SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: Pembroke File FL-09-D-107
DATE: May 4, 2012

RE: DIANNE LOIS VERCH, Applicant

and

KENNETH GEORGE VERCH, Respondent

BEFORE: Honourable Justice Brian W. Abrams

COUNSEL:
Peter Sammon, for the Applicant

Leonard Levencrown, for the Respondent

DATE HEARD: April 30, 2012

E N D O R S E M E N T

Background

[1] This motion is brought by the Applicant, Dianne Lois Verch (“Ms. Verch”) for the relief set out on page 2 of her Notice of Motion, dated April 4, 2012, most notably:

“(i) Following the directions made by Justice Timothy D. Ray (“Justice Ray”) by endorsement on the motion herein returnable March 23, 2012, given the Respondent’s failure to comply with the Order of Justice Timothy D. Ray dated February 24, 2012 with respect to payment of the outstanding taxes on the matrimonial home:

a) An Order directing the Respondent forthwith transfer to the Applicant for preservation during this litigation, the matrimonial home herein, namely, the property known for municipal purposes as 1707 Foymount Road, Eganville, Ontario K0J 1T0 and legally described as “PT LT 31, CON 13, SEBASTOPOL, PT LT 31, CON 14, SEBASTOPOL; PT LT 32, CON 14, SEBASTOPOL AS IN R174241 EXCEPT PT 2, 49R8409 AND PT 6, R237350 LYING N OF SHORE RDAL ALONG N/S OF HURDS CREEK AKA CLEAR CREEK; SEBASTOPOL” being all of PIN 57398-0049 (LT).”

[2] There is no cross-motion by the Respondent, Kenneth George Verch (“Mr. Verch”).

[3] These proceedings were commenced on January 23, 2009. The matrimonial home, where Ms. Verch and the four children of the marriage reside, has been the subject of previous motions. To that end, Lalonde J. made an endorsement on May 22, 2009:

“I rule that there is only one matrimonial home now occupied by Mrs. Verch with her four young children and I order that she continue to have exclusive possession of 1707 Foymount Road, Eganville.”

[4] Lalonde J.’s order was never appealed.

[5] Ms. Verch is not named on title. Mr. Verch appears solely on title as he owned the matrimonial home prior to the marriage. In the circumstances of Ms. Verch having exclusive possession of the home while not being on title, two issues have arisen:

1. Mr. Verch failed to pay the outstanding property taxes; and

2. Mr. Verch allowed the home insurance policy to lapse, he being the only person with an insurable interest in respect of the property.

[6] Ms. Verch brought a motion returnable on February 24, 2012, before Ray J., for an Order directing Mr. Verch to pay the property taxes. Mr. Justice Ray made the following order:

“The Applicant’s motion that the Respondent pay the taxes due on his house in which the Applicant now lives is granted. The Respondent says that he doesn’t have the money to pay the taxes and that he may have to let the house be sold for taxes by the municipality.

It is the Respondent’s asset subject to claims by the Applicant. Ordered that the Respondent pay the outstanding tax bill forthwith in the amount of $8,504.78 to the Township of Bonnechere Valley. The payment will be credited towards him in the context of the balance of the issues that are outstanding and to be resolved.” (Emphasis Ray J.)

[7] Ray J.’s order was never appealed.

[8] Mr. Verch did not pay the property taxes forthwith, or at all, as he was ordered to do.

[9] The matter was brought back before Ray J. on March 23, 2012, when Ms. Verch sought an Order, inter alia, to have Mr. Verch’s answer struck pursuant to Rule 14(23) of the Family Law Rules. To that end, Ray J. made the following endorsement:

“The Applicant seeks an Order striking the Respondent’s answer for failure to pay the taxes as per my order of February 24, 2012. The Applicant is at liberty to bring a motion for an Order to transfer the property to the applicant in order to secure the outstanding taxes and any further appropriate obligations. The motion will be heard April 30, 2012 (1/2 day). The Applicant’s affidavit to be filed by April 5, 2012. The Respondent’s affidavit by April 12, 2012 and reply if any by April 18, 2012. Factums to be filed by April 23, 2012. The Respondent has decided not to cross-motion.”

[10] Ms. Verch served and filed an updated affidavit, sworn March 30, 2012, in preparation for this motion and in keeping with the timelines ordered by Ray J.

