Court File and Parties

Court File No.: FS-08-7251 Bankruptcy Court File No.: 35-2090326 Date: 2016-09-23 Superior Court of Justice – Ontario

Between: Anna Maria Fiorito, Applicant And: Jefferson Ross Wiggins, Respondent

Counsel: Luigi DiPierdomenico, for the Applicant Brian Ludmer, for the Respondent Harry Van Bavel, for the Trustee in Bankruptcy

Heard: August 5, 2016

Before: Hebner J.

Ruling on Motion

[1] Both parties brought motions before the court that were heard on August 5, 2016. The motions can be summarized as follows:

1. The applicant brought a motion under rule 25(19) of the Family Law Rules, O. Reg. 114/99, for an order changing an existing child support order on the basis of (b) mistake, and (c) a matter the court did not decide. I found that this motion was properly brought in these proceedings. I ordered that it be scheduled before me for one half-day and that a case conference be held before Pomerance J., with Mr. Ludmer attending by phone. Any procedural issues shall be dealt with by conference call with me.
2. The applicant also brought a motion for a refraining order under section 35 of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31. The first notice to the applicant of her licence suspension was June 10, 2016, and the deadline to obtain a refraining order was July 10, 2016. As such, I found I had no jurisdiction to grant the order requested by the applicant and dismissed the motion.
3. The respondent brought a motion for an order annulling the applicant’s bankruptcy. In the alternative, the respondent requested an order under section 69.4 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”), lifting the stay of proceedings by declaring that sections 69 to 69.31 of the “BIA” no longer operate in respect of the respondent and authorizing the respondent to continue his enforcement of an outstanding costs award in the amount of $200,000 against the applicant’s registered retirement savings plans and other investment assets. I heard argument on this motion and reserved my decision.

[2] My ruling on the motion set out in number 3, above, is set out herein.

Background Facts

[3] For a comprehensive review of the extensive litigation history between these two parties, regard should be had to my decision on the access review dated June 14, 2016 (referred to herein): A.F. v. J.W., 2016 ONSC 3678. For the purpose of this decision, it is necessary to set out a few salient points.

[4] The applicant, Anna Fiorito, and the respondent, Jefferson Wiggins, were married on May 23, 1998. They have three children as follows:

a) Juliana Wiggins (“Juliana”), born August 27, 2001. Juliana is currently 15 years of age. b) Angelina Wiggins (“Angie”), born October 3, 2002. Angelina is currently 13 years of age. c) Catarina Wiggins (“Cat”), born October 2, 2003. Cat is currently 12 years of age.

[5] The parties separated on February 8, 2008. After more than two years of litigation immediately following the parties’ separation, they entered into final minutes of settlement dated October 19, 2010 on the issues of custody and access to their children. The settlement included the following terms: (1) that the applicant (Ms. Fiorito) have custody of the children; and (2) that the respondent (Mr. Wiggins) have substantial access equivalent to 40 percent of the residential time. The access contemplated by the minutes of settlement never took place.

Contempt Motion

[6] Although the minutes of settlement were never encapsulated into a final order, there were two earlier interim orders for access made: an order of Thomas J. dated October 24, 2008 and an order of Quinn J. dated March 5, 2010. Mr. Wiggins brought a motion for contempt alleging that Ms. Fiorito had refused to comply with those access orders. At that time, Mr. Wiggins was not receiving any access at all. That motion, and the trial of the custody/access issues, was heard by Harper J. over 22 days commencing March 21, 2011 and ending May 12, 2011. On June 27, 2011, Harper J. released his decision: see F. (A.M.) v. W. (J.R.), 2011 ONSC 1868, 6 R.F.L. (7th) 282. Harper J. found and ordered the following:

