O’Brien v. O’Brien, 2015 ONSC 3086

NEWMARKET COURT FILE NO.: FC-10-35650

DATE: 20150515

CORRIGENDA: 20150609

ONTARIO

SUPERIOR COURT OF JUSTICE

FAMILY COURT

BETWEEN:

Kyle O’Brien, Estate Trustee Estate of Philip O’Brien

Applicant

– and –

Galina O’Brien

Respondent

Kristen Woods, for the Applicant

Evan Chang, for the Respondent

HEARD: April 29, 2015

RULING ON MOTIONS

(TEXT OF ORIGINAL DECISION HAS BEEN AMENDED – CHANGES APPENDED)

JARVIS J.

[1] Philip John O’Brien (“the deceased”) died on April 28, 2014. He was 77 years old and in the process of divorcing Galina O’Brien (“the wife”). The parties had been married since May 12, 2006 and separated on October 15, 2009. Kyle O’Brien (“Kyle”) is the deceased’s step-son, Estate Trustee and sole beneficiary of the deceased’s estate.

[2] There are two motions before the court. Kyle seeks an order that, among other things, the wife post security for costs and provide listed disclosure. The wife seeks an Order that requires Kyle to pay into court the sale proceeds of the spousal parties’ former matrimonial home, that she be permitted to attend at that property to photograph and inventory its contents, and that the estate value three businesses which the deceased either owned or in which he held a significant interest at the time of his death.

[3] At the conclusion of argument, an Order was made dealing with partial distribution of the former matrimonial home sale proceeds, disclosure and costs payable by the wife pursuant to an earlier Order of McDermot J. The wife’s requests to photograph and inventory the contents of the former matrimonial home (the sale of which was scheduled to be completed on May 1, less than 48 hours from the parties’ motions being argued) and that the estate assumed sole responsibility to value the deceased’s business interests were dismissed. The court reserved decision on the balance of the relief sought by the parties including the disposition (or preservation) of the balance of the home sale proceeds, security for costs and valuing the deceased’s business interests. These are the reasons.

Background Facts

[4] The deceased commenced this Application on July 6, 2010, the only relief being claimed being a divorce. Each of the parties had been previously married. A marriage contract had been signed dated May 4, 2006 (the date it was recorded as having been signed by the deceased). The wife appears to have signed it on May 12, 2006, the date of marriage. The contract provides for separate property regimes and includes a spousal support waiver. The contract was independently witnessed and Schedules disclosing each party’s property were appended. While the contract states that each party acknowledged having had independent legal advice (“ILA”) or waiving that right there are no ILA Certificates appended to the contract or more explicit waivers apart from a paragraph entitled “Legal Advice, Disclosure, Fairness.”

[5] The wife delivered an Answer challenging the validity of the contract and claiming an equalization of the spouses’ net family properties and support.

[6] As the spousal parties were unable to agree on the dates of their cohabitation and separation, an Order was made on October 30, 2012, by McKelvey J. bifurcating the proceedings so that those issues could be determined before a trial of the contract, property and support issues. That trial proceeded before McDermot J. on May 21 and 22, 2013 and in comprehensive Reasons released September 12, 2013, the court determined the dates of commencement of the parties’ cohabitation (July 1, 2005) and the separation (or valuation) date (October 15, 2009). The divorce was severed from the corollary relief issues. The wife was ordered to pay costs of $19,000 inclusive of HST and disbursements in any event of the cause but enforcement was stayed pending the result of the corollary relief issues at a future trial. Leave was also given to the deceased for a motion for security for costs to be brought against the wife in light of her trial evidence involving the partial transfer of her ownership of a Toronto condominium into the names of her daughter and herself shortly before the spousal parties separated.

[7] A divorce order was made by Rogers J. on December 16, 2013.

[8] Philip O’Brien died April 28, 2014.

[9] By previous arrangement with Kyle, (and despite earlier requests as far back as September, 2010) the wife attended the former matrimonial home on May 31, 2014, with a moving truck to collect her chattels. No issue was raised by the wife in the weeks or months afterwards until early April 2015, (after she had learned that the residence would be sold on May 1) that she had not already obtained all of her chattels, or that there were any missing. By the time that the wife raised this issue, the residence was almost empty and the household goods distributed.

[10] Kyle was appointed Estate Trustee on July 22, 2014.

[11] The former matrimonial home, which had been owned by the deceased when he married, in which he was residing when the parties separated and had always been registered in his name, was listed for sale on February 14, 2015 and sold afterwards with a May 1, 2015 completion date.

