COURT FILE NO.: FD974/08

DATE: July 30, 2012

SUPERIOR COURT OF JUSTICE – ONTARIO

FAMILY COURT

RE: Kelly Ann Worrall, applicant

AND:

Michael Worrall and Jacqueline Clermont, respondents

BEFORE: MITROW J.

COUNSEL: Terry Hainsworth for the applicant and for the respondent, Jacqueline Clermont
Michael Worrall in person
J. Stanley Jenkins for Legal Aid Ontario (proposed party)

HEARD: May 2, 2012; facta and authorities on behalf of the applicant and the respondent, Jacqueline Clermont, filed May 11, 2012 and, on behalf of Legal Aid Ontario, filed June 7, 2012

ENDORSEMENT

INTRODUCTION

[ 1 ] The respondent Jacqueline Clermont (“respondent Clermont”) brings this motion to add Legal Aid Ontario (“LAO”) as a party because LAO has liens registered against a property in Grand Bend (“the Grand Bend property”), the title to which is currently registered in the names of the respondent Clermont and the respondent Michael Worrall (“respondent Worrall”). Ownership of the Grand Bend property is one of the issues in this case.

[ 2 ] The respondent Clermont is the applicant’s mother. The respondent Worrall and the applicant are spouses of one another. The liens registered by LAO were for legal services provided to the respondent Worrall.

[ 3 ] At one point all three parties were registered together as joint owners of the Grand Bend property but the applicant subsequently transferred her interest to the respondent Clermont.

[ 4 ] The applicant and the respondent Clermont take the position that the respondent Worrall was added on title to the Grand Bend property solely to facilitate mortgage financing, that the respondent Worrall had no beneficial ownership and, accordingly, that he lacked the capacity to grant liens in favour of LAO affecting the Grand Bend property.

[ 5 ] The applicant and the respondent Clermont argue that LAO should be a party so that it is bound by any judgment made in this case.

[ 6 ] LAO opposes the motion. The respondent Worrall filed no material on the motion because, as he submitted, having LAO as a party “does me well.” Also in his submissions, the respondent Worrall disputed the position of the applicant and respondent Clermont that he had no beneficial interest in the Grand Bend property.

[ 7 ] On a procedural point, LAO had raised a concern that the moving party on the notice of motion was the applicant, after she ceased to have any interest in the Grand Bend property. LAO submitted the applicant had no status to bring the motion. I find that the procedural concern was adequately addressed by Mr. Hainsworth explaining that he represents both the applicant and the respondent Clermont and that he was also bringing the motion on behalf of the respondent Clermont. Accordingly, I will deal with this motion as being made by both the applicant and the respondent Clermont (hereinafter referred to as “the moving parties”).

[ 8 ] This motion engages two issues: firstly, what is the proper test in adding a party under the Family Law Rules , and secondly, whether this is a proper case to add LAO as a party.

[ 9 ] For reasons that follow, I find that LAO should not be added as a party.

BACKGROUND FACTS

[ 10 ] The moving parties acquired the Grand Bend property in 2005. They became the registered owners.

[ 11 ] The moving parties allege that the purchase price of $72,000 was raised by the respondent Clermont mortgaging her house for slightly over $84,000, with the excess to facilitate renovations on the Grand Bend property. The moving parties describe the Grand Bend property as a cottage. According to the moving parties, the respondent Worrall did not contribute to the purchase price.

[ 12 ] Later, according to the moving parties, the Grand Bend property was mortgaged for renovations and also to consolidate indebtedness of both the applicant and her spouse, the respondent Worrall.

[ 13 ] The mortgage was for $65,000. The solicitor’s reporting letter dated November 23, 2006, addressed to all three parties, confirmed that in order to show the respondent Worrall as a mortgagor, it was necessary to transfer the property to all three parties. This transfer of title was registered November 2, 2006 and the accompanying land transfer tax affidavit showed a consideration of $1 and stated that the transfer was for natural love and affection and no other consideration.

[ 14 ] The applicant commenced family law proceedings against the respondent Worrall by way of application issued June 11, 2008, claiming relief pursuant to the Divorce Act , the Family Law Act and the Children's Law Reform Act .

[ 15 ] The respondent Clermont was subsequently added as a party pursuant to a motion brought by the applicant in 2010. (The respondent Clermont consented to being added as a party.)

