Babcock v. Murano, 2018 ONSC 5079

KINGSTON COURT FILE NO.: 420/15

DATE: 20180827

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Marjorie Frances Babcock

Applicant

– and –

Joe Murano

Respondent

Lanny S. Kamin, for the Applicant

Theresa J. Van Luven, for the Respondent

HEARD: August 22, 2018 at Kingston

REASONS FOR DECISION ON MOTION

SWARTZ J.

Overview and Issues

1This is a long standing, high conflict matter commenced in 2015. It has been delayed on many occasions. There have been three cost orders made against the Respondent, Mr. Murano. He has paid two. The third remains unpaid.

2On motion before me, the Applicant Ms. Babcock, seeks determination of the following question:

3Should Mr. Murano be foreclosed from replying to and participating in the Motion to Strike that she has commenced because he continues in breach of a cost order of this Court made by Justice Robertson on October 31, 2017?

4Both parties have through counsel and on the record, agreed that the cost order of Justice Robertson of October 31, 2017 is in the nature of spousal support and survives the bankruptcy filing of Mr. Murano, which occurred following the October 31, 2017 cost order.

5The dispute also lies in the question which Mr. Murano asks this Court to address as follows:

6Does the fact of Mr. Murano's bankruptcy filing in May of 2018 (following the October 31, 2017 cost order) prevent this Court from granting the order requested by Ms. Babcock?

7It is agreed also between the parties and it is the law, that Mr. Murano's bankruptcy does not stay this current proceeding relating to spousal support. Mr. Murano asserts that Ms. Babcock is compelled to serve a proof of claim within the bankruptcy proceeding and is thereafter subject to payment of available dividends from the trustee in the course of his bankruptcy. She has declined to file a proof of claim. It is anticipated and uncontradicted between the parties that Mr. Murano will not be discharged from bankruptcy for approximately two years.

8Mr. Murano asserts further that the Applicant, Ms. Babcock, is also foreclosed from insisting on payment of the spousal support cost order until after his discharge from bankruptcy and not before.

9On the one hand he acknowledges that his bankruptcy does not stay the spousal support action in this Court, that the cost order is related to spousal support and is not discharged in his bankruptcy and survives his bankruptcy and he then asserts that despite these facts, he should be protected in this proceeding from enforcement or the effects of that cost order because of his bankruptcy. Further he submits that the Applicant's participation in this litigation is to be circumscribed in the sense that she must continue with the litigation in which Mr. Murano claims benefits of participation while at the same time he continues in breach of a cost order of this Court of $8,012.82 to which she is entitled to.

10Mr. Murano has asserted to me today that he wishes to continue to participate in this process and that he ought to be able to file responding materials to the Motion to Strike of Ms. Babcock. He claims that he ought not be compelled to pay the cost order before participating further. All this despite the fact that he agrees clearly on the record that this process is not stayed by the bankruptcy, it is entitled to proceed as it relates to spousal support and that the cost order survives the bankruptcy as it relates to spousal support.

Background Facts

11The parties began cohabiting in 1985 and separated in early 2014. They were never married. Litigation was commenced between them in September of 2015 and continues to date. The only issues outstanding between them are spousal support issues. There are no children of this relationship. It is unnecessary at this stage to detail the further history of the parties other than to note that the file has been continually litigated since 2015. There have been ongoing problems with the Respondent's compliance with various disclosure and other orders.

12Three cost orders have been made against Mr. Murano. Two of which have now been paid. The first cost order was made against Mr. Murano on December 9, 2015 in the amount of $2,500 by Justice Minnema. A subsequent cost order was made against Mr. Murano on October 31, 2017 in the amount of $8,012.82 by Justice Robertson. A subsequent cost order was made against Mr. Murano on May 24, 2018 in the amount of $1,000 by Justice Minnema. The October 2017 order is the one in issue today.

13Over the years of this litigation there have been various orders, many of them on consent compelling the Respondent to produce disclosure by particular dates. Many of those disclosure orders have not been followed by the Respondent. Enforcement proceedings by the Family Responsibility Office have been commenced in the past. There have been problems obtaining tax returns, income information and other expected items of disclosure from the Respondent that continue to the date of this motion. Although today, through his new counsel, Mr. Murano has indicated more positive intentions with regard to his disclosure obligations.

