CITATION: McDonald v. McDonald, 2015 ONSC 2605

COURT FILE NO.: 13-35745(Milton)

DATE: 2015-05-21

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

SUSAN McDONALD

Katharine Rajczak, for the Applicant (Responding Party on the Motion)

Applicant

• and -

DAVID McDONALD

Marilyn Samuels, for the Respondent (Moving Party on the Motion)

Respondent

HEARD: April 7, 2015

The Honourable Justice C.D. Braid

RULING ON MOTION

[1] In May of 2013, the Applicant filed a Notice of Application seeking, in part, spousal support and equalization of net family property. The Respondent failed to file an Answer and was noted in default. He did not file any financial information and did not participate in the uncontested trial. He now moves to set aside the default Judgment, stating that he had a valid reason for not participating and that he has an arguable case on the merits.

FACTS

[2] The Applicant wife was born on March 7, 1962 and is 53 years of age.

[3] The Respondent husband was born on January 16, 1958 and is 57 years of age.

[4] The parties commenced cohabitating in May of 2001 and were married on August 23, 2002. They separated in April 2012. On April 5, 2012, the parties entered into a Separation Agreement.

[5] On May 29, 2013, the Respondent was served with a Notice of Application. The Application sought to set aside the 2012 Separation Agreement, and sought equalization of net family property and spousal support. The Applicant also obtained a Certificate of Pending Litigation against the residence at 2 Stonebury Place, Freelton, Ontario (“the Stonebury residence”).

[6] The Rules required that the Respondent file an Answer by June 30, 2013. Nothing was filed.

[7] The Respondent states that a second Agreement was reached on July 8, 2013. The Applicant disputes that there was a second Agreement.

[8] On February 4, 2014, the Court ordered that the matter be set down for an uncontested trial.

[9] On August 19, 2014, the uncontested trial proceeded before Justice Miller. The Applicant had limited evidence to offer regarding the Respondent’s financial circumstances due to the fact that the Respondent had not provided financial disclosure or otherwise participated in the proceedings.

[10] A decision was released on August 19, 2014 (“the default Judgment”). Justice Miller commented on the fact that the Respondent had not filed an Answer or other documentation in response to the Application; and that the valuation of the Respondent’s assets was considerably hampered by his failure to provide any financial information. The Court ordered the following:

i. A divorce;

ii. An Order setting aside the Separation Agreement signed on April 5, 2012, on the grounds that the Applicant did not have independent legal advice; that the Agreement was vague and, in some parts, incomprehensible; that the Respondent did not provide financial disclosure; that the waiver of spousal support has resulted in unconscionable circumstances; and that the Respondent has breached several terms of the Agreement, thereby requiring legal intervention.

iii. An Order for spousal support based on the Respondent’s imputed income of $126,453 and based on the fact that the Applicant earns minimal income due to significant health issues. The Court also recognized that the parties enjoyed a comfortable lifestyle during the marriage. Spousal support was set at $2,100 per month for 10 years, and a lump sum payment of $250,000 was ordered.

iv. An Order declaring that the Applicant has a constructive trust or beneficial interest in half the increase in value of the Stonebury residence.

v. A declaration that the property located at 26195 North 82nd Street, Scottsdale, Arizona (“the Arizona property”) and its contents are held by the Applicant free of any further claim by the Respondent.

vi. An equalization payment of $395,421.58 payable to the Applicant, taking into account that the Respondent owed the Applicant $30,000 in consideration of her transfer of shares in ITC plus $259,500 for the Applicant’s interest in the Stonebury residence, and also taking into account that the Respondent is entitled to a credit of $260,000 for his investment in the Arizona property.

vii. Pursuant to s.9 of the Family Law Act, title to the property located at 120 Bronte Road, #14, Oakville, Ontario (“the Bronte Road property”) was transferred to and vested absolutely in the Applicant as partial satisfaction for the equalization payment.

viii. The Respondent was ordered to pay the remaining equalization payment of $156,421.58 plus $250,000 lump sum spousal support, for a total of $406,421.58 within 30 days.

ix. The Respondent was ordered to pay costs of $15,000.

[11] On September 8, 2014, the Respondent’s counsel advised that he intended to bring a Motion to set aside the default Judgment. The parties then arranged for the matter to be heard on April 7, 2015 (the date that the Motion was argued).