[ 16 ] The material filed by LAO includes the following uncontested evidence:

a) In his application for legal aid services, the respondent Worrall advised he had an interest in two parcels of land, namely the former matrimonial home located in London, Ontario and the Grand Bend property;

b) Under LAO’s financial eligibility criteria, if a client has an interest in real property, then it is a policy of LAO to register a lien against the real property to secure legal aid services provided to the client;

c) The respondent Worrall executed a contribution agreement consenting to registration of liens on both properties. The registration of liens was pursuant to s. 48 of the Legal Aid Services Act, 1998 ;

d) The liens registered against the matrimonial home were withdrawn by LAO at the request of counsel for the applicant;

e) LAO has registered five liens against the Grand Bend property during the period starting June 9, 2009 (the date of the first registered lien) to August 11, 2011 (the date of the last registered lien). No amounts are shown on the parcel register for any of the liens. The amount of each lien is the full and actual costs of legal aid services and, as further services are authorized, new liens may be registered;

f) LAO is a corporation without share capital established under the Legal Aid Services Act, 1998 ; and

g) LAO has no knowledge of the factual details of the relationship between the applicant and the respondent Worrall.

WHAT IS THE PROPER TEST IN ADDING A PARTY UNDER THE FAMILY LAW RULES ?

[ 17 ] Rule 7 of the Family Law Rules deals with parties. In particular, subrule (3) dealing with naming parties when the case is started, and subrule (5) allowing the court to add a party, are relevant in the present case and provide as follows:

(3) A person starting a case shall name,

(a) as an applicant, every person who makes a claim;

(b) as a respondent,

(i) every person against whom a claim is made, and

(ii) every other person who should be a party to enable the court to decide all the issues in the case.

(5) The court may order that any person who should be a party shall be added as a party, and may give directions for service on that person.

[ 18 ] Subrule 7(3)(b)(ii) delegates to the person starting a case the right to name as a respondent every person who should be a party “to enable the court to decide all the issues in the case.” There is no requirement to give notice to a proposed respondent. If a person named as a respondent takes the position that he or she is not a proper or necessary party to decide all issues in the case, then a motion could be brought to remove that person as a party respondent. The present case was started before any liens were registered and therefore adding LAO pursuant to subrule 7(3)(b)(i) or (ii) would not have been a consideration. If LAO was to be added as a party in this case, it would be pursuant to subrule 7(5). The basis for adding a party under this subrule is stated broadly as follows: “The court may order that any person who should be a party shall be added as a party ...”

[ 19 ] In Children’s Aid Society of London and Middlesex v. P.(J.) , 2000 20732 (Ont. S.C.J.), Marshman J. in a protection case declined to add foster parents as parties pursuant to subrule 7(5). In that case, the foster parents sought to be added because allegations had been made by the mother that they had injured the child, and the foster parents wished to “clear their good name.” Marshman J. (at para. 8) made her decision on the basis that it was not appropriate to add the foster parents as parties because “[n]o order can be made against them or in their favour.”

[ 20 ] In Santilli v. Piselli , 2010 ONSC 2874 , (2011) 87 R.F.L. (6th) 135 (Ont. S.C.J.), the court refused to add as a party the mother of one of the parties. In reaching this decision, the court relied on the decision of Marshman J. in Children’s Aid Society of London and Middlesex v. P.(J.) for the principle that a person should not be added as a party under subrule 7(5) unless an order can be made in favour of, or against, that person. The court stated as follows:

3. There is much authority with respect to the adding of a party to a proceeding. The guiding case is a decision of Justice Mary E. Marshman in Children's Aid Society of London & Middlesex v. P. (J.) (March 1, 2000), Doc. C124/97 (Ont. S.C.J.), in which it was held that the court should not exercise its jurisdiction to add an individual or corporation under subrule 7(5) unless an order could be made in favour of, or against the individual or corporation when so added. Counsel for Mrs. Piselli has also directed me to Gilmour and Gilmour 2009 (Ont. S.J.) and Noik v. Noik 2001 27970 (ON SC) , 2001 Carswell Ont 324 (Ont. S.J.,) both of which adopt this reasoning.

[ 21 ] In the case at bar, the moving parties concede in their factum that no order can be made against LAO as the proceeding is brought under the Children's Law Reform Act, Family Law Act and Divorce Act , and none of these statutes authorize relief against LAO. The moving parties “admit” that Santilli supports a narrow interpretation of rule 7 that parties should not be added unless orders can be made for or against those parties.

[ 22 ] However, the moving parties also argue that this interpretation is too narrow. They rely on authorities [1] which state that a multiplicity of proceedings is to be avoided if there are common questions or events arising out of the same transactions. If a dispute between two parties will directly affect a third party, then the court may allow the third party to be added on such terms as are fit and just.

