COURT FILE AND PARTIES

COURT FILE NO.: 44717-10

DATE: 2013-12-13

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Jeffrey James Dillon, Applicant

and

Lucia Dillon, Respondent

BEFORE: The Honourable Mr. Justice D.J. Gordon

COUNSEL:
P. Amey, for the Applicant
J. Gyverson, for the Respondent

HEARD: December 5, 2013

ENDORSEMENT

[1] There are two motions requiring determination:

(a) the applicant’s request to split the case, with a trial of an issue regarding the validity of two marriage contracts to proceed first, and related relief; and

(b) the respondent’s claim to direct the applicant to pay her interim expenses of $100,000.

Background

[2] The parties married on May 16, 2008 following a period of cohabitation. They separated on August 31, 2010. There are no children born to the relationship.

[3] There are two marriage contracts signed by the parties on July 19, 2007 and December 17, 2007. The documents were prepared by the solicitor for Mr. Dillon. Ms. Dillon received independent legal advice. The essential terms of the marriage contracts involve a waiver by Ms. Dillon as to spousal support and an equalization payment in the event of separation, save for some amount regarding the matrimonial home based on a stated formula.

[4] Following separation, Mr. Dillon commenced this action to enforce the terms of the marriage contracts.

[5] In her answer, Ms. Dillon seeks spousal support and an equalization of net family property. In this regard, she requests the marriage contracts be set aside on the basis of duress, undue influence, fraudulent misrepresentation, unconscionability and lack of financial disclosure.

[6] The financial issues in this case are said to be complex, involving valuation and entitlement of Mr. Dillon in a family trust and in a business.

[7] The Dillon Family Trust was created by the parents of Mr. Dillon in 1999. It is described as a discretionary inter vivos trust, the class of beneficiaries being family members. Pamela Dillon, mother of Mr. Dillon, is the sole trustee as a result of the death of her husband. Although valuation is in some apparent dispute, the investment portfolio of the trust is said to be in excess of $17,000,000.

[8] Mr. Dillon is involved in the family business, Stone Landscapes Inc. The share structure of the company places control in the hands of his mother. Mr. Dillon is paid a salary by the company, presently at $80,000 per annum.

[9] There is another discretionary family trust, referred to as the Jeff Dillon Family Trust. Mr. Dillon established the trust and is the sole trustee. Ms. Dillon is one of several persons in the class of beneficiaries. No funds are reported to be held by the trust.

[10] The parties have been involved in lengthy and expensive litigation since November 2010. Little has been accomplished. From my review, it appears the case has been out of control from the outset. This raises a serious concern as to the motivation of certain participants.

Prior Order

[11] There have been several temporary orders in this case. Of particular interest here is the order granted by Broad J. on May 29, 2013 (2013 ONSC 3134), awarding interim expenses of $27,000 to Ms. Dillon.

[12] At that time, there was an outstanding motion by Mr. Dillon for summary judgment regarding the marriage contracts. The motion had been adjourned on several occasions. It has not been heard and, indeed, Mr. Amey reports the motion will not be required if the case is split.

[13] In her then motion, Ms. Dillon sought interim expenses of $100,000. Broad J. allowed an amount to cover part of her expenses through the hearing for summary judgment, without prejudice to reapply if that motion was dismissed.

[14] In a subsequent endorsement (2013 ONSC 4698), Broad J. awarded substantial indemnity costs to Ms. Dillon in the amount of $8,641.

[15] When Ms. Dillon’s counsel did not attend the settlement conference on August 12, 2013, Taliano J. awarded costs of $1,500 to Mr. Dillon, allowing him to deduct that amount from the award owing to Ms. Dillon.

[16] Mr. Dillon has paid the interim expenses and net cost award to Ms. Dillon as required.

[17] Counsel for Ms. Dillon reports that the $27,000 has already been spent on other matters, namely the balance owing by the client on the prior motion and on the present motions.

