Court File and Parties

COURT FILE NO.: FC-12-FS047180-0001 DATE: 2023/04/20 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FERDINAND KRONBERGER, Applicant AND: CLAUDIA KUDROCOVA, Respondent

BEFORE: Justice L. Madsen

COUNSEL: M. Dwyer, Counsel for the Applicant Respondent is Self-Represented

HEARD: April 4, 2023

Endorsement

[1] The Applicant, Mr. Kronberger, brings a contempt Motion against the Respondent, Ms. Kudrocova, alleging her failure to comply with the specific terms of two court Orders: paragraph 9 of the Final Order of Justice Broad made May 3, 2019 [“Justice Broad’s Order”] and paragraph 29 of the decision of Justice Henderson made October 18, 2021 [“Justice Henderson’s Order”].

[2] Upon a finding of contempt, Mr. Kronberger seeks several remedies, including: an Order dispensing with Ms. Kudrocova’s consent to filing certain corporate tax returns and other tax documents; an Order that the parties’ corporate tax liabilities be paid from funds held in trust; an Order that he be paid half of the remaining funds in trust; and an Order that from Ms. Kudrocova’s share of the funds in trust, he be paid outstanding costs amounts totalling approximately $44,575 in addition to costs arising from this motion.

[3] For the reasons set out below, I find, beyond a reasonable doubt, that Ms. Kudrocova is in contempt as claimed. The remedies are set out below.

Documents Reviewed

[4] I reviewed the following documents filed for this motion:

a. Mr. Kronberger’s Notice of Motion dated August 25, 2022; b. Mr. Kronberger’s Affidavit sworn July 7, 2022; c. Ms. Kudrocova’s Affidavit sworn September 2, 2022; d. Mr. Kronberger’s Statement of Law; e. Mr. Kronberger’s Form 14(c) Confirmation; f. Mr. Kronberger’s Amended Notice of Motion dated March 16, 2023; and g. Affidavits of service in relation to the above materials.

Procedural Issues

[5] This motion was served on August 19, 2022, by email, pursuant to the Order of Justice Ramsay made August 10, 2022 permitting service of this motion in that manner. The amended notice of motion was served March 16, 2023 also by email, pursuant to the same Order.

[6] Ms. Kudrocova does not accept the jurisdiction of the Court. She made this clear both on March 2, 2023, when she attended before me, as well as on April 4, 2023 when this motion was heard. Each time, she attended with “supporters” who variously interrupted the court, refused to follow court direction, and attempted to pass documents to me. Police were required to attend on both occasions and on both occasions, Ms. Kudrocova was temporarily removed from the courtroom as were some of her supporters. I instructed that she be permitted to return, if willing to follow the rules of the courtroom and the direction of the judge, which, when she returned, she largely did.

[7] Ms. Kudrocova had an opportunity to make submissions which I have considered carefully.

Evidence and Argument on this Motion

[8] Although Ms. Kudrocova served and filed an affidavit, it is non-responsive to the issues raised on this motion. Her affidavit does not deny, or in any way address the evidence of Mr. Kronberger. Therefore, Mr. Kronberger’s evidence stands substantively uncontested.

[9] Ms. Kudrocova’s submissions were similarly non-responsive. She repeated that she does not accept the jurisdiction of this Court, and stated that she has established her own court, the “Kudrocova Court.”

Background

[10] The parties were married for five years, separating in 2012. They are the parents of two children, one of whom lives with each parent. The parties divorced in 2015.

[11] The parties have litigated virtually all matters arising from their separation.

[12] The parties are owners of a corporation, “KFCCK Food Services” [“the company”]. The company operated an A&W franchise until October 31, 2017 when the assets of the corporation were sold for $650,000.

[13] Currently, there is $123,884 remaining in trust from the net proceeds of the sale.

[14] The parties ultimately resolved on consent the issues arising from their separation. They entered into Minutes of Settlement on April 15, 2019, which were incorporated into Justice Broad’s 2019 Final Order.

[15] As part of their settlement, the parties agreed to certain terms related to the filing of corporate tax returns, to utilize the funds in trust to address the corporate tax liability, and to cooperate to minimize tax liability for each of them in relation to interim payments received from the proceeds of the sale of the assets of the company.

[16] The specific wording in paragraph 9 of Justice Broad’s Order is as follows:

The parties shall cooperate and jointly file the 2017 and 2018 and 2019 Corporate T2 income tax returns for KFCCK Food Services Inc. (“KFCCK”).

