Court File and Parties

COURT FILE NO.: FS-17-00415408 DATE: 20190621 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jose Gustavo Steinberg, Applicant AND: Tatiane Hae Kung Steinberg, Respondent

BEFORE: Madam Justice Kristjanson

COUNSEL: Elizabeth C. Mourao, for the Applicant John P. Schuman, for the Respondent

HEARD: June 13, 2019

Endorsement

[1] The Respondent, Tatiane Steinberg, learned that her spouse, the Applicant Jose Gustavo (“Gus”) Steinberg, had transferred essentially all of his investments and savings – over $4 million dollars – out of his accounts and into his mother’s accounts in Brazil. As a result, on May 23, Tatiane brought an urgent motion seeking a preservation/non-dissipation order under sections 12 and 40 of the Family Law Act, RSO 1990, c. F.3, together with three other grounds of other relief. On an urgent basis, Justice Nakonechny issued an interim preservation/non-dissipation order. The final preservation order and the balance of the motion was adjourned to a short one hour motion on June 13, 2019. On this motion I deal with the issues of continuing the preservation Order, security for equalization, spousal and child support in light of the removal of assets from Canada, and payment to Tatiane of the proceeds of the disposition of the matrimonial home which have been withheld by Gus.

Issue #1: Continuation of Preservation Order and Security

[2] Gus concedes that in the middle of this family litigation, he has removed essentially all of his assets - $4.1 million - from Canada and more concerning, has transferred these assets into his mother’s name in Brazil. His explanation is that due to stress he can no longer manage his assets, but intends to comply with family court orders. This behaviour is of great concern, in part because Gus transferred his assets into his mother’s name in Brazil rather than simply giving her power of attorney over his accounts. Thus, he has wholly alienated his property without consideration, and has not provided proof that his mother holds his property in trust. The court is concerned with this behaviour.

[3] At the same time, Gus resides in Canada, and is moving to a shared parenting arrangement for the two children. At present, he has the children for 6 of 14 nights. In almost three years since the separation, Gus has paid child and spousal support, and has not missed a payment.

[4] In light of the movement of the husband’s assets, the wife has requested that security be provided for both the equalization claim and for spousal/child support, as well as a preservation/non-dissipation order.

[5] There is a great deal of contested evidence about the wife’s claim to equalization. Justice Kiteley reviewed some of the evidence and issues in her endorsement of May 1, 2018, reported at 2018 ONSC 3031. Based on Gus’ expert evidence, at that time Justice Kiteley was satisfied that Gus would owe Tatiane an equalization payment likely not less than $1,362,372. Based on that figure, Gus on this motion concedes an equalization payment of over $400,000.00 is likely. Tatiane has received a partial equalization payment of $749,176 from the sale of the matrimonial home, with another instalment of $112,500 forthcoming as ordered today.

[6] However, Tatiane’s expert has filed a report on this motion setting out a number of other additional scenarios, claiming a much higher potential equalization payment. Given the conflicting expert evidence, which will require a trial to resolve, I cannot find that a prima facie case of entitlement to an equalization payment of over $400,000.00 has been established. However, I find that security is required in the circumstances.

[7] Pursuant to the Family Law Act, RSO 1990, c. F.3, s. 9(b), within 30 days Gus shall post an irrevocable letter of credit drawn on a bank listed under Schedule 1 to the Bank Act, SC 1991, c. 46, in the amount of $400,000.00 to secure his obligations pursuant to section 5 of the Family Law Act. The letter of credit shall be in a form acceptable to counsel for Tatiane or approved by the court. The letter of credit shall have no time limit. It must be drawn in favour of the Accountant of the Ontario Superior Court of Justice, Court File No. FS-17-415408. The letter of credit shall provide for draws only by a court order in this proceeding.

[8] In the circumstances of removal and alienation of all assets in the midst of family law litigation, compliance is critical. As a result, it is important to make an order that specifically contemplates failure to obey the Order which I consider necessary for the just determination of the matter. In the event that the letter of credit is not provided as ordered, then pursuant to Rule 1(8) of the Family Law Rules, on 14B motion by Tatiane which shall be sent to my attention, Gus’ Application and Reply on the property and financial issues including the claims for damages, equalization of net family property, spousal support, and child support will be struck, and Tatiane shall be at liberty to proceed with an undefended trial on the property and financial issues. Pursuant to Rule 1(8.4) of the Family Law Rules, Gus will not be entitled to participate on the financial and property issues.

