ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FC-11-2339
DATE: December 16, 2013
B E T W E E N:
IRINA RISTO
Julius Dawn, for the Applicant
Applicant
- and -
PAUL MARCELAIS
Kenneth Bickley, for the Defendants
Respondent
HEARD: November 27, 2013
DECISION
James J.
[1] The applicant has brought a motion for an order against the respondent for contempt of court. The applicant also moves for an order pursuant to Rules 14(23) and 19(10) striking out the respondent’s answer.
[2] The applicant alleges six separate acts of contempt of court and nine breaches of court orders. The applicant also requests an order directing an uncontested trial after the respondent’s pleadings are struck out.
[3] The allegations of contempt of court originate with an order by Master Roger on March 21, 2012 not to sell any real estate and continue with allegations of non-compliance with the orders of Minnema, J. on September 18, 2012 and Maranger, J. on December 18, 2012.
[4] The applicant’s materials detail numerous examples of what are alleged to be flagrant and obvious failures by the respondent to comply with the terms of various orders.
[5] The respondent has replied to these allegations with an affidavit sworn October 25, 2013. The respondent claims a Charter right to remain silent in the face of contempt allegations and points to the need to adhere strictly to the rules applicable to the remedy of contempt of court in the context of family law proceedings. The respondent also says that there has not been a case conference on the specific issue before the court and therefore the motion ought not to be permitted. On this last point, when a party moves for relief on the basis of non-compliance with an order, there is no requirement to convene a case conference before launching the motion.
[6] This case involves claims by the applicant as an unmarried partner of the respondent in a common law relationship that lasted about 15 years. The applicant had a 13 year old son from a prior relationship when the parties commenced cohabitation. The applicant’s claims are based on the doctrine of constructive trusts and unjust enrichment. She says that as a result of the joint efforts of the parties, the respondent was able to acquire wealth and assets in respective of which he has sought to deprive the applicant of a fair share of the fruits of their collective efforts.
[7] The trial is set to proceed in 2 months or less.
[8] There is a wide divergence between the parties with respect to whether or not the respondent has failed to comply with the various court orders. The respondent says paid the Canada Revenue Agency approximately $30,000, paid spousal support of $33,000, repaid a loan on his plane of $55,000 and incurred living expenses of $40-$50,000. In addition, he has been funding his legal expenses with payments of $1500 per month starting in August 2012.
[9] The applicant says the respondent has not fully accounted for the sale of assets totaling $835,000 and has disposed of $320,000 in assets since the last non-dissipation order was made. If I understand counsel for the respondent correctly, the respondent says the amount is closer to $200,000 and that the applicant is protected for this amount because certificates of pending litigation have been registered against various properties including the family home which has equity of about $200,000.
[10] I do not think it is desirable to deal with this matter on the basis of contempt of court for the following reasons:
a. the case authorities make it clear that an order of contempt of court ought to be made only in the clearest cases when there is no viable alternative remedy;
b. there has been delay in advancing some of the claims upon which contempt of court is now sought. The parties are close to trial. Findings of contempt of court often involve an opportunity to purge the contempt and this process may impact on the timing of the trial.
c. contempt of court in family law cases is more remedial than punitive. There are remedies that are available to the applicant that are suitable and adequate.
[11] Instead, I prefer to approach the issues on the basis of whether there is adequate evidence to determine if the respondent has failed to comply with the terms of court orders that have been issued to date and if so, what remedy is appropriate in the circumstances.
[12] In my view, sufficient insight into the current situation and the conduct of the respondent can be gained by examining the following issues:
a) the order of Minnema, J. requiring payment into court of $130,000;
b) the sale of the Cessna aircraft; and
c) whether the respondent complied with an order to provide an accounting.
The Order of Minnema, J.
[13] To properly set the stage for a review of the circumstances surrounding the order of Minnema, J. requiring the respondent to pay $130,000 into court, is necessary to commence with the case conference that was held on March 21, 2012. The respondent was present with his counsel when Master Roger made an order that “none of the parties shall sell any real estate asset from this date on”.
[14] On the same date as the case conference the respondent closed the sale of a condominium at 1440 Heron Road. The purchaser was his family physician, Dr. Saeed. The agreement of purchase and sale was dated February 22, 2012 and provided for the payment of $180,000 on closing. The closing date was set for April 1, 2012. For reasons that are not explained, the closing date was advanced to the same day as the case conference. The fact of the pending closing or that the sale had closed earlier that day does not appear to have been brought to the Master’s attention.
[15] Now turning to the subsequent motion before Minnema, J. on September 18, 2012, the continuing record discloses that the applicant delivered the motion material on August 22, 2012. The notice of motion claimed extensive relief including an accounting of the proceeds of sale from the Heron Road condominium sale. The applicant’s supporting affidavit contained over 50 exhibits including details of the condo sale. The applicant contended that there had been a mortgage registered against the condominium property for $50,000 and that she believed the net proceeds of that sale were $130,000.