[11] Mr. Verch did not serve and file an updated affidavit to explain why he failed to pay the property taxes as ordered. Rather, Mr. Verch served and filed an affidavit, sworn January 9, 2012, that was previously before the court on February 24 and March 23, 2012. The affidavit is unresponsive to the issues raised by Ms. Verch on this motion.

Issue

[12] In the circumstances of Mr. Verch’s failure to pay the property taxes as ordered by Ray J., what steps, if any, should the court take to ensure preservation of the property pending the outcome of the litigation and in satisfaction of the obligation under the prior court Order?

Position of the Parties

Ms. Verch

[13] Ms. Verch contends that she will pay the outstanding property taxes, however, because she is not on title she cannot obtain the refinancing necessary to make the payment. She does not otherwise have the financial ability to make the payment. Moreover, she cannot obtain a policy of home insurance because she does not have an insurable interest as the non-titled spouse.

[14] The matrimonial home is worth in excess of $350,000.00 and is, for the most part, unencumbered. It is the family’s most significant asset. It must be preserved pending the outcome of this litigation. For it to be lost on a tax sale for the outstanding amount of $8,504.28, plus interest, is, to speak plainly, irrational.

[15] Ms. Verch contends that Mr. Verch would prefer to see the home sold for taxes. Ms. Verch believes that Mr. Verch will re-purchase the home through a third party on a tax sale and have her and the children evicted from the home, thereby circumventing Lalonde J.’s Order for exclusive possession.

[16] Ms. Verch asserts that her suspicions are well founded given the lengths to which Mr. Verch has gone to frustrate other, similar Orders in this litigation. To use one example, Mr. Verch withdrew the sum of $143,759.03 from the parties joint account with Edward Jones in or about November and December, 2009. Mr. Verch converted all of these funds for his own use. The withdrawal was the subject of a motion before this court, which resulted in James J’s Order of June 15, 2010, requiring Mr. Verch to pay $143,759.03 into court. Further, when the sum was not paid into court, a contempt motion was brought before Hackland, RSJ on January 7, 2011, in response to which Mr. Verch consented to certain relief being Ordered against him, specifically:

i. He execute a mortgage/charge of property on the matrimonial home in favour of Ms. Verch in a principle amount of $75,000, without interest, to be dealt with in the final determination of the family law litigation; and

ii. He was to direct Mr. Robert Sheppard, Barrister and Solicitor, to forthwith pay to Ms. Verch’s solicitor the further sum of $50,000.00 from the trust monies held by him on behalf of Ms. Verch and in connection with the estate of Albert Verch.

[17] In addition, Hackland RSJ Ordered Mr. Verch to pay Ms. Verch costs of the contempt motion in the sum of $4,035.51.

[18] Finally, Ms. Verch points to the fact that her evidence on this motion is uncontradicted. To recall, Mr. Verch did not serve and file an affidavit to explain why he did not pay the taxes as he was Ordered to do.

Mr. Verch

[19] Mr. Verch contends that he is no longer able to carry on business and, therefore, he has no money to pay the property taxes. To use the words of his counsel, he has been “strangled” financially by Ms. Verch who has conspired with others to ruin him.

[20] Alternatively, Mr. Verch asserts that Ms. Verch is quite capable of paying the property taxes herself.

[21] Further in the alternative, Mr. Verch contends that if Ms. Verch cannot or does not want to pay the property taxes, she has other houses that she can move to. As for him, he has been reduced to living in a room, in Pembroke.

[22] Finally, Mr. Verch contends that the court has no jurisdiction to Order the property transfer to Ms. Verch as requested. To that end, Mr. Verch included in his factum our Court of Appeal’s decision in Pirner-Moser v. Pirner (2003) O.J. No. 4419. Apart from the inclusion of this case, which Mr. Levencrown says is precisely on point, the balance of Mr. Verch’s factum is, like his stale affidavit, unresponsive to the issues raised by Ms. Verch on this motion.

Analysis

[23] The contention that Mr. Verch is unable to carry on business and, therefore, has no money to pay the property taxes is not supported by the evidence before the court.

