SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: F1084/13

DATE: 2014/10/03

RE: Cheryl Ann Jordan, Applicant

-and-

James Rupert Stewart, Respondent

BEFORE: JUSTICE A.K. MITCHELL

COUNSEL:
E. Reid, for the Applicant

T. Hainsworth, for the Respondent

HEARD: August 29, 2014 at London

E N D O R S E M E N T

Nature of the Motions and Preliminary Issue

[1] Two motions are before me. The applicant has brought a disclosure motion seeking various financial disclosure from three (3) corporations in which the respondent holds shares. The respondent has brought a cross-motion for financial disclosure from the applicant relating to the child, Jesse Clair Stewart born September 6, 2989 (“Jesse”).

[2] Aside from the respondent reserving his right to seek his costs of the motion, the respondent’s motion did not proceed as the applicant has produced all requested disclosure sought by the respondent on his motion.

[3] Counsel confirmed that the applicant’s motion was proceeding only in respect of the disclosure requested in subparagraphs (a),(b),(c),(j),(k),(o),(p),(t),(u) and (v) of the Amended Notice of Motion dated June 10, 2014 (Tab 29 Continuing Record). The respondent agrees to provide or has provided the balance of the requested disclosure.

[4] I was advised that the applicant no longer requires an order for substitutional service by fax with regards to Stewart Investments Inc. (“SII”), Chivas Securities Ltd. (“CSL”) and J.R. Stewart Investments Ltd. (“JRSIL” and together with SII and CSL, the “Corporations”). The Corporations were properly served with notice of the applicant’s motion.

[5] At the outset of the motion, the court was asked to address the issue of the admissibility of the Affidavit of Cheryl Ann Jordan sworn August 26, 2014 served August 27, 2014.

[6] Counsel for the respondent argues that the affidavit was short-served (2 days rather than 4 days as required by rule 14(11) of the Family Law Rules) and its contents are not proper reply evidence as permitted under rule 14(20) of the rules.

[7] Ms. Reid argues that the evidence referred to by the respondent in his factum should have been placed before the court by way of a responding affidavit rather than by reference in his factum. Had the respondent filed a responding affidavit as he was required to do, the affidavit of Ms. Jordan would constitute proper reply evidence.

[8] Mr. Hainsworth argued that the respondent has no obligation to file a responding affidavit; rather he is permitted to rely on all of the evidence in these proceedings contained in the continuing record. I agree. A party is not required to file responding affidavit evidence in order to have standing on a motion. The moving party has the onus to place before the court all evidence necessary to support the requested relief.

[9] Mr. Hainsworth argued that if the reply affidavit is permitted to stand, the effect will be that the applicant is able to “split” her case placing Mr. Hainsworth in the difficult position late in the day of having to respond to these new allegations.

[10] I am not persuaded by Mr. Hainsworth’s argument given that the respondent elected not to serve any responding materials. Surely he cannot now take the position that he needs time to file sur-reply evidence. In fact, Mr. Hainsworth wants to proceed today and does not seek an adjournment.

[11] It was conceded by Ms. Reid that portions of the affidavit contained argument and were largely responsive to the argument of the respondent contained in his factum. To that end, the affidavit is not proper and should be struck.

[12] More time than was reasonable was spent arguing this issue. It was clear that rather than an affidavit, the applicant should have filed a reply factum or simply reserved her argument to the hearing of the motion. In the end, after determining that the continuing record, in its entirety, is proper evidence on a motion. The affidavit was struck without prejudice to the parties to refer to any proper evidence in the continuing record during their respective submissions.

Background

[13] This proceeding involves a motion to change the order of Justice Czutrin dated July 12, 2013 (the “Czutrin Order”).[^1] In part, these proceedings are being brought pursuant to paragraph 3 of the Czutrin Order which provides as follows:

“The Respondent’s obligation to pay child support to the Applicant for Jesse shall terminate on April 30, 2013, subject to the without prejudice right of the Applicant’s right to seek a review for further funding of additional post-secondary educational programs in order that the respondent pay the post-secondary costs and expenses for Jesse.” (emphasis added)

[14] The applicant mother seeks more than “further funding of additional post-secondary educational programs”. The applicant also seeks child support for Jesse commencing May 1, 2013.

