Court File and Parties

COURT FILE NO.: FC-11-81 DATE: 2016-05-26 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Zahra Tajik, Applicant AND Shahpour Maharlouie, Respondent

BEFORE: Justice A. Doyle

COUNSEL: Kibondo Kilongozi, for the Applicant Philip W. Augustine, for the Respondent

HEARD: May 12, 2016

Endorsement

[1] The Respondent brings a motion for the following relief:

(i) an order that the Applicant’s pleadings be struck;

(ii) an order that the application be dismissed; or

(iii) an uncontested trial date and an order granting the Applicant the right to only file an updated financial statement and her net family property statement with the attached supporting documentation; and

(iv) costs.

[2] The Respondent submits that the Applicant failed to provide Court-ordered financial disclosure within the specified timeframe. Firstly, at the questioning held in September 2015, the Applicant gave undertakings to which she failed to provide answers within the specified time. Secondly, she further failed to comply with the consent order of Justice Hackland, requiring her to provide answers to the undertakings by February 7, 2016. Finally, the Applicant is also in default of the order for financial disclosure made at the first case conference in February 2011.

[3] The Applicant opposes the motion and wishes to proceed with a final determination of the issues of spousal support and division of property. She states that since the service of this motion, there has been substantial compliance with respect to disclosure. Furthermore, she has only recently received the respondent’s disclosure, which will allow her to obtain expert advice and complete her net family property statement.

[4] For reasons set out below, the Court orders this matter be added to the trial sittings to be heard in November 2016. A settlement conference must be set down by June 17, 2016. The parties are ordered to include the following documentation with their settlement conference briefs:

• updated financial statement (Form 13.1);
• recent paystubs;
• 2015 income tax return;
• 2015 notice of assessment (NOA);
• net family property (NFP) statement (Form 13B) with attached documentation corroborating all assets and liabilities; and
• any offers to settle as required by the Family Law Rules, O. Reg. 114/99 [FLR].

[5] By June 30, 2016, the Applicant is ordered to produce a current statement for her TD chequing account and savings account, the outstanding tax returns and Notices of Assessment and her post-separation financial transfers or asset transfers with supporting documents in respect of each transfer.

[6] To the extent that the Applicant has failed to provide psychiatric reports and a list of medications as ordered, the Court orders pursuant to Rule 1(8)(d) of the FLR that these documents may not be used at trial unless leave of the court is first sought and obtained.

[7] Any experts’ reports must be served and filed by August 30, 2016. A party who fails to do so will require leave of the Court to rely on the same at trial.

Background

[8] The parties met and were married in Turkey on January 22, 2004. After the marriage, the Applicant returned to Iran and the Respondent returned to Canada.

[9] In February 2005, the Applicant came to Canada to live with the Respondent.

[10] On November 15, 2009, the parties separated although there had been other separations prior to this final separation.

[11] There are no children of the marriage.

[12] The application was commenced on January 12, 2011 and on February 17, 2011 the parties attended a case conference before Master MacLeod.

[13] On that date, Master MacLeod ordered the following, on consent:

• that each party file a financial statement;
• that each party serve the other with an NFP statement (together with supporting documentation) in respect of all assets and liabilities;
• that each party serve on the other a list of all post-separation financial transfers or asset transfers along with supporting documentation; and
• that the ordered disclosure would be completed by April 15, 2011.

[14] A further case conference was scheduled for December 2, 2011. The Respondent was not available and therefore the case conference was adjourned.

[15] The next step in the proceeding was a settlement conference on July 22, 2014, at which time Justice Polowin placed the matter on the May 2015 trial sittings. At the Assignment Court held on April 24, 2015, the matter was adjourned to the September trial list.

[16] Questioning of the parties took place on September 16, 2015 where the Applicant gave certain undertakings.

[17] On September 17, 2015, Justice Roger removed the matter from the September trial list and added it to the January 2016 trial sittings.

[18] At the settlement conference held on January 7, 2016 before Justice Hackland, the parties agreed to the following consent order:

• the divorce would be severed;
• within 30 days, the Applicant would provide the answers to the undertakings from her questioning, a list of which was attached as a schedule to the order; and
• the matter was removed from the January 2016 trial sittings and would be set down for a future trial sitting after the trial scheduling endorsement form was completed and filed.

[19] The divorce order was granted by Justice Aitken on February 2, 2016.

[20] This motion was served on the Applicant on April 1, 2016.

[21] Following service of this motion, the Applicant’s lawyer sent an email to the Respondent’s lawyer indicating that he would be having surgery and would be away on sick leave until April 20, 2016, at which time he was to resume work and would address the outstanding issues.

