NATURE OF MOTION

[1] Katherine Mullin has been trying since October 2013 to obtain full financial disclosure from John Sherlock, from whom she separated in June 2013 after a 13 year relationship. She requires the information to establish her entitlement to spousal support and equalization of net family property. After three Orders of this Court requiring Mr. Sherlock to provide disclosure, questioning by Ms. Mullen’s lawyer, to obtain the information, and a further Order, requiring Mr. Sherlock to answer questions he had been asked by the lawyer, failing which his pleadings would be struck, Ms. Mullen asserts that Mr. Sherlock still has not complied and that the time has come to strike his pleadings. Mr. Sherlock, now represented by his fourth lawyer in the proceeding, submits that he has complied with his outstanding disclosure obligations. He submits that if the answers he has given are unsatisfactory, the Court should employ less drastic measures than striking his pleadings to obtain clarification of the information.

BACKGROUND FACTS

[2] The parties met in the summer of 2000, and began co-habiting in November 2000. They married on September 8, 2012, and separated less than a year later, on June 28, 2013. They co-habited for a total of 13 years. There are no children of the marriage.

[3] Ms. Mullin remained in the matrimonial home after the parties separated and continues to reside there. The parties jointly owned a Florida condominium, which was sold, and the proceeds of sale are being held in trust.

[4] Ms. Mullin began this proceeding by Application dated September 13, 2013, in which she claims a divorce, spousal support, exclusive possession of the matrimonial home and its contents, and equalization of net family property. She concludes her Application with the following:

The Applicant requires detailed financial disclosure regarding the Respondent’s various assets including his interest in the corporations referred to above. Valuations by a professional business valuator will have to be prepared at the Respondent’s expense. [Emphasis added]

[5] Ms. Mullin’s assertions in her Application are not evidence on her motion, but the fact that she has made the assertions provides part of the factual context for her claim that the information she seeks is relevant to the issues in the proceeding. Ms. Mullin asserts that:

a) Mr. Sherlock is the president, 100% shareholder, and directing mind of GS Medical Packaging Inc. (“GS Medical”). Ms. Mullin describes it as a successful, multi-million dollar business, which supplies sterilization packaging for instruments, kits, and dental supplies.

b) Ms. Sherlock additionally incorporated Arkle Medical Group, Beacon Medical Inc., and 950392 Ontario Ltd., and is a partner in Colin Andrews Brokerage, which sells used boats.

c) Mr. Sherlock’s reported income ranged from $159,028.17 to $351,096.00 from 2002 to 2008, as appears from his Income Tax Returns for those years. His reported income fell from $159,028 in 2008 to $61,333 in 2010 (his 2009 reported income is unknown), and his Financial Statements in the present proceeding state that his income in 2012 was $61,646.

d) Ms. Mullin asserts that his reported income was not reflective of his actual income, or of the parties’ lifestyle during the marriage, or of Mr. Sherlock’s lifestyle since the parties separated. In particular:

i) Mr. Sherlock acknowledges that his income in 203 was $257,723.64.

ii) Ms. Mullin has produced a letter dated January 26, 2012, on the letterhead of Ann Fan, Chartered Accountant for John Sherlock and GS Medical Packaging Inc., and apparently signed by Ms. Fan, which states that Mr. Sherlock’s personal base annual income in 2010 and 2011 was $425,000 CAD and $454,500 CAD, respectively. She has also produced a letter dated January 26, 2012, on the letterhead of Jarvis Ryan Associates, Chartered Accountants, and apparently signed by R. Peter Jarvis, CA, which states that Mr. Sherlock’s personal income will be an average of $454,500 for 2011 and 2012 “if he draws down on corporate Capital Dividend available to him.”

iii) Mr. Sherlock acknowledges, in his Financial Statements, that he acquired the matrimonial home in 2002 for $918,000, which was worth $1,400,000 in 2005, when he transferred it to joint tenancy in the names of himself and Ms. Mullin, and was worth $3,000,000 when the parties separated on June 28, 2013. Mr. Mullins also acknowledges that the parties own a condominium in Key West Florida, which he values at over a million dollars on the date of separation. He estimates that his interest in GS Medical Packaging Inc. is worth $1,600,000. Ms. Mullin asserts that he claimed that is interest in GS Medical is actually worth $6.2 million.

iv) Mr. Sherlock acknowledges owning a 40 foot sailboat which he values at $145,000 and that Ms. Mullin says is worth $220,000. Mr. Sherlock acknowledges that GS Medical leases two vehicles for his use, a 2006 Ferrari 430 (original price $300,000) and a 2012 BMW M6 650 (original price $135,000). The parties were members of a Golf Club at which Mr. Sherlock paid $48,000 to obtain a spousal membership and each of the parties paid over $5,000 in annual dues. They collected art from various art galleries, which Ms. Mullin estimates is worth $150,000.

e) Ms. Mullin states that she gave up her own career as an architect to devote herself to working full time to assist Mr. Sherlock in expanding the business of GS Medical. She says that she helped him prepare architectural drawings for his business and prepared plans for his existing plant, helped to locate new premises to accommodate the new company. She says that she assumed many roles in the company, including working as purchasing manager, plant manager, and operations manager, working as a sales representative at trade shows, and attending conferences and entertaining customers, agents and suppliers throughout the world. She states that in 2010, when GS Medical lost a major customer and experienced a financial crisis, she worked for free, convincing the company’s employees to return to work with promises of future payment, even after it was closed by a bank receiver. She convinced suppliers to continue supplying to the company and ran the plant largely on materials already in stock or those she could obtain from suppliers until eventually, the business recovered.

f) Ms. Mullin states that the parties’ assets are inextricably tied with Mr. Sherlock’s business and that she permitted those assets to serve as security for the business’ credit.

g) Ms. Mullin says that Mr. Sherlock hired his new girlfriend as Vice President of GS Medical and spends lavishly on her, paying her between $72,000 and $100,000 (with bonuses) for two half days of work per week, and taking her to various expensive resorts.

h) Mr. Sherlock is a citizen of the United States, and a permanent resident of Canada. Ms. Mullin states that the U.S. Department of Health and Human Services posted a warning letter online in June 2013, criticizing Mr. Sherlock’s business for failing to establish and maintain procedures to control certain manufacturing requirements. Ms. Mullin says the FDA is likely to treat his business more leniently if it were based in the U.S. than it would if it is regarded as a foreign company, and that Mr. Sherlock has claimed that he has become increasingly frustrated with operating his business in Canada and prefers the United States. Ms. Mullin alleges that for these reasons, and because Mr. Sherlock has no relatives in Canada, he is a flight risk.

[6] Mr. Sherlock delivered his Answer on October 9, 2013. He claims a divorce and equalization of net family property, and opposes Ms. Mullin’s claim for spousal support and exclusive possession of the home and its contents. He says that Ms. Mullin grossly exaggerates her role in, and contributions to, GS Medical. He denies that she gave up her career to devote herself to helping him, and he characterizes her employment with GS Medical as a means by which he helped her with significant personal financial troubles she had when they began cohabiting in the fall of 2000. He characterizes the travel she says she undertook for the company as vacation. He denies that she was a co-venturer with him in the business.

[7] During the course of the proceeding, Ms. Mullin has made detailed requests for information and documents from Mr. Sherlock, including documents required by a forensic accountant, Jeffery Feldman, whom she retained to value Mr. Sherlock’s businesses and the income he derives from them. In particular:

a) Ms. Mullin’s lawyer served a detailed Request for Information on Mr. Sherlock’s lawyer on October 29, 2013.

b) Ms. Mullin’s forensic accountant, Jeffery Feldman, sent a formal Information Request dated March 13, 2014, which her lawyer forwarded to Mr. Sherlock’s lawyer on March 14, 2014.

[8] The parties have made numerous motions. I will detail them here as they provide further context for Ms. Mullin’s motion to have Mr. Sherlock’s pleadings struck for failing to answer questions her lawyer asked him on January 26, 2017:

a) On September 19, 2013, Ms. Mullin made an urgent motion, before a Case Conference, for temporary spousal support of $9,109.00 per month and for an order requiring Mr. Sherlock to pay expenses associated with the matrimonial home and the parties’ Florida condominium. On October 11, 2013, Herold J. adjourned the motion to November 25, 2013, and thereafter to a date to be fixed at a Case Conference. In the interim, Herold J. ordered Mr. Sherlock, on a without prejudice basis, to pay Ms. Mullin $3,000.00 per month on October 1 and November 1, 2013.

At the Case Conference before Sproat J. on November 25, 2013, the parties consented to an Order for without prejudice interim spousal support of $3,000 per month to continue in December 2013 and January 2014, and for the matrimonial home and the Florida condominium to be listed for sale. Additionally, Sproat J.’s Order of November 25, 2013, provided:

Parties to provide disclosure to the extent available within 45 days or explanation as to why the information is either unavailable or subject to argument as to production. [The disclosure herein refers to the Request for Information of Kate Mullin dated October 29, 2013 and the disclosure requested at paragraph 13 of the Case Conference Brief of John Sherlock dated November 19, 2013.]

Justice Sproat’s Order incorporated the disclosure requests that Ms. Mullin had made in her Request for Information dated October 29, 2013. The disclosure it required is set out below, in Appendix A.

b) On February 18, 2014, Mr. Sherlock made a motion for an Order that he be reimbursed the expenses he was paying for the matrimonial home from the proceeds of sale, or relieving him from paying those expenses. Additionally, he moved for an Order giving him control of the sale of the parties’ Florida condominium. He also requested an Order prohibiting Ms. Mullin’s father from attending at the home or the Florida condominium, or attending at GS Medical or contacting any of its employees, and directing that the records of Mr. Sherlock’s businesses, including GS Medical, be sealed or requiring the parties to execute a confidentiality agreement preventing dissemination of the information contained in them.

c) On May 23, 2014, Ms. Mullin made a motion, returnable June 12, 2014, for an Order requiring Mr. Sherlock to deliver responses to Mr. Feldman’s Request for Information, which her lawyer had sent to Mr. Sherlock on March 14, 2014. Additionally, she requested an Order for further disclosure set out in her Notice of Motion. In her affidavit in support of the motion, Ms. Mullin stated that the forensic accountant Mr. Sherlock retained in April 2014, indicated at that time that the disclosure Mr. Feldman requested two months earlier would not be attended to until at least June 2014.