Additional Questions

[9] In light of the removal and alienation of assets, after the hearing I requested additional submissions on two issues. The first was whether I should order additional disclosure. The second was whether Gus’ mother should be added as a party, since she now apparently controls Gus’ assets, including assets which will satisfy equalization as well as assets which generate income and would be used for the purposes of spousal and child support. I additionally inquired into whether Brazil was a signatory on the Hague Convention on Service Abroad.

Disclosure

[10] I proposed the following additional disclosure as a term of the Order, to be provided on a monthly basis until trial, or until control of his bank and investment accounts was restored to Gus, and the assets were returned to his name:

(a) a listing of all his assets by bank account or investment account #, with monthly closing balances, held by his mother on his behalf, including any increase or decrease in those assets on a monthly basis; (b) an affidavit, from him or his mother, as to how Gus’ mother is accounting for Gus’ assets given that they have been transferred to her name, including confirming whether or not they are held in trust for Gus and if so, a copy of the trust agreement; if not held in trust, whether she acknowledges that Gus is the beneficial owner of the assets; and whether or not Gus’ assets are commingled in any accounts with her funds or those of another person; (c) proof of the amounts being transferred on a monthly basis to Gus from his mother, and the source of those transfers (e.g., interest on assets that were his and now held by her), and the bank account(s) into which all transfers are made by his mother.

[11] Tatiane submits that prior to alienating the funds, Gus earned significant income from his investments, and if they are now held in a trust under which he is sole beneficiary, sections 19(1)(d) and (h) of the Federal Child Support Guidelines would apply. In addition, section 21(1)(g) of the Federal Child Support Guidelines requires that where a parent is a beneficiary under a trust, disclosure of the trust settlement agreement and financial statements is required.

[12] In response to my questions, Gus has tendered the affidavit of his mother, Cecilia Steinberg, who lives in Brazil. Her evidence is that she observed her son in emotional turmoil as a result of the litigation, and offered to help with his investments, obtaining a power of attorney and a transfer of his investments to her account under her management in Brazil. She states:

11. Although there is no Trust agreement, I acknowledge that these are my son’s funds. I am merely managing them while he finishes this litigation. The funds are to be returned upon the end of the litigation, which I understand is now in February, 2020. Until then upon his request and need, I am to send a monthly allowance for his basic expenses, child and spousal support and legal fees.
12. To assure the Court of any concern, I advise that Gustavo’s assets are not commingled with any other assets. They are being held in a new bank account I opened just for this purpose.
13. I will provide any kind of disclosure necessary about the amounts and where the funds are being held while managed by me. This can be in monthly reports with statements…I have no issue listing accounts and monthly balances to show the status of investments. I also have no issue identifying where the monthly funds being paid to Gustavo are coming from.

[13] As a result, I make a disclosure order as set out below.

Not Adding Cecilia Steinberg as a Party

[14] I asked the parties whether Cecilia Steinberg, Gus’ mother who controls his assets, should be added as a party. The respondent has indicated that it is impractical to do so. There are two major reasons. First, Brazil is now a signatory, as of March 21, 2019, to the Convention on Service Abroad of Judicial and Extrajudicial Documents (Hague Service Convention). However, documents must be translated into Portuguese, letters rogatory must be signed by a judge in Canada, and service is through the Central Authority, which entails delay. The addition as a party will inevitably delay the proceedings as Cecilia would have to obtain a Canadian lawyer. In addition, there are no treaties between Canada and Brazil with respect to the enforcement of civil court orders. If Gus’ assets remain in Brazil, the respondent would have to commence proceedings in Brazil. As a result, the respondent does not seek to add Cecilia as a party.

Issue #2: Child and Spousal Support - Security

[15] Pursuant to Justice Kiteley’s interim order, Gus is paying child support in the amount of $2,677 per month, and spousal support in the amount of $5,920.00, based on income of $200,000. On this motion, based on an expert report, Tatiane sought to establish Gus’ annual income at $1,320,700, leading to child support of $16,125.00, and security for child support alone in the amount of $2,000,000. On this short motion, where there is conflicting evidence on Gus’ income and complicated legal issues, I cannot conclude that the husband’s income should be set on an interim basis at $1,320,700.00.

