NEWMARKET

COURT FILE NO.: FC-11-038492-00

DATE: 20130404

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ROSA MARIA COLIVAS, Applicant

AND:

STIVIN COLIVAS, Respondent

BEFORE: THE HON. MR. JUSTICE J.P.L. McDERMOT

COUNSEL: H. Neiman and D. Bernstein, for the Applicant

J.D. Singer, for the Respondent

HEARD: March 27, 2013

ENDORSEMENT

Introduction

[1] These parties were married in 1999, and separated on June 20, 2011. Apparently the parties lived an opulent lifestyle during marriage, and in the last years this was apparently funded from capital realized from the sale of a business owned by the Respondent, Steve Colivas. These proceedings were commenced by the Applicant, Rose Colivas in July, 2011.

[2] On January 11, 2013, Boswell J. of this court ordered spousal support payable, not only on the basis of income, but on the basis of the parties’ pattern of encroaching on capital throughout the closing years of the marriage. He ordered the Mr. Colivas to pay spousal and child support in the amount of $20,000 per month, an amount well above the $159,000 annual income acknowledged by Mr. Colivas.

[3] It is acknowledged that this support has not been paid in full. The order was retroactive to November 1, 2012 and Mr. Niman states on behalf of his client that there is some $70,000 outstanding under the Boswell J. order. He states that this takes into account certain expenses paid by Mr. Colivas to the Applicant’s benefit. As well, at a motion returnable September 13, 2012, Kaufman J. ordered that the Respondent pay $13,510.10 to the children’s private school, the Country Day School; the Respondent is also in arrears of tuition owing under that order in the amount of $6,413.08.

[4] The Respondent has sought leave to appeal the Boswell J. order (although not Kaufman J.’s order which is also in default). That leave to appeal application is set to be heard on May 9, 2013. He has not sought a stay of the support award in the meantime; that specific relief was not pleaded by the Respondent in his motion for leave to appeal although Mr. Singer argued that this was covered by the request for “such further and other relief as this honourable court deems just”.

[5] Mr. Niman on behalf of Ms. Colivas brings a motion to strike the Respondent’s pleadings pursuant to Rule 14(23) of the Family Law Rules.[^1] He also moves for a non-depletion order, something requested from and refused by Boswell J. in his ruling of January 11, 2013.

[6] Surprisingly, Mr. Singer did not request that this motion striking the Applicant’s pleadings be adjourned to the leave to appeal motion scheduled for May 9, 2013. He also did not bring a counter-motion for a stay of Boswell J.’s order. He requested on behalf of Mr. Colivas that the motion be dismissed and he filed an affidavit in response. That affidavit did not deny that the support was in arrears; it stated that Mr. Colivas has paid about $78,000 in expenses for Ms. Colivas since November, 2012 and it also complains of Ms. Colivas’ “ornate” lifestyle and her budget being “an exercise in extravagance.”[^2] He argues that Mr. Colivas has taken extraordinary measures to settle this matter including the waiving of a $1,600,000 pre-marriage deduction that he states is available to him. He states that he has no control over the capital from which support is payable; that “legal control” belongs to his mother, Helen Colivas.[^3] As such, he argues that the motion to strike is premature and should be dismissed.

[7] For the reasons set out below, I have determined the following:

a. The motion to strike the Respondent’s pleadings shall be adjourned to a date before me to be set by the trial coordinator once the motion for leave to appeal and a stay returnable on May 9, 2013 have been determined. The parties shall file updating material confirming arrears taking into account any stay of the Boswell J. order. Assuming the parties have a result by the trial sittings, the motion may be scheduled before me during the May trial sittings.

b. The motion for a non-depletion order is dismissed.

Analysis

[8] I will firstly deal with the issue of the striking of Mr. Colivas’ pleadings; the second and less important issue is the preservation of property order requested and refused by Boswell J. several months ago.

