COURT FILE NO.: FS-10-1530-00

DATE: December 5, 2012

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Elizabeth Xidis

S. Codas, for the Wife

Applicant (Wife)

– and –

Michael Xidis

D. Aujla, for the Husband

Respondent (Husband)

HEARD: November 29, 2012

ENDORSEMENT

Ricchetti, J.

[1] This is a motion by the Wife to strike the Husband’s Answer.

[2] It is important to note that custody and access issues involving their children, Helena Xidis (born February 25, 1999) and Giorgio Xidis (born April 17, 2008) have been resolved on a final basis pursuant to the order dated July 3, 2012 of Justice Bielby.

[3] The financial issues are the only remaining issues between the parties.

Background

[4] The parties were married on May 4, 1996.

[5] The parties separated on February 4, 2010.

[6] Helena and Giorgio (the “Children”) are their children. Pursuant to a final order, the Wife has custody of the Children and the Father has specified access with the Children.

[7] The Wife commenced the Application on March 17, 2010. The Application was served on the Husband on April 26, 2010.

[8] Both parties have been represented by counsel throughout except for a brief period during the summer of 2012 when the Husband was self-represented.

[9] The first Case Conference was held on October 1, 2010. The Husband had not filed him Answer by the first Case Conference.

[10] By Order dated October 1, 2010 Justice Seppi, on consent, ordered:

(a) The parties to exchange specified financial disclosure within 40 days;

(b) The Wife to file an Amended Application within 10 days; and

(October 1, 2010 Order)

[11] The financial disclosure the Husband agreed to provide and was ordered to provide by the October 1, 2010 Order included production of:

(a) His complete personal income tax returns for 2007-2009 and the notices of assessment;

(b) Proof of current income by producing a pay stub;

(d) Copies of bank statements (including RRSP, line of credit, mortgage, credit card etc) as of the date of marriage, date of separation and the current date;

(e) Copies of line of credit statements;

(f) Copies of all applications for loans or credit; and

(g) Copies of any net worth statements filed with the bank for the prior 5 years.

[12] Financial disclosure is central to the Wife’s claim in this case.

[13] 4029372 Canada Inc. is a company owned by the Husband’s family, according to the Husband. However, the Wife alleges that the Husband has an interest in this corporation. It is clear that for a point in time, the Husband was a director and possibly an officer of this corporation. It is clear that, at least for a period of time, the Husband received monies and benefits from this corporation. The Wife needs the financial information regarding this corporation to properly consider her entitlement to assets and support in this proceeding.

[14] By November 23, 2010, almost 2 months after the October 1, 2010 Order:

(a) the Husband had not filed his Answer; and

(b) the Husband had not provided any financial disclosure.

[15] On November 23, 2010, the Wife’s counsel wrote to the Husband’s counsel demanding the Husband comply with the October 1, 2010 Order.

[16] By letter dated February 2011, the Husband’s counsel provided some financial disclosure. It is clear that this disclosure did not even come close to full and proper financial disclosure under the Family Law Rules, or the October 1, 2010 Order.

[17] By March 3, 2011, four months after the October 1, 2010 Order, the Husband had not provided financial disclosure in compliance with the Family Law Rules or the October 1, 2010 Order. The Wife’s counsel again wrote to the Husband’s counsel and demanded the disclosure.

[18] Again, on May 6, 2011, the Wife’s counsel wrote to the Husband’s counsel and demanded the Husband comply with the Family Law Rules and the October 1, 2010 Order with respect to making financial disclosure.

[19] The Husband's financial disclosure which remained outstanding as of May 6, 2012 was fundamental to the issues in this proceeding. The Husband’s failure to make financial disclosure included the failure to provide the which had been order to be produced pursuant to the October 1, 2010 Order:

• his complete income tax returns for 2007-2009;

• proof of his current income;

• his T4 for his 2010 income;

• his complete bank account statements, credit card statements, line of credit statements for the periods set out in the October 1, 2010 Order; and

• copies of any net worth statements he had submitted to any banks.

A complete list of what remained outstanding is set out in the Wife’s counsel’s letter of May 6, 2011.

[20] The matter proceeded to a Settlement Conference on January 27, 2012. By this date, the Husband had still not provided the financial disclosure pursuant to the October 1, 2010 Order or complied with the repeated demands of the Wife’s counsel for financial disclosure. The only correspondence from the Husband’s counsel enclosing financial disclosure remained the letter of February 8, 2011.

