COURT FILE NO.: FC-18-57524-00 DATE: 20220223 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

RUTA NIKFAR Applicant – and – MOHAMMAD REZA NIKFAR Respondent

Counsel: George Karahotzitis and Camelia Amiri, for the Applicant Lorna Yates, for the Respondent Christina Internicola, for TD Bank

HEARD: November 26, December 2, 2021 and December 17, 2021

REASONS FOR DECISION

CASULLO J.

OVERVIEW

[1] The Applicant has been trying since late 2018 to obtain full financial disclosure from the Respondent, from whom she separated in early 2018. She requires this information to establish her entitlement to spousal and child support and to equalization of net family property.

[2] The Applicant brings this motion to strike the Respondent’s pleadings and to vest title in two of three Ontario properties, currently in the Respondent’s name, to her name. The grounds for the motion to strike are that the Respondent is in breach of numerous court Orders dealing with financial disclosure, support, an advance payment on account of equalization (which was satisfied one week prior to the start of the hearing), costs, and preservation of assets. The Applicant seeks the vesting order in a bid to stave off TD Bank’s foreclosure lawsuit in respect of the matrimonial home.

[3] The Respondent, now represented by his third or fourth lawyer in the proceeding, submits that he has made best efforts to comply with his outstanding disclosure obligations. In place of striking his pleadings, he submits that the trial judge can make an adverse inference if material disclosure remains outstanding. He further submits that a vesting order is an inappropriate remedy in this instance.

[4] By Endorsement dated January 6, 2022, I granted the vesting order, with reasons to follow. Said reasons would also include my determination as to whether the Respondent’s pleadings should be struck. These are my reasons.

[5] It bears noting that it was entirely inappropriate for the Applicant to schedule this motion for one hour. There were, inter alia, 19 affidavits contained in four large bound document books, as well as facta and emails exchanged during the hearings containing additional documentation.

[6] The issues before me were complex and I believed it important to give counsel the time they needed to make their submissions. This necessitated three separate court appearances and a total of 8.5 hours.

BACKGROUND

[7] The parties met in Dubai in 2006. At the time, the Respondent was the CEO of United Broadcast & Media Solutions (“UBMS”), a company located in Dubai. The Applicant was a Marketing Manager for Sony Broadcast and Professional Solutions.

[8] The parties were married on January 4, 2007 and separated on either January 1, 2018 (Respondent) or June 1, 2018 (Applicant). They have three sons together. The Applicant was a stay-at-home mom, assuming primary care and responsibility for the children. The Respondent focussed on building a career overseas, which required long periods of time away from home.

[9] The Respondent was the financial backbone of the family and his substantial income, the majority of which the Applicant claims was earned in Dubai, allowed for a luxurious lifestyle. Over the course of their marriage, the Respondent acquired various properties in Iran and Dubai, and the following Ontario properties in his name alone:

(a) 3 Rayneswood Crescent, Thornhill (the “Matrimonial Home”); (b) 3 Doncrest Drive, Thornhill (the “Doncrest Property”); and (c) 1205-111 Bathurst Street, Toronto (the “Bathurst Property”).

[10] The Applicant submits that as of the date of separation, the Respondent operated numerous corporations in which he held an interest, including:

(a) UBMS and Fast Target Trading LLC (“Fast Target”). Throughout the marriage the Respondent earned the bulk of his income through UBMS; (b) Nikava, a corporation in Iran; (c) Aruan Corporation (“Aruan”), which is registered in Ontario. Through Aruan, the Respondent purchased and sold properties for a profit. The Applicant believes that Aruan offers consulting services to the Respondent’s overseas corporations, and that Aruan is the vehicle through which the Respondent transfers money into Canada; and (d) Nova International (“Nova”), a company which holds shares in UBMS.

[11] It appears that following separation the Respondent has made efforts to undermine his involvement in certain of these companies, including terminating his work with UBMS as well as denying any ownership interest in it; denying an ownership interest in Nova; and directing UBMS’s financial director to (a) reverse his salary from 2018 and 2019 and (b) sanction his salary from Nova. Precisely what “sanction” meant was not provided to the court, but the connotation is that the Respondent’s salary was to be diminished in some manner.

[12] In light of these efforts, and particularly given what the Applicant understood about the Respondent’s business interests during the marriage, she retained a private investigator to explore his financial circumstances overseas. The private investigator produced the following two documents:

(a) Amendment & Share of Memorandum of Association of “United Broadcast & Media Solutions L.L.C.” (Limited Liability Company) (“UBMS MOA”); and (b) Amendment Memorandum of Association United Broadcast & Media Solutions L.L.C. (“UBMS MOA #2”).

[13] These documents demonstrate that as of February 2018, 49% of the shares of UBMS were owned by Nova, and that Nova is owned by the Respondent.

[14] Paragraph 13.2 of the UBMS MOA describes how the profits and losses of UBMS are distributed amongst its partners: (a) First Party (Mr. Nazar): 20%; and (b) Second Party (Nova): 80%.

[15] When the Respondent was asked to identify the shareholders of UBMS during his March 10, 2020 Questioning, he advised that one of the shareholders was his nephew, and he was unaware of the names of the two other shareholders.