Ms. Mullin additionally requested leave to question Mr. Sherlock, and an Order that Mr. Sherlock’s pleadings be struck if he failed to provide all of the above disclosure within 21 days. Ms. Mullin stated that she needed her accountant’s report as her motion for temporary spousal support, originally returnable 8 months earlier, was now scheduled to be heard July 21, 2014.

d) Mr. Sherlock made a motion, returnable June 12, 2014, for an Order requiring Ms. Mullin to provide the disclosure that Sproat J. had ordered on November 25, 2013, and additionally requiring her to provide all credit card and bank statements, the names of persons with whom she had discussed GS Medical’s business after February 2013, the names of persons who had stayed at the Florida condominium, an inventory of contents removed from the homes, and an order requiring her to sign a Confidentiality Agreement. His motion further requested the following:

i) An Order requiring the Applicant to return all business documents and personal documents currently in her possession, or located in the matrimonial home to the Respondent in order to assist him in complying with the requests of the Applicant with respect to disclosure;

ii) An Order that all company owned computers currently in the possession of the Applicant be forthwith returned to the Respondent including intact hard drives and software.

On June 12, 2014, the parties consented to an Order by Trimble J., setting out the disclosure that Mr. Sherlock was to provide. Its terms are set out below, in Appendix B. The Order required Mr. Sherlock to deliver responses to Mr. Feldman’s Request for Information dated March 13, 2014, by June 24, 2014. The Order concluded:

In the event that the Respondent does not provide all the above noted disclosure to the Applicant by June 25, 2014, at 6:00 p.m., then the issue of what relief, if any, the Applicant shall be entitled to at that time shall be determined on the return of the Applicant’s motion, on June 27, 2014. [Emphasis added]

On June 27, 2014, Ricchetti J., adjourned Ms. Mullin’s motion on consent to July 11, 2014, peremptory to both parties. On July 11, 2014, Donohue J. endorsed the record, “Parties are narrowing the issues. Adjourned on consent to July 31, 2014, to be spoken to. At request of counsel, costs of today (full day of negotiation) reserved to justice hearing motion.”

On August 11, 2014, the parties consented to a further order by Trimble J., requiring Mr. Sherlock to provide specified “additional disclosure” and/or to take steps specified in the Order regarding obtaining such disclosure within 60 days. The additional disclosure that the Order required is set out below, in Appendix C. On November 18, 2014, Trimble J. ordered Mr. Sherlock to pay Ms. Mullin’s costs in the amount of $10,171.18 within 60 days.

e) On February 5, 2015, Ms. Mullin made a motion, returnable February 26, 2015, for an Order striking Mr. Sherlock’s pleadings on the ground that he had breached the orders of Sproat J. dated November 25, 2013, and of Trimble J. dated August 11, 2014, by renovating the Florida condominium and refusing to sign the listing agreement for its sale, failing to pay the carrying costs of the matrimonial home and the Florida condominium, terminating the cable television service in the matrimonial home, and failing to account for the rentals he had received from the Florida condominium. Ms. Mullin additionally sought an order allowing her to make all decisions regarding the carriage and terms of sale of the matrimonial home and the Florida condominium. The motion did not allege a breach of the disclosure orders.

f) On February 24, 2015, Mr. Sherlock made a motion, for hearing February 26, 2017, to adjourn all the outstanding motions to a long motion date, and for an Order giving him control of the sales of the matrimonial home and the Florida condominium. On May 28, 2015, the parties consented to an order for a 4 month listing of the matrimonial home and Florida condominium for sale, and Ms. Mullin submitted a Motion in form 14B for a consent order to that effect.

g) On August 18, 2015, Mr. Sherlock made a motion, for hearing September 1, 2015, to sever his claim for divorce from the claims for collateral remedies.

h) On August 26, 2015, Ms. Mullin made a motion, also for hearing September 1, 2015, to dismiss Mr. Sherlock’s motion to sever the claim for divorce, and to require Mr. Sherlock to allow her forensic accountant, Mr. Feldman, to re-attend at the offices of GS Medical and to be provided with a copy of the GS Medical detailed general ledger for Mr. Sherlock’s draw account and the its petty cash sheets for 2012 to 2015, samples of the journal entries for expenses Mr. Sherlock had charged on his personal credit cards, and, if Mr. Feldman requested, copies of all the journal entries for that period and an order that failing compliance with same, that Mr. Sherlock’s pleadings be struck.

On September 1, 2015, Emery J. dismissed Mr. Sherlock’s motion to sever the claim for divorce. Justice Emery stated:

I also heard submissions that the Respondent husband has been difficult or dilatory in providing disclosure as ordered at least by Justice Trimble. There is enough evidence before this court about disclosure issues to at least determine the Respondent husband is not “fault-free” in the disclosure process, at least not for the purpose of bringing a motion to sever such as was the case in Smith v. Smith 2011 ONSC 3915. The Respondent husband may learn over time that cooperation and compliance will go a long way in the court process.

On the motion of the Applicant wife for further disclosure, the parties by their counsel consent to an Order for the disclosure set out in her Notice of Motion, such disclosure to be made by October 1, 2015. The terms of Emery J.’s disclosure Order are set out below, in Appendix D.

On March 23, 2015, Tzimas J. dismissed his motion for leave to appeal Emery J.’s decision.

i) On November 21, 2016, Mr. Sherlock renewed his motion, returnable November 24, 2016, for an order giving him control of the sale of the matrimonial home.

j) On the same date (November 21, 2016), Ms. Mullin made a cross-motion, also returnable November 24, 2016, for a further three month listing of the matrimonial home, granting her continued exclusive possession of the home pending its sale, and compelling Mr. Sherlock to attend for questioning and to produce the disclosure set out in the Notice of Motion.

On December 22, 2016, a day reserved for motions that could be argued in an hour or less, André J. concluded that the motions would require longer than an hour to argue, and adjourned them for the parties to try to resolve the issues. He ordered that either motion could be returned alone, on three days’ notice, and reserved the costs to the judge hearing the motions.

On January 26, 2017, Mr. Sherlock attended for questioning by Ms. Mullin’s lawyer, Mr. Halpern.

k) On February 24, 2017, Mr. Sherlock made a further motion for an order directing that the matrimonial home be sold and giving him control of the sale.

l) On February 24, 2017, Ms. Mullin returned her cross-motion dated November 21, 2016, to strike Mr. Sherlock’s pleadings and grant her control of the sale of the matrimonial home. She amended her Notice of Motion to add, in addition to the breaches of the orders of Sproat J. of November 25, 2013, and of Trimble J., dated August 11, 2014, Mr. Sherlock’s breach of the Order of Emery J. dated September 1, 2015, by “failing to provide the entirety of the disclosure as required by the order of Emery J.”.

Ms. Mullin added the following to her claims for relief:

An Order compelling the Respondent to provide answers to his undertakings, given at his Questioning held January 26, 2017, within 15 days (as set out at Schedule “1” attached to this Amended Notice of Motion);
An Order directing the Respondent to return to Questioning within 30 days at his own expense and provide answers to those questions he refused to answer at his Questioning, held January 26, 2017, including those questions that were taken under advisement and have not been answered as at the date of this motion (as set out at Schedule “2” attached to this Amended Notice of Motion), pursuant to Rule 34.15 of the rules of civil Procedure;
An Order for costs of the Respondent’s non-attendance at questioning on September 28, 2016, pursuant to rule 1(8) and 1(8.1) and rule 24(7) of the Family Law rules;
A temporary Order that the Respondent pay to the Applicant spousal support on a without prejudice basis in the amount of $9,500 per month, commencing December 1, 2016, subject to variation on return to court following the Applicant’s receipt of the Respondent’s disclosure, referenced in paragraphs 24 and 25, above.

On March 1 and April 3, 2017, the Court heard Ms. Mullin’s motion to strike Mr. Mullin’s pleadings. On April 3, 2017, it made an Order requiring Mr. Sherlock to comply with his undertakings and answer the questions he had refused by April 26, 2017, failing which his pleadings “shall be struck”. The Order stated:

The Respondent (Mr. Sherlock) shall answer all questions asked at his examination of January 26, 2017, by April 26, 2017, including undertakings and refusals. With regard to the request for journal entries and petty cash vouchers, he shall provide an explicit and detailed statement in an affidavit by that date setting out the following:

(a) Whether the documents ever existed and whether they were in his possession, power, or control;

(b) If they were, but no longer are, in existence or in his possession, power, or control, when they ceased to be and under what circumstances;

In the event the Respondent does not comply fully with item # 5 above, his pleadings shall be struck.

When the Court released its decision on April 3, 2017, it invited the parties to make written submissions on costs by May 15, 2017. Both parties submitted written arguments on May 15, 2017. In his costs submissions, Mr. Sherlock referred to events subsequent to the hearing of the motion, submitting, in effect, that he had, since April 3, 2017, complied with his disclosure obligations.

m) On the same date, May 15, 2017, that she received Mr. Sherlock’s costs submissions, Ms. Mullin made a further motion for an oral hearing on those post-hearing events. She now renews her request that the court strike Mr. Sherlock’s pleadings on the ground that he has not, in fact, complied with his disclosure obligations.

The parties agreed to a hearing on June 15, 2017, but when Mr. Sherlock retained new counsel, Martha McCarthy & Co., counsel agreed to postpone the hearing to July 5, 2017.

ISSUES

[9] The motions require the court to determine the following issues:

Has Mr. Sherlock failed to provide necessary disclosure and answered the questions he undertook or refused to answer on January 26, 2017? If so, should the court:

a. strike his pleadings?

a. order him to comply with his undertakings?

b. Order him to attend for further questioning?

c. Adjourn his motion until he has complied with his undertakings and finished being questioned?

What costs, if any, should be paid for the motions, up to and including the attendance on April 3, 2017?

PARTIES’ POSITIONS

Ms. Mullin’s Position

[10] Ms. Mullin submits that Mr. Sherlock wilfully and deliberately did not comply with the Order of this Court dated April 3, 2017 in that he did not comply with the undertakings or answer the questions he refused on January 26, 2017, and did not pay increased spousal support to Ms. Mullin for the month of April until June 16, 2017.

[11] Ms. Mullin further submits that the Court should impose the consequence set out in its April 3, 2017, Order, which provided that if Mr. Sherlock failed to answer all outstanding questions from the January 26, 2017, examination by April 26, 2017, his pleadings would be struck.

Mr. Sherlock’s Position

[12] Mr. Sherlock submits that the motion to strike his pleadings is an exaggerated response to his own motion to force the sale of the matrimonial home. He states that Ms. Mullins has received all relevant disclosure necessary for the proceedings. He attaches to his affidavit dated February 27, 2017, a financial document brief and his responses to Ms. Mullins’ Request for Information.

ANALYSIS AND LAW

Legislative Framework

[13] Rule 1(8) of the Family Law Rules governs compliance with orders made in a case, or in a related case. Subrules 1(8)(b) and (c) empower the court to dismiss a party’s claim or strike a party’s pleadings for non-compliance:

1.(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.

(8.1) If a person fails to follow these rules the court may deal with the failure by making any order described in subrule (8), other than a contempt order under clause (8)(g).

