Court File and Parties
COURT FILE NO.: FC-13-202 DATE: 20141120
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Sakina Wehbe, Applicant AND Michael Mohammad Wehbe, Local Motion Transportation Inc., Respondents
BEFORE: J. Mackinnon J.
COUNSEL: P. Augustine, Counsel for the Applicant L. Levencrown, Counsel for the Respondents
HEARD: November 12, 2014
ENDORSEMENT
[1] A number of temporary orders have been made in this case. On July 30, 2013 Justice Warkentin made an order prohibiting the respondent from, amongst other things, mortgaging property at 1351 Gaultois Ave. Contrary to that order the respondent did register a charge against title on October 31, 2013. On October 25, 2013 Justice Minnema ordered the respondent to pay $26,278 in arrears of support to the applicant within 60 days. The respondent has not made any payments towards this amount. On October 25 Minnema J. also ordered the respondent to pay $2,990 per month in ongoing spousal support effective November 1, 2013. The respondent has not paid anything towards this order either. Minnema J. awarded $6,000 of costs against the respondent on January 7, 2014. That award is also unpaid. On April 14, 2014 Justice Parfett made a detailed disclosure order against the respondent. The applicant says significant disclosure remains outstanding despite being required to be completed by July 1, 2014.
[2] In response to this history of noncompliance the applicant seeks an order striking the respondent’s pleadings, and requiring him to post security for her spousal support claim, or alternatively, security for costs. She also sought a finding of contempt.
[3] The respondent has changed legal representation a number of times during the litigation. The motion had been properly served on October 10th. No responding materials were delivered. However his current counsel, retained just prior to the return of the motion, was ready to argue the motion on the basis of the existing record. He pointed out the lack of personal service which is required for a contempt motion. I declined to hear that aspect of the motion. He also submitted that only the Director of the Family Responsibility Office could enforce the spousal support order and that an award of security was a form of enforcement albeit granted in advance of final determination of the issue. I agree. Counsel also noted the case is scheduled for trial in January; leave to bring this motion had not been sought. Accordingly, the respondent submitted the motion should be dismissed. He also submitted the respondent’s pleadings should not be struck in any event because he had made significant disclosure.
[4] Additionally, respondent’s counsel expressed his client’s willingness to pay the applicant $20,000 by November 30, to remove the offending mortgage and to list the property for sale forthwith, to pay $750 in monthly support until trial, and to pay the remaining balance due to the applicant from the net proceeds of sale.
[5] The issues remaining for determination are whether the motion should be dismissed because the case is already listed for trial, and if not, whether the respondent’s noncompliance with the court orders warrants an order to strike his pleadings. Lastly, should security for costs be awarded against the respondent?
Brief Factual Context
[6] The parties were married in 1976 and separated in May, 2007. The application is for spousal support and an equalization of the parties’ net family property. The respondent is the sole owner and operator of a taxi and limousine business known as Local Motion Transportation Inc. He owns two taxi plates, one personally and the other through the corporation. Two key issues in the case are the determination of his income and the valuation of the taxi plates. The parties have three adult children. The applicant stayed home with them from 1982 until after the separation. She is now 55 years of age and has worked as a housekeeper since separation. She alleges a substantial unreported cash component to the respondent’s business. Whereas the respondent submitted his only income is as he reports for income tax purposes, Justice Minnema rejected that assertion. Based on a review of the respondent’s 2012 bank and credit card statements Minnema J. imputed an annual income of $100,000 to him.
[7] The total amount currently in arrears by my calculation is $70,760.
Is Leave required?
[8] The Family Law Rules (“FLR”) do not include a prohibition against bringing motions after a case has been placed on a trial list. In Smith v. Smith (22 November 2000), Ottawa, 95-FL-22621 (S.C.J. Ont.) I referred to the Rules of Civil Procedure (“Rules”) and to FLRs 1 and 2 and held:
[9] In my view, the combined effect of these Rules supports the proposition that, in general, motions should not take place after a settlement conference or placement of a case on a trial list. To rule otherwise could encourage a practice of scheduling a settlement conference or placing a case on the trial list prematurely to its readiness for either event. Such a practice does not respect the principles set out in R. 2(3), either with respect to the case or to other cases before the court. Nor does it respect the duty of the court set out in R. 2(5)(d) and €, to manage the case in accordance with the goals of the primary objective.