(i) Splitting the Case

[18] Rule 12(5), Family Law Rules, provides as follows:

If it would be more convenient to … split a case into two or more separate cases, claims or issues, the court may, on motion, order accordingly.

[19] In Simioni v. Simioni (2009), 2009 934 (ON SC), 74 R.F.L. (6th) 202 (Ont. S.C.J.), M.G. Quigley J., at paras. 15-17, provides a thorough and comprehensive analysis of the legal principles and relevant considerations regarding splitting a case, saying:

15 First, it should be accepted as non-controversial that both the Family Law Rules and the inherent jurisdiction of the Court provide ample authority and power to permit cases such as this to be split: Family Law Act, section 2(10); Rule 12(5). The jurisprudence confirms that this is an authority and power that ought to be exercised if convenient, and if the exercise of the power would be in the interests of justice. The interests of justice will be served if there are clear time and expense benefits to be gained from the bifurcation and determination of the threshold issue, provided no real or meaningful prejudice is caused to either party: Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills, 1986 2591 (ON CA), [1986] O.J. No. 578 (Ont. C.A.); General Refractories Co. of Canada v. Venturedyne Ltd., [2001] O.J. No. 746 (Ont. S.C.J.); Royal Bank v. Kilmer van Nostrand Co., [1994] O.J. No. 1476 (Ont. Gen. Div.).

16 Nevertheless, it is equally important to remember that the splitting of a trial effectively denies the fundamental principle that as far as possible, multiplicities of proceedings are to be avoided, and thus the power to split a case should be regarded as one that is narrowly circumscribed and to be exercised in only the clearest of cases – in cases that exhibit the exceptional merit that calls upon the Court to exercise its inherent power: Courts of Justice Act, section 138; Elcano, above; Carreiro (Litigation Guardian of) v. Flynn, [2004] O.J. No. 3117 (Ont. S.C.J.). In light of this caution, the onus necessarily lies upon the party seeking to bifurcate to satisfy the Court on a balance of probabilities that if granted, severance will result in the “just, expeditious and least expensive determination of the proceeding on its merits”.: Merck & Co. v. Brantford Chemicals Inc., 2004 FC 1400, [2004] F.C.J. No. 1704 (F.C.) at para. 4.

17 There are a number of questions the Court should consider in deciding whether the severance of the trial in this instance is just and expeditious. These include whether the issues for the first trial are relatively straightforward and the extent to which the issues proposed for the first trial are interwoven with those that will arise in the second. They include whether a decision from the first trial will likely put an end to the action, significantly narrow remaining issues, or significantly increase the likelihood of settlement. They include the extent to which resources have already been devoted to all issues, the possibility of delay, the advantages or prejudice the parties are likely to experience and whether the severance is sought on consent or over the objections of one or more parties: see General Refractories Co. of Canda, above at para. 16. However, as Himel J. noted there, emphasizing the observations of Wilkins J. in Royal Bank v. Kilmer van Nostrand Co., above, the focus of these questions on expediency does not displace fairness and justice as the dominant considerations.

[20] Counsel also referred to Bandanza v. Nicoletti, 2011 ONSC 352 and G. (C.M.) v. G., 2013 ONSC 961. Both decisions adopt the aforementioned interpretation of the law. I agree.

[21] I pause to comment on the submissions of counsel. Quite appropriately, Mr. Amey identified the appropriate principles and factors and then proceeded to refer to the relevant facts and circumstances of this case. While Mr. Gyverson attempted to present his argument in a similar manner, he focused on his client’s position with bold statements not supported by evidence. For example, he said a first trial on the validity of the marriage contracts would be more complex than stated by Mr. Amey and that there were overlapping issues. Mr. Gyverson did not expand on this submission.