[14] Rule 19(10) governs compliance with orders requiring disclosure. It similarly empowers the court to strike a party’s pleadings for non-disclosure:

19(10) If a party does not follow this rule or obey an order made under this rule, the court may, on motion, do one or more of the following:

Order the party to give another party an affidavit, let the other party examine a document or supply the other party with a copy free of charge;
Order that a document favourable to the party’s case may not be used except with the court’s permission.
Order that the party is not entitled to obtain disclosure under these rules until the party follows the rule or obeys the order.
Dismiss the party’s case or strike out the party’s answer.
Order the party to pay the other party’s costs for the steps taken under this rule, and decide the amount of the costs.
Make a contempt order against the party.
Make any other order that is appropriate. [Emphasis added.]

[15] Rule 2 provides guidance as to how the Family Law Rules as a whole should be interpreted. It provides, in part:

2(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;

(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases.

(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.

(5) The court shall promote the primary objective by active management of cases, which includes,

(a) at an early stage, identifying the issues, and separating and disposing of those that do not need full investigation and trial;

(b) encouraging and facilitating use of alternatives to the court process;

(d) setting timetables or otherwise controlling the progress of the case;

(e) considering whether the likely benefits of taking a step justify the cost. [Emphasis added.]

Jurisprudence

(i) The court’s exercise of discretion to dismiss a party’s claim or strike pleadings

[16] In Marcoccia v. Marcoccia (2008), the Ontario Court of Appeal cautioned that a “remedy striking a pleading is a serious one and should only be used in unusual cases”.

[17] A court may nevertheless dismiss proceedings for non-compliance with court orders, including non-payment of support and failure to comply with disclosure orders.[^1]

[18] Rule 1(8) was amended in 2014. This amendment removed the requirement that a party’s failure to follow the Rules or obey a Court order have been ‘wilful’ in order for the Court to be able to dismiss the party’s claim. “The establishment of the failure to obey an order in a case will be sufficient to dismiss a claim. Rule 1(8) still provides that the court may deal with a failure to obey an order in a case by making any order that it considers necessary for a just determination of the matter, including striking out any Motion to Change.”[^2]

[19] The jurisprudence under the former subrules 1(8) or 14(23) (Failure to Obey Order Made on Motion), is still applicable and sets out the relevant principles for the court to consider.[^3] In Ferguson v. Charlton (2008),[^4] Spence J. of the Ontario Court of Justice set out the approach to be taken by the courts when deciding whether to dismiss a motion or application for non-compliance.

(a) The court must ask where there is a triggering event, such as non-compliance with a court order in the case or a related case.

If the triggering event has occurred, the court should ask whether it is appropriate to exercise its discretion in favour of the non-complying litigant by ordering by not sanctioning the litigant. The court’s decision as to whether or not to exercise its discretion in favour of the non-complying party ought to take into account all relevant history of the litigation and, more specifically, the conduct of the non-complying party.

If the court determines that it will not exercise its discretion in favour of the non-complying party, it will then exercise its broad discretion as to the appropriate remedy under subrule 1(8).

[20] This court recently considered and adopted the three-part test from Ferguson in Dumont v. Lucescu (2015)[^5] and Chiaramonte v. Chiaramonte (2015).[^6]

[21] In Purcaru v. Purcaru (2010), the Court of Appeal upheld the order of a trial judge who struck the husband’s pleadings and his financial statement and proceeded to a trial of the financial issues based solely on the evidence of the wife and her expert.[^7] Lang J.A. stated:

(ii) Nonetheless, the decision to strike pleadings and to determine the parameters of trial participation is a discretionary one that is entitled to deference on appeal when exercised on proper principles. The exercise of discretion will be upheld where the motion or trial judge fashions a remedy that is appropriate for the conduct at issue. In Sleiman v. Sleiman (2002), 2002 44930 (ON CA), 28 R.F.L. (5th) 447 at p. 448, a case involving a refusal to provide financial disclosure, this court upheld the motion judge’s determination that the appellant had demonstrated a “blatant disregard for the process and the orders of the court” as well as her decision precluding the appellant from contesting the wife’s financial claims. In Vacca v. Banks(2005), 6 C.P.C. (6th) 22, the plaintiff had repeatedly failed to comply with orders related to discovery and the progress of litigation. Ferrier J. for the Divisional Court, observed at p. 27 that the master’s remedy of the dismissal of the action may be an appropriate sanction to recognize the court’s “responsibility for the effective administration of justice.” [Emphasis added.]

(iii) The Onus

[22] As noted in Ferguson, once the court has found that Mr. Bullock breached the earlier orders of this court, the onus is on him to show why the court should exercise its discretion to find that rule 1(8) does not apply and that his pleadings should not be struck.[^8]

Applying the legal principles to the facts of this case

a) Did Mr. Sherlock breach the Orders of this Court?

Failure to pay spousal support

[23] This Court’s Order dated April 3, 2017, required to pay spousal support to Ms. Mullins in the amount of $9,500.00 per month, beginning April 1, 2017. Mr. Sherlock initially paid only $3,000 for April 2017. This represented a continuation of the support that had initially been ordered by Herold J. on September 19, 2013, and by Sproat J. on November 25, 2013, requiring the without-prejudice payment of $3,000 per month. When Mr. Sherlock retained Martha McCarthy & Co. on June 16, 2017, he paid the balance of $6,500, more than two months after it was due. I find that Mr. Sherlock breached the order for increased spousal support by delaying his payment, but eventually complied.

Failure to leave the proceeds of sale of the boat in trust

[24] Justice Trimble’s order dated August 5, 2014, required Mr. Sherlock to leave the proceeds of sale of the parties’ boat in trust with Robbins Appleby LLP.

[25] On May 1, 2017, Mr. Sherlock’s lawyer, Mr. O’Connor, wrote to Ms. Mullin’s lawyer and stated that the proceeds of sale had been paid to Mr. Sherlock at some point in the past. He wrote:

In follow up to our letter of April 26, 2017, I feel professionally obliged to explain something that has now been brought to my attention. I do not want to be overly dramatic about this but I do feel it necessary to make this disclosure and trust that you will agree that it is not particularly relevant.

In any event, I contacted David Taub, from Robins Appleby, to explain to him that he would be receiving a Direction regarding payments out of trust for taxes and repairs. He explained that he no longer had the funds in trust and was never made aware of the obligation to do so. Neither your predecessor – nor mine – ever thought that it was necessary to tell him – or provide him with a copy of Justice Trimble’s Order.

I am advised that he held the funds for some time and that he told my client that they were not the type of funds that he would normally be keeping in his firm trust account and so he provided the funds to my client.

For my client’s part, all I can say is that he was confused about these technicalities and/or legalities. He simply accepted Mr. Taub’s explanation.

I did explain to Mr. Taub that he is blameless in this situation. In the meantime, my client has made arrangements to re-deposit all of the funds from the boat sale to the Robins Appleby trust account. I have confirmation that that has now been done.

I have also explained to my client that I have a professional obligation to advise you of this – not only because it relates to a Court Order within this proceeding, but also to clear Mr. Taub of any concern that he could be accused of any wrongdoing.

[26] Ms. Mullin’s lawyer immediately responded, asking for proof of the authorization pursuant to which Mr. Taub and/or Robbins Appleby LLP received the proceeds of sale of the boat, the account number where Mr. Taub or his firm had held the proceeds of sale, proof of the authorization pursuant to which Mr. Taub and/or his firm had released the funds to Mr. Sherlock, including copies of the correspondence between them, statement of interest accruing during the period Mr. Taub or his firm held the funds in trust, proof of payment from Mr. Taub or his firm to Mr. Sherlock, the bank statements showing the deposits made by Mr. Sherlock, proof of the interest earned on the funds while held by Mr. Sherlock, and proof of repayment of the full amount, including interest, to Mr. Taub or his firm.

[27] On May 30, 2017, when a copy of Mr. Halpern’s letter was given to Mr. Taub, Mr. Taub replied, stating that Mr. O’Connor forwarded Mr. Halpern’s May 4, 2017, letter to him on May 10th, and that he had sent his reply to Mr. O’Connor, which he expected Mr. O’Connor would forward to Mr. Halpern shortly.

[28] On June 27, 2017, following an adjournment of Ms. Mullin’s motion on consent, and based on Mr. Sherlock’s decision to retain new counsel, Mr. Sherlock’s new lawyer, Ms. Hansen, wrote to Ms. Mullin’s lawyer, responding to his request for further information. She included an e-mail from Mr. Sherlock’s accountant, Ann Fan, to Robbins Appleby LLP dated September 30, 2016, seeking a transfer of the entire funds to the bank account of his new company, 1944231 Ontario Inc. Ms. Hansen confirmed that the funds had been transferred back to Robbins Appleby on April 27, 2017, and that Ms. Hansen was prepared to hold the funds in her trust account in accordance with Trimble J.’s August 5, 2014 Order.

[29] On October 16, 2016, Mr. Sherlock swore an affidavit in which he stated, at paragraph 10, “I was unwilling to pay for [the repairs] out of my pocket and suggested that any necessary repairs could be paid out of monies that were being held in trust from the sale of my boat at my former solicitors, Robbins Appleby.”

[30] On December 9, 2016, Mr. Sherlock swore a further affidavit in which he stated, at paragraph 14, “When I finally agreed to those repairs being paid out of the proceeds from the sale of the Florida property that was not satisfactory. They had to be paid out of the boat sale proceeds. I eventually did agree to this…”

[31] At the time when Mr. Sherlock swore to the above affidavits, he had already transferred the entire proceeds of sale from the boat to his company’s bank account. There is no evidence before me as to whether Mr. O’Connor’s proper response, upon learning of the breach of Trimble J.’s Order, contributed to the end of Mr. O’Connor’s retainer. Mr. Sherlock elected not to waive solicitor and client privilege over their communications, as was his right. Yet, while Mr. O’Connor’s and Ms. Hansen’s proper handling of the matter almost surely avoided an even more calamitous outcome of the breach for their client, Mr. Sherlock’s request, through Ann Fan, on September 30, 2016, for the deposit of the funds to Mr. Sherlock’s new company’s account, and his failure to restore the funds to his lawyer’s trust account immediately, rather than retaining them for more than six months until Mr. O’Connor arranged for them to be returned, support an inference of an intentional breach by Mr. Sherlock, and a conclusion that his evasive responses to Ms. Mullin’s disclosure requests, set out below, were a deliberate attempt to frustrate her efforts to obtain the disclosure she was entitled to, and not simply an innocently imperfect attempt to comply.