[10] The circumstances in which the court would entertain a motion after a settlement conference or after the case is on the trial list will be exceptional. In general, a settlement conference is held when the parties have completed all necessary steps of disclosure and are in a position to address a final resolution of the case in a serious, comprehensive way. When a case is on the trial list, the parties should be ready for trial and it is rare that a motions judge would deal on affidavit evidence with one or more of the very issues that will be before the trial judge, with the benefit of oral evidence and cross-examination. In my view, the same principle applies as was stated recently by Aston J. in Hope v. Hope, (22 November 2000) Ottawa 99-FL-058926 (S.C.J.), with respect to a motion to change a temporary support order:
I pause to observe that the court should generally be loath to embark upon a re-examination for interim support orders that, on their face, are not inappropriate. Fine-tuning of temporary orders, particularly retroactively, ought to be the rare exception so that parties are encouraged to move towards a final resolution of all issues rather than engaging in expensive skirmishes over relatively small amounts of money.
[22] For these reasons, my ruling is that the motion to change custody and access should not have been brought given the completion of the settlement conference and the fact that the case is on the trial list. It should be dismissed for that reason and in addition, it should also be dismissed on the merits because there is no evidence in the record filed by the rather that could warrant a judge changing the existing order even if the case were not on the trial list.
[9] R. 48.04(2) and (3) of the Rules provide clear exceptions to the general rule set out in r 48.04(1):
48.04(2) Subrule (1) does not,
(a) relieve a party from complying with undertakings given by the party on an examination for discovery;
(b) relieve a party from any obligation imposed by,
(0.i) rule 29.1.03 (requirement for discovery plan),
(i) rule 30.07 (disclosure of documents or errors subsequently discovered),
(ii) rule 30.09 (abandonment of claim of privilege),
(iii) rule 31.07 (failure to answer on discovery),
(iv) rule 31.09 (disclosure of information subsequently obtained),
(v) rule 51.03 (duty to respond to request to admit),
(vi) rule 53.03 (service of report of expert witness); or
(vii) Revoked: O. Reg. 131/04, s. 13.
(c) preclude a party from resorting to rule 51.02 (request to admit facts or documents). R.R.O. 1990, Reg. 194, r. 48.04 (2); O. Reg. 131/04, s. 13; O. Reg. 260/05, s. 10; O. Reg. 438/08, s. 43.
48.04(3) Leave of the court is not required for a motion to compel compliance with any obligation imposed by a rule listed in clause (2) (b). O. Reg. 436/10, s. 1 (2). [Emphasis added.]
[10] In the family law context there is a clear distinction between seeking to change terms of a temporary substantive order on the eve of trial, and moving to enforce compliance with disclosure and other orders essential to the primary objective of enabling the court to deal with the case justly.
[11] In this case it is not disputed that the respondent has not paid a penny of the support or costs the court has ruled the applicant is entitled to receive from him. This clearly impacts her ability to proceed with her claim. Nor does he dispute that he encumbered the family home in violation of a court order, and as will be addressed below, he has not provided the disclosure ordered in connection to that transaction. Similarly the other disclosure the applicant says is outstanding relates to the two key issues in the case, namely the respondent’s income and the value of the taxi plates.
[12] These are issues that should properly be dealt with before trial so that the court can endeavor to meet its obligation to ensure the process is fair to both parties, to save time and expense in an appropriate way for these parties , and to marshal court resources having regard to the needs of this and other cases.
[13] For these reasons, in my view, leave ought not to be required to bring this motion despite the fact that the case is listed for trial in January 2015.
Is significant disclosure outstanding?
[14] Justice Parfett’s order dated April 14, 2014 specified some 25 items of disclosure required to be produced by the respondent on or before July 1, 2014. The applicant’s affidavit included a letter from the respondent’s then lawyer dated August 6, 2014 listing the partial disclosure being provided at that time. In response the applicant’s lawyer wrote back identifying ordered disclosure that had not yet been made. This included documents to show whether mortgage proceeds were received in connection to the mortgage improperly registered against title to 1351 Gaultois Ave., payroll or other records of the business showing salary/compensation paid to the respondent, bank and credit card statements, both personal and corporate, forward from July 2013, his personal income tax return for 2013, and a valuation for the taxi plates, verified by the City of Ottawa.
[15] I indulged respondent’s counsel and received earlier letters written by a previous lawyer acting for the respondent listing disclosure made in 2013 prior to Parfett J.’s order. These letters list much disclosure that has been provided, but I find that the important disclosure noted above has not been made, and that the respondent has not provided an explanation to the court for not making it.
