Court of Appeal for Ontario

Date: 2021-03-01 Docket: C66823

Before: Strathy C.J.O., Brown and Miller JJ.A.

Between:

Jastinder Manchanda Applicant (Appellant)

and

Sukhvir Thethi Respondent (Respondent)

Counsel

Stephen P. Kirby and Gary S. Joseph, for the appellant Richard H. Parker, Q.C., for the respondent

Heard

February 8, 2021 by video conference

Background

On appeal from the order of Justice Patrick J. Monahan of the Superior Court of Justice, dated March 21, 2019, with reasons reported at 2019 ONSC 1749, and the costs order dated July 12, 2019, with reasons reported at 2019 ONSC 4239.

Reasons for Decision

[1] This matter comes before the court a second time. On the first occasion, this court dismissed the respondent’s appeal from an order striking his pleadings as a result of his willful non-compliance with court orders, including orders to make financial disclosure: Manchanda v. Thethi, 2016 ONCA 909, 84 R.F.L. (7th) 374. The court observed that the parties had been engaged in “high conflict matrimonial litigation”, which gave rise to “countless court attendances resulting in court orders from at least ten different judges”.

[2] The matter eventually proceeded to an uncontested trial, which the respondent was permitted to attend as an observer.

[3] The appellant appeals various aspects of the trial judge’s disposition of her claims. We deal with each of her complaints below. In overview, we see no error in the trial judge’s thorough reasons. Before turning to the grounds of appeal, we address whether the respondent is entitled to make submissions on the appeal.

No right of audience

[4] The appellant submits that the respondent should not be permitted to participate in the appeal. She describes the appellant as a “serial” violator of court orders. The respondent also remains in default of approximately $45,000 of court ordered costs. This court’s decision in Abu-Saud v. Abu-Saud, 2020 ONCA 824, reaffirmed that an audience will not be granted to a party who is in default of court orders: see also Dickie v. Dickie, 2007 SCC 8, [2007] 1 S.C.R. 346, at para. 6. In Murphy v. Murphy, 2015 ONCA 69, 56 R.F.L. (7th) 257, the party in default was the respondent to the appeal, as is the case here.

[5] After hearing the appellant’s submissions, and submissions from the respondent’s counsel on the issue of his client’s standing on the appeal, we concluded that the respondent’s default was both deliberate and willful. We advised the respondent’s counsel that we would not hear submissions from him. Nor would we consider a document he had filed with the court on the day of the appeal, purportedly containing a calculation of the equalization payment.

First ground: trial judge allowed respondent to participate indirectly

[6] The Family Law Rules, O Reg 114/99, provide that the court may deal with a party’s failure to follow the rules, including a failure to make proper disclosure, by striking out any or all documents filed by that party. This consequence stems from the need to sanction and deter non-disclosure of assets, which has been described as the “cancer of family law”: Leskun v. Leskun, 2006 SCC 25, [2006] 1 S.C.R. 920, at para. 4, citing Cunha v. Cunha (1994), 99 B.C.L.R. 93 (S.C.).

[7] The appellant submits that the trial judge imposed an unfair evidentiary burden on her and erred in failing to draw adverse inferences against the respondent where his documents had been struck. As a result, the appellant claims that the trial judge ultimately allowed the respondent to benefit from his own misconduct.

[8] In Meade v. Meade (2002), 31 R.F.L. (5th) 88 (Ont. S.C.), Kiteley J. held that where disclosure is inadequate and inferences must be drawn, they should be in favour of the compliant party: at para. 81. The appellant submits that the trial judge failed to abide by this principle. The appellant also submits that the trial judge failed to recognize that once the respondent’s documents were struck, the documents of the compliant party should be accepted.

[9] The appellant cited three instances in which the trial judge failed to accept the information in her documents: her claim to a constructive or resulting trust in the rental property, the respondent’s percentage of ownership of his company, A4U Limited, and the appellant’s valuation of the matrimonial home. In doing so, the appellant submits the trial judge permitted the respondent to “re-enter the proceeding”.

[10] We disagree. Rule 1(8.4) of the Family Law Rules, which establishes the consequences of striking out documents, does not automatically exclude the defaulting party from the proceeding. Instead, it intentionally removes the party’s entitlement to notice and participation. The court may nevertheless permit participation by the defaulting party, to the extent it will assist the court.

[11] Referring to para. 81 of Meade, the trial judge acknowledged that in view of the respondent’s failure to make adequate financial disclosure, “there is broad discretion for a court to draw reasonable inferences for the purpose of resolving property issues or imputing income”. Contrary to the appellant’s assertion, the striking of the respondent’s documents did not mean that the trial judge was compelled to accept her evidence at face value. In an uncontested trial, the trial judge was entitled, indeed required, to probe the appellant’s evidence to ensure a just result.

[12] As this court stated at para. 49 of Purcaru v. Purcaru, 2010 ONCA 92, 75 R.F.L. (6th) 33 and confirmed in Mullin v. Sherlock, 2018 ONCA 1063, 19 R.F.L. (8th) 1: “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…This is because denying a party the right to participate at trial may lead to factual errors giving rise to an injustice”.

