CITATION: McCain v. Melanson, 2017 ONSC 916

COURT FILE NO.: FS-16-409757

DATE: 20170209

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ELEANOR MARIE NORRIE McCAIN, Applicant

AND:

JEFFREY JAMES MELANSON, Respondent

BEFORE: C. Horkins J.

COUNSEL: Don H. Jack and Jacqueline M. Mills, for the Applicant

Harold Niman and Richard Niman,, for the Respondent

HEARD at Toronto: January 26, 2017

ENDORSEMENT

introduction

[1] The respondent, Jeffrey James Melanson, brings a motion under rule 24(12) of the Family Law Rules, O. Reg. 114/99. He requests an order that the applicant, Eleanor Marie Norrie McCain, pay him $125,000 on account of his interim costs, without prejudice to his right to seek a further payment for interim costs after a Settlement Conference. The payment shall be a credit against any entitlement the respondent has under the Marriage Agreement or will be repaid if the court finds there is no entitlement.

legal framework

[2] Rule 24(12) states that “[t]he court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees.”

[3] Rule 24(12) is discretionary. In exercising discretion under rule 24(12), the court must ensure that the primary objective of fairness as set out in rules 2(2) and (3) is met. Specifically, the court must deal with cases justly and ensure that the procedure is fair to all parties. As Mesbur J. stated in Ludmer v. Ludmer, 2012 ONSC 4478 at para.14, "One of the primary themes of the case law is that orders may be required in order to 'level the playing field' between the litigants."

[4] The party seeking a payment under rule 24(12) does not have to prove that exceptional circumstances exist. Instead, the respondent must satisfy the following factors (see Stuart v. Stuart (2001), 24 R.F.L. (5th) at para. 8; Ludmer at paras.15-17; Sadlier v. Carey, 2015 ONSC 3537 at paras. 34-38 and Turk v. Turk, 2016 ONSC 4210 at paras. 4, 24):

1. On a balance of probabilities, the moving party’s claim/defence has sufficient merit.

2. The legal fees are necessary and reasonable given the needs of the case and the funds available.

3. The moving party is incapable of funding the requested amount.

[5] The applicant concedes that the respondent has satisfied the first two criteria, but argues that he is capable of funding his legal fees. While the applicant has conceded the first two criteria, it is nevertheless important to explain why the criteria are satisfied because it provides context for the motion and the third criterion that is in dispute.

analysis

[6] On October 25, 2016, Kiteley J. issued an order that set out a timetable for this motion. Deadlines were set for exchanging affidavits, books of authorities and factums. The respondent complied with the timetable. He filed an affidavit in support of his motion. The applicant did not comply. She was ordered by Kiteley J. to file her responding material by December 15, 2016. The applicant did not file any affidavits in response. As a result, the respondent’s evidence filed in support of his motion that is reviewed below is uncontested.

1. The Merit of the Respondent’s Defence/ Claim

[7] The applicant concedes that the respondent has established the merit of his defence and claim for the purpose of this motion. Aside from this concession, I find that he has clearly done so.

[8] The parties married on April 26, 2014. In advance, the applicant insisted that the respondent sign a Marriage Agreement and he agreed to do so.

[9] Before the Marriage Agreement was signed, the parties received independent legal advice and exchanged financial disclosure. The parties exchanged sworn financial statements and they were attached as schedules to the Marriage Agreement. The respondent’s financial statement showed that his debts exceeded his assets and he had a negative net worth of ($456,702.77). His income in 2013 was $400,000. The applicant’s financial statement showed that her net worth was $365,753,626.43. In 2013, her income consisted of $4.25 million in tax-free capital dividends. This is the only evidence of the applicant’s financial circumstances since she has not filed a financial statement in this Application.

[10] The Marriage Agreement was signed on April 24, 2014. The parties separated in January 2015.

[11] The applicant commenced this Application on March 2, 2016. The only relief she seeks is an annulment of the marriage. The applicant does not refer to the Marriage Agreement in her Application.

