Stephanie Joan Morton v. Donald Edward Morton
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Stephanie Joan Morton, Applicant
AND: Donald Edward Morton, Respondent
BEFORE: The Honourable Mr. Justice Russell Raikes
COUNSEL: Cynthia Mackenzie Counsel, for the Applicant Hillary Houston Counsel, for the Respondent
HEARD: June 26, 2015 at Sarnia, Ontario
ENDORSEMENT
NATURE OF MOTIONS
1The Applicant (moving party), Stephanie Morton, brings a motion seeking:
An advance interim payment of $22,000 to assist in payment of expert valuation/accounting costs pursuant to Rule 24(12) of the Family Court Rules;
Disclosure and production of various financial documents pertaining to the Respondent’s business operations; and,
An Order pursuant to section 30 of the Children’s Law Reform Act directing an assessment of the needs of the parties’ two daughters and the ability and willingness of the parties to satisfy those needs, with the cost of that assessment to be paid at this stage by the Respondent.
She withdrew her request for a preservation order during argument of the motion.
2The Respondent, Donald Morton, opposes the relief sought. In the alternative, he seeks detailed confidentiality terms in the event disclosure of the requested financial information is directed.
FACTS
Section 30 Request
3The parties married September 9, 1999 and separated July 15, 2009. There are two children of the marriage: Samantha Mae born March 28, 2003 and Amanda Dawn born September 26, 2004. The children’s primary residence is with the Applicant mother. There is no interim order dealing with custody.
4The Endorsement Record shows a single interim consent order dated December 12, 2014 dealing with access during the Christmas holidays between December 14, 2014 and January 5, 2015. I am advised by counsel that there is no formal arrangement with respect to access. Access is an ongoing issue that requires the involvement of counsel from time to time as the parties cannot deal with changes without conflict.
5On September 19, 2013, Justice Thomas requested the involvement of the Children’s lawyer to assist in resolving issues related to the children. In his Order, Justice Thomas indicated: “I am convinced that this is a high conflict case that requires OCL involvement….” The Order was made on consent at a settlement conference. Despite Justice Thomas’ indication that this was “high conflict”, the Children’s Lawyer declined to become involved.
6This is the first request to the court for a section 30 assessment. The motion was initiated November 25, 2014. The motion came before me on June 26, 2015 at a special appointment. There were earlier adjournments that were unavoidable and not caused by the Applicant.
7Both girls see a counsellor and have for the past five years. There is no evidence before me as to the frequency of those visits, nor any linkage to the issues between the parties. The evidence in support of the section 30 assessment request is sparse and is found at paragraphs 31 – 39 of the Applicant’s affidavit sworn November 25, 2014 at Tab 14 of the Continuing Record. The evidence contains a number of bald assertions without details; for example, her belief that “the ongoing uncertainty regarding the children is having a detrimental impact on them”.
8The Applicant wishes the section 30 assessment to be done through the London Custody and Access Project at an estimated cost of $8,400. She asserts that she is unable to contribute to these costs at this time, and asks that the court order the Respondent to pay for same without prejudice to any costs order that might be made in the future.
9Counsel for the Applicant submitted that the Respondent did not address the section 30 relief in his initial responding material which led the Applicant to infer that the section 30 request was not opposed. As a result she did not file additional evidence. The last affidavit filed by the Respondent dated June 12, 2015 does oppose the section 30 request. The Respondent asserts that no assessment is necessary; the court can determine this issue without such a report. In addition, the cost of that report would be a hardship to the Respondent especially if he has to bear it alone.
10I note that the Applicant did not seek to strike the June 12, 2015 affidavit, nor did she ask for an adjournment to respond to it. In any event, it is her motion and she is required to file evidence sufficient to prove on a balance of probabilities that such an assessment is warranted. The Respondent can file nothing in response and simply assert that the evidence before the court is inadequate. Silence in this case is not consent.
Disclosure of Business Records
11The Applicant noted at the outset of her submissions that financial disclosure and the status of same was something of a moving target as the motion date approached. The Respondent has delivered several of the documents requested in the Applicant’s motion or has undertaken to provide documents upon receipt from third parties such as Revenue Canada.
12In this Endorsement, I will focus on what I understand remains outstanding and in issue. If I inadvertently overlook a particular document in dispute and fail to address it, the parties may re-attend and/or bring that to my attention, if needed.
Background to Document Disclosure Issues
13The Respondent is the sole shareholder of three numbered companies (737986 Ontario Limited, 2044705 Ontario Limited and 1480801 Ontario Limited) collectively known as the Don-Mor Group of Companies. He is also a 50% shareholder of a fourth numbered company, 119745 Ontario Ltd..
14The Respondent through his companies is the owner and operator of three auto body repair shops. The shops do some mechanical repair work as well. His shops are part of the Car Star dealer network which I understand from the evidence to be a franchise or licensing arrangement.
15The Applicant was employed by the Respondent’s businesses as an administrative assistant before and during the marriage. She was terminated from her employment in March 2010. She asserts that during her time as an employee and while she was living with the Respondent, he regularly and routinely had his companies pay for personal items, including trips, tickets to events, antique cars, home repairs, a boat with attendant costs etc.. He treated the companies as his piggy bank to access monies for his expenditures.
16The Applicant also deposes that the companies had corporate credit cards which accrued significant reward points that the Respondent used for his personal benefit. She maintains that these points have value which must be taken into account in assessing the Respondent’s income and/or the value of the companies for net family property purposes.
17Further, the Applicant asserts that the Respondent frequently travelled to events like the Daytona 500 with family and friends which his companies expensed as business promotion. She disputes that characterisation and intends to argue that those expenditures should be included in the calculation of the Respondent’s income for the purpose of spousal and child support.
18The Respondent presently pays monthly child support for the two children at the rate of $1,526, as well as spousal support of $1,909 per month. The aggregate of child and spousal support is $3,435 per month. He has produced his 2013 and 2014 personal tax returns which show his income was $135,657.80 and $183,956.44, respectively.