Failure to answer the outstanding questions asked on January 26, 2017

[32] At his questioning on January 26, 2017, Mr. Sherlock advised that he would require 90 days to comply with his undertakings. He has explained that he relies on his companies’ bookkeeper to prepare the kind of reports that Ms. Mullin’s lawyer requested. Over three months passed from January 26 to May 15, 2017, and there were still numerous requests for information that Mr. Sherlock had not complied with, as set out in Exhibit B to the affidavit of Armando Dominguez, the law clerk of Ms. Mullin’s lawyer, sworn May 15, 2017.

[33] In particular, at question 42 of his examination on January 26, 2017, Mr. Sherlock undertook to provide any documents within his possession, power, or control that supported the values contained in each of his Financial Statements and, to indicate, in any instances where such documents were not provided, that they did not exist. Mr. Sherlock failed to provide the following documents that would have to have been provided in order to comply with that undertaking:

a) Bank statements supporting the value of Mr. Sherlock’s Capital Bank, U.S. Chequing account *9606 as of the date of marriage and the date of separation;

b) Bank statements showing the balances of two additional U.S. chequing accounts at Capital Bank on the date of separation, referred to in Mr. Sherlock’s November 4, 2014 Financial Statement.

c) Bank statements supporting the value of Mr. Sherlock’s Scotiabank RRSP account *4545-17 for the date of marriage;

d) Proof of the personal loan in the amount of $200,000 that Mr. Sherlock claimed Sean and Julia Besson had made to him and that he owed to them on the date of marriage;

e) Documentation of the amount paid by GS Medical for the advance for payment of Mr. Sherlock’s boat, and for the purchase of the parties’ Florida condominium, which Mr. Sherlock claimed he owed to GS Medical as of the date of separation;

[34] At Question 185, Mr. Sherlock undertook to write to the law firms of McLean and Kerr, Pallet Vallo, and Tobe & Associates, and obtain a copy of any wills prepared by Mr. Sherlock between November 2000 and June 28, 2013, and to provide copies of their responses. Mr. Sherlock’s response, which was to provide a copy of a Will and to indicate that it was the “only Will”, did not comply with the undertaking, which was to provide a copy of the requests to the law firms and the responses received.

[35] At question 222, Mr. Sherlock undertook to ask Ms. Fan the purpose of preparing the letter dated January 26, 2012, referred to above, indicating that Mr. Sherlock’s income from GS Medical in 2011 was $454,500. Mr. Sherlock’s response, which was to state, “She did not prepare or sign this letter”, did not comply with his undertaking. Regardless of whether Ms. Fan prepared or signed the letter, which was on her letterhead and bears her signature, the undertaking required Mr. Sherlock to ask Ms. Fan the purpose of the letter and to elicit her knowledge of it.

[36] At question 248, Mr. Sherlock undertook to ask Mr. Jarvis the purpose of preparing the letter dated January 26, 2012, which states that Mr. Sherlock’s income in 2011 and 2012 was $454,500. Mr. Sherlock’s response, which was to state, “He has no recollection of ever signing or preparing this letter.”, like the response to the undertaking regarding Ms. Fan’s letter, did not comply with his undertaking, which was to ask Mr. Jarvis the purpose of preparing the letter, regardless of whether it was he who signed or prepared it or not. Mr. Sherlock was required to provide Mr. Jarvis’ knowledge regarding the letter and, if he had no knowledge of its purpose, to state that explicitly.

[37] At question 496, Mr. Sherlock undertook to ask Ms. Fan how the loans from GS Medical to Mr. Sherlock are reflected in the company’s Financial Statements. Mr. Sherlock complied with an earlier undertaking, at question 489, requiring him to confirm the extent of loans he had received from GS Medical from the date of separation to the present, by responding, “There have been no further loans.” However, when Mr. Sherlock responded to the undertaking at question 496 by stating, “There were no further loans.”, his response failed to comply with his undertaking.

[38] Mr. Sherlock’s Financial Statements sworn October 9 and November 15, 2013, included, among debts he said he owed on the date of marriage and on the date of separation, the following amounts owed to GS Medical:

a) Due to GS Medical Packaging Inc.: Amount remaining on advance in 2007 from GS Medical for re-build of matrimonial home after fire. Note: Value is an estimate provided by controller – value to be confirmed. On Date of Marriage and on Date of Separation: $300,000.

b) Due to GS Medical Packaging Inc.: Advance in 2012/2013 re: Florida Condo. Note: Value is an estimate provided by controller – value to be confirmed. Date of Marriage: $51,665.00; Date of Separation (and on date of Financial Statement): $478,981.00.

c) Due to GS Medical Packaging Inc.: Advance in 2013 for Boat Payment. Note: Value is an estimate provided by controller – value to be confirmed. Date of Marriage: $2,161.00; Date of Separation: $57,503.00.

[39] The above amounts changed in later Financial Statements, as follows:

a) In his Financial Statement sworn February 7, 2014, Mr. Sherlock adjusted the separation date balance of the loan for the boat payment from $57,503.00 to $167,503.00.

b) In his Financial Statement sworn November 4, 2014, he eliminated the loan for the re-build of the matrimonial home altogether for both the date of marriage and the date of separation.

c) In his Financial Statement sworn November 4, 2014, he adjusted the balance of the condominium loan and the boat loan on the date of marriage to nil.

d) In his Financial Statement sworn November 4, 2014, he adjusted the balance of the loan for the Florida condominium on the date of separation from $478,981.00, as it was estimated in the earlier Financial Statements, to $400,647.59, adding a separate loan “for interest on the Fl. Condo” in the amount of $43,333.29.

e) The Notes from the first three Financial Statements, to the effect that the values were estimates provided by the controller, were eliminated in the final Financial Statement.

[40] Even though Mr. Sherlock stated that no further loans were made after the date of separation, Mr. Sherlock claimed that the loans from GS Medical were outstanding on the date of separation. They were therefore relevant to the calculation of his Net Family Property, and of the Equalization payment, if any, that he owed to Ms. Mullin. Mr. Sherlock’s undertaking at question 496 required him to obtain information from GS Medical’s controller, Ms. Fan, referenced in his first three Financial Statements as the source of his estimates of the balances of the loans on the date of marriage and on the date of separation, and to provide it to Ms. Mullin. He failed to comply with that undertaking.

[41] At question 666, Mr. Sherlock undertook to provide a list of all travel he had done, for both business and pleasure, since the date of separation. In response, he stated, “All business trips: Dubai, China, Taiwan, Korea, Germany, England, and numerous cities within the United States.” Mr. Sherlock’s answer did not provide the particulars of the trips, as to when he made each of them, as to whether he travelled to each of the locations he identified once or on multiple occasions, and whether each of the trips was for business or pleasure. His answer therefore did not comply with his undertaking.

b) Should the Court strike Mr. Sherlock’s pleadings?

[42] Ms. Mullin began her proceeding on September 13, 2013. In order to establish her claim to spousal support and equalization of net family property, Ms. Mullin must prove Mr. Sherlock’s income and the value of his assets and liabilities on the date of marriage and on the date of the parties’ separation.

[43] Mr. Sherlock provided the following financial statements over the course of the proceeding:

Oct 9, 2013
Nov 15, 2013
Feb 7, 2014
Nov 4, 2014

[44] The amounts that Mr. Sherlock has advanced in his financial statements have varied. For example:

a) He stated that his 2013 income was:

i) $257,723.64 in his Oct. 9, 2013 Financial Statement

ii) $204,144.96 in his Nov. 15, 2013 Financial Statement

iii) $203,760.00 in his Feb. 7, 2014 Financial Statement

iv) $213,801.00 in his Nov. 4, 2014 Financial Statement.

b) He valued his property on the date of separation as:

i) $3,873,910.00 in his Oct. 9, 2013 Financial Statement

ii) $3,905,783.57 in his Nov. 15, 2013 Financial Statement

iii) $3,905,783.57 in his Feb. 7, 2014 Financial Statement

iv) $2,260,807.34 in his Nov. 4, 2014 Financial Statement

c) He stated that his debts on the date of separation were:

i) $1,768,962.72 in his Oct. 9, 2013 Financial Statement

ii) $1,793,097.56 in his Nov. 15, 2013 Financial Statement

iii) $1,898,622.70 in his Feb. 7, 2014 Financial Statement

iv) $1,750,039.80 in his Nov. 4, 2014 Financial Statement

d) He stated the net value of his property on the date of marriage as:

i) $2,500,687.49 in his Oct. 9, 2013 Financial Statement

ii) $2,335,775.02 in his Nov. 15, 2013 Financial Statement

iii) $1,635,773.37 in his Feb. 7, 2014 Financial Statement

iv) $266,268.12 in his Nov. 4, 2014 financial Statement

[45] The individual entries in the Financial Statements have similarly varied. I have referred above, for example, to the changing amounts that Mr. Sherlock provided for the loans from GS Medical that he claimed he owed on the date of marriage and the date of separation. It would be highly unfair to require Ms. Mullin to proceed to trial without the information Mr. Sherlock has repeatedly been ordered to provide to reconcile those differences, which she requires in order to quantify Mr. Sherlock’s income and Net Family Property and to establish her claims to spousal support and an Equalization Payment.

[46] Mr. Sherlock’s counsel argues that this is not a case, like many that Ms. Mullin relies on in support of her request to have Mr. Sherlock’s pleadings struck, where the defaulting spouse has repeatedly breached court orders. I do not agree. Many of the questions Mr. Sherlock was asked at his examination on January 26, 2017, and the undertakings he gave, and that this Court ordered him on April 3, 2017, to answer by April 26, 2017, sought information that he had been ordered to provide as earlier as November 25, 2013. For example, Sproat J.’s Order of that date required him to provide all documents, including bank statements, supporting the values of assets and debts claimed in his Financial Statements. Justice Sproat’s Order specifically required him to provide all documents relating to his non-arm’s length loans, which would include the loans from GS Medical for the matrimonial home, the Florida condominium, and the boat.

[47] Justice Trimble’s Order dated August 11, 2013, required Mr. Sherlock, within sixty (60) days, to use best efforts to make inquiries of Ann Fan and/or Peter Ryan Jarvis, to obtain a reconciliation of the detailed general ledger accounts provided for office and general and travel and entertainment to GS Medical Packaging Inc.’s (“GS Medical”) financial statements for 2009 to 2013. It also required him to use his best efforts to provide the details of the dates of all business trips that Mr. Sherlock had taken from the date of separation (June 28, 2013) to the present.