1. Ms. Fiorito was in contempt of the order of Thomas J. dated October 24, 2008 and the order of Quinn J. dated March 5, 2010.
2. The children’s expressed fear and dislike of Mr. Wiggins was rooted in Ms. Fiorito’s fear and dislike of Mr. Wiggins.
3. All three children were in need of protection in accordance with the meaning of that term as set out in the Child and Family Services Act, R.S.O. 1990, c. C.11.
4. Ms. Fiorito was sentenced to 26 months probation. The terms of the probation required Ms. Fiorito to comply with all of the terms of the custody and access order made by Harper J. They included an order that Mr. Wiggins was to have access, on a graduated basis, every Tuesday evening and on alternating weekends.
5. The custody and access order was to be the subject of a review before Harper J. six months thereafter.

The 2012 – 2013 Review

[7] The review of the custody and access order took place before Harper J. over 23 days commencing July 3, 2012 and ending April 3, 2013. Judgment was released on June 28, 2013: see F (A.) v. W. (J.), 2013 ONSC 4272.

[8] Harper J. found that access was taking place in accordance with the schedule ordered in 2011. However, the children’s behaviour during access was completely unsatisfactory. They refused to interact with their father. They were rude and disrespectful to Mr. Wiggins and his wife, Sarah Wiggins. At times, they were downright cruel. At para. 136, Harper J. stated, “I find that the children can no longer be in the custody of the mother. She has not been able to remove the children from the harm and future risk of harm of emotional abuse.” He ordered the following:

1. Mr. Wiggins shall have custody of all three children, with the custody change to take place no later than July 5, 2013.
2. Ms. Fiorito shall have access to the children during the therapy sessions with Dr. Ricciardi only.
3. Ms. Fiorito will have to bring a motion to change in order to obtain increased access and, upon such a motion, will have to demonstrate that she can both act and articulate to the children in a manner that promotes the ability of the children to have a loving relationship with both of their parents.

The Costs Award

[9] Harper J. ordered that Ms. Fiorito pay to Mr. Wiggins costs in the amount of $400,000 for the 2011 and 2013 proceedings.

The Court of Appeal Decision

[10] Ms. Fiorito appealed from the orders of Harper J. dated June 27, 2011 and June 28, 2013 to the Ontario Court of Appeal. The appeal was heard October 1, 2015, and judgment was released October 30, 2015: see Fiorito v. Wiggins, 2015 ONCA 729, 69 R.F.L. (7th) 5. The Court of Appeal found that there was no order outstanding in respect of which Harper J. could find Ms. Fiorito in contempt and, accordingly, set aside the finding of contempt and imposition of sentence. The Court of Appeal ordered that a review of access arrangements was to be held before a judge of the Superior Court of Justice in Windsor no later than February 15, 2016. That review was heard by me over eight days between February 1 and February 25, 2016. My decision was released on June 14, 2016.

[11] The Court of Appeal reduced the costs payable by Ms. Fiorito to Mr. Wiggins from $400,000 to $200,000, inclusive of fees, disbursements and taxes.

The January 22, 2016 Motions

[12] After the date was set for the commencement of the access review hearing, the respondent brought a motion returnable January 22, 2016. The nature of that motion, and my disposition of that motion, is illustrated in my endorsement of that day as follows:

The 2nd motion was for a number of orders, principally to ensure payment of the costs ordered by the Ontario Court of Appeal ($200,000). The respondent seeks security for costs and payment as a condition of the access review proceeding on February 1, 2016. I am not prepared to order that – the review must proceed without conditions. I am prepared to make a temporary order today (the terms of which are on consent) and hear further argument on a date to be determined following the access review hearing. The temporary order is:

a) The applicant shall produce to the respondent copies of all bank and investment statements, personal and corporate (Anna Maria Physiotherapy Professional Corp.); b) The applicant shall produce to the respondent copies of financial statements and accounting records for the corporation for 2013, 2014 and 2015; c) Production shall be done by February 19, 2016; d) The respondent shall examine, by way of written interrogatories, the applicant on her finances with the interrogatories to be served by January 29, 2016; answers by February 19, 2016; follow-up questions by March 4, 2016 and answers to any follow-ups within 30 days; e) Pending the return of the motion the applicant is restrained from disposing of her RRSPs at TD Canada Trust and Fidelity & Nationwide and the applicant and the corporation are restrained from disposing or dissipating assets outside of the normal course of business.