Striking of Pleadings

[9] As noted above, Mr. Niman on behalf of Ms. Colivas seeks an order striking the Respondent’s pleadings. He notes that Mr. Colivas is not paying support and that nothing has changed since Boswell J. made the order on January 11, 2013; both before and since that date, Mr. Colivas has continued to pay for expenses for the home and for Ms. Colivas on a sporadic basis. This appears to be confirmed by the list of expenses paid by Mr. Colivas since November 1, 2012;[^4] the order made absolutely no difference in the pattern of expenses paid by Mr. Colivas and the support was never paid under that order. Mr. Niman notes that there is no automatic stay of a support order in the event of an appeal[^5] and to permit Mr. Colivas to continue to flout a very clear court order for support (as well as a previous order for payment of private school expenses) is contrary to the interests of justice.

[10] The major difficulty is that the Respondent has sought leave to appeal the Boswell J. temporary order. The motion for leave is scheduled for May 9, 2013. Although there is no automatic stay of a support award in the event of an appeal of that award, in the event that the Respondent’s pleadings are struck by me, it prejudges the appeal if leave is granted; any successful appeal would be a pyrrhic victory as the Respondent’s pleadings would already be struck and he could not defend this matter in any event of the result. This seems especially offensive where the pleadings are being struck based largely upon the order which may eventually be set aside or stayed. And this is particularly so where there are pleadings in respect of child related issues; custody of the children is presently a live dispute.

[11] Mr. Singer also argues that his client is undeserving of this remedy. He notes that his client has made every attempt to settle this matter including the waiving of a substantial right that he has in the litigation. He notes that Mr. Colivas has paid to the account of Ms. Colivas some $200,000 since separation, and $78,000 in expenses since the order became effective in November of last year. He states that, for the remedy to apply, the actions of the Applicant must be egregious and “incorrigible”; where the responding party can explain the failure to pay or can demonstrate why he is unable to pay, the motion to strike should be dismissed: see Serra v. Serra, [2007] O.J. No. 2493 (C.A.) and Knopf v. Knopf, 2012 ONSC 6634, [2012] O.J. No. 5509 (S.C.J.).

[12] Apart from the fact that Mr. Colivas cannot explain his inability to pay support in light of Boswell J.’s finding that Mr. Colivas controlled the shares of the corporations in question, the cases cited by Mr. Singer considered the criteria for a stay of proceedings and not a motion to strike under either Rule 1(8) or Rule 14(23) of the Family Law Rules. The former does not deal with the breach of an order; unlike a motion to strike, it concerns the continued operation of an order rather than enforcement of an order in default. It appears to me that the test of whether a party can explain a default or, alternatively, can pay but is “incorrigible” in his or her behaviour is not the law in respect to the striking of pleadings under the Rules. The issues under those rules have been considered in a number of cases and it seems that the test is not as onerous as that promulgated by Mr. Singer.

[13] In the present case, we are considering a motion to strike under Rule 1(8) and/or Rule 14(23) of the Family Law Rules. Rule 1(8) reads as follows:

(8) 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 wilfully failed to follow the rules or obey the order.

[14] Rule 14(23) applies only to an order made on motion:

(23) A party who does not obey an order that was made on 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;

(b) postpone the trial or any other step in the case;

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

[15] The courts have, naturally enough, taken a dim view of a party breaching a court order. In Levely v. Levely, 2013 CarswellOnt 1953 (S.C.J.) at paragraph 13, Chappel J. states that a court should use the tools available to it including a motion to strike to “prevent… litigation abuse.” Later she states that “[j]udicial response to a party’s failure to respect the court process and court orders should be strong and decisive.” And, as stated by Quinn J. in his famous (or perhaps infamous) statement in Gordon v. Starr, 2007 35527 (ON SC), [2007], O.J. No. 3264 (O.C.J.) at para. 23:

...Court orders are not made as a form of judicial exercise. An order is an order, not a suggestion. Non-compliance must have consequences. One of the reasons that family proceedings degenerate into an expensive merry-go-round ride is the all-too-common casual approach to compliance with court orders.

[16] What is the applicable test for the striking of pleadings under Rules 1(8) and 14(23)? In Moran v. Cunningham (2009), 2009 34992 (ON SC), 96 O.R. (3d) 783 (S.C.J.) at para. 58, C. Horkins J. adopts the three part test from Ferguson v. Charlton, 2008 ONCJ 1, [2008] O.J. No. 486 (C.J.):

First, the court must ask whether there a triggering event that would allow it to consider the wording of either subrule 1(8) or subrule 14(23). That triggering event would be non-compliance with a court order "in the case or a related case" [subrule 1(8)] or an order "made on motion" [subrule 14(23)].