[48] I find that Mr. Sherlock has repeatedly breached the Orders of this Court for disclosure, and that he has done so wilfully, in a deliberate attempt to frustrate Ms. Mullin’s efforts to establish her claims. Ms. Mullin has been forced to incur substantial legal costs in making repeated motions for disclosure that Mr. Sherlock should have provided in response to the requests that Ms. Mullin made since early in the proceeding. In the last of its Orders, the court warned Mr. Sherlock that if he failed to answer all questions asked at his examination of January 26, 2017, by April 26, 2017, his pleadings would be struck. He did not comply with that Order and he must now suffer the consequence that he was warned would be imposed.

c) The costs of the motions heard March 1 and April 3, 2017

Legislative framework

a) Deferring costs to the trial judge

[49] I have considered whether the issue of costs should be reserved to the trial judge. I am mindful of Rule 24(10) of the Family Law Rules, which requires that the costs be decided at each step in the case. I am in as good a position as the trial judge will be to determine the costs based on the outcome of the motions and the reasonableness of the parties. I have therefore concluded that the issue of costs should not be reserved to the trial judge.

(a) General Principles

The objectives of a costs order

[50] Indemnification of the successful party to a proceeding is the paramount, but not the only, objective to be served by a costs order. Other objectives include encouraging settlement, discouraging unreasonable conduct and unnecessary litigation,[^9] and preserving access to justice.[^10]

[51] An appropriate costs order balances two conflicting principles:

A blameless litigant who is successful in a proceeding should not be required to bear the costs of having his or her rights tested.
Citizens should not be made to feel unduly hesitant to assert or defend their rights in court by the prospect that, if unsuccessful, they will be required to bear all of the opposing party’s costs.

[52] The ultimate objective in balancing these two principles is to ensure that the justice system works fairly and efficiently.[^11]

The discretion to be exercised

[53] The determination as to which party, if any, should compensate the other for his/her costs, and as to the amount of such costs, is “within the court’s discretion.”[^12] The court must exercise its discretion with due regard to the objectives of costs awards, and to Rule 24(11) of the Family Law Rules, which sets out the factors relevant to how the objectives are best attained in a particular case.

The outcome of the motion

[54] Consideration of the relative success of the parties on the issues in the motion is the starting point in determining costs.[^13] For the purposes of Rule 24(1), “success” is assessed by comparing the terms of an order against the relief originally requested, and against the terms of any offers to settle.[^14] Ms. Mullin was substantially successful in the motions, having obtained an order, on April 3, 2017, for increased spousal support and control of the sale of the matrimonial home, and directing Mr. Sherlock to answer the questions asked at his January 26, 2017 examination, and having obtained an Order now, striking Mr. Sherlock’s pleadings as a result of his non-compliance with earlier orders.

Factors to be considered

[55] Rule 24(11) of the Family Law Rules lists the factors the court should consider when quantifying costs:

(11) A person setting the amount of costs shall consider,

(a) the importance, complexity or difficulty of the issues;

(b) the reasonableness or unreasonableness of each party’s behaviour in the case;

(d) the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;

(e) expenses properly paid or payable; and

(f) any other relevant matter.[^15]

Importance, complexity, and difficulty

[56] The motion was of importance to the parties. The longer Ms. Mullin was delayed in obtaining disclosure, the greater the risk that Mr. Sherlock would prevail in a war of attrition against her, and frustrate her completely in her effort to establish her claims. The motions were of moderate complexity, owing to the following issues that had to be determined:

a) Whether Ms. Mullin had deliberately delayed the sale of the matrimonial home;

b) Whether Mr. Sherlock had, in fact, answered the numerous questions asked at the January 26, 2017, hearing;

c) Whether Mr. Sherlock had wilfully breached the prior Orders.

[57] The factual complexity of the motions were increased by the fact that Mr. Sherlock had provided four separate and conflicting Financial Statements, and by the fact that four separate disclosure Orders were alleged to have been breached.

Reasonableness of each party’s behaviour – scale of costs

[58] Rule 24(4) of the Family Law Rules explicitly authorizes the use of costs orders to express the court’s disapproval of a litigant’s unreasonable conduct. It provides:

24.(4) Despite sub-rule (1) [which provides that a successful party is presumed to be entitled to the costs of a motion], a successful party who has behaved unreasonably during a case may be deprived of all or part of the party’s own costs or ordered to pay all or part of the unsuccessful party’s costs. [Emphasis added]

[59] Ms. Mullins seeks payment of her costs by Mr. Sherlock on a full recovery or substantial indemnity scale on the ground that he acted in bad faith by failing to comply with the disclosure orders. In Nairn v. Lukowski, in 2002, and in Piskor v. Piskor, in 2004, Blishen J. adopted the definitions of bad faith that the court formulated in Erickson v. Erickson,[^16] in 2000, and Hunt v. Hunt, in 2001.[^17] In those cases, it was held that bad faith could consist of conduct intended to deceive or mislead,[^18] or of an intentional breach of an agreement or court order in order to achieve an ulterior motive.

[60] These formulations of bad faith are consistent with the definition set out in Black’s Law Dictionary, 6th ed. (St. Paul, Minn./West Publishing Co., 1990):

Generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation not prompted by an honest mistake as to one’s rights or duties but by some interested or sinister motive. Bad faith is not simply bad judgment or negligence but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that it contemplates a state of mind affirmatively operating with furtive design or ill will.[^19] [Emphasis added]

[61] Justice Perkins gave a more extensive explanation of bad faith in S.(C.) v. S.(C.) in 2007:

…The essence of bad faith is the representation that one’s actions are directed toward a particular goal while one’s secret, actual goal is something else, something that is harmful to other persons affected or at least something they will not willingly have supported or tolerated if they had known. However, not all bad faith involves an intent to deceive. It is rare, but not unknown in family cases, for bad faith to be overt – an action carried out with an intent to inflict harm on another person or a person affected by the case without an attempt to conceal the intent.

In order to come within the meaning of bad faith in Rule 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith. The requisite intent to harm, conceal or deceive does not have to be the person’s sole or primary intent, but rather only a significant part of the person’s intent. At some point a party could be found to be acting in bad faith when their litigation conduct has run the costs up so high that they must be taken to know their behaviour is causing the other party major financial harm without justification.[^20] [Emphasis added]

[62] Not every instance of unreasonable conduct attracts an order that costs be paid on a higher than partial indemnity scale. Substantial indemnity costs, like their predecessor, solicitor and client costs, are exceptional. Mark M. Orkin, in The Law of Costs,[^21] cites the Supreme Court of Canada in Young v. Young, in this regard: “Solicitor and client costs are generally awarded only where there has been reprehensible, scandalous, or outrageous conduct on the part of one of the parties.”

[63] In Empire Life Insurance Co. v. Krystal Holdings Inc., in 2009, Archibald J. stated: “Substantial indemnity costs are an exceptional award, saved for extenuating circumstances such as situations where there has been egregious conduct … or where a motion has been brought unreasonably”[^22] The same principle can apply where a motion is unreasonably opposed, but the court must be careful not to characterize every lack of success in a motion, or in the opposition to a motion, as evidence of bad faith to justify an award of costs on a higher scale for a lack of success.

[64] The determination of costs in the present case is governed by the FLR, not by the Rules of Civil Procedure,[^23] and a finding of bad faith is not a condition precedent to full recovery of costs by the other side under the FLR.[^24] Under the FLR, the traditional assumption that there are only two levels of costs (“party-and-party”/“solicitor-and-client”; or “partial indemnity”/“substantial indemnity”), no longer applies. The court is simply required to consider the range between a nominal amount of costs and full recovery.^25A finding that the motion should not have been brought, or should not have been opposed, is sufficient to attract costs on a higher scale.

[65] In a family law case, the court need not find “special circumstances” before ordering costs on a substantial or full indemnity scale.[^26] It is, however, important to preserve the distinction between substantial and full indemnity costs, in order to delineate the gradations of unreasonable conduct and apply predictable consequences attendant on each. This court reviewed the jurisprudence distinguishing between substantial and full indemnity costs in the context of the Rules of Civil Procedure in 1623242 Ontario Inc. v Great Lakes Copper Inc., in 2016. It stated:

The general rule is that costs follow the event and will be awarded on a partial indemnity scale.[^27] In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional and generally involve circumstances where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and/or unnecessarily run up the costs of the litigation.[^28] Substantial indemnity costs are the exception, not the rule.

Rule 57.01(4) provides that nothing in this rule or in the other costs rules affects the authority of the court to award all costs on a substantial indemnity scale or in an amount that represents full indemnity. The court has the discretion to order these costs, but it should exercise that discretion sparingly, in special and rare cases.[^29]

[66] I noted that the court awards costs on a substantial indemnity scale against litigants whose conduct is found to have been unreasonable, such as:

a) making a motion that had no prospect of success, or opposing a motion whose success was a foregone conclusion;

b) making unsupported allegations of fraud; or

c) failing to accept an offer that would have produced an outcome that was as favourable or more favourable than the one that ultimately resulted.

[67] The court awards full indemnity costs where there has been intentional wrongdoing, such as:

a) intentionally breaching agreements or court orders, as for financial disclosure, in order to gain strategic advantage;

b) intentionally making allegations of fraud, or otherwise lying to the court; or

c) intentionally relying on falsified documents, or making scandalous allegations of wrongdoing about the court or an officer of the court.

[68] The court concluded:

While there is discretion in the court to award costs on a full indemnity scale, such awards should be reserved for the most egregious cases. Such awards are appropriate, for example, where the court is punishing a litigant for falsifying documents submitted to the court, or intentionally making false allegations of fraud.[^30] [Emphasis added]

[69] I find that Mr. Sherlock sought to frustrate the court’s process by providing deliberately ambiguous and misleading answers to the questions he was asked and by failing to produce documents that he was ordered to produce as long ago as November 25, 2013. I do not find that he made statements that were outright lies. I therefore find that his conduct justifies an order requiring him to pay Ms. Mullin’s costs on a substantial indemnity scale.

[70] As a rule, the successful party in a motion made necessary by the responding party’s contempt is entitled to his costs on a substantial indemnity scale.[^31] This is because a finding of contempt is a finding of unreasonable conduct. Substantial indemnity costs do not follow automatically or invariably from a finding of contempt, but such a finding gives rise to a rebuttable presumption that the successful party is entitled to costs on a substantial indemnity scale. In In Astley v. Verdun, in 2013, Goldstein J. described the jurisprudence governing the imposition of substantial indemnity costs as it pertains to contempt, He then stated:

I characterize the test this way: there is a rebuttable presumption that substantial indemnity costs are appropriate in a contempt of court case. The presumption may be rebutted where the contemnor is suitably contrite, has attempted to purge his or her contempt, has taken steps to minimize costs incurred by the other party, and the contempt itself is towards the lower end of the "flagrant and wilful" scale.[^32]

[71] In assessing whether Mr. Sherlock is contrite and has taken steps to minimize the costs that Ms. Mullin incurred, I have considered his failure to comply with my Order dated April 3, 2017. I have also considered his failure to accept reasonable Offers to Settle made by Ms. Mullin.