[21] At the Settlement Conference, the focus was on financial disclosure to permit the matter to proceed to trial. The parties entered into minutes of settlement which provided:

(i) they would exchange Requests for Information by March 10, 2012;

(ii) they would exchange Affidavits of Documents by May 6, 2012 (which affidavits were to include the documents requested in the Request for Information and any documents the party intended to rely on in support of their respective issues). It is also important to note the parties agreed that if one party could not produce a document requested, the party was to provide an explanation for the failure to produce the document in the Affidavit of Documents;

(iii) the Husband was to provide a certified appraisal of the land and building owned by 4029372 Canada Inc.; and

(iv) The Husband sought to amend his Answer to make a claim to add the Wife’s mother as a respondent to this action. The Husband was to serve his amended Answer within 21 days.

An order on consent with respect to the above matters was made by Justice Price on January 27, 2012. (January 27, 2012 Order)

[22] By agreement of counsel, the date for the exchange of the Requests for Information was extended to April 7, 2012.

[23] The Wife’s counsel served a Request for Information by April 7, 2012.

[24] The Wife served her Affidavit of Documents within the time set out in the January 27, 2012 Order.

[25] The Husband failed to deliver a Request for Information.

[26] The Husband failed to deliver an Affidavit of Document.

[27] Having received nothing from the Husband, on May 14, 2012, the Wife’s counsel wrote to the Husband’s counsel demanding compliance with the January 27, 2012 Order. There was no response.

[28] On May 31, 2012, the Husband alleges he discharged his counsel. However, no Notice of Change in Representation was filed with the court until October 12, 2012, after the date this motion had been brought.

[29] Some of the delay in this proceeding may be explained by the parties dealing with custody and access issues. The Husband's failure to comply with the agreements and consent court orders was not limited to financial disclosure. The Husband also failed or refused to produce responding materials on the dates he agreed to in the January 27, 2012 Order. The Husband simply filed nothing on the custody and access motion. By June 22, 2012, the hearing date for the custody and access motion before Justice Bielby, the Husband had not filed any materials on the custody and access issues and did not ask to file any affidavit materials. In my view, this is further evidence of the Husband’s intentional delay in connection with this proceeding by agreeing to provide materials by a certain date and then ignoring the agreement and the resultant consent order.

[30] On October 2, 2012, the Wife served and filed this motion seeking to strike the Husband’s Answer.

[31] This motion was heard by me on November 27, 2012, almost 2 months after the Mother had been served with the motion to strike the Husband’s Answer for failure to comply with the Family Law Rules, the agreements and the court orders. One would have expected that, within that two month period, the Husband would have made complete financial disclosure required of him. Had he done so, the Husband would have been in a much better position on this motion. The Husband chose not to do so.

[32] The Husband continues to refuse to comply with the Family Law Rules, the agreements where he agreed to make financial disclosure by a specified date and the consent court orders. For example:

• The Husband has not served a Request for Information to date;

• The Husband has not served an Affidavit of Documents to date;

• The Husband has not produced a certified appraisal for the land and building owned by 4029372 Canada Inc. to date;

• The Husband has not served any amended pleading to add the Wife’s mother to date;

• The Husband has not produced to date most of the financial disclosure set out in the agreements and the consent court orders of October 1, 2010 and January 27, 2012. A detailed list of the outstanding financial disclosure by the Husband is found at Exhibit B to the affidavit of Aidalyn Gella dated November 22, 2012. The list is extremely long and the items outstanding are very significant to the Wife’s claim in this proceeding.

The Husband’s Position

Amending the Pleading to Add the Wife’s Mother

[33] With respect to the failure to amend his Answer to add the Wife’s mother as a respondent, the Husband blames his former lawyer for not having done so. This is a bald allegation but I note that no proposed amendment adding the Wife’s mother has been produced in the Husband’s materials or at the motion, some 10 months after the January 27, 2012 Order. I do not accept the Husband’s explanation. The Husband’s request to amend the pleadings to add the Wife’s mother appears to have been nothing more than a delay tactic.

The Husband’s Explanations for Incomplete Disclosure

[34] The Husband now states that he does not have all the financial documents to produce as they were not given to him when the parties separated and the documents are now missing. Many of the financial documents the Husband was to produce are met with: “I do not have access to the information that is requested by the Applicant/Mother.”