[22] The affidavit relied on by the respondent is likewise vague. In her affidavit, sworn September 23, 2013, Ms. Dillon simply says:

… the Applicant appears to be intentionally dragging this matter on by scheduling court appearances such as a motion to bifurcate the issues in this matter, and a settlement conference … (para. 9)

… I verily believe the Applicant is intent on inundating me with, inter alia, motions, briefs, and court appearances in an attempt to frustrate and drain me financially and emotionally so that I give up and withdraw my claims in this matter (para. 10).

Similar concerns are presented in her affidavit sworn October 25, 2013.

[23] I realize that affidavits are prepared by counsel, not the party. The above extracts are not evidence but more in the nature of argument, at best.

[24] Mr. Gyverson went on to address the caselaw. However, his focus was on the facts of each case, not the legal principles. The factual considerations in prior cases is helpful but only for demonstration. It is the application of principles to the facts of the case that are determinative. Mr. Gyverson failed to do so in his submissions, relying on position and belief.

[25] So what are the facts or circumstances of this case that are relevant to the principles involved in splitting a case, or not. On my review of the evidence and prior events in this case, it appears disclosure is complete. There are vague references by Ms. Dillon in prior affidavits as to incomplete disclosure, but no complaint is advanced in her present affidavits and no mention was made as to any intended motions for further disclosure. Questioning took place in September and October 2011. No request has been made for further questioning. I see no complaint regarding refusals or undertakings arising from questioning.

[26] Mr. Amey estimates the first trial would require four days. He intends to call the following witnesses:

(a) Mr. Dillon;

(b) Mr. Dillon’s mother;

(c) Mr. Dillon’s sister;

(d) Mr. Weiler, accountant for the Dillon family, as to facts, not opinion; and

(e) Mr. McMurray, solicitor for Ms. Dillon regarding the execution of the marriage contracts and related matters.

[27] Mr. Gyverson simply says a trial would take much longer, due to credibility issues. He declined to provide an estimate and did not identify the potential witnesses.

[28] The validity of the marriage contracts is clearly a “threshold” issue. Ms. Dillon’s claims for spousal support and an equalization payment are dependant upon being successful in having the agreements set aside pursuant to section 56(4), Family Law Act.

[29] Despite Mr. Gyverson’s submission, the issues are not interwoven to any extent. Credibility is an issue in most trials. Some witnesses might be called on both trials, if required, but on different issues. The evidence pertaining to the issue of validity of the marriage contracts will be factual in nature. Opinion evidence would only be required on the second trial, having regard to valuation of assets and income.

[30] In my view, the applicant has established a prima facie case for splitting the issues. In so doing, the parties, counsel and the court will be able to focus.

[31] It is important to consider that the case comes to an end if the marriage contracts are found to be valid. That possibility attracts obvious benefits in terms of time to trial, expense and efficiency.

[32] Further, if the agreements are ruled to be invalid, the second trial will be likewise focused and would result in the same benefits.

[33] Mr. Gyverson’s submission to the contrary is not supported by the evidence and is rejected. Indeed, I adopt the statement by M.G. Quigley J. in Simioni at para. 20 when he said:

It seems impossible to imagine that a comprehensive trial, including the inevitable trial within a trial on the validity of the Agreement, would not be substantially lengthier than a bifurcated trial that focused first solely on the validity of the Separation Agreement and closely related accessory issues.

[34] The other benefit of splitting the case is the possibility of settlement. The parties are firm in their positions as to the validity of the marriage contracts and that issue requires a trial. If the agreements are set aside, resolution is realistic as the primary issue is with valuation.

[35] Hence, I conclude there is no prejudice to Ms. Dillon in splitting the case. Indeed, I would say there is prejudice to her if the case proceeds to a comprehensive trial as:

(a) Ms. Dillon has, or should have, the funds to litigate the first trial and there is the possibility a further award for interim expenses will be denied;

(b) if Ms. Dillon is successful on the first trial, she will likely receive a significant cost award;

(c) if Ms. Dillon is not successful on the validity issue, her exposure to a cost award is minimized as opposed to the same result following a comprehensive trial; and

(d) the expense for valuation evidence is not required on the first trial.

