CITATION: Dillon v. Dillon, 2013 ONSC 3134
COURT FILE NO.: 44717-10
DATE: 2013-05-29
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jeffery James Dillon, Applicant
AND:
Lucia Dillon, Respondent
BEFORE: The Honourable Mr. Justice D.A. Broad
COUNSEL: Paul D. Amey - Counsel, for the Applicant
Stephen Durbin - Counsel, for the Respondent
HEARD: March 28, 2013
ENDORSEMENT
Nature of the Motion
[1] The Respondent wife has brought a motion for an order:
(a) adding as defendants the Applicant’s mother and the estate of his late father, as trustees of the two family trusts referred to below,
(b) adding a claim against the proposed added defendants for breach of trust; and
(c) requiring the Applicant to pay interim disbursements/expenses in the amount of $100,000.00
[2] The motion to add the new defendants was adjourned sine die to permit service of the motion materials on them and argument continued on the claim for interim expenses.
Background
[3] The parties cohabited for period of time prior to their marriage on May 16, 2008 and they separated on August 31, 2010. There are no children of the relationship. The parties disagree on the total length of the cohabitation, the Respondent maintaining that it lasted five years, while the Applicant’s position is that it was only four years.
[4] Prior to their marriage, the parties entered into two domestic contracts, the first on July 27, 2007 (the "First Agreement”) and the second on December 12, 2007 (the “Second Agreement’).
[5] The Applicant commenced this Application shortly after separation seeking to enforce the terms of the two agreements, including payment to the Respondent of her entitlement out of the matrimonial home under the second Agreement. The Respondent, in her Answer, claimed spousal support and an equalization of net family property, taking the position that the two domestic contracts are void and not binding on her due to duress, misunderstanding, inadequate independent legal advice and lack of disclosure.
[6] The proceedings in this matter have been extensive, as exemplified by the fact that the continuing record now consists of 12 volumes. There is a pending motion for summary judgment brought by the Applicant which was originally returnable on August 25, 2012, and was adjourned, at the request of the Respondent, as she had retained new counsel. The adjournment was granted subject to the term that the earlier interim spousal support order be suspended.
[7] The complexity of the proceeding largely results from the existence of two family trusts in which the Applicant is involved. The first, the Dillon Family Trust (“DFT”), was created by the Applicant's parents Pamela Dillon and the late Jim Dillon in 1999, as settlors. It is described as a discretionary inter vivos trust, the class of beneficiaries of which include the settlors’ three children, including the Applicant, the settlors themselves, and ultimately their five grandchildren, including the Applicant's two children from his previous marriage. The second trust, the Jeff Dillon Family Trust (“JDFT”), was created by the Applicant as settlor, also as a discretionary inter vivos trust, with a number of the Applicant’s family members within the class of beneficiaries, including the Respondent, but not the Applicant himself.
[8] The First Agreement, entitled “Marriage Contract” and executed some ten months prior to the marriage, provided. inter alia, that each party waived all property rights arising out of their marital relationship, and that, except where otherwise specifically provided, the property of the parties will be distributed between them only according to ownership and that, on separation, neither party would be entitled to receive, or owe an obligation to pay, spousal support. Each party waived the right to receive an equalization of net family properties under the Family Law Act and released the other, and the other's estate, from all claims for entitlement to equalization. The Agreement provided that, if the Applicant obtained title to the condominium in which they resided, which was then owned by his father, and it became a matrimonial home for the purposes of the Family Law Act, the Respondent would acquire a graduated interest in the equity at the 10% per year for each year of marriage up to 50% after five years.
[9] The Second Agreement, executed some seven months prior to the marriage, recited that the parties wished to amend the First Agreement for the purpose of having it apply to their rights and obligations arising from their then current common-law living arrangement prior to their contemplated marriage, in addition to their rights and obligations that would exist following their marriage. It also recited that they wished to amend and clarify certain provisions contained in the First Agreement. In particular, a provision was added specifying that nothing in the contract shall limit either party's rights under Part II of the Family Law Act, dealing with the matrimonial home, in the event that they became married. A provision was also added confirming that the Respondent shall have no interest in any income or capital which the Applicant may receive as a discretionary beneficiary of the DFT or any assets purchased from such income or capital which he may receive from it.