NATURE OF THE MOTION

[12] The Respondent seeks the following:

i. An Order setting aside the Judgment of Madam Justice Miller dated August 19, 2014 in its entirety (except for the divorce);

ii. An Order permitting the Respondent to file his Answer and Financial Statement and to participate in the within proceedings;

iii. An Order staying the enforcement of the Judgment by the Family Responsibility Office until final disposition of this matter;

iv. An Order transferring the Bronte Road property back into the joint names of the parties until the final disposition of this matter;

v. An Order restraining the Applicant from selling or otherwise encumbering the Bronte Road property and the Arizona property until the final disposition of this matter;

vi. An Order that the Respondent shall receive credit for all of the monies he has paid to the Applicant since August 19, 2014 until the final disposition of this matter; and

vii. Costs of the Motion.

[13] Although both parties filed affidavits on this Motion, there was no cross-examination on the affidavits.

[14] The Applicant is in Agreement that the Respondent should have credit for approximately $14,600 he has paid to the Applicant in support since the uncontested trial. Otherwise, the Applicant is seeking to have the Motion dismissed.

EVIDENCE ON THE MOTION

1. Affidavit of the Respondent Husband

[15] The Respondent has filed an affidavit in support of his Motion to set aside the default Judgment.

[16] The Respondent says that the Applicant drafted the terms of the 2012 Agreement and that he essentially agreed to all of her demands. He disputes that there was any power imbalance between them, or that she was under duress when she signed the Agreement. He also says that the Agreement was more than fair, as it allowed her to enjoy the “lifestyles of the rich and famous”.

[17] The Respondent says that the 2012 Agreement required him to pay various housing, vehicle and other living expenses of the Applicant totaling $4,500/month. He arranged for the Applicant to work for his company for 16 hours a month and receive $1,000/month for that work. He agreed to manage her brokerage account, provided her with two plane tickets a year and gave her regular cash gifts to buy food and gas.

[18] The Respondent says that the Applicant prepared the property section of the separation Agreement that she added to a boiler plate document that was downloaded from the internet. The Respondent says that the Applicant consulted with a lawyer before drafting the Agreement and that it was signed in the presence of a lawyer on April 5, 2012. The Respondent refers to this as “the original Agreement”.

[19] The parties communicated from time to time throughout 2012 regarding possible legal proceedings. On May 22, 2013, the Respondent was served with the Application.

[20] The Respondent says that, after he was served with the Court papers, he and the Applicant began negotiating an amendment to the original Agreement. He says that he made a proposal to her on June 24, 2013; she made a counter proposal the next day; he agreed to her demands and they signed the document on July 8, 2013 confirming the settlement. Interestingly, there is an email dated July 12, 2013, in which the Respondent appears to say that the July 8, 2013 Agreement was “worthless” as it was not signed or witnessed.

[21] The Respondent stated in his affidavit that he contacted her lawyer several times to “provide (his) response to the Applicant’s accusations”. The lawyer responded to the emails by letter dated June 3, 2013, asking what days he would be available for a case conference. The letter from the lawyer acknowledged that the Respondent’s emails purported to respond to the Application, and reminded the Respondent that he should seek advice from a lawyer “as to the information that appropriately goes into (an) Answer in the proceedings and file same within the time frame provided by the Family Law Rules”.

[22] The Respondent says that he faxed the June 3, 2013 letter back to the lawyer with his own handwritten notes added to it. He says that he sent it back “sometime in June 2013, advising that (he) was available any day but also advised that the client had agreed not to pursue this because (they) had a new Agreement”.

[23] It appears that the Applicant’s counsel did not receive this faxed letter. The affidavits filed in this matter contain copies of emails that the Respondent sent to the Applicant’s counsel on June 8, 2013 and on other days shortly before and after that date. None of these emails contained references to a new Agreement.

[24] The Respondent says that he continued to honour the new Agreement by working on her brokerage account and paying her close to $5,000/month in expenses tax free from May 2013 to August 2014. He says this is proof that the parties had an Agreement. Since he believed there was a new Agreement, he did not file anything. He says that, in May of 2014, the Applicant sent him an email stating “you are not following the new Agreement”, which he says is proof that the Applicant thought they had an Agreement as well.

[25] The Respondent says that the parties had a “tumultuous relationship” in which they alternated between missing each other and fighting with each other. They saw each other and communicated by email on numerous occasions, but the Applicant did not tell him that she was proceeding with the Court case. He says that he continued to pay the Applicant’s monthly expenses and was stunned to receive the default Judgment in the mail on August 29, 2014.

[26] The Respondent says that, even after the Judgment, he has continued to pay the Applicant’s expenses.