Second, if the triggering event exists, the court should then ask whether it is appropriate to exercise its discretion in favour of the non-complying party by not sanctioning that party under subrule 1(8), or by ordering that subrule 14(23) does not apply. My review of the foregoing case law suggests that this discretion will only be granted in exceptional circumstances. In my view, the court's decision whether or not to exercise its discretion in favour of a non-complying party, ought to take into account all relevant history in the course of the litigation and, more specifically, the conduct of the non-complying party.

Third, in the event that the court determines that it will not exercise its discretion in favour of the non-complying party, it is then left with a very broad discretion as to the appropriate remedy pursuant to the provisions of either subrule 1(8) or subrule 14(23).

[17] There is little doubt that the first criterion is met. The Respondent has breached the order of Boswell J. dated January 11, 2013 as he has failed to pay his support due under the order. The Applicant states in her affidavit that the Respondent owed her $100,231.50 in support under the order and that arrears are $67,255.09 taking into account the direct payments made by Mr. Colivas to her credit.[^6] That calculation is not entirely accurate; Ms. Colivas’ counsel acknowledged during argument that payments made toward the Range Rover lease by Mr. Colivas may also be taken into account and those payments were not accounted for in the Applicant’s affidavit. However, even according to Mr. Colivas’ calculation (and removing payments made to Country Day School and a payment of $13,000 towards a costs award against him), Mr. Colivas has only paid some $49,493.19 in direct payments to the credit of Ms. Colivas since November 1, 2013, leaving some $50,738.31 in arrears under the Boswell J. order.[^7] Mr. Colivas also does not deny that he is in breach of the order of Kaufman J. by reason of his failure to pay $6,413.08 owing to Country Day School.

[18] As it is apparent that Mr. Colivas is in breach of the order in question, the second issue is whether I should exercise my discretion at this time to not to strike pleadings respecting the breach of these orders by Mr. Colivas. As stated in Ferguson, this should only be done in “exceptional circumstances.” The question is whether these circumstances are present here.

[19] As noted above, the major issue appears to be the pending leave to appeal motion which is before the court. If the Respondent’s pleadings are struck, it effectively makes any appeal an exercise in futility as success in the appeal, if leave is granted, would then be rendered moot as the Respondent would have no further right to make his case in these proceedings. The fact that the order in breach is the subject matter of the potential appeal makes this argument more compelling. If the findings of Boswell J. are set aside, especially the finding that the Respondent has control over the shares and capital from which he is to pay support, then to strike the Respondent’s pleadings would be particularly unfair as I would be setting a requirement to pay arrears and support which the Respondent could not make.

[20] Set off against this is the fact that the Respondent appears to be deliberately flaunting the order. The correspondence from Mr. Singer dated February 20, 2013 makes this apparent when he states that, because Helen Colivas (Mr. Colivas’ mother) is not a party to the litigation, the order is unenforceable; he asserts in the letter that Ms. Colivas “will not be able to enforce a support order, be it child or spousal. That is a fact.”[^8] When that is combined with the statement in Mr. Colivas’ affidavit that Helen Colivas is willing to “overlook her legal control of Lucosta and the assets and give half of Lucosta’s assets to Rose”,[^9] one can hardly avoid drawing the conclusion that Mr. Colivas and his mother are colluding in the distribution of funds in this litigation. If Helen Colivas finds the obligation to pay support to be “repugnant” as set out in Mr. Singer’s correspondence, one can hardly understand why she does not find it as repugnant to pay one half of her supposed assets in Lucosta to Rose Colivas as Mr. Colivas says she is prepared to do in his affidavit. It appears to me that whatever Mr. Colivas finds repugnant, his mother will also.

[21] As well, Mr. Colivas is free to appeal the interim support award, but, as stated by Mr. Niman, it is also his job to apply to stay the order pending appeal. It is not proper conduct to default in the order and wait for a motion to strike as in the present case. No motion for a stay is pending, and I find it problematic that no stay is specifically pleaded in the motion for leave to appeal. Without a stay, the order is enforceable, and the means of enforcing the order are set out in the Rules. Ms. Colivas was left with little choice but to bring this motion when no support payments had been made under the order some 10 weeks after it was made.

