Court File and Parties
Court File No.: FC-17-1870 Date: 2018/11/02 Superior Court of Justice - Ontario
Re: Karen Enid Elaine Martin, Applicant (Responding Party) And: David Blair Watts, Respondent (Moving Party)
Before: J. Mackinnon J.
Counsel: James D. S. Whyte, for the Applicant Michael Rappaport, for the Respondent
Heard: October 22, 2018
Endorsement
[1] Mr. Watts is the moving party in a motion brought for disclosure and procedural relief. For the reasons that follow the motion is substantially dismissed.
[2] Mr. Watts asks for production of bank statements from the BMO joint chequing account, from a joint line of credit, and with respect to joint credit cards. These records are equally available to both parties. Mr. Watts’s counsel submits his client is incapable of requesting documents from the bank. This is unsubstantiated. If Mr. Watts is a special party as defined in the Family Law Rules, O. Reg. 114/99 as am, then his counsel should proceed accordingly.
[3] Additionally the applicant says there were no joint credit cards. Nothing suggests the contrary.
[4] The request for statements that may show withdrawals by the applicant against the joint line of credit is also factually misguided. It is made in conjunction with the assertion that the applicant received $30,000 from the joint line registered against the matrimonial home on December 15, 2015, and should produce records to show where the money went. On December 15 a charge was registered against title to the matrimonial home to secure the sum of $93,000. This was formed by a conventional mortgage of $63,000 and a line of credit facility of $30,000.
[5] The $63,000 proceeds from the conventional mortgage were fully advanced on December 15. Mr. Watts has the BMO joint bank account statement for the period ending December 21, 2015 showing the $63,000 deposited into that account. There is nothing from the lendor indicating that any more than that was advanced on December 15, 2015. The applicant’s testimony is that the new joint line of credit facility was registered on December 15, and was used in the normal course by the parties over time for a variety of expenses, to the tune of $22,664 as at the date of separation in 2017. All of these records are available to Mr. Watts at his own request, and need not be produced for him by the applicant.
[6] Counsel for Mr. Watts thought he would require the consent of the applicant to obtain any joint banking records. I doubt this, but if BMO confirms in writing that her consent is required I am confident the applicant will provide it.
[7] The applicant annotated the joint account statement to show how the $63,000 was disbursed. The sum of $7,026.06 was transferred to an account owned by Mr. Watts. In her letter dated May 25, 2018 the applicant explains this amount was to pay off his Master Card. He can verify this himself. The applicant noted $29,911.21 was used to pay off the “old line of credit”. This was joint. Mr. Watts can verify this himself. The sum of $17,362.52 went to an account owned by the applicant. In the May 25 letter she advised this paid off her Master Card. Mr. Watts asked in oral argument that the applicant trace that sum. I order her to produce proof that she used this sum to discharge credit card debt as stated.
[8] The BMO joint account statement shows a closing balance on December 21, 2015 of $4,306.25. Counsel for Mr. Watts misread the statement as showing a closing balance of $65,840.64. Not so. That entry is under the column for amounts added to the account during the period in question.
[9] His error seems to have led counsel to believe there was still $65,000 in the joint account after payment out of the amounts set above. To the contrary, the record is consistent with the applicant’s testimony that the $63,000 borrowed on the conventional mortgage was used to pay off the old joint line of credit and some credit card debt.
[10] Mr. Watts’s demand for other productions is also linked to the misreading of the joint bank account statement. His counsel argued his belief that the applicant may have transferred the “balance” in that account to her brother to deposit in their mother’s account. Then, her brother could use that money to purport to advance funds to the applicant against her future inheritance. This is the theory underlying an alleged “money laundering scheme” between the applicant and her brother, William Martin, to defraud the moving party of his fair share of the equity in the matrimonial home. In particular Mr. Watts alleges this scheme was used to launder money used by the applicant to repay a debt to her brother William.
[11] The applicant did borrow money from William prior to separation to pay for repairs to the matrimonial home. The loan was documented by a promissory note and was repaid after separation, in July, 2017. Mr. Watts asks for production of all bank statements to show the source of the funds used to repay this loan. The applicant says these have already been produced.
[12] It is acknowledged the applicant did receive two sums of money advanced from her mother’s accounts on December 16, 2016: $17,500 CAD; $47,500 USD. The applicant has produced the USD deposit into her own USD account. She has produced the statement for this account showing it was the source of two payments to her brother which she says repaid the promissory loan. The applicant produced a copy of one of these cheques with a letter dated May 14, 2018. She requisitioned the other cheque and deposed that she produced a copy of it with her letter dated May 25, 2018. A copy of that cheque was not included in the productions filed. If it has not yet been provided, I order its production now.
[13] Counsel for Mr. Watts asks the applicant to prove William Martin’s confirmation that identical advances were made to the applicant’s siblings. This request is denied. Counsel submits that absence of identical advances could be evidence of the alleged money laundering scheme. There is no foundation to that allegation; it is a theory based on counsel’s misreading of the December 21, 2015 bank statement which clearly shows a closing balance of $4,306.25 not $65,840.64.