[22] In his April 6, 2016 letter to the Respondent’s solicitor, the Applicant’s lawyer enclosed the following disclosure:

• Dr. Duong’s file;
• tax return information for 2006 to 2013;
• chequing account information as at the time of separation and Bank information for January 2016.

[23] In his letter of April 6, 2016, the Applicant’s lawyer also indicated that he would be sending an updated financial statement and “FNP” (sic) calculation. He provided the names of two witnesses, requested reports of the two refinancings of the matrimonial home along with corporate financial information for the year 2003.

[24] On April 15, 2016, the Respondent’s lawyer sent a letter summarizing the history of the correspondence regarding disclosure:

• Subsequent to Justice Hackland’s order of January 7, 2016, the Respondent’s lawyer sent a letter dated January 22, 2016 requesting answers to the undertakings;
• On January 28, 2016, the Applicant’s lawyer sent the Respondent’s lawyer’s assistant an email advising that he was on sick leave until February 20, 2016.
• The Respondent’s lawyer’s reply letter indicated that if the Applicant did not comply with the ordered disclosure, a motion would be launched;
• On March 7, 2016, the Respondent’s lawyer sent a letter reiterating the fact that the undertakings remained outstanding;
• On April 1, 2016 (after he was served with the motion that same date), the Applicant’s lawyer sent an email to the Respondent’s lawyer saying he was on sick leave until April 20 and would address the outstanding issues upon his return;
• On April 6, 2016, the Applicant’s lawyer sent a letter providing some answers to the undertakings.

[25] In this letter of April 15, 2016, the Respondent’s lawyer further indicated that the following answers to undertakings had not been provided:

• letters from psychiatrists;
• a current statement for the TD chequing account and a savings account;
• income tax returns and notices of assessment for 2006 to the present date;
• a list of medications taken for depression;
• whether her aunt Sherry will be a witness at the trial and, if so, an outline of her evidence;
• a signed NFP statement with accurate figures;
• an updated financial statement;
• documentation regarding the joint bank account.

[26] The Respondent’s lawyer also attached a schedule listing the outstanding disclosure from Master MacLeod’s order, as follows:

• NFP statement with supporting documents in respect of the Applicant’s assets and liabilities; and
• Applicant’s post-separation financial transfers or asset transfers with supporting documents in respect of each transfer.

[27] The Applicant’s lawyer also included the trial scheduling endorsement form in his April 15, 2016 letter, which provided as follows:

• the names of witnesses, along with those of their expert witnesses, namely Jean-Claude Desnoyers, who will complete a business valuation of the Respondent’s company, and R. Duong, who will speak to the Applicant’s miscarriage and mental health; and
• an explanation of a Facebook picture (namely, that it did not depict a common law partner but rather his co-tenant from Toronto while he was in school).

[28] On May 3, 2016, the Respondent’s lawyer provided the information and documentation pertaining to the refinancing of the matrimonial home which occurred on August 24, 2007 and October 21, 2011.

[29] On May 4, 2016, the Applicant’s lawyer requested further information regarding the refinancing including the following documents: discharge statements, trust ledger, the amount deposited into the respondent’s account, and the bank statements.

[30] A further letter dated May 5, 2016 was sent from the Applicant’s lawyer indicating that the refinancing documents were not complete and he would like more complete information or alternatively a consent allowing the Applicant to obtain the information.

[31] On May 5, 2016, the Applicant’s lawyer sent the following:

• 2005 statement of remuneration;
• 2011 NOA and tax return;
• 2012 NOA and tax return;
• 2013 NOA and tax return;
• 2014 NOA; and,
• 2015 NOA.

[32] He stated that the Applicant would provide consent to allow the Respondent to contact CRA directly if they required further information.

[33] On May 6, 2016, the Respondent’s lawyer sent his client’s corporate tax return for 6010644 Canada Inc. for 2003- 2004 tax year.

Law

[34] Failure to comply with Court orders can attract serious consequences for litigants. The FLRs set out a number of remedies available to litigants who face non-complying opposing parties.

[35] FLR Rule 1(8) sets out various orders available if a person fails to obey an order:

(8) If a person fails to obey an order in a case or a related case, the court may deal with the failure by making any order that it considers necessary for a just determination of the matter, including,

(a) an order for costs;

(b) an order dismissing a claim;

(c) an order striking out any application, answer, notice of motion, motion to change, response to motion to change, financial statement, affidavit, or any other document filed by a party;

(d) an order that all or part of a document that was required to be provided but was not, may not be used in the case;

(e) if the failure to obey was by a party, an order that the party is not entitled to any further order from the court unless the court orders otherwise;

(f) an order postponing the trial or any other step in the case; and

(g) on motion, a contempt order.

