Court File and Parties

COURT FILE NO.: FS-13-00018911-0000 DATE: 20180817 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MARIA RUJA, Applicant AND: IOAN RUJA, Respondent

BEFORE: J. Wilson J.

COUNSEL: Jason Cherniak, for the Applicant Ioan Ruja, representing himself

HEARD: August 14, 2018

Endorsement

The Motions

[1] The former husband (the Respondent) seeks to terminate the garnishment proceedings brought by the former wife (the Applicant) to enforce the outstanding judgment against him due to his recent assignment in personal bankruptcy. The amount outstanding was confirmed by Perkins J. on April 28, 2017, to be $63,538.56. The Respondent asserts that the outstanding judgment is an equalization payment and will be extinguished as a result of his assignment in bankruptcy.

[2] The Applicant seeks an order to change to clarify that the outstanding judgment as yet unpaid is lump sum spousal support. Hence this amount will not be discharged by the bankruptcy proceeding. The Applicant also seeks an order that the Court hold the Respondent’s passports until he has paid the amounts owing.

[3] The Trustee in bankruptcy takes no position in this motion.

[4] The Applicant has obtained an order dated July 31, 2018, lifting the stay of proceedings to allow the Applicant to establish the amount she is entitled to for support, and to enforce payment of any such amount.

Background

[5] In this action, the Applicant claimed a division of property and lump sum support for the significant support arrears. The parties, represented by counsel, settled their outstanding action at a conference. The terms of the agreement reached are reflected in the consent judgment of Kiteley J. dated October 19, 2016, which set aside a prior agreement of the parties made without legal advice, and ordered that a global lump sum payment be made to settle the Applicant’s claim for both support and property in the amount of $175,000.00 (the Consent Judgment). The Consent Judgment required the Respondent to pay the amount of $175,000.00 in three installments.

[6] It is clear from the background material that the Consent Judgment was a settlement of the Respondent’s obligations to pay spousal support, payable as lump sum support, as well as for a division of net family property.

[7] This was a 29-year traditional marriage with two children. The Respondent earned more than the Applicant. She was clearly entitled to arrears of support and to ongoing periodic support. Given the parties’ acrimonious history, the Applicant sought lump sum support.

[8] The Respondent defaulted on all three installment payments.

[9] Unbeknownst to the Applicant prior to entering into the settlement, the Respondent had applied to increase the mortgage on the formerly jointly owned matrimonial home. He did not disclose this to the Applicant.

[10] It was a term of the Consent Judgment that a certificate of pending litigation be registered against the former matrimonial home pending payment of the Consent Judgment to ensure that the equity in the former home would be available to ensure compliance. Unfortunately, former counsel for the Applicant did not register the certificate of pending litigation in correct form prior to the mortgage being increased and the funds advanced.

[11] The Respondent increased the mortgage. Instead of paying off his obligation to the Applicant, he paid off other debt and used the funds for other purposes.

[12] On March 23, 2017, the matter came before me on a motion. I ordered that the Respondent sell the former jointly owned matrimonial home that was registered in the Respondent’s name, to pay the Consent Judgment. The home was sold for $455,000.00 leaving net proceeds in the amount of $116,216.74 after deducting the mortgage and closing costs. These funds were paid to the Applicant in partial satisfaction of the Consent Judgment.

[13] The Applicant has made various unsuccessful attempts to collect the balance of the Consent Judgment in the amount of $63,538.56. When the Applicant brought garnishment proceedings against the Respondent realizing two small payments totalling $378.29, the Respondent in March 2018 took steps to declare bankruptcy, seeking to extinguish his obligations to the Applicant and other creditors. The Applicant is his largest creditor.

Conclusions

[14] The Applicant brings this motion to change seeking to vary the Consent Judgment to declare that the outstanding amounts owing should be characterized as spousal support. I conclude that the outstanding amount owing to the Applicant in the amount of $63,538.56, less the two payments received in the garnishment, is lump sum spousal support as yet unpaid flowing from the Consent Judgment. I reach this conclusion for four reasons.

[15] First, it is clear that the Applicant was entitled to support in this lengthy marriage at the time the Consent Judgment was entered into.

[16] In the brief filed for the conference before Kiteley J. resulting in the settlement, the Applicant sought the amount of $92,323.00 for arrears and lump sum spousal support.

