COURT FILE NO.: D/966/96 (Hamilton)

DATE: 2012-08-14

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Joseph Rosati and Linda Rosati, Applicants

AND:
Laura Reggimenti, Respondent

BEFORE: The Honourable Mr. Justice J. W. Sloan

COUNSEL:
Stanley P. Jaskot & D. Willer - Counsel for the Applicants (Moving Party)
Jerry J Chaimovitz & Tyler Banham - Counsel for the Respondent (Responding Party)

HEARD: June 12, 19, 22, 25 & 27, 2012

ENDORSEMENT

[ 1 ] I will begin with quoting the first paragraph of Justice Arrell’s endorsement in this case from April 27, 2012, “the parties to this litigation have had a long and torturous path through the family court system since their initial separation in 1996.”

[ 2 ] This matter was scheduled for a 3 week hearing and 3 weeks of court time was blocked off to hear the matter.

[ 3 ] There is essentially, after a motion before Justice Arrell in April of 2012, one issue left to be decided and that is whether or not the Applicants have perpetrated a fraud upon the Respondent and/or the court and thereby obtained a better settlement of the financial matrimonial issues than they might have otherwise achieved.

[ 4 ] At the start of the first day of trial the court was faced with a motion to strike most of the allegations of fraud of the Respondent partly because the allegations as then drafted contained allegations of non disclosure pursuant to s. 56(4)(a) of the FLA that Justice Arrell ruled would not be part of the trial.

[ 5 ] In an effort to assist the court and perhaps all counsel, the court requested by fax on June 13, 2012, a brief outline of the Respondent’s redacted allegations of fraud on the left hand side of the page with the Applicants’ brief response to each allegation on the opposite side of the page. (Ex. 5)

[ 6 ] It was the court’s hope that this document which has been marked exhibit 5 could be used as a road map to assist it, in dealing logically with each and every allegation.

[ 7 ] When court resumed, it became evident that it was the Applicants’ intention to proceed with a motion, to try to strike out each and every fraud allegation without having a trial or allowing the Respondent to call viva voce evidence.

[ 8 ] Over the objection of Respondent’s counsel I allowed the Applicants to continue.

[ 9 ] We are now at the stage where the court must make a decision either to grant the Applicant’s motion in whole or in part, deny the Applicant’s motion and proceed with the trial or allow the Respondent to call evidence either in the form of affidavits or orally in response to the Applicant’s motion.

[ 10 ] It is indeed unfortunate that this motion was not brought in advance of trial and/or that the request in the motion itself was not better particularized and the specific rules which it was being brought under set out. Both options would have saved precious court time and perhaps allowed these parties to advance and perhaps finally resolve their issues.

[ 11 ] Exhibit 5 is set up such that the Respondent’s allegations of fraud are on the left hand of the booklet and the Applicant’s response to each allegation is on the right hand page.

[ 12 ] The Applicant’s lawyer proceeded to take me through each paragraph of the Respondent’s particulars of fraud set forth in exhibit 5 and the Applicants’ response to the particulars of fraud.

[ 13 ] The Applicants’ responses are legal arguments related to whether or not the allegations can stand and are not factual answers either denying the allegation outright or giving the Applicant’s version of the allegation. This is therefore not the “road map” the court was hoping for.

[ 14 ] The Applicants attack the Respondents allegations of fraud on numerous grounds including, cause of action estoppel, lack of due diligence on the part of the Respondent, that the allegations of fraud did not induce the Respondent to sign the minutes of settlement, that the Respondent is attempting to impute income to Mr. Rosati & argue a joint venture between the Applicants and that the Respondent has, based on other affidavits of hers or her previous court testimony already given evidence which should now preclude her from making certain allegations of fraud.

[ 15 ] On June 20, 2011, Justice Brown ordered that the trial to attempt to set aside Justice Steinberg’s order after a 2 day trial (based on the minutes of settlement) would proceed on viva voce evidence.

[ 16 ] On April 27, 2012, Justice Arrell left no doubt that the trial was to proceed on the issue of fraud and therefore viva voce evidence would be called. He acknowledged in paragraph 11 of his endorsement that the Respondent’s:

allegations of fraud arise out of undisclosed income, assets and bank accounts determined by her financial expert reviewing the disclosure the Respondent had prior to her entering into the Minutes of settlement.

[ 17 ] Paragraph 13 reads:

The issue here is fraud. The Respondent, subject to the discretion of the trial judge, will certainly lead evidence, as per her financial expert, showing intentional non disclosure of income, assets, bank accounts etc. to prove fraud.

[ 18 ] In paragraph 17 he concludes:

...The trial judge is in the best position after hearing the evidence to then decide ...(the underlining is mine)

CAUSE OF ACTION ESTOPPLE

[ 19 ] The issue here has been repeated several times by different judges and the lawyers involved. It is fraud, fraud, fraud. The issue of fraud between these parties has not been adjudicated by any court.