[15] The Form 15: Motion to Change states the annual income of the respondent is $374,000 resulting in Guidelines[^2] child support of $2,921 per month - the amount imputed for purposes of the Czutrin Order. As noted in paragraph 163 of the Czutrin Order, reproduced below, the court made no finding as to the respondent father’s income.

[16] With respect to the issue of the father’s income, Czutrin J. commented as follows:

[163] There was no finding of the father’s income. It cannot be said therefore that the child support as ordered was based on a determination of the father’s income as would be required by the guidelines.

[189] The father appears to rely on others with respect to providing financial information and arranging his financial affairs to meet his needs in the most tax advantageous way.

[194] Mr. Stewart relies on his investments, largely managed by others, to support himself. The evidence suggests that the bulk of his income has never been from his work or employment, therefore his line 150 income tax returns do not reflect his income for guideline purposes.

[195] This income situation has been existent throughout the period from 2010 when the mother first commenced her application seeking child and spousal support and other relief.

[196] Mr. Stewart received, from time to time, distribution of capital from the trust established by his mother and distributions of non-taxable income from the estate of Edith Flavelle McLean (his late grandmother), of which he is a beneficiary.

Position of the Parties

[17] The applicant argues that she is unable to determine the respondent’s “true” income until the requested disclosure from the Corporations is provided. The respondent owns all of the shares in JRSIL and together with his siblings, is a part owner (16.67%) of the shares, in SII and together with his siblings, is a part owner (24.68%) of the shares in CSL.

[18] The applicant’s disclosure requests can be summarized as follows: (i) details of all assets owned by each of the Corporations; and (ii) copies of the CRA T2, T4 and T5 summaries together with all supplemental forms for each of the Corporations.

[19] The applicant relies on subrule 19(11) of the Family Law Rules. Subrule 19(11) provides as follows:

If a document is in a non-party’s control, or is available only to the non-party, and is not protected by a legal privilege, and it would be unfair to a party to go on with the case without the document, the court may, on motion with notice served on every party and served the non-party by special service,

(a) order the non-party to let the party examine the document and to supply the party with a copy at a the legal aid rate; and

(b) order that a copy be prepared and used for all purposes of the case instead of the original.

[20] The applicant acknowledges that the balance of the relief sought in the Amended Notice of Motion has either been provided by the respondent or has been abandoned.

[21] The applicant argues that full and frank disclosure in the early stages of the litigation is mandatory and in this case that disclosure includes disclosure from the Corporations in which the respondent holds an interest, controlling or otherwise.

[22] The respondent argues that he has complied with all orders made to date and to that end has made full and frank disclosure and has complied with his disclosure obligations under the Rules. The respondent submits that the court must consider the principle of proportionality. At best, the applicant is entitled to one year of child support which amount, no matter what the “true” income of the father, if ordered will be disproportionate to the time and cost required to comply with the requested non-party disclosure.

[23] The respondent also points out that the relief sought in the Motion to Change ventures far beyond the limited scope of relief provided for in the Czutrin J. Order. He argues that Czutrin J. envisioned only a change to his order to address the need for further funding of Jesse’s post-secondary education. Czutrin J. did not specifically authorize the mother to seek further child support for Jesse.

Analysis

[24] Whether or not the Czutrin J. Order referred specifically to the mother’s right to seek further child support for Jesse, the mother has a legislative right to seek additional child support. Whether or not the applicant will ultimately be successful in obtaining an award of child support as claimed is not an issue I need to consider for purposes of this motion.

[25] Support has been raised as an issue. If entitled to support and absent agreement of the parties, income must be determined in order to determine the quantum of support to which the applicant is entitled.

[26] To date and despite years of litigation, there has been no finding as to the father’s income. The applicant is no longer prepared to accept that the father’s income is $374,000 as imputed by Czutrin J.

[27] As of the date of this motion, the father has provided financial disclosure. The father has paid the cost of delaying and withholding information[^3]. I am advised that with respect to his personal disclosure obligations, the plaintiff has complied with his statutory obligations, albeit begrudgingly. In addition, the respondent has produced or caused to be produced a measure of disclosure from the Corporations.

[28] The question then becomes, is the applicant required to the balance of the disclosure requested from the non-parties?