[36] Mr. Gyverson complains of additional time and expense and the possibility of conflicting decisions. I am not persuaded by this argument. I would add that a bifurcated case should still be assigned to one judge, although such is within the discretion of the trial judge, thus eliminating any of Mr. Gyverson’s concerns.

[37] Accordingly, I am satisfied, on a balance of probabilities, that splitting this case will result in the “just, expeditious and least expensive determination of the proceeding on its merits” (see Merck & Co. v. Brantford Chemicals Inc., 2004 FC 1400, [2004] F.C.J. No. 1704 (F.C.), at para. 4 as referred to in Simioni, at para. 16, and G. (C.M.) v. G. (R.), at para. 16).

[38] In keeping with this conclusion, it is appropriate to expedite the first trial. I see no benefit from the time and expense for either a settlement or trial management conference. The positions are firm. Counsel advise they are available and can proceed at the next sittings.

[39] An order, therefore, is granted on the following terms:

(a) splitting the case and directing the trial of the issue regarding the validity of the marriage contracts to proceed first, the balance of the issues to proceed, if required, at a later date;

(b) the first trial to be expedited and directing it be placed on the trial list for the sittings commencing February 10, 2014 with a speak to court on February 3, 2014;

(c) dispensing with the requirement of a settlement conference or a trial management conference;

(d) vacating the settlement conference date of December 18, 2013; and

(e) the trial record shall be served and filed in accordance with Rule 23.

[40] The issue of costs will be addressed at the end of this endorsement.

(ii) Interim Expenses

[41] This is the second request by Ms. Dillon for interim expenses in the amount of $100,000.

[42] Rule 24(12), 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.

[43] The applicable legal principles were canvassed by Broad J. in the first ruling, previously mentioned and need not be repeated here. Simply put, the purpose of interim expenses is to level the playing field when required in the circumstances of the case.

[44] There is no serious dispute as to the impecunious situation of Ms. Dillon for the purposes of this motion. I note, however, that she neglected to file an updated financial statement with her motion as required by Rule 13(12). Her affidavits are silent as to present financial circumstances. This lack of disclosure is concern.

[45] Broad J. awarded $27,000 to allow Ms. Dillon to proceed with the case through to the motion for summary judgment. That motion is not being pursued. The question now is whether Ms. Dillon requires or should receive a further payment towards the expense of the first trial.

[46] In her affidavit, sworn September 23, 2012, Ms. Dillon reports her counsel advising as to the financial requirements:

(a) $8,000 for a settlement conference;

(b) $15,000 to respond to Mr. Dillon’s motion;

(c) $15,000 for her motion; and

(d) $100,000 for trial.

[47] No detail was provided for these amounts. When I challenged Mr. Gyverson on the estimate of $30,000 for the two motions, heard together in regular motions court, he suggested $15,000 as being more appropriate. Such amount, in my view, is inflated and not realistic. He prepared a notice of motion and two affidavits. No financial statement, factum or book of authorities was presented. Time would be required in reviewing Mr. Amey’s material, obtaining instructions, preparation and attending motions court. Surely, that cost to Ms. Dillon, under any circumstances, should not exceed $4,000. Indeed, as hereafter discussed, there ought to have minimal expense incurred on these matters.

[48] I am most concerned with the report that the $27,000 has already been spent. Having regard to the information provided, I have difficulty accepting that statement.

[49] In the prior ruling on costs, Broad J. awarded $8,641. In para. 12 of his decision, he indicated counsel had requested $11,342 in fees. Broad J. reduced the claim by $1,650, regarding the motion to amend pleadings that Ms. Dillon did not pursue, and by $2,492 as she was not completely successful. Assuming $11,342 was the appropriate amount to invoice Ms. Dillon, she would have a shortfall of $4,142, plus HST, after the cost award was paid.