[16] At the Respondent’s August 19, 2020 Questioning, he named the other shareholders of the company. He also explained that Mr. Nazar is a silent partner who held a 51% interest in the company for these other shareholders. Mr. Nazar is listed as the “First Party” in the UMBS MOA. The Applicant submits that, by the Respondent’s own admission, the Respondent is the beneficial owner of Mr. Nazar’s 51% interest in UBMS.

[17] This information flies in the face of facts to which the Respondent has sworn in various affidavits. For example, in his October 1, 2020 affidavit, the Respondent denied any ownership interest in Nova. When he was cross examined on this affidavit, he continued to deny any interest in Nova or UBMS. However, in his November 27, 2020 affidavit, the Respondent backtracked from his earlier position, explaining that at the time he was questioned he did not understand that his interests in UBMS and Nova were relevant to the proceedings. Douglas J. did not find favour with this explanation.

[18] There are numerous other inconsistencies in the Respondent’s materials, including that he did not operate any businesses outside of Canada; that when he referred to himself as UBMA’s CEO that was simply for ease of carrying out business transactions and attracting customers, for he never owned the business; that his nephew is the true owner of UBMA; that the Respondent does not earn an income from UBMA; and that he does not draw a salary from Nova.

[19] Douglas J. has already found the Respondent’s evidence to be not credible, particularly as it relates to financial disclosure. On the information before the court, I agree with my colleague. For example, the Respondent’s net worth appears to be a moving target when his Financial Statements (“FS”) are concerned:

(a) In the Respondent’s FS sworn February 13, 2019, his net family property is listed as $5,307,470.64. This FS does not include an interest in two banks accounts with TD Waterhouse; personal accounts with overseas banks; or his interests in UBMA or Nova. (b) In his FS sworn January 7, 2020, the Respondent lists his net worth as $6,789,947.08 and still fails to value his interests in UBMA or Nova. (c) In his FS sworn September 11, 2021, the Respondent’s net family property is listed as $4,040,858.08 and, once again, he neglects to value his interests in UBMA or Nova.

[20] The Applicant believes the Respondent is trying to defeat her claim. A deep dive into the evidence provides support for this serious allegation. Examples include:

(a) The Respondent encumbered the matrimonial home following separation by drawing down on the line of credit for the matrimonial home to the tune of $426,900 when, prior to separation, there had been no line of credit. (b) He depleted an investment account by $344,611.81. (c) He took steps to wind down an offshore company. (d) Shortly after Douglas J.’s December 2020 Endorsement, the Respondent left Canada for Dubai. He eventually stopped paying undifferentiated support of $10,000 per month and stopped making mortgage and tax payments on the Matrimonial Home.

[21] Once the mortgage payments were in arrears, TD Bank served a statement of claim seeking $630,263.89 for repayment of the line of credit plus accrued interest and possession of the property.

[22] Both the Applicant and the Respondent have defended the claim. [1]

[23] The most troubling indication that the Respondent may be trying to defeat the Applicant’s claim is his decision to self-report to Canada Revenue Agency (“CRA”). It is undisputed that from 2010 to 2018 the Respondent did not declare the totality of his worldwide income on his Canadian tax returns.

[24] The Respondent first advised the Applicant that he was considering taking part in the voluntary disclosure program in November 2020 (post-separation); on September 12, 2021, he provided a copy of the Voluntary Proposal regarding his 2010-2018 taxes. The net result is that the Respondent owes $1,183,966.40 to Canada Revenue Agency, exclusive of penalties and interest. With no effort to enlighten the court as to why he chose to self-report, his decision appears engineered to create a fresh liability, which in turn reduces his net family property.

[25] Certain information in the Voluntary Proposal lends further credence to Douglas J.’s concerns regarding the veracity of the Respondent’s financial information. To wit, the income declared from 2017 to 2018 (between $248,078.55 to $312,778.50) is significantly higher than in three previous FSs (January 7, 2020; January 31, 2020; and March 9, 2020) where the Respondent swore his income was $97,858.68, or in his FS sworn February 13, 2019, when he deposed his income from all sources was $83,150.64.

[26] While the Respondent submits that he does not have the ability to comply with his court-ordered obligations in relation to his financial commitments, he has not provided disclosure to date to support this proposition. Further, in his affidavit sworn November 4, 2021, the Respondent made no mention of his involvement in UBMS or Nova or any of his other business interests overseas. This is a significant omission, as the existence and value of the Respondent’s offshore interests is a major point of contention in this litigation.

OPERATIVE ORDERS AND THE RESPONDENT’S CORRESPONDING BREACHES

A. Di Luca J. Order, February 25, 2019

[27] At this first case conference, the Respondent consented to the Order which provides, in part, that:

1. The Respondent pay the Applicant undifferentiated support of $10,000 per month.
2. The Respondent shall continue to pay 100% of the children’s current section 7 expenses.
3. The Respondent shall continue to pay directly to the relevant third parties 100% of the matrimonial home expenses.

[28] Contrary to paragraph 1 of the Di Luca J. Order, the Respondent has not paid support to the Applicant since November 20, 2020.

[29] Contrary to paragraph 2 of the Di Luca J. Order, the Respondent owes $6,811.85 for section 7 expenses.