[12] In her Application, the applicant states that she is entitled to an annulment because the respondent “lied to her, deliberately misrepresented himself to her and tricked her into going through a ceremony of marriage … [h]ad she known the truth about [the respondent], she never would have married him.” As a result, she states that she did not give her “free and enlightened consent to be married to [the respondent]”.The applicant sets out the various ways in which she states the respondent misrepresented himself to her.

[13] In his Answer, the respondent denies the allegations against him. The respondent asserts his own claim. He asks for a divorce and an order that the Marriage Agreement be enforced with costs and prejudgment interest.

[14] In the Marriage Agreement, the parties waived all rights to spousal support and property. In the event of a marriage breakdown, section 4.2 of the Marriage Agreement states that the applicant will pay the respondent a lump sum of $5 million, less any amounts previously transferred or gifted by the applicant to the respondent during the marriage. There is no evidence that the applicant transferred any monies or gifts to the respondent prior to separation. The Marriage Agreement requires the applicant to pay the respondent the lump sum of $5 million within 120 days of the marriage breakdown.

[15] Further, the Marriage Agreement states that the respondent is entitled to share in the increased value of the matrimonial home during the marriage.

[16] The Marriage Agreement provides at section 9.11 that all terms of the agreement survive an annulment or a divorce.

[17] The applicant filed a Reply disputing the respondent’s claim. In her Reply, the applicant states that the Marriage Agreement “should be set aside pursuant to s. 56(4)(c) of the Family Law Act, R.S.O. 1990, c. F.3.” However, the applicant has not requested this relief in her Application. To state the obvious, a party cannot advance a claim for relief in a Reply. As a result, there is no claim to set aside this Marriage Agreement.

[18] The respondent has satisfied the first criterion. His defence to the Application and his own claims have sufficient merit. My reasons follow.

[19] In her Application, the applicant seeks an annulment. The basis for the annulment, as pleaded, is that the respondent “deliberately misrepresented himself to her and tricked her into going through a ceremony of marriage”.

[20] The circumstances in which deceptions, misrepresentations and even fraud can justify an annulment are severely limited. As stated in Iantsis (falsely called Papatheodorou) v. Papatheodorou, 1970 438 (ON CA), [1971] 1 O.R. 245 (C.A.) (“Iantsis”) at p. 248:

In Swift v. Kelly (1835), 3 Knapp 257 at p. 293, 12 E.R. 648, the Judicial Committee of the Privy Council expressed the following opinion as to the effect of fraud and deception upon the validity of a marriage:

…no marriage shall be held void merely upon proof that it had been contracted upon false representations, and that but for such contrivances, consent never would have been obtained. Unless the party imposed upon has been deceived as to the person, and thus has given no consent at all, there is no degree of deception which can avail to set aside a contract of marriage knowingly made.

[Emphasis added.]

[21] Deception as to the person means “the identity of one of the persons to the marriage, as when A is induced to marry B, believing that she is marrying C” (Sahibalzubaidi v. Bahjat, 2011 ONSC 4075 at para. 39, citing Iantsis at p. 249 ).

[22] Further, misrepresentations as to character or personality traits are not what the court envisioned in Iantsis (see Sahibalzubaidi at para. 41). These are the type of allegations that the applicant pleads against the respondent. Based on the law, such allegations do not entitle a person to an annulment.

[23] Iantsis is still good law in Ontario as confirmed in Grewal v. Kaur (2009), 2009 66913 (ON SC), 75 R.F.L. (6th) 443 (Ont. S.C.) and Grewal v. Kaur 2011 ONSC 1812 (“Grewal #2”) where the courts held, following Iantsis, that immigration fraud is not a ground for annulment. As van Rensburg J. stated in Grewal #2 at para. 86, Iantsis “remains good law in Ontario until specifically considered and overruled by the Court of Appeal.” It remains good law today.

[24] The respondent seeks a dismissal of the application seeking an annulment. The law in Ontario, as set out above, shows that the respondent has established the merit of his defence to the annulment claim and his request that the applicant’s claim be dismissed.