[35] The Husband makes these bald statement but fails to explain why he would have agreed to produce the financial documents specifically identified in the October 1, 2010 Order and the January 27, 2012 Order if the documents were “missing” or he did not have “access” to the documents.

[36] If the Husband truly could not have produced the financial documents, he could have produced an Affidavit of Documents which contained explanations why he could not produce the documents. Instead, the Husband has produced nothing, admits he is in default and continues to ask for more time.

[37] The Husband also points to some disclosure he made on February 8, 2011. It is the only documentary disclosure the Husband points to. Unfortunately, the disclosure was late and only a very small fraction of the financial disclosure he agreed to make and was ordered to make on October 1, 2010 by this court. A review of what the Husband produced on February 8, 2011 confirms that his financial disclosure was woefully incomplete.

[38] As of the date this motion was heard, the Husband remains in default of the Family Law Rules, the agreements to make specified financial disclosure and the consent court orders requiring him to make specified financial disclosure within a specified time period. The Husband is simply playing games, buying time and deliberately refusing to produce the financial disclosure.

Examples of Failure to Disclose Financial Information

[39] The Husband has not provided his complete 2007-2009 Income Tax Returns. Even if he didn’t have them, he could have obtained copies from Revenue Canada during the past 2 years. The Husband appears to deliberately avoiding production of the complete income tax returns.

[40] The Husband states that he “did not have shares of 4029372 Canada Inc. at the time of separation” but he was listed as a director. This wording begs the question whether the Husband at any time during the marriage owned shares of 4029372 Canada Inc. If so what happened to them? Further, the Husband also states that he was “not a director and/or officer of 4029372 Canada Inc. at separation.” This also begs the same questions. But this evasive response by the Husband goes on. The Husband says: “I have not received any income and/or benefits from 4029372 Canada Inc. that were not reported on my income tax returns from 2008-2010.” The use of the double negative suggests the Husband did receive income and/or benefits from the corporation during the specified years. This simply makes the Husband’s complete income tax returns even more significant and critical for the proper determination of the Wife’s claim. The complete tax returns will show what income and/or benefits the Husband received from the corporation. The Husband’s “interest”, if any, in the corporation remains a very significant issue in this proceeding.

[41] Despite having agreed to produce a current appraisal for the corporation's property, the Husband has failed to do so. There really is no reason set out why he couldn’t comply with this financial information which he agreed to obtain and was ordered to obtain.

[42] The Husband was to provide details of his pension plan. Instead, the Husband produced a 2010 T4A statement which only shows his pension income for 2010. It does not provide any information regarding his pension plan and no information regarding the value accrued during marriage. There is no reason the Husband could not have provided the information required from the pension administrator.

[43] The Husband states he has no copies of any statements of net worth filed with any banks. Again, the response is somewhat evasive. It does not say the Husband did not file net worth statements with any banks. It therefore suggests that net worth statements were filed by the Husband but there is no indication the Husband has made any effort to get copies of these net worth statements from any of the banks.

[44] The Husband states that copies of various bank account statements, credit card statements, line of credit, etc as of the date of separation were provided on February 8, 2011. As stated above, this financial disclosure was woefully inadequate and failed to comply with the Husband’s financial disclosure agreed to or ordered to produce.

[45] Some of the Husband’s answers where he alleges there are no documents are clearly false. The Husband stated in his affidavit, filed on this motion, that he has no credit cards in his name. However, his sworn financial statement (which he swore was correct to date) shows that he has a number of credit cards in his name: Amex, CIBC Visa, Capital One Mastercard and BMO Mastercard with substantial outstanding balances.

[46] The Husband states that he does not have a “detailed summary of all personal expenses paid by 4029372 Canada Inc. and/or any subsidiaries or related companies.” Clearly this is critical financial information. There is no indication what the Husband has done to obtain this information from his “family’s business.” This failure simply underscores the Husband’s deliberate attempt to withhold financial information personally and with respect to the corporation.

[47] I do not accept the Husband’s conclusion that he has provided “whatever information and disclosure is in his power, control and possession.” It is simply false.

[48] The Husband’s counsel candidly admitted that there were numerous failures to provide financial disclosure and non-compliance with the court orders. Counsel sought a further extension for compliance with the Husband's financial disclosure obligation and the consent court orders. He stated he was only recently retained. While I accept counsel’s bona fides in making this statement, the difficulty is that it requires the Husband to obtain the documents and to produce them to counsel before the financial documentation can be produced to the Wife’s counsel. The Husband’s counsel has no control over this part of the process. Given the Husband's past conduct and deliberate refusal to make financial production, I am not persuaded that he ought to receive yet another opportunity to comply with the Family Law Rules and consent court orders. In my view, this would be nothing more than a further delay by the Husband.

