CITATION: Hobbs v. Hobbs, 2008 ONCA 598
DATE: 20080829
DOCKET: C48103 & C48382
COURT OF APPEAL FOR ONTARIO
CRONK, ARMSTRONG and LaFORME JJ.A.
BETWEEN:
CAROL ROSE HOBBS
Applicant (Respondent)
and
DUNCAN ROGER HOBBS
Respondent (Appellant)
Constance M. Brown, Q.C. for the appellant
Aaron Crangle for the respondent
Heard: April 23, 2008
On appeal from the orders of Justice John R. Sproat of the Superior Court of Justice dated November 27, 2007 and January 25, 2008, with reasons reported at 2007 51339 and 2008 1947, respectively.
ARMSTRONG J.A.:
INTRODUCTION
[1] The appellant, Duncan Hobbs, appeals the following two orders of Justice Sproat of the Superior Court of Justice:
(i) an order dated November 27, 2007 finding him in contempt of court concerning his failure to make production of documents in this family law proceeding;
(ii) an order dated January 25, 2008 awarding full indemnity costs in the amount of $26,572.17 in favour of the respondent, Carol Rose Hobbs and dismissing his motion to find Ms. Hobbs in contempt of court for failure to provide documentation and information concerning RBC bank account number 5125232.
[2] Carol Hobbs and Duncan Hobbs were married on January 12, 1980. They separated in the spring of 2005. There are two adult children of the marriage who at the time of these proceedings were engaged in educational pursuits.
[3] These proceedings were commenced in April 2006. The main issues concern child support, spousal support and the equalization of property. The matters that are in dispute in these appeals arise out of the parties' respective obligations to produce financial information.
BACKGROUND
[4] Mr. Hobbs is the sole shareholder of Basil D. Hobbs Inc., a family holding company. Basil D. Hobbs Inc. owns 30% of Charton-Hobbs Inc. The remaining 70% of Charton-Hobbs Inc. is owned by Jean Charton. Charton-Hobbs Inc. is engaged in the wine importation and distribution business. Mr. Hobbs is employed by Charton-Hobbs Inc. In 2006, his annual income is admitted to be $466,598.
[5] Issues concerning the valuation of Mr. Hobbs's corporate interests and his annual income surfaced early in the litigation. Ms. Hobbs brought a motion on February 13, 2007 before Sproat J. seeking the production of documents and information set out in a letter from her expert valuator, Wayne Rudson, dated August 10, 2006. The motion judge made the order requested as follows:
That paragraph 2 of the notice of motion is granted, and Order to go mandating the Respondent to co-operate in all respects with respect to the disclosure requests of the Wife's former valuator, Wayne B. Rudson of Rudson Valuation Group Inc., made in his correspondence dated August 10, 2006, and as more particularly set out in his Schedule of Information Required, (Applicant's C.R., Part 2., Part 2, Vol. 1 Tab 6(P)). These disclosure requests are to be answered within 30 days of the date of this Order, and to the extent that they are not answered, Mr. Hobbs is required to provide a detailed explanation for why they have not been answered, also within 30 days of the date of this Order.
That the Respondent shall permit access by the Wife's current business valuator, Mr. Andrew J. Freedman of Cole & Partners, and shall facilitate all aspects of the disclosure process, and such inquiries as Mr. Freedman may have arising out of the Horsley & Associates Report, when finally produced.
[6] On April 16, 2007, the parties were back before the motion judge on a number of issues including Mr. Hobbs' lack of financial disclosure. Counsel for Mr. Hobbs advised the court that her client had been travelling almost constantly for two months and that she had not had an opportunity to review some of the information with him. The motion judge rejected this explanation. His endorsement in this respect reads:
[11] This is unacceptable. I realize litigants cannot be expected to give up their day jobs to attend to litigation matters. On the other hand, court orders must be followed. Ms. Brown advises Mr. Hobbs's travel schedule is somewhat cyclical and that he will be spending more time in Canada. If Mr. Hobbs believes any future travel commitments will interfere with his ability to comply with court ordered disclosure he should cancel them now. If he is in contempt of any further orders due to travel issues he may be ordered to surrender his passport until he purges his contempt.
[12] Ms. Brown asked for three weeks to review the Rudson requests with Mr. Hobbs. In effect this asks me to continue this aspect of the motion if Mr. Hobbs decides to raise some objection. This I am not prepared to do. I am deciding this motion on the material before me.
[13] All of the information requested by Rudson appears relevant and shall be produced to the extent it is in Mr. Hobbs's power or available to him on request as specified in Rule 19(1)(b).