14The ongoing order for spousal support in the amount of $1,000 per month is not being paid by the Respondent either. This $1,000 monthly obligation was not disclosed to the trustee in bankruptcy in the Respondent's financial documentation provided in the course of his bankruptcy. The spousal support arrears owed by the Respondent at the present time are approximately $17,000.

15The next motion before the Court by the Applicant, Ms. Babcock, scheduled for argument on September 17, 2018 is a Motion to Strike the Respondent's pleadings as a result of allegations that the Respondent has failed to attend for questioning in a proper fashion and continues in obstructive behaviour relating to disclosure.

16Counsel have provided the Court with casebooks relating to the issues before me and in particular, the issue of whether or not the Respondent's failure to obey Court orders ought to preclude him from participation in this Court process. Cases were also received from counsel with regard to the Respondent's assertion that the bankruptcy proceedings now foreclose the Applicant from requesting compliance with the cost order and the consequences for this breach of the cost order.

17Counsel for the Respondent, Mr. Murano, has not been able to present me with a case supporting his position that the cost order relating to spousal support is now in effect stayed from enforcement or implication in this current Court process.

18I have received a case from counsel for the Applicant which is Riddell v. Lenssen, [2015] O.J. No. 6728 of Justice Roger which I find to be helpful and persuasive in this case. In that case, Justice Roger notes as follows:

12The fact that the respondent did not file a proof of claims resulted, pursuant to ss. 121(4) and 124(1) in the respondent not being entitled to share in any distribution made in the bankruptcy. I have been provided with no authority that this would also impact s. 178 debts and prevent the respondent from pursuing this debt post‑bankruptcy. There is no such provision in the Act. Further, such an argument runs contrary to the purpose of s. 178 which is to ensure that such debts are not released by the bankruptcy. You would expect clear language to do away with this protection if a creditor did not file a proof of claim. Arguing s. 178(f) does not assist the applicant as that paragraph is meant to protect creditors who are not aware of the bankruptcy in circumstances where the liability for the dividend that a creditor would have been entitled to was not disclosed to the trustee unless the creditor had notice or knowledge of the bankruptcy and failed to take reasonable action to prove his or her claim – it is meant to address non‑disclosure by the bankrupt.

19Like in the Riddell v. Lenssen case, the parties in this motion agree that the order of Justice Robertson relating to spousal support is provable as a claim in bankruptcy and does survive the discharge of the bankrupt pursuant to Section 121(4).

20I have reviewed the sections of the Bankruptcy and Insolvency Act urged upon me by both counsel, in particular Section 178(1), 121, 124 and 136. I have not been provided with any authority from the Respondent by way of reference to direct language in the legislation or case law which supports Mr. Murano's assertions. I have no authority before me that supports the position that Ms. Babcock must wait for two years for Mr. Murano's discharge, that he can continue in breach of the cost order while participating in the litigation and only at discharge will Ms. Babcock be able to ask that the cost order have legal effect.

21I find this to be an unreasonable position. It cannot have been the intent of the Legislature to, on the one hand;

22a) confirm that spousal support proceedings are not stayed by a payor's bankruptcy, that the Court proceeding may continue and that obligations for spousal support accumulated before bankruptcy remain and then;

23b) on the other hand, prevent a support recipient in the very same active, non-stayed Court proceeding from seeking compliance with existing Court orders in that protected proceeding relating to such serious issues as breaches of Court orders and payment of long-standing Court cost orders.

24That Mr. Murano today seeks the assistance and benefits of this Court and requests orders from this Court to benefit him and in fact, shield him from his obligations while at the same time continuing in breach of the cost order of this very Court, is simply untenable.

25Mr. Murano further asserted in argument on the motion that if the costs award of Justice Robertson had been delineated as enforceable spousal support (at the time the order was made) through the Family Responsibility Office that this would have been acceptable and in compliance with the Bankruptcy and Insolvency Act.

26I am not convinced and have been provided with no convincing authority from the Respondent that the Family Responsibility Office, collecting as agent for Ms. Babcock, could have collected the cost order in this spousal support proceeding yet Ms. Babcock herself in this protected, non-stayed process cannot ask for the same compliance with and payment of her cost order.