[30] Contrary to paragraph 3 of the Di Luca J. Order, the Respondent still owes $9,426.88 in relation to third-party home expenses. Further, as noted above, the Respondent stopped paying various expenses in relation to the Matrimonial Home, including the mortgage, property taxes, and insurance, although this latter omission has been rectified.

B. McGee J. Order, September 25, 2019

[31] The relevant portion of McGee J.’s Preservation Order is paragraph 3:

3. The Respondent shall provide to the Applicant’s counsel 30 days advance written notice of any intended transfer, assignment, mortgage, encumbrance, disposition or depletion of any property outside of the Province of Ontario in which he has an interest, directly or indirectly, legal or beneficially as trustee, and any financial disclosure in relation to any such transaction.

[32] In his affidavit sworn November 27, 2020, the Respondent admitted he breached paragraph 3 when he transferred his shares in Nova to his nephew on February 12, 2020.

C. Douglas J. Order, October 22, 2020

[33] Pursuant to paragraphs 2 – 4 of this Order:

2. By November 20/20 the RF shall bring himself into full compliance with his [financial] obligations pursuant to paras. 1, 2 and 3 of the order dated February 25/19 [the Di Luca Order].
3. By November 20/20 RF shall bring himself into full compliance with his disclosure obligations pursuant to para. 5 of the February 25/19 order, including, as applicable, an affidavit describing his best efforts to comply and explaining why compliance is not possible.
4. By November 20/20 RF shall answer his undertakings and confirm his position regarding under advisements and refusals given at questioning, including, as applicable, an affidavit describing his best efforts to comply and explaining why compliance is not possible.

[34] With respect to the Respondent’s financial obligations, the outstanding arrears totalled $176,952.85 as at November 8, 2021. These arrears remain outstanding.

[35] With respect to the Respondent’s disclosure and undertakings obligations, the Respondent has produced the following:

(a) 2020 Income Tax Return; (b) Uber logs for 2021; [2] (c) The Voluntary Proposal; (d) His FS sworn September 11, 2021; (e) The 2019 financial statements and T2 return for Aruan; (f) A construction lien in relation to the Doncrest Property; (g) Confirmation that the Matrimonial Home is insured; (h) A Notice of Issuance to Bailiff dated August 26, 2021 and Warrant to Distrain for Taxes dated September 1, 2021 (in relation to the unpaid property taxes for the Bathurst Property); (i) Tenancy Agreement for the Bathurst Property dated October 1, 2021; and (j) Documentation in respect of two apartments in Dubai.

[36] To date the Respondent has failed to produce any additional information or documents regarding any of his business interests in UBMS, nor has he provided a reason why he has not produced further disclosure in relation to these companies. When asked by the court why, for example, he had not followed up on the various requests for information he had made in November 2020, he had no cogent answer.

D. Douglas J. Order, December 15, 2020

[37] On December 3, 2020, Douglas J. had a motion from each party before him. The Respondent was seeking to reduce his support obligations, as well as permission to list and sell certain real properties. In his ruling released December 15, 2020, Douglas J. declined to consider the Respondent’s requests until he brought himself into compliance with Di Luca J.’s Order. To date, the Respondent’s motion has not been heard.

[38] The Applicant’s motion sought, inter alia, an advance equalization payment. The Respondent argued he lacked the financial wherewithal to satisfy his financial obligations, which argument Douglas J. rejected. The Respondent was ordered to pay $175,000 as an advance against the Applicant’s equalization payment within 45 days of the Order (January 29, 2021).

[39] The advance on equalization was eventually made on November 19, 2021, almost ten months late.

E. Douglas J. Order, February 1, 2021

[40] On February 1, 2021, Douglas J. awarded $58,000 in costs against the Respondent in respect of the December 15, 2020 motion.

[41] To date, this costs award remains unpaid.

F. Jarvis J. Order, November 12, 2021

[42] On this date the Respondent brought a refraining motion, seeking to stay the outstanding support order of Di Luca J. The Refraining Order was granted on terms, with Jarvis J. ordering that the Respondent continue to pay the $10,000 per month in undifferentiated support commencing December 1, 2021, and $1,000 monthly on account of arrears commencing January 1, 2022. The balance of the Respondent’s motion was dismissed.

[43] The Respondent was also directed to apply the funds in his counsel’s trust account [3] toward payment of the $175,000, and the balance toward support arrears after taking into account reasonable legal expenses.

[44] It is unclear whether the Respondent has continued payment (support), commenced payment (arrears), or applied the funds in his lawyer’s trust account toward support arrears as ordered.

G. Summary of Outstanding Financial Obligations

[45] As of November 24, 2021, the Respondent owed the Applicant $250,942.60, broken down as follows:

(a) $180,259.85 on account of undifferentiated support and section 7 expenses; (b) $8,567.17 [4] on account of household expenses for which the Applicant paid; (c) $2,807.87 on account of interest accrued from March 19, 2021 to November 18, 2021 in relation to the $175,000 advance payment on equalization; (d) $58,500 on account of costs; and (e) $805.71 on account of interest accrued from March 19, 2021 to November 24, 2021 in relation to the $58,500 costs award.

OVERVIEW OF THE RESPONDENT’S OUTSTANDING FINANCIAL DISCLOSURE

[46] The parties spent much time advancing and defending their respective positions concerning outstanding financial disclosure, much of it comprised of undertakings, under advisements, and refusals given at the Respondent’s question on March 10, 2020.