[13] The principle from Purcaru is applicable here. It is apparent from the record that the appellant’s own documentation was deficient in many respects, that she was over-reaching in some respects, and that her evidence shifted in the face of the trial judge’s inquiries. From our observations of the record, the trial judge did not impose an unfair burden on the appellant. On the contrary, he wanted to be satisfied that his findings of fact were based on credible and reliable evidence.

[14] Pursuant to Rule 2 of the Family Law Rules, trial judges in family law proceedings have great latitude to use their discretion to adjudicate cases fairly: Titova v. Titov, 2012 ONCA 864, 29 R.F.L. (7th) 267, at para. 48. The trial judge’s approach appropriately reflected the court’s obligation to guard against the risk of factual errors in the face of only one party’s evidence and documents.

Second ground: constructive trust

[15] The appellant submits that the trial judge erred in failing to recognize a constructive trust in her favour. She submits that the issue of net family property and constructive trust are linked. In the net family property calculation, the trial judge reduced the value of the matrimonial home from the current value to the value on valuation day. The appellant submits that the value she put forward reflected her contribution to the property and that the trial judge’s reduction of the property value failed to acknowledge her contributions – contributions that, the appellant submits, are tied to the constructive trust.

[16] The appellant concedes that in the vast majority of cases, a married couple’s division of property will be governed by the net family property statutory scheme. However, in some circumstances, a party may seek the equitable remedy of a constructive trust. In this case, the appellant submits that the trial judge should have recognized that a trust was created through unjust enrichment. She submits that this is an appropriate case to recognize a constructive trust because her contribution to the business of the rental property, including financial contribution, was substantial.

[17] The trial judge noted that in family law cases there is an expectation that the net family property calculations will address unjust enrichment. However, the appellant submits that unjust enrichment is not always addressed in the statutory scheme: Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522. For example, the net family property equalization does not account for unjust enrichment when there is a significant increase in value due to one party’s contribution. The appellant submits that her contributions were ignored and that this constitutes a reviewable error. The appellant submits that she met the test for unjust enrichment, and that the trial judge failed to properly engage with the test, simply saying that the appellant failed the test.

[18] We disagree. The trial judge considered the appellant’s submissions and held that this was not an exceptional case as described in Martin. In this case, any unfairness that might otherwise arise out of unequal contribution could adequately be addressed by the equalization of net family property. The trial judge’s conclusion is consistent with s. 5(6) of the Family Law Act, R.S.O. 1990, c. F.3.

Third ground: spousal support

[19] The appellant submits that the trial judge failed to acknowledge that “loss of opportunity” factors are not the only factors to be considered in a compensatory spousal support claim. The appellant submits that compensatory support should also address sacrifices and contribution. The appellant contributed to the rental business by collecting rent and dealing with defaulting renters, among other things. The appellant submits that the trial judge failed to recognize these contributions and articulated a narrow definition for compensatory support. In the appellant’s submission, this was an error and “ignores the second half of s. 15.2(6) [of the Divorce Act, R.S.C. 1985 c. 3. (2nd Supp)]”.

[20] In our view, the trial judge did not err. The trial judge specifically acknowledged, at para. 58 of his reasons, the “expansive approach” to considering a compensatory basis for spousal support. He simply found that, based on the facts before him, the appellant failed to establish an entitlement to spousal support on compensatory or other grounds. His conclusion is entitled to deference.

Fourth ground: vesting order

[21] The trial judge dismissed the appellant’s request for an order pursuant to s. 9(1)(d) of the Family Law Act. The appellant sought an order that a property owned by the respondent, valued at $870,000, be transferred to her in satisfaction of the judgment if the respondent had not paid the judgment within 120 days. In rejecting this relief, the trial judge reasoned that such an order would constitute a windfall to the appellant because the value of the property exceeded the amount of the judgment. He also noted that there could be third parties with an interest in the property.

[22] The appellant submits that this was an appropriate case for a vesting order due to the respondent’s persistent breaches of court orders. She acknowledges that granting a vesting order is discretionary, but submits that the trial judge should have imposed a partial charge on the property. The appellant concedes that this option was not proposed to the trial judge.

[23] The trial judge cannot be faulted for failing to grant a remedy that was not requested at trial. We would not interfere with the exercise of his discretion.

Fifth ground: costs

[24] In the event the appeal is dismissed, the appellant seeks leave to appeal the costs award. She submits that the costs award was unreasonably low and had the effect of punishing her for the respondent’s misconduct.

[25] We do not agree. The trial judge awarded costs of $80,000, all-inclusive, about half the amount claimed by the appellant on a full indemnity basis. He found that while the rates charged by counsel were reasonable, and much of the time spent was necessary, the costs award should reflect the fact that many of the appellant’s claims were rejected in whole and in part. He also found that the appellant conducted the litigation in a way that needlessly added to its length and complexity.

[26] In arriving at the costs award, the trial judge considered the relevant principles in Rule 24(12)(a) of the Family Law Rules. The appellant has identified no error in principle and no error in the exercise of the trial judge’s discretion. We dismiss the application for leave to appeal costs.

Disposition

[27] For these reasons, the appeal is dismissed. In all the circumstances, we make no order as to costs.

G.R. Strathy C.J.O.

David Brown J.A.

B.W. Miller J.A.