[ 23 ] In my view, the test for adding parties is not as narrow as suggested by the moving parties’ interpretation of Santilli . In Children’s Aid Society of London and Middlesex v. P.(J.) , Marshman J. did not foreclose the possibility of adding parties pursuant to subrule 7(5) who have no legal interest in the issues before the court (“legal interest” meaning an order can be made in their favour or against them). The discretion to add such parties is there but it should be exercised “very sparingly.” The relevant analysis in Children’s Aid Society of London and Middlesex v. P.(J.) appears at para. 4 as follows:

[4] Subrule 7(5) of the Family Law Rules , O. Reg. 114/99 , provides that the court may order that any person who should be a party shall be added as a party. The rule gives no direction as to how the court should exercise its discretion. The former rule and case law suggests that a person ought to be made a party if that person’s presence is “necessary to determine the matters in issue”. I am satisfied that I have the discretion to add the foster parents as parties to this proceeding if their presence is necessary to determine the issues. It seems to me that a person should not be add [sic] as a party in child welfare proceedings unless that person has a legal interest in the proceedings, i.e., an order can be made in their favour or against them. If subrule 7(5) is intended to give the court broad discretion to add parties who have no legal interest in the issues before the court, then that discretion ought be exercised very sparingly. Family court cases would become unwieldy if courts exercise a broad discretion to add parties who have an interest in the outcome but who are not legally affected thereby. [emphasis added]

[ 24 ] In Gilmour v. Gilmour , 2009 3783 (Ont. S.C.J.), the court considered subrule 7(5) and the test to be applied when adding a party. In assessing whether someone is a “necessary party,” the court cited with approval authorities which stated that, in assessing if someone is a “necessary party,” it is unlikely that a person would necessary if there is no cause of action against that person. Further, a necessary party is not someone who merely has relevant evidence.

[ 25 ] A circumstance where a court may add an execution creditor as a party was considered in the Ontario case of Bray v. Bray [2] . That case involved an application by a wife under s. 7 of the Family Law Reform Act, 1978, for a declaration that she was the sole beneficial owner of various parcels of real property which had been conveyed to her and her husband, either as joint tenants or tenants in common. The husband had executed a declaration to the effect that he held the interest in such properties in trust for the wife and he had recently executed deeds conveying his interest in the properties to her. An execution creditor of the husband requested to be added as a party. The court stated that in the usual case under s. 7 of the Family Law Reform Act , 1978 , the court would be “most reluctant” to add an execution creditor as a party. The court, however, observed that this was not a usual case. It appeared to the court that the husband and wife were in agreement as to the outcome of the motion which would affect the rights of the execution creditor.

[ 26 ] Bray was considered in two western province cases. Both cases involved matrimonial proceedings where creditors sought to be added as parties. Even though different rules of practice were applicable in those cases, it is still instructive to examine those cases in relation to the issue in the case at bar.

[ 27 ] In Kalinocha v. Kalinocha , 1984 2309 (SK KB) , [1984] S.J. No. 19, [1985] 3 W.W.R. 137, 38 Sask.R. 50, 48 C.P.C 247, the court was faced with a motion by two creditors of one of the parties in a matrimonial proceeding. In that case, the court noted that the subject matter of the action was a division of matrimonial property and found that the creditors did not have any legal or equitable interest in that property which might be defeated by an order under the Matrimonial Property Act . The court also referred to and was critical of the Bray decision and declined to follow it. The court dismissed the application of the creditors.

[ 28 ] In Dion v. Dion , [2005] B.C.J. No. 2863, 2005 BCSC 1802 , 50 B.C.L.R. (4th) 388, 25 C.P.C. (6th) 144, 23 R.F.L. (6th) 156, 145 A.C.W.S. (3d) 591, 2005 CarswellBC 3153, the court was faced with an application by a creditor who sought to be joined as a party in the final stages of a proceeding arising from the divorce of a debtor and his spouse. In dismissing the creditor’s application to be added as a party, the court commented favourably on the decision and analysis in Kalinocha . However, in relation to Bray , the court was not critical of that decision, but distinguished it, noting simply that the facts which were present in Bray, suggesting that the husband and the wife were co-operating towards a common purpose of defeating the husband’s execution creditor, were factors that were not present in Dion .

[ 29 ] In Dion , the court quoted with approval the limited circumstances where creditors may be given a right to intervene in matrimonial proceedings, as follows at para. 34:

34 The conclusion I have reached is consistent with the observation made by Robert A. Klotz based on his review of the authorities in Bankruptcy, Insolvency and Family Law, 2nd ed., looseleaf (Scarborough: Thomson Canada, 2001) at para. 9.10(b)(5):

In egregious cases the court will intervene, either through a stay or by joining the creditors, to frustrate a collusive proceeding between the spouses. But unlike the Australian experience [where creditors have significant rights of intervention], Canadian courts have issued no ringing endorsements of the primacy of unsecured creditors' claims. It appears that creditors will have difficulty obtaining a stay or other relief in the face of bona fide matrimonial proceedings, even if the effect of such proceeding may be to frustrate their ability to recover the debt.

