CITATION: Cline v. Moran, 2016 ONSC 6859
COURT FILE NO.: 3348/14 (Hamilton)
DATE: 20161108
SUPERIOR COURT OF JUSTICE – ONTARIO
FAMILY COURT
RE: Robert Cline (Applicant) v. Lora Moran (Respondent)
BEFORE: The Honourable Mr. Justice R.A. Lococo
COUNSEL: The Applicant did not file costs submissions
Fareen L. Jamal, for the Respondent
HEARD: By written submissions dated August 8, 2016 (for the Respondent only)
E N D O R S E M E N T – C O S T S
[1] Robert Cline brought a family law application following the breakdown of his common law relationship with Loran Moran. He claimed a monetary award from Ms. Moran, alleging that she was unjustly enriched by Mr. Cline’s financial and other contributions during their relationship. Ms. Moran denied that any amount was due to Mr. Cline. She also claimed against him for repayment of credit card charges as well as for amounts Ms. Moran provided to Mr. Cline for stock market investments. Neither of them claimed spousal support or child support from the other.
[2] For the reasons set out in Reasons for Judgment dated July 18, 2016,[^1] I dismissed Mr. Cline’s unjust enrichment claim. I also ordered Mr. Cline to pay Ms. Moran $3,700 as a return of capital and $3,122 plus interest to repay credit card debt. The issue of costs was left to be determined following written submissions.
[3] In her written submissions, Ms. Moran sought costs from Mr. Cline in the amount of $50,000, calculating the fee amount on a full indemnity basis after the date of her most recent offer to settle. According to Ms. Moran, it was appropriate to calculate costs in that way because the court’s final order was more favourable than the offer to settle, relying on rule 18(14) of the Family Law Rules.[^2]
[4] On the last page of Ms. Moran’s costs submissions, her counsel indicated that after preparing the submissions, Ms. Moran became aware that Mr. Cline made an assignment in bankruptcy on July 29, 2016, less than two weeks after release of the Reasons for Judgment. She argued that family proceedings are not automatically stayed by bankruptcy, noting that support claims survive bankruptcy. She submitted that the amount Mr. Cline owed Ms. Moran under the July judgment as well as an additional amount for costs should be characterized as spousal support and costs incident to spousal support. As a result, the claims would survive bankruptcy and be enforceable by the Family Responsibility Office (FRO). She also submitted that the amounts Mr. Cline owes should be payable from his Registered Retirement Savings Plan (RRSP), noting that the RRSP is preserved in bankruptcy. In that regard, she referred to Mr. Cline’s testimony that Suncor shares he purchased on Ms. Moran’s behalf were held in his RRSP. Not surprisingly, no submissions were filed in response to Ms. Moran’s costs submissions.
[5] Under the heading “Stay of proceedings - bankruptcies”, section 69.3(1) of the Bankruptcy and Insolvency Act[^3] provides that on the bankruptcy of any debtor, no creditor has a remedy against a debtor or the debtor’s property for the recovery of a claim provable in bankruptcy, and shall not commence or continue any proceedings for the recovery of such a claim. However, pursuant to sections 69.41(1) and 121(4) of that statute, this stay provision does not apply to claims for child support or spousal support arising under a court order or separation agreement. As well, pursuant to section 178(1)(c), the debtor’s discharge from bankruptcy does not release the debtor from support liability arising prior to bankruptcy. Other claims provable in bankruptcy are released upon the debtor’s discharge pursuant to section 178(2).
[6] As matters currently stand, by reasons of section 69.3(1), Ms. Moran has no remedy against Mr. Cline or his property for recovery of the amounts awarded to her under the July judgment, or any costs relating to those proceedings. These amounts would clearly be claims provable in bankruptcy that are not exempt from the effect of that provision. For that reason, Ms. Moran has asked me to characterize those claims as spousal support and costs incident to child support, with a view to bringing them within the exception for support claims in the bankruptcy statute. If I do so, she would avail herself of section 5 of the Family Responsibility and Support Arrears Enforcement Act, 1996,[^4] which provides that amounts payable pursuant to a support order, including legal expenses arising in relation to support, are enforceable by the Director of the Family Responsibility Office (FRO).
[7] A similar request was considered by the Ontario Court of Appeal in its recent decision in Clark v. Clark.[^5] In that case, the Court reversed the costs decision of the trial judge, who ordered a costs award payable as lump sum spousal support, enforceable by FRO. The Court of Appeal held that such an order could not be permitted to stand in that case because spousal support was never an issue before the trial judge.[^6] Similarly, child support or spousal support was never an issue in the proceedings between Mr. Cline and Ms. Moran. In these circumstances, the characterization of the amounts in question as support or costs incident to support is not sustainable, based on reasoning analogous to that of the Court of Appeal in Clark. To hold otherwise would constitute an inappropriate end run around the provisions of the Bankruptcy and Insolvency Act.
