COURT FILE NO.: FC-18-987-00

DATE: 20190308

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ruth Alice Ord, Applicant

AND:

Lewis Robert Ord, Respondent

BEFORE: The Honourable Mr. Justice J.P.L. McDermot

COUNSEL: Alison L. Pengelley, for the Applicant

David Winnitoy, for the Respondent

HEARD: February 28, 2019

ENDORSEMENT

BACKGROUND

[1] Marriage contracts result in a world of second thoughts. Often signed with marriage pending, they speak to business at a time when those types of thoughts are foreign to the parties. Because of this, the negotiation of an agreement is often hasty and ill thought out. Notwithstanding this, marriage contracts are often of long-lasting effect, both during the marriage and after. The terms, which might have seemed fair at the time, may also result in seemingly inequitable situations resultant from waivers of spousal support or property claims after a long-term relationship, leaving one party in apparent poverty and without recourse to remedies that he or she might otherwise have on marriage breakdown.

[2] This is such a case. In October, 2008, the Applicant Wife and the Respondent Husband moved in together. They married on June 16, 2011. On the day before the marriage, June 15, 2011, they signed a marriage contract (the “Marriage Contract”). Both parties had legal advice and there was financial disclosure attached. That contract barred spousal support and reserved certain assets as being matrimonial assets, leaving others alone:

(a) The agreement confirmed that as of the date of marriage the parties were living at 6 Creekside Court, in Bolton, Ontario. That property was owned by the Respondent, and, according to his financial disclosure, was worth $950,000 and was mortgage free.[^1] In paragraph 9 of the agreement, the parties agreed that the Creekside property would be designated as the parties’ matrimonial home, and that it would be sold. The agreement also provided that the parties would buy another matrimonial home with the net proceeds, and would put it in both names as joint tenants with “right of survivorship.”

(b) The agreement further acknowledged that the parties equally owned shares in two numbered companies, 2200471 Ontario Inc. and 2200472 Ontario Inc., which respectively owned a furniture store named Shaw’s Interiors and the land on which that furniture store operated out of at 22 Queen Street in Elmvale, Ontario. Paragraph 11 of the agreement provided that, in the event of a marriage breakdown, the shares of both the corporations would be transferred to the Applicant Wife. Similarly to the prospective matrimonial home, the agreement further provided that in the event of death of one of the parties, that party’s shares in the corporation would go to the other.

(c) All other property would remain in the ownership and possession of each party according to ownership. In particular, the parties agreed that the Respondent’s cottage property at 1 Monica Drive in Tiny Township would remain solely his asset, and that this property would not be a matrimonial home “at the effective date of this agreement or at any future time.”

(d) There were full waivers of spousal support by both parties supported by a Miglin[^2] release.

[3] There is a traditional saying that, “There is many a slip ‘twixt cup and lip.” Nothing took place as originally contemplated by the marriage contract. The parties did not buy a matrimonial home after the sale of Creekside, but moved into the excluded cottage property. They demolished the cottage and built a large house on the same property. It was never transferred into both names. The furniture business sold, but there was no sharing of the net proceeds; the Respondent says that he paid debts with most of that money, purportedly because Applicant had mismanaged funds when operating the business.

[4] And it is not the Marriage Contract that the Applicant complains of. She says that the marriage began to break down in 2017 and the Respondent became increasingly abusive. The Applicant says that the Respondent’s sons moved in into the home and they were concerned about losing their inheritance in the cottage property. In March, 2017, the Applicant was presented with an agreement which purported to amend the Marriage Contract (the “Amending Agreement”). The Amending Agreement deleted paragraphs 10 and 11 (cottage property and Shaw’s Interiors) and provided that Ms. Ord had “made no financial contribution to the building of the matrimonial home or payment of the mortgage.” Under paragraph 9.7 of the Amending Agreement, Ms. Ord released Mr. Ord “from all claims that she may have on the effective date of this Amending Agreement or may later acquire to any interest in the Matrimonial Home.” The Amending Agreement further contained full spousal support and property equalization releases.