[24] Attached as exhibits to Ms. Verch’s affidavit, sworn January 25, 2012, are copies of income documents disclosed by Mr. Verch, specifically:

i. Notice of Assessment for the 2009 tax year showing line 150 income of $102,273.00 (Exhibit “A”);

ii. Notice of Assessment for the 2010 tax year showing line 150 income of $22,289.00 (Exhibit “B”); and

iii. Income Statement for Ken Verch Forest Products Limited, dated November 3, 2010 (Exhibit “C”), showing total revenue of $325,286.00 and gross profits of $102,615.00, which would put Mr. Verch’s 2010 income in line with his 2009 Notice of Assessment. However, there appears at line 8860 of the statement a deduction of $138,568.00 for “Professional Fees”, which when added to other operating expenses results in a net loss of $55,815.00 for the business.

[25] There is no indication as to whom the professional fees of $138,568.00 were paid to. Ms. Verch deposes in her affidavit of January 25, 2012, that she believes Mr. Verch is engaged in a scheme to reduce his income for purposes of reducing his child support payment. What is noticeable, by its absence, is any response from Mr. Verch. Rather, Mr. Verch swore an affidavit, dated February 3, 2012, in which no attempt is made to explain the sudden reduction in his income or the source of the $138,568.00 in professional fees. Mr. Verch swore another affidavit on February 9, 2012, wherein he reiterates much of the same information contained in the February 3rd affidavit, however, the second affidavit is equally silent on the unexplained recipient of the $138,568.00 in professional fees.

[26] Mr. Verch was given until April 12, 2012, to serve and file an updated affidavit to explain this and other inconsistencies regarding his income raised by Ms. Verch in her materials. For whatever reason(s), Mr. Verch chose not to do so. Accordingly, I draw the adverse inference that any explanation provided by Mr. Verch would not have been helpful to his case.

[27] On the evidence before me I reject Mr. Verch’s assertion that he is no longer able to carry on business and, therefore, does not have the money to pay the property taxes. Rather, I find that Mr. Verch chose not to pay the property taxes in contravention of Ray J.’s Order, dated February 24, 2012, thereby placing the matrimonial home in jeopardy of being sold by the municipality.

[28] Mr. Verch’s contentions that Ms. Verch is capable of paying the property taxes herself, or alternatively that she can move to another house are equally untenable. Indeed, those contentions offend two prior Orders of this court:

i. The Order of Lalonde J. granting exclusive possession to Ms. Verch and the children; and

ii. The Order of Ray J. obligating Mr. Verch to pay the property taxes.

[29] Mr. Verch relies on the decision in Pirner-Moser v. Pirner to support his position that the court has no jurisdiction to Order the property transferred to Ms. Verch to be preserved, pending the outcome of this litigation. A review of the facts in that case is necessary to understand the conclusion reached by our Court of Appeal.

[30] The application that launched the proceedings that led to the appeal in Pirner-Moser v. Pirner was an application by a third party (the appellant) to require Ms. Pirner to remove all encumbrances from a property in Toronto. In a cross-application, Ms. Pirner sought an Order setting aside an earlier conveyance of a cottage property (the matrimonial home) to a Family Trust. The initial transfer of the cottage was from Mr. Pirner to the Pirner Family Trust without Ms. Pirner’s consent. Thereafter, the cottage was transferred again from the Pirner Family Trust to a third party, the appellant.

[31] Against this factual backdrop, Ms. Pirner attempted to enforce certain payments owing to her from Mr. Pirner under an earlier Divorce Judgment of Jennings J. in 1994. At that time, Jennings J. found that the cottage was the matrimonial home and that the conveyance from Mr. Pirner to the Pirner Family Trust without Ms. Pirner’s consent was in violation of section 21(1) of the Family Law Act. However, Jennings J. did not set aside the transfer. Instead he held as follows:

i. “Accordingly, provided that the husband complies within 45 days with the Orders for lump sum payments that I Order to be made in the balance of this judgment, no Order under section 21 shall issue. If he should fail to do so, counsel may move before me on a motion for such an Order securing support payments against the cottage property.”

[32] In considering the application judge’s analysis of Jennings J’s Order, the Court of Appeal said:

“The application judge held that Jennings J. had found that the conveyance of the cottage to the Pirner Family Trust was void. In our view, the application judge erred in that respect. The conveyance was voidable and Jennings J. did not set it aside.” [1] (Emphasis added)

[33] After some further discussion regarding whether or not section 21 of the Family Law Act was applicable in the circumstances of the parties being divorced, which the Court of Appeal declined to decide, the court concluded:

“But, he [the application judge] had no jurisdiction under the Act [the Family Law Act] to Order the appellant [a third party] convey property to Ms. Pirner.”