[22] Finally, it is to be noted that the order of Kaufman J. noted above is not the subject matter of the appeal and it is also in default.

[23] The issue of the request for leave to appeal must be balanced against the interest in an orderly resolution of disputes and respect to be accorded to the court and an order of this court. Without there being some consequence to a breach of an order, there can be no respect for that order or the court that granted it.

[24] That being said, none of the cases cited by Mr. Niman deal with the enforcement of an order which was then the subject matter of a motion for leave to appeal. The motion for leave to appeal is scheduled for May 9, 2013, and at that time, Mr. Singer states that he will also be requesting a stay of the order if leave is granted. If leave is granted and the appeal proceeds to the Divisional Court, the within enforcement proceedings may be subject to any stay or partial stay that is granted in the appeal; that remains to be determined. Leave to appeal is supposed to be a speedy remedy and the blame for the delay does not lie with the Respondent; it is a function of judicial resources and available dates presumably to hear a long motion. Considering the fact that leave will be heard just over five weeks from the release of this endorsement, and considering the fact that the major breach sought to be enforced is the order for support being brought into question, it is not in the interests of justice that those proceedings be rendered meaningless by a striking of the Respondent’s pleadings. In my view, in light of the pending motions for leave to appeal and a stay, the exceptional circumstances spoken of in Ferguson are present at this time; once the leave to appeal and stay motions are resolved, one way or another, then those circumstances will no longer exist.

[25] I am therefore adjourning the motion for the striking of pleadings to a date before me to be set by the trial coordinator after the leave motion and any stay or partial stay of Boswell J.’s order is determined. The results of that motion will determine the extent of any default in the Respondent’s support obligations, if any, which will then determine the appropriate remedy available to the Applicant. I do this with some hesitation. The Respondent’s actions in failing to pay support and in relying upon his mother’s ownership of the shares appear to be both self-serving and a wilful disregard of the court orders made in this proceeding. Kaufman J.’s order remains in default. Balanced off against this, however, is the very serious result of an order striking pleadings, which removes a party from the litigation and prevents his entitlement to his day in court. I cannot possibly make such an order until I can determine the nature and extent of the default once leave to appeal and any motion for a stay is determined. As noted above, this is especially so where there are live custody and access issues in this court proceeding: see Haunert-Faga v. Faga, 2005 39324 (ON CA), [2005] O.J. No. 4569 (C.A.).

[26] I note that the Respondent’s motion for leave to appeal does not contain a specific request for a stay. If the stay is refused on May 9, 2013 because of defects in the Respondent’s motion, this motion to strike may still proceed; there should be no delays in enforcement if the presiding justice refuses to hear a stay application because of the Respondent’s failure to adequately plead that relief.

[27] Therefore, the within motion to strike the Respondent’s pleadings shall be adjourned to a date before me to be set by the trial coordinator once the motion for leave to appeal and a stay returnable on May 9, 2013 have been determined. The motion may be scheduled during the trial sittings assuming a decision has been issued on the May 9, 2013 motion by then. Both parties to file updating material indicating what arrears, if any, are then outstanding based upon the order made upon the hearing of the motion on May 9, 2013 and taking into account the payment owing to Country Day School, which order, as noted above, is not under appeal but in default.

Motion for Preservation of Property

[28] The Applicant has renewed a request for an order for preservation of property originally before Boswell J. On January 11, 2013, he refused that order because it would obviously impair Mr. Colivas’ ability to pay support from capital found to be under his control.

[29] The change in circumstances relied upon is the statement made in Mr. Singer’s letter dated February 20, 2013 that “Helen Colivas is perfectly within her legal rights to take whatever steps she deems necessary to preserve Lucosta’s assets.” Mr. Niman states that this is an implied threat of dissipation of those assets to avoid the consequences of the Applicant’s equalization claim.

[30] In reviewing that letter, it is obvious to me that this was not the intent of the statement in question. The intent of that statement was to emphasize that Helen Colivas will not dissipate the assets of Lucosta by payment of support that she finds “repugnant.” There was no statement that the assets are going anywhere anytime soon.

[31] I do not find any change in circumstances which would warrant an order for preservation of