Court File and Parties

COURT FILE NO.: 835/17 DATE: 2018-10-11 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MAGDALENA DULEBA, Applicant AND: STEVE GUY SORGE, Respondent AND: MOBILE FRINGE INC., Non-Party

BEFORE: Conlan J.

COUNSEL: Jessica Brown, Counsel for the Applicant Steve Guy Sorge, Self-Represented Andreus Snelius, Counsel for the Non-party

HEARD: October 9, 2018

ENDORSEMENT on motion

I. The Background

[1] The Applicant mother, Magdalena Duleba-Lapensee (“Magdalena”), and the Respondent father, Steve Guy Sorge (“Steve”), were married for nine years and were divorced in early 2015. They have two children together, one almost 12 years old and the other 10 years of age.

[2] The parties signed a thorough Separation Agreement in September 2014. As part of that deal, Steve was to pay fixed child support in the amount of $1452.00 monthly, concluding on January 1, 2017.

[3] In February 2017, by way of an Application, Magdalena sought to, among other things, review the issue of child support payable by Steve.

II. The Motion

[4] Magdalena moves for certain disclosure to be provided by an Ontario company named Mobile Fringe Inc. (“Mobile”), which entity Steve has a minority ownership interest in.

[5] Magdalena also seeks disclosure from another Ontario company, 2121572 Ontario Inc. (“2121572”), which entity is owned solely by Steve.

[6] In particular, Magdalena asks for the relief set out in the attached draft Order, marked as Schedule “A” to this Endorsement.

[7] Magdalena’s Motion is opposed by Steve and, in so far as it relates to Mobile, by that corporation as well.

III. The Law

[8] The parties and Mobile all agree that subsection 21(1) of the Federal Child Support Guidelines is relevant to this Court’s decision on the Motion:

21 (1) A spouse who is applying for a child support order and whose income information is necessary to determine the amount of the order must include the following with the application:

(a) a copy of every personal income tax return filed by the spouse for each of the three most recent taxation years;

(b) a copy of every notice of assessment and reassessment issued to the spouse for each of the three most recent taxation years;

(c) where the spouse is an employee, the most recent statement of earnings indicating the total earnings paid in the year to date, including overtime or, where such a statement is not provided by the employer, a letter from the spouse’s employer setting out that information including the spouse’s rate of annual salary or remuneration;

(d) where the spouse is self-employed, for the three most recent taxation years

(i) the financial statements of the spouse’s business or professional practice, other than a partnership, and

(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the spouse does not deal at arm’s length;

(e) where the spouse is a partner in a partnership, confirmation of the spouse’s income and draw from, and capital in, the partnership for its three most recent taxation years;

(f) where the spouse controls a corporation, for its three most recent taxation years

(i) the financial statements of the corporation and its subsidiaries, and

(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation, and every related corporation, does not deal at arm’s length;

(g) where the spouse is a beneficiary under a trust, a copy of the trust settlement agreement and copies of the trust’s three most recent financial statements; and

(h) in addition to any income information that must be included under paragraphs (c) to (g), where the spouse receives income from employment insurance, social assistance, a pension, workers compensation, disability payments or any other source, the most recent statement of income indicating the total amount of income from the applicable source during the current year, or if such a statement is not provided, a letter from the appropriate authority stating the required information.

[9] Further, the parties and Mobile all agree that subrule 19(11) of the Family Law Rules is relevant:

(11) If a document is in a non-party’s control, or is available only to the non-party, and is not protected by a legal privilege, and it would be unfair to a party to go on with the case without the document, the court may, on motion with notice served on every party and served on the non-party by special service,

(a) order the non-party to let the party examine the document and to supply the party with a copy at the legal aid rate; and

(b) order that a copy be prepared and used for all purposes of the case instead of the original. O. Reg. 114/99, r. 19 (11).