[16] On this one hour motion, I also decline to deal on an interim basis with the husband’s claim to reduce child support pursuant to s. 9 of the Child Support Guidelines, or to impute income to Tatiane on an interim basis and recalculate both child and spousal support.

[17] Justice Kiteley’s interim order is intended to take the parties to trial. At trial, the complex issues of Gus’s net family property for equalization purposes, Gus’ income (included imputed income, three year averaging, and support relating to income over $150,000/$300,000), and Tatiane’s income (including imputed income) for section 7 purposes, will all be determined on the basis of expert evidence subject to cross-examination and viva voce evidence of the parties and other witnesses. On this short motion, where the Respondent has just delivered her Expert Reports, and the Applicant has not yet filed his Reply Reports, I will not make an interim adjustment to the husband’s income for the purpose of calculating security for a potentially increased support obligation, as I am not able to make those findings of fact nor do I think it appropriate.

[18] I reviewed the affidavit evidence of the parties, and a notarized transcript of a phone call between the parties. In the call, Gus says that he will bring the money back to Canada and pay Tatiane’s share, as he has never refused to pay for his things, but he does not want to be ripped off. He also stated in the call that the only thing holding him to Canada was the children, and referring to Tatiane’s refusal to receive the Get, commented that he would go to another country to start a new life with a new family. I consider that these statements are made in what is obviously a very heated phone call, and the parties were not under oath. I decline to put weight on the call as a matter of evidence.

[19] What does matter is that all of Gus’ assets have been removed from Canada, and moved into his mother’s name. On the other hand, the child support and spousal support are monthly obligations which have been met, Cecilia is transferring those monthly amounts from Gus’ alienated assets, Gus has paid for a s. 30 assessment, and the parties are moving to a shared parenting regime. I have considered all evidence and all the factors set out in Kumar v. Kumar, 1988 CarswellOnt 1074. I decline to order security to be posted relating to child support and spousal support on the facts of this case.

[20] On consent, the preservation/non-dissipation order was extended and continued, and I separately issued that Order.

Issue #3: Tatiane’s Claim for Matrimonial Home Payment

[21] Justice Kiteley ordered that the matrimonial home be sold and from the net proceeds of sale, the parties would pay tuition for 2018-2019, and from the remaining balance, Tatiane would receive 75% and Gus 25%. Tatiane has received $749,175.99 from the original proceeds. However, the balance of the payment from the additional $150,000.00 received from the sale of the matrimonial home has been withheld by Gus since January, 2019. The balance must be paid to Tatiane. The claims advanced by Gus will be dealt with at trial.

[22] Gus has misinterpreted Justice Kiteley’s order. While spousal and table child support were ordered, there was no order as to payment of section 7 expenses or allocation, other than the 2018-2019 school tuition.

[23] Gus has been withholding monies from Tatiane’s share of the proceeds for 2019-2020 private school tuition. That is not an agreed upon section 7 expense. Tatiane takes the position that the children should not attend private school. At trial it will be determined if this is a reasonable and necessary expense, and the allocation as between the parties. Gus must release this money.

[24] Gus is withholding monies from Tatiane’s share of the proceeds for orthodontic expenses. Tatiane states she has never seen the actual invoice from the orthodontist (just the payment receipt), and has not given her approval. Again, this money must be released. At trial it will be determined if this is a reasonable and necessary expense, and the allocation as between the parties.

[25] Gus loaned the amount of $16,789.44 to Tatiane. There is a factual disagreement as to whether this was an advance on equalization (Gus’s position), or some kind of uncharacterized support payment. There is no affidavit evidence establishing that as a term of the loan, Gus was entitled to withhold that amount from the matrimonial home payment ordered by Justice Kiteley. This issue will be determined at trial as a post-separation adjustment.

[26] Gus is to pay Tatiane $112,500 as the balance of the payment relating to the matrimonial home, plus 3% interest from date of receipt of funds.

Procedural Background

[27] This case illustrates, yet again, a significant problem with counsel failing to responsibly estimate the time required to argue motions, and failing to case conference motions. Following the interim preservation motion, Gus brought a motion dated May 30, 2019 seeking eight orders, including contempt. Tatiane then brought an Amended Amended Motion seeking an additional nine orders. These were all on my list for a total of 60 minutes for all 21 orders being sought, many of them very complicated and some requiring review of disputed expert evidence.