[5] The Applicant signed the Amending Agreement. She says that this Amending Agreement was forced on her in order to deprive her of her rights in the matrimonial home which she might otherwise have had under the Marriage Contract. She claims that she was subject to a course of badgering by the Respondent and his sons which resulted in her signing the Agreement. There was no legal advice or financial disclosure. She denies the Agreement is a domestic contract, as she says that the witness to the Agreement, the Respondent’s son, was not present when she signed it and did not see her sign it.

[6] She claims the agreement to be unconscionable and points to the fact that she received nothing from the marriage whatsoever; in fact her assets decreased. She notes that when the parties signed the Marriage Contract she had a home in Calgary worth $400,000 as well as her $200,000 RRSP. The latter was all that she was left with when she separated, and it was cashed in to allow her to return to Calgary, furnish a home, purchase a vehicle and pay her lawyer. She says that she is ill and that her present annual income is $6,700 from CPP. She notes that the Respondent had assets on the valuation date of over $4,000,000 including the matrimonial home, which she says appraises out at more than $1,800,000, and that his income exceeds $72,000 per annum.

[7] The Respondent says that his wife is entirely responsible for where she finds herself. He says that she drank to excess during the marriage, and squandered funds. He said that the Amending Agreement only reflected the state of affairs at the time that it was signed insofar as she put nothing into the matrimonial home and deserves nothing from it.

[8] Ms. Ord seeks to set aside the Amending Agreement. She says that she is out of money and requires the Respondent’s financial assistance to properly litigate this matter. She asks for the Respondent to pay her interim costs and disbursements of $150,000 under r. 24(18) of the Family Law Rules.[^3]

[9] The parties have had a case conference. Wildman J. described this as a “difficult case.” Although there is no order to this effect, the parties have agreed to bifurcate these proceedings and firstly schedule a trial to deal with the validity of the Amending Agreement. If the agreement is set aside, the property and spousal support issues will proceed to a second trial. If it is not, that will be an end to it, at least as far as the property issues go.

Result

[10] For the reasons set out below, I find that the Respondent shall pay an advance towards the Applicant’s costs and disbursements in the amount of $40,000.

ANALYSIS

[11] This is a motion for payment of interim costs and disbursements which is brought pursuant to r. 24(18) of the Family Law Rules, which reads as follows:

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.

[12] According to Rogers J. in the leading case of Stuart v. Stuart[^4], this provision is for the sake of “fairness” between litigants of different economic means taking into account the primary purpose of the Rules which is to ensure that cases are tried “justly” [Rule 2(2)]. The rule is meant to “level the playing field” to allow an impecunious party to review and make disclosure and to go to trial [paras. 7 and 9].

[13] Moreover, in that case, Rogers J. identified seven “themes” concerning the law of the granting of interim disbursements in family law matter which are as follows [at para. 8]:

1. The ordering of interim disbursements is discretionary;

2. The claimant must demonstrate that the interim disbursements are necessary to pursue her case. She must, according to Rogers J., “demonstrate that absent the advance of funds for interim disbursements, the claimant cannot present or analyse settlement offers or pursue entitlement.”

3. The interim disbursements must be shown to be necessary;

4. The claim advanced must be meritorious;

5. The exercise of discretion should be limited to exceptional cases;

6. Interim costs are for the purpose of leveling the playing field;

7. Monies may be advanced against an equalization payment.

[14] Mr. Winnitoy, on behalf of the Respondent, suggests that the claim for interim costs should be dismissed on three grounds. Firstly, he suggests that in claims involving setting aside a marriage contract at a bifurcated trial, the court must exercise caution because cases of this nature are generally not meritorious; only once the agreement is set aside should an order for interim costs go. Further, the Respondent says that the Applicant has not proven that the disbursements are necessary, nor has she provided sufficient particulars enabling the court to quantify the necessity of the costs to be paid or allowing the court to permit a reasonable amount to be set. Finally, he states that his client should not be made to pay the disbursements, as much of his fortune is tied up in RRSPs which are inaccessible without tax consequences.

Meritorious Claim

[15] As noted above, the parties have acknowledged that the issues in this case are going to be bifurcated. The first issue to be dealt with is the validity of the Amending Agreement signed by these parties weeks prior to separation.