[29] The applicant cites the decision of Bailey v. Bailey[^4] wherein the court lays down six criteria which must be met to justify the court’s exercise of its discretion to order production and disclosure from a non-party pursuant to rule 19(11) of the Rules.

[30] The six criteria are as follows[^5]:

(a) The documents are in a non-party’s control;

(b) The documents are available only to the non-party;

(c) The documents are not protected by legal privilege;

(d) It would be unfair for the party seeking the disclosure to proceed without the information sought;

(e) The documents sought are relevant and necessary; and

(f) Notice is provided to the non-party.

[31] As earlier noted, the respondent is the sole and, thus, controlling shareholder of JRSIL. Under section 21(1)(f) of the Guidelines, he is required to produce the financial statements of the corporation and its subsidiaries, and a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation, and every related corporation does not deal at arm’s length.

[32] This is the minimum disclosure required of the respondent with respect to JRSIL. Subrule 19(11) allows more fulsome disclosure where the six part test is satisfied and in particular the applicant establishes that unfairness would result without the requested disclosure.

[33] JRSIL stands in different position than SII and CSL on this motion.

[34] Subject to redaction for privileged content, I am satisfied that the applicant meets the six criteria and is therefore entitled to production of the T2, T4 and T5 CRA summaries and documents related thereto for each of the Corporations but only insofar as those summaries relate to the respondent, his spouse and his siblings (implicitly this includes the shareholders) and corporations related thereto. This information will confirm whether or not any income, whether employment, dividend or otherwise, to which the respondent is entitled, has been directed to someone other than to the respondent.

[35] I am satisfied that the six criteria have been met with respect to the applicant’s request for details of all assets owned by JRSIL including the name and nature of all companies owned by it including, but not limited to, all investment companies or portions of investment companies owned by it as well as all trust holdings, as well as the addresses of all real estate owned by it.

[36] The assets of JRSIL are indirectly the assets of the respondent through his 100% ownership of the shares of JRSIL. Section 7 of the Guidelines requires an assessment of not only the income of the respondent but also his “means”, generally. Determining the respondent’s means will necessarily include an assessment of the extent of his assets and any dispositions or other dealings with those assets.

[37] I am not persuaded that the same is true of the asset disclosure requested from CSL and SII. The respondent has a minority shareholding in these corporations. The link between the asset base of these companies and a determination of the respondent’s means is tenuous at best. I am unable to conclude that it would be unfair to the applicant to proceed without this same asset information from CSL and SII.

[38] Moreover, my finding is reinforced by the relatively short period of time for which the applicant claims child support[^6] The cost and time to CSL and SII to amass this information is disproportional to the period of time for which the applicant seeks child support.

[39] Accordingly, an Order shall issue requiring CSL, SII and JRSIL, as the case may be, to produce for examination the documents requested in subparagraphs 1.(b), (j), (k), (o), (p), (t), (u) and (v) of the Amended Notice of Motion[^7] and to supply the applicant with a copy of these documents at the legal aid rate. The documents to be produced and copied under subparagraphs (j), (k), (o), (p), (t), (u) and (v) shall be redacted for names and other identifying information of persons other than the respondent, the respondent’s spouse, the respondent’s siblings or corporations related to the respondent, his spouse and/or his siblings.

[40] The respondent was successful on his motion since it motivated the applicant to make full disclosure of information relating to Jesse’s means. The respondent was also successful in having the reply affidavit struck. Conversely, the applicant was largely successful on her disclosure motion which was the most time consuming of the matters before me.

[41] As a result of this divided success, I award no costs of the motions.

[42]

”Justice A. K. Mitchell”

Mitchell J.

DATE: October 3, 2014

[^1]: The Czutrin Order follows the Reasons for Decision of Czutrin J. released March 1, 2013 in respect of the Respondent’s motion to terminate child support.
[^2]: Child Support Guidelines (Ontario)(“Guidelines”) O. Reg 391/97, as amended.
[^3]: Henderson J. ordered the respondent to pay costs of $4000 to the plaintiff on her motion of November 20, 2013.
[^4]: 2012 ONSC 2486.
[^5]: Ibid. at para 15.
[^6]: Approximately 1 year.
[^7]: Tab 29, Continuing Record