Court File and Parties

Court File No.: FS-14-00019285 Date: 20160624 Superior Court of Justice - Ontario

Re: Jennifer Sandra Turk, Applicant And: Stuart Bernard Turk, Respondent

Before: Kiteley J.

Counsel: Harold Niman and Katharine Rajczak, for the Applicant Heather Hansen, for the Respondent

Heard: in writing

Endorsement

Background

[1] This is a motion by the Applicant for an order requiring the Respondent to pay interim disbursements in the amount of $500,000. In an endorsement dated April 28, 2016 2016 ONSC 2813 I directed counsel to make submissions in writing according to the timetable in paragraphs 13 to 15. The Applicant served and filed an affidavit sworn May 9, 2016 with exhibits attached together with the affidavit of Wayne Rudson sworn May 9, 2016. The Respondent delivered an affidavit sworn May 16, 2016. As permitted, the Applicant delivered a reply affidavit sworn May 24, 2016. Both counsel provided confirmation forms or amended confirmation forms in which they relied on affidavits delivered in 2014 or 2015 and earlier financial statements as well as facta. All of that was as contemplated in the endorsement.

[2] On May 30, 2016, counsel for the Respondent served a Form 14B motion in which she asked for an order that the affidavit of the Applicant sworn May 24, 2016 be struck on the basis that it splits her case improperly, and, if necessary, an opportunity for the Respondent to make oral submissions as directed by the Court. As an alternative request, counsel asked for an order granting the Respondent leave to file an affidavit in response to the Affidavit of the Applicant sworn May 24, 2016. I have waited beyond the requisite period for counsel for the Applicant to respond and nothing has been received. There are events scheduled in the immediate future and I will not wait longer for a response.

[3] In her reply affidavit sworn May 24, 2016 the Applicant included some evidence that was appropriately reply such as evidence of the Respondent’s lifestyle designed to counter his evidence of lack of means. However, that affidavit also includes more evidence as to the calculation of the amount of fees and disbursements as well as evidence about her attempts to borrow in order to fund the litigation. I agree that that evidence is not reply evidence and does constitute splitting her case which is unfortunate when the motion was directed to be in writing only. As indicated below, there are parts of her evidence which I will not consider.

Analysis

[4] Pursuant to rule 24(12) of the Family Law Rules, the court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees. Both counsel refer to the decision of Stuart v. Stuart, [2001] O.J. No. 5172 and Ludmer v. Ludmer 2008 CarswellOnt 4987 and 2012 ONSC 4478 amongst other cases.

[5] In an endorsement dated February 2, 2016 2016 ONSC 816 I set the settlement conference/trial management conference for April 25, 2016 and set the trial date tentatively to begin the week of September 19, 2016 estimated at 20 days subject to confirmation at the settlement conference/trial management conference as to the estimated duration. In the April 28 endorsement, I adjourned the settlement conference to June 30.

A. Merits of the claims made

[6] The parties signed a separation agreement dated April 26, 2010 which included a provision that, on or after January 1, 2013 either party could seek a variation in child or spousal support if there was a material change in circumstances but if there was a variation, the Applicant’s entitlement to spousal support and the Respondent’s obligation to pay spousal support would never exceed $11,000 gross per month. The agreement also provided that the Applicant was entitled to the net proceeds of sale of the former matrimonial home subject to paying to the Respondent an equalization payment of approximately $181,000.

[7] On the basis of lack of financial disclosure and duress, the Applicant seeks a declaration that the separation agreement dated April 26, 2010 is null and void and should be set aside. Alternatively she asks for an order that the child and spousal support provisions of the Agreement be set aside and for an order for the appropriate amount of child and spousal support retroactive to the date of separation. She also sought an order for the equalization of net family property, financial disclosure, interim disbursements and other relief.

[8] The Respondent brought a motion to dismiss the claim that the agreement is null and void and should be set aside which motion I dismissed 2015 ONSC 5845. That endorsement contains more detailed background as to the issues in this proceeding.

[9] Counsel for the Respondent has devoted considerable attention to the merits of the claims, particularly the claim to set aside the separation agreement. The factum contains details derived from prior affidavits, questioning, and the contents of the file of the Applicant’s lawyer at the time of the negotiations.