[16] Mr. Winnitoy argues that case law dictates that, where a matter is being bifurcated and a marriage contract or other domestic contract is in issue, the court should be hesitant to find a meritorious case as a domestic contract is, prima facie, valid. He says that disbursements should only be ordered where the agreement has, in the first stage, been set aside.

[17] He relies upon Balsmeier v. Balsmeier, [^5] a decision of Kaufman J. On its surface, the fact scenario was similar to the present case. In that case, there was a marriage, a marriage contract barring equalization and limiting spousal support and a determination that the matter would be bifurcated, with the issue of the marriage contract being addressed prior to the other issues. The wife sought interim disbursements of $40,000 to pursue the litigation and Kaufman J. noted [at para. 37]:

The court recognizes that the husband is an extremely wealthy individual, but the court also recognizes that at this stage of the proceeding the marriage contract is deemed to be valid, until such time as the wife can persuade the court to the contrary. Accordingly, the request for interim disbursements is dismissed without prejudice to the wife requesting that the issue be revisited at a later stage of the proceeding.

[18] Mr. Winnitoy also relies upon Dillon v. Dillon[^6], which is another case where a claim for interim costs was dismissed, again in the face of a bifurcated hearing to address two marriage contracts.

[19] I do not find that Balsmeier stands for a general proposition that there is a higher threshold to find a meritorious case where there is a claim to set aside a domestic contract and the issues have been bifurcated. I note that the threshold for a meritorious claim is fairly low in claims for interim costs under r. 24(18). Douglas J. noted in Rea v. Rea[^7] that,

At this early stage in the proceeding there is no reason to conclude that the claims advanced by either party are without merit. All claims advanced by the parties are prima facie meritorious at this early stage of these proceedings [para. 24].

[20] I also addressed this issue in Romanelli v. Romanelli[^8], where I noted that a party does not have to prove his or her case to obtain an order for interim disbursements. All that the material has to demonstrate is that this is a case that is worthwhile to prosecute; would it be reasonable for an individual of modest means to expend legal fees on a case such as the present one?

[21] Seen in this light, Balsmeier is really a case confined to its particular facts and only addresses the question of whether the claimant’s case was, at that point, meritorious. In that case, there was only a three-year cohabitation, an agreement signed with independent legal advice, and negotiations that took place between counsel with at least one redraft of the agreement. There was consideration for the agreement, and full financial disclosure. It is apparent that, even if the marriage contract were upheld in that case, there would be a time limited award of spousal support. There was a good argument that the agreement was properly negotiated and constituted a fair bargain considering the length of cohabitation.

[22] That is completely at odds to the present case. Here the only agreement that is in issue is the Amending Agreement, which leaves the claimant with literally nothing after more than nine years of cohabitation. There was little or no consideration for the execution of that Agreement; it is apparent from the face of the Amending Agreement that the Applicant would receive no property or support at the close of the day. There are allegations of duress and bullying leading up to the execution of the Amending Agreement and, on the face of things, the end result is patently unfair. The Applicant’s property decreased from the date of marriage values as set out in the original Marriage Contract, and the Respondent’s property remained roughly the same as it was on that date. The Applicant ended the day with just over $200,000 in assets while the Respondent’s assets exceed $4,000,000, and he has more than ten times the Applicant’s income, while the Applicant is being expected to subsist on disability income. That is a result that might be easily seen as unconscionable.

[23] This does not even take into account the Applicant’s contention that her signature was not even witnessed, an issue not addressed in the Respondent’s materials by way of an affidavit of execution signed by the Respondent’s son. All that Mr. Ord said about that issue was that the Applicant’s allegations were “simply colour and irrelevant”.[^9] I disagree. If Ms. Ord’s signature was not witnessed, the Amending Agreement is not a valid domestic contract under s. 55(1) of the Family Law Act[^10] and cannot be relied upon the replace the Marriage Contract that the Applicant seeks to uphold.