The formal order of April 26, 2007 included not only the information requested by Mr. Rudson but also further information requested by Ms. Hobbs' newly-retained valuator, Andrew J. Freedman. The order provided at para. 5:
All of the information requested by Rudson and Freedman, appears relevant and shall be produced to the extent it is in Mr. Hobbs's power or available to him on request as specified in Rule 19(1)(b).
[7] Rule 19(1)(a) and (b) of the Family Law Rules provide:
- (1) Every party shall, within 10 days after another party's request, give the other party an affidavit listing every document that is,
(a) relevant to any issue in the case; and
(b) in the party's control, or available to the party on request.
MS. HOBBS'S CONTEMPT MOTION
[8] On September 7, 2007, counsel for Ms. Hobbs launched a motion against Mr. Hobbs for contempt of the court orders dated February 13, 2007 and April 26, 2007 on the ground that Mr. Hobbs had failed to make full financial disclosure as required by these orders. Counsel for Ms. Hobbs filed affidavit material that detailed the allegations of deficient disclosure.
[9] Counsel for Mr. Hobbs was made aware on or about September 13, 2007 that a contempt motion was proceeding against her client. In the next two weeks, counsel for Mr. Hobbs sent approximately seventeen letters to counsel for Ms. Hobbs forwarding disclosure material. During the period October 4 to October 16, 2007, approximately twenty-three further letters were sent by counsel for Mr. Hobbs enclosing additional disclosure material.
[10] Mr. Hobbs responded to the contempt motion by filing two affidavits. His counsel also filed two affidavits deposed by her assistant, Diana Mares.
[11] Ms. Hobbs relied upon a letter addressed to her counsel dated August 13, 2007 from Mr. Freedman detailing the alleged deficiencies in Mr. Hobbs' disclosure which had been requested in Mr. Freedman's prior letter of April 10, 2007. Mr. Freedman's August letter read in part:
On April 10, 2007 we provided you with a letter setting out information and documents that we had requested in order for us to comment on the valuation of Mr. Hobbs' business interests prepared by Mr. Horsley and to calculate Mr. Hobbs' income for the purposes of determining support. We have reviewed the correspondence and information provided to you by Constance Brown subsequent to this letter and have determined that only two of the outstanding requests have been provided.
We are unable to understand why most of the information regarding the valuation of Basil D. Hobbs Inc. could not have been provided together as most of it is likely contained in Mr. Horsley's files or easily accessible by him or Mr. Hobbs. Our requests are routine for this type of matter and production of this information is critical to enable us to provide advice to Mrs. Hobbs and yourself. We have requested the opportunity to meet with Mr. Hobbs directly, however, we require the requested disclosure so that our meeting will be productive.
[12] Mr. Hobbs agreed that there was some delay in responding to the disclosure required by the order of April 26, 2007. He said it was unintentional and that he had to obtain the corporate documents from the accountants, corporate lawyers and staff at Charton-Hobbs Inc. who did not always answer immediately. He also deposed that his counsel had fractured her shoulder and elbow at the end of April 2007 and that she did not return to work full-time until August 1, 2007. In addition, counsel's assistant, who had been dealing with his file, had moved to British Columbia in June 2007.
[13] The motion judge rejected Mr. Hobbs's explanation for delay:
[27] I do not accept these as any legitimate explanation or excuse. If Mr. Hobbs had, with the assistance of the accountants, corporate lawyers and staff of Charton-Hobbs, obtained the documents that were required it would have been a simple matter for Ms. Brown to review the documents prior to delivery.
[28] It is not necessary for me to make a determination as to Mr. Hobbs's motives. It does appear, however, that he perceives some tactical advantage in delaying Ms. Hobbs and running up her costs. No doubt he is also influenced by the evident animosity between the parties.
[14] Mr. Hobbs deposed that he reviewed the August 13, 2007 deficiency letter of Mr. Freedman and concluded that it was full of inaccuracies. He claimed that of the sixteen items in Mr. Freedman's letter, eleven items were wrong. The requests in those eleven items had been answered prior to August 2007.
[15] On October 3, 2007, Mr. Freedman forwarded a letter to counsel for Ms. Hobbs in which he stated that the information contained in items 23 and 24 of the August 13, 2007 letter remained outstanding as follows:
- Details of any non-arms length or non-recurring revenues or expenses of Charton-Hobbs Inc., M&T Canada Limited and Societe Commerciale Ville-Marie Inc. for the fiscal years ended December 31, 2002 through 2006. Examples of some of these items would include legal fees with respect to litigation, tax reassessments, moving costs, large repairs to equipment or building, etc.
