Court File and Parties

Court File No.: FC-14-787 Date: 2016/08/10 Superior Court of Justice - Ontario

Re: Karen Bridge, Applicant And: Richard Laurence, Respondent

Before: Madam Justice J. Mackinnon

Counsel: Andrea R. Camacho, for the Applicant Edward C. Conway, for the Respondent

Heard: June 22, 2016

Endorsement

Introduction

[1] The Applicant brings this motion to strike evidence, preliminary to my hearing her substantive motions for interim spousal support and disclosure from Trilly’s Systems Inc. The disclosure is to obtain a valuation of Trilly’s at the date of separation. The strike motion seeks to remove evidence protected by mediation privilege and settlement privilege, and evidence that does not comply with the Family Law Rules, O. Reg. 114/99 (the “FLR”).

[2] The parties, married for 30 years, separated in October 2011. They are now 66 and 60 years old respectively. Together, they are the parents of three adult children. In fall 2011, they discussed and agreed to take certain steps, and to enter formal mediation. The Respondent alleges that an agreement was reached between the spouses and then reduced to writing in an email exchange. He submits that the parties agreed to a mutual waiver of spousal support and to divide their Trilly’s shares equally between themselves. This would have meant that about 300 shares would be transferred from him to the Applicant. His position is that he can rely on what may have been mediation-privileged or settlement-privileged communications to prove the agreement reached.

[3] The Applicant denies that any agreement was reached and claims that requirements of the Family Law Act R.S.O. 1990, c. F.3 (“FLA”) were unmet. She relies on s. 55(1) of the FLA which sets out the formal requirements for an enforceable separation agreement:

55. (1) A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed.

[4] The Applicant submits that what the Respondent relies on as proof of an agreement cannot legally establish an enforceable agreement. If there was an agreement, which is not admitted, she says it was oral. If it was made via an email exchange (also denied), then it is not signed or witnessed and was made without financial disclosure or independent legal advice. With respect to the alleged share transfer agreement to transfer some 300 shares to her, she maintains that essential terms were never discussed. These include a transfer price, whether she would receive common or preferred shares, what rights would attach to the shares (such as whether dividends would be paid on them), and what role she might then play with respect to running the company.

[5] The Respondent further submits that this strike motion should be dismissed as premature. He says the judge hearing the substantive motions should make the determinations which are now sought by the Applicant.

[6] Although I will also be that motion judge, the Respondent submits that proceeding as he suggests accords with policy to discourage unnecessary interlocutory motions. Additionally, he says that I will be in a better position to judge these matters in the context of the substantive motions with their more complete records and argument.

[7] The Applicant argues that this request is properly brought before the substantive motions because the Respondent has delivered a 55 page affidavit, plus nine volumes of Exhibits containing more than 200 Exhibits. She says his materials are unwieldy and difficult to reply to. The Exhibit Books are not organized in the same order as the affidavit. For example, the first Exhibit referred to in the Respondent’s affidavit is at tab 164 in volume 5. The second Exhibit referred to is at tab 192, in volume 6. The third Exhibit referred to is at tab 90 in volume 1.

[8] Additionally, the Respondent’s affidavit is replete with footnote references back to a prior affidavit for the purpose of identifying and producing Exhibits. That affidavit is not in the Continuing Record by order of the Master. The Applicant does have the affidavit, but submits she should not have to cross reference back to another affidavit as required by these many footnotes.

[9] In terms of non-compliance with the FLR, the Applicant asks the Court to strike:

1. Documents attached to the Respondent’s affidavit that are not referred to in the affidavit;
2. Parts of paragraphs that refer to Exhibits that the Respondent has already removed, in advance of this motion;
3. Exhibits that are attached in duplicate, including two of the Applicant’s documents;
4. Exhibits supported by only a footnote reference to his former affidavit, which was served but not filed in accordance with the Master’s direction;
5. An expert report.

Rulings

(a) Privileged Communications

[10] The motion was argued in terms of whether mediation and settlement privileged communications were admissible to prove that an agreement was reached through their exchange. The short answer is yes. But this presupposes that the existence of the alleged agreement is an issue to be determined by the court to which the evidence is proffered. For reasons that follow, I have concluded that the existence or not of the alleged agreement is not an issue that is properly determined on the upcoming substantive motions.