[24] Where the result of the agreement signed by the parties appears to be unconscionable, and the court is left to ask why any reasonable person would sign this particular Amending Agreement, the Applicant’s case for setting aside the agreement is, on its face, meritorious. Added to this are the unanswered concerns respecting the issue of adherence to the formal requirements of the FLA for enforcement of domestic contracts.

[25] Moreover, the claimant in Balsmeier had access to a line of credit on a home that she owned in Michigan in order to fund her legal expenses and so to proceed to trial; the playing field did not need to be lowered. Further, a review of Dillon makes it apparent that the real issue for Gordon J. in that case was not whether the case was meritorious; that had already been addressed in an earlier motion where an advance of $27,000 was ordered. The real issue was the fact that the previous advance had already been spent, in the words of Gordon J. “at her peril”, and the failure of the claimant to properly account for the purpose of the second advance that she was requesting.

[26] Notwithstanding the agreement to bifurcate, I find that the Applicant’s claim to set aside the Amending Agreement sufficiently meritorious so as to warrant an advance of fees and disbursements in the Applicant’s favour.

Necessity/Quantum of Advance

[27] In dealing with a case such as the present one, the claimant for legal fees and disbursements must satisfy the court as to the necessity for the advance. In addition, they must also prove impecuniosity and also justify the advance that is being requested by way of an accounting for the expenses that he or she needs to funds to pay. The court must satisfy itself that it is not giving the claimant a “free license to litigate” especially where there is no requirement that the claimant be in a position to repay the funds if unsuccessful at trial.[^11]

[28] Mr. Winnitoy vigorously argued that the Applicant had not proven necessity or need for the advance. He says that the Applicant has squandered her RRSPs that she cashed in after separation and it is her own fault that she is without funds today. He says that the request for funds by the Applicant is both unreasonable and unjustified.

[29] Ms. Ord requests $150,000 by way of an interim advance from the Respondent. She filed a “Prospective Bill of Costs” as an exhibit to her affidavit, which states that she needs the following funds:[^12]

Disclosure Motions/Motion for Disclosure $ 7,500 Motion for Interim Support $ 5,000 Questioning $ 7,500 Settlement Conference $ 5,000 TSE/Trial Management Conference $ 10,000 First Part of Bifurcated Trial (5 day estimate) $ 50,000 Second part of Bifurcated Trial (5 day estimate) $ 50,000 Total: $135,000

[30] After separating from the Respondent, the Applicant cashed in her RRSPs which totaled about $218,500. She used those funds to move to Calgary where she lived prior to meeting the Respondent. She furnished an apartment and purchased a vehicle. She paid 30% withholding tax on the RRSPs, something that Mr. Winnitoy suggested was a poor financial decision as she could have cashed them in piecemeal, reducing the withholding tax.[^13] She deposed that there remains $15,947 left in the bank and that the remaining funds were spent on legal fees to date. Based on her affidavit, I calculate that she has therefore accounted for the following expenses at the time of argument of the motion:

Amount cashed in $218,500 Less withholding tax (30%) ($ 60,216) Less Living Expenses ($ 40,359) Less Moving Expenses ($ 3,850) Less furnishing apartment ($ 16,595) Less used vehicle purchase ($ 11,595) Less cash on hand ($ 15,947) Difference spent on legal fees and disbursements $ 69,938

[31] This means that the Applicant has spent nearly $70,000 on legal fees and disbursements to date. There has been one case conference prior to this date, and this motion. To have spent this amount of money to get to a case conference and a subsequent motion is, simply speaking, excessive. When asked what this money was spent on, counsel advised that it was spent on the review of nine volumes of disclosure from the Respondent. However, considering the fact that the only issue for the bifurcated trial is the validity of the Amending Agreement, a detailed review of the disclosure is, with respect, unnecessary at this stage of the litigation.

[32] However, I also find that Mr. Winnitoy’s suggestion that the Applicant “squandered” her funds to be less than helpful. The money that she has spent on her living expenses, her move to Alberta and to furnish her apartment and purchase a vehicle are expenditures about which she had little choice. What else was she to do when she had determined that she would leave the marriage and had signed an agreement three weeks previously which gave her nothing? Was Mr. Winnitoy suggesting that the Applicant go onto public assistance and enter public housing and thereby preserve that asset? I note that it is questionable that she could have received public assistance when she had an asset of more than $200,000.

