SUPERIOR COURT OF JUSTICE – ONTARIO

FAMILY COURT

COURT FILE NO.: F1373/01-02
DATE: October 25, 2013

RE: Carol Lesley Hooper (sometimes known as Carol Lesley Fretwell), applicant

AND:

William Robert Fretwell, respondent

BEFORE: MITROW J.

COUNSEL:
Donald W. Kilpatrick for the applicant

William Robert Fretwell in person

HEARD: October 16, 2013

ENDORSEMENT

INTRODUCTION

1The applicant brings a motion for various relief but the only issue that was argued was the applicant’s request that the respondent’s motion to change be dismissed, the primary reason being the respondent’s failure to comply with an existing order for production of various financial disclosure. The proceeding before the court is the respondent’s motion to change a final order. The respondent’s relief includes a reduction of child support based on his actual income.

2In her response to the motion to change, the applicant seeks various orders regarding ongoing child support for the youngest child, plus other orders including termination of child support effective May 31, 2011 in respect of the two oldest children (twins), as they were no longer dependants effective that date. As it was clear that those children had finished their university by the end of May 2011, and the respondent was in agreement with that, an order terminating the support obligation for those children effective May 31, 2011 is included in the order below.

3Further, the applicant was in agreement that all spousal support owed to her by the respondent should be fixed at zero as of May 1, 2009 and that no spousal support be payable thereafter. An order to that effect will also issue on consent.

4The position of the applicant (being the responding party on the respondent’s motion to change) is that the facts merit an order dismissing the respondent’s motion to change. The respondent submits that he should be given some further opportunity to provide the requisite court ordered disclosure.

5For reasons explained below, I agree with the applicant’s position that the respondent’s motion to change should be dismissed.

LITIGATION HISTORY

6It is necessary to briefly review the background history of the litigation between these parties in order to provide some context to the applicant’s request for dismissal.

7There is no real dispute as to the material facts relevant to this issue.

8In 2001, the applicant commenced a family law application in this court. The parties, who were married to each other, were subsequently divorced in 2003.

9The parties have three children: Caroline and Sophie, both born April 3, 1989; and Alex, born December 27, 1993. As indicated earlier, Sophie and Caroline each finished their four year undergraduate university degrees by May 31, 2011. After that date, they were no longer dependent children. Alex continues to attend university, having started his third year in September 2013.

10In terms of employment, the applicant is currently employed as an executive assistant at Western University. The respondent is a pharmacist and for many years has been self-employed. The respondent generally does not work at any specific pharmacy but rather works at various pharmacies including filling in for pharmacists.

11On January 4, 2002, the applicant obtained an order of Aston J. dealing with custody, access, child support, spousal support, sale of the matrimonial home and dealing with the application of the proceeds from the sale of the matrimonial home.

12Although the order was marked as a “final” order, there were aspects of the order that were not final; specifically the applicant’s claim for equalization of net family properties was adjourned sine die and the spousal support of $750 per month was temporary. The respondent did not defend the application and did not appear on the application. The respondent had provided no financial disclosure after being served with the application and I accept the applicant’s evidence that the respondent’s income of $83,200 (on which the child support order of $1,388 per month was based) was arrived at by way of an estimate of the respondent’s income using $40 as an hourly rate. Initially, after the order, the respondent made some payments towards the child support and by July 2002 all unpaid child support and spousal support (and also costs ordered against the respondent) were paid to the applicant from the respondent’s portion of the matrimonial home sale proceeds.

13Thereafter the respondent fell into arrears and by January 2004 there was approximately 18 months’ worth of child support and spousal support arrears.

14The applicant deposes that she was contacted by the respondent in January 2004 and the parties agreed to the respondent’s proposal that the respondent would begin making the child support payments of $1,388 monthly as ordered, and in exchange, the applicant had to waive the existing arrears and had to agree to withdraw the support order from the Family Responsibility Office. Also, no spousal support would be paid.

15The applicant deposes that she agreed (rather reluctantly) to this as the Family Responsibility Office had not been able to collect arrears over the past 18 months.

16There is a Director’s statement of arrears filed starting at the beginning of 2002 and ending in March 2012. The evidence of the applicant is corroborated by the Director’s statement of arrears.