19The Respondent has produced to the Applicant his shareholder accounts from 2006 through to 2014. He acknowledges that he has had his companies pay for personal items but deposes that the companies track those expenditures in a “Due to Shareholder” account. At the end of each year, the accumulated amounts in the Due to Shareholder accounts are treated as a dividend and taken into income. Many, if not all, of the examples mentioned in the Applicant’s affidavits are reflected in the Due to Shareholder accounts. He notes that Revenue Canada recently audited his companies and found only a very modest figure of expenses that should have been attributed to personal expense and were not (less than $1,000).
20The parties participated in a voluntary mediation during 2009 and 2010. To assist the parties in the mediation, a report was obtained from Dwayne Pyper of Durwand, Jones & Barwell of Grimsby, Ontario. The mediation was unsuccessful. Subsequently, the Respondent engaged Mr. Pyper to prepare a business valuation of the Don-Mor companies as of the date of marriage and the date of separation.
21The Applicant is not prepared to accept Mr. Pyper’s valuation. She raises concerns with respect to the manner in which the report was prepared, the quality of the information utilized in the preparation of the report and the level of review. She has engaged Mr. Steve Ranot, a business valuator, at Marmer, Penner Inc. in Toronto, Ontario to provide expert advice on the value of the Respondent’s various businesses as well as his historical and current income for support purposes.
22Mr. Ranot swore an affidavit in support of the Applicant’s motion for disclosure of documents by the Respondent. In his affidavit, Mr. Ranot sets out the information and documentation that he requires to fulfil his engagement and provides an explanation why this documentation is necessary and appropriate to his task. At paragraph eight of his affidavit, Mr. Ranot indicates that the operating company is profitable and will likely be valued on an earnings approach.
23The Respondent has already produced voluminous documentation either voluntarily or in response to this motion. The Respondent objects to the production of the balance of the requested documents on three bases:
The expense of the disclosure is disproportionate to the value of the equalization payment and support in issue;
The disclosure requested is unreasonable; and,
Confidentiality concerns.
24I turn now to the specific categories of documents identified by the Applicant which have not been provided to date by the Respondent and whose production is disputed by the Respondent. I will address the Applicant’s rationale for this disclosure and the Respondent’s objections in respect of each category.
Personal Expenses Charged as Business Expenses
25The Applicant seeks a schedule of personal expenses charged as business expenses, including but not limited to automobile, travel, promotion, entertainment and repairs, to all of the corporations in the Don – Mor Group of companies for the years ended January 31, 2005 to 2014 broken down by payor, fiscal year and description. Mr. Ranot indicates at paragraph 4b of his affidavit that this information is required in order to properly calculate Mr. Morton’s income for support purposes and the corporations’ maintainable earnings for valuation purposes.
26Intertwined with this request, the Applicant also seeks the general expense ledgers of 4737986 Ontario Limited and the other Don-Mor companies for the fiscal years ending January 31, 2006 to January 31, 2015. If the general ledgers do not contain the names of suppliers and instead show items such as “VISA expenses”, the Applicant requires the credit card statements with notations for which expenses were business-related and which were personal.
27The Applicant asserts that she is not seeking information with respect to revenues, only expenses. She acknowledges the Respondent’s concerns with respect to confidentiality and advises that both she and her expert are prepared to enter into a confidentiality agreement by which their use of the documentation produced shall be only for the purposes of litigation. In any event, she asserts that the general expense ledger should not contain client information. If it does, it can be redacted at the Respondent’s expense.
28The parties separated in 2009 and, as such, disclosure is limited by section 21(1)(f) of the Child Support Guidelines to the most recent three tax years. Accordingly, counsel for the Applicant properly conceded in oral argument that the timeframe for which production is sought is 2006 – 2014.
29The Respondent has produced his Due to Shareholder Accounts for the period to 2006 to 2014. He did so on June 12, 2015. Counsel for the Respondent takes the position that this fully satisfies this request; anything more is unreasonable. She asserts that the accounts provide detail of the individual items which have been charged to the Respondent’s personal account by the companies. The documents produced from the companies and the Respondent personally evidence that these amounts were not only charged to his account, but were also taken into income in the form of dividends on an annual basis.
30The Respondent has also provided evidence that the general expense ledger contains third-party information which his companies are contractually obligated to keep confidential. This information includes the name of the customer for whose vehicle the expense was incurred, the name of the insurer, the amount of the deductible and other personal information of the owner of the vehicle. The cost to redact that information, if it can be redacted at all, is estimated at $100,000 given the number of transactions over such a lengthy period.
31The Respondent argues that the Applicant’s request for this information is unreasonable. She has been provided with the Due to Shareholder account information. There is no evidence that personal expenses have been paid for the Respondent by his companies that are not included in the Due to Shareholders account records. In addition, the cost to redact the general expense ledgers is disproportionate to any potential benefit she might obtain from finding any modest expenses that should perhaps have been classified differently. Most of the expenses clearly relate to specific customers and are not relevant to the matters in issue between the parties. He argues that this is a “fishing expedition”.
32With respect to confidentiality, there are certain terms that he requests be incorporated into any order if production is ordered. He is concerned that the disclosure of costing information could prejudice his business. He notes that the Applicant has family that are his principal competitors. While she has been estranged from her family, he has heard recently that her family were at her home. He worries that through inadvertence or perhaps even spite, his business could be significantly damaged by disclosure of this information to non-parties.
33His companies are also subject to confidentiality agreements with the insurance companies from whom he obtains the bulk of his work. Disclosure of this documentation in this context will put him off-side the terms of those agreements and could cost him that relationship and the work that goes with that relationship.