[16] Put another way, numerically speaking, significant disclosure has been made. A smaller number of key documents essential to the applicant’s case have not been produced.
[17] The Court of Appeal for Ontario recently dealt with the question of striking pleadings in family law cases in Chiaramonte v. Chiaramonte 2013 ONCA 641 (“Chiaramonte”). In describing this as a remedy of last resort the court held:
[31] In family law cases, pleadings should only be struck, and trial participation denied, in exceptional circumstances and where no other remedy would suffice: Purcaru v. Purcaru, 2010 ONCA 92, 75 R.F.L. (6th) 33, at para. 47. The exceptional nature of this remedy is rooted in the significance of the adversarial system, as this court recognized in Percaru, at para. 49:
The adversarial system, through cross-examination and argument, functions to safeguard against injustice. For this reason, the adversarial structure of a proceeding should be maintained whenever possible. Accordingly, the objective of a sanction ought not to be the elimination of the adversary, but rather one that will persuade the adversary to comply with the orders of the court.
[32] Striking a party’s pleadings is a drastic remedy that should only be applied in exceptional circumstances. The rules authorizing this remedy must be interpreted in light of the draconian effect of rule 10(5) (b). That rule provides that a respondent whose answer has been struck is not entitled to participate in the case in any way. For example, in Kim v. Kim, reflex, 2001 CarswellOnt 502 (ONSC), on the basis of rule 10(5) (b), an uncontested hearing was held on custody, support and property without further notice to the party whose pleadings had been struck. Similarly, in Costabile v. Costabile, reflex, 2004 CarswellOnt 4860 (ONSC), a party whose pleadings had been struck was not entitled to notice of further proceedings nor was he entitled to participate in any way.
[18] In Chiaramonte the appeal court found the husband had been making serious efforts to comply with his disclosure obligations. He deposed a detailed affidavit with exhibits attached including personal income tax returns, corporate financial statements, personal and corporate bank statements for various accounts, purchase price and mortgage information for 40 properties he owned, listing agreements and invoices for valuation services. The Court of Appeal held that the husband’s disclosure was not perfect but that the motion judge had erred in finding he was in willful breach and had made only token efforts to comply.
[19] The respondent has not provided any evidence on this motion. The letter from his lawyer dated August 6, 2014 was contained in the applicant’s material. Despite allowing his current counsel to hand up letters outlining disclosure made, none of them postdated the clear articulation by the applicant in her counsel’s letter of September 5, 2014 as to the remaining disclosure and its necessity to the applicant’s case.
[20] In Chiaramonte the Court of Appeal concluded that justice in that case would best be served by allowing the husband to participate at trial and that the determination of whether his disclosure led to the conclusion that his income or assets exceeded the figures disclosed is best left to the trial judge. I infer from this the Court of Appeal was satisfied that sufficient disclosure had been made to provide a trial judge with a proper evidentiary foundation upon which to rule. Here, the respondent has not provided a valuation of his taxi plates verified by the City of Ottawa or records from the corporation of salary or other compensation paid to or on his behalf. He has not provided his 2013 income tax return or the post-July 2013 bank statements or credit card statements necessary to determine his current income. Nor has he produced the documents surrounding the prohibited encumbrance of 1351 Gaultois Ave. The absence of these productions would make it very difficult for a trial judge to fairly adjudicate the issues of income determination and property value. In my view, it would also be unfair to require the applicant to proceed to trial without this disclosure.
[21] The Court of Appeal also directs consideration should be given to whether any other remedy would suffice. A lesser remedy is available in respect to the mortgage registered against 1351 Gaultois Ave. Pursuant to FLR r 1(8) (d) the respondent could be prohibited from using at trial any document pertaining to that transaction for the purpose of demonstrating that he did receive any valuable consideration for the mortgage from the mortgagee. Similarly the respondent could be prohibited from tendering his 2013 income tax return at trial and from relying on it or the associated notice of assessment for 2013 (which he has produced) in support of his position as to what his income is. He could be ordered to advance funds to the applicant sufficient for her to obtain her own valuation of the taxi plates. She estimates this cost to range between $3,000 and $4,000. The respondent appears to have told Justice Minnema that his accountant could testify at trial to explain his income. The respondent could be ordered to provide his accountant his irrevocable written authorization and direction to provide any of the court ordered personal or corporate disclosure in his power or control directly to the applicant’s counsel at the respondent’s own expense. The same order could be made in relation to the financial institutions and accounts listed at the continuing record, volume 7, tab 20(m), page 2.