[10] Finally, both Magdalena and Mobile, in their facta and in their counsel’s oral submissions at Court on October 9, 2018, referred to the decision of Mulligan J. in Bailey v. Bailey, 2012 ONSC 2486. I agree that the said decision is very useful in terms of understanding the test to be employed on this type of motion, and I reproduce below paragraph 15 therein:

[15] Mrs. Bailey submits that Rule 19(11) can be broken down into a six part test with respect to the issues on this motion as follows:

• The documents are in a non-party’s control (Mr. Bailey as a minority shareholder does not have access to these documents).

• The documents are available only to the non-party (it is clear that these documents, subject to availability with respect to flood related items, are available to the non-party).

• That the documents are not protected by legal privilege.

• It would be unfair to require Mrs. Bailey to proceed without this information (her business valuator cannot complete his retainer without these documents).

• All of the documents requested ought to be provided as relevant and necessary (the parties agree that the documents are relevant).

• The application has to be on notice to the non-party (that is not an issue in this case).

[11] To summarize, it is agreed on all sides that Magdalena must demonstrate, on a balance of probabilities, that the disclosure requested is relevant and necessary, such that it would be unfair for her to have to proceed with the Application in the absence of the information sought.

IV. The Positions of the Parties and Mobile

[12] Magdalena asserts that the disclosure being requested is crucial to a fair and accurate determination of Steve’s income for support purposes.

[13] Steve submits that the disclosure being sought was never contemplated by the parties’ Separation Agreement, and that it has already been deemed improper by other judges at prior stages of the within litigation, and that it is not necessary.

[14] Mobile takes the position that the disclosure being sought is not a proportionate response to the issues to be decided in the case (the disclosure would be time-consuming and expensive to produce), and it is not necessary, and it would offend the confidentiality and privacy interests of Mobile and its other shareholders.

V. Decision

[15] The first thing to note is that Gibson J. has already made an Order that deals, in part, with the information being sought by Magdalena. On June 14, 2017, His Honour ordered that Steve provide a financial statement for Mobile.

[16] That Order stands. There may be some ambiguity as to what it means, however, this Court was not asked to interpret the said Order.

[17] Otherwise, Magdalena’s Motion is dismissed, for these reasons.

[18] In my view, Steve is wrong that the Separation Agreement never contemplated this type of disclosure obligation on his part, and he is also incorrect that Magdalena’s request has, essentially, already been decided in his favour.

[19] It is true that Miller J., on February 15, 2017, made comments on the record in Court that suggest that Her Honour did not agree with any argument made by Magdalena that the parties’ Separation Agreement required that Steve disclose financial documents from Mobile. Clearly, however, Justice Miller was referring to section 5.4 of the Separation Agreement, and not section 5.15. The two sections are set out below:

5.4 Commencing January 9, 2017, child support will be determined pursuant to section 9 of the Child Support Guidelines. As such, there will be a set-off payment reflective of the parties’ respective child support obligations, considering both parties’ income at that time. If and when determining the set-off amount, the parties shall exchange their previous year’s income tax return and year-to-date payment information to determine the new amount of child support payable. Accordingly, the parties will be obliged to complete their income tax returns for the previous calendar year as early as possible each year, commencing 2017.

5.15 If either party asks in writing for disclosure, both will, in writing, provide the following information to the other, within 30 days of the request:

(a) the documents required in s. 21(1) of the Guidelines that have not previously been provided,

(b) current information about ‘s special or extraordinary expenses,

(c) current information about a party’s claim of undue hardship, if any, and his or her household’s standard of living,

(d) details of Canada Child Tax Benefits or other child benefits received in the previous year and anticipated in the coming year, and

(e) any other information needed to review child support.

[20] There is, undoubtedly, some degree of incongruity between those two sections, but what is important is that the disclosure being sought by Magdalena could fall within section 5.15. Of course, the test set out by Mulligan J. in the Bailey, supra decision would still have to be met.