34Finally, the Respondent points out that there is a marriage contract. The Applicant must first succeed in setting aside that contract to be entitled to any equalization payment. His financial statement indicates that even if she is successful in invalidating the marriage contract, her estimated equalisation payment is $284,000. He argues that I should take into consideration that her entitlement to equalization at all is a matter in dispute in determining whether her request and the cost associated with it is reasonable or disproportionate to the benefits to be obtained.
Use of Corporate Credit Card Points
35The Applicant seeks disclosure of the credit card points generated from corporate cards and how those have been expended since the date of separation. She asserts that in the past, the Respondent has utilised those points for personal benefit. They have economic value and should be accounted for in the Respondent’s income, if he has continued that practice, and in the valuation of the companies. She seeks all of the supporting documents which reflect the points which presumably include all of the credit card receipts for the past 6 years.
36The Respondent acknowledges that the cards do accrue points but deposes that the points are typically used to reduce the cost of gas for company vehicles. He maintains that any personal benefit from such points is disclosed in the Due to Shareholder accounts already provided. He also asserts that the request is unreasonable; it would require review of many credit card receipts at great cost for minimal value.
Body Shop vs. Mechanical Repair Breakdown
37The Applicant requests a breakdown of revenues generated from body shop work versus that generated from mechanical repairs. The body shop work attracts a royalty payment obligation to Car Star, whereas the mechanical repairs do not. In oral argument, counsel advised that she wished to ensure the Respondent was not overpaying Car Star.
38The Respondent says those figures are contained in the Financial Statements of Don-Mor Collision which have already been produced.
Valuation of Properties
39The Applicant wants the Respondent to obtain and provide appraisals of the value of real estate held by the companies from which they carry on their auto body operations as at the date of separation. The properties are at the following municipal addresses in London, Ontario:
1056 Brydges St.;
1058 Brydges St.; and,
10 Douglas Court.
40The Respondent obtained and produced a letter of opinion as to value which is marked as Exhibit “I” to his June 12, 2015 affidavit. The letter of opinion is from Kirwin & Associates and is dated February 14, 2011. It is not an appraisal; rather, it is a broker opinion of value.
41The Respondent takes the position that Mr. Ranot has already indicated in his affidavit in support of this motion that the companies will likely be valued on an earnings approach. Accordingly, there is no need to obtain a formal appraisal of the value of the underlying assets such as the land. It is redundant since the approach to valuation looks at earnings. He also asserts that the letter of opinion addresses all three properties and is more than sufficient for the Applicant’s expert’s needs at this stage. Mr. Ranot did not indicate that appraisals were essential to his valuation.
42At paragraph 4k of his affidavit, Mr. Ranot indicates that they require bona fide appraisals at the valuation date in order to value Mr. Morton’s interests in the three numbered companies. In oral argument, counsel for the Applicant indicated that this information was necessary at least in part to ensure that an earnings approach was the preferred method of valuation.
Hoare Dalton Report
43The Respondent’s companies received payment from the City of London in respect of an expropriation. In connection with that expropriation, the Respondent’s companies obtained an expert report from Hoare Dalton. The Applicant speculates that that report may include business interruption loss calculations, valuations of real estate and other information relevant to the Respondent’s income including the income available to him through his companies.
44In his affidavit sworn December 8, 2014, the Respondent indicated that the report was prepared in approximately 2002 – 2003, well before the date of separation. He asserts that this request is irrelevant and unreasonable. However, the Applicant notes in her affidavit sworn March 4, 2015 at paragraphs 30 – 32 that the City of London paid monies to two of the Respondent’s numbered companies in September, 2008 in respect of an expropriation of land from those corporations. The 2009 Financial Statement of 1199745 Ontario Limited shows as “other income”, business interruption loss of $52,801. Likewise, the 2009 Financial Statement of 737986 Ontario Limited shows the sum of $154,867 as “other income” but does not indicate whether that is business interruption loss or not. These figures could be relevant to the 2009 corporate statements. She notes that her expert is unable to say what, if any, reliance he will place on that report until he has an opportunity to review it.
45The Applicant is concerned that the Respondent will later assert that the monies taken into income from the City are for a non-recurring business loss which should not form part of the valuation of the companies. His view of the profitability of his companies is directly relevant to the issues this court will have to address if this matter proceeds to trial.
Documents for New Car Star Shop
46The Respondent has opened a new Car Star Express facility at a new location. He did so in 2013. This fact is reflected in the 2013 Financial Statements of 737986 Ontario Limited. The Applicant seeks documentation with respect to that enterprise as relevant to his income.
47Each of the above categories of documents was the subject of oral submissions by counsel for the Applicant. In addition, a chart prepared by Respondent’s counsel raises other requests by the Applicant which do not appear to me to fall under the umbrella of the above categories on which the Applicant made no oral submissions. I presume they remain part of the matter for my determination on this motion.
Use of Monies Drawn by Respondent
48The Applicant seeks disclosure of how and on what the Respondent spent monies drawn from 737986 Ontario Limited from February 1, 2008 to January 31, 2010. The Respondent takes the position that this request is over-reaching. Once he accounts for the receipt of the monies by taking it into income, how he spends it is not her concern. He has provided Financial Statements as part of this proceeding which set out his monthly expenses in any event.
Valuation of Personally Held Real Estate
49The Respondent has provided letters of opinion and proof of mortgages with respect to three properties held by him personally. These are situate at:
105 Fairlane Road, London;
319 Egerton St., London; and,
The matrimonial home.
50The Applicant seeks valuations of these properties together with proof of the mortgages and amounts owing as at various dates.
RULE 24(12) FUNDING
51In August, 2012, the parties entered into an interim agreement whereby the Respondent advanced to the Applicant $25,000 as against her equalization claim for the purpose of allowing her to pay for experts and to pay 50% of the costs to restart the mediation. This payment was without prejudice to the Applicant bringing a motion for an order pursuant to Rule 24 (12) in the future.
