Court File and Parties

COURT FILE NO.: FS-18-00421960 DATE: 20181218 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

The Estate of Rita Peters by her Estate Trustee Jacques Fiorentino, Applicant – and – The Estate of Martin Peters by his Estate Trustee Victor Peters and Victor Peters in his personal capacity, Respondent

COUNSEL: Shawn Richard, for the Applicant Victor Peters on his own behalf and on behalf of the Estate of Martin Peters. – and – Lorne Wolfson, Intervenor Brett Hughes (for Intervenor)

HEARD: December 13, 2018

BEFORE: C. Gilmore, J.

RULING ON MOTION

Overview

[1] This is a motion brought by Victor Peters for security for costs against Mr. Jacques Fiorentino (“Mr. Fiorentino”), the Estate Trustee for the late Rita Peters.

[2] There was a cross motion brought by the applicant but the issues in that motion were, in large part, resolved on consent. The issues that were not resolved on consent will be heard at a short motion to be scheduled in January 2019. An order was signed on December 13, 2018 reflecting the terms of the consent.

[3] The substantive issues in this proceeding will be dealt with by way of a summary judgment motion to be heard in April 2019.

[4] The title of proceedings is to be amended on consent as per its current form.

[5] Mr. Hughes, on behalf of the Intervenor, Mr. Wolfson, takes no position on this motion as no relief is sought against his client. He submits that it is premature to consider the issue of any costs being awarded against his client, as that is an issue for the summary judgment judge to determine.

Factual History

[6] Martin Peters (“Martin”), now deceased, and Rita Peters (“Rita”), now deceased, were married on November 30, 1986. This was a second marriage for both parties. The marriage broke down in 2001. There were no children of the marriage.

[7] Rita commenced litigation against Martin seeking a divorce and spousal support, among other things.

[8] Philip Epstein of Epstein Cole acted for Martin. Lorne Wolfson of Torkin Manes acted for Rita.

[9] Victor Peters (“Mr. Peters”) is Martin’s son from a previous marriage. Jacques Fiorentino (“Mr. Fiorentino”) is Rita’s son from a previous marriage. Mr. Fiorentino resides in the State of California. Victor Peters is a retired lawyer living in Toronto. Both are the Estate Trustees of their parent’s respective estates.

[10] Shortly before a trial was scheduled to be heard in September 2001, the parties settled all outstanding issues on consent. An agreement dated September 24, 2001 was drafted which incorporate the terms of the consent. The parties consented to a judgment (“the judgment”) containing the terms of the consent.

[11] It is important to recite the relevant terms of the judgment in order to understand the issues in this litigation:

1. The Husband shall pay to the Wife spousal support in the amount of $4,600 per month on the first day of each and every month commencing June 1, 2000;
2. The amount referred to in paragraph 1 shall be indexed to the CPI of Canada (all items) with the first adjustment occurring on May 1, 2002 and annually thereafter, based on the change in the CPI over the preceding 12 months;
3. The support provisions of this offer shall be binding on the husband’s estate;
4. The husband shall provide the following security for the support payments; a. He and his son, Victor Peters, will provide a joint letter of credit drawn on a Canadian chartered bank guaranteeing the payments for the ensuing years. b. On June 1 of each year, they will jointly renew the letter of credit and provide it to the wife’s lawyer, Lorne Wolfson. c. On or before June 1 of each year the husband shall provide the wife with 12 post-dated cheques. d. In the event the letter of credit is not produced within 5 business days of June 1 each year, then the husband and Victor Peters will jointly be required to post security of $700,000 in a form satisfactory to the wife’s lawyer acting reasonably. e. The provisions of this paragraph shall be binding on the estate of both the husband and Victor Peters.

[12] Support was paid regularly to Rita during Martin’s lifetime. Martin died in January 2015. After Martin’s death, no support was paid to Rita.

[13] Requests were made to Victor Peters to honour the terms of the judgment. Mr. Peter’s response was that the estate’s liabilities exceeded its assets and that he had no personal liability under the judgment.

[14] On May 19, 2016, Rita started the current family law application against Martin’s estate and against Mr. Peter’s personally. Rita sought enforcement of the consent judgment and various ancillary orders against Mr. Peters and Martin’s estate. Rita seeks spousal support arrears and the provision of $700,000 in additional security from Mr. Peters and from Martin’s estate.

[15] On July 19, 2017, counsel for Rita served Lorne Wolfson with a Notice of Action and a Statement of Claim for negligence alleging that he failed to properly secure Rita’s support entitlement. In that action, Rita claims $700,000 in general damages and $60,000 in damages for emotional and mental distress.

[16] On December 14, 2017, counsel for Mr. Wolfson advised that an original and irrevocable letter of credit from HBC dated November 26, 2001 in the amount of $32,000 had been located. The letter of credit was subsequently increased to $60,000.

[17] On December 19, 2017, Mr. Wolfson was granted leave to intervene as an added party.

[18] Rita died on March 2, 2018.