[25] As noted, the respondent has advanced his own claim for relief. He has clearly established the merit of his claim under the Marriage Agreement. As noted, the applicant did not file any affidavits in response to this motion. As a result, the following key facts are not disputed.

[26] The applicant insisted that the respondent sign the Marriage Agreement. Before the Marriage Agreement was signed, the parties had independent legal advice and exchanged financial disclosure. The applicant has not made a claim to set aside the Marriage Agreement. The respondent has a right under the Marriage Agreement to the $5 million payment and a share of the increase in the value of the matrimonial home, regardless of whether the marriage is annulled or a divorce granted. The respondent is entitled to the lump sum of $5 million within 120 days of the marriage breakdown. The applicant has not complied with the Marriage Agreement.

2. Necessity and Reasonableness of the Fees

[27] The applicant does not contest the necessity and reasonableness of the fees. It is worth noting that the applicant has not offered any evidence about the fees that she has incurred and expects to incur. She has at least five lawyers representing her in this Application.

[28] I am satisfied that the fees the respondent expects to incur are necessary and reasonable.

[29] The respondent explains that his lawyers will not represent him if he does not pay them. The $125,000 is intended to cover expected fees through to a settlement conference. The respondent has provided a detailed breakdown explaining the basis for the requested $125,000. This breakdown covers the time and fees for a senior and junior counsel to deal with the rule 24(12) motion, up to 36 hours of questioning and a settlement conference. The parties have a court order allowing them to question each other for up to 18 hours each.

3. Ability of Respondent to Fund his Legal Fees

[30] There is a considerable amount of evidence from the respondent about his inability to fund his legal fees. As I review and consider this evidence, it is once again important to emphasize that the applicant did not file any responding affidavits, even though she had ample opportunity to do so. As a result, the respondent’s evidence that I will now review is not challenged and I accept it as fact.

The Applicant’s vindictive, time consuming and costly approach

[31] The respondent explains that since their separation, the applicant “has embarked on a vindictive path … and she will stop at nothing to ruin me professionally and financially. She will use her vast financial resources to cause me to be unable to properly prepare my case”.

[32] The respondent explains that the applicant commenced her Application for an annulment “in bad faith with the clear intention to harm me.” Further in her Application, the applicant asserts “[w]holly irrelevant and inaccurate anecdotes that have no bearing on an annulment analysis.”

[33] Since issuing the application on March 2, 2016, the applicant has created “as many cost-consuming obstacles as possible”. The respondent describes these cost consuming obstacles as follows:

• The applicant’s 41 page Application “contains an extraordinary amount of irrelevant and scandalous allegations that she will surely use to produce as lengthy a trial as possible and call as many witnesses as possible”.

• The applicant refused to consent to the late filing of the respondent’s Answer unless he consented to unreasonable conditions. This forced respondent’s counsel to incur the expense of a motion.

• The applicant unsuccessfully brought a motion to remove Harold Niman as the respondent’s counsel. She brought a motion for leave to appeal this decision and this motion was dismissed.

• The applicant requested and obtained an order allowing her to conduct questioning of the respondent for up to 18 hours.

The Respondent is unemployed

[34] In January 2015 when the parties separated, the respondent was the Chief Executive Officer of the Toronto Symphony Orchestra (“TSO”).

[35] After the parties separated, the respondent states that the applicant “began a campaign against [him] that involved interfering with [his] role as CEO of the TSO.” Ultimately, after the applicant issued her Application, the respondent resigned from the TSO.

[36] The respondent explains that the applicant played a “direct and indirect role in [him] resigning from the TSO due to various communications sent by her or on behalf of her to the Board of the TSO and by allegations made in her application which were swiftly obtained by the media … the negative publicity has also had a secondary impact on [his] ability to obtain new employment across North America”. He believes that the applicant gave the Application to the press.

[37] The respondent resigned from the TSO in the spring of 2016. He has taken all reasonable efforts to find employment throughout North America. The respondent explains that the attention this case has received in the media and the allegations that the applicant has made against him have “evidently made [him] a less attractive candidate for positions for which [he] would otherwise be qualified.”

