COURT OF APPEAL FOR ONTARIO
CITATION: Ferguson v. Ferguson, 2022 ONCA 543
DATE: 20220721
DOCKET: C69946
van Rensburg, Harvison Young and Copeland JJ.A.
BETWEEN
Christine Doreen Ferguson
Applicant (Respondent)
and
Kyle Robert Ernest Ferguson
Respondent (Appellant)
Stephen P. Kirby, for the appellant
Charles Mota, for the respondent
Heard: May 16, 2022 by video conference
On appeal from the order of Justice George MacPherson of the Superior Court of Justice, dated September 16, 2021.
Harvison Young J.A.:
(1) OVERVIEW
[1] The parties separated in the spring of 2019, after which the respondent wife spent two years making repeated attempts to obtain full financial disclosure from the appellant husband. His pleadings were finally struck on May 18, 2021, and the matter proceeded to an uncontested trial. By order dated September 16, 2021, the trial judge determined the appellant’s income, his resulting support obligations, as well as the equalization payment owing to the respondent.
[2] The appellant raises three grounds of appeal before this court. First, he says that it was an error in principle to permit the respondent to proceed to an uncontested trial without providing reasons and notwithstanding the appellant’s substantial compliance with prior Orders. The appellant argues that the motion judge could not determine the relevant issues on a three-page written record.
[3] Second, he submits that the trial judge erred in failing to provide adequate reasons to explain his decision and to permit appellate review.
[4] Finally, he asserts that the trial judge committed palpable and overriding errors in failing to consider relevant evidence when determining the outstanding property and support issues.
[5] For the following reasons, I would dismiss the appeal.
(2) The Factual Background
[6] To set the context for the order ultimately striking the appellant’s pleading and the ensuing uncontested trial, it is necessary to set out the background in some detail.
[7] The parties separated in March 2019 after six years of marriage. They have two sons.
[8] The record shows that between September 2019 and January 2021, the respondent made numerous requests through counsel for financial disclosure from the appellant. The appellant was ordered to comply with his disclosure obligations as early as January 2020. Both the respondent’s requests and the repetitive court orders were variously met with no response, inadequate disclosure, and requests for additional time.
[9] In November 2019, the respondent’s counsel requested a valuation for the appellant’s HVAC business, to which the appellant responded with a request for additional time. In the course of 2020, there were at least two court orders for the appellant to disclose. First, Sutherland J. ordered the appellant to comply with his disclosure obligations on January 10, 2020. Second, by order of Douglas J. in August 2020, the appellant was ordered to bring himself into compliance with the January order within 30 days and, if he failed to do so, to provide an affidavit describing his best efforts.
[10] This disclosure had still not been provided when the parties appeared before Bruhn J. for a settlement conference on January 26, 2021. Although their separation has been acrimonious, they were able to settle the parenting issues on consent. However, in her endorsement, Bruhn J. remarked that “[u]nfortunately, the parties were not able to address the support and property issues because the [appellant] had not provided his disclosure.” She continued:
The Court will provide the [appellant] with one further opportunity to provide the outstanding disclosure failing which the [respondent] shall be at liberty to proceed on a default basis as provided below. However, in accordance with the primary objective of the Family Law Rules [O. Reg. 114/99] to deal with cases justly, and in the interests of focusing the disclosure on what is necessary at this stage, I will make an order for disclosure which replaces any previous requests or orders for disclosure. This order is without prejudice to the right of the [respondent] to request further disclosure, if necessary, upon receipt of the disclosure provided below.
[11] Bruhn J. compiled a list of the disclosure required, which included valuation of all business and personal assets, credit card and bank statements from 2017 onward, credit applications, proof of the value of all assets and debts at the date of marriage and the date of separation, as well as of any excluded property.
[12] Finally, she ordered:
If the [appellant] fails to provide the disclosure noted above or a sworn Affidavit setting out his efforts to provide the disclosure and reasonable grounds as to why he has been unable to do so by March 1 , 2021, his pleadings shall be struck and the [respondent] may proceed by way of an Affidavit for Uncontested Trial on the support and property issues.
If the [appellant] provides the disclosure noted above, the parties shall book a continued Settlement Conference before me through the Trial Coordinator to deal with the support and property issues.
