COURT OF APPEAL FOR ONTARIO
Laskin, Gillese and Pepall JJ.A.
BETWEEN
Tommy Kovachis
Applicant (Appellant)
and
Carole Bertrand Kovachis, Carlo D’Amato
and Bill Lee
Respondent (Respondent in Appeal)
Gary S. Joseph and Elissa H. Gamus, counsel for the appellant
Julie Stanchieri, counsel for the respondent Carole Bertrand Kovachis
Heard: May 24, 2013
On appeal from the final order of Justice A. Donald K. MacKenzie of the Superior Court of Justice, dated December 4, 2012 at Brampton, Ontario.
A. INTRODUCTION
1Tommy Kovachis appeals a motion judge’s order striking his pleadings for failure to comply with previous disclosure orders in what the parties have termed a “high conflict” matrimonial dispute. In the underlying proceeding, Carole Bertrand claims support and property. To succeed in her claims, she must set aside both a marriage contract and a separation agreement, each of which she signed after receiving financial disclosure from Kovachis and independent legal advice.
2The issue on this appeal is whether the motion judge fairly applied the well-established principle that in a family law case, pleadings should be struck only in exceptional circumstances, and where no other remedy would suffice.
3In my opinion the motion judge did not give effect to this principle. Striking Kovachis’ pleadings was not warranted in the light of the following four related considerations:
The substantial disclosure Kovachis had already made;
The failure of the motion judge to itemize what disclosure Kovachis had not provided;
The absence of any evidence that Kovachis wilfully disobeyed any of the previous disclosure orders; and
Proportionality, now a fundamental principle of all civil proceedings in Ontario.
4I would therefore allow the appeal, set aside the motion judge’s order and reinstate Kovachis’ pleadings.
B. BACKGROUND FACTS
(1) The Parties’ Marriage and Separation
5Kovachis and Bertrand met in 1988 and were married in 1991. They have one child, Alexandra, now 20 years old, who lives with her mother. The parties separated in May 2004. Kovachis has been paying child support at least in accordance with, if not above, the Child Support Guidelines.
(2) The Marriage Contract and the Separation Agreement
(a) The Marriage Contract
6When they married, Kovachis and Bertrand signed a marriage contract. At the time, each party made full financial disclosure. Paragraph 22 of the marriage contract specifically acknowledges that each party has had full disclosure from the other and that each was satisfied with the information provided.
7Attached to the marriage contract is the certificate and affidavit of the lawyer who advised Bertrand. In her affidavit, the lawyer confirms that it was her belief Bertrand was “fully aware of the nature and consequences of the contract on and in light of her present and future circumstances and is signing it voluntarily.”
(b) The Separation Agreement
8With the assistance of counsel, the parties negotiated and then signed a separation agreement in November 2004.
9The separation agreement contains a declaration that each party is financially independent, and therefore neither will pay spousal support to the other.
10Paragraph 14.10 of the agreement provides that Kovachis and Bertrand have disclosed their income, assets and other liabilities existing at the date of marriage, date of separation and date of the agreement. Each party’s sworn financial statement is a schedule to the agreement.
(3) The Underlying Litigation
11In May 2009, Kovachis brought a motion in the Ontario Court of Justice to reduce child support and require Bertrand to contribute her proportionate share to Alexandra’s orthodontic expenses.
12In March 2010, Bertrand indicated that she wished to assert support and property claims and to set aside the marriage contract and separation agreement. She alleged that Kovachis had failed to provide complete financial disclosure at the time that these agreements were signed. The proceedings were transferred to the Superior Court of Justice where, in an amended answer, Bertrand asserted these claims.
(4) The Disclosure Orders
13In the Superior Court proceeding, over the course of some two years, numerous disclosure orders have been made, several of them on consent. In addition, Bertrand obtained an order adding as parties Kovachis’ employers or business partners, D’Amato and Lee, and she has sought financial disclosure from them.
14The following is a list of the disclosure orders that have been made:
(a) September 27, 2010:
15On consent, Seppi J. ordered that Kovachis use “his best efforts” to make disclosure of a long list of itemized matters.
(b) November 25, 2010:
16Bielby J. noted that Kovachis had not provided all of the disclosure that he had agreed to but “at this stage ‘best efforts’ cannot be determined.”