[50] Broad J. included $7,500, plus HST, for accounting fees in his award. There is no indication that an accountant has been retained for further services. In her prior affidavit, sworn February 12, 2013, Ms. Dillon indicted the prior accounting expense of $6,977 had been paid in 2012. Further, there is no need for opinion evidence on the first trial.

[51] Therefore, I conclude Ms. Dillon should have at least $22,500 remaining from the prior award for interim expenses. It is impossible to spend that amount on these motions.

[52] Is $22,500 sufficient for the first trial? I conclude it is, given that the only expense will be for preparation and attending on the trial. Using the full indemnity rate for senior counsel of $400, as Broad J. considered appropriate, and allowing for four days of trial and two days for preparation, the cost to Ms. Dillon would be approximately $21,000. As she will be using junior counsel, according to her affidavit, the expense should be less.

[53] Therefore, a further award for interim expenses is not warranted at this time.

[54] If Ms. Dillon has, in fact, spent the award of $27,000, she did so at her own peril. She cannot expect the opposing party to provide a blank cheque. The award was not intended to represent a “license to litigate”: see Stuart v. Stuart (2001), 2001 28261 (ON SC), 24 R.F.L (5th) 188 (Ont. S.C.J.), at para. 10.

[55] Should Ms. Dillon be successful on the first trial, I expect she will receive a cost award after taking into account the prepaid amount. In keeping with the order of Broad J., I would allow her to renew her motion for interim expenses related to the second trial.

[56] In reaching this conclusion, it becomes unnecessary to determine Mr. Dillon’s ability to pay a further award. I do note that Mr. Amey has tendered considerable evidence on behalf of Mr. Dillon on this potential issue, including a sworn financial statement, income tax and corporate documents and, of particular interest, sworn statements from the accountant.

[57] In response, Ms. Dillon, in her affidavit sworn October 25, 2013, simply refers to her “belief” that Mr. Dillon has the ability to pay and to her “belief” as to his interest in the family trust and other resources. Speculation is not evidence. Counsel for Ms. Dillon has received disclosure regarding the trust agreement, corporate records, financial records and accountant’s reports. Accordingly, it is expected that responding affidavits present evidence, not belief.

[58] This motion is dismissed.

(iii) Costs

[59] These motions were not necessary. Given the obvious benefit to Ms. Dillon to split the case, that matter should have proceeded as a Form 14B consent motion. There was no merit in the claim for further interim expenses.

[60] If the parties are unable to agree on the issue of costs, brief written submissions are to be delivered to my chambers in Cayuga within 30 days.

(iv) Summary

[61] For these reasons, the applicant’s motion to split the case is granted on the terms indicated and the respondent’s motion for further interim expenses is dismissed.

[62] In the circumstances of this case, I feel compelled to provide further comment. Far too often, we are seeing litigants incurring significant expense that may not be necessary. Regard must always be had to the primary objective set out in Rule 2(2).

[63] When legal expense, as here, reaches a high level, with little advancement in the case, the obvious inference is that this must be a complex case. It is not.

[64] The validity of the marriage contracts is a threshold issue. Quite frankly, that matter ought to have been finalized by now. Subsequent issues, if required, are primarily financial. Much is made of the underlying documents, although the analysis is not difficult. Further, the period of the marriage or the relationship coincides with an economic recession. Surely valuation and calculation of any purported equalization payment is not as complex as advertised.

[65] It is not appropriate to litigate at will in family law cases. Having regard to Rule 2(2), the standard must be one of reasonableness. I am not persuaded that standard has been met thus far in this case. I remind the parties that reasonableness is a primary consideration when assessing costs under Rule 24 at the end of this case.

[66] Lastly, as previously stated, I recommend one judge be assigned as the trial judge, subject to his or her discretion in that regard.

D.J. Gordon J.

Released: December 13, 2013