The parties shall direct Waterous Holden Amey Hitchon LLP (David Clement) prior to any disbursal of funds held in trust on account of the sale of KFCCK to the parties or for the parties’ benefit, to retain the sum of $123,884.00 (“the corporate tax holdback account”) to be utilized in resolving the parties’ liability equally for outstanding corporate taxes owed to Canada Revenue Agency (“CRA”) as a result of Federal and Provincial income taxes from the operation of KFCCK (including any recapture on the sale of KFCCK assets, which closed on or about October 31, 2017).

The parties shall cooperate as may be reasonably possible to minimize any tax liability of each on account of interim payments received by them from the proceeds of sale of the assets of KFCCK.

[17] Since Justice Broad’s Order, Mr. Kronberger has been attempting to comply, and to have Ms. Kudrocova comply, with paragraph 9 of that Order, so that the corporation can finally be wound up, taxes paid, and remaining funds, if any, disbursed to the parties.

[18] Mr. Kronberger initially took steps, including the following, to enlist Ms. Kudrocova’s cooperation:

a. The company’s long-time accountant provided draft income tax returns for her review; b. Ms. Kudrocova was requested to sign a document to make an election under section 83(2) of the Income Tax Act, to declare a capital dividend, which would, according to the accountant, have minimized the parties’ tax liability as contemplated by Justice Broad’s Order; c. Mr. Kronberger’s counsel made numerous overtures by correspondence to Ms. Kudrocova’s counsel to attempt to secure cooperation.

[19] Unable to secure Ms. Kudrocova’s cooperation, Mr. Kronberger brought a motion for compliance with Justice Broad’s Order. Ms. Kudrocova brought cross motions for disclosure.

[20] The motions were conferenced by Justice Breithaupt Smith, resulting in consent disclosure terms on December 9, 2020, and a plan for review of the draft tax returns by an accountant to be retained by Ms. Kudrocova. The accountants were to be permitted to communicate with one another and Ms. Kudrocova was to provide her position with respect to the filing of the returns prepared by the company accountant by January 15, 2021. The motions were adjourned.

[21] The evidence is that although Ms. Kudrocova did retain an accountant, she did not authorize him to review the draft corporate returns in accordance with Justice Breithaupt Smith’s endorsement. She also did not provide her position with respect to the filing of the returns as prepared by the company’s accountant, despite repeated requests from Mr. Kronberger’s counsel. Her position has, in fact, never been provided.

[22] The motions were heard by Justice Henderson on October 18, 2021. In his decision, Justice Henderson found as a fact that Ms. Kudrocova had “not diligently attended to the filing of the tax returns.” He found that issues raised by Ms. Kudrocova’s accountant were well beyond the scope of what was contemplated in Justice Broad’s Order.

[23] Justice Henderson ordered that the company accountant provide responses to three questions posed by Ms. Kudrocova’s accountant within 30 days.

[24] At paragraph 29 of his decision, Justice Henderson ordered that within 30 days of her receipt of those responses, Ms. Kudrocova was to comply with paragraph 9 of Justice Broad’s Order:

“ by signing the draft tax returns, consenting to and/or signing Form T2054, and by executing form T1873, unless the respondent is specifically instructed not to do so by Joshi (her accountant), such instructions to be in writing with supporting reasons and forthwith produced to the Applicant” [emphasis added].

[25] Justice Henderson ordered costs against Ms. Kudrocova of $8,475 in relation to the motions, stating that the filing of the tax returns had taken far too long, and that the scope of Ms. Kudrocova’s accountant’s questions had gone well beyond what was necessary.

[26] Mr. Kronberger’s counsel provided the additional information from the corporate accountant to Ms. Kudrocova, as required by Justice Henderson, within the 30 days. He then sought her execution of the required documents, or evidence of written instruction from her accountant that she should not do so. Neither was forthcoming. Instead, Ms. Kudrocova’s counsel took steps to be removed from the record. The evidence is that no response was received from Ms. Kudrocova nor any evidence of “instruction” to her in writing, by her accountant, not to execute the forms.

[27] To date, Ms. Kudrocova has still not given any indication that she intends to sign the tax returns or otherwise comply with either paragraph 9 of Justice Broad’s Order or paragraph 29 of Justice Henderson’s decision. When directly asked by me in Court, she stated that an investigation by the CRA was required.