(c) January 19, 2011:
17Seppi J. again dealt with question of disclosure. She did not make a finding against Kovachis; instead, the parties consented to provide disclosure of an itemized list of documents. Seppi J. said:
Further it is ordered that in the event any of the items ordered for disclosure are not produced despite the party’s best efforts being made, the party not producing shall provide an affidavit or state under oath on the questioning a complete explanation of the reason for such failure to produce…
(d) June 22, 2011:
18Dissatisfied with the disclosure and explanations from Kovachis, Bertrand brought another motion, which was heard by Snowie J. She ordered Kovachis to:
Provide a sworn affidavit with supporting documents as schedules setting out his best efforts in respect of outstanding undertakings and disclosure within 30 days
Provide a sworn affidavit of all bank accounts and lines of credit that he has or has had since the date of marriage.
19On July 21, 2011, within the 30 day period ordered by Snowie J., Kovachis delivered a detailed affidavit in which he tried to provide the disclosure requested or, in the few instances where he could not do so, an explanation why he could not.
(e) October 10, 2012
20Still dissatisfied with Kovachis’ disclosure, Bertrand brought another motion. She sought an order striking Kovachis’ pleadings, or in the alternative striking his pleadings if he did not provide a sworn financial statement, answers to outstanding undertakings and updated bank account and credit card information. In response, Kovachis filed further financial information and explanations for his failure to provide certain requested documents.
21The motion was brought in March but not heard until October 10, 2012. The motion judge, Snowie J., was of the view that Kovachis had not made full disclosure. She gave him 45 days to comply with the previous disclosure orders. If he did not do so, his pleadings would be struck.
22Following this order, Kovachis provided yet further disclosure. For example, he consented to the release to Bertrand’s lawyer of financial information from ten financial institutions. He provided credit card statements, bank account statements, a list of properties he had an interest in, and documents pertaining to his mother’s estate.
(5) The Order of December 4, 2012 Striking Kovachis’ Pleadings
23Bertrand took the position that Kovachis had not complied with Snowie J.’s October 10, 2012 order. She moved to strike Kovachis’ pleadings. On December 4, 2012, MacKenzie J. granted the order. In a brief endorsement, he recognized that striking pleadings was a remedy of last resort but he found that this was a situation of “egregious circumstances”. He said:
The record showing the previous orders respecting the continuing non compliance of the applicant with financial disclosure from September 2010 through October 10, 2012, amply demonstrates the failure of the applicant to proceed in this litigation in a reasonable pace. The most current disclosure arising after the motion to strike the pleadings in [sic] not sufficient in terms of satisfying the directions to provide quotes, “Reasonable and best efforts respecting his non disclosure.” There has been no adequate response by the applicant to his motion.
C. DISCUSSION
24The principle governing this appeal is well established. In any case, but particularly in a family law case, a party’s pleading should be struck only in exceptional circumstances, where no other remedy would suffice: see, for example, Percaru v. Percaru 2010 ONCA 92, 265 O.A.C. 121 at paras. 47-48. If a party’s pleading is struck, that party “is not entitled to participate in the case in any way”: see Rule 10(5)(b) of the Family Law Rules.
25The rationale for this principle is obvious. Without one side’s participation in the trial, there is a risk the court will not have either enough information or accurate information to reach a just result. If the judgment provides for continuing obligations that can only be varied on changed circumstances, as many family law judgments do, the injustice may be perpetuated.
26The motion judge seemed to accept this principle. However, in my opinion, he did not fairly apply it, and therefore his decision does not attract the deference it would ordinarily be entitled to. This was not one of those exceptional cases that warranted striking Kovachis’ pleadings. I say that because of the four considerations outlined at the beginning of these reasons.
(1) Kovachis had made substantial disclosure
27The record before us shows that Kovachis had made substantial disclosure in the face of what can reasonably be characterized as a very broad, if not overly broad, disclosure demand from Bertrand. The disclosure Kovachis had made is itemized at paragraph 15 of his factum. That disclosure includes:
Several sworn financial statements, providing for date of marriage, date of separation and current value of all his assets and liabilities
A complete set of documents pertaining to his mother’s estate, including an authorization for Bertrand to have access to the estate bank account
Authorization for Bertrand to gain access to his banking information
Banking, credit card and line of credit statements
Income tax returns, notices of assessment and a statement of current income
Rental records and mortgage documents
Financial information from his employers
Reasonable explanations for why he cannot provide some items of disclosure Bertrand had requested.
28Kovachis acknowledges that he has not produced every item of disclosure Bertrand has asked for, but he seems to have produced most of what she sought. Regrettably, the motion judge did not consider this substantial disclosure that Kovachis had already provided.