[72] On December 22, 2016, the parties attended before André J. and as appears from Justice André’s endorsement, they spent the entire day trying unsuccessfully to negotiate a settlement. Justice André reserved the costs of that day’s attendance to the judge hearing the motions. The issues that were to have been heard that day were included in the motion that was before me on March 1, 2017.

[73] Prior to the December 22, 2016, attendance, Ms. Mullin served an Offer to Settle dated December 19, 2016, that included six severable Parts. Part 1 dealt with the relief that Ms. Mullin sought in her motion returnable March 1, 2017, including terms of sale of the matrimonial home, release of proceeds upon closing, and spousal support. The terms of Part 1 of Ms. Mullin’s Offer were more favourable to Mr. Sherlock than the Order made by me on April 3, 2017.

[74] Ms. Mullin served a second Offer to Settle, dated March 1, 2017, which dealt with the relief she was seeking in the long motion. The terms of that Offer were also more favourable to Mr. Sherlock than the Order made by me on April 3, 2017.

[75] Ms. Mullin seeks an Order that Mr. Sherlock pay her full costs in the amount of $57,206.05 for work completed by Torken Manes LLP (Mr. Halpern’s firm) and $33,567.36 for work done by her former solicitor, Mr. Kurtz, for a total of $90,773.41.

[76] While the Family Law Rules reduce judicial discretion, the Court of Appeal in M. (C.A.) v. M. (D.), in 2003, noted that the court retains discretion to fashion a costs order that will create a just remedy.[^33] In M. (C.A.) v. M. (D.), the Court of Appeal upheld an award of costs in a custody case, based on the respondent mother’s unreasonable conduct, notwithstanding her limited financial means. The same reasoning dictates that Ms. Mullin be awarded her costs on a substantial indemnity scale in the present case. To relieve him of his presumptive obligation to pay Ms. Mullin’s costs on a substantial indemnity scale would deprive Ms. Mullin of the protection she is entitled to from Mr. Sherlock’s contempt, and the costs benefit she earned by making a reasonable Offer to Settle which Mr. Sherlock did not accept.

[77] Within the spectrum of motions to enforce compliance with undertakings and require answers to questions refused, the present case justifies an order for costs on a substantial indemnity scale, owing to the fact that Ms. Mullin’s motion was made necessary by Mr. Sherlock’s repeated breaches of court orders for financial disclosure. Mr. Sherlock’s breaches of court orders justifies costs on a higher scale to sanction him for his unreasonable conduct.

Lawyer’s rates

[78] Ms. Mullin’s lawyer, Mr. Halpern, was called to the Bar in Ontario in 1985. He had practiced law for 32 years when he argued these motions. Mr. Halpern was assisted by Jessica Brown, who was called to the Bar in 2015.

[79] In determining the appropriate hourly rates to be assigned to him, the court follows the approach taken by Aitkin J. in Geographic Resources.[^34] That is, the starting point is the successor of the Costs Grid, namely, the “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy or Watson & McGowan editions of the Rules, sets out the maximum partial indemnity hourly rates for counsel of various levels of experience.

[80] The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same rate. The court adjusts the hourly rate, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 57.01(1). If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting amount of fees accordingly.

[81] The Costs Bulletin suggests maximum hourly rates (on a partial indemnity scale) of $350 for lawyers of over 20 years’ experience, and $225 for lawyers of less than 10 years’ experience.[^35] The upper limits of hourly rates in the Costs Bulletin are generally intended for the most complex and important of cases. However, having regard to Mr. Halpern’s 35 years’ experience, and the moderate complexity of the motion, he was entitled to claim at least $350 per hour in 2005. Ms. would have been entitled to claim $225.

[82] The Costs Bulletin, published in 2005, is now dated. Aitkin J. considered adjusting the Costs Subcommittee’s hourly rates for inflation, as Smith J. did in First Capital (Canholdings) Corp. v. North American Property Group,[^36] but the unadjusted rates of the lawyers in her case were only slightly less than the actual fees they charged, so she elected to use their unadjusted rates. Normally, however, it is appropriate to adjust the hourly rates in the Costs Bulletin to account for inflation since 2005.

[83] Based on the Bank of Canada Inflation Calculator, available online at http://www.bankofcanada.ca/rates/related/inflation-calculator/, the 2017 equivalent of the maximum rate of $350 per hour is $422.32. I round that amount down to $420.00. The 2017 equivalent of $225 per hour is 271.49. I round that amount down to $270.00.

[84] The Costs Bulletin entitles Mr. Halpern to claim a maximum hourly rate of $420.00 on a partial indemnity scale for himself and $270 per hour for Ms. Brown after adjusting their 2005 hourly rates for inflation.

[85] Rule1 of the Rules of Civil Procedure defines substantial indemnity costs to mean "costs awarded in an amount that is 1.5 times what would otherwise be allowable in accordance with Part I of Tariff A" - i.e. 1.5 times the partial indemnity rate.[^37] Costs calculated on a substantial indemnity scale, obviously,

may represent something less than full indemnity, but not always, depending on the seniority of the lawyers and their adjusted hourly rates, increased by 1.5. Courts have estimated substantial indemnity costs to be approximately 90% of costs on a full recovery basis,[^38] but this is not invariably so.

[86] On this basis, Mr. Halpern’s substantial indemnity hourly rate is $630.00 ($420 x 1.5), and Ms. Brown’s rate is $405.00. In Ms. Mullin’s costs submissions, she claims a full recovery hourly rate of $635 for Mr. Halpern and $300 for Ms. Brown. The costs ordered to be paid should not exceed the amount actually charged, as the principal objective of the costs order is indemnification. Accordingly, I allow an hourly rate of $630 for Mr. Halpern’s time and $300 for Ms. Brown.

Time properly spent on the case

[87] Rule 24(11)(d) of the FLR directs me to consider “the time properly spent on the case, including conversations between the lawyer and the party or witness, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order.”

[88] Mr. Halpern spent 38.4 hours on the motions and Ms. Brown spent 82.3 hours. Mr. Sherlock does not argue that the time spent by Ms. Mullin’s lawyers was excessive. In any event, although Mr. Sherlock has tendered his own lawyers’ Bill of Costs, he does not provide a breakdown of the costs, as Ms. Mullin’s lawyers have, which would permit a comparison of the two and a determination as to whether the costs Ms. Mullin claims for time spent in any particular task are so much greater than Mr. Sherlock’s as to appear excessive.

[89] This court has held, on several occasions, that even when one party attacks another’s costs as excessive, but does not put its own dockets before the court, the attack “is no more than an attack in the air.” In Risorto v. State Farm Mutual Automobile Insurance Co., (2003), Winkler J., then a motion judge, stated:

The attack on the quantum of costs, insofar as the allegations of excess are concerned, in the present circumstances is no more than an attack in the air. I note that State Farm has not put the dockets of its counsel before the court in support of its submission. Although such information is not required under Rule 57 in its present form, and the rule enumerates certain factors which would have to be considered in exercising the discretion with respect to the fixing of costs in any event, it might still provide some useful context for the process if the court had before it the bills of all counsel when allegations of excess and “unwarranted over-lawyering” are made. In that regard, the court is also entitled to consider “any other matter relevant to the question of costs”. (See Rule 57.01(1)(i). In my view, the relative expenditures, at least in terms of time, by adversaries on opposite sides of a motion, while not conclusive as to the appropriate award of costs, is still, nonetheless, a relevant consideration where there is an allegation of excess in respect of a particular matter. [^39] [Emphasis added.]

Disbursements

[90] Ms. Mullin claims $1,550.82 for disbursements, consisting of photocopies, and process serving fees. Mr. Sherlock does not take issue with the disbursements and I find them to be reasonable.

Other Relevant Matters

[91] I must “step back and examine the overall award with a view to determining whether it is ‘fair and reasonable’ for the kind of matter involved.” In determining what is fair and reasonable, I must take into account the reasonable expectation of the parties concerning the amount of costs.[^40]

[92] Awards of costs in motions to change custody or access vary greatly, depending on their factual complexity, the extent of the change sought, and the reasonableness of the parties’ conduct.

[93] At the outset of the long motion on March 1, 2017, I asked counsel to advise the court what amount they may be seeking for costs from the other party if they were successful and for what attendances those costs were claimed. Ms. Mullin responded that she should be awarded costs for the motions heard May 20, 2015, September 1, 2015, December 22, 2016, and for the long motion heard March 1, 2017, (which was continued on April 3, 2017.

[94] Mr. Halpern estimated Ms. Mullin’s costs for those attendances, including the questioning of Mr. Sherlock, but not including the later attendance on April 3, 2017. He stated that her costs, on a partial indemnity scale, were approximately $8,500 for fees, including HST and disbursements, which included 3 to 4 hours, or $2,500, that he anticipated would be required that day (March 1, 2017), and $12,000, including HST and disbursements, for Marvin Kurtz’s time.

[95] Mr. Halpern estimated that Ms. Mullin’s total costs for all attendances and preparation, on a full indemnity scale, were $37,500.00, inclusive of HST and disbursements. Mr. Sherlock’s counsel advised the court that he estimated his client’s costs for the same attendances were $25,000.

[96] I indicated that the estimates counsel were giving were estimates only, but that I required them in order to provide a basis upon which I could later determine what the reasonable expectations of each of the parties were as to the costs they might face if unsuccessful in the outcome. Counsel who appear on a motion should assume that a decision will be rendered that day, and be prepared to tender a Costs Outline, or at least an accurate estimate, of the costs incurred up to the beginning of the hearing.

[97] I am prepared to take the high end of Ms. Mullin’s counsel’s estimate as a basis for determining what Mr. Sherlock could reasonably have expected to pay, exclusive of the costs for the later attendance of April 3, 2017, and the preparation for it. I am not considering at this stage the costs associated with the hearing on July 5, 2017, as counsel asked that they have an opportunity to address those costs after Ms. Mullin’s renewed motion to strike Mr. Sherlock’s pleadings was decided.

[98] Ms. Mullin tendered, with her costs submissions, the invoice she had received from Torkin/Manes, dated March 16, 2017, for the period February 5 to March 1, 2017. The invoices includes 8 hours for each of Mr. Halpern and Ms. Brown on March 1st, and disbursements of $1,073.99. She also tendered the invoice she received dated April 30, 2017, for the period from March 20 to April 3, 2017, which includes 5.2 hours spent by Mr. Halpern and 5.3 hours spent by Ms. Brown, and $218 for disbursements. At the hourly rates noted above, I am adding a total of $12,306.00 (13.2 hours for Mr. Halpern, at $630 per hour, and 13.3 hours for Ms. Brown, at $300 per hour), plus HST of $1,599.78, plus disbursements of $1,459.95 ($1,291.99 plus 167.96 HST) for the costs incurred after the March 1 attendance, to arrive at an amount of $52,665.73 as the amount of costs that Mr. Sherlock should reasonably have expected to pay if he was unsuccessful in the outcome of the motions. In all the circumstances, I find that the costs in that amount to be proportionate to the interests at stake in the motions, and the amount Mr. Sherlock should have expected to pay if unsuccessful, especially having regard to the fact that he will face additional costs in connection with the hearing on July 5, 2017.