The Law

[49] Rule 19(1) of the Family Law Rules provides:

(1) Subject to subrule (1.1), every party shall, within 10 days after another party’s request, give the other party an affidavit listing every document that is,

(a) relevant to any issue in the case; and

(b) in the party’s control, or available to the party on request.

[50] The failure to comply with the Family Law Rules or court orders may be sanctioned by this court by striking the pleading under Rules 1(8), 13(17), 14(23) and 19(10) (4) of the Family Law Rules.

[51] There is no real dispute on the law to be applied on such a motion.

[52] The remedy to strike a pleading is a serious one and the court’s discretion should only be exercised in “unusual cases” (Marcoccia v. Marcoccia, 2008 ONCA 866) or “exception circumstances” (Molina v. Molina, 2011 ONSC 3030) or sparingly and with caution. It is a remedy of last resort (Spittigue v. Varcoe, [2011] O.J. 4917(S.C.J.) at para. 31.

[53] The real issue is that the Wife submits this is an “exceptional” case and the Husband’s Answer should be struck. The Husband submits that his default does not rise to the level where his Answer should be struck.

[54] Having reviewed the authorities, some of the factors the courts have considered in the exercise of the court’s discretion, on motions such as this, include:

(i) Whether the respondent's breach of the order(s) and/or the failure to comply with the Family Law Rules (including financial disclosure) is clear on the record;

(ii) Whether the respondent's breach of the order(s) and/or failure to comply was a deliberate and flagrant breach or failure to comply by the responding party;

(iii) The nature of the respondent's breach(s) and/or failure(s) to comply, in particular,

• the seriousness of the breach(s) or the importance of the failure(s) to comply with the issues to be determined in the proceeding,

• the number of breaches or failures to comply,

• the length of time the respondent has had to remedy the breach(s) or failure(s) to comply, and

• what steps and efforts, if any, the respondent has taken to remedy the breach(s) or attempts to comply;

(iv) The history of the proceeding;

(v) The conduct of both parties to the proceeding. This will also include any breach(s) or failure(s) to comply with the Family Law Rules by the applicant;

(vi) The consequences to the parties of making or not making the order requested; and

(vii) Any reasonable or rational explanation(s) offered by the responding party as to the responding party's inability to comply or why a breach(s) or failure(s) to comply occurred.

[55] I note that this is not the situation referred to by the Court of Appeal in King v. Mongrain, 2009 ONCA 486, where there remained outstanding issues involving the custody/access of the children. In this case, those issues have been dealt with on a final basis. The only remaining issues are financial.

Analysis

[56] Let me review some of the factors as they apply to the facts of this proceeding.

Clear on the Record

[57] The Husband’s breaches are clear on the record. He is in breach of the consent orders of October 1, 2010 and January 27, 2012.

[58] The Husband’s failure to comply with the Family Law Rules and the agreements entered into with the Wife are clear on the record.

[59] In fact, the breaches and failures to comply were admitted by the Husband by his counsel at the motion.

Deliberate and Flagrant

[60] It is clear the Husband’s breaches are deliberate and flagrant.

[61] The Husband agreed in writing to make the financial disclosure and provide an Affidavit of Documents. The Husband's obligations to make financial disclosure were embodied in a court order. The agreements and the consent order provided a time frame for the Husband to make the financial disclosure. There was nothing unclear about the documentary disclosure the Husband agreed to make.

[62] The Husband failed to make the financial disclosure pursuant to the October 1, 2010. The Husband failed to make the financial disclosure as demanded by the Wife. The Husband failed to make the financial disclosure pursuant to the January 27, 2012 Order. The Husband failed to respond to the Wife's request to comply with the orders. The outstanding financial disclosure has been outstanding for over 2 years. In many cases it is the same financial disclosure that has remained outstanding despite the subsequent demands, agreements and court orders. The Husband has had numerous opportunities to comply with his obligation to make financial disclosure and the court orders and has failed to do so.

[63] The actions of the Husband clearly establish a course of conduct to deliberately ensure the Wife does not have the relevant financial disclosure from himself or the corporation.