[38] In December 2016, the respondent incorporated a consulting company, but he has yet to earn any income from this company.

The Respondent’s financial circumstances

[39] The respondent’s November 8, 2016 financial statement provides the following financial information. In summary, the respondent’s expenses and debts well exceed his 2016 income.

[40] In 2016, the respondent’s income was $420,000. The income consists solely of the severance payment from the TSO. The severance money was not paid into the respondent’s RRSP. In 2017, the respondent has no income because he is unemployed.

[41] The respondent’s expenses for 2016 total $496,996.32. The respondent’s debts total $280,206.87. The debts include $104,541.43 that the respondent owes on his line of credit and three private loans of $167,574.36.

[42] The respondent has $205.19 in his chequing account and a zero balance in his savings account. The only asset of some significance is the respondent’s RRSPs. The primary objective of fairness would not be met if he were expected to use his RRSP funds to pay for legal fees.

[43] In May 2016, the respondent sold his condominium in Toronto for $1,006,644.04. After payment of the mortgage and other expenses, he received net proceeds of $110,888.74. The respondent used the net proceeds from the sale to pay legal expenses, renovation expenses and personal debt.

[44] The respondent has paid a considerable amount of money for legal fees. When the applicant brought her motion seeking to remove Mr. Niman’s firm as counsel for the respondent, the respondent had to pay to retain counsel for Mr. Niman (Jonathan Lisus and Paul Michell). In August, he paid them $37,000.Since then he has been billed a further $107,716.54. The applicant paid the respondent costs of the motion fixed at $80,000.

[45] The respondent states that fees for the applicant’s motion for leave to appeal are expected in the range of $15,000 to $20,000. The Divisional Court ordered the applicant to pay the respondent his costs of this motion fixed at $10,000.

[46] As of November 8 2016, the respondent had paid Mr. Niman’s firm fees of $44,814.05 and he owed the firm about $20,000. Additional fees have been incurred since that date.

The Respondent’s bank and credit card statements

[47] The respondent provided the applicant with his 2015 and 2016 bank and credit card statements. The two bank accounts (chequing and savings) and one credit card are listed on the respondent’s financial statement. The bank and credit card statements are extensive and were provided to the applicant’s counsel last December.

[48] Last week, counsel reached an agreement that allowed these records to be used for this motion. The applicant agreed that she, and no one on her behalf, would disseminate these records that are produced solely for this motion. It was also agreed that the applicant could file an affidavit from Steve Ranot (an accountant) in response to this rule 24(12) motion, even though her deadline for filing material expired on December 15, 2016. The applicant retained Mr. Ranot last December. Despite this agreement, an affidavit was not filed.

[49] A legal assistant at Mr. Niman’s office swore an affidavit that simply identifies and attaches the banking and credit card statements to the affidavit. This affidavit was filed for the motion. The applicant relies on these records to resist the respondent’s motion.

[50] The applicant’s counsel makes two arguments that flow from his review of these financial records. First, counsel argues that the records show the respondent travelled and went on a spending spree. If he had not done so, counsel argues the respondent would have money to pay for legal fees. Second, the applicant’s counsel argues that the records show significant unexplained cash infusions. Therefore counsel argues that the court should draw an adverse inference and find that the respondent has significantly more resources available to him than he has disclosed, and dismiss his motion.

[51] Aside from what the records reveal, there is no evidentiary basis for the two arguments. Instead, counsel for the applicant provided his submissions about the records that I will now review. This court is asked to accept the arguments based on a review of the respondent’s bank and credit card statements.

[52] I will deal with the travel issue first. The evidence regarding the respondent’s travels covers late August 2016 until the end of 2016. The respondent travelled to several destinations in North America during this time frame. He explains that he has travelled extensively since August, because he is actively seeking employment across North America. On some occasions, his current partner has travelled with him. He travelled to California for a job interview and used the occasion to travel around the area. Some of the trips were for public speaking engagements and board related commitments. The trip to Manitoba was an annual trip to his family cottage. In late September and October, he travelled to British Columbia and the Yukon where his partner is from. They stayed with friends and family and used the trip to explore this area of the country. He states that they generally travelled “in an overall frugal fashion”.