52The Applicant has utilized $17,000 of the $25,000 advanced against her equalization. Approximately $2400 was spent for appraisals of the Respondent’s boat and vehicles, although the Applicant has not yet disclosed or produced those appraisal reports to the Respondent. In addition, she has paid to Marmer Penner $14,161 for its expert services. To date, Marmer Penner has not produced any reports or opinions.
53The evidence indicates that Marmer Penner has advised the Applicant that it will require a further $30,000 plus HST to complete its engagement subject to any forensic investigation which may be required for which no estimate is provided. The Applicant has $8000 remaining from the funds advanced by the Respondent. She seeks $22,000. Her counsel advised that she would bear the HST. This is her first application under Rule 24(12).
54The Applicant advises that she requires further funds in order to level the playing field. She works part-time providing bookkeeping services. She earned approximately $9000 in 2014 from her bookkeeping work which is in addition to the amounts that she receives for child support and spousal support from the Respondent. She has provided her 2014 income tax return to the Respondent through counsel, but has not filed a new financial statement. It is her position that her affidavit material makes clear that there has been no material change in her financial circumstances since her last financial statement.
55The Applicant indicates that she has no personal financial resources with which to pay her expert, nor does she have the ability to borrow such funds. According to the Respondent’s Net Family Property Statement at tab 21B of the Continuing Record, she is entitled to $284,000 less any post-separation adjustments if she is entitled to equalization.
56The Applicant has several concerns with the report prepared by Mr. Pyper at the Respondent’s request. She notes that it is the lowest level of review. It depends significantly on information provided by the Respondent which she believes to be inaccurate. She was never consulted by Mr. Pyper and it appears to materially under-estimate corporate income and the Respondent’s income. In short, she believes that it is a low-ball, poorly done expert report that marginalizes her entitlement which is to the Respondent’s benefit.
57Counsel for the Applicant submits that if I agree to grant the advance, I should follow the trend in other cases to leave it for the trial judge to characterize the advance. He or she is best positioned to assess whether the report was of any use and to determine whether it should be characterized as a loan, a credit against her equalization payment or costs of the action. She also argues that the utility or proportionality of the cost to obtain this report is best observed with hindsight by the trial judge. Although the Respondent characterizes her choice of expert as a “Cadillac”, she is entitled to the expert of her choice. She notes that the Respondent’s expert is likewise not local.
58Finally, the Applicant notes that there is a significant disparity in the income of the two parties. The Respondent’s 2013 income on his income tax return was $135,657. According to his Financial Statement, his expenses were only $1000 less. His 2014 income tax return found at tab 22D of the Continuing Record shows his income was $184,000. Thus, he has a surplus of income over his previous year’s income and over his expenses. It will not be a hardship for him to contribute the amount requested.
59The Respondent objects to the requested payment under Rule 24(12) as:
The proposed expense is excessive;
The proposed expense is disproportionate and thereby unreasonable in relation to the amount at stake;
He cannot afford to bear this cost;
She does have assets, notably her RRSPs, to pay this expense; and,
Her expert has produced nothing despite payment of $14,000 from which I should conclude that the expert is too expensive.
60The Respondent paid approximately $13,000 for the expert report that he obtained from Mr. Pyper. He disputes the Applicant’s characterization of the quality of Mr. Pyper’s report and the analysis therein. He also notes that even if the Applicant is successful in setting aside the marriage contract, she will be expending $44000 in expert costs over an equalization payment likely in the range of $284,000 or less. If she wishes to hire a very expensive firm and incur the cost of leaving no stone unturned, then she should bear that expense.
61In his affidavit material filed, he has provided a letter from his banker which indicates that he cannot borrow further funds. He explains that in the last few years that he and the Applicant were together, they expended a lot of money which gave rise to debt obligations that he had to finance and continues to repay. In addition, he is paying child and spousal support of more than $40,000 per annum. He argues that she is under-employed given her education and past employment experience.
62The Respondent further argues that the Applicant has wasted the money that he has provided to her for experts as evidenced by the $14,000 paid to Marmer Penner for which she has received nothing to date. He notes that her expert leaves open the door that it will require even more funds of an undetermined amount for forensic work at some future date. He worries that this is merely the start of demands for money by the expert which are excessive in any event.
LAW AND ANALYSIS
63I will address each of the above issues in turn. In doing so, I will examine the applicable legal principles and then apply them to the facts before me.
LAW – S. 30 CLRA ASSESSMENTS
64Section 30(1) of the Children’s Law Reform Act gives the court the authority on motion of the parties or on its own initiative to order an independent expert assessment of the needs of children whose parents have separated, and the willingness and ability of those parents to meet those needs. This tool is meant to assist the Court to ensure that applications for custody and/or access to children are determined on the basis of the best interests of the children: section 19(a), Children’s Law Reform Act.
65The following general principles apply on a motion for a section 30 CLRA assessment:
There is no requirement that there be evidence of a clinical issue or clinical pathology as a precondition to an assessment being ordered: Glick v. Cale, 2013 ONSC 893, [2013] O.J. No. 573 at paragraphs 40-46 ;
The presence of a clinical issue or clinical pathology may be a significant factor in favour of an assessment being ordered: Parniak v. Carter, 2002 CanLII 45671 (ON CJ), [2002] O.J. No. 2787 at paragraph ;
Assessments should not be ordered as a matter of routine given the expense and intrusive nature of such investigations: Ryan v. Scott, [2013] O.J. No. 3301 at paragraph 16; and,
Each case must be determined on its own facts having regard to the evidence before the court as to the benefits and potential harms arising from the assessment process: Glick v. Cale, supra, at paragraphs 48 and 49.
66In Glick v. Cale, supra, Justice Kiteley conducted an in-depth analysis of the case law on the issue of whether a court has jurisdiction to order an assessment only if there are clinical issues or pathology. She concluded that while the presence of clinical issues and pathology is a significant factor, it is not a precondition to an assessment being ordered. At paragraph 48 of her decision, she provided a non-exhaustive list of criteria which may be considered in the determination of whether to order an assessment. Those criteria are:
“(a) What was the parenting relationship like before separation? Did the parents function at least adequately before the separation and the dysfunction arose after the separation?