[36] FLR Rule 1(7.1) allows the Court to make an order striking pleadings at any time during a case:

(7.1) For greater certainty, a court may make an order under subrule (7.2), (8), (8.1) or (8.2) at any time during a case, and the power to make such an order,

(a) is in addition to any other power to make an order that these rules may specify in the circumstances; and

(b) exists unless these rules expressly provide otherwise.

[37] Further, under FLR Rule 1(8.4), the consequences of pleadings being struck are as follows:

(8.4) If an order is made striking out a party’s application, answer, motion to change or response to motion to change in a case, the following consequences apply unless a court orders otherwise:

1. The party is not entitled to any further notice of steps in the case, except as provided by subrule 25 (13) (service of order).

2. The party is not entitled to participate in the case in any way.

3. The court may deal with the case in the party’s absence.

4. A date may be set for an uncontested trial of the case.

[38] These rules are to be interpreted in accordance with the primary objective of the FLRs, as set out by rules 2(2)-(3), as follows:

(2) The primary objective of these rules is to enable the court to deal with cases justly;

(3) 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.

[39] In Grenier v. Grenier (2012), 26 R.F.L. (7th) 69 (S.C.), the husband failed to provide a life insurance policy as security for support pursuant to a court order made in 2003. In 2006, this requirement was restated along with required financial disclosure. On the wife’s application to strike the husband’s pleadings for his failure to provide the insurance policy and disclosure as ordered, Justice Rogers remarked, at para. 33: “The disclosure orders themselves are clear and understandable. The time allowed for production was reasonable and generous extensions were given. The overall amount of disclosure requested was not onerous.” The disclosure ordered included documents pertaining to: a numbered company, a series of transfers for a property, copies of bank and credit card statements and income tax returns.

[40] The Court examined the issues to be considered before striking pleadings in cases of financial non-disclosure, at para. 21:

A court being asked to strike pleadings looks to Rules 1(8), 13(6), 13(7), 14(23) and 19(10). The remedy of striking of pleadings has the most drastic impact for a party that is not in compliance with court orders and should only be imposed in the most egregious of circumstances. To determine if said sanction is appropriate in situations of non-disclosure, the court should consider the following issues:

1. What was the overall effort to complete disclosure relative to the undisclosed items and what ratio does the completed disclosure bear to the undisclosed items?

2. Are the missing pieces of disclosure relevant to significant issues in the file or are they about issues that were or have become minor? Does the mover need this disclosure to proceed and would a court be hampered in adjudicating without it?

3. Was there and is there a realistic possibility of obtaining this disclosure?

4. What is the cost of the disclosure relative to the overall quantum of money at risk?

5. Is the disclosure available to the seeker?

6. Given the advances in the information in the case, has the request for missing disclosure become over-reaching?

7. Were the orders (or order) concerning the disclosure sufficiently clear that the party ordered to provide the information would understand what was being sought?

8. Were the time-frames for obtaining the disclosure reasonable?

9. Did the seeker of the disclosure continue to pursue the disclosure and enforce the order(s)?

10. Were the disclosure orders (or order) so onerous that a party could not reasonably locate and disclose the volume of material requested?

11. Is there a lesser remedy that would suffice? Would it be reasonable to provide that information not disclosed could not be used at trial?

12. Has the seeker of disclosure discharged the onus of the burden of proof in the motion?

[41] The Ontario Court of Appeal dismissed the husband’s appeal from the motion judge’s decision to strike his pleadings (Grenier v. Grenier, 2012 ONCA 732, 26 R.F.L. (7th) 80), stating:

The motions judge did not err in exercising her discretion to strike the appellant's pleadings and order an uncontested trial. The appellant has failed to comply with disclosure orders since 2006. The motions judge considered whether some lesser remedy was appropriate. We can see no error in principle and the order was reasonable.

[42] In Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, at para. 13, Justice Benotto stated that financial disclosure is automatic. In this case, the husband had disobeyed three Court orders, namely an April 22, 2013 order which required disclosure to be provided within 20 days, another Court order requiring the same disclosure to be produced by March 31, 2014 and a subsequent Court order made on June 11, 2014 granting an extension to July 20, 2014. On September 24, 2014, the wife brought a motion to strike the husband’s pleadings. The motion was granted: Justice Vallee struck the pleadings for “persistent and ongoing failure to provide court ordered disclosure”. The Court of Appeal dismissed the appeal.