[17] The Applicant was also entitled to a division of net family property. The Applicant calculated her entitlement to property, taking into account what she had already received to be $112,528.00. The Applicant had significant equity in what was formerly the jointly held matrimonial home at separation which was approximately $100,000.00.

[18] It is reasonable to attribute the payment already made of $116,216.74 as a payment for the division of property, as the proceeds were derived from the former jointly held matrimonial home.

[19] Second, the Consent Judgment provides in case of non-compliance with the Consent Judgment that the matter could be returned to the trial list for a determination of issues on the merits. In light of the lengthy history and a concern about costs, the Applicant reasonably chooses to proceed to enforce the outstanding judgment confirmed by Justice Perkins as lump sum support, rather than continuing the litigation.

[20] The Respondent cannot run from his spousal support obligations. If the issue of support was decided at trial today, there is no doubt that the Applicant would be entitled to ongoing periodic spousal support, secured to ensure compliance, or lump sum support if assets could be located.

[21] Third, the Respondent does not come to court with clean hands. Prior to the settlement, the Respondent had applied to increase the mortgage. This important fact was not disclosed. Had the fact been disclosed, the Respondent would not have been entitled to remortgage the home until the Applicant’s entitlement had been determined and paid.

[22] As a result of the Respondent’s non-disclosure, he has successfully frustrated the Applicant obtaining full payment upon the Consent Judgment. He received the mortgage funds from the refinancing of the former jointly owned matrimonial home on the very day he was to make the first capital payment of $50,000.00. At the date of separation, the debt against the matrimonial home was approximately $143,000.00. The Respondent increased the mortgage debt to $315,000.00. Instead of paying the Consent Judgment he chose to ignore the obligation to the Applicant and used the funds to pay other debts and for other purposes.

[23] Finally, the decision Sim v. Sim (2009), 66 R.F.L. (6th) 185 (Ont SC), and other cases [1] confirm that the bankruptcy of one party resulting in an equalization payment not being made may result in a material change in circumstances justifying an award of lump sum spousal support. Such an order respects and preserves the intent of the legislation to protect separating spouses and their children.

[24] Section 178(1)(b) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, recognizes that spousal support payments are in a separate category of obligation that survives an assignment in bankruptcy.

[25] For these reasons it is appropriate that I declare that the outstanding judgment in the amount of $63,538.56, less the two payments received in the garnishment, is lump sum support as yet unpaid flowing from the Consent Judgment. This award of spousal support survives the Respondent’s assignment in bankruptcy.

The Outstanding Request to Challenge the Consent Judgment

[26] The Respondent has made a variety of accusations in his lengthy motion materials that the Applicant and her counsel misrepresented the facts to Kiteley J. and to the Respondent in the settlement conference prior to entering into the Consent Judgment. He argues that these misrepresentations should undermine the integrity of the Consent Judgment. I explained that he could not raise these issues in this motion, and that he would have to bring a proceeding to seek to set aside the Consent Judgment for non-disclosure or misrepresentations.

[27] The Respondent intends to take such steps to, in his words, seek justice. He has a case conference scheduled dealing with this issue.

[28] Having reviewed all of the allegations and in the context of the history of this case, I expressed my doubts to the Respondent at the conclusion of argument about the unlikely success of the Respondent’s proposed challenge of the Consent Judgment. The burden on a party seeking to set aside a negotiated agreement with legal advice is very high.

[29] I am concerned about escalating costs. I have strongly recommended that in the conference that the parties review the Respondent’s actual financial situation with full disclosure to come up with a realistic schedule for the Respondent to repay the outstanding support obligation.

Costs

[30] I have heard submissions by counsel for the Applicant for costs. I cannot order costs for the motion to stay the bankruptcy proceeding. I do not think this is a case for substantial indemnity costs of this motion. The motion had to be brought to clarify the rights and obligations between the parties.

[31] I fix the costs payable by the Respondent to the Applicant in the amount of $3500.00 inclusive of HST and disbursements payable forthwith.

J. Wilson J. Date: August 17, 2018

[1] See Scott v. Scott, 2017 ONSC 346; C.C. v. P.C., 2015 ONSC 7530; Schreyer v. Schreyer, 2011 SCC 35.