(b) Are the parents unable to make any decision about the child’s needs (including education, religion, health, and activities) without intervention by a court?
(c) Without defining “high conflict”, is the relationship between the parents so unhealthy that one or both parents is/are unable to identify the best interests of the child and act on it?
(d) Do the parents have a mutual disregard for the other parent’s ability to parent?
(e) Do the parents blame each other for the dysfunction each describes?
(f) Is there a clinical diagnosis that might impact on the parenting capacity of one or both parents?
(g) Is there a clinical diagnosis with respect to any of the children in the family unit that means the child is fragile and vulnerable to ongoing conflict and has special needs?
(h) What is the age of the child at separation and at the time of the request for the assessment?
(i) Is the child manifesting behaviour that might be associated with stress caused by the conflict between the parents?
(j) Is there an alternative? For example, is the child of an age and maturity that his or her views should be no one and if so, would it be more appropriate to ask the OCL to become involved and appoint a lawyer to act for the child?
(k) Are there other challenges in the family such as whether the family home must be sold? If those challenges are resolved, will the family dynamic be improved and avoid the necessity of an assessment?
(l) What is the basis upon which the moving party relies? Is it essentially a mobility case on which the court must hear evidence? Is the issue custody or access?
(m) What is the estimated cost? Do the parents have the financial resources to pay that cost?
(n) Will the assessment cause delay that is not in the best interests of the child? In considering the impact of delay, is it more likely than not that the delay necessarily involved in an assessment will enable the parents to have a better understanding of the family dynamic and arrive at a resolution without a trial?
(o) Is an assessment in the best interests of the child?”
67One of the cases reviewed and considered by Justice Kiteley in Glick v. Cale, supra, is the 2012 decision in Baillie v. Middleton, [2012] O.J. No. 2893, a decision of Justice Pazaratz. In Baillie v. Middleton, supra, Justice Pazaratz summarized principles arising from a long line of cases where the court found that a clinical issue or clinical pathology was required for an assessment to be ordered. Although the current approach of the courts as reflected in Justice Kiteley’s decision does not follow that line of cases, some of the principles noted by Justice Pazaratz continue to be relevant; specifically,
(1) Assessments are not to be ordered routinely;
(2) Assessments are not to be ordered routinely as a vehicle to promote settlement of custody disputes;
(3) A court should not order an assessment simply to obtain an apparently impartial third party’s opinion on what is in a child’s best interests;
(4) The use of an assessor’s report simply because it might be helpful to the court is an overarching use of expert evidence;
(5) Allegations of parental alienation or an inexplicable rift between parent and child may warrant a s. 30 assessment;
(6) Age may be important. Where the case involves a young child- whose views and preferences may be given limited weight- and where the child is not experiencing behavioural difficulties, an assessment may not be appropriate in the absence of significant clinical issues;
(7) There must be some reason to expect that the assessment will add to the evidence; there must be some evidence that the dispute is so intense as to prevent all the relevant factors coming out, or that there appears to be a parent/child problem that requires expert analysis and/or explanation, or finally, that the assessment is necessary to allow the parties to understand the needs of the child and the need for cooperation;
(8) The mere fact that the parties are engaged in a high- conflict custody dispute does not, in itself, justify ordering and assessment;
(9) Courts should resist any subtle influence created by the sheer volume of material- the number of allegations and affidavits;
(10) A dispute about joint custody versus sole custody is a question of fact. An assessment- although perhaps helpful- is not required in order to make this determination;
(11) The order must have a proper evidentiary basis and the paramount concern must be the best interests of the child;
(12) Expert evidence should not be routinely required to establish the best interests of the child;
(13) A court should not delegate its duty to determine what parenting arrangement is in a child’s best interests to an assessor. An assessment- if appropriate- is merely one factor;
(14) The potential benefit of expert assistance in a particular dispute must be weighed against the fact that assessments are expensive, intrusive and time-consuming. There must be evidence that the reasons for requiring the assessment more than offset any harm that might be incurred by ordering the assessment;
(15) Many children in custody disputes have already been exposed to a great deal of stress, disruption and exposure to professionals. Courts must consider whether an additional layer of investigation can be justified;
(16) Delay is of particular concern where prospects of settlement appear remote, or where no “middle-ground” appears viable. Where the parties are so entrenched and unyielding in their respective positions that nothing short of a trial will resolve the case, a marginally beneficial assessment should not be allowed to delay that final resolution;
(17) The burden is on the party requesting the assessment. They must establish that there is a need in this case for the type of information that only an expert can provide; information that would not otherwise be discoverable. A court should not order an assessment over a party’s objections unless the person seeking the assessment can establish a purpose for the assessment other than simply providing another person to decide the case or obtaining another point of view on what is in the child’s best interests;
(18) An assessment is not to be used as a fishing expedition, or a strategic fact – finding exercise by one parent hoping to discover evidence favourable to their position;
(19) The cost of the assessment will usually be an important consideration, although not necessarily determinative. But affordability can be a complex issue and a difficult cost – benefit analysis is required. How much will the expert evidence really help the judge? What are the financial (and other) implications of the delay? And how much would in assessment help the parties avoid (or simplify) a trial?
(20) It is not sufficient for one of the parties to simply state that an assessment should be ordered because that party is prepared to fund the costs.
68There are many parallels between the criteria identified by Justice Kiteley and the principles summarized by Justice Pazaratz.
69I take from these decisions that, inter alia, there must be an evidentiary foundation for an assessment to be ordered. The evidence must support the finding that such an assessment is in the best interests of the children; it is not a matter of speculation. Absent an evidentiary foundation, it is inappropriate to order an assessment given the intrusive and expensive nature of such an assessment.
