Court of Appeal for Ontario
Date: 2018-01-16
Docket: C63520
Judges: Simmons, Cronk and Paciocco JJ.A.
Between
Theresa Ann Mary Wouters Applicant (Respondent)
and
Eddy Daniel Jules Wouters Respondent (Appellant)
Counsel
Jennifer Suzor, for the appellant
George McFadyen, for the respondent
Heard: December 11, 2017
On appeal from: The order of Justice P.B. Hockin of the Superior Court of Justice, dated February 22, 2017, with reasons reported at 2017 ONSC 1241.
Reasons for Decision
Introduction
[1] The appellant husband appeals from an order, dated February 22, 2017, (the "February 2017 order") under which the motion judge:
i) struck a reply factum filed by the husband;
ii) rectified an overpayment of trust funds to the respondent wife by applying the overpayment to an underpayment of support payments; and
iii) struck the husband's pleadings for failure to obey court orders.
[2] The husband was self-represented on the motions that led to the February 2017 order, which were heard on February 1, 2017. The wife had counsel.
[3] In addition to the above orders, at the motion hearing, the motion judge refused to permit the husband to lead oral evidence from his accountant because the husband had not complied with a condition in a December 22, 2016 order (the "December 2016 order") permitting him to lead such evidence. The condition required the husband's accountant to send a letter to the wife's counsel outlining his intended evidence by January 20, 2017. However, although the requirement to send the letter to the wife's counsel was included in the formal order entered on January 30, 2017 and was mentioned on one occasion during the oral hearing at which it was made, it was not included in the handwritten endorsement of the December 2016 order, on which the husband relied.
[4] Both parties were represented on appeal. At the appeal hearing, counsel agreed that, in fact, there was no overpayment of trust funds as described in para. 2 of the February 2017 order and also agreed that para. 2 of that order should be set aside in its entirety on consent.
[5] In our view, the appeal from that part of the February 2017 order striking the husband's pleadings must be allowed for three reasons.
[6] First, the appellant was denied the opportunity to respond fully to the wife's motion to strike. Second, the motion judge overstated the wife's efforts to move the case on to trial. Third, in the context of not having a full picture of the husband's position, the motion judge failed to properly consider whether any lesser remedy would suffice.
[7] Before turning to these reasons, we will briefly review some of the background leading up to the February 2017 order.
Background
[8] The parties were married in 1996 and separated in 2007. They have three children, ranging in age from 15 to 20.
[9] The wife commenced a divorce proceeding in February 2008. Since that date, multiple motions have resulted in numerous court orders.
[10] Among other things, the parties' farm property, which was held in the name of a corporation, has been sold. The wife's counsel is holding the net proceeds of sale (originally $440,600.41) in trust, subject to an order to pay child and spousal support to the wife from the net proceeds with the payments to be credited against the husband's interest in such proceeds.
[11] The parties' house and associated 3.8 acres of land has also been sold; the husband's counsel is holding the net proceeds of sale ($265,111.72) in trust.
[12] Following a settlement conference in January 2014, the wife obtained a final order for custody of the parties' children. No access to the children was ordered for the husband.
[13] This proceeding first came on for trial in September 2015. With the consent of the wife's counsel, the trial did not proceed – the husband could not attend because he was in jail in the United States.
[14] The matter next came on for trial at a September 6, 2016 sitting of the Superior Court in Sarnia.
[15] On September 7, 2016, the wife brought a motion returnable September 12, 2016 to adjourn the trial and for disclosure from the husband. The motion judge adjourned the trial to November 7, 2016 and ordered the husband to produce the following items within 30 days, failing which the wife could move to strike his pleadings (the "September 2016 disclosure order"):
income tax returns and notices of assessment for 2010 to 2015, subject to the proviso that the notices of assessment would not be available within 30 days;
a statement of year-to-date gross earnings from all income sources in 2016;
an up-dated financial statement; and
a net family property statement and brief of supporting documents.