[43] As stated by Justice Douglas in Dumont v. Lucescu, 2015 ONSC 494 [Dumont], at para. 43: “It is trite to say that an order is not a suggestion and that compliance is not optional. Further, non-compliance must have consequences. Protection of the integrity of the administration of justice is at stake if a litigant wilfully disobeys a court order”.

[44] At para. 44 of Dumont, Justice Douglas refers to Kovachis v. Kovachis, 2013 ONCA 663, 367 D.L.R. (4th) 189, in which the Court of Appeal emphasized the well-established principle that a party’s pleading “should only be struck in exceptional circumstances where no other remedy would suffice.” In Kovachis, the Court of Appeal directed that “consideration ought to have been given to the importance or materiality of the items of disclosure [the party] had not produced” before striking the party’s pleading.

[45] In Dumont, the husband had been ordered on September 22, 2014 to produce credit card statements. The wife’s motion to strike his pleadings was dismissed as the Court found that, although the husband was in breach of the Court order, the information was not material to the case.

[46] In Xidis v. Xidis, 2012 ONSC 6931, 26 R.F.L. (7th) 82 [Xidis], the court struck pleadings where a party had failed to provide disclosure. The husband had failed to comply for over 2 years and the disclosure went “to the very heart of the issues to be tried” (para. 67).

[47] The Court stated that at para. 54 of Xidis:

Having reviewed the authorities, some of the factors the courts have considered in the exercise of the court’s discretion, on motions such as this, include:

(i) Whether the respondent's breach of the order(s) and/or the failure to comply with the Family Law Rules (including financial disclosure) is clear on the record;

(ii) Whether the respondent's breach of the order(s) and/or failure to comply was a deliberate and flagrant breach or failure to comply by the responding party;

(iii) The nature of the respondent's breach(s) and/or failure(s) to comply, in particular,

• the seriousness of the breach(s) or the importance of the failure(s) to comply with the issues to be determined in the proceeding,

• the number of breaches or failures to comply,

• the length of time the respondent has had to remedy the breach(s) or failure(s) to comply, and

• what steps and efforts, if any, the respondent has taken to remedy the breach(s) or attempts to comply;

(iv) The history of the proceeding;

(v) The conduct of both parties to the proceeding. This will also include any breach(s) or failure(s) to comply with the Family Law Rules by the applicant;

(vi) The consequences to the parties of making or not making the order requested; and

(vii) Any reasonable or rational explanation(s) offered by the responding party as to the responding party's inability to comply or why a breach(s) or failure(s) to comply occurred.

[48] In Hughes v. Hughes (2007), 85 O.R. (3d) 505 (S.C.), the Court remarked that the integrity of the administration of justice is at stake when a party willfully disobeys an order. In the course of the trial, Justice Quinn struck the respondent’s answer/claim for failure to obey an interim order which required him to maintain the wife as beneficiary of his life insurance policy.

[49] Justice McDermot in Varcoe v. Varcoe, 2014 ONSC 328, indicated that it is not a solution to re-order the party to comply with the order already made. The remedy is contempt or to strike pleadings pursuant to Rule 1(8).

Analysis

Master Macleod’s Order

[50] Master Macleod’s original disclosure order was made in 2011 and, from the record, there was no action on the litigation until 2014. During this 3 plus years hiatus, there is no evidence of correspondence or demands that would assist in determining what efforts were made to comply with the order.

[51] The Respondent indicates that the financial statement prepared and served by the Applicant is deficient and mathematically incorrect.

[52] The Respondent admits that an NFP statement had been provided with the Applicant’s settlement conference brief but not with the attached documents dealing with assets and liabilities.

[53] The Applicant’s lawyer indicates that he was waiting for the corporate tax returns so that he could ask their expert to value the company at the date of marriage and date of separation. The corporate tax returns of the Respondent were provided in May 2016.

[54] The Respondent indicates that trial dates were adjourned due to the Applicant’s lawyer’s health issues.

Justice Hackland’s Order

[55] Questioning took place in September 2015 and undertakings were made.

[56] Justice Hackland’s Order of January 2016 ordered that answers from the undertakings be provided within 30 days.

[57] The Applicant’s lawyer had medical issues and had two eye surgeries which he says interfered with obtaining the ordered disclosure.

[58] The primary objective of the FLRs is to deal with cases in a manner that is fair to all parties and that saves time and expense. Clearly, this matter has dragged on and there was a hiatus of a few years with no action by either party.