(2) The motion judge did not itemize what disclosure Kovachis had not provided
29The motion judge characterized Kovachis’ failure to comply with previous disclosure orders as “egregious circumstances”. This characterization suggests that the motion judge considered Kovachis’ non-compliance to be flagrant. I cannot accept that to be so.
30It is telling that not only did the motion judge fail to list what disclosure Kovachis had not provided, but even in this court counsel for Bertrand could not list for the panel what items were missing. To invoke a “remedy of last resort” – striking a party’s pleadings – is not justified when neither the motion judge who made the order, nor the party who asked for it, can clearly articulate the basis for it. On this ground alone the order striking Kovachis’ pleadings cannot stand.
(3) Kovachis has not wilfully disobeyed any of the previous disclosure orders
31Kovachis submits that he has not wilfully disobeyed any of the previous disclosure orders. I agree with this submission.
32The original disclosure order – made on consent by Seppi J. in September 2010 – required Kovachis to use “his best efforts” to comply. In November 2010, Bielby J. considered Kovachis’ disclosure and expressly stopped short of making a finding that Kovachis had not used his best efforts.
33Indeed, in none of the motions that followed, including the motion in which Kovachis’ pleadings were struck, did any judge make a clear finding that Kovachis had not used his best efforts or had wilfully failed to comply with his disclosure obligations. Moreover, on my review of the extensive record filed in this appeal I can find no evidence of wilful disobedience. The absence of such evidence or any evidence of a failure to use best efforts weighs against striking Kovachis’ pleadings.
(4) Proportionality
34In 2010, the Rules of Civil Procedure were amended to incorporate the principle of proportionality. Rule 1.04(1.1) provides:
In applying these rules, the court shall make orders…that are proportionate to the importance and complexity of the issues…in the proceeding.
Before striking Kovachis’ pleadings, consideration ought to have been given to the importance or materiality of the items of disclosure Kovachis had not produced. Although full and frank disclosure is a necessary component of family law litigation, exhaustive disclosure may not always be appropriate. Courts and parties should consider the burden that disclosure requests bring on the disclosing party, the relevance of the requested disclosure to the issues at hand, and the costs and time to obtain the disclosure compared to its importance: see Chernyakhovsky v. Chernyakhovsky, 2005 6048 (ON SC), 137 A.C.W.S. (3d) 988 (ON SC) at paras. 8, 15; Boyd v. Fields, [2007] W.D.F.L. 2449 (ON SC) at paras. 12-14. Disclosure orders must be fair to both parties and appropriate to the case.
35The motion judge did not consider proportionality, and I am not satisfied that any of the disclosure Kovachis has not provided is so important to the issues in this proceeding that his pleadings should have been struck. Rather, the record suggests that Kovachis has produced everything of significance.
36Bertrand’s underlying claim seeks to set aside the parties’ marriage contract and separation agreement and is founded on allegations that Kovachis failed to disclose material financial information at the time that these contracts were signed. These agreements contain strong language indicating that the parties intended them to be complete and final frameworks governing their relationship. Kovachis has relied on these agreements to govern his affairs. Striking his pleadings would deny him the opportunity to participate in litigation that could have significant personal consequences. His conduct has not been so egregious to warrant this harsh sanction.
D. CONCLUSION
37Taken together, these four considerations – the substantial disclosure Kovachis had made, the failure of either the motion judge or Bertrand to list what disclosure he had not made, the absence of any evidence that he had wilfully disobeyed any of the previous disclosure orders, and the principle of proportionality – call for an order reinstating Kovachis’ pleadings.
38In the light of this conclusion, it is not necessary to address Kovachis’ complaint about the sufficiency of the motion judge’s reasons.
39Ordinarily, I would make this order conditional: Kovachis’ pleadings would be reinstated only if he provided the outstanding items of disclosure within a specified time. However, I decline to make a conditional order as Bertrand has been unable to list what items she has requested and either has not received or has not received a satisfactory explanation for their non-disclosure.
40Accordingly, I would allow the appeal, set aside the order of the motion judge, and simply reinstate Kovachis’ pleadings. If Bertrand brings any further motion for disclosure, her notice of motion should state precisely what items she is asking Kovachis to provide. The parties may make brief written submissions on the costs of this appeal within two weeks of the release of these reasons.
Released: October 31, 2013 (“JL”)
“John Laskin J.A.”
“I agree. E.E. Gillese J.A.”
“I agree. S.E. Pepall J.A.”