ANALYSIS
70It is not necessary for me to undertake a detailed consideration of each of the criteria identified by Justice Kiteley because, in this case, the evidence is simply inadequate to provide an evidentiary foundation for an assessment to be ordered. The affidavit evidence filed by the Applicant fails to address in a meaningful way the rationale for the need for this assessment to be done. For example, there is no evidence of how the parental dysfunction on matters of custody and access is affecting the children. There is a suggestion that they continue to see a counsellor five years post-separation, but there is no evidence which links that counselling to the disputes between the parents or custody and access. Do they see the counsellor once a week or once every six months? What is the focus of that counselling? Why can’t the counsellor testify at trial as to the needs of the children?
71The affidavit material before me is sparse and replete with bald generalizations that do not assist me in assessing whether an order for assessment is appropriate. The fact that Justice Thomas previously indicated almost 2 years ago that this was a “high conflict” case, does not assist me in establishing that it remains a high conflict case. That the parties have been able to work out access matters with the assistance of counsel does not provide compelling evidence that a section 30 assessment is warranted.
72Accordingly, I deny the Applicant’s motion for a section 30 CLRA assessment. I do so without prejudice to the right of the Applicant to renew her motion at a future date with proper supporting affidavit evidence.
LAW- DISCLOSURE OF DOCUMENTS
73Rule 19(1) of the Family Court Rules requires each party to deliver an affidavit listing every document that is relevant to any issue in the case which is in that party’s control or is available upon request. The goals of this provision are to avoid trial by ambush and to enable the parties to resolve issues with a fuller appreciation of the evidence in the case.
74The application of Rule 19 is informed by the objectives of the Rules set out in Rule 2. The primary objective of the rules is to enable the court to deal with cases justly: Rule 2(2). Rule 2(3) states:
“Dealing with a case justly includes,
(a) ensuring that the procedure is fair to all parties;
(b) saving expense and time;
(c) dealing with the case in ways that are appropriate to its importance and complexity; and,
(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases.
The court must apply these rules so as to promote the primary objective.
75In the context of disclosure of documents, there is a balance to be struck to achieve fairness by having regard to the probative value of the information, the value of the claim and the burden on the disclosing party. In Chernyakhovsky v. Chernyakovsky, 2005 CanLII 6048 (ON SC), [2005] O.J. No. 944 at paragraph 8, Justice Rogers wrote:
“The courts must, however, be clear that the disclosure process cannot be used to cause delay or to reap tactical advantage. The court must consider the burden certain disclosure requests bring for the disclosing party. Is the probative value of the sought-after disclosure so great in relation to the difficulty of obtaining the disclosure that said disclosure would be ordered and sanctions imposed for failure to comply? How does the disclosure request fit into the overall context of the case? Is the issue for which disclosure is requested a central issue in the case? Or is it peripheral? Does the cost of obtaining the disclosure outweigh the value of the issue in the case? Is there a more expeditious and cheaper way of getting the same information? As the case develops, is the disclosure still related to an important issue in the case? As always, the court must balance these competing interests to ensure fairness.”
76Similarly, Justice Perell in Boyd v. Fields, [2006] O.J. No. 5762 recognized that the obligation to disclose balances the need for relevant documents to be produced with proportionality, fairness and common sense. In Boyd, supra, Justice Perell wrote at paragraph 12:
“Full and frank disclosure is a fundamental tenet of the Family Law Rules. However, there is also an element of proportionality, common sense, and fairness built into these rules. A party’s understandable aspiration for the utmost disclosure is not the standard. Fairness and some degree of genuine relevance, which is the ability of the evidence to contribute to the fact finding process are factors. I also observed that just as non-disclosure can be harmful to a fair trial, so can excessive disclosure be harmful because it can confuse, mislead or distract the trier of fact’s attention from the main issues and unduly occupy the trier of fact’s time and ultimately impair a fair trial.”
77The obligation to disclose in Rule 19(1) must be interpreted and applied in light of the primary objective of the Family Law Rules. Disclosure obligations should be proportional to their relevance to the material issues and not place an undue and unnecessary burden on a party: Jakubowski v. Kopacz, 2014 ONSC 6592 at paragraphs 12 and 13.
ANALYSIS
78I will address the documents for which disclosure is sought by reference to the same headings employed above.
Personal Expenses Charged As Business Expenses
79There is no question that the records which the Applicant seeks have a semblance of relevance to a matter in issue in the proceeding, i.e. the Respondent’s true income for support purposes. The material filed by the Respondent indicates that most, if not all of that information has been produced in the Due to Shareholders account records and this request would cause the Respondent significant hardship either because of the cost to redact confidential information or because it could imperil the relationship between his companies and insurers for whom he depends for significant business. The latter concern is one which the Applicant presumably shares since the quantum of her support and that of the children depends, to no small degree, on the successful operation of those businesses. If those businesses fail or if they suffer a significant loss of customers, she should reasonably expect that his income will fall and with it the support payable.
80The exercise in which the Applicant is engaged by this inquiry is to ferret out transactions which should have been treated as a personal benefit to the Respondent which, as such, would increase his deemed income for support purposes. Her request for what amounts to potentially thousands of credit card receipts and production of accounting records going back several years is excessive and disproportionate to any likely realizable benefit. In this regard, I note the following:
Revenue Canada looked at two taxation years and found less than $1000 of corporate expenses that should have been characterized as a personal benefit to the Respondent;
The trips and events to which the Applicant referred in her affidavits as examples of personal benefits which were paid for by his companies are reflected in the Due to Shareholder account records that have already been produced. It is not disputed that the annual balance in the Due to Shareholder account is taken into income as a dividend by the Respondent;
The Applicant does not in her affidavit material identify specific expenses not referred to in the Due to Shareholder account which she says ought to be.
81In his affidavit material, the Respondent identifies certain trips to industry events which he indicates are legitimate business expenses in the nature of marketing and promotion or to keep up with the latest developments in the industry. Based on her past experience when she was married to and living with the Respondent, the Applicant believes these junkets to be personal benefits disguised as a business expense.