27In fact it is not a new remedy that Ms. Babcock is asking for. The Court order has been made and there is a continuing breach in this existing proceeding. The remedy that she is seeking is that Mr. Murano be foreclosed from further participation in the upcoming motion because of his ongoing breach of the order.

28Mr. Murano seeks to continue to participate in future court proceedings in this Court while in breach of an order. I am unprepared to accept that situation as reasonable in these circumstances and find that it is not an appropriate interpretation of the bankruptcy legislation, the Rules of this Court, nor an equitable approach to the administration of justice to allow this request.

29There have been a number of cases urged on me with regard to the effect of breaching a Court order on one's future participation in that Court process. I have reviewed those cases in detail and reviewed a number of decisions including Ferguson v. Charlton, 2008 ONCJ 1, [2008] O.J. No. 486, Moran v. Cunningham, [2009] O.J. No. 2877 and Pey v. Pey, [2017] O.J. No. 5196 and the clear statements of Justice Quinn referenced in the case of Anderson v. Anderson, 2017 ONSC 6239.

Orders

30As a result, the following order shall issue:

1. On consent, the cost order of Justice Robertson dated October 31, 2017 in the amount of $8,012.82 is a claim which survives the bankruptcy of the Respondent, Mr. Murano, pursuant to the provisions of Sections 178 of the Bankruptcy and Insolvency Act as the cost order relates to spousal support;

2. The Respondent, Joe Murano, is to comply with the order of Justice Robertson of October 31, 2017 in full on or before 2:00 p.m. on September 14, 2018;

3. The Respondent, Joe Murano, is permitted to file responding materials to the Motion to Strike of the Applicant found at Tab 36 of the record in accordance with the Rules. Should he fail to comply with the order at paragraph 2 above, this further breach of a Court order shall be considered by the Court within the Motion to Strike of the Applicant.

4. The parties are to produce factums for argument of the motion on September 19, 2018 in accordance with the Rules.

31I make this order in specific recognition of the Rules of this Court and the general expectation that parties who wish to participate in Court proceedings and receive the benefit of a decision of the Court are expected to promptly comply with the orders made for or against them.

32Mr. Murano wishes for Ms. Babcock to be denied her request that he pay the cost order as a precondition to his further participation in this motion. Mr. Murano in essence asks that Ms. Babcock be compelled to fund his continuing participation in the litigation or phrased differently, that she be forced to obtain financing or rearrange her own financial affairs to fund his ongoing breach of the cost order to which she is entitled. She will be forced to fund her own participation in this Court process without the $8,012.82 to which she is entitled.

33Except in exceptional circumstances, it is not reasonable to request further entitlement to proceed with submissions and through the Court process when there are consistent and ongoing flagrant breaches of orders and the Rules.

34I find that there are no such convincing reasons and no exceptional circumstances in this case. It is not fair or equitable to accept the position asserted by Mr. Murano on this threshold issue nor is it reasonable for him to expect to shield himself behind his bankruptcy filings while clearly acknowledging at the same time the protected nature of this spousal support related cost order and acknowledged continuation of this proceeding under the legislation despite his bankruptcy.

35Costs of this motion are reserved to the hearing of the main motion on September 19, 2018. Consideration of the costs of this motion are to take into account Mr. Murano's compliance with existing Court orders and whether between now and the motion date on September 19, 2018 he has complied with this order and the previous cost order.

36In essence Mr. Murano is being given a chance by this Court to reconsider his position in this litigation and his choices to date. This particular comment of the Court also follows from a number of submissions of counsel, who indicate, from an apparently cautiously optimistic perspective, that there have been some discussions regarding possible resolution of some or all of the issues between the parties.

37As noted above, there is also some indication that compliance with disclosure obligations by Mr. Murano is improving and that the parties themselves may now wish to find an easier route out of this litigation rather than through a trial.

38If however, continued litigation is unavoidable, it is the expectation of this Court that the Rules and orders are to be followed. Those who follow the Rules and are reasonable and successful, are entitled to expect that cost orders made in their favour will be paid and will have legal effect. To expect otherwise would be to essentially "gut" the cost Rules of this Court and create an environment where unreasonable, unsuccessful parties would, without consequence, continue in such a manner.