[16] On October 12, 14, and 20, 2016, the husband's counsel sent correspondence to the wife's counsel in which she explained that the husband's accountant (who was also the accountant for the corporation that owned the farm) required certain information about the trust funds held by the wife's counsel to complete tax returns for the husband and the corporation. She also explained that she could not complete the husband's financial statement for the same reason. In that correspondence, the husband's counsel also purported to forward date of marriage financial information and draft financial statements for the corporation. Counsel's October 12, 2016 correspondence enclosed a letter from the husband's accountant questioning certain payments made to the wife from the trust account held by the wife's counsel.
[17] On November 4, 2016, the wife's counsel sent a letter to the husband's counsel explaining that, as a result of an error, the wife had been overpaid $53,996.19 from the net proceeds of sale of the farm. The wife's counsel proposed that the overpayment be rectified by treating the support payments as being in arrears – because they were being paid from joint funds – and by applying the overpayment to outstanding arrears. The wife's counsel also moved on October 25, 2016 to adjourn the November 7, 2016 trial date by motion returnable that day. The supporting affidavit indicated counsel had agreed to the adjournment. The husband subsequently discharged his counsel due to lack of funds. Nonetheless, the trial scheduled for November 7, 2016 was adjourned on consent to a date to be fixed by the trial coordinator. The trial was to be scheduled as soon as practicable but taking account of the fact that the husband had not yet complied with the September 2016 disclosure order.
[18] On November 18, 2016, the husband brought a motion returnable November 24, 2016, requesting a full accounting from the wife's counsel of the proceeds of sale of the farm property and seeking damages from the wife's counsel for breach of fiduciary duty and fraud. The husband attached to his affidavit certain documents that he did not identify in his affidavit but which purport, on their face, to be copies of proposed personal and corporate tax returns and corporate financial statements for years that include 2010 to 2015. In addition, he attached a letter, dated November 14, 2016, from his accountant to the wife's counsel, purporting to enclose the husband's personal tax returns for 2007 to 2015 and corporate financial statements and tax returns for the same period.
[19] In response to the husband's affidavit, the bookkeeper/accountant for the wife's counsel delivered an affidavit in which she explained that she had mistakenly paid $53,996.19 to the wife from the trust funds being held by the wife's counsel as a result of confusion about the terms of certain court orders for the release of funds. She also asserted that, unless an adjustment was made, the wife was effectively paying support to herself because the ongoing support payments were being deducted from joint funds.
[20] On November 22, 2016, the wife brought a motion returnable on December 8, 2016 seeking, among other things, an order striking the husband's pleadings for failing to comply with various court orders (the September 2016 disclosure order and prior orders, dated January 30, 2014, June 14, 2012, August 25, 2011, and August 30, 2012, under which the husband had been ordered to: provide information concerning his attempts to obtain employment and the terms of the employment he had obtained; answer undertakings; and provide evidence that he was maintaining certain insurance policies in place).
[21] In the same motion, the wife also asked for an order rectifying the overpayment of support of $53,996.19 by setting it off against support payments of $77,371.10, which she asserted had been paid from her share of the funds held in trust.
[22] On December 12, 2016, the husband brought a motion returnable December 15, 2016 seeking a payout of $50,000 from the proceeds of sale of the farm property held in trust by the wife's counsel.
[23] On December 15, 2016, the husband brought a motion returnable December 22, 2016, requesting leave to call oral evidence from his accountant on his motion for an accounting.
[24] With the exception of the December 22, 2016 motion, all the motions were dealt with on February 1, 2017.
[25] On December 22, 2016, the motion judge granted leave, in the December 2016 order, to the husband to call oral evidence from his accountant, subject to two conditions and subject to the further direction of the motion judge presiding at the motion on February 1, 2017. First, the accountant's evidence in-chief would not exceed 30 minutes. Second, the accountant would provide a letter to the wife's counsel by January 20, 2017, outlining his intended evidence. However, as noted above, although the motion judge stated the latter condition on one occasion orally, neither his handwritten endorsement nor a typed transcription included the requirement that the accountant's letter go to the wife's counsel.