82I order the Respondent for the period to 2006 – 2015 to provide the following information to the Applicant if it has not already been disclosed:
The date of every overnight business trip taken by the Respondent;
Where the trip was taken to;
The purpose of the trip;
The amount expended for the Respondent’s travel, accommodation and meal expenses;
The names of any persons who accompanied him on any trip under (1) above; and,
The amount expended for that person(s) for travel, accommodation and meal expenses in respect of that trip.
83It is not necessary for the Respondent to produce every piece of documentation with respect to those trips at this stage. Upon production of this information which I expect would be in schedule form to the Applicant, she will promptly advise which, if any, trip she contends was for a personal benefit and not a business expense. Upon being so advised, the Respondent shall produce to the Applicant those documents in his possession or that of his companies pertaining to the disputed trips.
84If the trip is one which has already been accounted for and referred to in the Due to Shareholder account, no production of documents is required because the Respondent will have already conceded that that is a personal expense and has taken that into income. As such, it is not a matter in issue between the parties.
85I decline to order the Respondent to produce his general expense ledgers to the Applicant either in redacted or non-redacted form. In my view, this request is one which is disproportionate to the value of the claim and the matters in issue between the parties. The expense associated with the redaction of documents is significant. The risk of damage to the Respondent’s business from the disclosure of this information is simply too great relative to the benefits to be gained from the disclosure of this information. I am not satisfied that the production of this documentation to the Applicant or her expert is warranted on the evidence before me nor am I satisfied that the confidentiality required by the Respondent’s companies can be adequately safeguarded to the satisfaction of his customers.
86In my view, on the evidence before me, the Applicant’s efforts to secure this information from the Respondent holds the prospect of marginal gain at significant expense and risk to the Respondent.
Use of Corporate Credit Card Points
87Once again, the Applicant seeks production of thousands of documents in the hope of finding that the Respondent has gained some financial advantage, however modest, which she can use to increase the amount of support. This seems to me excessive and casts the net far too widely.
88I order that the Respondent disclose and produce to the Applicant, to the extent he has not already done so through his Due to Shareholder account information, all benefits which he has personally enjoyed from the use of corporate credit card points between 2009 and 2015 including any documentation that evidences that use. The request made by the Applicant for the totality of the corporate credit card transactions amounts to a forensic investigation in the hope that it will yield some additional income to the Respondent which will affect the amount payable for support. It is an exercise whose cost grossly outweighs the potential benefit and is too burdensome in the circumstances.
Body Shop Versus Mechanical Repair Breakdown
89The explanation provided by counsel for the Applicant with respect to this item is wholly inadequate to justify the expense and exercise which the Applicant proposes to take. She wishes to ensure that the Respondent is not over-paying Car Star. I am sure that the Respondent does not wish to over-pay Car Star which is an independent third-party. There is no evidence that the Respondent is incompetently managing his business or dissipating the value of the business through over-payment of suppliers or Car Star. This request is not relevant to a matter in issue in the action or, if it is, it is far too remote to justify the expense.
Valuation of Properties
90The Respondent has produced an estimate of the value of the properties which, although not an appraisal, is nevertheless a professional opinion. I decline to order the Respondent to obtain a formal appraisal of the three properties for the following reasons:
The Applicant’s own expert has indicated that an earnings approach is likely the best approach to the valuation of the Respondent’s businesses;
The evidence indicates that these properties are all used to carry on the auto body shop and mechanical repair businesses, i.e. they are used in the operation of a going concern;
There is no evidence before me that there is any prospect that any of the three properties may have greater value than would be generated by an earnings approach; and,
The applicant is free to obtain her own appraisals of the three properties if she truly feels that is necessary to give comfort to an earnings approach to valuation.
I am not going to require the Respondent to incur the cost of obtaining appraisals of the three properties in the circumstances.
Hoare Dalton Report
91This report is already in existence and is available to the Respondent. I order that it be produced. I agree with the Applicant’s submissions that it may have relevance to valuation issues.
Documents for New Car Star Shop
92The financial statements for the Respondent’s companies reflect the new operation. It is not entirely clear to me exactly what information the Applicant seeks in respect of the new facility. If she is intent on pursuing the same issues that are outlined above with respect to personal expense etc., then my order above deals with that documentation. If there is additional specific information relevant to that new facility, she can pursue that request in a further application with more detailed evidence as to what documentation is required and why.
Use of Monies Drawn By Respondent
93I agree with the Respondent’s submission that he is not required to provide an explanation to the Applicant with respect to how he has spent monies drawn from his companies. He has filed the required financial statements which outline his expenses. Having accounted for the receipt for the monies by taking it into income, how he spends it is not her concern so long as he is paying support as agreed.
Valuation of Personally Held Real Estate
94Once again, the Applicant is entitled to obtain her own appraisal of these properties if she so desires. It will be at her expense. The Respondent has provided her with opinions as to value. If she is not satisfied with the opinions obtained, she is entitled to get her own experts to respond.
95She is entitled to confirmation of the amounts owing on mortgages secured against each property as at the date of marriage, date of separation and presently. I order the Respondent to produce that information which he can presumably obtain by seeking mortgage statements.
LAW- RULE 24(12)
96Rule 24(12) states:
“The court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees.”
97On a motion for advance payment of interim disbursements, the moving party must demonstrate the following:
The interim disbursements for which an advance payment is requested are important to matters in issue in the proceeding or to the proceeding as a whole;
The disbursements are necessary and reasonable given the needs of the case and the funds available. If the disbursements are for payment of an expert, the moving party must demonstrate a clear need for the services of the expert;
The moving party is incapable of funding the requested amounts;
The claim or claims being advanced in the case must be meritorious as far as can be determined on the balance of probabilities at the time of the request for disbursements; and,
The imposition of the payment on the responding party will not cause undue hardship to the payor: Stuart v. Stuart, 2001 CanLII 28261 (ON SC), [2001] O.J. No. 5172 at paragraphs 7, 11 to 13; Agresti v. Hatcher, [2004] O.J. No. 910 at paragraphs 11 and 12.