[11] During the hearing of this motion, Respondent’s Counsel acknowledged that it will be for the trial judge to determine whether an agreement has been reached and if so, whether it is enforceable. His Counsel also acknowledged that disclosure necessary to the valuation of Trilly’s would be made, as ordered by the Court. There will be submissions as to the necessary terms of a confidentiality agreement to be signed in relation to that disclosure.

[12] Given these admissions and the actual issues I will need to determine at the substantive motions, I have decided to exercise my jurisdiction under FLR 1 and 2.

[13] FLR 1(7.2) states:

(7.2) For the purposes of promoting the primary objective of these rules as required under subrules 2 (4) and, particularly, (5), the court may make orders giving such directions or imposing such conditions respecting procedural matters as are just, including an order,

(d) that a statement setting out what material facts are not in dispute be filed within a specified time (in which case the facts are deemed to be established unless a judge orders otherwise);

(n) identifying the issues to be decided at a particular hearing

[14] FLR 2(2) – 2(4) states:

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

2(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.

2(4) The court is required to apply these rules to promote the primary objective, and parties and their lawyers are required to help the court to promote the primary objective.

[15] Case law applicable to interim support motions has established that the order made will typically take effect from the date of the application: Walsh v. Walsh, 69 O.R. (3d) 577; Knowles v. Lindstrom, 2015 ONSC 1408, 250 A.C.W.S. (3d) 94.

[16] It is also established that interim support motions are not intended to involve a detailed examination of whether a claimant has standing to claim support or is entitled to support. In Bater v. Bater concerning an interim support claim despite a domestic contract where spousal support is, or may have been waived, Justice Hackland at para 7 quoted with approval from Robertson v. Hotte 21 R.F.L. (4th) 452:

7. …Because of the nature of the proceedings the court will not conduct an in-depth analysis of the standing and entitlement issues. If the Applicant is able to make out a good, arguable case for standing and entitlement the court will assess support on the basis of the parties' needs and means.

[17] Hackland J. also went on to say at para. 8:

I think there is ambiguity in this marriage contract, which may require a trial judge in his or her discretion to hear viva voce evidence and assess credibility. The concept of an "inability to obtain reasonable gainful employment ..." seems to raise a triable issue as does the contested issue of whether the husband in fact supported the wife during the marriage, thereby possibly waiving or affecting the interpretation of the support provisions of the marriage contract. In any event, an interim spousal support application is not an appropriate time to rule on the enforceability of a 16-year-old agreement, except in a very clear case, which this is not, see Patan v. Patan, [2004] O.J. No. 5365, 2004 CarswellOnt 5594 (S.C.J.). Evaluating the husband's allegations against the wife's position as expressed in paragraphs 53 and 54 of her first affidavit and paragraphs 12 and 13 of her second affidavit, I do not accept the husband's position that there is nothing more to the wife's argument than that there is a substantial disparity in income after a lengthy marriage.

[18] Justice Penny put it this way in Knowles v. Lindstrom, 2015 ONSC 1408, 57 R.F.L. (7th) 402 at para. 8:

It is well-established that interim support motions are not intended to involve a detailed examination of the merits of the case. Nor is the court required to determine the extent to which either party suffered economic advantage or disadvantage as a result of the relationship or its breakdown. These tasks are for the trial judge. Orders for interim support are based on a triable or prima facie case. An order for interim support is in the nature of a "holding order" for the purpose of maintaining the accustomed lifestyle pending trial, Jarzebinski v. Jarzebinski, 2004 CarswellOnt 4600 (ONSC) at para. 36; Damaschin-Zamfirescu v. Damaschin-Zamfirescu, 2012 ONSC 6689, 2012 CarswellOnt 14841 (ONSC) at para.24.

[19] In Knowles, the Respondent disputed that the parties had cohabited long enough for the Applicant to qualify as a spouse. Penny J. held at para. 13:

The respondent contests the applicant's claim that she was a spouse. He maintains that there was no continuous period of cohabitation for three years. Whatever details of the relationship the respondent may wish to pursue at trial, in my view the applicant has made out a prima facie case that the parties cohabited from 2002 to 2012 and that she was a spouse within the meaning of s. 29 of the FLA.

The Justice noted that virtually all of the facts with respect to the Applicant’s need or entitlement to compensatory support were disputed, but at para. 22 he found that, “for interim support purposes, there is at least a prima facie case for some compensatory element to support.”