Additional Facts

[28] The undisputed evidence is that Ms. Kudrocova does not respect the Court or follow court Orders including cost Orders. Presently, on the evidence, she owes Mr. Kronberger $44,575.32 in unpaid costs orders as follows:

a. $20,000 ordered by Justice MacLeod on June 30, 2020, in relation to an urgent motion and a motion to change in which Mr. Kronberger was wholly successful. b. $16,100.32 in relation to an unsuccessful appeal of Justice MacLeod’s final Orders; c. $8,475 ordered by Justice Henderson on November 24, 2021, in relation to the motions discussed above.

[29] Ms. Kudrocova has taken steps to intimidate one of Mr. Kronberger’s counsel, including invoicing him for each time he uses her name. The evidence is that she has invoiced him for $21,166,850 and threatened to retain a collection agency to enforce same. Ms. Kudrocova also commenced ancillary proceedings against counsel, with reports to the Law Society of Ontario and claims at the Human Rights Tribunal of Ontario. Her complaint to the Law Society was dismissed as was her subsequent appeal. Her proceedings at the Human Rights Tribunal have been dismissed as well.

Law and Analysis

[30] Rule 31 of the Family Law Rules, O. Reg. 114/99 governs contempt motions. Rule 31 provides in part:

WHEN CONTEMPT MOTION AVAILABLE 31(1) An Order, other than a payment order, may be enforced by a contempt motion made in the case in which the order was made, even if another penalty is available.

[31] Below, I rely on and apply my statement of law as set out in Weber v. Merritt, 2018 ONSC 7590, 19 R.F.L. (8th) 70, at paras. 29-39 and 53-61.

[32] Civil contempt has three elements which must be proven beyond a reasonable doubt:

a. The order alleged to have been breached must state clearly and unequivocally what should and should not be done; b. The party alleged to have breached the order must have actual knowledge of it; c. The party allegedly in breach must have intentionally done the act that the order prohibits or intentionally failed to do the act that it compels.

See Carey v. Laiken, 2015 SCC 17, 2 S.C.R. 79, at paras. 32 – 35 [Carey]; Fatahi-Ghandehari v. Wilson, 2017 ONSC 6034, O.J. No. 5280, at para. 56.

[33] The offence of contempt consists of the intentional doing of an act or the intentional failure to do an act that has been ordered by the Court to be done. The required intention relates to the act itself, not to the disobedience. The intention to disobey, in the sense of desiring or knowingly choosing to disobey the order, is not an essential element of civil contempt: Greenberg v. Nowack, 2016 ONCA 949, 135 O.R. (3d) 525, at para. 27 [Greenberg].

[34] Contumacy or lack thereof goes to the penalty to be imposed, not to liability: Carey, at 38 and 47; Blatherwick v. Blatherwick, 2016 ONSC 2902, O.J. No. 2399, at para. 50.

[35] Contempt is a serious remedy and contempt powers are to be used cautiously. As set out in Fisher v. Fisher, 2003 CarswellOnt 1170, at para. 11:

Contempt of court is the big stick of civil litigation. It should be used sparingly and only in the most clear-cut cases. There are other procedures available to enforce Orders: other than a contempt motion. To use contempt motions to enforce minor but annoying breaches of [an Order] takes away and waters-down the effectiveness of the contempt procedure. Contempt should be reserved for those most serious breaches which justify serious consequences.

[36] Clear proof, beyond a reasonable doubt, must exist that the terms of the order have been breached by the contemnor. Any doubt must be exercised in favour of the person alleged to be in breach of the order: Blatherwick, at para 47; Prescott-Russell Services for Children and Adults v. G.(N.), [2006] 82 O.R. (3d) 686, at para. 27. See also Greenberg, above, at 26.

[37] A finding of contempt is a remedy of last resort, to be exercised only where there are no other adequate remedies available to the aggrieved party: Godard v. Godard, 2015 ONCA 568, 387 D.L.R. (4th) 667 at para. 17; Hefkey v. Hefkey, 2013 ONCA 44 at para. 3. The object of a civil contempt proceeding is remedial, namely: compliance with the Order.

[38] At the same time, as noted by Justice Charney in Perna v. Foss, 2015 ONSC 5636, O.J. No. 4673, at para. 14, “notwithstanding the court’s reluctance to exercise its contempt powers, it is important that such power be exercised in appropriate cases to ensure that parties in family law proceedings understand that court orders cannot be ignored or disobeyed, and that compliance with a court Order is neither an option nor a bargaining chip.”