[12] The thrust of Kyle’s motion for security for costs is premised on the wife’s litigation conduct and pre-separation transfer of one half of her interest in her most valuable asset, the Toronto condominium, to her daughter (both of which were the subject of comment by McDermot J.) as well as Kyle’s evidence that whatever the resolution of the validity of the marriage contract issue, the deceased’s net worth significantly declined after the spousal parties married due principally to financial challenges his business experienced such that no, or only a modest, equalization payment would be payable to the wife. It also appeared that during the same period the wife’s income exceeded the deceased’s income. This is what McDermot J. observed.

[13] Much of the evidence dealing with the value of the deceased’s business interests comprised corporate Financial Statements from which Kyle asked the court to infer a significant decrease in value. No business valuator had been retained because Kyle maintained that the cost for the valuations would be excessive and more likely to harm the wife’s equalization claim than assist.

[14] The wife maintained that the deceased owed her an equalization payment of $274,043 but this was calculated on since-corrected financial disclosure by Kyle and did not include the full value of the wife’s condominium, sole title to which she had progressively transferred to her daughter shortly before the parties separated (November 17, 2008) and on December 1, 2011, when full title was registered in the name of the wife’s daughter alone[1] (Interestingly, despite the fact that the wife disclosed sole ownership of the condominium when the marriage contract was signed she advised the court through counsel that the entirety of its $102,000 purchase cost had been funded by her daughter, then about 19 years old, when the wife and her daughter immigrated to Canada).

[15] The sale of the former matrimonial home will result in net proceeds of sale of about $483,600. As a result of the Endorsement made after the motions were argued, there was ordered to be paid from those proceeds after payment of realtor’s fees and other costs associated with the sale (including reasonable legal fees and disbursements) the following:

(a) the sum of $55,000 to Mr. O’Brien’s new spouse whom he had married shortly before his death, as a settlement of her claims;

(b) the aggregate sum of $35,533.26 for estate taxes, accountant’s preparation of the deceased’s 2014 tax return and for junk removal relating to the residence sale; and

(c) the sum of $19,000 earlier awarded to the deceased for costs by McDermot J., on consent of the parties, such sum to be taken into account after trial as an adjustment to any equalization payment found owing or to be taken into account when later dealing with the costs of these proceedings.

[16] The balance of the net proceeds of sale, totalling about $384,000 was ordered to be held by Kyle’s solicitors in trust pending further order. This then is the amount that the wife is seeking to be paid into court or held elsewhere in trust until trial[2].

Analysis

[17] Rule 24(13) of the Family Law Rules identifies the factors that the court may consider when making an order for security for costs.

ORDER FOR SECURITY FOR COSTS

(13) A judge may, on motion, make an order for security for costs that is just, based on one or more of the following factors:

1. A party ordinarily resides outside Ontario.

2. A party has an order against the other party for costs that remains unpaid, in the same case or another case.

3. A party is a corporation and there is good reason to believe it does not have enough assets in Ontario to pay costs.

4. There is good reason to believe that the case is a waste of time or a nuisance and that the party does not have enough assets in Ontario to pay costs.

5. A statute entitles the party to security for costs. O. Reg. 114/99, r. 24 (13).

[18] Only the fourth factor is relevant in this case. Based on her Financial Statement sworn April 12, 2015, the wife has no assets in Ontario to pay costs. This is largely attributable to her transferring her major asset, the Toronto condominium, to her daughter in circumstances which tested not only McDermot J’s credulity[3] but also this court as her explanations about the property’s ownership are wholly contradictory. Even so, and while the court is suspicious about the wife’s financial probity, the test under this fourth factor also requires a “good reason” why the wife’s claims are a waste of time or a nuisance, and the evidence in this respect is insufficient. In arguing a post-marriage decline in the value of the deceased’s business interests (ownership of which had been transferred to Kyle, and which were still operating when the motions were argued) Kyle sought, on the basis of unaudited Financial Statements, supplemented by supposition to have the court discharge his burden of credibly advancing the values for the deceased’s business interests as at the marriage and valuation dates: see Homsi v. Zaya, 2009 ONCA 322, [2009] O.J. No. 1552 (ONT. C.A.). It will be the rare case that claims for equalization or spousal support will ever be a waste of time or a nuisance, particularly too where, as in this case, the validity of a marriage contract is disputed.

[19] No order for security for costs is appropriate at this time. However, during the course of argument, it was clear that the evidentiary record dealing with the values for the deceased’s business interests was unsatisfactory. Kyle argued that a valuation of the businesses costing anywhere from $15,000 for a basic valuation to $60,000 for a comprehensive valuation report was wasteful and unaffordable. No evidence was led about the financial circumstances of any of the businesses after 2009.