[20] Prima facie is a well-known Latin phrase meaning sufficient to establish a fact or raise a presumption unless disproved or rebutted. A prima facie case is established if a party produces enough evidence to allow the trier of fact to infer the fact in issue and rule in the party’s favor (Black’s Law Dictionary, 9th ed, sub verbo “prima facie case”).

[21] Regarding disclosure required for the business valuation, on the basis of these authorities on the return of the substantive motions, neither the court nor the parties need go through all of the extensive evidence that will be martialed at trial in support of or against the existence of the alleged separation agreement. To obtain orders for disclosure, the Applicant on the motion must demonstrate that she has a prima facie case that no enforceable agreement was reached. The evidence and submissions of the parties should focus on that issue at this stage of the proceedings. If the trial Judge decides that there is no enforceable agreement, he or she will require a business valuation to determine the parties’ net family properties and to calculate any equalization payment owing. The business valuation must be available for use at trial in this event. This means that the necessary foundational disclosure must be made, and determination of this issue at the interim motion stage does not require the court to determine whether there is an enforceable separation agreement between the parties.

[22] Accordingly, the issue on the substantive motions will be whether the Applicant has made a prima facie case that there is no enforceable waiver of spousal support or agreement for the share transfer as alleged by the Respondent. For this reason, I provide the Respondent a period of 21 days to either admit that the Applicant has made out a prima facie case that there is no enforceable separation agreement, or if he does not make the admission, to confine his evidence and oral submissions on the return of the substantive motions to that issue.

[23] In either event, the necessary removals and redactions from his motion materials shall be made forthwith.

[24] Documents that may have had mediation or settlement privilege may be used to address whether the Applicant has a prima facie case that there was no agreement. Other documents protected by mediation or settlement privilege shall be removed.

[25] The Respondent may state his position that an agreement was reached and may also provide a brief summary of what he relies on as supporting the agreement for context, but not to the extent or with a view to proving an agreement.

[26] The materials that the Respondent has included to show post agreement conduct consistent with the existence of an agreement would not be material to the issue of whether the Applicant has established a prima facie case in relation to either issue in the substantive motions, and shall be removed.

[27] The Respondent says Trilly’s issued a $1 million dividend cheque to each party as one half owner of the company. The Applicant returned her cheque, in the belief that she was not a one half owner of Trilly’s and was not entitled to the cheque. Both cheques are now held in storage by the company. The Respondent wished to proffer this as evidence of lack of need on the substantive motion for spousal support. He can do that without definitively proving the alleged share transfer agreement. The cheque’s existence may also be useful as to the potential prejudice that may or may not arise from a temporary support order.

[28] On the motion for temporary support, the Applicant will need to establish a prima facie case of entitlement to spousal support. In the context of the present issue, that means she would need to demonstrate a prima facie case that the alleged agreement does not exist or is not enforceable under s. 55(1) of the FLA. If she does this, then the significance of the possibility that after trial there may be a finding that she did waive spousal support relates to the potential prejudice to the Respondent from any temporary spousal support order.

[29] The Applicant issued her application in April 2014. In addition to seeking spousal support from that day forward, her motion asks for temporary spousal support retroactive to the date of separation two and a half years earlier. The considerations to achieve a retroactive award are different and speaking generally, are more onerous on the Applicant, than those with respect to a prospective order. Generally, retroactive support claims are reserved for trial. The possibility for prejudice to the Respondent in this case, arising from a retroactive award payable before trial in the event that he succeeds at trial on the spousal support waiver makes it more likely that the standard commencement date would apply on this interim support motion.

[30] Based on these considerations I make three additional orders. The Applicant shall advise the Respondent within 21 days whether she will agree to defer to trial the claim for spousal support retroactive to a date before the issuance of her application. If she does so, then the Applicant shall also remove those portions of her materials that refer only to the retroactive claim. In this event, the Respondent shall also remove responding portions from his affidavit.

[31] Second, I direct both parties, with the assistance of Counsel, to endeavour to enter into a confidential, without prejudice agreement, that will not be made known to me or the trial judge as to how the dividend cheque payable to the Applicant and held by Trilly’s may be used to address the issue of potential prejudice to the Respondent arising from a temporary order of spousal support, should the trial judge find in his favour that there is an agreement for the share transfer and mutual waiver of spousal support.