Costs reserved to the return of the matter.

[13] The following evidence was filed by Ms. Fiorito prior to the motion:

1. An affidavit of Lisa Geer, a law clerk employed by Ms. Fiorito’s then lawyer, Donna Wowk, sworn January 6, 2016. At paragraph 20 of that affidavit she said, “The applicant remains prepared to discuss payment of the costs award with the respondent and will provide a financial statement to him voluntarily.”
2. An affidavit of Ms. Fiorito sworn January 19, 2016. At paragraph 47 of that affidavit she said, “I have every intention of paying the respondent the costs that he was awarded and I have no intent of involving the children, directly or indirectly, in our litigation.”
3. An affidavit of Ms. Fiorito sworn January 21, 2016. At paragraph 12 of that affidavit she said, “at paragraph 13 of Ms. Edirissa’s affidavit she alleges I maliciously intend to file for bankruptcy after the review hearing is finished to thwart the respondent’s claim. This is not true.”

The February 9, 2016 Motion

[14] During the course of the access review hearing, Mr. Wiggins brought a motion on notice, in writing, requesting assistance in enforcing the costs award against the financial institutions at which Mr. Fiorito has registered assets. The comment was made on January 22, 2016, by either Ms. Wowk or myself, that there was nothing preventing Mr. Wiggins from issuing garnishments or taking any other steps necessary to enforce the costs award. Mr. Wiggins filed affidavit evidence indicating that he was attempting to take those steps but the garnishment process could not be completed until the account owner, Ms. Fiorito, instructed the financial institutions to sell the equities involved and convert the assets to cash. Essentially, Mr. Wiggins was requesting an order that he be entitled to communicate directly with the financial institutions and provide those instructions.

[15] Ms. Fiorito provided a responding affidavit requesting that the motion be dismissed. She took the position that funds in an RRSP cannot be garnished as they are in the nature of a trust.

[16] The motion was never dealt with. Ms. Fiorito made an assignment in bankruptcy on February 22, 2016.

Ms. Fiorito’s Bankruptcy

[17] The assignment was made during the course of the review hearing before me and prior to the hearing of the enforcement of costs issues pursuant to my endorsement of January 22, 2016. In her statement of affairs, Ms. Fiorito listed the following as exempt assets:

Fidelity IRA – $42,000 Fidelity IRA – $43,000 Nationwide 403B – $6,600 TD RRSP – $62,000 IPC RRSP – $142,000

The total of the above claimed exempt assets is $295,600.

[18] The following additional information can be gleaned from the statement of affairs:

a) Ms. Wiggins claims to own virtually no other assets. She has included her home at an estimated value of $275,000 against which there are mortgages totaling $275,000. She has included her corporate shares for her physiotherapy business at $1. b) In her list of liabilities, Ms. Fiorito has included Mr. Wiggins’ costs award plus interest at $214,021.92. c) In a financial statement sworn January 19, 2016, Ms. Fiorito has claimed a personal debt to her mother, Carmelina Fiorito, in the amount of $150,000. This debt is not included in her statement of affairs. d) Insofar as the balance of the debt is concerned, it appears as though Ms. Fiorito has increased her debt somewhat between January 19, 2016 (the date of the last financial statement Ms. Fiorito swore before making her assignment in bankruptcy) and the date of her assignment. When Mr. Wiggins’s costs award and the claimed debt to Carmelina Fiorito are taken out of the equation, the total debt claimed in the statement of affairs is $516,910. The total debt claimed on the January 19, 2016 financial statement was $475,718. The increase in debt over that one month period is $41,192. There was no explanation provided by Ms. Fiorito for the increase.