[47] It is striking that for the most part, the Respondent’s submissions in defence of his disclosure obligations reference the information contained in his November 20, 2020 and November 27, 2020 affidavits. This material has already been considered by Douglas J. and found to be lacking. Indeed, the Respondent admitted to Douglas J. through counsel that the material had shortcomings and agreed that that “more needed to be done.”

[48] Nothing “more” of substance has been done. Fulsome disclosure in respect of UBMS and Nova remains outstanding. The Respondent admits that he has not provided the 2018 and 2019 financial statements for Nova but does not explain why. Likewise, while he provided Aruan’s 2019 financial statement (not until December 2021), he does not explain why Aruan’s 2019 corporate tax return and Notice of Assessment have not been produced.

[49] With respect to UBMS, the Respondent states that his ownership interest did not crystalize until February 2018, after what he believes to be the separation date: January 1, 2018.

[50] There is a competing date of separation, however, which the Applicant submits is June 1, 2018. If the Applicant’s date is the correct one, the Respondent’s ownership interests in UBMS are an important piece of the Respondent’s financial puzzle.

[51] The Respondent’s failure to produce such intrinsic documents is further evidence of his failure to fully engage in this litigation.

[52] This is not to suggest that the Respondent has shirked his disclosure obligations entirely. He has produced over 544 documents thus far. However, given the sheer volume of businesses, properties, bank accounts, etc. to which the Respondent is connected in Canada, Iran, and Dubai, a high level of disclosure is eminently proportional. Moreover, it is not the quantity of disclosure which signals compliance, but the quality.

[53] The Respondent did serve additional affidavits in support of the Applicant’s motion. In essence, he admits he is in breach of the court orders outlined above. He documents his health and financial difficulties, submits that he has produced all of the documentation in his possession or control for UBMA and Nova, and confirms he paid funds to his lawyer’s trust account sufficient to satisfy the $175,000 advance on equalization payment.

[54] While the court appreciates the Respondent has produced all the documentation in his possession, that is not the end of the exercise. The Respondent is obligated to procure the outstanding material from the persons or entities in possession of the documentation.

ISSUES

A. Should the Respondent’s Pleadings be Struck?

[55] The most basic obligation in family law is to disclose financial information. This requirement is immediate and ongoing, and should not require court orders: Roberts v. Roberts, 2015 ONCA 450, R.F.L. (7th) 6, at paras. 11-13.

[56] The Family Law Rules, O. Reg. 114/99 provide for strict compliance with court orders. In the event an order is not complied with, Rule 1(8) sets out the following sanctions:

If a person fails to obey an order in a case or a related case, the court may deal with the failure by making any order that it considers “necessary for a just determination of the matter”, including,

a. an order for costs; b. an order dismissing a claim; c. an order striking out any application, answer, notice of motion, motion to change, response to motion to change, financial statement, affidavit, or any other document filed by a party; d. an order that all or part of a document that was required to be provide but was not, may not be used in the case; e. if the failure to obey was by a party, an order that the party is not entitled to any further order from the court unless the court orders otherwise; f. an order postponing the trial or any other step in the case; and g. on motion, a contempt order.

[57] The court has jurisdiction, pursuant to Rule 1(8.1) of the Family Law Rules, to make any order described in Rule 1(8) when a party fails to follow the rules (barring contempt).

[58] As Quinn J. held in Gordon v. Starr, at para. 23: “Court orders are not made as a form of judicial exercise. An order is an order, not a suggestion. Non-compliance must have consequences.”

[59] The threshold is high when a party seeks an order striking pleadings. In Purcaru v. Purcaru, 2010 ONCA 92, 265 OAC 121, the Court of Appeal found that the court’s discretion to make such an order should be exercised sparingly, only in exceptional circumstances, and where no other remedy will suffice. The court further underscored the importance of the participation of both parties to the litigation. Despite cautioning that care must be taken in motions to strike where the interests of children are at issue, the Court of Appeal upheld the lower court’s decision to strike the father’s pleadings: at paras. 48 and 76.

[60] In Purcaru, the Court of Appeal held (at para. 49):

The adversarial system, through cross-examination and argument, functions to safeguard against injustice. For this reason, the adversarial structure of a proceeding should be maintained whenever possible. Accordingly, the objective of a sanction ought not to be the elimination of the adversary, but rather one that will persuade the adversary to comply with the orders of the court. As this court said at p. 23 of Marcoccia v. Marcoccia (2009), 2008 ONCA 866, 60 R.F.L. (6th) 1 (Ont. C.A.), the remedy of striking pleadings is “a serious one and should only be used in unusual cases”. The court also explained at p. 4 that the remedy imposed should not go “beyond that which is necessary to express the court’s disapproval of the conduct in issue.” This is because denying a party the right to participate at trial may lead to factual errors giving rise to an injustice, which will erode confidence in the justice system.

[61] In Nanchanda v. Theti, 2016 ONCA 909, the Court of Appeal found that the conduct of the appellant had been egregious and exceptional. At para. 13, it stated that:

Rule 1(8) provides the court with the authority to strike claims. Those who choose not to disclose financial information or to ignore court orders will be at risk of losing their standing in the proceedings as their claims or answers to claims may be struck.