[39] I conclude, beyond a reasonable doubt, that Ms. Kudrocova is in contempt of paragraph 9 of Justice Broad’s Order and paragraph 29 of Justice Henderson’s decision for reasons including the following:

a. I find that the Orders state clearly and unequivocally what is to be done. While it could be said that paragraph 9 of Justice Broad’s Order left some room for interpretation of what constituted “cooperation,” upon the endorsement of Justice Breithaupt Smith of December 9, 2020, and the further decision of Justice Henderson made October 18, 2021, it was entirely clear what was required of Ms. Kudrocova to comply with the Orders. b. I am satisfied that Ms. Kudrocova had actual knowledge of the Orders of which she is alleged to be in contempt. Justice Broad’s Order was a consent order, and she was represented at the argued motions before Justice Henderson. I find that she is deliberately in breach of both Orders and that she was fully aware of the terms. Countless efforts have been made to secure her compliance with those terms and after outreach by her accountant, she has been unresponsive. c. Asked by me directly, in Court (her affidavit having been non-responsive), it is clear that, even now, she has no intention of complying with the Orders. d. Further, I note in addition that Ms. Kudrocova has not denied any aspect of the allegations carefully set out in Mr. Kronberger’s affidavit.

Remedy

[40] Where a party is found to be in contempt of an order of the court, he or she is generally given an opportunity to purge his or her contempt.

[41] In this case, however, I decline to do so.

[42] Ms. Kudrocova has made it abundantly clear, for several years now, that she will not comply with Orders of the court. She has delayed and delayed, causing protracted steps in court at considerable expense to Mr. Kronberger, and she has failed to pay the resulting costs Orders. This motion must be brought to a conclusion so that the company can be fully wound down, the funds released from trust, and so that the parties can move on.

[43] Where contempt is found, the Court has broad penalty powers under Rule 31(5) of the Family Law Rules. That section provides as follows:

31(5) CONTEMPT ORDERS – If the Court finds a person in contempt of the Court, it may order that the person,

(a) Be imprisoned for any period and on any conditions that are just; (b) Pay a fine in any amount that is appropriate; (c) Pay an amount to a party as a penalty; (d) Do anything that the Court considers appropriate; (e) Not do what the Court forbids; (f) Pay costs in an amount decided by the Court; and (g) Obey any Order.

[44] Sentencing should be restorative to the victim and punitive to the contemnor. To accomplish the former requires that the sentence correlate to the conduct that produced the contempt and to accomplish the latter requires the sentence not to reflect a marked departure from those imposed in like circumstances: Cassidy v. Cassidy, 2010 ONSC 2707, 85 R.F.L. (6th) 148, at para. 10 [Cassidy].

[45] The primary objective in sentencing civil contempt is to coerce the offender into obeying the court judgment or order: Cassidy, at para. 12; Kopaniak v. MacLellan, 2002 CarswellOnt 1309, [2002] 212 D.L.R. (4th) 309, (O.C.A.) at para. 28, citing Nigel Lowe and Brenda Sufrin, Borrie and Lowe on the Law of Contempt, 3rd ed. (1996) at pp. 655-56, and Jeffrey Miller, The Law of Contempt in Canada (1997) at pp. 13 - 17.

[46] Punishment must be in proportion to the breach or breaches of the order. The court must consider aggravating or mitigating factors: Carroll v. Richardson, 2013 NSSC 187, 331 N.S.R. (2d) 129, at para. 20 [Carroll].

[47] Deterrence and denunciation are also important objectives of sentencing: Carroll, at para. 21. The purpose of penalties is not to compensate the wronged party, per se. It is to punish the wrongdoer: Roby v. Roby, [2003] 48 R.F.L. (5th) 389, at para. 30 [Roby].

[48] In Cassidy, at para. 13, Justice Price summarized the applicable sentencing principles as follows:

a. The available sentences; b. The proportionality of the sentence to the wrongdoing; c. The similarity of sentences in like circumstances; d. The presence of mitigating factors; e. The presence of aggravating factors; f. Deterrence; g. The reasonableness of a fine; h. The reasonableness of incarceration.