[53] The applicant’s counsel submits that the “travel portion” of the credit card expense for 2015 was $92,858.16 and in 2016 it was $53,232.53. Assuming this is accurate, what flows from this? Travel in the year 2015 is not particularly relevant since the respondent was employed. However, the comparison between 2015 and 2016, shows that the respondent significantly decreased his travel spending in 2016.

[54] The respondent has explained why he travelled in 2016 and this evidence is not contested. If the respondent had not travelled at all in 2016, in theory, he would have had $53,232.53 to pay for legal expenses. This would not be enough to pay what he currently owes in fees and the fees that are expected through to a settlement conference. There is no doubt that the respondent is unemployed. In my view, it was reasonable, given the respondent’s nature of employment for him to travel and actively look for employment across North America and to attend at speaking and board commitments. I reject the applicant’s argument that the money should have been spent on legal fees.

[55] The second argument focuses on the flow of money in and out of the bank accounts and the credit card. The main bank account is the chequing account. In summary, the applicant’s counsel argues that the records show the respondent spends more money than he earned. Counsel argues that there are unexplained cash infusions into the accounts. In total, the cash exceeds his income. Therefore counsel argues that the respondent must have other funds available to him that he has not revealed.

[56] Counsel asks the court to draw an adverse inference against the respondent and deny his motion. In essence, counsel asks the court to reject the respondent’s extensive unchallenged evidence and accept his interpretation of the bank and credit card statements that have never been analyzed.

[57] I reject this argument. My reasons follow.

[58] The applicant’s counsel prepared charts of the deposits and withdrawals in the respondent’s chequing account that exceeded $5,000 (the value of smaller amounts was not addressed in submissions). Counsel argues that there are large unexplained deposits and withdrawals. I am assuming that counsel’s charts are accurate.

[59] The applicant’s counsel also prepared a chart of all credit card expenditures for 2015 and 2016. According to this chart, the expenditures in 2015 totalled $343,341.35 and, in 2016, the expenditures decreased to a total of $178,150.48. I fail to see how this assists the applicant. The credit card statements show that the respondent’s spending is steadily decreasing. This is consistent with his evidence of unemployment.

[60] Given counsel’s late presentation of the charts, the respondent’s counsel did his best to offer a responding submission. For example, he was able to identify the deposit of the condominium sale proceeds and loans. As well, the respondent’s counsel identified numerous entries in 2015 and 2016 to show that the respondent regularly transferred monies between his accounts. This raises the concern that the charts prepared by applicant’s counsel are double counting the same amount.

[61] The chart for 2015 shows that $1,075,785.39 was deposited and $1,078,331.73 was withdrawn. The respondent’s T4 for 2015 shows income of $535,266.70. I appreciate that this total exceeds his 2015 income. The respondent purchased the Toronto condominium in 2015 and this could explain the amount of cash in and out of the accounts.

[62] In 2016, for all months except December that is not available, $513,951.13 was deposited and $515,286.73 was withdrawn. The applicant’s counsel argues that these deposits are greater than what the respondent earned and therefore he must have other sources of income.

[63] In 2016, the respondent earned $420,000. That year, the deposits in the chequing account exceeding $5,000, total $513,951.13. Simply because this total exceeds the respondent’s income in 2016 does not mean that he is receiving cash infusions that he has not revealed. His November 2016 financial statement offers an explanation. The financial statement shows that the respondent received loans (totalling $167,574.36). Two of the loans totalling $125,000 were received in 2016. As well, the respondent received the net proceeds from the sale of his condominium ($110,888.74). The net proceeds were deposited into the chequing account.

[64] In the face of the respondent’s compelling uncontested evidence, applicant’s counsel asks the court to reject the respondent’s evidence and find that he has misrepresented his financial circumstances and ability to pay his legal fees because of what counsel says the banking and credit cards reveal. Counsel argues that the respondent has the obligation to explain these accounts and he has not done so.