CONCLUSION AND ORDER

[99] For the foregoing reasons, it is ordered that:

Mr. Sherlock’s pleadings are struck out.
Ms. Mullin has leave to proceed to an uncontested hearing.
Mr. Sherlock shall have the right:

i) To attend at and participate in a settlement conference on the conditions set out below;

ii) To receive notice of any step in the proceeding taken by Ms. Mullin;

iii) To attend any step in the proceeding (including the trial) as an observer;

iv) To make closing submission at the trial, with leave of the trial judge.

In the remaining proceedings, Mr. Sherlock, shall not have the right:

i) To bring any motion or application;

ii) To question Ms. Mullin or any other person;

iii) To seek disclosure from Ms. Mullin or any other person;

iv) To participate in any step in the proceeding except as described above.

Mr. Sherlock shall pay Ms. Mullin’s costs of the motions, to and including April 3, 2017, including the costs reserved to the hearing of the motion, in the amount of $55,365.73, inclusive of fees, HST, and taxable disbursements, to be paid within 60 days.
If the parties are unable to agree on the costs of the hearing on July 5, 2017, including preparation, they shall submit written arguments, not to exceed 4 pages, and a Costs Outline, by November 30, 2017.

Price J.

Released: November 10, 2017

Appendix A

The disclosure required by Justice Sproat’s Order dated November 25, 2013, based on Ms. Mullin’s Request for Information dated October 29, 2013.

Personal disclosure

Proof of the Respondent’s current income;
Copies of personal income tax returns including all attachments to the returns, T4 slips, and any Notices of Assessment or Re-assessment for the past five tax years.
Copies of all personal credit card statements for any credit card held directly or indirectly by the Respondent for the past five years; and
Copies of all personal bank statements for any and all bank accounts held in the Respondent’s name solely or jointly with anyone else, or held directly or indirectly for the past five years.

Corporate Disclosure

All requests below apply to any corporations/businesses in which the Respondent has an interest, either solely or jointly with others, in Ontario or elsewhere including but not limited to GS Medical Packaging Inc., Arkle Medical Group Inc., Beacon Supplies Limited; 950392 Ontario Limited, Colin Andrews Brokerage, and Andrews Yachts Sales (“the corporations”):

a. Complete copies of the federal and provincial corporate income tax returns including all related schedules and attachments to the returns for the five most recent taxation years;

b. Copies of corporate Notices of Assessment (or Re-assessment if any) issued by the Canada Revenue Agency for the five most recent taxation years.

c. Copies of the corporate Financial Statements (formal or informal) for the five most recent fiscal years including for 2013, interim financial statements (monthly or quarterly); balance sheets and income statements for every quarter until the conclusion of this action;

d. Copies of any projections prepared in the five years ended fiscal 2013;

e. Copies of the Minute books or other corporate documents including the Articles of Incorporation and Share Registers;

f. Confirmation of the Respondent’s ownership in the corporations and if more than one shareholder, a copy of the Shareholder Agreement;

g. Detailed breakdown of owner-management remuneration, including but not limited to salaries, bonuses, expense allowances, car allowances, golf clubs, yacht clubs, and other club dues and expenses, entertainment including sports events and other emoluments provided to management, directly, indirectly, or in any manner whatsoever;

h. Copies of detailed general ledger accounts for the five fiscal years ended fiscal 2013 for the office, general, travel, and entertainment accounts;

i. Copies of any and all bank statements for any and all corporate bank accounts held in the name of any corporation in which the Respondent has an interest, in Ontario or anywhere else for the past five years;

j. Copies of any credit cards or lines of credit statements held in the name of the corporations or paid for by the corporations in which the Respondent or anyone not at arm’s length to him including Luan Avram has signing authority whether in Canada, the United States, or anywhere else for the past five years;

k. Schedule of all related entities and non-arm’s length entities;

l. Details of all significant third party and non-arm’s length part loans, advances, payments, and transactions within the immediately preceding five years;

m. Details of all non-recurring and unusual expenses during the immediately preceding five fiscal years;

n. Copies of any business insurance policies, if any;

o. Copies of the rental agreements for the premises upon which the corporations operate;

p. A list of all cars leased by the Respondent or any corporations including but not limited to the 2006 Ferrari and 2012 BMW.

Other Disclosure

Copies of any loan applications made by the respondent in the past five years;
A copy of the rental agreement and application for the Respondent’s current residence;
A detailed accounting of all the funds withdrawn from the joint line of credit that is registered against the matrimonial home in favour of the National Bank of Canada, from inception to date;
A detailed accounting of all funds and benefits paid by the corporations to or on behalf of Luan Avram;
Supporting documentation regarding all items in the Respondent’s Financial Statements sworn October 9, 2013, including assets on the date of marriage and date of separation;
A sworn Affidavit that the Respondent does not have any other accounts or assets aside from those set out in his sworn financial statements sworn October 9, 2013; and
Any other financial disclosure which may arise from the production of the above.

Appendix B

Disclosure required from Mr. Sherlock by the consent Order of Trimble J. dated June 12, 2014.

Respondent’s Disclosure

The Respondent, John Sherlock, (“the Respondent”) shall deliver responses to the Information Request of the Applicant’s forensic accountant, Mr. Jeffrey Feldman, dated March 13, 20143, to the Applicant, Katherine Ann Mullin (“the Applicant”) no later than June 25, 2014, as follows:

Beacon Supplies Limited

a. Financial Statements for Beacon Supplies Limited (“Beacon Supplies”)

GS Medical Packaging Inc.

b. Details of payments (dates and amounts), which comprised the T4 issued from GS Medical Packaging Inc. (“GS Medical”) to the Applicant for 2013;

c. Details of payments (dates and amounts), which comprised the management bonus paid to the Respondent in 2013 and 2009, if any;

d. Detailed general ledger accounts for the following for 2009 to 2013, which reconcile to the amounts per GS Medical’s financial statements:

i. Due to related parties; and

ii. Advertising and promotion.

e. Reconciliation of the detailed general ledger accounts provided for office and general and travel and entertainment to GS Medical’s financial statements for 2009 to 2013;

f. Confirmation as to the nature of records and support, if any, that was retained for transactions described as “petty cash” in the detailed general ledger for office and general and travel and entertainment for the past year;

g. Year-end adjusting journal entries for 2009 to 2013;

h. Details of the arrangement with Obstrukt Media and a copy of the related contract, if any;

i. Lease and/or purchase agreement for vehicles leased by GS Medical from 2009 to 2013 (not including the 2012 BMW 650i X Drive Coupe or the 2006 Ferrari F430 F1), to the extent not previously provided;

j. Deposits (cash or trade-in value) paid in connection with vehicles leased by GS Medical from 2009 to 2013 and confirmation of an accounting for the deposits;

k. Insurance premiums paid by GS Medical in connection with the vehicles identified above and a cop of the insurance policies for the period prior to 2013;

l. Journal entries, if any, which recorded the reimbursement of business related expenses charged on the personal CIBC visa credit cards of the Applicant and Respondent from 2009 to 2013 for a breakdown of the reimbursement of the business expenses;

m. Details of payments from GS Medical set out in Tab B attached to the Applicant’s Notice of Motion and confirmation about whether the highlighted payments were paid to the Respondent;

n. Details of any expenses related to the condominium at 403-A Emma Street, Key West, Florida, which were paid by GS Medical;

o. Details of the life insurance policies paid by GS Medical from 2009 to 2013, including the summary of insurance coverage and the related premium;

p. Missing statements for the following, if retrieved;

BMO Mosaik MasterCard

i. 2010: January, March, April, June to December;

ii. 2011: January to April, June, July, September

iii. 2013: July & November

Personal Accounts

iv. CIBC Bank Account 82-30595: November 2013 & December 2013

v. CIBC Aventura Visa statements (CAD): November 2013 & December 2013

The Respondent shall immediately provide the following additional disclosure to the Applicant to be provided no later than June 25, 2014:

a. Copy of purchase and/or lease agreement regarding the Porsche Cayenne;

b. Updated credit card and bank statements (both personal and corporate) from November 2013 to the present;

c. Summary of all business trips from the date of separation (June 28, 2013) to the present;

d. All missing credit card statements for his personal and business related credit cards and bank statements including but not limited to the following statements, if retrieved:

• Bank of Montreal Mosaik MasterCard, account number 5560…6616, January, March-April, June-December 2010; January-April 20111; June-July 2011; September 2011; July and November 2013;

• Any credit cards held in the name of Beacon Supplies Limited; and

• CIBC account #82-30595 for December 2010 and January-February 2011.

e. Details regarding the rental of the jointly owned condominium municipally described as 403A Emma Street, Key West, Florida, 330140, since the date of separation (June 28, 2013) to the present, including the following:

• Names of the renters;

• Copies of any rental agreements;

• Details regarding the rent received;

In the event that the Respondent does not provide all the above noted disclosure to the Applicant by June 25, 2014, at 6:00 p.m., then the issue of what relief, if any, the Applicant shall be entitled to at that time shall be determined on the return of the Applicant’s motion, on June 27, 2014.

Appendix C

Additional disclosure required from Mr. Sherlock by the consent Order of Trimble J. dated August 11, 2013

The Respondent, John Sherlock, (“the Respondent”) shall provide to the Applicant the following additional disclosure and/or to take the following steps regarding obtaining such disclosure within sixty (60) days:

a. To use best efforts to make inquiries of Ann Fan and/or Peter Ryan Jarvis, to obtain a reconciliation of the detailed general ledger accounts provided for office and general and travel and entertainment to GS Medical Packaging Inc.’s (“GS Medical”) financial statements for 2009 to 2013;

b. To make available whatever documentation is available from GS Medical that was retained for transactions described as “petty cash” in the detailed general ledger for office and general for the past year regarding GS Medical and to keep any further petty cash vouchers or other records, including those for travel, until this case is settled or tried. Should the Applicant’s accountant wish to attend at the offices of GS Medical, he may review such documents for the four previous years;

c. Confirmation of the drivers of each of the vehicles leased and/or purchased by GS Medical from 2009 to 2013 if possible;

d. Written confirmation that GS Medical did not pay any deposits in connection with vehicles it leased from 2009 to November 1, 2013, except with regard to the Ferrari vehicle;

e. Written confirmation of the insurance breakdown per vehicles for all vehicles leased by GS Medical for 2009 to 2013;

f. Details of the life insurance policies paid by GS Medical from 2009 to present, including the summary of insurance coverage including but not limited to details related to the Respondent’s life insurances policy with ARCA Financial Group, policy number 2795321 (Manulife) with coverage of 1 million dollars;

g. Best efforts to provide: details of dates of all business trips taken by the Respondent from the date of separation (June 28, 2013) to the present;

h. Make best efforts to obtain from rental agent, Kevin McGinty, copies of any rental agreements regarding the rental of the jointly owned condominium municipally described as 403A Emma Street, Key West, Florida, 33040, from the date of separation (June 28, 2013) to the present and any other documents available regarding such rentals. Such documents to include but not be limited to the names of the renters; details regarding the rent received; details of the payment of commission of the agent (which the Respondent represents is approximately 20%); accounting of the rent charged and collected (which the Respondent represents is approximately $7,200.00 net amount); and any documents regarding any repairs that the Respondent claims that he completed to the property and any expenses incurred for the property that have been paid for using the rental income.