The response received as set out in Mr. Hobbs' September 17, 2007 Affidavit is to "refer to the relevant financial statements". This is an incomplete answer and does not provide any meaningful information.
- For each of Charton-Hobbs Inc.'s years ended December 31, 2003 through 2006, please provide us with a detailed breakdown (including item descriptions) of the following accounts as presented in the audited financial statements:
a. Salaries – administration;
b. Salaries – bonus;
c. Salaries – benefit;
d. Automobile and travel;
e. Advertising and promotion; and
f. Professional fees.
The response received as set out in Mr. Hobbs' September 17, 2007 Affidavit, is to "refer to the relevant financial statements". This is an incomplete answer and does not provide any meaningful information.
The information requested in numbers 23. and 24. above is required to enable us to determine Mr. Hobbs' income for support purposes.
[16] On October 1, 2007, Brigitte Lachance, Finance Vice-President of Charton-Hobbs Inc., wrote to Mr. Hobbs by e-mail concerning the information contained in items 23 and 24 of the Freedman letter of August 13, 2007:
If you required further information, [i]t will take a lot of time to dig into each of these financial years and I will need assistance to define specifically what mean [sic] non-recurrent expenses. Also [how] do they determined [sic] a minimum amount for a transaction to be consider [sic] important.
For example, in our business we lose and gain new suppliers (our client). When losing a suppliers [sic] we gain a compensation revenue and when we acquirer [sic] a new one we can contribute for a certain amount. I haven't list [sic] all these case [sic] because of the time it will take and also I consider these transaction [sic] as part of the regular business. It would be much easier if this Mr. Freedman could meet with you and me. It would help all of us to understand everything he is looking for.
[17] In respect of items 23 and 24, Mr. Hobbs deposed in an affidavit sworn November 9, 2007:
The items that we did have difficulty with, in Mr. Freedman's disclosure requests, due to the sheer volume of pages and sometimes vagueness were #23 and #24. To try and remedy the completion of the disclosure, Brigitte Lachance, a Chartered Accountant and Vice President offered to work with Mr. Freedman. This offer was not acted upon.
Therefore, summaries were sent and then the huge documentation (over 1,000 pages for each year) for Promotion and Advertising were emailed directly to Mr. Freedman by Ms. Lachance to work with, as he saw fit, as Ms. Brown's computer could not handle the sheer volume.
[18] It would seem apparent that as of October 1, 2007, there was still much work to be done to deal with this significant area of financial disclosure.
THE GROUNDS OF APPEAL RELIED UPON BY MR. HOBBS CONCERNING HIS CONTEMPT
[19] Mr. Hobbs relied upon the following grounds of appeal concerning his contempt:
(i) There was no precise date for Mr. Hobbs to complete the court-ordered disclosure. The disclosure was completed prior to the contempt hearing.
(ii) The order of April 26, 2007 qualified the required disclosure "to the extent it is in Mr. Hobbs's power". While third parties were co-operative, they were slow in providing disclosure documentation.
(iii) The illness of Mr. Hobbs's counsel and the loss of the assistant working on the file were not the fault of Mr. Hobbs.
(iv) The motion judge misapprehended the evidence of Mr. Hobbs's disclosure in September and October 2007 after the motion was proceeding. The majority of the disclosure provided in that time included voluntary disclosure that was not ordered by the court. The voluntary disclosure exceeded the court-ordered disclosure to such an extent that it caused a serious misapprehension of the evidence.
(v) The motion judge relied on the deficiency set out in the Freedman letter of August 13, 2007. The letter was incorrect – eleven of the sixteen deficiencies referred to in the letter were simply wrong.
(vi) The motion judge erred in making a finding of contempt on the basis of conflicting affidavit evidence.
[20] I do not agree that there was no precise date for Mr. Hobbs to complete the court-ordered disclosure. On the hearing of the motion in April 2007, counsel for Mr. Hobbs requested a three-week extension to review the outstanding disclosure with her client. As indicated above, the motion judge refused this request and ordered production to proceed "as specified in Rule 19(1)(b)". Rule 19(1)(b) provides for a ten-day time period within which to provide an affidavit of documents in a party's control or available to the party on request. The motion judge intended Mr. Hobbs to comply with his order within ten days. This order was not challenged by an application for leave to appeal or by appeal as counsel obviously thought her client could make disclosure within three weeks (twenty-one days). She and Mr. Hobbs accepted that he would have to do it within ten days.