[14] The parties disagree as to the value of the matrimonial home on the date of separation. They have each obtained appraisals. The applicant’s appraisal makes a reduction in value for the estimated cost of foundation repairs said to be required. The moving party disagrees that the repair is as extensive or costly as outlined in this report. Although he has his own appraisal and his own estimate for the cost of repairs he asks the court to order the applicant to obtain a building inspection report from a certified building inspector/civil engineer. This request is denied. The applicant has met her valuation obligation in relation to the matrimonial home.
[15] The submission that the applicant’s appraiser may not even be qualified as an expert at trial does not assist Mr. Watts. If he is correct, that will be the applicant’s problem to deal with at trial.
[16] Leave is granted to deliver an amended Answer within 30 days. The applicant may deliver an amended Reply within 10 business days thereafter. The questioning previously ordered shall take place promptly after the amendments are completed or the time for making them has elapsed.
[17] Mr. Watts requests an order for interim disbursements in the amount of $2,500 to cover the costs of scheduling the questioning and obtaining transcripts. The authority to make this award is found in FLRs r 24 (18):
PAYMENT OF EXPENSES (18) The 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. O. Reg. 418/18, s. 1.
[18] No case law was provided to me. I did refer myself to British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371, where the power to order interim costs is held to be inherent in the court’s equitable jurisdiction to award costs, but is regarded as an extraordinary exercise of its powers. The conditions set down by the Supreme Court to support such an order were stringent:
- impecuniosity to the extent that, without such an order, the party would be deprived of the opportunity to proceed with the case;
- a prima facie case of sufficient merit to warrant pursuit; and
- special circumstances sufficient to bring the case within a narrow class of appropriate cases.
[19] This decision has been applied in family cases with some adjustments to account for the specific provisions of the FLRs. One such case is Sadlier v. Carey, [2015] O.J. No. 2863 (SCJ). That court stated in paras 34 and following:
34 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.
35 I agree with the court in Stuart v. Stuart, 2001 ONSC 5172, [2001] O.J. No. 5172 at paras. 9-13 as follows:
... The discretion should be exercised to ensure all parties can equally provide or test disclosure, make or consider offers or possible go to trial. Simply described, the award should be made to level the playing field.
An order under section 24(12) should not immunize a party from cost awards. The order is to allow the case to proceed fairly and should not be such that a party feels a license to litigate.
Certainly the proof of the necessity of interim disbursements would be critical to the successful claim. The claimant must clearly demonstrate that the disbursements are necessary and reasonable given the needs of the case and the funds available. In particular, if an expert is the subject of a requested disbursement, the claimant must demonstrate there is a clear need for the services of said expert.
The claimant must demonstrate that he or she is incapable of funding the requested amounts.
The claim or claims being advanced in the case must be meritorious as far as can be determined on the balance of probabilities at the time of the request for disbursements.
37 This is a clear case for an order under rule 24(12). The applicant is literally in the dark about the value of the respondent's business and his income. It is obvious from the respondent's conduct in this litigation that she cannot rely on him to be forthcoming with financial disclosure.
[20] There are three primary reasons why I exercise my discretion to turn down Mr. Watts’s request for interim disbursements. The first is that his financial statement dated October 24, 2017 discloses a monthly income of $5,571 and monthly expenses of $3,133. He also shows a net worth of $192,350, which is mainly made up of his estimate of his share of equity in the matrimonial home. His only debt is $610.98.
[21] This financial information does not show Mr. Watts to be incapable of conducting the questioning without the requested award.
[22] Second, Mr. Watts has brought two previous motions, both unsuccessful and both attracting costs awards in favour of the applicant. Those costs have been fixed at $4,500 and $1,000 respectively. The respondent is responsible for those costs unless the court orders his counsel to pay them. Determination of that issue remains outstanding.
[23] Either way, the fact that costs have already been awarded to the applicant disinclines me to exercise my equitable jurisdiction to require her to pay interim disbursements to Mr. Watts.
[24] Third, the applicant has not avoided her disclosure obligations. To the contrary the large majority of Mr. Watts’s requests for disclosure have been dismissed as unmeritorious.
[25] For these reasons an order will go requiring the applicant to produce proof of use of the sum of $17,362.52 to pay off credit card debt, to produce a copy of the first cheque issued in repayment of the promissory loan, if not already done, and granting leave to deliver an amended Answer as set out above.
[26] This case should be individually managed. A copy of these reasons shall go to Shelston LAJ with the request that he assign a justice for this purpose.
[27] The applicant has been successful on the motion and is entitled to costs. If the parties do not agree on the amount of costs, I shall determine the issue by written submissions. These shall not exceed 3 pages in length plus attached copies of Bills of Costs and pertinent offers to settle. The applicant shall deliver her submissions by November 19, 2018. The moving party shall deliver his submissions by December 3, 2018. A brief response may be delivered by no later than December 7, 2018.