[64] The proceeding is now 2 ½ years old and the Wife has not been able to obtain critical and fundamental relevant financial production from the Husband. This simply defeats the primary purpose of the Family Law Rules set out in s. 2(2):

The primary objective of these rules is to enable the court to deal with cases justly.

[65] The Wife cannot proceed with her claim in an efficient and proper manner. It is simply not possible for this court to deal with the issues in this proceeding in a just manner given the Husband's continuing conduct.

Nature of the Breach/ Non-disclosed documents

[66] The breaches of the court orders are serious. The breaches are even more egregious when the orders were made on the written agreement of the parties and the breaches have continued for such a long period of time.

[67] The nature of the financial disclosure the Husband has failed to make goes to the very heart of the issues to be tried – the family assets to be divided and the Wife’s financial claims.

[68] These breaches and failures to comply have continued for over 2 years. Nothing appears to have motivated the Husband to make the financial disclosure or comply with the October 1, 2010 Order, or the January 27, 2012 Order.

History of the Proceeding/ Conduct of the Parties

[69] There has been no delay or obstruction by the Wife. She has complied with her financial disclosure obligations and has complied with the court orders.

[70] The Wife has tried continuously, and on numerous occasions, to get financial disclosure from the Husband.

[71] The Husband, in his motion materials, makes allegations of bad faith and misconduct on the part of the Wife but these allegations relate to the custody and access issues which have already been decided on a final basis. Besides even if true, none of the allegations made by the Husband would have or should prevented the timely disclosure of financial documentation by the Husband pursuant to the orders or the Family Law Rules.

[72] As I stated above, the Husband’s failure to comply with his obligations under the Family Law Rules, his agreements or the consent court orders is not limited to financial disclosure. The Husband’s conduct is consistent with his behaviour in the custody/access motion which was to oppose, get extensions, set timetables, have the court issue consent orders and then fail to comply with the orders and do nothing but force the Wife to expend more money and time.

Consequences of Making/Not Making the Order

[73] Obviously, if the order is granted striking his Answer, the Husband will not be entitled to defend this application. It is for this reason that the authorities state the court should exercise utmost caution before making the order.

[74] However, let me now turn to the consequences to the Wife.

[75] The Wife alleges that she has suffered prejudice in the terms of delay and expense caused by the Husband’s actions. I agree.

[76] The Wife's Financial Statement shows that she has limited financial resources. The Wife has incurred considerable legal expense in the various demands and court appearances seeking disclosure which was already required to be produced by the Husband.

[77] The Wife, 2 ½ years after commencing her application, is in no better a position that she was when she started this application – little financial disclosure and information about the Husband’s finances/assets. Equally important, if the Wife is correct that the Husband has an interest in 4029372 Canada Inc., the Wife’s ability to prove an interest, and the ability of recover any claim which she may be entitled to, may become more difficult with time.

[78] Dealing with a case “justly” means:

(3) Dealing with a case justly includes,

(a) ensuring that the procedure is fair to all parties;

(b) saving expense and time;

(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases.

S. 2(3) of the Family Law Rules

[79] I repeat what I said above, the case cannot be dealt with justly with the Husband’s failure to comply with the Family Law Rules, the agreements to make financial disclosure and the consent court orders requiring the Husband to make specified financial disclosure in a timely way. The Husband's misconduct utilizes valuable judicial resources to the detriment of other cases which could and should be dealt with more expeditiously.

Conclusion

[80] For the reasons set out above, the excuses and explanations by the Husband for his non-compliance with the consent orders or the Family Law Rules are not accepted. The Husband’s explanations for not producing the financial documentation are not credible and appear only to come on the eve of this motion.

[81] I am satisfied this is one of those exceptional cases where the only effective remedy is to strike the Husband’s Answer. She will no doubt continue to face additional cost in obtaining financial information from third parties to establish much of the Husband’s finances/assets. However, that is a much better result than permitting the Wife’s claim to be indefinitely delayed by the Husband with yet more promises and continuing non-compliance and further increasing the Wife's legal expenses.

Costs

[82] The Wife may make written submissions as to costs within 3 weeks. The written submissions are limited to 3 pages. To this may be attached a Cost Outline and any authorities.

[83] The Husband shall have 3 weeks thereafter to make written submissions in response. The same limitations apply to the Husband’s submissions.

[84] There is no right of reply without leave.

[85] Having read Justice Bielby’s endorsement, I note the parties exceeded the limitation he set for written costs submissions. I stress that costs submissions are limited to 3 pages.

Ricchetti J.

Released: December 5, 2012