[62] In Van v. Palombi, 2017 ONSC 2492, the Divisional Court expressed the well-established, three-part test governing the exercise of judicial discretion to strike a party’s pleadings as follows:

(a) Is there a triggering event justifying the striking of pleadings? (b) Is it appropriate to strike the pleadings in the circumstances of the case? (c) Are there other remedies in lieu of striking pleadings that might suffice?

There Is a Triggering Event

[63] I am satisfied that there is a triggering event justifying the striking of pleadings, as the Respondent is in breach of the following Orders:

(a) Payment of undifferentiated support in the amount of $10,000 per month since November 20, 2020, contrary to the February 25, 2019 Order of Di Luca J.; (b) Payment of Matrimonial Home expenses (the correct amount, either $9,426.88 or $8,567.17, remains to be clarified), contrary to the February 25, 2019 Order of Di Luca J.; (c) Payment of $58,500 in costs for the December 3, 2020, contrary to the February 1, 2021 Order of Douglas J.; (d) Failing to provide prior written notice of any intended transfer or assignment of property, contrary to the September 15, 2019 Preservation Order of McGee J.; and (e) Failing to provide fulsome financial disclosure, contrary to the February 25, 2019 Order of Di Luca J., and the October 22, 2020 Order of Douglas J.

[64] The Respondent may also be in breach of the November 12, 2021 Order of Jarvis J.

It is Appropriate to Strike the Pleadings

[65] Satisfied that there has been a triggering event, I next turn to whether exceptional circumstances exist such that I should exercise my discretion in favour of the Respondent and not strike his pleadings. In undertaking this task, I should consider and weigh the following factors:

(a) The extent and persistence of the non-compliance (Horzempa v. Ablett, 2011 ONCA 633, at para.7); (b) Whether the disobedience of the orders and rules was wilful in nature (Kovachis v. Kovachis, 2013 ONCA 663, 367 DLR (4th) 189, at para. 3) [5]; (c) Whether the non-compliant party made reasonable efforts to comply and is able to provide acceptable explanations for the breaches (Horzempa, at para. 6); (d) Where the non-compliance relates to support orders, the payor’s financial circumstances and their ability to pay support (Higgins v. Higgins, 152 ACWS (3d) 96, at paras. 7-10); and (e) The remedy should be proportionate to the issues in question and the conduct of the non-compliant party (Kovachis, at para. 3).

Extent and Persistence

[66] Even when given the opportunity to bring himself into compliance with his court-ordered obligations, the Respondent has elected not to do so. His breaches began in early 2020 with the transfer of shares in Nova to his nephew and have continued to date. As indicated above, relevant financial disclosure remains outstanding.

Wilful Non-Compliance

[67] The Respondent’s claimed inability to pay repeats the same arguments he put before Douglas J. in late 2020. His arguments did not find favour then due to the demonstrated unreliability of his financial statements. This claimed inability to pay continues to manifest itself, most recently with the Respondent’s FS of September 11, 2021 and the many questions arising therefrom. [6]

[68] The Respondent concedes that his financial disclosure is lacking, but along with this concession he offers no rationale as to why.

[69] I find that the Respondent’s non-compliance is wilful.

Minimal Efforts to Comply

[70] As Raikes J. recently held in Zantingh v. Zantingh, 2021 ONSC 7959, at para. 40:

Parties in matrimonial litigation have a positive duty to provide complete, accurate, and timely financial disclosure. Non-disclosure and/or partial disclosure that begs more questions than it answers is clearly insufficient and non-compliant. It delays and adds to the cost of litigation. It undermines the objectives of the Family Law Rules and the legislation dealing with family property and support. It is the bane of family litigation: Cunha v. Cunha, at para. 5.

[71] Without full and complete disclosure of the entirety of the Respondent’s business interests, the court will be unable to arrive at a just and equitable resolution.

[72] While the Respondent has made efforts to comply, he has withheld documentation fundamental to this litigation. I find his efforts to comply to be lacking.

Payor’s Financial Circumstances

[73] The Respondent is a successful businessman. His most recent FS puts his net family property at over $4,000,000. Even with my vesting order, he still owns a property in Ontario (valued at $3,750,000) [7] and multiple properties overseas (total value exceeding $2,000,000).

[74] Jarvis J. succinctly captured the Respondent’s current financial situation:

While this Court will grant the Refraining Order, and is somewhat sympathetic to the SP [Respondent], the fact is that he is in breach of at least three Orders of the Court dealing with his financial affairs. He has not impressed several judges with his financial probity and, quite likely, finds himself in a situation he created. By complying with the Order to advance $175,000 to the SR [Applicant] as soon as possible, the SP may be able to avoid his pleadings being struck (and other sanctions) and persuade the motion judge on 26 November to permit him to proceed to vary the support Order. There is no evidence, for example, why the SP cannot access value in his other non-Ontario assets (possibly even those he claims are beneficially owned by his sisters) to bring himself into compliance with allthe [sic] financial Orders of this Court.

[75] I find that the Respondent has the means to pay his support obligations, yet chooses not to. While he claims he is unable to get his money out Iran and Dubai, he provides no affidavit evidence describing his efforts to do so.