[21] In respect of disclosure from third parties including Ms. Lachance, it is apparent that in respect of items 23 and 24 in the Freedman letter of August 13, 2007 little effort was made to obtain relevant documents and information until on or about October 1, 2007. This was some five months after the order of April 26, 2007. Items 23 and 24 were crucial to Ms. Hobbs and her counsel obtaining full financial disclosure from Mr. Hobbs.
[22] The motion judge rejected the illness of Mr. Hobbs's counsel and the loss of her assistant as providing a reasonable excuse for the delay in dealing with the deficiencies in production. Given Mr. Hobbs's failure to initiate the production of significant corporate information from Ms. Lachance until the fall of 2007, I can find no palpable or overriding error with the motion judge's apparent scepticism concerning his position.
[23] I do not believe that the motion judge misapprehended the evidence of the September/October disclosure. While Mr. Hobbs alleges that the majority of the disclosure was voluntary and unrelated to the disclosure mandated by the April 26, 2007 order, no details are provided. Also, one does wonder why there would be a burst of production activity immediately following the launch of a contempt motion if it did not relate to the alleged deficiencies. In any event, the motion judge emphasized in his reasons for costs dated January 25, 2008 that "the contempt finding was based upon the court ordered disclosure."
[24] In respect of Mr. Hobbs's assertion that eleven of the sixteen deficiencies noted by Mr. Freedman were incorrect and had been answered prior to August 2007, even if this is correct, the lion's share of the production requests would appear to be those contained in items 23 and 24 of the Freedman letter of August 13, 2007. Those items were still outstanding as of October 1, 2007.
[25] Finally, Mr. Hobbs alleges that the motion judge erred in making a finding of contempt against him on the basis of conflicting affidavit evidence. In my view, a complete answer to this alleged error is contained in the motion judge's reasons where he says:
At the outset of the hearing I enquired whether Mr. Hobbs was seeking a trial of the issue of contempt and to call viva voce evidence. Ms. Brown advised that he was not and that Mr. Hobbs wished to proceed on the basis of the affidavit evidence before the Court.
[26] In Prescott-Russell Services for Children and Adults v. G. (N.) et al (2007), 2006 81792 (ON CA), 82 O.R. (3d) 686 at para. 27, Blair J.A. set out the test for a finding of contempt of court:
The criteria applicable to a contempt of court conclusion are settled law. A three-pronged test is required. First, the order that was breached must state clearly and unequivocally what should and should not be done. Secondly, the party who disobeys the order must do so deliberately and wilfully. Thirdly, the evidence must show contempt beyond a reasonable doubt. Any doubt must clearly be resolved in favour of the person or entity alleged to have breached the order.
[27] The motion judge concluded his analysis of the evidence before him as follows:
[30] I am satisfied beyond a reasonable doubt that Mr. Hobbs has deliberately and wilfully disobeyed the Court order of April 26, 2007 by failing in a timely manner to make the financial disclosure that was ordered.
[31] The April 26, 2007 Endorsement was critical of Mr. Hobbs for having failed to comply with the February 13, 2007 order. He was specifically alerted to his exposure to liability for contempt of court.
[32] It would then have been a simple matter to convene a meeting including officials of Charton-Hobbs to review Mr. Freedman's letter, line by line, and arrange for the documents that were readily available to be assembled and for other documents to be obtained. Further, if there were any issues such as the proper definition of a non-recurring expense, this could have been raised with a view to agreeing upon a definition or they could have adopted a reasonable definition and so advised Ms. Hobbs.
[28] I agree with the motion judge's analysis. The evidence before him satisfied the criteria for a finding of contempt of court as summarized by this court in Prescott-Russell Services, supra. I would therefore dismiss the appeal of the order against Mr. Hobbs for contempt of court.
THE COSTS APPEAL OF MR. HOBBS
[29] On January 25, 2008, the motion judge ordered Mr. Hobbs to pay his wife the costs of the motion for contempt against him on a full indemnity scale in the total amount of $26,572.17, including disbursements and GST.
[30] Since I would not allow Mr. Hobbs's appeal on the merits of the motion for contempt, he requires an order for leave to appeal the costs order. See Courts of Justice Act, R.S.O. 1990, c. C.43, s. 133(b).
[31] Mr. Hobbs accepts that his wife is entitled to costs on a full indemnity scale but claims the quantum ordered by the motion judge is excessive.
[32] In order to succeed on an application for leave to appeal an award of costs, strong grounds must be shown. In Brad-Jay Investments Ltd. v. Szijjarto (2006), 2006 42636 (ON CA), 218 O.A.C. 315 at para. 21, leave to appeal to S.C.C. refused, 2007 67861, this court said:
Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court there are "strong grounds upon which the appellate court could find that the judge erred in exercising his discretion".