[10] The Second Agreement appended a schedule listing the assets and liabilities of each party, including a reference to an interest of the Applicant in the DFT in an "unknown" amount and stating that he was a "discretionary beneficiary".
[11] The Respondent attended with an independent lawyer prior to executing each of the two agreements. Each agreement included an acknowledgement that each party had received independent legal advice, understood his/her rights and obligations under the contract, was signing the contract voluntarily, and acknowledged that he/she had made full and complete disclosure to the other of significant assets, debts and liabilities and that there were no unanswered requests or questions for further information about their respective income and assets. Appended to the First Agreement was a "Certificate of Solicitor” for each party stating that, at the time of execution of it, the party understood its nature and consequences and signed voluntarily. No such certificates were appended to the Second Agreement.
[12] The Respondent, in her affidavit in support of the motion, stated that the Applicant advised her that, if she did not sign the First Agreement, they would not get married. She felt "compelled and coerced” to sign something that she indicated she did not understand nor want to sign. She stated that she was in love with the Applicant and wanted to be his wife and deposed "I felt I had no other choice but to sign the Contract he insisted I sign. I wanted to make the Applicant happy.”
[13] The Respondent, in her affidavit, deposed further that she met with her lawyer regarding the First Agreement on two occasions, the first meeting lasting approximately one hour, and the second meeting lasting 30 min, at which time she executed the document. She stated "I was extremely nervous and unsure about signing the Contract but as the Applicant specifically told me, he would not marry me if I did not sign it. I felt I had no alternative but to do so." She deposed that no financial disclosure was provided to her respecting the Applicant's assets and liabilities at the time of the First Agreement.
[14] The Respondent stated in her affidavit that in September 2007 the applicant advised her that he just received $1 million from his parents and, in or about October 2007, he advised her that she needed to sign an amending marriage contract (the Second Agreement) and that if she did not do so they would not get married.
[15] The Respondent concluded, in her affidavit, that she believed that the Applicant was dishonest, fraudulent, and calculating in his attempts to force her into signing the two agreements and that the Applicant intentionally failed to disclose the nature and extent of his assets to her and that he was a working closely with his parents to ensure she would not hold claim to any part of the Applicant's assets. She stated "I verily believe I signed the said Agreements under duress, coercion and undue influence.”
[16] It his responding affidavit, the Applicant deposed that it was only in September 2007, at a family meeting, that he discovered any "meaningful information about the DFT". He acknowledged that he had been given a card by his parents which indicated that $1 million would be set aside for him as an inheritance but he received none of that money at that time, nor since that time. He did depose, however, that he did receive a $10,000 cheque from his parents as a gift. He stated that it was only after the making of the disclosure order in this proceeding on April 15, 2011 and receipt of productions from his mother, that he became aware that the DFT had a portfolio of publicly-traded securities having a fair market value in the range of $17 million.
[17] The Applicant deposed that he set up the JDFT on December 31, 2008 and that, from the outset, there were eleven persons in the class of beneficiaries, being ten of his family members, including his two children, as well as the Respondent. He stated that he made no changes to the class of beneficiaries so as to exclude the Respondent, nor can he pursuant to the trust document. No distributions have been made to any members of the class of beneficiaries of the JDFT.
[18] The parties each retained accountants to assist with financial disclosure and analysis in this proceeding. The Respondent’s accountant, Mr. Tim Brose, has held the designation of a chartered accountant since 1982 and also holds a professional designation as a "Trust and Estate Practitioner.” He was retained by the Respondent to review the financial disclosure provided by the Applicant. Following his initial review, he requested additional disclosure to assess the value of the Applicant's interest in the DFT as well as his net worth. Mr. Brose subsequently had direct discussions with the Applicant's accountant, Mr. Greg Weiler, which resulted in additional disclosure being provided.