[33] Going by her own costs estimates for the conferences and motions as set out above, the Applicant should only have only spent some $12,500 to date ($5,000 for the conference + $7,500 for the motion). Even considering the initial pleadings in this matter and the disbursements disclosed in her own material, the Applicant should not have gone through more than $30,000 to date, leaving approximately $40,000 for legal fees from her RRSP funds. Deducting another $10,000 for living expenses, she should have at least $30,000 in hand to proceed to the first part of the bifurcated trial.

[34] The first trial should be no more than three or four days, and should cost no more than $40,000. The estimate for the costs of the motions are reasonable, but I do not believe that a disclosure motion is necessary at this time, as we are only dealing with the validity of the agreement. Therefore there need only be one further motion, the one suggested by Wildman J., for spousal support. The Trial Scheduling Conference should not cost more than the settlement conference, no more than $5,000. The parties have agreed to questioning, but it should take no more than one day, at a maximum cost of $5,000: see the endorsement of Wildman J. which permits only one-half day of questioning each. This means that the costs of the steps set out above should be no more than $60,000 to the end of the first trial.[^14] Deducting the sum of $30,000, the amount which the Applicant should have in hand at this point in time, the advance for legal fees should be no more than $30,000. Taking into account disbursements already expended, and taking into account disbursements for trial and HST, I find that the appropriate amount for an advance should be $40,000.

[35] I recognize that this is not based upon the estimate of the exact hours to be taken as suggested by Mesbur J. in Ludmer v. Ludmer.[^15] However, I believe that my estimates are modest and proportionate taking into account the steps necessary for the first part of the bifurcated trial.

Ability to Pay

[36] The Respondent suggests that he has no funds for legal fees because he does not have any ready cash; the only funds available to him are his RRSPs which total nearly $1 million. He notes that case law has suggested that RRSPs should not be used to fund litigation advances under r. 24(18).[^16]

[37] When the Applicant has been forced to cash in her RRSP to live on and to fund her separation and this litigation, it does not lie in the Respondent’s mouth to suggest that his RRSPs should remain intact while the Applicant’s are to be used in their entirety. That would be giving effect to a double standard. I do not find this to be a valid objection to an order in this matter.

ORDER

[38] There shall therefore be an order that the Respondent shall forthwith advance to the Applicant the sum of $40,000. This is an advance intended to bring the Applicant to the end of the bifurcated trial regarding the Amending Agreement. The Applicant has leave to bring a further motion for another advance at completion of the first trial.

[39] The parties may submit costs submissions regarding this motion, the Applicant first and then the Respondent on a ten-day turnaround through my legal assistant at Barrie. Costs submissions shall be no more than three pages in length, not including offers to settle and bills of costs as are necessary.

McDermot J.

Date: March 8, 2019

[^1]: Although the Respondent says that the line of credit noted in his financial disclosure of $570,000 was registered against that home. [^2]: Miglin v. Miglin, 2003 SCC 24. [^3]: O. Reg. 114/99 [^4]: 2001 CanLII 28261 (ON SC), [2001] O.J. No. 5172 (S.C.J.). [^5]: 2014 ONSC 5305. [^6]: 2013 ONSC 7679, [2013] O.J. No. 5744 (S.C.J.). [^7]: 2016 ONSC 382 [^8]: 2017 ONSC 1312. [^9]: Respondent’s affidavit sworn February 22, 2019, para. 33. [^10]: R.S.O. 1990, c. F.3 [^11]: Ma v. Chao, 2016 ONSJ 585, at para. 10. [^12]: Ex. KK to the affidavit of the Applicant sworn February 11, 2019. [^13]: And had she done this, she may have been left with a tax debt if those reduced amounts of withholding tax did not cover her tax liability. [^14]: $5,000 for the interim support motion + $5,000 for questioning + $10,000 for the two conferences + $40,000 for trial. [^15]: 2012 ONSC 4478. [^16]: Ludmer v. Ludmer, supra at para. 53.