[28] Upon receiving the voluminous file, I wrote to counsel as follows:

“The Respondent’s motion of May 23, 2019 dealing primarily with the freeze of assets was adjourned to be heard for one hour on 13 June. Subject to the submissions of counsel, that is the issue that will proceed on 13 June, since (a) the other issues have not been case conferenced, and (b) the other issues, when added to the original motion, require significantly longer than the allotted 60 minutes to consider, and indeed, after a case conference dealing with the issues, I anticipate a full day or even two day long motion, or a trial, would be the appropriate venues for dealing with the other issues. Having reviewed the materials, neither the husband’s motion (nor the additional relief sought in Amended Amended Motion) are one hour motions.

Each party is to consider how they will address the issues sought in the May 23, 2019 notice of motion in 30 minutes each.

The husband seeks a finding of contempt re the Get. The issue of contempt must be case conferenced. I would recommend that the husband, in addition to contempt, consider Rule 1(8) of the Family Law Rules relief which may be provided on a case conference.

What has happened in this case is similar to Medjuck v. Medjuck, 2019 ONSC 3254. I draw the attention of counsel to paras. 74-76:

[74] This litigation began in 2017, and there is no trial date scheduled. For this one day motion, there was a Notice of Motion, Notice of Cross-Motion, and Amended Notice of Motion. The Respondent sought 28 orders and the Applicant sought 13 orders on a wide array of issues. Many of these issues were never case conferenced. The evidence comprises three volumes of the Continuing Record, including serial affidavits with improperly introduced exhibits. One day was insufficient to deal with all the matters raised. The day before the hearing I contacted counsel and indicated we would deal with seven key issues. As it turned out, there was not enough time to deal with even the truncated list I identified the day before the motion. On certain complex tax issues, I heard argument then directed the parties to meet jointly with their experts after the motion, and return before me in two weeks. After the joint meeting with experts, the parties resolved a number of tax and financial issues and I have made that order on consent.

[75] It was unrealistic for counsel to expect the court to deal with all the issues raised in one day. The primary objective of the Family Law Rules is to deal with cases justly, including by ensuring that the process is fair to all parties, and cases are dealt with expeditiously, cost-effectively, and proportionately. Accurately estimating the time required to argue motions is consistent with the primary objective, since it ensures that client resources are not thrown away drafting affidavits and researching case law on a plethora of issues that cannot be addressed in the time counsel propose for argument. Piling on motions and cross motions and amended motions and serial affidavits is antithetical to the primary objective. Case conferencing all issues prior to motions is an essential element of achieving a cost-effective and proportionate resolution of issues. “

[29] When the 60 minutes allotted for argument on the May 23 motion is complete, then I will ask the parties/counsel to discuss next steps to be taken, and will book a case conference or settlement conference date.”

[30] As it turns out, even the relief sought on the original motion took approximately 2.5 hours to argue. Following the motion, on consent of the parties, I held a case conference and set out a schedule designed to take the parties to a trial in February, 2020. I have separately issued a case conference endorsement.

[31] Counsel must fairly estimate time for motions. The wait for long motions may be months, but the answer is not to pile on issues that could not possibly be dealt with in an hour. The materials filed on these motions took the better part of two long evenings to review, after full court days, in order to prepare for the motion. The court time expanded beyond one hour, thus leapfrogging the wait for a long motion which is unfair to litigants in the system who comply with the Family Law Rules. Short motions are exactly that – intended to deal with one or two short issues that can be dealt with expeditiously.

[32] Given the large number of issues dividing the parties, it is a mystery to me why no party had earlier sought a rigorous timetable that would take the parties to trial in an expeditious manner.

Costs

[33] Tatiane is to provide costs submissions, 3 pages maximum plus bill of costs and offers to settle for the May 23 and the June 13 motions, by Friday June 28.