[Emphasis added.]
[13] On May 18, 2021, Bruhn J. concluded that the appellant had failed to provide his financial disclosure contrary to rr. 1(8), 1(8.1), and 13 of the Family Law Rules, O. Reg. 114/99, and prior court orders. She accordingly granted the respondent’s 14B Motion to strike the appellant’s pleadings and ordered the financial issues to continue to an uncontested trial by way of a Form 23C affidavit.
[14] The respondent filed a Form 23C on June 21, 2021. There, she detailed her two-year attempt to obtain disclosure, and stated that whatever disclosure had been produced had been so deficient as to be unhelpful. She sought to impute an income of $150,000 to the appellant for support purposes.
[15] The appellant answered with his own 14B motion seeking an extension of time to comply with Bruhn J.’s January disclosure order. Each party then filed additional affidavit material. The appellant indicated that he had hired counsel on a limited scope retainer to assist him with disclosure, and repeated his earlier assertion that he had unsuccessfully attempted to send his disclosure by email. He stated that it was ready, but nevertheless asked for an extension until the end of August to provide it. The respondent claimed that the appellant’s failure to disclose meant that he had been underpaying child support for a significant period of time.
[16] These motions, supported by the two affidavits from each party, were considered by Kaufman J. in chambers. His endorsement (the “Kaufman Order”), dated July 23, 2021, is detailed. He began by noting that the appellant’s pleadings had already been struck and that the appellant had not appealed that order. He also stated:
The Court, the parties and their counsel are, in essence, partners in promoting the primary objectives of the rules.
In this case the [appellant] has flaunted his role in the partnership. He has ignored no less than three if not four Court Orders requiring him to provide basic disclosure to enable this case to resolve or, at a minimum, be adjudicated fairly and in a just manner. The very relief he seeks in requesting another opportunity to delay this matter is identical to the relief that the [respondent] has been seeking from the date of separation, a fair and just result.
[17] Kaufman J. nevertheless granted an extension to the appellant, although he was very clear that his only reason for doing so was to allay the respondent’s concern that the appellant was underpaying child support.
[18] He emphasized that the terms of the extension were strict:
The [appellant] shall be granted one further chance to participate in this matter, but it will not be on his terms. He shall be required to do the following, without exception and without further extension:
He shall provide all of the court-ordered disclosure by August 13, 2021.
He shall provide a written acknowledgement from a Certified Business Valuator that that individual has been retained to complete a valuation of the [appellant’s] business and an Income Valuation of the [appellant]. The letter shall confirm that this individual has received a sufficient retainer to proceed and shall provide a time estimate for the expected completion of the two-assigned tasks. This written acknowledgement shall be provided by August 16, 2021.
He shall pay to the [respondent] an advance towards her legal fees incurred to date in the sum of $10,000. These funds will be accounted for as the matter proceeds. If there is an overpayment, the [appellant] shall receive a credit in due course. The funds shall be paid by August 6, 2021.
[19] The appellant failed to meet all of these conditions, and the trial judge heard the 23C motion for an uncontested trial in writing on September 16, 2021. In his ruling, he begins by noting that the appellant had retained an expert, provided the respondent with the $10,000, but did so late, and that he had yet to complete disclosure. The trial judge held that the appellant had not completely fulfilled the order as Kaufman J. had emphasized he must do to avoid having the matter proceed by uncontested trial.
[20] Accordingly, the trial judge proceeded on the basis of the respondent’s affidavit materials before him.
[21] With respect to child support, the trial judge accepted the respondent’s submission that he should impute an annual income of $150,000 to the appellant for support purposes, resulting in child support of $2,077 per month for the two children. He noted that the respondent sought to impute this amount of income to the appellant throughout the court process and drew the adverse inference that the appellant would have provided his disclosure earlier had it in fact supported his position that his income was significantly lower. The trial judge also ordered that the appellant pay 60% of the s. 7 expenses for the children, amounting to an additional $250 per month.
[22] With respect to the equalization payment, the trial judge ordered that the matrimonial home be transferred into the respondent’s name to satisfy any portion of the equalization payment owing to her. He based this on evidence that the matrimonial home and the appellant’s business were the only significant assets held by the parties, and on the absence of any valuation of the husband’s business.