[19] Mr. Brose swore an affidavit on June 21, 2012 in response to the Applicant’s Motion for Summary Judgment in which he recited details of the disclosure provided to him, his analysis of such disclosure, and his dealings with Mr. Weiler. Although he indicated that he disagreed with certain statements or representations in the material provided by the Applicant and Mr. Weiler, Mr. Brose did not provide a comprehensive analysis or set of conclusions. Nor did he propose a plan for any further necessary investigations. He did not indicate that he not capable, by his education or experience, to carry out whatever further investigation or analysis that may be required prior to trial. In particular, he did not state that the services of a forensic accountant would be required.
[20] The Respondent, in her affidavit, asserts that "it is clear from the affidavit of Mr. Brose that he requires additional disclosure from the Applicant" and that he will require him to review and test the additional disclosure, but is unable to afford to engage him for that purpose. She goes on to state that since Mr. Brose is not a forensic accountant, she wishes to retain, on the advice of her lawyer, an accountant with experience in that area.
Legal Principles
[21] Rule 24(12) of the Family Law Rules provides:
The court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees.
[22] In the recent case of Biddle v. Biddle 2011 ONSC 1783 Turnbull, J. adopted the summary of the essential principles to guide a court in the exercise of its discretion under Rule 24(12) in the case of Stuart v. Stuart 2001 28261 (ON SC), [2001] O.J. No. 5172 (SCJ), as follows:
The ordering of interim disbursements is discretionary: Airst v. Airst, [1995] O.J. No. 3005 (Ont. Gen. Div.); Hill v. Hill (1988), 1988 4710 (ON SC), 63 O.R. (2d) 618 (Ont. H.C.) and Lossing v. Dmuchowski, [2000] O.J. No. 837 (Ont. S.C.J.).
A claimant must demonstrate that absent the advance of funds for interim disbursements, the claimant cannot present or analyse settlement offers or pursue entitlement: Hill v. Hill (1988), 1988 4710 (ON SC), 63 O.R. (2d) 618 (Ont. H.C.) and Airst v. Airst, [1995] O.J. No. 3005 (Ont. Gen. Div.).
It must be shown that the particular expenses are necessary: Lossing v. Dmuchowski, [2000] O.J. No. 837 (Ont. S.C.J.).
Is the claim being advanced meritorious? Lynch v. Lynch (1999), 1 R.F.L. (5th) 309 (Ont. S.C.J.) and Randle v. Randle (1999), 1999 ABQB 954, 3 R.F.L. (5th) 139 (Alta. Q.B.).
The exercise of discretion should be limited to exceptional cases: Organ v. Barnett (1992), 1992 7433 (ON SC), 11 O.R. (3d) 210 (Ont. Gen. Div.).
Interim costs in matrimonial cases may be granted to level the playing field: Randle v. Randle (1999), 1999 ABQB 954, 3 R.F.L. (5th) 139 (Alta. Q.B.).
Monies might be advanced against an equalisation payment: Zagdanski v. Zagdanski, 2001 27981 (ON SC), 2001 CarswellOnt 2517 (Ont. S.C.J.)
Preliminary Objection to Service of Late Affidavit by Respondent
[23] As a preliminary matter, the Applicant objected to service by the Respondent of an affidavit, sworn February 19, 2013, of Claire Atkinson, the law clerk for the Respondent's counsel. In her affidavit, Ms. Atkinson set forth various details supporting the amount of interim disbursements/expenses sought by the Respondent, including her counsel’s hourly rate, the amount of legal fees anticipated to respond to the Applicant's summary judgment motion and for trial, and appending a letter from a proposed forensic accountant, Mr. John Douglas, setting forth his statement of qualifications, his hourly rate and his required retainer amount.