[27] The following is a summary of some of the issues that the Respondent raises with respect to the financial evidence at the uncontested trial:

i. The Respondent says that his average income during the last four years was $115,000. He says that the Applicant could be earning $25,000/year. The Spousal Support Advisory Guidelines would set the spousal support between $1,125 and $1,500 per month for these incomes (10 year lump sum $87,000-$116,000). He takes the position that a $250,000 lump sum payment for 10 years of spousal support is excessive and he does not know how the Court arrived at that number.

ii. The Respondent says that he has been paying for all of the Applicant’s expenses since April 2012 and he should have been credited for the amounts that he has paid.

iii. He disputes that the Applicant put money or work into the properties. The evidence of the parties on this point is widely divergent.

iv. A Home Equity Line of Credit of $200,000, secured on the Stonebury residence, was not taken into account in the valuation of this property (he says the Applicant was aware of this and failed to disclose it at the uncontested trial).

v. The Respondent’s interest in the hunting camp in Haliburton was overvalued at the uncontested trial. The Applicant estimated that it was worth $200,000 but its value as at date of separation was $67,000.

vi. The Respondent loaned a friend $50,000 to buy a house at 16 Greenstem Crescent, Stoney Creek, Ontario (“the Greenstem property”), and he went on title when the house was purchased. The Court attributed 50% of the value of the home to the Respondent in his asset calculation. There was a $140,000 mortgage on the house that the Court failed to take into account.

vii. The Respondent says that his corporations are of little value. One had ceased operating; one was insolvent in early 2012; one was a holding company with very little profit; and a fourth company is in the growth stage so the Respondent takes very little out of the company so that it can grow.

viii. The Respondent disputes the $30,000 claim that the Appellant made for ITC shares. He says that the shares were worthless and that the Appellant had abdicated her shares in any event.

ix. The Respondent says that his pre-marriage investments were significantly undervalued and his date of separation investments were overvalued. He estimates his pre-marriage investments at approximately $1.76 million and his date of separation investments at approximately $500,000.

x. He complains about numerous miscellaneous financial investments that he made on the properties; furnishings that the Applicant took; and other items for which the Court did not give consideration in its analysis on the default Judgment because that information was not presented to the Court.

xi. The Respondent states that he was not given credit for the upgrades that he provided for the Arizona property, including extensive furnishings and the SUV motor vehicle that was purchased for use when staying at that property.

[28] The Respondent argues that, if the Court had taken into account the items listed above, the amount of spousal support and equalization would have been significantly different than the amounts imposed in the default Judgment. In addition to these financial issues, the Judgment awarded the Applicant the title to the Bronte Road property but failed to address the mortgage, which is in his name. The Respondent argues that these issues demonstrate that he has an arguable case for a significantly different outcome; or, put another way, he can demonstrate an arguable case on the merits.

[29] Although the Respondent provided a lot of detail about his financial position in his affidavit, it is unfortunate that he did not provide a sworn financial statement in support of this Motion.

2. Affidavit of Sharon Pfaff, Law Clerk for Applicant’s Counsel

[30] Ms. Pfaff is a law clerk to Ms. Rajczak, who is counsel for the Applicant.

[31] In response to the Respondent’s evidence, Ms. Pfaff has searched for the letter that the Respondent says he sent to their office on or about June 8, 2013. Ms. Pfaff does not recall receiving this letter from the Respondent. She checked the file in various locations and was unable to locate a copy of the letter or any reference to having received it.

3. Affidavit of the Applicant Wife

[32] The Applicant stated that the Separation Agreement was prepared by the Respondent and she says it was grossly unfair. Later in her affidavit, she says that the Respondent “dictated the terms of the Agreement and made (her) type it out”. He did not provide any financial disclosure and insisted that she sign it immediately. She says that she did not receive any independent legal advice and that the Respondent told her that she “was not to see a lawyer at all. He was adamant about this point”. The Applicant says that she was afraid of the Respondent’s temper and signed the document under duress.

[33] The Applicant says that, after the 2012 Agreement was signed, the Respondent failed to follow the terms of the Agreement: he did not cover the costs of the Bronte Road property; he did not cover his share of the expenses on the Arizona property; and he unilaterally terminated her work at his company.

[34] The Applicant states that she is unable to work at the current time due to health issues. She says that she requires spousal support as was ordered in the default Judgment.

[35] The Applicant states that the Respondent had ample opportunity to respond to the Application, but he refused to provide financial disclosure and declined to file an Answer. Even though he was advised to seek the assistance of a lawyer and file an Answer, he did not do so. He sent numerous emails to her lawyer responding to the allegations in the Application, but filed nothing with the Court and provided no financial disclosure. The Applicant agrees that she tried to resolve the litigation directly with him but they did not reach an Agreement.