[33] As to the grounds upon which an appellate court should set aside a costs order, Arbour J. said in Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303 at para. 27:
A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong. (Duong v. NN Life Insurance Co. of Canada (2001), 2001 24151 (ON CA), 141 O.A.C. 307, at para. 14).
[34] While the quantum of the costs award is on the high side I cannot find that there are strong grounds upon which to conclude the motion judge erred in exercising his discretion. I may well have come to a different conclusion on the quantum. However, that is not enough. I cannot say that the quantum is so high that a court could find that it constitutes error in principle or is plainly wrong.
[35] I would not grant leave to appeal the costs award.
THE APPEAL OF THE DISMISSAL OF THE CONTEMPT MOTION AGAINST MS. HOBBS
[36] After Ms. Hobbs brought contempt proceedings against her husband, he brought a cross-motion for contempt against her. He relied on a number of grounds to support his allegations of contempt. However, the only issue on this appeal concerns the alleged failure of Ms. Hobbs to provide documentation and information concerning inter alia RBC bank account number 5125232, which had been ordered produced by the motion judge on April 26, 2007.
[37] Ms. Hobbs filed an affidavit of documents sworn August 29, 2006 that referred to RBC bank account number 5125232. Some documents related to the account were produced. When asked about the account, Ms. Hobbs advised that she knew nothing about it.
[38] On the motion for contempt against Ms. Hobbs, Mr. Hobbs took the position that his wife was intentionally refusing to comply with the order of the court.
[39] By letter dated June 7, 2007, Ms. Hobbs's counsel provided a written direction to the RBC bank to permit her husband to obtain relevant documents directly from it.
[40] In his reasons for judgment dated January 25, 2008, the motion judge said:
[32] In effect Ms. Hobbs' position is that she initially listed what she understood various family accounts to be but in fact she has no documentation on this account. Given that Mr. Hobbs says there is no such account the reasonable inference is that Ms. Hobbs initially listed this account number in the mistaken belief it was a family account, controlled by Mr. Hobbs, in which she had an interest.
[33] Given that there is complete distrust between the parties if Mr. Hobbs harboured the belief that Ms. Hobbs was lying, and she had such an account, it would have been a very simple matter for a law clerk to send a one paragraph letter to RBC which, at nominal expense, would have answered this question.
[34] To repeat my earlier comment, it borders on ridiculous to think that the evidence which I have just reviewed constitutes proof beyond a reasonable doubt that Ms. Hobbs was in intentional or wilful disregard of this court order.
[41] On this appeal, counsel for Mr. Hobbs seeks to file fresh affidavit evidence in which his counsel's assistant deposes that they wrote to the RBC bank requesting information concerning account number 5125232 and initially received no reply. The assistant does not indicate the date upon which the letter was written. In any event, they wrote the bank manager again on December 12, 2007 and again received no reply. Counsel's office wrote the bank manager again on January 31, 2008 and received a telephone reply, followed by the receipt of documentation related to the RBC account in question on February 4, 2008.
[42] In my view, this evidence does not meet the test for admissibility of fresh evidence. See R. v. Palmer, 1979 8 (SCC), [1980] 1 S.C.R. 759 at 775. This information existed at the time the motion for contempt was heard. If due diligence had been exercised, it could have been obtained in time for the hearing of the contempt motion.
[43] Even if the evidence was admitted, it would not have affected the result. An affidavit of Ms. Hobbs sworn February 25, 2008 and filed in response to this fresh evidence makes it clear that she simply made a mistake in respect of the number of her bank account and hence believed that account number 5125232 was not her account. Her account was incorrectly described as number 4519020 which, as it turns out, was really account number 5125232. In these circumstances, I agree with the motion judge that there was no intentional conduct on the part of Ms. Hobbs to breach the court order in question. This is really a "tempest in a teapot".
[44] I would dismiss the appeal against the dismissal of the contempt motion brought against Ms. Hobbs.
COSTS OF THE APPEALS
[45] Counsel for Ms. Hobbs seeks costs of the two appeals on a substantial indemnity scale in the amount of $19,047.52, including disbursements and GST. While the motion judge awarded costs on a full indemnity scale, I am not persuaded that the costs of the appeals should be granted on either that or a substantial indemnity basis. I would award costs to Ms. Hobbs on a partial indemnity scale in the amount of $12,500, including disbursements and GST.
RELEASED:
"RPA" "Robert P. Armstrong J.A."
"AUG 29 2008" "I agree E.A. Cronk J.A."
"I agree H.S. LaForme J.A."