[32] Third, to focus the substantive motions on the issues for determination at those motions, the Respondent shall restrict his motion materials to what is required to have the motion court determine whether or not the Applicant has a prima facie case that no agreement was made. As it is, his materials address whether or not an agreement was made, which is an issue that will only be decided at trial.

[33] I expect Counsel to comply with these orders within 21 days. In case there are any unresolved disagreements that cannot be dealt with on the return of the interim support motion, Counsel may seek an appointment with the first available of myself, Justice MacLeod or Master Champagne.

(b) Rule Non-Compliance

[34] I agree that parts of the Respondent’s material are not rule compliant. See Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 4.06(1)–(3). I order as follows:

1. Any Exhibits not referred to in his affidavit contained in the Continuing Record shall be removed from the Exhibit Books. This includes documents that are only identified by a reference back to the prior affidavit which was served but not filed. The court does not have the prior affidavit and Counsel should not have to refer back to a prior affidavit to determine whether an Exhibit is properly identified and what is said about it.
2. The reference in para. 146 to Exhibit #24 shall be corrected to refer to the correct Exhibit, #7. The portion of para. 150 referring to Exhibit 154 shall be removed because that Exhibit has been removed.
3. Exhibits which are duplicated under another Exhibit number should be removed.
4. Exhibit 55 shall be removed.
5. Pleading documents of the Applicant that are already in the Continuing Record shall be removed.
6. Tabs for Exhibits that have been removed voluntarily or by order shall also be removed. The new table of contents to the Exhibit Books should note any gaps in the numbering system by stating “tab has been removed”.
7. The index at the back of Volume 4 of the Continuing Record should be removed. If the Respondent wishes to provide a new index with reference to his amended record, he may do so.
8. Exhibit #227 includes part of an affidavit by an expert retained by the Respondent in a separate action. The jurat is not included. That omission alone renders the report inadmissible. The report sets out the author’s opinion that Mr. Pittman was in a conflict of interest and did not comply with his professional code of conduct during the time he was retained by the Applicant to value Trilly’s. Those issues are not before this Court. The Respondent says the report is necessary to show why the terms he proposes for the confidentiality agreement are necessary. I disagree. If he wishes the Respondent may deliver an expert report in proper evidentiary form that focuses on the confidentiality requirements deemed necessary to protect Trilly’s.
9. The Applicant shall also remove from her materials anything that responds to something the Respondent has been ordered to remove.
10. Permission is given to the Respondent to properly identify and include Exhibits ordered removed under 1 above provided the inclusion of the properly marked and identified Exhibit is also in compliance with my other rulings in this endorsement.

Conclusion

[35] I agree that this type of order preliminary to hearing the substantive motion is infrequent. Here, so much of the material is directed at proving an alleged agreement despite the fact that the existence or enforceability of any such agreement will not be decided at the motion, rather at trial. Proportionality for the parties and the court, including other litigants waiting their day in an over-busy court, requires that the motion material and oral submissions focus on issues essential to the motion stage of the proceeding and not on issues that can and will only be determined at trial.

[36] This ruling is consistent with 876502 Ontario Inc. et al. v. I.F. Propco Holdings (Ontario) 10 Ltd., 37 O.R. (3d) 70 where the court holds that material will only be struck where it is plain and obvious that including it could procure no legitimate advantage to the party advancing it. In my view, including extensive materials on issues which are not going to be determined at the motion rather only at trial, falls within this description. I would also note that much has changed in the legal landscape in the almost two decades since Propco was decided. Access to justice, proportionality and the over-busy Family Court in Ontario have all emerged as significant issues to be considered at every step in every case.

[37] Counsel are directed to provide the Trial office with dates in October when they are both available for the one day interim spousal support motion.

[38] Costs of this motion are reserved to the conclusion of both substantive motions. I will then address the costs of all three motions.

[39] If it is convenient for Counsel to schedule the second substantive motion now, they should advise the Trial office of the expected duration of that motion and when they are both available to have it heard.

[40] Further, if Counsel wish to provide a timetable to trial readiness and an estimate of the time required for the trial, I will consider scheduling the case for trial now. If not, I will require such a timetable and estimate of time after I have determined both of the substantive motions.

Madam Justice J. Mackinnon Date: 2016/08/10