[36] The Applicant states that her counsel communicated with the Respondent to suggest that he seek advice from a lawyer and file his Answer. On June 3, 2013, the Respondent sent an email back stating “I need no advice” and that he would represent himself. When the Applicant offered to extend the time for filing the materials, the Respondent sent an email on June 27, 2013 that stated “your offer to move the date out is of no value to me”.

[37] The Applicant states that the document dated July 8, 2013 is merely an Offer and is not an Agreement. She was attempting to resolve the issues without incurring the costs of further litigation. She says that the Respondent was drunk at the time it was signed and it was not witnessed; therefore she considered it only to be an Offer and did not bring it to the attention of the Court at the uncontested trial. The Applicant states that the Respondent’s email comments of July 12, 2013 demonstrate that the Respondent thought the “Agreement” of July 8, 2013 was worthless because it was not signed or witnessed.

[38] The Applicant has not provided an explanation for her email dated May 25, 2014, in which she accused the Respondent of not following the “new Agreement”.

[39] The Respondent wrote to the Applicant’s counsel on September 13 and 14, 2013 threatening that he would contact the police to commence a criminal investigation and that he would be calling the I.R.S. He stated “I am not negotiating”.

[40] The Applicant states that the Respondent was aware that the Applicant still wished to set aside the Agreement, but refused to provide financial information. He insisted that the Agreement was fair and ignored the Application.

[41] The Applicant summarized the evidence that she gave at the uncontested trial to support her claim for spousal support and property claims. The Applicant acknowledges that she did not have the full financial information about the line of credit on the Stonebury residence; the financial contribution to the Arizona property; the valuation of the hunting camp; and the Respondent’s corporations.

ISSUES

[42] The following issues are raised by this Motion:

A. Does the Respondent’s failure to pay costs affect this Motion?

B. The test to set aside default Judgment

C. Was the Motion brought promptly?

D. Is there a plausible explanation for the Respondent’s default?

E. Does the Respondent have an arguable case on the merits?

F. Should the Judgment be set aside?

G. Terms

H. Costs

ANALYSIS

A. Does the Respondent’s Failure to Pay Costs Affect This Motion?

[43] The Respondent concedes that he has not paid the costs of the default Judgment. The Applicant argues that, since the Respondent has failed to pay these costs, the Respondent has no standing to bring the Motion to set aside the Judgment. Although I was not provided with the case, counsel stated that the authority for this proposition is the Supreme Court of Canada decision in Dickie v. Dickie, 2007 SCC 8, [2007] 1 S.C.R. 346.

[44] In Dickie, the appellant was found in contempt by a trial Court and he failed to purge his contempt before bringing an appeal. The Supreme Court of Canada held that the Court has discretion to refuse to hear the appeal of a litigant “who has not cured a wilful breach of a Court Order”. The Court may exercise its discretion and refuse to hear an appeal until the wilful breach is cured.

[45] The facts of the case before me are very different than the facts in Dickie. The Respondent’s actions in failing to pay costs of a default Judgment prior to asking the Court to set that Judgment aside is not equivalent to an individual who has failed to purge his contempt, who is abusing the Court’s process or is otherwise impeding the course of justice. I reject this argument and find that the Respondent has standing.

B. The Test to Set Aside Default Judgment

[46] The Family Law Rules do not contain a specific provision for Motions to set aside default Orders. It has been held that, in matters of family law, the Court may proceed on the basis of Rule 19.08 of the Rules of Civil Procedure, which permits a default Judgment to be set aside on such terms as are just: see Gray v. Rizzi 2010 ONSC 2858, [2010] O.J. No. 4021 (Ont.S.C.J.); and Bargiel v. Mainville [2012] O.J. No. 6028 (ON.S.C.J).

[47] The language of Rule 19.08 is permissive, and this Court has discretion to grant or refuse the relief sought. This Court must determine whether the interests of justice favour granting the Order setting aside the default Judgment, taking into account three factors:

i. Whether the Motion was brought promptly after the Respondent learned of the default Judgment;

ii. Whether there is a plausible explanation for the Respondent’s default; and

iii. Whether the facts establish that the Respondent has an arguable case on the merits.

Bargiel v. Mainville, supra; Page-Cole v. Cole 2009 CanLII 57152 (ON SC), [2009] O.J. No.4386 (Ont.S.C.J.).

[48] The parties agree that this three-part test is the one to be applied in the case before the Court. The exercise of discretion requires a weighing of the three factors whilst balancing the interests of the parties and examining the effect of any Court Order on the overall integrity of the administration of justice. A contextual approach is required: see Mountain View Farms Ltd. v. McQueen 2014 ONCA 194; D’Alessio v. D’Alessio [2010] O.J. No. 92 (Ont.S.C.J.).