17The applicant deposes that the respondent continued making monthly payments of $1,388 from January 2004 until January 2009, when the payments stopped. In or about April 2009, the applicant re-filed the existing order with the Family Responsibility Office and the statement of arrears confirms the applicant’s evidence that $4,164 was claimed as child support arrears at the time of the re-filing of the order. Thereafter, the Director enforced both the ongoing child support and spousal support.

18Later in 2009, the applicant brought a motion to change after not having received responses from the respondent to correspondence that had been forwarded to the respondent by the applicant’s lawyer requesting financial disclosure, including income tax returns and notices of assessment.

19The respondent, again, did not serve and file material in response to the applicant’s 2009 motion and he did not provide any of the required financial disclosure. A trial was held before Marshman J. on November 19, 2009 in the absence of the respondent. The court imputed an income of $132,841 to the respondent on the basis of evidence adduced at trial regarding the income of pharmacists in Ontario.

20On November 19, 2009, Marshman J. made a final order varying the child support provisions set out in the initial order of Aston J. dated January 4, 2002 as follows:

a) effective January 1, 2009, the respondent was ordered to pay child support for the three children in the amount of $1,526 per month pursuant to s. 3(1)(a) and 3(2)(b) of the Guidelines; and

b) also commencing January 1, 2009, the respondent was ordered to pay a monthly contribution for support for the university expenses of Caroline and Sophie in the amount of $608 per month and $365 per month, respectively. This order was made on the basis of an income of $132,841 for the respondent and $50,000 for the applicant.

21The statement of arrears filed in the motion material shows outstanding arrears of $96,035 as at March 3, 2012. However, that amount will be subject to increases for child support owing for the child Alex after that date and, further, the arrears will be reduced when accruals are reversed for the children, Caroline and Sophie, for the period commencing May 31, 2011 and also when arrears relating to spousal support are reversed.

THE RESPONDENT’S CURRENT MOTION TO CHANGE

22The respondent issued his current motion to change May 14, 2012, initially returnable on June 26, 2012.

23When the documentation supporting the motion to change was filed on behalf of the respondent, those documents included the mandatory form 13 financial statement. In his financial statement sworn May 14, 2012, the respondent disclosed net self-employment income of $57,000 annually. Even though the respondent was seeking changes to child support based on his income retroactive to 2009, the respondent has provided no income tax disclosure for the years starting 2009 and, furthermore, there was no income tax disclosure appended to the respondent’s financial statement.

24Subrule 13(7) provides as follows in relation to the duty of the clerk not to accept a party’s financial statement:

13(7) The clerk shall not accept a party’s financial statement for filing unless the following are attached to the form:

1. Proof of the party’s current income.

2. One of the following, as proof of the party’s income for the three previous years:

i. For each of the three previous taxation years,

A. the party’s notice of assessment and, if any, notice of reassessment, or

B. if a notice of assessment and a notice of reassessment are unavailable for a taxation year, a copy of the Income and Deductions printout provided by the Canada Revenue Agency for the party for the taxation year.

ii. If the party swears or affirms a statement in the form that he or she is not required to and has chosen not to file an income tax return because of the Indian Act (Canada), some other proof of income for the three previous years.

25The respondent was unable to explain how he was able to file his financial statement when it did not contain the information as required by r. 13(7) para. 2(i)A or B. I find that if r. 13(7) had been enforced by the clerk as required, that the respondent’s financial statement would have been rejected and the respondent would not have been able to file his notice of change as that document had to be accompanied by a properly prepared financial statement containing the required income tax information.

26On September 18, 2012, Henderson J. made an order requiring the respondent within 90 days to provide various financial disclosure. This disclosure included his income tax returns for 2009, 2010 and 2011 together with attachments and notices of assessment, financial statements for the respondent’s business or professional practice for the years 2009 to 2011 inclusive, proof of income to date, proof that the respondent has complied with life insurance provisions set out in the order of Marshman J., copies of all bank statements in the respondent’s name or with any other person or corporation for the period November 1, 2009 to July 1, 2012. The respondent was also ordered to provide answers or explanations regarding an entity called “Rx-Aid,” the names of shareholders and officers of William Fretwell Pharmacy Limited and copies of the incorporating documents, proof of monies received by the respondent, and an explanation of the respondent’s income tax arrears of $220,000. The disclosure order required the respondent to provide all documents in relation to his bankruptcy but it was conceded by the applicant and agreed by the respondent that the respondent had not in fact filed for bankruptcy.