[10] On a motion pursuant to rule 24, the threshold is whether the claims have merit. Based on the extensive analysis contained in the Respondent’s factum, there are reasons to consider that the claim to set aside the separation agreement has some weaknesses. Indeed, on the Respondent’s calculation, the Applicant will be worse off in an equalization of net family property if the agreement is set aside than if the agreement remained. The Respondent has also taken the position that the alternative claim of setting aside the provisions of the agreement with respect to child and spousal support and seeking an order for both retroactive to the date of separation in late 2007 or early 2008 will not succeed. His evidence that he is fully financially responsible for both children means that the prospect of success for child support is weak and may be without merit. But the Respondent’s vigorous opposition to setting aside the agreement and to setting aside the support provisions of the agreement does not mean that the claim for retroactive child support and retroactive and ongoing spousal support are without merit. I am satisfied that the Applicant has met the threshold of merit.

B. Necessity and reasonableness of the fees and disbursements

[11] On February 22, 2016, counsel for the Respondent finally served a form 13.1 financial statement consistent with the Family Law Rules. On the eve of the settlement conference in April, counsel for the Respondent delivered 10 valuation reports with respect to date of marriage in 1989 (including claimed pre-marital deductions) and at his date of separation on November 5, 2007 (including claimed exclusions) along with the documents in the scope of review relied on by the valuator and an affidavit of documents.

[12] In her May 9 affidavit, the Applicant’s evidence with respect to the claim for $500,000 is as follows:

I understand the estimated costs of the work that RVG would need to undertake to come to their own conclusions is in the neighbourhood of $100,000 plus HST. There will be further costs for Mr. Rudson to discuss his conclusions with my counsel and then to prepare and attend at trial. I already owe my professionals $140,000 plus the costs to prepare these motion materials. In addition, there will be the cost of preparation and the attendance of my lawyers at 20 days of trial. Therefor, I am seeking an order compelling Stuart contribute to my interim costs in the amount of $500,000.

[13] The affidavit of Wayne Rudson explains the challenges in obtaining disclosure, the use of November 5, 2007 as valuation date (as opposed to a possible consensus date of December 31, 2007), and the apparent inconsistencies between the recently provided information and earlier information. In his letter dated May 5, 2016 that is attached to his affidavit, he has provided a preliminary perspective on the contents of the reports and he estimates that future fees to complete reports and comments would be in excess of $10,000 per report, for a total of approximately $100,000 plus HST. He left open the additional costs to assist in the preparation for, and attendance at, a trial. He pointed out his outstanding account of approximately $65,000 reflecting work completed over the last two years.

[14] In his affidavit, the Respondent challenges the estimates as excessive and unsupported. He provided a copy of the account rendered by his expert showing a total cost of $76,500 for all of the 10 reports that he had delivered. He pointed out that Mr. Rudson had prepared his estimate without requesting communication with his valuator or with Mr. Rosenberg, the accountant who provided important information to the mediator during the settlement negotiations. He also noted that there was no evidence of an outstanding account with Mr. Rudson which the Applicant estimated at $54000. With respect to legal expenses, he noted that he had paid $156,000 of her legal costs to date as well as a lump sum of $63,150 plus interest, pursuant to the order of McWatt J.

[15] The affidavit sworn May 16 provoked the reply affidavit sworn May 24, 2016 in which the Applicant indicated that the request for $500,000 in interim disbursements was “an underestimate of the funds” she would need to go forward. She provided this calculation:

Outstanding account with RVG $ 53,000 Future work by RVG $100,000 Outstanding account with NGA $112,000 Future legal fees $335,000

[16] In that affidavit, she provided a breakdown of legal costs based on lawyers involved, hours involved at particular stages, as well as an attendance fee of $10,000 for Mr. Rudson to attend the trial.

[17] I agree that it would be unfair to rely on that evidence in her May 24 affidavit. Even assuming that the extent of the detail suffices to substantiate a claim for $500,000, it did constitute “splitting her case” by dealing with an essential element of the motion in reply.

[18] I agree with counsel for the Respondent that based on her original affidavit and that of Mr. Rudson, the Applicant has failed to explain how so much could have been spent in legal and accounting fees to this point (including considerable costs awards in her favour) and failed to provide sufficient detail for substantiating the amount sought.

[19] Having said that, I do agree that the February form 13.1 and the 10 reports do require input from a professional valuator. Without necessarily agreeing with Mr. Rudson’s estimate of cost to review the 10 reports and without accepting that the amount outstanding to RVG is $53,000 (as she has said in two affidavits) or $65,000 (as Mr. Rudson has said in his letter attached to his affidavit), the complexity of the Respondent’s financial affairs as demonstrated in the delivery of 10 reports and a form 13.1 where he spends considerably beyond his stated means (which he explains partly by extraordinary indebtedness to his father), there is no question but that the Applicant requires expert advice.