[20] Nor is the evidentiary record much better with respect to the values to be attributed to the former matrimonial home or the wife’s condominium.

[21] A trifecta of recent amendments to the Family Law Rules involving Rules 1, 13 and 16 are purposed, in large part, to help rid family law litigation of the scourge of inadequate or simply non-existent financial disclosure (Rule 13) and to enhance the court’s ability to more proactively, and expeditiously, manage cases and make determinations on the best available evidence (Rules 1 and 16). Amended Rule 1(7.2) permits the court to give directions and impose such conditions respecting procedural matters as are “just.” The enumerated subsections are prescriptive, not exhaustive.

[22] In this case the former spousal parties separated in October, 2009, after slightly more than four years of cohabitation. There has been a bifurcated trial lasting two days, at least four conferences, five motions (including the two now before the court) and, notwithstanding earlier disclosure efforts (as far back as January, 2012) disclosure remains an outstanding issue. At least eight judges have been involved, and the evidentiary record dealing with the principal assets of the former spousal parties (the deceased’s business interests and the realty owned by the spouses) is little better now than it was when these proceedings were commenced in 2010 and the wife raised her challenge to the marriage contract and claimed in 2011 an equalization of the parties’ net family properties. And over one and a half years have passed since McDermot J. determined the cohabitation and valuation dates! Accordingly, an Order will issue as follows:

(a) within 15 days of the date of release of these Reasons, Kyle shall provide to the wife the names of three qualified business valuators to express an opinion about the value of the deceased’s business interests as of the marriage and valuation dates. Within ten days of those names being provided to the wife, she shall select one of those names: if the wife fails to make her selection within that time then Kyle may choose the valuator;

(b) there shall be paid to Kyle from the balance of the net sale proceeds of the former matrimonial home now held in trust the sum of $15,000 to engage the valuator selected to undertake a calculation value report. This is not a joint retainer but the wife shall be entitled to provide to the valuator such information as she believes relevant to the valuation engagement;

(c) each party shall provide to the other on or before June 30, 2015, all of the evidence upon which that party is relying to prove the value of the realty owned by each of the spousal parties on the marriage and valuation dates. An “estimate” by a party or a person not qualified to provide an opinion of value will not be acceptable. At the very least, and in accordance with amended Rule 13(3.3) a copy of the MPAC Assessment for the deceased’s residence and the wife’s condominium on the valuation date will be required;

(d) each party shall be entitled to question the other, such questioning not to exceed two hours, and to be completed no later than July 31, 2015;

(e) any issue with respect to either party’s compliance with the directions for disclosure given on April 29 shall be returnable by motion on ten days notice before me;

(f) the parties’ motions are otherwise adjourned to August 12, 2015, before me to be spoken to with respect to compliance by each party with the direction set out in this Endorsement, and to consider at that time whether a summary judgment motion or a combined case conference and settlement conference should be scheduled pursuant to, respectively, Rule 16 and 17(8) of the Family Law Rules. Each party shall deliver no later than August 5, 2015 and file with the court an affidavit identifying (without detailing the evidence) what he or she contends remains a genuine issue requiring a trial and which affidavit shall also address each party’s compliance with the court’s directions;

(g) except as otherwise ordered on April 29, as otherwise provided in (b) above and any necessary Canada Revenue Agency and accounting expenses relating to the administration of the deceased’s estate from on or after April 29, the net sale proceeds of the former matrimonial home shall continue to be held by Kyle’s solicitors in trust pending further Order. Any issue with respect to any further distribution of those funds may be addressed on August 12, 2015.

[23] Although success on the motions has been divided, costs will be reserved to August 12, 2015. At that time the court will also consider the degree to which each party has complied with the court’s directions.

Justice D.A. Jarvis

Released: May 15, 2015

AMENDMENT

Page 6 – Paragraph 22 (c) (amended) to now read:

each party shall provide to the other on or before June 30, 2015, all of the evidence upon which that party is relying to prove the value of the realty owned by each of the spousal parties on the marriage and valuation dates. An “estimate” by a party or a person not qualified to provide an opinion of value will not be acceptable. At the very least, and in accordance with amended Rule 13(3.3) a copy of the MPAC Assessment for the deceased’s residence and the wife’s condominium on the valuation date will be required;

[1] Paragraphs [24] and [37] of McDermot J.’s Reasons released September 12, 2013.

[2] In fairness, the wife had asked in her motion that the entirety of the net proceeds of sale not be disbursed.

[3] See Paragraph [24] of McDermot J.’s Reasons released September 12, 2013.