[24] The Applicant argues that, since the Atkinson affidavit was served after the exchange of Factums by the parties in preparation for the original date for argument of the motion, being February 21, 2013, to permit the Respondent to file and rely upon the affidavit is unfair, as it would deprive the Applicant of the ability to address it in his Factum and in argument.
[25] The Atkinson affidavit appears to have been prepared in response to argument made in the Applicant's Factum that the Respondent had led no evidence respecting an estimate of further expenses to be incurred by Mr. Brose, nor an estimate of expenses to be incurred by the, then unnamed, forensic accountant. From that standpoint, there is an element of unfairness for the Respondent to deliver an affidavit designed to fill gaps in her original affidavit material in support of the motion after delivery of the Applicant’s Factum, and it is a practice which should certainly be discouraged. Had the Applicant sought an adjournment of the motion to permit him to file materials responding to the Atkinson affidavit, that request would likely have been granted, with appropriate costs consequences to the Respondent. However no such request was made, and it must therefore be presumed that the Applicant did not deem it necessary to file materials to respond to the Atkinson affidavit to support his argument in opposition to the motion. I am therefore prepared to admit the Atkinson affidavit for the purposes of the motion.
Analysis
[26] The Applicant acknowledges that the Respondent is impecunious. However he argues that she has not established that the proposed expense to retain a forensic accountant is either necessary or reasonable. On the questions of reasonableness, and whether an order for interim costs is necessary to "level the playing field," the Applicant asserts that he has a limited or negligible ability to pay the amount sought by the Respondent.
[27] The Applicant also argues that the Respondent’s case to set aside the two domestic contracts and to seek an equalization of net family property is not prima facie meritorious. In particular, he submits that the grounds for setting aside the two agreements pursuant to subsection 56(4) of the Family Law Act, R.S.O. 1990, c. F.3 cannot be established by the Respondent, and, in any event, the value of the DFT fell during the period between the date of marriage and valuation day such that whatever interest the Applicant has in the trust as a contingent beneficiary could not give rise to an equalization obligation.
[28] Dealing with the issue of the merits of the Respondent’s case first, it is noted that, in Stuart, at para. 13, Rogers, J. cast the nature of the inquiry by stating that “the claim or claims being advanced in the case must be meritorious as far as can be determined on the balance of probabilities at the time of the request for disbursements.”
[29] In the case of Agresti v. Hatcher (2004) 2004 8311 (ON SC), 1 R.F.L. (6th) 1 (SCJ) O’Neill, J., at para. 21 (ii), characterized the question as whether the "claimant has established a prima facie case of sufficient merit to warrant pursuit”.
[30] In my view, the test for whether the claimant’s case has insufficient merit to support a motion for interim expenses under Rule 24(12) (i.e. of insufficient merit to “warrant pursuit”) is necessarily lower than the test for summary judgment under Rule 16(6) that there be “no genuine issue requiring a trial.”
[31] The Applicant’s motion for summary judgment is pending, and will presumably be shortly brought back on for hearing. To make a determination of the merits of the Respondent’s case to set aside the two agreements and in reference to the values of the DFT on the date of marriage and the date of separation would be prejudicial to the determination of the summary judgment motion. Moreover, based upon the affidavit material, and in particular, the apparent failure of the Applicant to make full disclosure of his assets and liabilities at the time of execution of the First Agreement, and the questions which Mr. Brose, in his affidavit, states as remaining outstanding respecting the assets of the DFT and the Applicant’s net worth, I am not satisfied that the Respondent’s case is of such insufficient merit as to not “warrant pursuit.”
[32] The fact that the motion for summary judgment is pending also has an impact on the basis of an appropriate order for interim expenses. In the event that the Applicant’s summary judgment motion is successful, the proceeding will obviously come to an end. Accordingly, in my view, it is not necessary, at this time, to “level the playing field” through to trial, but rather only until disposition of the motion for summary judgment. In any event, I am not satisfied, based on the material before me, that the Applicant has sufficient personal resources to pay the amount claimed by the Respondent for interim costs to take the matter through to trial, which the Respondent has estimated to be in the sum of $138,000 plus HST for legal costs, plus an unspecified sum for retention of a forensic accountant.