Proportionate Remedy

[76] I agree with the reasoning of Chappell J. in Levely v. Levely, 2013 ONSC 1026, at para. 12:

Family Court proceedings are intended to be a means by which aggrieved parties can have their disputes arising after separation adjudicated upon by the court in a just, efficient and timely manner. Unfortunately, they all too often become a destructive tool which one party wields and manipulates in order to create further financial and emotional hardship for the other party. The frequency with which Family Law litigation degenerates into an abusive game of delay tactics, stonewalling, and dodging of judicial authority is a concern which must remain at the forefront of the judge’s mind in considering remedies for a party’s failure to participate as required in court proceedings or to comply with court orders. Family Law litigants who come to the court for assistance must come with a strong sense of assurance that the process will be an effective means of mending and stabilizing the family fabric, rather than a futile money pit of failed justice. The court has a critical responsibility and role to play in ensuring that proceedings which are intended to protect families and lead to resolution of pressing and emotionally divisive issues are not hijacked by a party and transformed into a process for further victimizing the other party and the children in their care.

[77] The sheer scope of the Respondent’s breaches leads me to conclude that there is no reasonable sanction other than to strike his pleadings. The proceedings have been ongoing for over three years. Giving the Respondent open-ended opportunities to comply with the various Orders will only prolong the forward motion of the litigation.

[78] Upon consideration of the relevant factors, I find there are no special circumstances warranting the exercise of my discretion in favour of the Respondent.

Other Remedies in Lieu of Striking the Pleadings

[79] Having determined that I will not exercise my discretion in favour of the Respondent, it is open to me to fashion an appropriate remedy pursuant to subrule 1(8): Ferguson v. Charlton, 2008 ONCJ 1, at para. 64. These remedies include an adjournment to provide the Respondent with more time to effect disclosure (Mullin v. Sherlock, 2018 ONCA 1063); striking the Respondent’s pleadings on financial issues and allowing him to continue on the parenting issues (Sleiman v. Sleiman); ordering reinstatement of the Respondent’s pleadings on conditions (Costabile v. Costabile); and/or inviting the Applicant to seek an adverse inference at trial if material disclosure remains outstanding (Purcaru).

[80] An adjournment will simply prolong the progress of the litigation, and it is unlikely the Respondent will bring himself into full compliance.

[81] Likewise, permitting the Applicant to seek an adverse inference at trial does nothing to acknowledge the gravitas of the Respondent’s breaches.

[82] I believe a remedy crafted by combining the remaining two of the four possible options noted above achieves an appropriate balance. Accordingly, while I am striking the Respondent’s Answer and Respondent’s Claim dated February 13, 2019, the Respondent will have 90 days from the release of these reasons to bring himself into full compliance with the outstanding Orders (support, financial disclosure, answers to undertakings, and the costs award).

In the event the Respondent fails to bring himself into full compliance within the 90 days, he will only be permitted to participate in the trial on the limited issues of decision-making responsibility and parenting. Given the potential impact on the best interests of the children, it would behoove no one to prevent the Respondent from making submissions on parenting issues. As the Court of Appeal observed in Haunert-Faga v. Faga, (2005), 20 R.F.L. (6th) 293 (Ont. C.A.) at paragraph 7, it is generally preferable to avoid the sanction of striking pleadings where children’s interests are involved.

B. The Vesting Order

[83] As already noted, my advance ruling granting the Applicant’s request for a vesting order was released January 6, 2022. What follows are my reasons for doing so.

[84] The Respondent owned three Ontario properties in his name only. The Applicant sought to transfer title in two of the three: Bathurst Street and the Matrimonial Home. Her intention was to sell Bathurst Street and use the proceeds of sale to save the Matrimonial Home.

[85] In Ontario, the court’s general power to grant a vesting order is found in s. 100 of the Courts of Justice Act:

A court may by order vest in any person an interest in real or personal property that the court has authority to order be disposed of, encumbered or conveyed.

[86] Sections 9(1)(d)(i) and 34(1)(c) of the Family Law Act also provide a broad power to grant a vesting order.

[87] In Lynch v. Segal, 82 OR (3d) 641, the Ontario Court of Appeal described the legal principles related to the issuance of vesting orders as follows:

27 In Ontario, the court's broad general power to grant a vesting order is found in section 100 of the Courts of Justice Act. In the specific context of family law claims, sections 9(1)(d)(i) and 34(1)(c) of the Family Law Act confer an equally broad power to grant a vesting order on an application for equalization of net family property or support, respectively. Vesting orders are discretionary and have their origins in the court's equitable jurisdiction …

31 The rationale for the vesting power, therefore, is to permit the court to direct the parties to deal with property in accordance with the judgment of the court. The jurisdiction is quite elastic. Nothing in the language of either section 100 of the Courts of Justice Act or section 34(1)(c) of the Family Law Act operates to constrain the flexible discretionary nature of the power.

32 I do not think any useful purpose is served by attempting to categorize the types of circumstances in which a vesting order may issue in family law proceedings. The court has a broad discretion, and whether such an order will or will not be granted will depend upon the circumstances of the particular case. I agree with the appellants that the onus is on the person seeking such an order to establish that it is appropriate. As a vesting order — in the family law context, at least — is in the nature of an enforcement order, the court will need to be satisfied (as the trial judge was here) that the previous conduct of the person obliged to pay, and his or her reasonably anticipated future behaviour, indicate that the payment order will not likely be complied with in the absence of more intrusive provisions: see Kennedy v. Sinclair (2001), 18 R.F.L. (5th) 91 (Ont. S.C.J.), affirmed (2003), , 42 R.F.L. (5th) 46 (Ont. C.A.). Thus, the spouse seeking the vesting order will have already established a payment liability on the part of the other spouse and the amount of that liability, and will need to persuade the court that the vesting order is necessary to ensure compliance with the obligation.

