9010
jdoris@dwpv.com pveel@litigate.com

Chantelle Cseh LSO#: 60620Q Lawyers for the Plaintiff,


Tel: 416.367.7552 Elfriede Stronach
Fax: 416.863.0871
ccseh@dwpv.com

Lawyers for the Plaintiff,


Frank Stronach

AND TO: BLAKE, CASSELS & GRAYDON LLP


Barristers and Solicitors
199 Bay Street
Suite 4000
Commerce Court West
Toronto, ON M5L 1A9

Michael Barrack
Tel: 416.863.5280
Fax: 416.863.2653
michael.barrack@blakes.com

Lawyers for the Defendant,


Belinda Stronach
-27-

AND TO: OSLER, HOSKIN & HARCOURT LLP


100 King Street West
1 First Canadian Place, Suite 6200, P.O. Box 50
Toronto, ON M5X 1B8

Mark Gelowitz
mgelowitz@osler.com

Craig Lockwood
clockwood@osler.com

Tel: 416.862.4743
Fax: 416.862.6666

Lawyers for the Defendant,


Alon Ossip

AND TO: TORYS LLP


79 Wellington Street West
Suite 3000, Box 270, TD South Tower
Toronto, ON M5K 1N2

Linda Plumpton
lplumpton@torys.com

Leora Jackson
ljackson@torys.com

Tel: 416.865.8193
Fax: 416.865.7380

Lawyers for the Defendant,


Stronach Consulting Corp.
FRANK STRONACH et al. - and - BELINDA STRONACH et al. Court File No: CV-18-606163-00CL
Plaintiffs Defendants

ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST

Proceeding commenced at Toronto

STATEMENT OF DEFENCE

GOODMANS LLP
Barristers & Solicitors
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, ON M5H 2S7

Alan Mark LSO#: 21772U


amark@goodmans.ca

Melanie Ouanounou LSO#: 55336S


mouanounou@goodmans.ca

Tel: 416.597.4264
Fax: 416.979.1234

Lawyers for the Defendants,


Frank Walker and Nicole Walker

6871394