[26] The December 2016 order also required the husband to produce proof that he was in receipt of Ontario Works and to serve any medical evidence he had to support his claim that he was unable to work due to depression by January 20, 2017.
[27] On January 25, 2017, the husband delivered a financial statement sworn the same day. Although the first page of the document referred to it as accurate as of March 4, 2008, page two of the document indicates it addresses income from January 1, 2016 to December 31, 2016. On January 26, 2017, the husband delivered his net family property statement. Although these documents refer to various "Tab[s]", neither appends a document brief.
The Motion Judge's Reasons
[28] In his reasons for striking the husband's pleadings, the motion judge noted that the continuing record consisted of 12 volumes and disclosed that 16 judges had been involved in the case. He observed that the wife's affidavit set out many examples of the husband's "effort to stand in the way of the progress of the application and act to the disadvantage of" the wife. Further, he noted breaches of four orders and stated the following:
- The September 12, 2016 order …:
a) No Financial Statement in 5 years. Order of … September 12, 2016 to file within 30 days. Not filed. Result, trial adjourned.
b) No Net Family Property Statement with a document brief. In breach of September 12, 2016 order ….
c) By September 12, 2016, not file personal tax returns from 2010 to 2015.
d) No statement of gross earnings from all sources in 2016. Breach of [September 12, 2016] order ….
January 30, 2014 order … at a settlement conference undertaking to set out attempts to find employment. Nothing provided despite his representation to a Michigan court of criminal jurisdiction that he assisted with his mother's farm.
August 25, 2011, [the motion judge] ordered answers to his undertakings. Some still outstanding.
Breach of [the motion judge's] August 30, 2012 order to produce a life policy.
[29] The motion judge concluded his reasons as follows:
[Counsel for the wife] has tried a number of times to move this matter onto a trial list but the lack of financial disclosure has stood in his way to end this litigation.
This case is now at the 9 year mark. This is about 7 years too long.
The administration of justice must not suffer, beyond this date, further delay. In fairness to [the wife], she should be able to move ahead to finalize what is left to be done and without [the husband] continuing to stand in her way. His pleadings are struck. This case is one of those cases which requires this exceptional response to the behaviour of [the husband].
Discussion
[30] As we have said, in our view, the husband's appeal from that part of the February 2017 order striking his pleadings must be allowed for three reasons.
[31] First, the transcript of the motion heard on February 1, 2017 demonstrates the appellant was denied the opportunity to respond fully to the wife's motion to strike.
[32] The early part of the motion hearing was devoted to sorting out what motions were before the court and what the record would be for purposes of the motion hearing. The motion judge made two rulings related to these issues. In ruling one, he denied the husband the opportunity to call oral evidence from his accountant. In ruling two, he struck the appellant's reply factum based largely on the wife's counsel's stated objections to it. Both of these rulings adversely affected the husband's ability to respond to the wife's motion to strike, and both rulings are problematic.
[33] Ruling one adversely affected the appellant's ability to respond to the motion to strike because the appellant's accountant was being called to explain his concerns about the reconciliation of trust funds held by the wife's counsel and the difficulties it created in preparing income tax returns. Although this evidence related primarily to the husband's motion for an accounting and other relief related to the farm proceeds of sale held in trust, it was also relevant to the motion to strike.
[34] It is not clear from his reasons that the motion judge appreciated the husband's position that the income tax returns, which had been ordered produced within 30 days of the September 2016 disclosure order, had not been finalized within that period because of questions raised by the husband's accountant about reconciliation of the trust funds held by the wife's counsel. These questions later resulted in the wife's counsel asserting that an error had been made in the distribution of trust funds. As we have said, on appeal, both counsel agreed that, in fact, no error was made. Nonetheless, it is apparent that, as of October 2016, confusion existed over how the trust funds had been distributed.