[21] It is on the basis of that test that the within Motion must fail.

[22] First, in so far as 2121572 is concerned, I agree with Steve that nothing material has changed since the Endorsement made by Gray J. on November 1, 2017. On that date, His Honour heard a very similar motion brought by Magdalena. That motion was dismissed, “without prejudice to [Magdalena] renewing the motion if she asserts that the degree of disclosure is insufficient, and she provides particulars”.

[23] Sufficient particulars have not been provided by Magdalena, in my opinion. It is undisputed that Steve has been and still is the sole owner of 2121572. It is further conceded by Magdalena that at least some of the disclosure being sought in the Motion from 2121572 is unnecessary if in fact Steve is the corporation’s sole owner.

[24] To point to a few minor anomalies in the financial documentation already filed related to 2121572, such as a modest decrease in a bank account balance between year-end 2015 and year-end 2016, as counsel for Magdalena has done, is not enough to counter Steve’s unequivocal evidence that the corporation has been inactive since well before the parties signed the Separation Agreement. I accept Steve’s evidence on that point.

[25] Beyond what has already been disclosed by Steve to date, there is simply nothing in the record that supports the submission that the additional disclosure being sought from 2121572 is at all necessary to a determination of Steve’s income for support purposes. To the contrary, this effort by Magdalena resembles a fishing expedition.

[26] With respect to Mobile, I agree with the position advanced by Mr. Snelius on behalf of that company. This case is very different than the facts that presented themselves to Justice Mulligan in the Bailey, supra matter. There, the moving party wife set out detailed reasons as to why she required the information being sought from the non-parties. In fact, she retained the services of an expert business valuator and filed an affidavit from that expert on the disclosure motion. Actually, two affidavits from that expert were filed. Each one very comprehensive, outlining the nature of the retainer, and why each disclosure item requested was necessary to fulfill that retainer, and how the non-parties’ confidentiality and privacy concerns would be protected if disclosure was ordered.

[27] None of that exists in our case. Instead, Magdalena argues that it is the responsibility of Steve to prove his income, and the implication is that the only way that he can do that is to provide all of the disclosure being requested. In other words, as alluded to at paragraph 56 of the Factum filed on her behalf, Magdalena claims to be uncertain as to the extent of Steve’s available income for support purposes, hence, her Motion.

[28] With respect, that does not meet the test for disclosure from a non-party in a family law case. If it did, any payee of child support could force any payor who happens to be a shareholder of any company, even a minority one as Steve is, to produce extensive documentary disclosure of all of that corporation’s financials. That cannot be an acceptable result.

[29] In addition, the case for Magdalena is only weakened further by the affidavit evidence filed by Mobile. To the best of my knowledge, that evidence was not the subject of cross-examination out of court. And it stands uncontradicted by anything filed subsequently on behalf of Magdalena, including her Affidavit sworn on October 1, 2018. Mr. Simpson’s Affidavit answers many of the questions being posed by Magdalena, including the details of Mobile’s share structure and the specifics of Steve’s compensation.

[30] Yes, it would always be ideal to have more and more disclosure. More and more supporting documentation. There comes a time, however, when the principle of proportionality comes into play. When a litigant needs to move on and rely instead, for example, on a trial judge’s ability to draw an adverse inference against someone who asserts an income without anything reliable to support it (if that is, in fact, the conclusion drawn by the trial judge).

[31] This proceeding is in its fifth volume of the Continuing Record, cobbled together over a span of less than two years. Many Court appearances. Many motions. In the overall context, I am not at all satisfied that it would be unfair for Magdalena to have to prosecute her Application in the absence of the disclosure being sought from Mobile.

[32] The Motion must, therefore, be dismissed.

[33] Any litigant claiming costs may file written submissions within thirty calendar days of the date of this Endorsement. Any responding submissions shall be filed within fifteen calendar days thereafter. No reply is permitted.

Conlan J.

Date: October 11, 2018