(3) Issues and Analysis
[23] The appellant’s submission rests on two arguments. First, he submits that it was unfair and improper to impute his income and award an equalization payment by way of an uncontested trial following the 14B motion striking his pleadings. Second, he argues that the reasons of the trial judge are inadequate. He also raises a number of alleged palpable and overriding errors.
(a) Was the procedure unfair?
[24] The appellant asserts that the process of arriving at a final order for support and equalization via a 14B motion and 23C sworn affidavit was unfair.
[25] There are two main problems with this claim. First, it appears to be a collateral attack on Bruhn J.’s order striking his pleadings, from which the appellant did not appeal. In the same order that provided that the appellant’s pleadings be struck, Bruhn J. ordered that the respondent could proceed by way of a 23C motion for an uncontested trial. This was entirely proper given the striking of the pleadings. Since there was no appeal from Bruhn J.’s order, the appellant cannot raise this issue on this appeal. That alone disposes of this ground of appeal.
[26] Even beyond that, focussing on the 14B motion in isolation ignores the context and history of the matter.
[27] There can be no question that the striking of pleadings is an exceptional remedy for non-compliance: Martin v. Watts, 2020 ONCA 406, at para. 7, citing Kovachis v. Kovachis, 2013 ONCA 663, 367 D.L.R. (4th) 189, at para. 24.
[28] That said, our courts have repeatedly emphasized that individual disclosure is the lynchpin of our family law system. There must be serious consequences for those who prevaricate. This was most recently re-articulated by the Supreme Court of Canada in Colucci v. Colucci, 2021 SCC 24, 458 D.L.R. (4th) 183, at para. 48, where Martin J. wrote “the child support system … depends upon adequate, accurate and timely financial disclosure.”
[29] In my view, disclosure’s foundational importance, and the circumstances of this particular case, warranted an exceptional remedy for non-compliance.
[30] The importance of the context of this proceeding cannot be overstated. Bruhn J.’s order striking the appellant’s pleadings and the subsequent uncontested trial followed two years of the respondent’s fruitless efforts to obtain the appellant’s disclosure. These efforts forced her to expend significant funds on legal fees for even the most basic disclosure. Yet, despite several court orders granting last chances to the appellant, any disclosure he provided was half-hearted, incomplete and failed to respond to the numerous legitimate requests and court orders that followed.
[31] Indeed, the appellant never provided a valuation of his business or full financial disclosure. This was central given that the business was both his source of income for support purposes and his major asset. As the respondent’s material before this court indicates, the limited disclosure he did provide suggests that his income was considerably greater than the approximately $49,000 he claimed to receive annually. His purported income even falls short of his reasonable monthly expenses.
[32] The appellant’s pleadings were struck only after repeated court conferences, requests, orders, and extensions of time.
[33] Accordingly, there is no merit to the claim that this case should not have been resolved by way of a 14B motion.
[34] The appellant also submits that the three-page limit placed on affidavit material filed on 23C motions is inadequate for the sorts of determinations necessary in these kinds of cases. However, the 23C affidavit filed by the respondent included sufficient evidence to allow the trial judge to infer that the respondent’s income should be imputed in the amount of $150,000 annually.
[35] This evidence included that the deposits into the appellant’s disclosed bank account added up to more than his reported income or reasonable expenses, that he did not disclose the full details of all bank accounts and credit cards held at the material times, and, once again, that he failed to provide a value for his business, his sole source of income and capital.
[36] Moreover, as this was an uncontested trial, a fairly routine process following the striking of a party’s pleadings, there is no basis to suggest that there would have been additional material in an oral hearing because the appellant would still not have been entitled to participate.
[37] Given the appellant’s obvious understatement of his income and his repeated failures to disclose, the trial judge was required to rely on the only evidence available in order to arrive at an income for child support purposes. Again, had the appellant provided full and prompt disclosure, as he was required to, his pleadings would not have been struck and the trial judge would have benefited from a fuller record. In the circumstances, there is no basis for the appellant to complain about the imputation of income.
[38] In the future, it may be open to the appellant to claim a variation in child support, on the basis of full disclosure on his part. However, as things stand, I see no error in the trial judge’s child support order.