[16] On September 6, 2012 the respondent delivered a notice that his counsel, Mr. White, was no longer retained and that the respondent would be representing himself. No responding material was served. Justice Minnema’s order was made in the context of a contested adjournment. His endorsement provides as follows: “contested adjournment granted on terms as set out in the draft order signed by me today. A new date is to be set by Mr. Marcelais’ new counsel in consultation with Mr. Dawn.”
[17] It appears that the fact of the condo sale was addressed before Minnema, J and the only evidence available to the court was contained in the applicant’s affidavit. One of the terms of the adjournment was a requirement that the respondent pay the net proceeds of sale from the condominium sale into court. Based on the evidence provided by the applicant, Minnema, J determined that the net proceeds of sale were $130,000 and directed that this sum be paid into court.
[18] Shortly after the contested adjournment on September 18, 2012, the respondent’s present counsel gave notice that he had been retained. In December 2012 the parties were again before the court with competing motions. The respondent’s cross-motion sought to vary, among other things, the order to pay $130,000 into court. In addition, the respondent sought access to his bank accounts and an order permitting the sale of his aircraft. His affidavit in support of the request to vary the payment into court indicated that the sale of the Heron Road condominium had generated net proceeds of sale of $89,696.81, not $130,000. While the respondent provided an affidavit declaring what the respondent said were the true proceeds of sale, no documentation confirming this statement was provided at that time; no lawyer’s reporting letter, no mortgage statement, and no trust statement although all these documents were either in his possession or available to him at the time the affidavit was made.
[19] In the respondent’s affidavit filed in response to the applicant’s present motion, the respondent provides all the details that he could have provided to both Minnema, J. in September 2012 and Maranger, J. in December 2012 but did not. He repeats his averment that the net proceeds of sale from the condominium sale were $179,614.49 less a mortgage debt of $89,696.49 and closing disbursements of $281.22 (no fees were charged) for net proceeds of $89,696.81.
[20] The respondent seeks to deploy these “after the fact” details in an effort to avoid legal sanctions on the grounds that it was “impossible” for him to comply with the order of Minnema, J. The respondent acknowledges that he did not pay what he says were the true net proceeds of sale into court, nor does he offer any explanation for advancing the closing date from April 1st to March 21st, the day of the case conference before Master Roger.
The Respondent’s Sale of His Cessna Aircraft
[21] In response to the order of Minnema, J. prohibiting the respondent from dissipating and depleting any assets, the respondent included in the relief sought in his December 2012 motion a request to vary the aforesaid order to permit the sale of his Cessna aircraft.
[22] He swore in his affidavit in support of this request that due to restrictions on his bank accounts he was unable to pay any costs relating to the Cessna “so it will be seized and probably sold at a big loss”. No details of the value of the aircraft, the value of the debt secured against it or the monthly payments required to be made in connection with the aircraft indebtedness were provided. Nor did the respondent provide any information with respect to the cost, storage or maintenance of the aircraft.
[23] Maranger, J., in refusing the request to permit the Cessna to be sold, observed that in his view an accounting by the respondent of what he had previously sold was more pressing than the sale of remaining property.
[24] In or about June 2013 the respondent sold the aircraft to the Rockcliffe Flying Club in spite of the presence of an unappealed court order prohibiting the sale. Recall that the respondent had previously moved unsuccessfully for permission to make such a sale. The details of the sale and the disposition of the sale proceeds have not been disclosed. In argument counsel for the respondent stated that the respondent paid a loan owed to Dr. Saeed of $55,000 with the money from the aircraft sale. The respondent’s net family property statement sworn September 26, 2013 makes no reference to such a loan as of the valuation date of August 12, 2011. Similarly, the respondent’s Form 13.1 financial statements sworn October 26, 2011 makes no reference to a debt owed to Dr. Saeed.
The Requirement for an Accounting
[25] In making the order of December 18, 2012 the endorsement of Maranger J. provided in part as follows:
With respect to the applicant’s motion, it would appear that counsel representing the respondent all but conceded the relief requested. Regardless of whether he did or did not, I would have granted the order as the relief was clearly supported by the evidence, therefore there will be an order to go as follows:
“The respondent shall within 30 days of the date of this order provide to the applicant a detailed accounting, together with all supporting documentation, fully tracing the net proceeds of the sale from the time of sale up to the current date for the properties municipally known as:
a) 1916 Lavergne Street, Ottawa
b) 1927, 1941 and 2205 Stonehendge Crescent, Ottawa
c) unit 308-1807 St. Joseph Blvd., Ottawa
d) and unit 1912-1440 Heron Rd., Ottawa
Should the respondent fail to provide the accounting, then all of the documentation respecting the sale of the properties and the deposits of proceeds shall be provided to the applicant together with the payment of an interim disbursement of $15,000 to permit the applicant to engage the services of a professional to conduct the accounting.