33 In addition, the court should be satisfied that there is some reasonable relationship between the value of the asset to be transferred and the amount of the targeted spouse's liability and, of course, that the interests of any competing execution creditors or encumbrancers with exigible claims against the specific property in question are not an impediment to the granting of a vesting order. However, I would not go so far as to say — as argued by the appellants — that the onus to satisfy the court on these matters is at all times on the person seeking the order. I shall return to these issues later in these reasons.

[88] Before making a vesting order, the court should have some indication from the payor’s previous conduct, and reasonably anticipated future behaviour, that payment will not be forthcoming: Lewchuk v. Lewchuk, 2012 ONSC 2236, at para. 24.

[89] In Buttar v. Buttar, 2013 ONCA 517, 116 OR (3d) 481, the Court of Appeal considered the powers granted to the court under s. 9 of the Family Law Act. As Rosenberg J.A. explained at para. 53:

[S]ection 9 gives the court the power to transfer properties only “if appropriate to satisfy an obligation imposed by the order [for equalization of net family properties]”. In other words, the transfer power under section 9 is specifically connected to the satisfaction of the order for equalization of net family properties rather than a general transfer power for the settlement of disputes arising from martial breakdown.

[90] While the Court of Appeal cautions that a vesting order under s. 9 should be applied to ensure satisfaction once a net family property determination has been made at trial, there have been instances where such orders were made prior to trial.

[91] For example, in Verch v. Verch, 2012 ONSC 2621, the court granted a vesting order to the wife, who was not named on title, before an equalization payment had been ordered. The couple were at risk of losing the matrimonial home to a tax proceeding following the husband’s failure to pay property taxes. The husband’s behaviour during the course of litigation (including disregarding an order to pay $143,700 into court) led the court to conclude that the husband would continue to disregard court orders:

I am persuaded that a Vesting Order is necessary to ensure compliance with that obligation and to ensure that the matrimonial home is protected pending the final outcome of this litigation: at para. 39.

[92] Finally, relying on r. 1(8) and 14(23) of the Family Law Rules, Abrams J. held that when a party chooses not to follow the Family Law Rules, or fails to abide by a court order, the court has the discretion to “make any order that it considers necessary for a just determination of the matter, on any conditions, that the court considers appropriate.”

[93] In Patel v. Patel, 2021 ONSC 1741, the wife was granted a vesting order, which allowed her to list and sell the matrimonial home to secure payment of the husband’s court-ordered child support obligations, in addition to an outstanding costs award. The husband had not complied with six court orders concerning financial disclosure and had left the jurisdiction. As Tzimas J. held at paras. 31-34:

First, there is no dispute that Mr. Patel has failed to comply with any of the court orders related to his obligation to pay child support and s. 7 expenses, and he has accumulated costs orders against him that total $16,500. All told, the monies he owes to Ms. Patel to date add up to approximately $37,467. Having regard for the fact that the child is only three and a half years old, Ms. Patel can expect a substantial augmentation of this debt and a substantial judgment if she were to proceed with an uncontested trial, as anticipated by the court order of July 29, 2020. When these figures are considered against the estimated equity of $70,000 I find that there is a reasonable relationship between the value of the matrimonial home and Mr. Patel’s debt to Ms. Patel.

Second, I also find that a absent a vesting order, there is no reasonable prospect that Ms. Patel will be able to enforce the current outstanding court orders or any future judgment against Mr. Patel. On Mr. Patel’s own representations to the court, his alleged financial difficulties underscore the risk to Ms. Patel’s future ability to enforce the court orders to date and any other judgment against Mr. Patel. His disappearance to India, without notice and for an extended period of time only exacerbates the risk to Ms. Patel’s rights. Rather remarkably, nobody suggested anything about any plans to return to Canada. That means that apart from being able to realize against the matrimonial home, if Mr. Patel does not return to Canada, the prospects of the Family Responsibility Office being in a position to go after Mr. Patel’s wages, or any other financial sources to collect support and section 7 obligations are slim to nil.

Third, insofar as Mr. Patel’s default on his debts to RBC and RBC’s imminent power of sell (sic) proceedings are concerned, there was no evidence before the court to suggest that Mr. Patel would seek to reinstate his mortgage payments or do anything to avert the sale of the matrimonial home. The indication by RBC that if Ms. Patel acted swiftly to obtain a vesting order and then to immediately list and sell the matrimonial home actually represents a very time-limited opportunity for Ms. Patel to mitigate Mr. Patel’s expected loss and effectively do what she could to maximize the net equity…

On the strength of the foregoing this (sic) analysis, I conclude that issuing a vesting order in favour of Ms. Patel and requiring her to list and sell the property immediately is the only order that makes sense.

[94] In the case at bar, it is uncontroverted that the Respondent will owe the Applicant a considerable equalization payment. During his Questioning he agreed that, at a minimum, the Applicant would be entitled to $750,000. Indeed, according to one of the Respondent’s FSs, the equalization payment could be as high as $2,600,000.