[19] After Rita’s death her estate drew down the line of credit for the full amount of $60,000. The arrears of spousal support as of the date of Rita’s death were $174,821.80. The accrued interest as per the 6% rate set out in the judgment is approximately $18,775.

[20] The applicant’s position is that sufficient security should have been in place to secure the support owing to Rita including the current arrears and interest. Further, the $60,000 line of credit for securing the ensuing year’s support was inadequate because the support obligation as of May 1, 2014 was $72,442.80 given that the monthly support was $6,036.90 with CPI increases. The applicant submits the Mr. Peters is bound by the consent, in breach of it and personally liable.

[21] The respondents’ position is that although the estate does not dispute its liability to pay spousal support, it has no liability for the $700,000 of additional security. Further, Martin’s estate has insufficient assets to pay any arrears of support or interest. The respondents submit that it was never the intention of Martin or Mr. Peters to provide security for spousal support beyond the provision of the letter of credit guaranteeing the support obligations for the ensuing year.

[22] Mr. Peter’s position is that he has no personal liability under the judgment for various reasons including the fact that he was not a party to the consent, was not asked to nor did he give his consent, was not given notice of the hearing at which the consent judgment was made, and was not present when it was signed. Further, any obligation he may have personally had with respect to support was satisfied on delivery of the letter of credit.

[23] Certain statements produced in relation to Martin’s estate show that the letter of credit was renewed in 2015 and 2016 at a cost of approximately $770 per year. The estate’s net position in March 2017 was $359.99 in assets.

The Motion for Security for Costs

The Position of the Moving Party

[24] Mr. Peters brings this motion for an order under Rule 24(13) of the Family Law Rules, O. Reg. 114/99 requiring the applicant to post security for his costs. He seeks $100,000 to be paid into court and awarded to him in the event a costs order is made against the applicant in his favour. In the event security for costs is ordered and the applicant does not pay the security required, Mr. Peters seeks to dismiss the application.

[25] Rule 24(13) stipulates the following:

A judge may, on motion, make an order for security for costs that is just based on one or more of the following factors:

1. A party ordinarily resides outside Ontario;
2. A party has an order against the other party for costs that remain unpaid, in the same case or another case;
3. A party is a corporation and there is good reason to believe it does not have enough assets in Ontario to pay costs;
4. There is good reason to believe that the case is a waste of time or a nuisance and that the party does not have enough assets in Ontario to pay costs;
5. A statute entitles the party to security for costs.

[26] Mr. Peters submits that the test is a two-step one. First, the party must show that one of the factors in Rule 24(13) applies and second, the court shall make an order that is “just.”

[27] In this case, it is uncontested that Mr. Fiorentino resides in California, not Ontario. Therefore, Mr. Peters has satisfied the initial onus. Mr. Peters relies on 2311888 Ontario Inc. v. Ross, 2017 ONSC 1295 for the proposition that once he has satisfied the initial onus, the onus then shifts to the applicant to prove that an order for security for costs would be unjust (see para 17).

[28] The applicant has not proven financial hardship or impecuniosity. He has not provided any evidence to support his contention that he is financially “stressed” as a result of paying his mother’s expenses during the period that she was not receiving support. The applicant has not provided information with respect to his assets and liabilities or his ability to borrow funds. The requirement to provide financial evidence with “robust particularity” leaving “no unanswered material questions” has not been met here according to Mr. Peters. [1]

[29] Mr. Peters submits that if he is successful in having the claims against him dismissed, he will be unable to recover his costs because there is no evidence that the applicant has any assets to satisfy a costs order. As such, collectability is a significant issue. Further, if he hires counsel, he estimates the legal fees would be in the range of $200,000. The legal issues are complicated, the examinations will be extensive (at least four people to be examined by two parties) and there is a long motion for summary judgment upcoming.

[30] Mr. Peters raises the point that the applicant received $60,000 from the redemption of the letter of credit. This amount was unanticipated as the letter of credit was not discovered until late 2017. The applicant has at least this amount of “found” money to put towards a security for costs order.

[31] Mr. Peters submits that the required test has been met and the need for security for costs made out. As such, the court should not be “weak-kneed” and order the amount sought. [2]

The Position of the Applicant

[32] The applicant insists that all of the cases referred to by Mr. Peters are irrelevant. This is an enforcement matter and, as such, the issue of security for costs does not arise. The applicant submits that security for costs should not be ordered because:

a. There is an existing judgment which has not been appealed or set aside. b. The judgment imposes liability on the respondents. c. Rule 24(13) does not deal with enforcement because it is not appropriate to order security for costs against a litigant who is trying to collect on a judgment. d. Mr. Peters was aware of the judgment prior to his father’s death. e. The merits of the claim are not in issue. They cannot be in issue because a judgment exists which is unimpeachable until reversed. f. The quantum of support and arrears is not in issue. g. The position of both the applicant and counsel for the intervenor, Mr. Wolfson, is that the judgment dated September 24, 2001 is binding against Mr. Peters and obliges him to secure the spousal support payable by his father to Rita. h. Mr. Peters is challenging various aspects of the judgment which is a collateral attack on an existing judgment which has not been set aside. i. Mr. Peters is in breach of the judgment. The letter of credit was for $60,000. In fact the security required for the year in question was over $72,000 given the CPI increases to the support quantum. Further, the letter was not produced within five days when requested. As such, Mr. Peters now has an obligation to post security of $700,000 in accordance with the terms of the judgment. j. The test under the Family Law Rules is different from the test under the civil rules. There is no onus or switching of burdens as in the civil rules. k. The applicant believes that it was Mr. Peters who paid to renew the letter of credit thereby demonstrating his belief that he is bound by the judgment. l. If Mr. Peters is entitled to costs, he cannot look solely to the respondents. Mr. Wolfson, as intervenor, may also have an obligation to pay costs.

[33] Mr. Peters, not surprisingly, does not agree with the applicant’s position. He suggests that the applicant is attempting to argue the merits of the summary judgment motion, which is irrelevant in the context of this motion. The only issue for this court to decide is whether or not ordering security for costs against the applicant would be unjust.

[34] Further, the arguments raised by the applicant with respect to the collateral attack issue must be approached with caution. All of the cases referred to by the applicant on that issue related to collateral attacks by parties to the relevant order. Mr. Peters is not a party to the judgment. If he had been a party, the applicant would not have had to start a new application. This is not a simple enforcement proceeding and should not be treated as one.

[35] Mr. Peters submits that if the merits must be discussed, he agrees that the estate has liability to pay the arrears of support. However, his only personal obligation extended to the provision of the letter of credit, which he has done. Further, there is no evidence as to who or how the cost of renewing the letter of credit was paid.

Analysis and Ruling

[36] I agree with the applicant that this is not a simple matter to which the usual considerations on a motion for security for costs would apply. I also agree that in this case there need not be reference to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 as the Family Law Rules, O. Reg. 114/99 related to security for costs are adequate and applicable.

[37] As such, the application of the test is not as rigid as Mr. Peters makes out. As per the principles set out in Izyuk v. Bilousov, 2015 ONSC 3684 at para 40, once the other party falls within one of the enumerated grounds (such as non-residence in Ontario), the court has the discretion to both make or refuse the order, and discretion as to quantum and method of payment of an order for security for costs. I infer, therefore, that the discretion would include some consideration of the merits of the case and the conduct of the litigants.

[38] As per the expansive considerations set out in Izyuk, it would not be just to stop the applicant in its tracks by requiring it to pay a large amount of security for costs. This case is not like the facts in Izyuk or Shulist v. Shulist, 2006 ONCJ 547, in which the party against whom the order was sought had large and dated support and/or costs orders which remained unpaid.

[39] As well, these proceedings cannot be characterized as a nuisance or conducted without regard to the merits of the case. There may be arguments that the respondents have failed to comply with their obligations under the judgment or that Mr. Wolfson was negligent. There are interesting and complex arguments yet to be made on both sides.

[40] A further consideration in this case must be the collateral attack argument advanced by the applicant. The question to be asked is whether or not that argument must be dismissed out of hand because Mr. Peters is not a party to the judgment. My view on that is no. Surely, the policy arguments related to collateral attacks must include affected persons and not just formally named parties.

[41] The underlying policy against collateral attacks is twofold; first, an order is binding and conclusive unless set aside on appeal or quashed and second, attacking such an order is objectionable because it re-litigates already decided matters. [3] Allowing such litigation would undermine the rule of law for obvious reasons not the least of which is it upends the administration of justice and defeats the finality and binding nature of court orders.

[42] In this unique fact situation, Mr. Peters is clearly not a party to the judgment in question but he has obligations in relation to it. What those obligations are have yet to be fully determined. In my view, he cannot hide behind his status as a non-party to the judgment, while at the same time seeking to dismiss the claim against him if the applicant does not pay a large amount of security for costs.

[43] In short, the applicant’s argument on the collateral attack on the judgment should succeed. If I am wrong, the respondent’s motion should be dismissed on the grounds that it would not be just to require the applicant to pay security for costs in these circumstances.

Orders

[44] The respondent’s motion for security for costs is dismissed.

[45] Given my knowledge of this case, I am prepared to hear the summary judgment motion if scheduling permits.

[46] If the parties cannot agree on costs they shall provide written submissions on costs of no more than two pages in length, exclusive of any Bill of Costs or Offers to Settle. The written submissions shall be on a seven day turnaround starting with the applicant with the first submission due seven days from the release of this ruling. Costs submissions should be directed to my assistant at Patrizia.Generali@ontario.ca in electronic form.

C. Gilmore, J. Released: December 18, 2018

[1] Morton v. Canada (Attorney General), 2005 CarswellOnt 939 (SCJ) at 32. [2] Ibid at para 42. [3] See Perell, P. and Morden, J. (2010), The Law of Civil Procedure in Ontario, Toronto, Ontario: LexisNexis Canada, p. 139.