[34] It is that proposition that Mr. Levencrown contends is unequivocally on point with the case before me.

[35] To recall, the matrimonial home, the cottage, in the Pirner case was transferred to the Pirner Family Trust by Mr. Pirner without Ms. Pirner’s consent. The conveyance was voidable, as the Court of Appeal determined, however, Jennings J. did not set it aside. Rather, he fashioned, what might be described as, a contingent paragraph in the Divorce Judgment ordering Mr. Pirner to make certain payments to Ms. Pirner, failing which Ms. Pirner could move for an Order securing support payments against the cottage property. Thereafter, but before Ms. Pirner brought her cross-application resulting in the appeal, the Pirner Family Trust transferred the cottage (now the former matrimonial home) to a third party, the appellant. The facts in the case before this court are clearly distinguishable.

[36] In this case we have a party, Ms. Verch, who is asserting a claim for equalization of net family property. She has been granted exclusive possession of the matrimonial home. As a non-titled spouse she has no ability to seek financing on the home in order to pay the outstanding property taxes. She does not otherwise have the financial ability to pay the property taxes. Moreover, as a non-titled spouse she does not have an insurable interest. Mr. Verch refuses to pay the property taxes and insurance on the home. His refusal to pay the property taxes is in contravention of the Order of Ray J., dated February 24, 2012. The matrimonial home is the party’s most significant asset, being valued in excess of $350,000.00. Apart from the outstanding property taxes it is otherwise unencumbered. Finally, and most notably, there are no property rights of a third party to be trammeled by the transfer of the matrimonial home in this case.

[37] Separate and apart from Ms. Verch’s claim for equalization of net family property, recall that Mr. Verch executed a mortgage/charge of property on the matrimonial home in favour of Ms. Verch for $75,000 to be dealt with in the final determination of the family law litigation. The Order of Hackland RSJ, dated January 7, 2011, which sets out the payment liability, was entered into on consent of Mr. Verch to avoid a finding of contempt for failing to pay into court the sum of $143,759.03. It is axiomatic that a party ought not be allowed to create a payment liability to be dealt with in the final determination of the family law litigation, then refuse to pay the outstanding property taxes so that the house is sold, and thereby potentially avoid the obligation to pay the other party. The result would harm the integrity of the administration of justice.

[38] Section 9 of the Family Law Act provides that:

(1) “In an application under section 7, the court may order:

(d) that, if appropriate to satisfy an obligation imposed by the order,

(i) property to be transferred to or in trust for or vested in a spouse, whether absolutely, for life or for a term of years.”

[39] Given Mr. Verch’s previous actions and reasonably anticipated future behaviour, 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.

[40] As our Court of Appeal said in Lynch v. Segal, 2006 42240 (ON CA), [2006] O.J. No. 5014:

“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, Family Law Act ss 9(1)(d)(i) confers an equally broad power to grant a Vesting Order on an application for equalization of net family property or support, respectively.”

[41] Section 100 of the Courts of Justice Act provides that:

“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.”

[42] For the reasons set out above, I find that Ms. Verch has separate, valid claims to ownership in the home, which fall within the discretion of the court’s broad general power to protect and to preserve pending the outcome of this litigation.

[43] In the alternative, Mr. Verch seeks relief pursuant to s. 12 of the Family Law Act, which provides:

“In an application under section 7 or 10, if the court considers it necessary for the protection of the other spouse’s interests under this part, the court may make an interim or final order,

(b) for the possession, delivery up, safekeeping and preservation of the property.”

[44] This section when coupled with the court’s broad general power under s. 100 of the Courts of Justice Act serves to amplify the relief available to Ms. Verch for an interim preservation order to protect her interests for equalization or determination of title.