C. Was the Motion Brought Promptly?

[49] The Applicant concedes that the Respondent acted quickly once he became aware of the Judgment. The Respondent received the default Judgment on August 29, 2014. On Sept 8, 2014, the Respondent’s counsel wrote to the Applicant’s counsel to advise them that there would be a Motion to set aside. The parties contacted the Court and arranged the hearing date.

D. Is There a Plausible Explanation for the Respondent’s Default?

[50] The Applicant states that the Respondent has provided no reasonable excuse for failing to participate in this litigation. She says that he knew that she was not prepared to abandon the Application, and that there was no second Agreement reached to end the litigation.

[51] The Respondent states that he did not file materials on the Application, including financial information, because he believed that an Agreement had been reached with the Applicant. The Respondent sent numerous emails to the Applicant and her counsel. Some of them made reference to an Agreement or Agreements; and one suggested that there was no new Agreement. In May of 2014, the Applicant emailed the Respondent and said “you are not following the new Agreement”. The Applicant’s affidavit does not address what she meant by this statement.

[52] I find that the tone of the Respondent’s emails to the Applicant and her counsel were aggressive and arrogant. He appeared to threaten counsel and declined to accept the offer of an extension of time to file materials. He stated in one email that the second Agreement was worthless, but now states that he relied on it and believed they had an Agreement to end the litigation, so he did not file a response.

[53] The Respondent says that he faxed the Applicant’s counsel sometime in June to advise that they had reached an Agreement. He is unable to say exactly what day he sent this fax and does not have proof that it was sent. The Applicant’s counsel has no record of having received the fax. It is troubling that the Respondent says that the fax was sent in June, but then says that the Agreement was reached on July 8, 2013. It is also peculiar that the Respondent always communicated with the Applicant’s counsel via email, but says that he sent this letter via fax (although cannot provide proof that it was sent). In fact, the Respondent sent other emails on June 8th that were silent with respect to his position on the Agreement.

[54] It is certainly unfortunate that the Respondent did not advise the Court, in 2013 or 2014, of his belief that there was a new Agreement that settled the Court action. He failed to disclose and/or file financial information and failed to file a response. His own inaction in this case led to the Court making determinations regarding financial issues without full information being available.

[55] For purposes of this Motion, I do not need to determine whether there was, in fact, a new Agreement. Instead, this Court must determine whether the explanation of the Respondent is plausible.

[56] On the evidence before me, there is somewhat conflicting information about whether either of the parties believed that there was a new Agreement. Although I have concerns about the Respondent’s motivation for failing to participate in the proceedings, I find that his explanation cannot be rejected outright.

E. Does the Respondent Have an Arguable Case on the Merits?

[57] The Applicant argues that, in order to succeed on this Motion, the Respondent must set out the nature of the defence and set out specific and substantial evidence which will enable the Court to decide whether or not it would afford a defence on the matter. The Applicant relies on a number of civil cases in making this argument. She states that the Respondent still has not provided full financial disclosure and therefore has not established specific and substantial evidence.

[58] The Courts have applied a slightly different, less stringent test in dealing with family law cases where a party seeks to set aside a default Judgment. In those cases, the Respondent must present “an arguable case on the merits” in order to set aside a default Judgment: Page-Cole v. Cole 2009 CanLII 57152 (ON SC), [2009] O.J. No.4386 (Ont.S.C.J.); Hesse v. Hesse [2010] O.J. No. 3833.

[59] The Family Law Act is viewed as remedial legislation that attempts to bring economic order and equity to failed matrimonial relationships. On a trial for default Judgment, the party seeking the Order has a high duty to make full and frank disclosure of all material facts. The failure to do so is grounds for setting aside the Order: Caldwell v. Caldwell [2007] O.J. No. 332 (Ont.S.C.J.).

[60] The Respondent raises numerous issues, which he says resulted in an equalization payment and lump sum spousal support in excess of what they should have been. The primary issues are set out in the synopsis of his evidence earlier in these reasons. They can be summarized as follows:

i. Failure to disclose the Applicant’s proper income and/or the Applicant’s suggestion of a lump sum payment amount of spousal support that failed to properly take into account the tax consequences.

ii. Failure to credit expenses that he has paid since separation.

iii. Inflated valuation for the upgrades that the Applicant provided for the properties, if any.

iv. Failure to disclose the $200,000 Home Equity Line of Credit on the Stonebury residence.

v. Inflated valuation for the hunting camp in Haliburton ($200,000 instead of $67,000 true value).

vi. Failure to take into account the mortgage at the Greenstem property.

vii. Valuation of Respondent’s companies (some were not even operating at the date of separation).

viii. Inflated valuation for the ITC shares.

ix. Undervaluation of Respondent’s pre-marriage investments and inflated valuation of his date of separation investments.

x. Failure to disclose numerous financial investments that he made on the properties; and furnishings that the Applicant took.

xi. Lack of credit for the Respondent’s upgrades to the Arizona property.