[26] The accounting appears at Tab 2(N) of Volume 6 of the continuing record. Suffice it to say that in many instances it falls well short of providing the meaningful information that Maranger, J directed the respondent to provide and does not permit the tracing of the funds from the disposition date of a particular asset to the present.
[27] The respondent complains that he endeavoured to comply with the court orders and was confronted with varying interpretations of particular terms that resulted in confusion. He also emphasizes that he repaid the $50,000 he had taken from a line of credit, as well as paying $32,000 in spousal support and $13,500 in court costs. He says these payments demonstrate his respect for court orders. In my view, the problems and confusion described by the respondent are largely of his own making. His obvious lack of candor in fulfilling his disclosure obligations is completely consistent with his “catch me if you can” approach to this litigation. Where genuine uncertainty exists, judicial clarification and rulings can be obtained.
[28] As I indicated at the outset of this endorsement, my approach to the issues raised by this motion is to avoid the use of the court’s contempt powers. In my view there are other, less technical, measures that ought to be utilized in the particular circumstances of this case.
[29] I have concluded that the respondent has failed to make good faith efforts to comply with all terms of the court orders that have been made. In addition, he has failed to satisfy his obligation to make full and on-going financial disclosure as required by the family law rules.
[30] One of the remedies for such non-compliance is an order striking out the respondent’s pleadings. In Purcaru v. Purcaru, 2010 ONCA 92, the court of appeal considered whether the trial judge was correct to strike out the appellant husband’s pleadings pursuant to a motion made by the respondent wife at the outset of the trial. The basis for the request consisted of allegations of continuing and blatant breaches of various non-depletion and restraining orders. After hearing oral evidence, the trial judge struck the appellant husband’s pleadings and financial statements and precluded him from participating in the trial other than as an observer. The trial judge was concerned that the appellant husband’s participation at trial would prolong it unnecessarily and that an order striking out his pleadings was the only appropriate remedy available. The trial judge did not regard the appellant husband as a willing participant in the trial process and was concerned that his participation would not be constructive or helpful.
[31] The Court of Appeal commented that pleadings should only be struck and the right to participate in a trial denied to a litigant in exceptional circumstances where no other remedy will suffice. The objective of a sanction ought not to be the elimination of an adversary but rather ought to be aimed at persuading the adversary to comply with the orders of the court.
[32] In my view, the respondent in the present case should be given a final opportunity to at least partially redress his prior non-compliance. I note that he acknowledged that the condominium generated net proceeds of sale in excess of $80,000. I note as well that he has indicated a value for the Cessna aircraft of $80,000. It appears that the aircraft was sold earlier this year. There is no proper and convincing evidence from the respondent as to what he did with the funds. There is no evidence of any encumbrances that may have been in place to reduce the net proceeds of sale. I am of the view that if the respondent pays into court the sum of $80,000 plus a reasonable allowance for the costs of this motion, he should not have his pleadings struck and he should not be deprived of the ability to participate fully in this trial. In my view the evidence or lack of evidence suggests there is a reasonable probability that the respondent can comply with this requirement if he wishes. The amount is neither clearly unattainable nor punitive.
[33] On the issue of costs, counsel for the applicant has presented a bill of costs on a substantial indemnity basis of $17,212.50 before HST plus disbursements of $586.10. His solicitor and client rate in this case is $250 an hour. By way of comparison, counsel for the respondent has tendered a bill of costs of $20,300 plus HST on the basis of 58 hours spent in preparation at a solicitor and client rate of $350 an hour. In my view, the applicant has been substantially successful on the motion. The motion was initiated as a result of conduct by the respondent that was inconsistent with his obligations as a litigant and pursuant to the applicable rules of court. He has not conducted himself in good faith. Costs orders as between litigants should not simply be a tally of time spent by the successful party but should reflect a reasonable amount that could likely have been anticipated by the losing party. In this type of motion, the losing party can reasonably anticipate that costs will be substantial. Costs of this motion are awarded to the applicant, payable by the respondent, fixed in the sum of $15,000 inclusive of disbursements plus applicable HST.
Disposition
[34] The respondent is ordered to pay into court the sum of $80,000 to abide the result at trial plus costs of $15,000 and HST thereon, payable to the applicant, within 15 days of the date of this order.
[35] Should the respondent fail to make the required payments in full within the required time, the respondent’s answer shall be struck out and neither the answer nor any financial statements filed by the respondent shall be included in the trial record. The respondent will not be entitled to adduce evidence or to conduct cross-examinations. Rule 23(22) shall not apply so that the applicant will call oral evidence and prove documents in the usual fashion unless the trial judge directs otherwise. The respondent or his counsel will be permitted to make closing submissions and legal arguments at the conclusion of the evidentiary portion of the trial, subject to the direction of the trial judge.
Mr. Justice Martin James
DATE RELEASED: December 16, 2013
COURT FILE NO.: FC-11-2339
DATE: December 16, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
IRINA RISTO
Applicant
- and –
PAUL MARCELAIS
Respondent
DECISION
Mr. Justice Martin James
DATE RELEASED: December 16, 2013