[19] The result of Ms. Fiorito’s assignment in bankruptcy includes the following:

1. Mr. Wiggins is not entitled to continue in his attempts to enforce the costs award (section 69.3(1) of the Bankruptcy and Insolvency Act).
2. On Ms. Fiorito’s discharge, Ms. Fiorito will be discharged from Mr. Wiggins debt (section 178(1) of the Bankruptcy and Insolvency Act). In effect, the debt will disappear.
3. Ms. Fiorito will be entitled to keep her registered assets without having to use those assets to pay any of her creditors, including Mr. Wiggins (section 67(1)(b.3) of the Bankruptcy and Insolvency Act).

The Parties’ Positions

[20] The position of the respondent can be summarized as follows:

1. The applicant misled the court and the respondent in her affidavit evidence filed, particularly in her sworn evidence that she had every intention to pay the costs owing to the respondent and that she had no intention of making an assignment in bankruptcy.
2. It would be unconscionable for Mr. Wiggins not to receive the costs the Court of Appeal ordered Ms. Fiorito to pay, given what Mr. Wiggins went through between 2008 and 2013 in an attempt to have a relationship with his three children (all of which is summarized in the two decisions of Harper J. and in my decision on the access review).
3. An order ought to be made annulling Ms. Fiorito’s bankruptcy.
4. In the alternative, an order ought to be made lifting the stay of proceedings by declaring that sections 69 to 69.31 of the Bankruptcy and Insolvency Act no longer operate in respect of Mr. Wiggins and authorizing Mr. Wiggins to continue with his enforcement of the costs award.
5. Mr. Wiggins ought to be entitled to continue to enforce the costs award against the assets that were the subject of my order dated January 22, 2016 (the holding order) and against similar registered plans that are exempt assets in the bankruptcy. In doing so, the balance of Ms. Fiorito’s creditors would not be prejudiced.

[21] The position of the applicant can be summarized as follows:

1. Costs awards arising out of custody and access matters are not protected under the Bankruptcy and Insolvency Act. Accordingly, Mr. Wiggins’s costs award is not protected. Only costs incurred in enforcing support are protected.
2. In July 2008, the Bankruptcy and Insolvency Act was amended to protect pensions and RRSPs.
3. My January 22, 2016 order gave no proprietary or trust-like interest to Mr. Wiggins in any of Ms. Fiorito’s assets.
4. Given the foregoing, Mr. Wiggins is limited in his claim to assets that are not protected and should deal with the trustee in bankruptcy.
5. Ms. Fiorito did not attempt to mislead the court and/or Mr. Wiggins.
6. Ms. Fiorito has exercised her lawful right to go bankrupt.

Analysis

[22] Section 69.4 of the Bankruptcy and Insolvency Act reads as follows:

69.4 A creditor who is affected by the operation of sections 69 to 69.31 or any other person affected by the operation of section 69.31 may apply to the court for a declaration that those sections no longer operate in respect of that creditor or person, and the court may make such a declaration, subjected to any qualifications that the court considers proper, if it is satisfied

(a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or (b) that it is equitable on other grounds to make such a declaration.

[23] Thus, the stay of enforcement or the stay of proceedings can be lifted in one of two cases: (1) when a creditor or other person is likely to be materially prejudiced by the continuous operation of section 69.3; or (2) where it is equitable on other grounds.

[24] In the case of Schreyer v. Schreyer, 2011 SCC 35, [2011] 2 S.C.R. 605, LeBel J. dealt with a similar issue. The issue arose in the province of Manitoba, which has an equalization of property scheme similar to the Ontario equalization of property scheme. In that particular case, the property at issue was a family farm. The family farm was exempt from seizure by creditors under Manitoba’s provincial legislation. At paras. 31 and 32, LeBel J. said the following:

Under [Manitoba’s legislation] the Schreyers’ family farm was exempt from execution by creditors. But the appellant, as a spouse, would have been entitled to pursue the enforcement of her equalization claim against the exempt property, as we shall see. This property lay out of the reach of the trustee in bankruptcy, who could not dispose of it on behalf of the bankrupt’s estate in order to distribute it to his creditors.

