COURT FILE NO.: FS-18-2475
DATE: 20190308
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Nancy Candido-Gregorio Applicant
– and –
Edwin Gregorio Respondent
Julie Tyas, for the Applicant
Lorne Gershuny, for the Respondent
HEARD: March 7, 2019
C. Gilmore, J.
RULING ON MOTION
Overview
[1] This is the respondent’s motion to set aside the final default order of Kiteley, J. dated December 21, 2018.
[2] The respondent is not contesting the granting of the divorce.
Factual Background
[3] The parties were married for 25 years. They separated on March 28, 2016. The parties resided separate and apart in the matrimonial home until it sold in January 2018.
[4] There are three children of the marriage, namely Nickole aged 23, Abigail aged 21, and Jacob aged 17.
[5] After the parties’ separation, both parties retained counsel. Counsel had ongoing communication between April, 2017 and April, 2018. After the matrimonial home sold, the applicant sought child support from respondent. According to the applicant, the respondent refused to respond or pay support.
[6] The applicant commenced the within application which was served on the respondent on May 22, 2018. The respondent failed to file an Answer or any documents and failed to provide disclosure as requested. On July 18, 2018, the respondent was served with the applicant’s Affidavit for Uncontested Trial. On December 3, 2018, the respondent was served with the applicant’s Amended Affidavit for Uncontested Trial.
[7] On December 21, 2018, Kiteley, J. signed the default order with respect to the applicant’s request for an uncontested trial.
[8] The default order is extensive but the relevant parts for this motion are as follows with respect to amounts payable to the applicant:
a. Respondent to pay ongoing child support of $1,462 for all three children based on an imputed income of $150,000 commencing January 1, 2019.
b. Respondent to pay retroactive child support of $62,226 for the period of April 2016 to December 1, 2018.
c. Respondent to pay his proportionate share of $788 per month for the children’s special and extraordinary expenses commencing January 1, 2019.
d. Respondent to pay retroactive special and extraordinary expenses of $16,873 for the period of March 2016 to December 1, 2019.
e. Respondent to pay ongoing spousal support of $215 per month commencing January 1, 2019 based on an imputed income of $150,000.
f. Respondent to pay arrears of spousal support in the amount of $8,085 in retroactive spousal support for the period of April 2016 to December 1, 2018.
g. Respondent to pay an equalization payment of $225,000 within 60 days.
h. Respondent to pay $25,000 representing his share of funds removed from the parties’ joint line of credit in October 2016, paid out by the applicant on the sale of the matrimonial home.
i. Respondent to pay $6,500 for the applicant’s one-half share of the sale proceeds of the Siena van.
j. Respondent to pay costs of the proceedings in the amount of $22,000.
[9] It is uncontested that the respondent received all of the court documents served upon him but did not respond. It is also uncontested that the respondent has not paid any of the amounts in the default judgment.
The Positions of the Parties
The Moving Party Respondent
[10] The respondent admits that he did not respond to any court documents and that he should have. The marriage breakdown had a serious effect on him. As a result, he sought the help of a psychotherapist between May 2016 and July 2018. A letter from Dwayne Ivey, psychotherapist/Clinical Social Worker, dated February 13, 2019 confirms that the respondent had bi-weekly sessions with him during that period of time.
[11] Mr. Ivey confirms that the respondent consulted him for depression and anxiety symptoms resulting from the breakdown of the marriage.
[12] The respondent also suffered a financial setback when he and his brother lost their biggest client, IKEA. Their business did many of the IKEA kitchen installations. Without that client, the respondent was forced to find other renovation clients. His income has suffered as a result.
[13] The respondent argues that he deserves an opportunity to have his case judged on the merits. He submits that terms of the default order were made on incorrect facts as follows:
a. There is no reason to order retroactive support as the respondent contributed to household expenses and child related expenses until the home sold in January 2018.
b. The respondent has never earned $150,000 in income. His average annual income between 2014 and 2017 was $66,884 and $30,000 in 2018. The respondent attached Notices of Assessment for the years 2014 to 2017.
c. The parties’ oldest child Nickole is no longer a dependent child.
d. The parties’ daughter Abigail has lived on her own since September 1, 2017 and the respondent pays for her rent, utilities and living expenses.
e. The parties’ son Jacob has shared time with his parents since February 1, 2018.
f. The respondent has never owned any share in the property at 25 Portland Street, Etobicoke, nor does he have a share in the corporation which owns that property. It is inaccurate for any amount to be included for this property in the respondent’s net family property statement.
g. The amounts withdrawn from the joint line of credit by the respondent were used to benefit the family and to pay for household maintenance and repair to ready the home for sale.
h. The Siena van was traded in for a value equal to the debt owing against it and thus no sale proceeds were realized.
The Position of the Applicant
[14] The applicant reminds the court that the applicant waited a full year before issuing her application. She was hopeful that matters could be worked out until it became clear that the respondent had no intention of paying any form of support or providing disclosure.
[15] When she finally issued her application, the respondent had eight months to respond to the various court documents served on him but did nothing.