(b) Equalization
[39] The circumstances with respect to equalization, however, are not completely identical. While the respondent indicated in her financial statement that she had a teacher’s pension, it does not appear to have been valued. The trial judge did have the value submitted by the respondent of the matrimonial home, and the net equity which amounted to a little over $200,000. He also noted that the respondent had brought somewhat over $100,000 into the marriage.
[40] In that sense, and given the absence of any valuation of the appellant’s business or any contrary evidence whatsoever, the trial judge’s determination that the matrimonial home should be transferred to the respondent in satisfaction of any equalization payment appears to be fair and just. That said, there is no indication whatsoever of the value of her pension.
[41] One would expect, however, that if it benefited the appellant, he would have provided the court with the valuation of his business, income tax statements and bank statements for his undisclosed accounts. Instead, the appellant’s financial statement baldly asserts that he has almost no assets of value. Even if the respondent did disclose the valuation of her pension, the appellant’s failure to disclose would continue to prevent an arithmetic equalization of the value of net family property because the value of his assets is completely unknown.
[42] In the face of this substantial non-disclosure from the appellant, there was no unfairness in excluding the value of the wife’s pension in ordering an equalization payment. The trial judge’s equalization payment captures the spirit of r. 2(3) of the Family Law Rules: to ensure that the procedure is fair to all parties, and to give appropriate court resources to the case while taking account of the need to give resources to other cases.
[43] Indeed, it would be most unfair to the respondent to further delay the equalization payment because she has not valued her pension despite the appellant’s repeated and blatant attempts to avoid even the most basic disclosure. Consequently, the order transferring the matrimonial home to the respondent does not constitute a palpable and overriding error.
[44] However, I wish to emphasize that the justice of excluding the respondent’s pension from the equalization calculation is contingent on the appellant’s continued failure to disclose. For that reason, I would order that this decision remain without prejudice to the appellant’s ability to request a valuation for the pension and an adjustment to the equalization order on a r. 25(19)(c) motion to change if and only if the request is accompanied by his own required disclosure.
(c) Inadequacy of Reasons
[45] Finally, the appellant argues that the reasons are inadequate. I would not agree.
[46] Inadequacy of reasons does not provide a free-standing right of appeal. Rather, an appellant who argues insufficiency of reasons must show not only a deficiency in the reasons, but that the deficiency caused prejudice to the exercise of the right to appeal: see R. v. W.O., 2020 ONCA 392, 454 D.L.R. (4th) 54, at para. 13, aff’d 2021 SCC 8, 454 D.L.R. (4th) 51; Dovbush v. Mouzitchka, 2016 ONCA 381, 399 D.L.R. (4th) 69, at para. 22.
[47] The question in every case is whether the reasons provide the basis for meaningful appellate review of the correctness of the trial judge’s decision. Trial judges are not held to an abstract standard of perfection. In evaluating a trial judge’s reasons, appellate courts must consider the time constraints and general press of business in the court: R. v. Sheppard, 2002 SCC 26, [2002] 1 S.C.R. 869, at para. 55.
[48] In the context of busy family law trial courts, there must be a high bar for the insufficiency of reasons. This high bar is mandated by the primary objectives of the Family Law Rules captured in r. 2(3). This rule emphasizes saving expense and time, dealing with the case in ways that are appropriate to its importance and complexity, and giving the case appropriate court resources while taking account of the need to give resources to other cases.
[49] As has been discussed, the reasons for the imputation of income are clear. The trial judge accepted the respondent’s submission as to the basis upon which to infer the appellant’s income. To the extent that there is any concern as to the order transferring the matrimonial home to the respondent, this can be addressed if and when the appellant furnishes full disclosure, as he has been repeatedly ordered to do.
[50] The reasons were adequate to provide appellate review, and I would also dismiss this ground of appeal.
(4) Disposition and Costs
[51] For the foregoing reasons, I would dismiss the appeal. Costs are payable to the appellant in the amount of $7,000, inclusive of disbursements and HST.
Released: July 21, 2022 “K.M.v.R.”
“A. Harvison Young J.A.”
“I agree. K. van Rensburg J.A.”
“I agree. J. Copeland J.A.”