[35] Ruling one is problematic because the motion judge focused on the terms of the formal December 2016 order, which required that a letter outlining the husband's evidence be sent to the wife's counsel. The transcript reveals that the motion judge never grasped, or even entertained, the husband's point that the handwritten endorsement did not say the letter should be sent to the wife's counsel – or the husband's position that he had filed the necessary letter with the trial coordinator. Had the motion judge grasped the husband's position, it may well have been possible to receive the accountant's evidence by affording the wife's experienced counsel an opportunity to review the accountant's letter that the appellant asserted he had filed.
[36] Ruling two adversely affected the husband's position on the motion to strike because, after the ruling to strike his reply factum was made, the husband asserted that, among other things, it contained answers to undertakings and document briefs. The wife's counsel objected to the reply factum because neither the Family Law Rules, O. Reg. 114/99, nor the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provide for a reply factum; because it was delivered on January 30, 2017, only two days before the motion hearing; and because it contained evidence that was not under oath.
[37] Ruling two is problematic because there is no indication the motion judge turned his mind to whether the reply factum contained any material that could properly be considered on any of the motions before the court for the husband's benefit – such as answers to undertakings, responses to outstanding orders for disclosure, or documents that related to the husband's net family property or financial statements.
[38] Although the Family Law Rules and the Rules of Civil Procedure are designed, at least in part, to ensure procedural orderliness and efficiency, they are not so rigid or inflexible as to preclude the court from examining non-compliant documents submitted by self-represented litigants to ensure that any properly admissible portions are received.
[39] A key issue on the motion to strike was the husband's state of compliance as of the date of the motion hearing. Contrary to the subsequent submissions of the wife's counsel, if the husband delivered documents in advance of the motion hearing to comply with outstanding undertakings or court orders, he should not have been precluded from demonstrating compliance because he did not file an affidavit in response to the motion to strike. If the documents or responses were included in his reply factum, that demonstrated pre-hearing compliance.
[40] The husband did not file fresh evidence on appeal. We do not, therefore, know whether he filed a letter from his accountant with the court office or what additional information his reply factum contained. What we do know is that he did not have the opportunity to convey fully his position on these issues to the motion judge.
[41] Second, although the motion judge relied on a finding that the wife's counsel had tried "a number of times to move this matter onto a trial list but the lack of financial disclosure [had] stood in his way to end this litigation", that is not an accurate characterization of how the case progressed.
[42] The record reveals that the wife's counsel agreed to adjourn the trial from the September 2015 trial list, albeit because the husband was not available to attend. The matter next came up for trial in September 2016. The wife did not move for disclosure until the sittings were underway. Issues over reconciliation of the trust funds held by the wife's counsel contributed to delay in completing the disclosure, and the November 7, 2016 trial date was vacated on consent.
[43] In the result, the record does not, in fact, reveal a consistent effort by the wife's counsel to pursue outstanding disclosure or to get this matter on for trial.
[44] Third, in the context of not having a full picture of the husband's position on the motion to strike, the motion judge failed to properly consider whether any lesser remedy would suffice.
[45] It is a "well-established principle that in a family law case, pleadings should be struck only in exceptional circumstances, and where no other remedy would suffice": Kovachis v. Kovachis, 2013 ONCA 663, 311 O.A.C. 228, at para. 2. At the same time, the most basic obligation in family law is the duty to disclose financial information. This requirement is immediate and ongoing and should not require court orders: Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, at paras. 11-13. Nonetheless, before striking pleadings, a court should consider not only the availability of any alternate remedy, but also the importance and materiality of any items not produced: Kovachis, at para. 34.
[46] Here, the motion judge could not properly carry out that function. He did not allow the husband to file his reply factum so that he (the motion judge) could assess to what extent it provided additional compliance with outstanding undertakings or court orders. And he did not explore whether the husband's accountant could be permitted to testify on terms that were fair to the wife's counsel.