In such circumstances, the appropriate remedy for a creditor like the appellant would be to apply to the bankruptcy judge under s. 69.4 BIA for leave to pursue a claim against the exempt property. Since this property is beyond the reach of the ordinary creditors, lifting the stay of proceedings cannot prejudice the estate assets available for distribution. In keeping with the wording of s. 69.4(b) BIA, this is why it would be “equitable on other grounds” to make such an order. This procedure would also accord with the policy objective of bankruptcy law of maximizing, under the BIA, returns to the family unit as a whole rather than focusing on the needs of the bankrupt.

[25] In the Schreyer case, the bankrupt spouse received his discharge before the appellant made an application under section 69.4 of the BIA. The result of the discharge was that the bankrupt was released from the equalization claim, which was a claim provable in bankruptcy. As the equalization claim was neither a proprietary claim, nor was it exempt from the effect of a discharge, the appellant could not proceed with her claim after the discharge. In effect, she was too late. Based on the reasoning of LeBel J., if she had applied under section 69.4 of the BIA prior to the bankrupt’s discharge, she could possibly have obtained a remedy.

[26] In Scott (Re), 2014 ONSC 5566, 51 R.F.L. (7th) 223, Mr. Scott filed for bankruptcy on July 26, 2012. The parties had a dispute over the date of separation. Ms. Scott asserted that the date of separation was August 1, 2012, and Mr. Scott asserted that the date of separation was September 30, 2007. As of the date of Mr. Scott’s bankruptcy, both parties had interests in pension plans.

[27] Kershman J. dealt with a motion brought by Ms. Scott to lift the stay of proceedings under section 69.4 of the BIA. Ms. Scott argued that Mr. Scott was using the bankruptcy proceedings to frustrate her equalization claim. At paras. 13-17, Kershman J. determined the case as follows:

Based on the reasoning in Schreyer and Hewton (Re), this court finds that in this particular case it would be equitable to lift the stay of proceedings to allow Ms. Scott to pursue her claim for equalization of net family property. The lifting of the stay will not prejudice the Estate assets available for distribution to the creditors of the bankrupt Estate.

Accordingly, there will be an order to go lifting the stay of proceedings so that Ms. Scott can pursue a claim for equalization of net family property.

For exempt assets, the equalization of net family property would proceed as a normal equalization claim assuming there had been no bankruptcy.

For non-exempt assets, the equalization of net family property would only proceed to determine the amount of the equalization of net family property for the purpose of allowing Ms. Scott to file a claim in Mr. Scott’s bankruptcy.

[28] Kershman J. also dealt with the issue of a pending discharge. He ordered that the trustee hold the estate open for 18 months so that Ms. Scott could pursue her claim.

[29] In Shirkie v. Shirkie, 2015 SKQB 303, 67 R.F.L. (7th) 274, the parties were separated in 2008. In May 2014, the husband was ordered to pay interim spousal support of $7,500 per month. Approximately five weeks after the support order was issued, the husband filed an assignment in bankruptcy. In the bankruptcy, the husband claimed exempt assets totaling $158,602. The wife brought an application under section 69.4 of the BIA requesting an order that the stay of her family property claim, which was caused by the husband’s assignment in bankruptcy, be lifted and that the matter be permitted to continue, but only with respect to property that is exempt from seizure by the trustee in bankruptcy. Elson J. determined at para. 34 that “the continued operation of the stay will materially prejudiced the respondent and that it will prevent her from pursuing her family property claim in respect of the exempt assets that do not form part of the estate in bankruptcy.” He went on to say, “If I am wrong in finding material prejudice in this respect, I am satisfied that, on equitable or other grounds, it is appropriate to lift the stay in so far as the respondent’s claim pertains to a division of family property consisting of exempt assets.”