[ 20 ] Therefore there can be no cause of action estoppel.

[ 21 ] The Applicants’ may certainly argue at the end of the trial that the evidence of the Respondent does not prove fraud in a Family Law Case.

[ 22 ] As they have on their motion, the Applicants may of course direct the courts attention to the principles set out by Justice Campbell in the matrimonial case of Dodge v Dodge , 2007 80075 where he referred to the nine principles of civil fraud set forth in the commercial case of International Corona Resources Ltd. V LAC Minerals Ltd. , 1988 4534 (ON SC) , [1988] O.J. No. 3118.

[ 23 ] All of the nine principles of civil fraud set forth in the commercial case of International Corona Resources Ltd. V LAC Minerals Ltd. , 1988 4534 (ON SC) , [1988] O.J. No. 3118 would require the court to hear evidence to determine if they have been met.

LACK OF DUE DILIGENCE

[ 24 ] The Applicant’s have drawn the court’s attention to several instances where it may be argued that the Respondent did not exercise due diligence. Due diligence may very well be a question of degree and the court cannot adjudicate on it until it has heard from the party alleged, to not have carried out the due diligence. The court needs to know what the Respondent did do, not just what it is alleged she did not do. This is particularly so when litigation has gone on as long as this litigation has and the actions or non actions of the Applicants may have to be taken into account when deciding whether or not the Respondent’s due diligence was appropriate.

NO INDUCMENT

[ 25 ] Inducement can come in many forms, including, in a matrimonial matter the misstating of assets and income, which for the purpose of this trial would have to rise to the level of fraud.

ATTEMPT OT IMPUT INCOME TO MR. ROSATI

[ 26 ] The issue which was already decided by Justice Arrell at paragraph 13 of his endorsement is whether or not Mr. Rosati has been guilty of “intentional non disclosure of income” which the court would consider fraudulent.

[ 27 ] Justice Arrell did not say that evidence could not be lead to call into question Mr. Rosati’s stated income. In fact, it is very necessary evidence for the court to take into account when deciding the issue of fraud.

[ 28 ] Paragraph 17 of Justice Arrell’s endorsement refers to issues that may have to be determined after the fraud hearing only in the event the trial judge finds sufficient fraud which would allow him/her to set aside Judge Steinberg’s order.

JOINT VENTURES

[ 29 ] If the Applicants set up joint ventures to perpetrate a fraud on the Respondent that is evidence the court should hear. It may well be that the joint ventures were set up for accounting or other legitimate purposes but the court cannot rule on this until it hears the evidence.

RESPONDENTS PREVIOUS EVIDENCE

[ 30 ] Previous statements of the Respondent may very well be fodder for the Applicants’ to use when they cross examine her but she is entitled to put the evidence she has before the court in an effort to see if she can prove her allegations of fraud.

GENERAL

[ 31 ] If the Respondent does not prove any fraud or fraud to the level that the court may determine would allow her to set aside the judgement of Justice Steinberg dated January 22, 2007 that will be the end of the matter unless either party launches an appeal.

[ 32 ] If the Respondent does prove fraud to the level that the court determines would allow her to set aside the judgement of Justice Steinberg dated January 24, 2007 the trail judge will give directions for the next step.

[ 33 ] In short I find that the Applicants are trying to put the proverbial cart in front of the horse and I dismiss their motion with costs.

[ 34 ] I am not prepared to burden the trial judge with the issue of costs when I have determined that the motion should not have been brought.

[ 35 ] If the parties are unable to agree on costs the Respondent shall forward her brief submissions on costs to me by August 24, 2012. The Applicant shall forward his response to me by August 31, 2012. The Respondent shall then forward his reply, if any, to me by September 7, 2012.

[ 36 ] This trial shall proceed on a date to be set by the trial co-ordinator. It shall proceed on the allegations set forth in Exhibit 4 which I find sufficient to allow the Applicants to prepare their defence. In addition I understand from the endorsement of Arrell J. that the Respondent has retained a financial expert who has produced a report. I assume this report has been served on the Applicants and if not, it shall be served forthwith. This will further delineate the Respondent’s fraud allegations.

[ 37 ] Based on the allegations in exhibit 4 it appears there may be numerous documents referred to at trial. Obviously a combined document brief or if necessary two separate document briefs should be prepared for the use of the court.

[ 38 ] I do not know if the Applicants intend to retain a financial expert and will leave it to the rules of court regarding service of any report that may be produced.

[ 39 ] The Applicants’ shall file a factual response to the allegations in Exhibit 4 setting out their version of events so that the Respondent can properly prepare her case, the case can be shortened and the court can adequately and properly follow the evidence. Their legal position is already set out in exhibit 5.

[ 40 ] Since I have not heard any viva voce evidence I do not considered myself seized of this matter.

J. W. Sloan J.

Date: August 14, 2012