[ 30 ] In the context of the Family Law Rules , the Dion and Kalinocha cases support the general principle that in matrimonial proceedings the court should be quite wary in permitting creditors of spouses to be added as parties. However, with respect, I do not share the criticism of Bray as set out in Kalinocha . In fact, in Dion , the court appears to implicitly approve Bray, noting the distinguishing feature in Bray of some apparent collusion or common intention on the part of the husband and the wife.

[ 31 ] Although the authorities canvassed above involved cases where a motion was brought by the party who sought to be added to the proceeding, there is in my view no difference in the guiding principles to be applied where, as in the case at bar, the motion is brought by others to add an unwilling proposed party.

[ 32 ] By way of summary, the following criteria, which are not exhaustive, can be applied to determine when a person should be added as a party pursuant to subrule 7(5) of the Family Law Rules :

a) Is the person a “necessary” party to determine all issues in the case;

b) In determining “necessity,” it will be unlikely that necessity can be established if the proposed party has no “legal interest” in the case, meaning that no order can be made for, or against, the proposed party;

c) In a circumstance where a proposed party has no legal interest in the case, the court may exercise its discretion to add the proposed party in situations (and this list is not meant to be exhaustive) where there are unusual facts, there is evidence of some collusion between the parties in the matrimonial proceeding or the case is egregious. The exercise of the discretion to add parties in these circumstances should be exercised very sparingly.

SHOULD LEGAL AID ONTARIO BE ADDED AS A PARTY?

[ 33 ] There is no evidence that LAO takes any position or favours a desired outcome in the matrimonial issues in this case.

[ 34 ] The moving parties have conceded that no order can be made for, or against, LAO.

[ 35 ] LAO voluntarily removed its lien on the matrimonial home. There is no evidence to suggest that LAO will refuse to vacate its liens if it is found that the respondent Worrall has no interest in the Grand Bend property. In the event that the respondent Worrall was found to have some interest in the Grand Bend property, there again is no evidence to suggest that LAO would fail to vacate its liens after receiving any appropriate payment from the respondent Worrall consistent with any final determination of the respondent Worrall’s interest in the Grand Bend property and his entitlement to realize on that interest.

[ 36 ] LAO has nothing to contribute in the lis between the three parties. LAO has no knowledge of the facts relevant to the family law issues. If added as a party, LAO would be put, in my view, to unnecessary expense, even if its participation in the case was limited by an order.

[ 37 ] I do not find any facts which could properly characterize this case as being either “unusual” or “egregious” and there is no suggestion of any collusion between the parties in the family law proceeding. None of the principles discussed in the jurisprudence trigger the necessary conditions to add LAO as a party.

[ 38 ] However, should any dispute develop regarding vacating the liens, then the cost of any such process should be minimized by making an order that those issues are to be determined in the Family Court and by granting leave to do so pursuant to s. 21.9 of the Courts of Justice Act .

ORDER

[ 39 ] For the foregoing reasons, I make the following order:

1. The motion by the applicant and the respondent Clermont to add LAO as a party respondent is dismissed.

2. After trial or other final disposition of this case, if any issues occur regarding the discharge of any liens registered by LAO against the Grand Bend property, then those issues shall be determined in the Family Court at London, Ontario as a related matter pursuant to s. 21.9 of the Courts of Justice Act .

3. If LAO and the parties cannot agree on costs of the motion, then brief written submissions may be made to the Family Court trial coordinator in accordance with the following timelines from the date of this order:

a) LAO shall make its submissions within 14 days;

b) the applicant and both respondents shall make their submissions within 28 days; and

c) LAO shall make its reply submissions, if any, within 35 days.

“Justice Victor Mitrow”

Justice Victor Mitrow
Date: July 30, 2012

[1] Ottawa Separate School Trustees v. Quebec Bank (1917), 1917 501 (ON SC) , 39 O.L.R. 118 (H.C.J.) at pages 123 – 125; Clough v. Greyhound Leasing (1980), 1979 2004 (ON SC) , 26 O.R. (2d) 592 (Ont. H.C.J.); and Gurtner v. Circuit , [1968] 1 All E.R. 328 (C.A.) , cited in Bray v. Bray (1979), 9 C.P.C. 241 (Ont. Supreme Ct.) .

[2] supra , at footnote 1.