[59] The failure of the Applicant to comply with the order of Justice Hackland prompted this motion, resulting in serious and concrete actions to provide the answers to her undertakings.

[60] The motion also gave the Applicant an opportunity to address outstanding disclosure issues from the Respondent who has provided some of the outstanding disclosure after the motion was served.

[61] The Applicant brings her claims for relief and hence it is incumbent upon her to move the matter along. She provides a partial explanation as to some of the delay, i.e. her lawyer’s medical issues. However, the responsibility lies with her to gather those documents and provide them to her lawyer for him to send along.

[62] In this regard, the Court finds she has failed to comply with the Court order in accordance with the timeline set out therein. Substantial compliance was made only after the service of this motion.

[63] Under Rule 1(8)(d) of the FLRs, there are various options available to the court when a person fails to obey a Court order. To the extent that the applicant has failed to provide psychiatric reports and a list of medications, the Court orders that, pursuant to Rule 1(8)(d), these documents may not be used at the trial without leave of the court.

[64] With respect to the outstanding disclosure identified in the Respondent’s materials, the Court comments as follows:

• Letters from psychiatrists: none have been produced. The Court notes that psychiatric records and a list of medications would be important for the Applicant in her case if she is claiming spousal support. Given her failure to produce this disclosure since September 2015, if she now wishes to rely on the same at trial, she will need to obtain leave from the Court.
• A current statement for the TD chequing account and a savings account and post-separation transfers: These must be provided by June 30, 2016.
• Income tax returns and notices assessment for 2006 to the present date: 2014 and 2015 tax returns have not been provided and tax documents between 2006 and 2010 remain outstanding. The outstanding documents must be provided by June 30, 2016.
• List of medications taken for depression: As noted above, the Applicant has not answered this request and therefore the Applicant will not be able to rely on this evidence at trial without leave of the Court.
• Whether her aunt Sherry will be a witness at the trial and an outline of her evidence: This has been answered (see trial scheduling endorsement form where she is not listed as a witness).
• A signed NFP statement with accurate figures with attached proof: At the settlement conference, a signed NFP statement was submitted but the required documentation was not attached. This item is still outstanding as the Applicant was waiting for the corporate tax return so her expert could determine values. The corporate tax return has now been received from the Respondent. This item must be included in the settlement conference brief.
• Updated financial statement: – The Applicant produced updated financial statements on April 12 2011, July 25, 2015 and April 29, 2016, even though the Respondent complains that they are not detailed enough.
• Documentation regarding the joint bank account: The Respondent admits that he has access to this documentation as he is on title of this account.

[65] The other substantial and important information was produced although tardy and only after the Applicant was served with this motion.

[66] Therefore, the majority of the substantive disclosure has been provided. Most of the answers were provided after the motion was served. This is improper and inappropriate.

Summary

[67] The Court is dismissing the motion requesting an order striking the pleadings. A review of the relevant cases shows that on a motion to strike for non-disclosure, the Court is essentially required to review the following: the length of time that the party has not been in compliance with the Court order, what remains outstanding, when disclosure was provided and the materiality of the disclosure.

[68] From 2011 and 2014, there was a long hiatus in this litigation and no evidence of a demand by either party until after Justice Hackland’s January 2016 order for compliance with Master McLeod’s order.

[69] The January 2016 order confirmed that the Applicant was required to provide answers to undertakings made in September 2015. While she failed to provide answers in a timely fashion, she has recently substantially complied with the January 2016 order.

[70] The Applicant’s lawyer indeed had some medical issues and that can explain, in part, the Applicant’s delay. However the Court notes that upon service of the motion, despite the claim that the Applicant’s lawyer was on “sick leave” until April 20th, substantial disclosure was nevertheless provided.

[71] Striking pleadings is a draconian remedy and as stated by the Court of Appeal, other remedies should be considered before resorting to striking pleadings. Given the substantial compliance, it is time to move this matter along and the Court is therefore placing this on the next trial sittings to be held in November 2016.

[72] The Respondent brought this motion at his own expense because the Applicant was non-compliant. After being served with the motion, despite the fact she says her counsel had medical issues, she was able to gather a substantial amount of documentation to answer to her undertakings and also provided an updated financial statement. This motion should not have been necessary to call the Applicant into action.

[73] Therefore, the Respondent is entitled to costs of this motion. If the parties are unable to agree on the issue of costs, the Respondent may provide his two-page written submissions along with his bill of costs by June 15, 2016 and the Applicant may respond with her two-page written submissions by June 22, 2016.

Madam Justice A. Doyle Date: 2016-05-26