[47] In this case, the husband has a strong incentive to make proper disclosure before this case proceeds to trial. He takes the position that his preferred share in the farm corporation (arising from his prior ownership of the farm) makes the common shares that he and the wife hold essentially worthless. He also takes the position that the interim support being charged to his share of the farm proceeds is too high because it is based on an inflated imputed income. However, he cannot expect to advance these positions at trial if he does not make full and fair documentary disclosure about his assets, income, and ability to work (including full particulars of any attempts at retraining or finding work).
[48] Based on our review of the existing record, by the time of the motion, the wife had disclosure of the husband's personal and corporate income tax returns for years exceeding those required under the September 2016 disclosure order, as well as at least draft corporate financial statements. The husband had also delivered a financial statement purporting to set out his income for 2016, as well as a net family property statement.
[49] Although the husband's financial statement lacked particulars (including the sources of his income and the amount of income from each source) and although his net family property statement did not include a document brief, a specific order could have been made requiring the husband to produce specific documents related to his income. Similarly, it was not made clear in any of the September 2016 disclosure order, the motion judge's reasons, or the material filed before us what documents the husband was to include in the document brief to be delivered with the husband's net family property statement. We note that in her October 2016 correspondence, the husband's counsel purported to forward to the wife's counsel documents related to date of marriage values for his property. If the husband was required to produce any documents other than those described in particular rules, the required documents ought to have been specified.
[50] And, as we have said, the motion judge should have reviewed the husband's reply factum and explored letting his accountant testify, so that he would have had a full picture of the disclosure that had been made as of the date of the motion. In failing to do so, he erred.
Disposition
[51] Based on the foregoing reasons, we would allow the appeal and make the following orders:
i) Para. 2 of the February 2017 order is set aside on consent;
ii) Para. 3 of the February 2017 order is set aside and the following orders are substituted:
3(a) If not already provided, within 30 days of the release of this decision, the husband shall provide the following to the wife's counsel:
A. A statement of his gross earnings from all sources in 2017, specifying the name and address of each income source, the amount of gross income received from that income source, and copies of any documents in his possession that support any amounts of income received from each income source during 2017;
B. A signed direction addressed to each income source listed under item A, directing the income source to provide written confirmation to the wife's counsel of the particulars of the husband's year-to-date gross income received from that source;
C. An up-dated sworn financial statement;
D. Copies of any documents in his possession relevant to his net family property statement that are requested by the wife's counsel within 15 days following the release of this decision;
E. Copies of any medical reports that support his claim that he is unable to work;
F. Details of any efforts to find employment or retrain, including the full name, address, and telephone number of any prospective employers/trainers; the dates on which they were approached; the nature of the information they were provided, for example, job application, C.V. etc., and copies of same if available;
3(b) If the husband fails to substantially comply with any aspect of para. 3(a) without a reasonable explanation, the wife may move for an order striking the husband's pleadings;
3(c) Subject to the discretion of the trial judge, the husband shall be precluded from introducing into evidence at trial any documents or other evidence that he has not provided to the wife's counsel at least seven days before trial; and
3(d) Despite this order, the wife may request that a trial date be set forthwith, peremptory on the husband, but allowing sufficient time for the husband to comply with the terms of this order.
[52] The costs order made below is also set aside. There shall be no order as to costs of the appeal or the proceeding below.
Janet Simmons J.A.
E.A. Cronk J.A.
David M. Paciocco J.A.
Footnotes
[1] Under an order dated November 12, 2010, the husband was ordered to pay the wife $770.00 per month for spousal support and $1448.00 per month for child support, based on an imputed annual income of $76,000 per year.
[2] The December 22, 2016 oral ruling also referred to the letter being "provide[d]" or "file[d]".
[3] It is unclear from the appeal record who prepared the typed transcription that is included in the record.
[4] At the motion hearing, the wife's counsel relied on the fact that the reply factum contained exhibits and "copious" material in support of his motion to strike the reply factum.