[33] A review of the “Dillon Family Trust Agreement”, being the document which established the DFT and which governs its maintenance and operations, reveals that the Applicant has no basis for calling upon the trust to provide him with a distribution out of income or capital to satisfy an interim costs order. Although para. 3 of the Trust Agreement, entitled “Payments before the Time of Division,” confers a power on the trustees to make payments out of income or capital to members of the Dillon family, it is fully discretionary. There is no ability conferred on the Applicant by the Trust Agreement to call upon, or require, the trustees to make any payment to him at any time.
[34] In her affidavit, Ms. Atkinson deposed that responding to the Applicant’s motion for summary judgment will require approximately $20,000 in legal fees. This is based upon Mr. Durbin’s stated hourly rate of $530.00. In my view, for the purposes of an order for interim expenses in a proceeding of this nature in the Region of Waterloo, a full indemnity rate of $400 per hour should be considered sufficient. This would result in an amount for legal fees in respect of the summary judgement motion of $15,000.00.
[35] I am not satisfied that the necessity for a forensic accountant to be retained has been demonstrated. The retention of a new accounting expert would necessarily involve at least some degree of duplication of the work already performed by Mr. Brose, which should not be the responsibility of the Applicant. As indicated above, Mr. Brose is a specialist in trust accounting, and the affidavit material does not support a suggestion that he does not have the necessary skills or knowledge to carry out whatever remaining accounting work is required in order to respond adequately to the accounting issues arising out of the motion for summary judgment. I am satisfied that there will be some accounting work which will be necessary for that purpose and I would be prepared to allow $7,500.00 for that.
[36] The Applicant acknowledges that, even if the enforceability of the domestic contracts is upheld, the Respondent will have entitlement to $40,000 out of the equity in the matrimonial home. As indicated above, it was held in Stuart, citing the case of Zagdanski v. Zagdanski, 2001 27981 (ON SC), 2001 CarswellOnt 2517 (Ont. S.C.J.) that monies might be advanced against an equalization payment.
[37] It is not necessary, at this stage of the proceeding, to characterize an amount to be ordered to be paid to the Respondent as an advance on her entitlement under the domestic contracts, however, as was suggested by Justice Turnbull in Biddle, at para. 34, should the Respondent be unsuccessful on the motion for summary judgment, she may face a costs order which can be enforced, in the discretion of the judge hearing the summary judgment motion, against any lump sum payable to her in respect of her interest in the matrimonial home under the domestic contracts.
[38] I am satisfied that the Applicant has the capacity to fund an order for interim expenses out of his corporation or his other resources in the sum of $27,000, and, given the disparity in the economic circumstances of the parties, it is appropriate to order him to pay that amount in order to level the playing field through the hearing of the motion for summary judgment, and in the interest of justice.
[39] The sum of $27,000.00 is determined as follows:
Legal fees - $15,000.00
Accounting fees - 7,500.00
HST on legal and accounting fees - 2,955.00
Disbursements - 1,545.00
TOTAL $27,000.00
Disposition
[40] It is therefore ordered that the Applicant pay to the Respondent the sum of $27,000 to cover part of the Respondent’s expenses of carrying on this case through the hearing of the Applicant’s motion for summary judgment, including lawyer’s and accountant’s fees and disbursements, without prejudice to the Respondent's right to reapply for an additional amount for interim expenses in the event that the motion for summary judgment is dismissed. This amount is to be paid within thirty days of the release of this endorsement.
Costs
[41] If counsel cannot agree on costs, they may make brief written submissions on costs, the Respondent within 21 days of the date of release of this Endorsement, and the Applicant within 10 days thereafter. The submission shall not exceed three double-spaced pages, exclusive of any offers to settle and Bills of Costs.
D.A. Broad J.
Date: May 29, 2013