[22] In Chiaramonte the court specifically noted the husband was up to date with his child and spousal support payments based upon the imputed income attributed to him by the court. The respondent here has neither paid the support and costs he was ordered to pay, nor has he offered any evidence by way of explanation for his noncompliance or of any efforts he may have made to comply. In my view, this is a very important distinguishing fact.
Disposition
[23] The steps the respondent is willing to take to avoid having his pleadings struck are set out in paragraph [4] above. They are partial as to his financial obligations and they are silent as to the outstanding disclosure. I am not inclined to exercise discretion in favour of the respondent’s unexplained noncompliance with four court orders. I am mindful of the direction of the Court of Appeal that the objective of a sanction ought to be compliance. Accordingly I make the following order:
- The respondent shall forthwith produce all the documents already ordered to be produced in connection with the mortgage wrongfully registered against 1351 Gaultois Ave. failing which he is prohibited from using any such document at trial for the purpose of demonstrating that he did receive any or any valuable consideration for the mortgage from the mortgagee.
- The respondent shall forthwith produce his 2013 income tax return and attachments as filed, failing which he is prohibited from tendering his 2013 income tax return at trial and from relying on it or the associated notice of assessment for 2013 (which he has produced) in support of his position as to his what his income is.
- The respondent shall provide a neutral valuation of the taxi plates verified by the City of Ottawa within 14 days failing which he shall advance the sum of $4,000 to the applicant to be used by her to obtain her own valuation of the taxi plates.
- The respondent is ordered to forthwith provide his accountant with his irrevocable written authorization and direction to provide any of the court ordered personal and corporate disclosure in the accountant’s power or control directly to the applicant’s counsel at the respondent’s own expense.
- The respondent is ordered to forthwith provide the same form of written authorization and direction to the financial institutions and accounts listed at the continuing record, volume 7, tab 20(m), page 2.
- The respondent shall forthwith remove from title the mortgage registered to his sister against 1351 Gaultois Ave. and shall forthwith list the property for sale on terms agreed to by the parties.
- On or before November 30 the respondent shall pay to the applicant the sum of $35,000 to be credited towards the final determination of the issues as directed by the trial judge.
- The respondent shall pay the applicant the additional sum of $1,000 on December 1, 2014 and on January 1, 2015 and each month thereafter until further order of the court made during or after trial, to be credited in the same way.
- The net proceeds of sale of 1351 Gaultois Ave. shall be held in trust by a member of the Ontario bar – from those proceeds shall be paid to the applicant the balance due to her pursuant to Justice Minnema’s orders dated October 25, 2013 and January 7, 2014. Any remaining balance shall continue to be held in trust and not be disbursed without further order of this court.
[24] The final disposition of the motion to strike the respondent’s pleadings is adjourned for 21 days. Failing compliance with my order, I intend to strike his pleadings. If necessary a motion on notice shall be scheduled through the Trial Office for the purpose of my determination of the respondent’s compliance.
Security for Costs
[25] I am persuaded that an order for security for costs is appropriately made in this case. The respondent is in default of an order for costs made against him. The applicant is granted a security interest in the amount of $50,000 in the right, title and interest of the respondent in the property located at 1351 Gaultois Ave., Ottawa ON. The legal description of the property shall be attached as a schedule to my order.
Amendment of Application
[26] The applicant may amend her application to include claims that any final orders for spousal support and equalization payment shall be secured against 1351 Gaultois Ave., Ottawa ON, and that said property shall be vested in her in satisfaction of her claims in this proceeding. The amendments shall be made forthwith and the respondent shall then be entitled to ten days in which to deliver an amended answer, if so advised.
Costs
[27] At the conclusion of the motion both counsel asked for costs of the motion if successful, in the amount of $2,000. They also provided me with sealed copies of the offers exchanged prior to the hearing. Neither party matched their offer; however, clearly, the applicant is the successful party. She is awarded her costs as asked, in the amount of $2,000.
J. Mackinnon J.
Date: November 20, 2014
COURT FILE NO.: FC-13-202 DATE: 20141120
ONTARIO SUPERIOR COURT OF JUSTICE
RE: Sakina Wehbe, Applicant AND Michael Mohammad Wehbe, Local Motion Transportation Inc., Respondents
BEFORE: J. Mackinnon J.
COUNSEL: P. Augustine, Counsel for the Applicant L. Levencrown, Counsel for the Respondents
ENDORSEMENT
J. Mackinnon J.
Released: November 20, 2014