27In her affidavit material, the applicant deposes the respondent had not complied with any of the disclosure ordered by Henderson J. In his responding affidavit, the evidence of the respondent shows that there has been some minimal compliance with the order. In some areas where there was compliance, it was not complete. For example, regarding William Fretwell Pharmacy Limited, the respondent identified the shareholders, as required, but did not provide a copy of the incorporating documents. In relation to bank statements, some statements were provided but not for the entire period as ordered.

28In my view, it is not necessary to dwell in any detail on what I would describe as the more minor disclosure requirements contained in the order of Henderson J. because the most important documents, namely the tax returns including the notices of assessment and financial statements for the corporation have admittedly not been provided.

29These are clearly the most significant documents ordered to be provided and they are absolutely necessary in order for the applicant to be able to defend the case and also for the respondent to be able to carry on with his case.

30Given the unusual history, it is appropriate to quote exactly what the respondent said in his affidavit material regarding his income tax returns and financial statements.

31In relation to the order to provide his 2009, 2010 and 2011 T1 general tax returns with all attachments and Canada Revenue Agency notices of assessment for those three years, the respondent deposes as follows:

Income tax documents for 2009 may exist, I have not found them. Later years do not exist. It is likely that they do not exist.

32In relation to the order to provide financial statements and other documents for the respondent’s business for the years 2009, 2010 and 2011, the respondent deposes:

Again financial statements for 2009 may exist, the others do not.

33In his affidavit, the respondent deposes that he has been suffering from depression which has continued for 11 years. He relates his depression to the circumstances of his separation from the applicant. He deposes that his depression was “so severe” that he was four years behind with his income tax returns and financial statements and he deposes that the interest and penalties now owing to Canada Revenue Agency total $300,000.

34Significantly, the respondent provides no corroboration from any physician or other healthcare provider in relation to his claim that he has a long-standing history of depression.

35During argument, the respondent submitted that he needed time to provide the required documentation and that his accountants would require time to prepare the necessary personal and corporate tax returns. However, the respondent provided no affidavit evidence as to any confirmation that an accountant had been retained and there was no evidence from any accountant as to how much time might be required to prepare the necessary tax returns and financial statements that are now a number of years in arrears. There was no evidence from the respondent as to what efforts, if any, he made to produce the tax returns and financial statements subsequent to the disclosure order.

THE LAW

36The relevant rules are 1(8) and 14(23) of the Family Law Rules, O. Reg. 114/99:

FAILURE TO FOLLOW RULES OR OBEY ORDER

1(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.

FAILURE TO OBEY ORDER MADE ON MOTION

14(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.

37It is not unusual to consider both rules 1(8) and 14(23) on a motion to strike pleadings. In Kloc v. Kloc, 2012 ONSC 4431, I reviewed the authorities as to the proper approach when dealing with a non-complying party (in relation to rules 1(8) and 14(23)) at para. 27:

In Molina v. Molina, [2011] O.J. No. 2287, 2011 ONSC 3030 (Ont. S.C.J.), S.E. Healey J. considered a motion by one party to strike the other party’s pleadings. That motion was grounded on subrules 1(8) and 14(23). In relying on authorities, Healey J. agreed that subrule 14(23) should not be taken lightly and that the onus is on the non-compliant party to show why subrule 14(23) ought not to apply. The court also cited a three-part test to be applied in dealing with non-compliance by a party with court orders within the context of subrule 14(23). Specifically, Healey J. stated as follows at paras. 5 to 7:

5 In Gordon v. Starr, 2007 35527 (ON SC), [2007] O.J. No. 3264 (S.C.J.) at para. 16 the court emphasizes that subrule 14(23) should not be taken lightly, and that the onus is on the non-compliant party to show, on a balance of probabilities, why subrule 14(23) should not apply. The court notes that it would take an extraordinary event to trigger the "unless' provisions of subrule 14(23).