[49] Ultimately, the Court is given very broad discretion to order what it considers appropriate when a person has been found to be in contempt. Rule 31(5)(d) specifically states that the court may “do anything else that it decides is appropriate” when it finds a person in contempt. As Justice Campbell stated in Roby, at para. 32, this confers the “broadest” discretion.

[50] I find that the following are the appropriate remedies for the contempt finding herein:

a. Ms. Kudrocova’s consent to and signature on the corporate income tax returns and any related tax documents, as prepared by Ajay Kaushnik (or an alternate accountant as referred to below) for KFCC Food Services Inc. (KFCCK), is hereby dispensed with; b. Ms. Kudrocova’s consent to and signature upon any and all documents required to wind up KFCCK, as per paragraphs 9 – 12 of Justice Broad’s Order is hereby dispensed with; c. Ms. Kudrocova’s consent to and signature on forms including but not necessarily limited to T183Corp, Form T2054, and corporate resolutions confirming the declaration of capital dividends, which documents shall be prepared by Ajay Kaushik upon the filing of the 2017 – 2021 corporate T2 income tax returns pursuant to sections 207 and 248 of the Ontario Business Corporations Act, is hereby dispensed with; d. If Ajay Kaushnik is unable to undertake the tasks set out above for any reason, Mr. Kronberger may, in his sole discretion, retain, at the company’s expense, another accountant to perform those tasks; e. The sum of approximately $123,884 currently held in trust by Waterous Holden Amey Hitchon LLP shall be forthwith distributed as follows, upon direction by Mr. Kronberger or his counsel:

i. First, to resolve any outstanding corporate tax liability from the operation of KFCCK (including any recapture on the sale of KFCCK assets which closed on or about October 31, 2017); ii. Second, to address any accounting fees incurred to wind up KFCCK; iii. Third, 50% of the remaining balance in trust shall be paid to Mr. Kronberger (in accordance with paragraph 9 of Justice Broad’s Order); iv. Fourth, from Ms. Kudrocova’s 50% share of the funds in trust, outstanding court-ordered costs amounts totalling $44,575.32 (plus any applicable post-judgment interest on the unpaid amounts) shall be paid to Mr. Kronberger; v. Fifth, the balance shall be held in trust pending the outcome of the costs component of this motion, and any costs ordered against Ms. Kudrocova on this motion shall be paid first from this source; vi. Any balance after payment of the sums above shall be paid to Ms. Kudrocova.

[51] In ordering the remedies set out above, I find that the extensive delays by Ms. Kudrocova to be an aggravating factor. She has done nothing to assist the parties in implementing their settlement in relation to the company.

[52] I find, as did Justice Price in Cassidy, that her de facto admission of the contempt (in not responding substantively to Mr. Kronberger’s allegations), may be regarded as mitigating. While she did not admit her contempt, she did not deny it. Cassidy, at para 31.

[53] I find that the remedies listed are directly related to the nature of the breaches found above and will assist in bringing the financial relationship between the parties to a conclusion (at least in relation to property).

[54] I also find, in the exercise of my broad discretion to craft a remedy, that ordering that unpaid court-ordered costs be paid from funds in trust is restorative and reasonable in all of the circumstances. The remedies repair the injury and denounce the conduct. Cassidy, at para 34.

[55] The remedies selected are proportionate to the nature of the contempt found. They impose a logical consequence on Ms. Kudrocova who did not do what she should have done under an Order that she consented to. These remedies do not “compensate” Mr. Kronberger.

[56] I decline to strike Ms. Kronberger’s pleadings. While she has filed several affidavits, there are final Orders governing all issues between the parties, arising from their separation. There are no pending motions. There is no necessity to strike the affidavits.

[57] I also decline to require that Ms. Kudrocova seek leave to bring further motions. I do not have a sufficient evidentiary basis to make that Order. Ms. Kudrocova is cautioned, however, that bringing meritless proceedings will likely result in further costs orders against her.

Costs

[58] The parties may submit written costs submissions, not to exceed four pages each, doubled spaced, 12-point font, with a Bill of Costs attached, by email to my judicial assistant at mona.goodwin@ontario.ca on the following schedule:

Mr. Kronberger by May 5, 2023 Ms. Kudrocova by May 19, 2023

[59] The costs timelines set out herein may not be extended without my permission. If no submissions are received on the timeline set out above, the parties will be deemed to have resolved costs on consent.

L. Madsen J. Date: April 20, 2023