[34] Gus is to provide responding costs submissions, same limits, by Monday, July 8. If Gus takes issues with the quantum of fees or hourly rates, he must provide his bill of costs. I specifically draw counsel’s attention to Justice Chappel’s decision in Beaver v. Hill, 2018 ONSC 3352 at para. 46:

A useful benchmark for determining whether costs claimed are fair, reasonable and proportional is to consider the amount that the other party has paid for their own legal fees and disbursements in the matter (Smith Estate v. Rotstein, 2011 ONCA 491 (C.A.); Durbin v. Medina, 2012 ONSC 640 (S.C.J.); Scipione v. Del Sordo, 2015 ONSC 5982 (S.C.J.)). Although there is no requirement that a party resisting costs file their own Bill of Costs, it is preferable that they do so to assist the court in dealing with costs in a fair and reasonable manner (Risorto et al. v. State Farm Mutual Automobile Insurance Co., 2003 ONSC 43566 (S.C.J.), at para. 10). Failure on their part to provide details regarding their own costs is a factor that the court may take into account in considering the reasonable expectations of the losing party, and may entitle the court to draw an adverse inference (Smith Estate, at para. 50; Scipione, at para. 126; 206637 Ontario Inc. (c.o.b. Balkan Construction) v. Catan Canada Inc., 2013 ONSC 5448 (S.C.J.), at para. 7). Consideration of the other party’s Bill of Costs is particularly helpful if that party challenges a costs claim on the basis of alleged excess and over-lawyering (Mullin v. Sherlock, 2017 ONSC 6762 (S.C.J.), at para. 89; Brar v. Brar, 2017 ONSC 6372 (S.C.J.), at para. 30; Bielak v. Dadouch, 2017 ONSC 4255 (S.C.J.), at para 10). As Winkler J. stated in Risorto, at para. 10, such allegations amount to “no more than an attack in the air” if the unsuccessful party fails to produce their own Bill of Costs. In addition, a significant discrepancy in the amount of fees that the parties have incurred may prompt the court to embark upon a more detailed scrutiny of the costs claimed to ensure that the amount meets the overall objectives of a costs order (Jackson, at para. 99). (Emphasis added)

Order

[35] Order to go as follows:

(1) Pursuant to the Family Law Act, RSO 1990, c. F.3, s. 9(b), within 30 days the applicant shall post an irrevocable letter of credit drawn on a bank listed under Schedule 1 to the Bank Act, SC 1991, c. 46, in the amount of $400,000.00 to secure his obligations pursuant to section 5 of the Family Law Act. The letter of credit shall be in a form acceptable to counsel for the respondent or approved by the court. The letter of credit shall have no time limit. It must be drawn in favour of the Accountant of the Ontario Superior Court of Justice, Court File No. FS-17-415408. The letter of credit shall provide for draws only by a court order in this proceeding.

(2) In the event that the letter of credit is not provided as ordered, then pursuant to Family Law Rule 1(8), on a 14B motion by the respondent which shall be sent to my attention,

(a) the applicant’s Application and Reply on all of the property and financial issues including his defences to claims for damages, equalization of net family property, spousal support, and child support will be struck,

(b) the respondent shall be at liberty to proceed with an undefended trial on all of the property and financial issues, and

(c) pursuant to Family Law Rule 1(8.4), Gus will not be entitled to notice or to participate in the trial on the financial and property issues.

(3) As a continuing obligation until trial, the applicant is to provide to the respondent:

(a) on a monthly basis commencing July 1, 2019, a listing of all his assets, including all assets held by his mother Cecilia Maria Steinberg or anyone else on his behalf, by bank account or investment account #, with monthly closing balances, including any increase or decrease in those assets on a monthly basis;

(b) proof of transfer of his assets to his mother Cecilia Maria Steinberg, together with a listing of all assets held by him and transferred to him on the date of transfer, including all opening balances in the account held by his mother on his behalf;

(b) on a monthly basis commencing July 1, 2019, proof of the amounts being transferred to Gus from his mother, and the source of those transfers (e.g., interest on assets that were his and now held by her), and the bank account(s) into which all transfers are made by his mother, and monthly production of the bank accounts in Gus’ name which receive such money transfers.

(4) The applicant is to pay the respondent $112,500 as the balance of the payment relating to the matrimonial home, plus interest at 3% from date of receipt of the funds by the applicant.

(5) A support deduction order shall issue with respect to support provisions of Justice Kiteley’s May 17, 2018 order.

F. Kristjanson, J. Date: June 21, 2019