[95] The Respondent submits that vesting orders are enforcement remedies. Absent an order under s. 9(1)(d) or 34(1)(c) of the Family Law Act vesting property in one spouse to secure an equalization payment or for payment of child or spousal support, the legislation equalizes property by a financial transfer, not by a property transfer.

[96] However, in the particular circumstances of this case, a vesting order was the appropriate remedy. TD Bank had commenced foreclosure proceedings. The Matrimonial Home was substantially at risk. The Respondent’s previous conduct and reasonably anticipated future behaviour led me to believe that the outstanding payments and disclosure would not be forthcoming. It was in the best interests of the children to ensure they enjoyed the security of the Matrimonial Home for as long as reasonably possible. The most practicable way to affect this was by granting the Applicant a vesting order.

C. Family Responsibility Office Involvement

[97] The Respondent submits that the Applicant’s choice to have Di Luca J.’s support order enforced through the Family Responsibility Office (“FRO”) disentitles her to a vesting order related to any of the Respondent’s real properties. In other words, no one but the Director of FRO may enforce a support order that is filed in the Director’s office. Because a vesting order is an enforcement remedy, the Applicant would have to withdraw from FRO’s purview.

[98] The Applicant relies, inter alia, on Kitely J.’s decision in Marchese v. Marchese, 2015 ONSC 7691, in support of her application for a vesting order. In Marchese, the husband owed arrears of both child and spousal support, and he was not entitled to relief from the court until he had satisfied the support orders. The court ultimately found that it was appropriate to grant the vesting order to the wife in light of the outstanding support payments. In that case, conditions were imposed as equalization had not yet been calculated and it was unclear who owed the equalization payment. The Respondent submits Marchese is of limited precedential value because the court’s jurisdiction to grant a vesting order while FRO occupied the field was not canvassed with the court.

[99] The difficulty with the Respondent’s argument lies in the fact that I granted the vesting order not as an enforcement remedy to secure the Respondent’s support obligations, but rather as an advance on the Applicant’s equalization payment. Recall that by the Respondent’s own admission this would be at a minimum $750,000, and pursuant to at least one of his FSs, the equalization could be $2.6 million or greater.

D. CRA Involvement

[100] Finally, the Respondent argues that the CRA, as the largest creditor, may have been prejudiced by not being put on notice of the motion, thereby depriving it of the opportunity to make submissions on the propriety of a vesting order.

[101] When I queried whether there was an obligation to put the CRA on notice, counsel for the Respondent conceded that there was no statutory duty to do so until the claim had crystalized. Thus, at the time the motion was before me, the CRA held no status as a creditor.

TERMS OF ORDER TO ISSUE

[102] Based on the foregoing, an order shall issue as follows:

(1) The Respondent’s Answer and Respondent’s Claim are hereby struck pursuant to subrule 1(8), subject to paragraphs 2 and 3, and the trial of this matter shall proceed on an uncontested basis.

(2) The Respondent may move to restore his Answer and Claim on further order of the court in the event each of the following conditions occurs within 90 days:

(a) He pays the outstanding costs award of $85,000 for the December 3, 2020 motion; (b) He pays the outstanding undifferentiated support and section 7 expenses [8]; (c) He pays the outstanding expenses in relation to the Matrimonial Home; and (d) He produces all of the outstanding financial disclosure, and answers all of the outstanding undertakings; and

(3) In the event the Respondent fails to satisfy the conditions in para. 2 of this Order, the Respondent is granted the following limited participation rights in respect of his parenting claims:

(a) To be given notice of any further steps and court appearances; and (b) To participate in the trial with respect to decision-making responsibility and parenting time only.

(4) Paragraph 1 ii) of the Vesting Order dated December 6, 2021 is amended to include the following after (“Matrimonial Home”):

, and subject to the rights and priority of the first mortgage in favour of the Toronto-Dominion Bank, which is in default as of the date of this order.

[103] The issue of the costs of this motion is reserved to the trial judge.

Madam Justice A.A. Casullo Released: February 23, 2022

[1] Counsel for TD Bank attended the entirety of the motion, although the bank took no position on the merits. [2] The Respondent does not work in Canada, but he does drive for Uber when he can, or is able. [3] These funds are comprised of the sale proceeds of two of the Respondent’s apartments in Dubai. [4] I took this figure directly from the Applicant’s materials. I appreciate this figure differs from the amount in paragraph 38 of these reasons. I suspect the difference might reflect a payment made by the Respondent after certain material was produced. [5] Rule 1(8) was amended in 2014. While the question of whether a party’s actions have been willful has been removed as a factor to consider, Kovachis remains good law. See for example Wouters v. Wouters, 2018 ONCA 26, at para. 45. [6] For example, LOANS, OBLIGATOINS, ETC. IN APPLICANT COUNSEL SUBMISSIONS. [7] I acknowledge that McGee J.’s Preservation Order prohibits the Respondent from disposing of this property (Doncrest Drive). However, the Respondent could have appealed the Preservation Order, sought to vary it, or have it set aside, but took no steps in this regard. [8] While this figure totalled $180,259.85 as at November 24, 2021, it must be adjusted to reflect the passage of time.