The Respondent shall provide to the Applicant the following disclosure in accordance with the Supplementary Information Request of Jeffrey Feldman dated June 9, 2014 (as explained/expanded in his letter of June 20, 2014) and other additional disclosure requested by the Applicant as set out in the Applicant’s Amended Notice of Motion returnable June 27, 2014, within sixty (60) days:

a. Copies of bank statements, if any, for P & J Gill Holdings Ltd. for 2012 and 2013. If the Respondent claims that he no longer possesses bank statements for the company for those years, he shall provide the last bank statements for the company in his possession power and control. If the Respondent claims that P & J Gill Holdings Ltd. never held any bank accounts, he shall provide written confirmation of that fact;

b. Written confirmation from the accountant for P & J Gill Holdings Ltd., Royal Peter Jarvis that there are no financial statements for the corporation for 2011-2013 and that no tax returns were filed with the Canada Revenue Agency for this corporation for these years;

c. Copies of bank statements, if any, for 950392 Ontario Limited for 2011 to 2013. If the Respondent claims that he no longer possesses bank statements for the company for those years, he shall provide the last bank statements for the company in his possession power and control. If the Respondent claims that the company never held any bank accounts, he shall provide written confirmation of that fact;

d. Written confirmation from the accountant for 950392 Ontario Limited that there are no financial statements for the corporation for 2011-2013 and no tax returns were filed with the Canada Revenue Agency for this corporation for these years;

e. Whether and the manner in which the long term investments set out in the balance sheets of P & J Gill Holdings Ltd. and 950392 Ontario Limited relating to the years in which the long term investments were reflected on the financial statements for these companies in 2010 and 2011 were the fixed assets of GS Medical and any reconciliation and or explanation that he may be able to provide;

f. Written confirmation in regard to any charge back by GS Medical to the Respondent regarding vehicle related expenses for 2011 to 2013 including details of the categories to which they are charged (e.g. lease or insurance) and a copy of any detailed general ledgers for the accounts in which the vehicle expenses were recorded, if available;

g. The manner in which the business related expenses charged on the personal CIBC Visa credit cards of the Applicant and Respondent from 2012 and 2013 were recorded by GS Medical;

h. Copies of the Respondent’s 2008 and 2009 Notices of Assessment (personal) and 2008 Income Tax Return with all attachments, and if the Respondent does not possess them, obtain notices of assessment and income tax return information statement if available from CRA;

i. Written confirmation from Ryan Peter Jarvis that no financial statements have been prepared and that no corporate tax returns have been prepared or filed for Beacon Supplies Limited (and no corporate Notices of Assessment received) after 2010 other than what has been produced to the Applicant;

j. A sworn updated Financial Statement of the Respondent confirming his property interest as of the date of separation and the date of the statement;

k. A copy of the Record of Employment for the Applicant from GS Medical Packaging Inc. regarding her employment, and if not available, a new Record of Employment for the Applicant; and

l. Details of the sale of the Respondent’s Bob Seger boat (2009 Beneteau first 40 Yanmar 41.27 ft.) and a copy of all documents related to the sale.

Appendix D

Justice Emery’s Order for disclosure dated September 1, 2015

The Respondent is to allow the forensic accountant, Jeffery Feldman (or an employee of SLF Valuations Ltd. to attend on his behalf), to are-attend at the offices of GS Medical at a date and time of his choosing and that he be provided with the following by October 1, 2015:

a. A copy of the GS Medical detailed general ledger for John’s draw account for 2012, 2013, 2014, and 2015, as well as;

b. Samples of the journal entries, which reduced the account to reflect the business expenses John charged on his personal credit cards;

c. If so requested by Jeffery Feldman, after a review of those samples copies of all the journal entries of that period.

CITATION: Mullin v. Sherlock, 2017 ONSC 6762

COURT FILE NO.: FS-13-78828-00

DATE: 2017-11-10

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

KATHERINE ANN MULLIN

Applicant

and –

JOHN SHERLOCK

Respondent

REASONS FOR ORDER

Price J.

Released: November 10, 2017

[^1]: Brophy v. Brophy, 2004 25419 (ON CA), [2004] O.J. No 17 (QL), para. 11; Vetro v. Vetro, 2013 ONCA 303 para. 4

[^2]: Myers v Myers, 2014 ONSC 1804

[^3]: Myers, ibid, at para 29.

[^4]: Ferguson v. Charlton, 2008 ONCJ 1

[^5]: Dumont v Lecescu, 2015 ONSC 494, para 41.

[^6]: Chiaramonte v Chiaramonte, 2015 ONSC 179, para 48.

[^7]: Purcaru v. Purcaru, 2010 ONCA 92, 265 O.A.C. 121, at paras. 47-49.

[^8]: Ferguson, at para. 59.

[^9]: Fellowes, McNeil v. Kansa General International Insurance Co. 1997 12208 (ON SC), 1997 12208, 37 O.R. (3d) 464 (ON S.C.), para. 10

[^10]: 1465778 Ontario Inc. v. 1122077 Ontario Ltd. 2006 35819 (2006), 82 O.R. (3d) 757 (ON C.A.), per Feldman J.A., at para. 45

[^11]: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371, at paras. 25, 26 [Okanagan].

[^12]: Courts of Justice Act, s. 131.

[^13]: Butty v. Butty 2009 23111 (ON SC), [2009] O.J. No. 1887 (SCJ) at para. 4, citing Sims-Howarth v. Bilcliffe 2000 22584 (ON SC), [2000] O.J. No. 330 (SCJ)

[^14]: Johanns v. Fulford 2010 ONCJ 756, at para. 13

[^15]: Family Law Rules, O. Reg. 114/99 [as amended]

[^16]: Erickson v. Erickson (May 16, 2000), Doc. 00-FL-868 (Ont. S.C.J.)

[^17]: Hunt v. Hunt, 2001 ONSC 39078 ()

[^18]: Nairn v. Lukowski, (2002), 2002 78091 (ON SC), 29 R.F.L. (5th) 117 (Ont.S.C.J.), per Blishen J., at p. 120

[^19]: Piskor v. Piskor, 2004 5023 (ON SC), [2004] O.J. No. 796 (Ont. S.C.J.), per Blishen J., at paras. 9 to 12

[^20]: S.(C.) v. S.(C.), 2007 20279 (ON SC), [2007] O.J. No. 2164 (Ont.S.C.J.), per Perkins J. at paras. 16 and 17

[^21]: M. M. Orkin, The Law of Costs, 2d ed., looseleaf (Aurora, Ont.: Canada Law Book, 1987), at p. 2-46 [Orkin]; Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, at p. 154, re-stated in Perri.

[^22]: Empire Life Insurance Co. v. Krystal Holdings Inc, [2009] O.J. No. 1095 (S.C.), at para. 19.

[^23]: Rules of Civil Procedure, R.R.O. 1990, Reg 194

[^24]: Osmar v. Osmar, 2000 20380 (ON SC), 2000 20380 (Ont. S.C.), at para. 11, Aston J

[^26]: Sordi v. Sordi, 2011 ONCA 665, 283 O.A.C. 287.

[^27]: Bell Canada v. Olympia & York Developments Limited et. al. (1994), 1994 239 (ON CA), 1994 ONCA 239 (), 17 O.R. (3d) 135 (C.A.)

[^28]: Standard Life Assurance Company v. Elliott (2007), 2007 18579 (ON SC), 86 O.R. (3d) 221 (S.C.J.)

[^29]: 1623242 Ontario Inc. v Great Lakes Copper Inc., 2016 ONSC 1002, paras. 86 to 87

[^30]: 1623242 Ontario Inc. v Great Lakes Copper Inc., at para. 95

[^31]: Cassidy v. Cassidy, 2011 ONSC 791, para. 14; Astley v. Verdun [2013] ONSC 6734 (SCJ) at paras 52 to 58

[^32]: Astley v. Verdun, para. 57

[^33]: M.(C.A.) v. (M.(D.), 2003 ON CA 18880 (),per Rosenberg J.A., para. 45

[^34]: Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041, paras. 7 and 11 to 16

[^35]: “Information for the Profession” bulletin (“the Costs Bulletin”) from the Costs Sub-Committee of the Rules Committee (that the Costs Sub-Committee of the Rules Committee issued to replace the Costs Grid, which it repealed in 2005). The Costs Bulletin has advisory status only and not statutory authority, as it was not included in the Regulation that repealed the Costs Grid.

[^36]: First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359, 2012 ONSC 1359 (S.C.J.)

[^37]: See Hanis v. University of Western Ontario, 2006 23155 (ON SC), [2006] O.J. No. 2763 (Ont. S.C.), per Power J.

[^38]: 680195 Ontario Ltd. v. 2169728 Ontario Limited o/a Stoneybrook Auto Service, 2010 ONSC 4064, para. 8, citing Hanis v. The University of Western Ontario et. al., 2006 23155 (ON SC), [2006] O.J. No. 2763 (S.C.J.), Power J., at para. 46.

[^39]: Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 2003 43566 (ON SC), ONSC 43566 (), 64 O.R. (3d) 135, at para. 10 (S.C.), per Winkler J., cited in Springer v. Aird & Berlins LLP (2009), 2009 26608 (ON SC), 2009 ONSC 26608 (), 74 C.C.E.L.(3d) 243 (Ont. S.C.), at paras. 10-17.

[^40]: See: Boucher; Moon; Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638 (C.A.).

Mullin v. Sherlock, 2017 ONSC 6762

Case Summary

NATURE OF MOTION

BACKGROUND FACTS

ISSUES

PARTIES’ POSITIONS

a) Did Mr. Sherlock breach the Orders of this Court?

b) Should the Court strike Mr. Sherlock’s pleadings?

c) The costs of the motions heard March 1 and April 3, 2017

CONCLUSION AND ORDER

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Financial Outcomes

Issues

Statutory Provisions 4

Legal Tests 2

Legislation 2