[8] As already noted, Ms. Moran also argued that the amounts Mr. Cline owes should be ordered payable from his RRSP, noting Mr. Cline’s testimony that Suncor shares that he purchased on Ms. Moran’s behalf are now held in his RRSP. I agree that Mr. Cline gave evidence to that effect at the application hearing. Once again, however, I do not consider it appropriate in the circumstances of this case to recast retroactively my previous findings in order to provide Ms. Moran with a remedy that she would not otherwise have following Mr. Cline’s bankruptcy. In any case, the amount that I ordered payable by way of return of capital (being $3,700) is only a small portion of the total amount she now seeks.
[9] In light of the foregoing, I see no purpose as a practical matter in proceeding to assess the amount of costs that would otherwise be payable by Mr. Cline as the unsuccessful party to the application. In any case, as explained further below, I do not consider myself to have the jurisdiction to do so in the absence a declaration under section 69.4 of the Bankruptcy and Insolvency Act.
[10] Under that provision, a creditor may apply to the court in Mr. Cline’s bankruptcy proceedings for a declaration that the stay imposed by section 69.3 no longer operates in respect of that creditor. No such application has been brought to permit Ms. Moran to continue to pursue Mr. Cline for recovery of the amounts awarded under the July judgment and any related costs costs.
[11] As well, consideration needs to be given as to whether Ms. Moran would also need to bring a motion in this family law application for a continuation order, as provided for in rule 11.01 of the Rules of Civil Procedure.[^7] Under that rule, a civil proceeding is stayed if the interest or liability of a party is transmitted to another person by, among other things, an assignment in bankruptcy with respect to the assignor until a continuation order had been obtained.
[12] As provided for in rule 1(2) of the Family Law Rules, those rules apply to family law cases in Ontario. As well, rule 1.02(1) of Rules of Civil Procedure provides that the civil rules do not apply to proceedings governed by the Family Law Rules “except as provided in those rules.” There is nothing in the Family Law Rules that would require a continuation order to permit a family law case to continue upon the bankruptcy of one of the parties. However, rule 1(7) of the Family Law Rules provides as follows:
If these rules do not cover a matter adequately, the court may give directions, and the practice shall be decided by analogy to these rules, by reference to the Courts of Justice Act and the Act governing the case and, if the court considers it appropriate, by reference to the Rules of Civil Procedure.
[13] In circumstances in which a party to a family law case has a monetary claim that is not a claim for support (or costs incident to support), it is appropriate to consider whether a continuation order is necessary in order to allow that claim to proceed if the prospective payor becomes bankrupt. In my view, rule 11.01 of the Rules of Civil Procedure may be applicable to require continuation order in those limited circumstances. However, whether such an order is required in this case may well depend on the terms of any declaration that the court may make in Mr. Cline’s bankruptcy proceedings pursuant to section 69.4 of the Bankruptcy and Insolvency Act. In that regard, the court has wide discretion as to the qualifications that it may impose in making such a declaration.
[14] I recognize that the foregoing discussion of the stay provisions in the bankruptcy statute and civil rules may be of no practical application in this case. It may well be that it would not be cost effective for Ms. Moran to further pursue her claims against Mr. Cline. However, that is for Ms. Moran to decide, with the benefit of input from her professional advisers.
[15] Accordingly, for the foregoing reasons, I am declining to fix Ms. Moran’s costs of this application, without prejudice to her renewing her request for costs against Mr. Cline after obtaining any required declaration or order, including a declaration under section 69.4 of the Bankruptcy and Insolvency Act.
The Honourable Mr. Justice R.A. Lococo
Released: November 8, 2016
CITATION: Cline v. Moran, 2016 ONSC 6859
COURT FILE NO.: 3348/14 (Hamilton)
DATE: 20161108
SUPERIOR COURT OF JUSTICE - ONTARIO
FAMILY COURT
BETWEEN:
Robert Cline
Applicant
- and -
Lora Moran
Respondent
BEFORE: The Honourable Mr. Justice R.A. Lococo
COUNSEL: The Applicant did not file costs submissions
Fareen L. Jamal, for the Respondent
ENDORSEMENT – COSTS
R. A. Lococo J.
Released: November 8, 2016
[^1]: Cline v. Moran, 2016 ONSC 4490. [^2]: O. Reg. 114/99. [^3]: R.S.C. 1985, c. B-3. [^4]: S. O. 1996, c. 31. [^5]: 2014 ONCA 175, [2014] O.J. No. 965. [^6]: Ibid. at paras. 64ff. [^7]: R.R.O. 1990, Reg. 194.