98The purpose of an award of advance interim disbursements is to level the playing field to ensure that meritorious claims in the family law context are not abandoned or forfeited by those who lack financial resources and, as a result, are at a significant financial disadvantage relative to the other party in the proceeding.
99Rule 24 evidences a less stringent approach in the family law context than is the case in public interest litigation where the courts have adopted a very restrictive and narrow approach to this relief: Stuart v. Stuart, supra, at paragraph 9. This rule recognizes that there may be circumstances where one party to the matrimonial relationship cannot afford to seek justice on meritorious claims given the disparity in financial resources available to that party. Consistent with the primary objective of these rules, it seeks to ensure the just determination of the issues between the parties.
ANALYSIS
100It is not disputed that it is appropriate for the Applicant to obtain an expert report with respect to valuation of the Respondent’s companies and his income for support purposes. These are matters in issue between the parties. The Respondent has obtained his own expert valuation report. The Respondent has already advanced $25,000 in an effort to level the playing field so that the Applicant could engage in settlement discussions and/or proceed to trial with some measure of comfort as to the true financial state of affairs of the Respondent and his companies. His advance interim payment recognizes the disparity in their financial circumstances.
101In his affidavit found at Tab 15 of the continuing record, Mr. Ranot of Marmer Penner Inc. indicates that he estimates the fees to complete this work will be a further $30,000 plus HST and will require full payment prior to release of the reports. He also indicates that this fee estimate does not include the amounts required for the forensic procedures because it is very difficult to predict accurately the extent of the necessary forensic steps. Thus, the actual amount which the applicant will spend for her expert is likely to be more than $44,000 plus HST (the aggregate of the amount spent to date and the additional $30,000 stipulated in his affidavit).
102I share the Respondent’s concern that the Applicant’s expert costs are excessive having regard to the matters in issue. This is especially so when Mr. Ranot leaves open the likelihood that the cost to complete the reports will go up by an undetermined amount for forensic work. I do not wish to be critical of his inability to estimate the cost of that forensic work given that he was facing the prospect of reviewing years of financial expenses, credit card receipts etc. Nevertheless, the amount requested even without the forensic work is excessive having regard to the nature of the business carried on by the Respondent, its location and the records which have been produced.
103The Applicant is entitled to engage an expert of her choice; however, this does not mean that the Respondent must contribute beyond what is reasonable. If she wishes to have what was termed a “Cadillac” expert (and I make no observation as to whether cost equates to value) she can certainly do so provided she is prepared to pay any amount in excess of that which the Respondent has contributed or may be ordered to contribute.
104The Applicant has spent $14,100 which, so far as I can tell from the material before me, yielded little more than a description of the documents that the expert believes he needs in order to do the valuation report. Certainly there is nothing in the material provided to me that would reasonably justify the expenditure to date.
105The amount spent by the Respondent for his expert is not determinative of what constitutes a reasonable amount for an expert for the Applicant. It is a consideration. He likewise retained an out of town expert and if one accepts the Applicant’s evidence, there are serious shortcomings in that report. His income has increased substantially between 2013 and 2014 and he certainly earns significantly more than she does. The suggestion that the Applicant is under-employed is best determined at trial.
106I accept that the Applicant does not have the financial means to pay for the cost of this expert report, especially in the amount proposed by her expert of choice. She has $8000 remaining from the money already advanced. I order the Respondent to make a further advance of $10,000 pursuant to Rule 24(12). In my view, that is a reasonable additional amount for a valuation report in these circumstances. If she wishes a more expensive report, then she can look to fund that from her RRSPs. In my view, a further $10,000 together with the $25,000 already advanced levels the playing field.
107I agree with the Applicant that the categorization of this payment shall be left to the trial judge who can assess whether it is to be labelled a disbursement or advance. This is consistent with the approach in Reynolds v. Reynolds, [2001] O.J. No. 4959 at paragraph 23 and Agresti v. Hatcher, [2004] O.J. No. 910 at paragraph 23.
CONCLUSION
108In summary, I conclude as follows:
The Applicant’s motion for a section 30 CLRA assessment is denied without prejudice to the Applicant renewing her motion at a future date with proper supporting affidavit evidence.
For the period 2006 – 2015, the Respondent shall provide the following information to the Applicant if it has not already been disclosed:
a. the date of every overnight business trip taken by the Respondent;
b. where the trip was taken to;
c. the purpose of the trip;
d. the amount expended for the Respondent’s travel, accommodation and meal expenses;
e. the names of any persons who accompanied him on any trip under (a) above; and,
f. the amount expended for that person(s) for travel, accommodation and meal expenses in respect of that trip.
Upon production of the information referred to in paragraph two above, the Applicant will promptly advise which, if any, trip she contends was for personal benefit and not a business expense.
Upon being so advised by the Applicant pursuant to paragraph three above, the Respondent shall produce to the Applicant those documents in his possession or that of his companies pertaining to the disputed trips to the extent they have not already been produced.
The Respondent shall provide to the Applicant a copy of the Hoare Dalton report.
The Respondent shall provide confirmation of the amounts owing on mortgages secured against real properties at 105 Fairlane Road, London, 319 Egerton St, London and the matrimonial home as at the date of marriage, date of separation and presently.
The Respondent shall pay to the Applicant $10,000 pursuant to Rule 24(12).
The categorization of the payment in paragraph seven above shall be determined by the trial judge.
If the parties cannot agree on costs of this motion, they may make written submissions not to exceed five pages in length, such submissions to be filed within 14 days of the date of these reasons.
“Justice R. Raikes”
The Honourable Mr. Justice Russell Raikes
Date: July 17, 2015