[65] The banking and credit card statements do not show on a balance of probabilities that the respondent has undisclosed sources of cash. To draw such a conclusion would require a forensic evaluation. The applicant could have undertaken this exercise because she received the records in December and hired Mr. Ranot. Although her deadline for filing an affidavit had expired, she secured an extension and yet failed to file an affidavit from Mr. Ranot. In these circumstances, it was inappropriate and unfair for the applicant’s counsel to present his own interpretation of the records at the last minute.

[66] One must remember that the parties are at the beginning of this litigation. There has been no questioning. Given the late decision to file the records, the respondent through his counsel has done his best to explain the records. I recognize that every entry in the accounts has not been explained. However, there has been a sufficient explanation for the purpose of this motion.

[67] The respondent has met the burden of proof on this motion. It is clear that he cannot afford to pay his legal fees. The respondent had to sell his condominium to access cash and he has incurred debt through loans and his line of credit. I doubt that he would have taken these steps if he had undisclosed cash.

[68] The applicant has made no claim to set aside the Marriage Agreement. The applicant agreed to pay the respondent $5 million dollars and his share of the increased value of the matrimonial home, even if the marriage is annulled. She now refuses to honour the Marriage Agreement that she insisted be signed. If the applicant had complied with the Marriage Agreement, this motion would not have been necessary.

Procedural Issues

[69] The respondent has every reason to be concerned with the future cost of this litigation. He has had to borrow money from friends and family, use his line of credit and sell his condominium to access the net value. He is unemployed and cannot find a new job. The applicant does not deny that she “has embarked on a vindictive path … and she will stop at nothing to ruin [the respondent] professionally and financially.”

[70] Family Law Rule 2(2) states that the primary objective of the Rules “is to enable the court to deal with cases justly”. Rule 2(3) states:

Dealing with a case justly includes,

(a) ensuring that the procedure is fair to all parties;

(b) saving expense and time;

(c) dealing with the case in ways that are appropriate to its importance and complexity; and

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

[71] Rule 2(4) states that 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."

[72] The court has a duty under rule 2(5) to promote the primary objective by active management of cases as follows:

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;

(c) helping the parties to settle all or part of the case;

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

(e) considering whether the likely benefits of taking a step justify the cost;

(f) dealing with as many aspects of the case as possible on the same occasion; and

(g) if appropriate, dealing with the case without parties and their lawyers needing to come to court, on the basis of written documents or by holding a telephone or video conference.

[73] Active management is required to ensure that this case proceeds in a just and timely manner. The orders that I have made below are necessary to achieve the primary objective of the Family Law Rules.

conclusion

[74] In summary, I make the following orders:

1. The applicant shall pay the respondent $125,000 on account of his interim costs, without prejudice to his right to seek a further payment for interim costs after a Settlement Conference. The money is payable by February 24, 2017.

2. The $125,000 payment shall be a credit against any entitlement the respondent has under the Marriage Agreement or shall be repaid if the court finds there is no entitlement.

3. Justice C. Horkins shall manage this case and decide all issues until further order of the court.

4. The parties shall immediately agree to a timetable to complete questioning and a date to conduct a settlement conference.

5. The settlement conference shall be heard by Justice A. Harvison-Young or Justice S. Stevenson. Counsel shall agree on a date when either judge is available. The date will be chosen and booked with the trial co-ordinator and included in the timetable.

6. The questioning and settlement conference shall be completed by June 23, 2017.

7. The timetable shall be filed with the court by February 24, 2017.

8. If the parties do not reach a final settlement before or at the settlement conference, they shall fix a date at the settlement conference for a final hearing of the dispute. The final hearing shall be completed by the end of 2017.

9. No further motions may be brought unless they are scheduled with Justice C. Horkins. Counsel may schedule necessary motions with Justice Horkins by conference call, to be set up with the trial co-ordinator.

10. As agreed between the parties, the applicant shall pay the respondent his costs of the motion fixed at $10,000 all inclusive payable by February 24, 2017

___________________________ C. Horkins J.

Released: February 9, 2017