[61] If the Respondent is able to prove these points, the equalization would be significantly different. The Respondent states that the Applicant was not forthcoming in terms of some of the information, especially with respect to the mortgages on the Stonebury and Greenfield residences. In other cases, the Court made determinations in the absence of financial information.

[62] The Respondent argues that, when seeking an Order to transfer title for the Bronte property into the Applicant’s name, the Applicant should have ensured that the Court made an Order amending the mortgage as well so that his name was removed from that charge.

[63] I do not accept that all of the Respondent’s concerns are legitimate; however, the accumulation of missing information with respect to the valuation of assets and liabilities may have led to a miscalculation regarding the equalization of net family property. I am satisfied that the Respondent has an arguable case on the merits regarding the issue of equalization.

F. Should the Judgment be Set Aside?

[64] The Applicant argues that it is “not fair to her” if the Respondent “gets a second kick at the can”. I am mindful that the Respondent’s own inaction and failure to provide financial information directly impacted the default Judgment that was unfavourable to the Respondent. This case is an example of why full financial disclosure is necessary to complete a fulsome and appropriate equalization.

[65] In the exercise of discretion when determining whether to set aside default Judgment, the Court must weigh the three factors. In my view, the most compelling factor in assessing the three-part test is that the Respondent has an arguable case on its merits. At the uncontested trial, the judge herself acknowledged that the valuation of the Respondent’s assets was considerably hampered by his failure to provide any financial information. The Applicant was unable to provide sufficient evidence to give a full picture of the assets and liabilities of the Respondent.

[66] The Respondent moved quickly to set aside the default Judgment. He presents an explanation as to why he did not file a response. Although the Court is loath to condone the Respondent’s aggressive communications with counsel and his deliberate decision not to participate in the process, the Respondent should be given an opportunity to present his case, as he has an arguable case on the merits. If his financial position is accepted at trial, the Judgment may be significantly different.

[67] Further, I find that setting aside the default Judgment will not adversely affect the integrity of the administration of justice. While the Applicant would welcome closure and finality to this case, any prejudice or unfairness to her can be compensated by the award of costs.

[68] Therefore, it is appropriate that the Judgment of August 19, 2014 be set aside, subject to the terms set out below.

G. Terms

[69] A default Judgment can be set aside on such terms as are just.

[70] The Respondent has asked that the entire default Judgment be set aside, except for the divorce. The Applicant did not specifically ask the Court to set aside the divorce if the rest of the Judgment is set aside. Therefore, the divorce, which has been granted, shall be severed from the corollary relief. The divorce will not be set aside and the remaining portions of the Judgment are hereby set aside.

[71] The Respondent must be prepared to file a significant amount of financial information within a short period of time in order to demonstrate his intention to move forward with this matter. The Order setting aside the default Judgment will include terms that must be met by the Respondent within specified timelines, failing which the default Judgment shall be reinstated.

[72] The Respondent essentially concedes that the Applicant is entitled to spousal support. I agree. The Court will order spousal support as a term of setting aside the default Judgment. The Respondent shall pay spousal support to the Applicant in the amount of $2,100 per month commencing June 1, 2015 on a temporary temporary without prejudice basis. Although the Respondent has suggested that spousal support should be set at a lower amount, he has not filed a sworn financial statement. The monthly amount of spousal support determined by Justice Miller was within the appropriate range set out by the Spousal Support Advisory Guidelines, given the information available to the Court. The quantum of spousal support may need to be adjusted once all relevant financial information has been exchanged.

[73] The Respondent seeks an Order transferring the Bronte Road property back into the joint names of the parties until the final disposition of this matter. I will grant this Order, with the added condition that the Respondent shall be responsible for all costs related to transferring the property back into the joint names of the parties.

[74] The Respondent also seeks an Order restraining the Applicant from selling or otherwise encumbering the Bronte Road property and the Arizona property until the final disposition of this matter. I have received no evidence with respect to potential dissipation or encumbrance of the assets. I therefore decline to grant this Order.

H. Costs

[75] The Respondent concedes that, in setting aside the default Judgment, the Court can impose costs against the Respondent in order to compensate the Applicant for costs thrown away. I am advised that he can pay within 30 days.