[20] If this were an application for equalization of net family property and support, I would be inclined to order an amount that would approach the estimate of Mr. Rudson of $10,000 per report. I appreciate that the Respondent incurred an expense of less than that but there is a difference between a party who has control over all of the documents and information who can inform his own expert and a party who has no control over all of the documents and information. Inevitably, the cost incurred by the latter will be greater. However there are two reasons why I will not make an order encompassing both that estimate and the outstanding account. The first is that I am not satisfied with the explanation for the costs already incurred with RVG; and the second is that there should be a discount to take into consideration the fact that there is an existing separation agreement that the Applicant is trying to set aside.

[21] I take a similar approach to the legal fees. I do not accept the request summarized in her May 24 affidavit for legal fees in the amount of $112,000 and $335,000 for these reasons. First, I am not satisfied with the explanation for the outstanding costs, particularly when the Applicant has received several favourable costs awards; and the second is that there should be a discount to take into consideration the risk to her as a litigant in seeking to set aside an existing separation agreement.

C. Ability of the Applicant to fund her own legal and valuation costs

[22] In her May 9 affidavit, the Applicant referred to borrowing from her mother to assist in her legal and professional fees but she was short on detail as to her ability to obtain institutional or other funds to finance the case. In his affidavit, the Respondent pointed out those weaknesses and that prompted a response in her May 24 affidavit in which she belatedly indicated that she would attempt to get financing secured against title to her home. That latter evidence did constitute splitting her case and I will not consider it.

[23] The Respondent insists that the Applicant is better off from a capital perspective to obtain financing to pay her professional fees. He refers to the indebtedness that has accumulated with his father of approximately $1.6 million. He takes the position that she has the ability and the means to finance the proceeding and should be required to do so.

[24] I agree with the Respondent that the Applicant has not demonstrated that she has taken reasonable steps to finance the case. However, the fact that she ought to have done more in that regard does not mean that an order ought not to be made given my conclusions as to merit and cost; it means that the amount ordered should be reduced to reflect those inadequacies.

D. Conclusion and next steps

[25] In order to level the playing field, I conclude that the Respondent should be required to pay interim disbursements in the amount of $140,000, calculated as set out below but subject to allocation amongst her professionals as the Applicant directs.

[26] At paragraph 10 of the April 28 endorsement, I noted that over two years had elapsed since the application was issued and there had not been a case conference or a settlement conference on the merits of the claims to set aside the agreement or parts of the agreement. At this stage, following disclosure and questioning, the parties have progressed to the stage where that settlement conference, currently scheduled for June 30, must take place. The order I make takes into account what has been done and what it seems needs to be done to ensure that the parties attend a settlement conference and have the opportunity to evaluate the strengths and weaknesses of the positions that they take. Thereafter the Applicant will have to assess her future risk and determine her ability to continue.

[27] As indicated, I adjourned the April 28 settlement conference/trial management conference because of the timing of delivery of 10 valuation reports. At that time, I adjourned the settlement conference to June 30 and provided for a timetable for making written submissions on this motion. In paragraph 2 above I have described the steps that have contributed to the delay in the release of this endorsement. In anticipation of the April 28 event, counsel for the Respondent had served and filed a trial management conference brief and a settlement conference brief. In that April 28 endorsement I directed counsel for the Applicant to serve and file a Trial Management Conference Brief and a Settlement Conference Brief by Monday June 27, 2016 at 2:00 p.m. Given release of this endorsement on June 24, I will extend that time. In order to focus on settlement, I will not require the Applicant to deliver a Trial Management Conference brief. At the conclusion of the settlement conference, a date for a Trial Management Conference before me will be scheduled at which time the duration of the trial will be finalized.

ORDER TO GO AS FOLLOWS:

[28] The Respondent shall pay to the Applicant the sum of $140,000 calculated as $70,000 on account of expert fees and $70,000 on account of legal fees, payable in the following installments:

(a) by June 29, 2016 $70,000 (b) by July 29, 2016 $70,000.

[29] If counsel are unable to agree on costs of this motion, then, on a timetable on which they agree, counsel may make written submissions not exceeding 3 pages plus offers to settle and costs outline.

[30] By Tuesday June 28, 2016 at noon, counsel for the Applicant shall serve and file her Settlement Conference brief.

[31] Neither counsel is required to bring Part 1 and Part 2 of the Trial Scheduling endorsement to the settlement conference.

Kiteley J. Date: June 24, 2016