6 The decision in Ferguson v. Charlton, 2008 ONCJ 1, [2008] O.J. No. 486, 2008 CarswellOnt 667 (O.C.J.) sets out the approach to be taken by the courts in dealing with non-compliance by a party with court orders in the context of Family Law Rule 14(23).

• The court must ask where there is a triggering event that would allow it to consider the wording of either sub-rule 1(8) or sub-rule 14(23). That triggering event would be non-compliance with a court order in the case or a related case (sub-rule 1(8)) or an order "made on a motion" (sub-rule 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 sub-rule 1(8) or by ordering that sub-rule 14(23) does not apply. My review of the foregoing caselaw 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 the court determines that it will not exercise its discretion in favour of the non-complying party, it is then left with the very broad discretion as to the appropriate remedy pursuant to the provisions of either sub-rule 1(8) or sub-rule 14(23). (emphasis added)

7 In Morin v. Cunningham, [2009] O.J. No. 2877, 2009 CarswellOnt 3974 (S.C.J.), the court considered and implicitly adopted the three part test set out in Ferguson v. Charlton, above, as did the court in Ragno v. Ragno, [2010] O.J. No. 2182 (S.C.J.).

38The approach described above, requiring an exceptional or extraordinary event to trigger the “unless” provision in r. 14(23), and applying the three-step process as formulated in Ferguson v. Charlton has been adopted in other cases: see Johanns v. Fulford, [2011] O.J. No. 5970 (O.C.J.) at paras. 17-18; Quinn v. Nicholson, [2013] O.J. No. 11 (S.C.J.) at para. 15; and Colivas v. Colivas, [2013] O.J. No. 1493 (S.C.J.) at paras. 15-16.

DISCUSSION

39In relation to r. 14(23), the respondent is the non-complying party. He bears the onus to show, on a balance of probabilities, why r. 14(23) should not apply.

40Applying the three-part test, the triggering event includes the respondent’s non-compliance with the disclosure order made in this case.

41In deciding whether an order should be made that r. 14(23) does not apply, the relevant history should be taken into account. The respondent, despite three court cases (including the present case) spanning over a decade, has never produced his tax returns, notices of assessment or financial statements. He failed to appear at the first two proceedings. He has commenced the present case, and somehow, inexplicably, has been able to file a financial statement without the mandatory tax information attached. The ability of the respondent to start a court case by slipping past the mandatory provisions of the rules is substantially prejudicial to the applicant. The best evidence the respondent has for the court is that the tax returns, notices of assessment and financial statements ordered to be produced for 2009, 2010 and 2011 do not exist, although for the year 2009 those documents “may exist.” The respondent has had over a year to comply with the disclosure order. The respondent’s excuses for non-compliance lack merit, are unreliable, are bereft of any corroboration and are most unconvincing. The respondent is not entitled to avoid the consequence of r. 14(23).

42The facts and the respondent’s longstanding contumelious behaviour place this case far outside the parameters of circumstances where the respondent would be entitled to some extension of time to comply with the disclosure order.

43The appropriate disposition in this case is an order dismissing the respondent’s motion to change pursuant to r. 14(23). Also, in my view, the same result would follow by applying r. 1(8). It should be noted, however, that the respondent will benefit from the termination of child support for the two eldest children and also the termination of spousal support including rescission of spousal support arrears.

ORDER

44For the foregoing reasons, an order shall issue incorporating the following:

a) The respondent’s motion to change is dismissed;

b) The respondent’s obligation to pay child support for the children, Caroline and Sophie, is terminated effective May 31, 2011;

c) All spousal support owing by the respondent to the applicant is fixed at zero as at May 1, 2009 and thereafter the respondent shall have no further obligation to pay spousal support to the applicant;

d) The applicant is at liberty to obtain a date from the trial coordinator for an uncontested hearing on the balance of the claims in the applicant’s motion; and

e) If the parties cannot agree on costs, then the parties shall serve written costs submissions on each other and also shall file same with the trial coordinator. The applicant’s costs submissions shall be served and filed within 14 days, the respondent’s costs submissions shall be served and filed within 14 days thereafter and the applicant’s reply, if any, shall be served and filed within 7 days thereafter. Each set of submissions shall not exceed three typed pages plus copies of any offers to settle, time dockets and/or statements of account and authorities. The reply shall not exceed two typed pages.