[76] Had the Respondent complied with the Rules and filed his financial information and Answer, this Motion to set aside the default Judgment would not have been necessary. Traditionally, the successful party is awarded their costs of a Motion. However, costs are in the discretion of the judge hearing the Motion.

[77] In this case, the Applicant argues that she is entitled to costs of the Motion on a full indemnity basis in the amount of $11,757.09, inclusive of disbursements and HST. For the reasons that follow, I have concluded that the Applicant is entitled to costs of this proceeding, and that the sum of $5,000.00, inclusive of disbursements and HST, is an appropriate quantum for costs of this Motion.

[78] The starting point in addressing the issue of costs is section 131 of the Courts of Justice Act, which provides that subject to the provisions of an Act or rules of Court, costs are in the discretion of the Court, which may determine by whom and to what extent the costs shall be paid. Rule 24 of the Family Law Rules sets out a number of principles to guide the Court in the exercise of its discretion.

[79] The Ontario Court of Appeal established in Serra v. Serra [2009] O.J. No. 1905, 2009 ONCA 395 that modern rules respecting costs have the goal of fostering three fundamental purposes:

i. to partially indemnify successful litigants for the cost of litigation;

ii. to encourage settlement; and

iii. to discourage and sanction inappropriate behaviour by litigants.

[80] The Court of Appeal has also highlighted the discretionary nature of costs awards, and the importance of the Court considering all relevant factors: Andrews v. Andrews, 1980 CanLII 3619 (ON CA), [1980] O.J. No. 1503 (Ont.C.A.).

[81] Once liability for costs has been established, the Court must determine the appropriate quantum of costs. In Serra v. Serra, supra, the Court set out additional general principles relating to the quantum issue:

i. Ultimately, costs decisions should reflect what the Court considers to be a fair and reasonable amount.

ii. Costs need to be proportional to the issues and amounts in question and the outcome of the case.

iii. Amounts actually incurred by the successful litigant are not determinative.

iv. In assessing what is fair and reasonable, the expectation of the parties concerning the amount of a costs award is a relevant consideration.

[82] Rule 24(11) of the Family Law Rules prescribes similar factors to be considered, including:

i. the importance, complexity or difficulty of the issues;

ii. the reasonableness or unreasonableness of each party’s behaviour in the case;

iii. the lawyer’s rates;

iv. the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the Order;

v. expenses properly paid or payable; and

vi. any other relevant matter.

[83] In my view, the behavior of the Respondent is a significant factor in the analysis to entitlement to the costs on this Motion. The Respondent failed to participate in any way in the proceedings until bringing this Motion for default Judgment. His failure to file an Answer and provide financial disclosure necessitated the expenditure of unnecessary legal fees and costs thrown away on this Motion. I find that, in the circumstances of this case, the Applicant has established entitlement to costs.

[84] With respect to quantum of costs, I conclude that the sum of $5,000.00, inclusive of disbursements and HST, is an appropriate amount. This figure represents slightly less than 50% of full indemnity costs and disbursements, plus HST on that amount. I have considered the factors outlined above in reaching this figure. Finally, I note that the Respondent was mostly successful on the Motion and has incurred his own expenses, which in my view is an important consideration in determining an amount of costs that is fair and just in this case.

[85] I am satisfied that the Applicant is entitled to her costs of this Motion. I will order costs of this Motion, payable to the Applicant, in the sum of $5,000.00.

[86] In addition, the Applicant incurred costs up to the default Judgment. She should be reimbursed for attendance at the uncontested trial. The Respondent shall pay $5,000 for costs thrown away at the uncontested trial date. The remaining costs are reserved to the judge hearing the Application.

DISPOSITION

[87] The Order of Justice Miller, dated August 19, 2014, is hereby set aside in its entirety, except for the divorce. The divorce shall be severed from the corollary relief. The divorce is not set aside and the remaining portions of the Judgment are hereby set aside. The Respondent is granted permission to file his Answer and financial statements, and to participate in the within proceedings.