[16] The respondent’s reasons for not responding should not be given any weight by the court for the following reasons:
a. The letter from Mr. Ivey is insufficient as medical evidence of depression. The respondent has never obtained a formal diagnosis of depression nor is Mr. Ivey qualified to make such a diagnosis. There is no evidence that the respondent is on any form of prescribed medication related to depression.
b. Despite being allegedly too depressed to deal with this litigation, the respondent went on a vacation to Cuba in July 2017, to Italy in March 2018, to Panama in April 2018, to Iceland (with Abigail) in June 2018, and to a cottage and on a Caribbean cruise in the summer of 2018.
c. The respondent has not provided adequate disclosure as follows:
i. He has failed to provide any evidence to refute his ownership interest in the Portland property
ii. He has provided only Notices of Assessment. T1 Generals are required to assess the respondent’s deductions from business income. The applicant deposed that during the marriage the respondent was able to afford a generous family lifestyle.
iii. The respondent has not acted in good faith by providing a single support payment or disclosure.
d. The applicant denies that setting aside the default order and allowing the respondent to participate in the litigation would lead to any different result.
e. Setting aside the default order would result in the applicant having to start over and incur more costs. She has already incurred significant costs.
Analysis and Rulings
[17] The test for setting aside a default judgment is well-articulated in the case law. In Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 2014 CarswellOnt 3011 (Ont. C.A.) the court set out the test at paras. 47-51 as follows:
a. Was the motion brought promptly after the respondent learned of the default judgment?
b. Was there a plausible excuse for the respondent’s default?
c. Does the respondent have an arguable defence on the merits?
d. What is the prejudice to the respondent if his motion is dismissed and to the applicant if the motion is allowed?
e. What is the effect of an order setting aside the default order on the administration of justice?
[18] In this case, there is no dispute that the respondent’s counsel contacted the applicant’s counsel within three days of the respondent receiving a copy of the issued default order. The applicant does not contest that the motion was brought promptly.
[19] The excuse for the default is thin at best. The respondent provides no formal diagnosis of depression and appears well rested and happy in his vacation photographs. He has, at least, accepted that he received all of the documents and simply failed to respond.
[20] The respondent appears to have a defence on the merits. Even during the course of the motion, it was clear that the parties had very different views on the arrangements for the children since separation and their dependency. This would have a significant effect on the ongoing and retroactive orders for child support and special expenses.
[21] The respondent’s income is also in issue. His Notices of Assessment are admittedly insufficient to adequately assess his income for support purposes. Imputation of income and lifestyle arguments are complicated and may require a trial/further disclosure and questioning to confirm that his income should be set at $150,000 for support purposes.
[22] The respondent denies he has any interest in the Portland property. If proven, this could make a significant difference in any equalization payment owing.
[23] While the respondent may have a defence on the merits, this does not negate the prejudice to the applicant in allowing the respondent’s motion. She has incurred significant costs to date only to be met with a request that the entire matter be re-opened.
[24] During the course of the motion, I asked counsel for the respondent to give me an estimate of the costs thrown away his client should be liable to pay if his motion was allowed. Counsel could not provide a number. In my view, the starting point would be at least the amount set out in the order of Kiteley, J. or $22,000.
[25] In the end, it is this court’s view that, somewhat reluctantly, the respondent’s motion must be granted. The only way to address the issues of prejudice to the applicant and ensuring that granting the relief is not inconsistent with the proper administration of justice is to ensure the applicant is adequately compensated for costs and that the respondent be bound by a court ordered schedule for filing of documents and disclosure.
Costs
[26] The respondent has had success on his motion. He did not provide a Bill of Costs but submitted that if successful, he should be awarded partial indemnity costs of $3,000.
[27] In this court’s view, the respondent’s success is tempered by the following factors:
a. The respondent had the opportunity to provide fulsome disclosure in addition to his financial statement as a show of good faith. He failed to do so.
b. The respondent’s reasons for failing to respond were not well documented and lacked substance. Had it not been for the possible merits of the respondent’s defence that alone may have been sufficient to prevent the respondent’s success on the motion.
c. There was no concrete offer to pay the applicant’s costs thrown away if the respondent was successful. This should have been a starting point for the respondent.
[28] I find that it would be unreasonable to have the applicant pay costs in these circumstances, despite the respondent’s success.
Orders
[29] Given all of the above, I make the following orders:
The respondent’s motion to set aside the default order dated December 21, 2018 is granted.
The respondent to serve and file his Answer within 10 days of the date of this ruling.
The respondent to provide the following disclosure within 21 days of the date of this ruling:
a. His T1 general tax returns with copies of all attachments for the period of 2014 to 2017.
b. Documents to corroborate each asset and debt set out in his financial statement.
c. Documents relating to the ownership and assets of his business including annual financial statements.
d. His 2018 T1 General and Notice of Assessment when available.
e. Documents relating to the ownership of the Portland Street property if they are in his possession or control. If they are not, a comprehensive affidavit setting out his response to the applicant’s allegations that he has an ownership interest in that property.
- In consideration of the default order being set aside, the respondent shall make the following payments to the applicant:
a. Costs thrown away of $22,000.
b. A lump sum of uncharacterized child/spousal support in the amount of $5,000. This may be credited as the parties see fit upon settlement of the matter or at trial.
The respondent may not file an Answer, nor will the default order be set aside until he has paid the amounts owing in paragraph 4 of this order.
If the respondent does not pay the amounts owing in paragraph 4 of this order within 30 days, the applicant may proceed to enforce the default judgment.
Notwithstanding the respondent’s success on this motion, the applicant is not required to pay any costs.
C. Gilmore, J.
Released: March 8, 2019
COURT FILE NO.: FS-18-2475
DATE: 20190308
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Nancy Candido-Gregorio
Applicant
-and-
Edwin Gregorio
Respondent
RULING ON MOTION
C. Gilmore, J.
Released: March 8, 2019