[45] Further in the alternative, Ms. Verch claims relief under s. 24(1)(a) and (f) of the Family Law Act:

“(1) Regardless of the ownership of a matrimonial home… the court may on application by order:

(a) provide for the delivering up, safekeeping and preservation of the matrimonial home and its contents;

(f) authorize the disposition or encumbrances of a spouse’s interest in the matrimonial home, subject to the other spouse’s right of exclusive possession as ordered…”

[46] Based on Mr. Verch’s previous actions and reasonably anticipated future behaviour to prejudice the matrimonial home, either by loss on a tax sale or through exposure to some peril in the absence of home insurance, s. 24 of the Act provides additional authority for the relief requested. Put simply, safekeeping and preservation must be taken to mean empowering Ms. Verch to be able to take the steps necessary to protect the home that Mr. Verch has refused to do by court Order.

[47] Finally, Ms. Verch seeks relief under Rule 14(23) of the Family Law Rules:

“A party who does not obey an order that was made in a motion is not entitled to any further order from the court unless the court orders that this subrule does not apply, and the court may on motion, in addition to any other remedy allowed under these rules,

(a) dismiss the party’s case or strike out the party’s answer or any other document filed by the party;

(c) make any other order that is appropriate, including an order for costs.” (Emphasis added)

[48] Rule 1(8) of the Family Law Rules falls within the “any other remedy allowed” provision of 14(23). Rule 1(8) provides that:

“The court may deal with a failure to follow these rules, or a failure to obey an order in the case or a related case, by making any order that it considers necessary for a just determination of the matter, on any conditions that the court considers appropriate, including,

(a) an order for costs;

(b) an order dismissing a claim made by a party who has willfully failed to follow the rules or obey the order.” (Emphasis added)

[49] This court in Hughes v. Hughes 2007 10905 (ON SC), [2007] O.J. No. 1282 interpreted the application of Rule 1(8), where it said:

“The words “just determination” are sufficiently wide to include protecting the integrity of the administration of justice, and that is what is at stake if a party willfully disobeys an order.”

[50] The integrity of the administration of justice will be protected in this case by empowering Ms. Verch to deal with the preservation of the matrimonial home pending final determination of the issues in this litigation, which Mr. Verch refused to do by willfully disobeying the order of Ray J., February 24, 2012.

[51] Moreover, Mr. Verch has come perilously close to having his Answer struck by the combined authority of ss 14(23) and 1(8) of the Family Law Rules. Any further attempt to disobey the Rules or an Order of this court may very likely result in that sanction being granted against him.

Held

(i) The Respondent shall forthwith, and in any event within 7 days from the date of this Order, transfer to the Applicant the matrimonial home known for municipal purposes as 1707 Foymount Road, Eganville, Ontario K0J 1T0 and legally described as “PT LT 31, CON 13, SEBASTOPOL, PT LT 31, CON 14, SEBASTOPOL; PT LT 32, CON 14, SEBASTOPOL AS IN R174241 EXCEPT PT 2, 49R8409 AND PT 6, R237350 LYING N OF SHORE RDAL ALONG N/S OF HURDS CREEK AKA CLEAR CREEK; SEBASTOPOL” being all of PIN 57398-0049 (LT).

(ii) The Applicant shall be entitled to encumber the matrimonial home without the Respondent’s consent, to a maximum of $15,000.00, to pay the outstanding property taxes and to ensure that the home is properly insured. The quantum of any further encumbrance shall be reviewable in the event that additional sums are required to preserve the matrimonial home pending final determination of the issues in this litigation.

(iii) The Applicant shall preserve and maintain the matrimonial home until the trial of this matter or final resolution of the issues by some other means, subject to any further directions of this court with respect to preservation and maintenance.

(iv) The Respondent is hereby prohibited from taking any further steps to seek an Order in these proceedings without first seeking and obtaining leave of the court.

(v) The parties may address the issue of costs by written submissions of no more than 2 pages, double spaced, with particular reference being given to the factors set out in Rule 24(11) of the Family Law Rules.

Abrams, J.

DATE: May 4, 2012

COURT FILE NO.: Pembroke File FL-09-D-107
DATE: ??, 2012

SUPERIOR COURT OF JUSTICE - ONTARIO
RE: DIANNE LOIS VERCH, Applicant and KENNETH GEORGE VERCH, Respondent

BEFORE: Justice Brian W. Abrams

COUNSEL: Peter Sammon, for the Applicant Leonard Levencrown, for the Respondent

ENDORSEMENT Abrams, J.

DATE: May 4, 2012

[^1]: Had Jennings J set aside the initial conveyance to the Pirner Family Trust, the subsequent conveyance from the Trust to the third party (appellant) would have been void.