[88] The setting aside of the default Judgment is subject to the following terms:

1. The Respondent shall serve the Applicant with and file a copy of the following documents with the Court on or before June 22, 2015:

i. An Answer.

ii. A sworn Form 13.1 Financial Statement.

iii. The following documents as proof of income for 2012, 2013 and 2014:

a. A copy of every personal income tax return with all schedules, attachments and information slips, filed with the Canada Revenue Agency.

b. If personal income tax returns have not been filed with the Canada Revenue Agency, a copy of all income slips (T4s, T4As, T5s, etc.) received for any of these taxation years.

c. Notices of assessment and, if any, notices of reassessment.

iv. Proof of year-to-date income for 2015.

v. A copy of any Application made by or for the Respondent from 2001 to present, for a loan, line of credit, credit card or mortgage, including any statement of income or net worth provided by or for the Respondent.

vi. Proof of all assets and debts on date of marriage, date of separation and present, including RRSPs, investments, bank accounts, etc.

vii. Documentation proving ownership of the house at 16 Greenstem Crescent, Stoney Creek, Ontario; a statement setting out the balance on the Greenstem mortgage on the date of separation and the current balance; and proof of all payments made on the promissory note.

viii.Documentation regarding the Home Equity Line of Credit on the residence at 2 Stonebury Place, Freelton, Ontario, including the balance at the date of separation and the current balance.

ix. Documentation supporting the Respondent’s claim that he made investments in the properties, including the purchase of upgrades, furnishings, vehicle, etc.

x. To the extent that the Respondent wishes to be credited for the monies he has paid to the Applicant since August 19, 2014, the Respondent shall receive credit. The Respondent shall provide a full accounting of all monies that the Respondent has paid to the Applicant since the date of separation, including supporting documentation.

2. The Respondent shall serve the Applicant with and file a copy of the following documents with the Court on or before August 21, 2015:

i. The following documents from any business in which the Respondent has had an interest from 2001 to present:

a. Year-end financial statements for all businesses in which the Respondent has an interest, including income and expense statements and lists of assets, liabilities and debts.

b. A statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, the Respondent or persons or corporations with whom the Respondent does not deal at arm’s length.

c. The most recent monthly or quarterly income and expense statements.

d. A copy of any Application made by or for the business for a loan, line of credit, credit card or mortgage, including any statement of income or net worth provided by or for the business.

e. A copy of any partnership Agreement involving the Respondent.

f. Confirmation of the Respondent’s income and draw from, and capital in, any partnership.

ii. A copy of the following documents for any corporation that the Respondent controls or in which the Respondent has 10% or more of the voting shares from 2001 to present:

a. Every corporation’s provincial and federal income tax returns.

b. A detailed statement of all personal expenses paid by a corporation for the Respondent.

c. A statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, the Respondent and persons or corporations with whom the corporation does not deal at arm’s length.

d. The year-end financial statements, including balance sheet and income statement or statement of profit and loss, of the corporation and of any related corporations or subsidiaries.

e. A copy of any shareholder’s Agreement.

f. Business valuations on the date of marriage and the date of separation.

3. The Respondent shall produce to the Applicant the following documentation on or before June 22, 2015:

i. A Net Family Property Statement showing values of all items listed thereon that are within his knowledge, and a Net Family Property Brief containing proof of values of all items listed on the Net Family Property Statement.

ii. A valuation of the property located at 2 Stonebury Place, Freelton, Ontario; 120 Bronte Road, #14, Oakville, Ontario; and 26195 North 82nd Street, Scottsdale, Arizona, at the date of separation.

iii. Documentation of the value of bank accounts, savings, RRSPs or other investments as of the date of separation.

4. The Respondent shall pay to the Applicant the following costs by June 22, 2015:

i. $5,000 costs for attendance at uncontested trial date; and

ii. $ 5,000 costs for preparation for and attendance at this Motion to set aside the default Judgment.

5. If the Respondent fails to meet any of the timelines set out above, paragraphs 1 to 4, the noting in default and default Judgment shall be reinstated.

6. Upon receipt of the above items from the Respondent, the Applicant shall file a sworn, updated financial statement and updated Notices of Assessment for any taxation years that have not been previously provided.

7. The property at 120 Bronte Road, #14, Oakville, Ontario shall be transferred back into the joint names of both parties until the final disposition of this matter. The Respondent shall be responsible for all costs related to transferring the Bronte Road property back into the joint names of the parties, including legal fees, registration costs, etc.

8. The Respondent shall pay spousal support to the Applicant in the amount of $2,100 per month on a temporary temporary without prejudice basis, based on the Respondent’s imputed income of $126,453 and the Applicant’s minimal income.

9. A Support Deduction Order shall issue, which shall reflect that the Judgment of August 19, 2014 is set aside, rendering that Judgment unenforceable. The Support Deduction Order shall also reflect that this Court has ordered spousal support as set out above.

Braid J.

Released: May 21, 2015

CITATION: McDonald v. McDonald, 2015 ONSC 2605

COURT FILE NO.: 13-35745(Milton)

DATE: 2015-05-21

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Susan McDonald

Applicant

• and –

David McDonald

Respondent

REASONS FOR JUDGMENT

Braid, J.

Released: May 21, 2015