Disposition

[30] The respondent has brought his motion in the bankruptcy action. I am satisfied that I have jurisdiction as a bankruptcy court pursuant to section 183 of the BIA.

[31] The respondent has requested an order annulling the bankruptcy or, in the alternative, lifting the stay under section 69.4. I find that the appropriate remedy is for the stay to be lifted for the following reasons:

1. The litigation between Mr. Wiggins and Ms. Fiorito has spanned, to date, eight years. The bulk of that litigation has been pursued by Mr. Wiggins in an attempt to have access to, and a relationship with, his three daughters. In the two decisions of Harper J., the court found that the actions of Ms. Fiorito and her family were the reason why Mr. Wiggins did not have a relationship with his daughters. This was an extreme case of one parent undermining the other parent’s role with the children.
2. The Court of Appeal has determined that Ms. Fiorito ought to pay costs to Mr. Wiggins in the amount of $200,000 for the two trials before Harper J. To date, Ms. Fiorito has paid nothing towards those costs.
3. In her affidavit material before the court in January of this year, Ms. Fiorito represented both to Mr. Wiggins and to the court that she intended to pay the costs award. Ms. Fiorito represented both to Mr. Wiggins and to the court that she had no intention of making an assignment in bankruptcy in order to thwart that payment. Those representations were relied upon by both Mr. Wiggins and myself when the holding order was put in place and the determination was made that the access review ought to proceed without first requiring payment of the costs award.

[32] I find that Mr. Wiggins is likely to be materially prejudiced by the continued operation of the stay of execution as a result of Ms. Fiorito’s bankruptcy. Mr. Wiggins will, in all likelihood, receive nothing towards his costs award unless the stay is lifted. In the event Mr. Wiggins is entitled to proceed with enforcement of his costs award against the exempt assets, the balance of Ms. Fiorito’s creditors will not be affected. In addition, I find that in all of the circumstances of this case, it is equitable, under section 69.4 of the BIA, to grant the declaration sought.

[33] As I understand it, when Ms. Fiorito is discharged, Mr. Wiggins’s debt is released. Accordingly, in order to ensure that Mr. Wiggins has a reasonable period of time to take enforcement steps, Ms. Fiorito’s discharge will have to be stayed and the bankrupt estate will have to be kept open.

Orders Made

[34] For the reasons set out above, I make the following orders:

1. An order will issue lifting the stay of proceedings by declaring that sections 69 to 69.31 of the Bankruptcy and Insolvency Act no longer operate in respect of Jefferson Ross John Wiggins, but only in relation to those assets that are exempt under the Bankruptcy and Insolvency Act.

2. Jefferson Ross John Wiggins shall be entitled to continue his enforcement proceedings for payment of the costs award determined by the Court of Appeal ($200,000), plus interest and the costs of enforcement, in Superior Court of Justice file number FS–08–7251 against Anna Fiorito against those assets that are exempt under the Bankruptcy and Insolvency Act.

3. The bankruptcy trustee shall hold the bankrupt estate open, and the discharge of Ms. Fiorito shall be stayed, for a period of eight months from today. In the event of an appeal of this order, subject to any order or direction from the Court of Appeal, the time shall be extended to eight months from the resolution of any appeal.

4. In the event ancillary orders are required to ensure that the intent of this order is complied with, motions may be made to me in writing on notice.

5. The parties may make written submissions on costs, to include a costs outline and any applicable offers to settle, according to the following timelines:

   a) The respondent may make submissions within 20 days; b) The applicant may make submissions within 30 days; and c) The respondent may make any reply submissions within 40 days.

Original signed by Justice Pamela L. Hebner Pamela L. Hebner Justice

**Released:** September 23, 2016