COURT FILE NO.: F1484/16-00FD
DATE: September 11, 2019
SUPERIOR COURT OF JUSTICE – ONTARIO
FAMILY COURT
RE: Mary Ellen Hall, applicant
AND:
Christopher Douglas Clifford Hall, respondent
BEFORE: MITROW J.
COUNSEL: Denis Burns for the applicant
William R. Clayton for the respondent
HEARD: September 4, 2019
ENDORSEMENT
INTRODUCTION
[1] The applicant brings this motion to strike the respondent’s answer as a result of the respondent’s failure to comply with an interim spousal support order and an interim costs order.
[2] The respondent opposes the relief sought and submits that this is not an appropriate case to strike his answer.
[3] For reasons that follow, the respondent’s answer is struck, except for the claim for divorce, but the order contains a time-limited stay to permit the respondent a final opportunity to pay the full amount owing.
FACTS
(a) The Interim Orders
[4] The applicant’s first motion, which was for interim spousal support, was argued before me on January 16, 2019. My decision was released on April 16, 2019, Hall v. Hall, 2019 ONSC 2286 (“the Reasons”). The respondent was ordered to pay interim spousal support in the amount of $8,000 per month commencing November 1, 2018, subject to a credit in the amount of $1,438.68 for the November 1, 2018 payment.
[5] On July 10, 2019, the respondent was ordered to pay costs of the motion in the amount of $11,500 inclusive of fees, disbursements and HST. The costs were payable within 30 days.
[6] The respondent had made a payment of $10,500 as a condition of adjourning the applicant’s spousal support motion to January 16, 2019. The applicant agreed in her reply affidavit that this amount should be credited towards the spousal support order.
[7] The applicant deposed in her reply affidavit sworn August 27, 2019 that the amount owing for spousal support and costs was $79,561.32 plus interest ($80,000 spousal support for 10 months + $11,500 costs - $10,500 credit – $1,438.68 further credit). The spousal support arrears therefore would not include any payments due on or after September 1, 2019.
(b) Background
[8] The details as to the parties’ employment and relationship history are set out in the Reasons. For the purpose of the present motion, it is sufficient to note the following:
(a) the parties separated in November 2010 after over 20 years of marriage;
(b) the parties’ two daughters were ages 18 and 24 at the time of the hearing of the applicant’s motion for interim spousal support;
(c) the applicant has not worked outside the home since 2000 and, between 1990 and 2000, the applicant had minimal employment and self-employment (Reasons, para. 18);
(d) the respondent retired on March 1, 2015 just prior to his 55th birthday after a successful career in the financial industry;
(e) the respondent’s retirement was voluntary and not precipitated by health or other reasons (Reasons, paras. 20, 44 and 46); and
(f) on the motion for interim spousal support, a finding was made that the respondent is intentionally unemployed and income was imputed to the respondent in the amount of $240,000 (Reasons, paras. 75 and 99).
[9] In the Reasons, the following is stated regarding the respondent’s decision to retire, at paras. 40-43:
[40] The respondent deposes that the financial planning business is “under serious pressure.” He cites the use of self-directed brokerage accounts where a low, flat transaction fee is paid as opposed to a percentage fee to the financial advisor.
[41] The respondent opines that the business model is unsustainable. He refers to his declining commissions from 2012 to 2014. The respondent also provides some further insight from his perspective as to changes within the financial industry that, in his view, did not justify his continued employment with National Bank. The respondent deposes at paragraph 32 that “I made the decision to retire in this context.”
[42] I do agree with the applicant’s concerns that none of the respondent’s analysis is corroborated by any credible independent evidence. The respondent agrees that, subsequent to separation, he inherited $1 million from his mother’s estate. Also, as discussed below in more detail, the respondent received a significant cash payout on his retirement.
[43] The respondent’s evidence explaining his decision to retire is bereft of any analysis or consideration by him as to whether retirement was appropriate given his outstanding support obligation to the applicant and the effect that his early retirement would have on the applicant.
[10] The application was commenced in November 2016. However, the parties became involved in negotiations, including mediation. Some progress was made that included an agreement as to how the children were to be supported and that the matrimonial home would be listed and sold and the proceeds of the matrimonial home would be shared equally as if the matrimonial home was jointly owned notwithstanding that it was registered in the applicant’s name (see also Reasons, para. 22).
[11] The parties’ discussions resulted in an arrangement for the respondent to make voluntary spousal support payments for a period of time. The respondent unilaterally ceased making the payments effective November 1, 2018, quickly prompting the applicant’s motion for interim spousal support initially returnable in late November 2018 (see also Reasons, paras. 24-30).
[12] The matrimonial home was sold for $1.732 million and the sale closed on October 29, 2018.
[13] From the sale proceeds, the applicant received $400,000 and the respondent received $300,000. Currently, the balance of a little over $363,000 remains in trust. It is the applicant’s position that the equalization payment owing by the respondent will exceed his share of the sale proceeds. Hence, the monies remain in trust pending resolution of the equalization payment.
[14] The respondent does not dispute the applicant’s evidence that he netted over $246,000 from the sale of his cottage in September 2018.
[15] The outstanding issues for trial relate to spousal support and equalization payment. This case is on the November 2019 trial list.
[16] Around the time that the spousal support motion was brought, the respondent had savings of over $453,000 and this included $410,000 in investments, according to his financial statement sworn November 22, 2018.
[17] Less than two months later, according to his financial statement sworn January 10, 2019, which was six days prior to the spousal support motion being argued, the respondent’s savings had decreased to a little over $179,500, with the investment portion of those savings having dropped from $410,000 to $165,000. However, it is noted that the bank statement dated January 31, 2019 for the respondent’s investment account showed a value of a little over $203,000.
[18] In his response to the applicant’s current motion to strike, the respondent filed an updated financial statement sworn August 20, 2019. He disclosed savings of just under $39,000, with the investment portion of those savings being reduced to just over $32,500.
[19] The respondent’s affidavit does invite some critical scrutiny. He deposes that he remains “unemployed.” However, the reader of his affidavit should not be confused that the respondent might be a person looking for work who has been unable to find work.
[20] The respondent has retired and remains retired. In his current financial statement, the respondent describes himself as “retired since 2015.”
[21] The respondent’s affidavit disclosed no attempt to find employment, notwithstanding his evidence as to his rapidly dwindling capital and apparent dire financial circumstances. The only minor exception as to working is the respondent’s evidence that he was staying at his sister’s cottage and that he was providing some labour around the property, including clearing brush “so as not to completely sponge” off his sister.
[22] The respondent deposes that at trial he intends to prove on a preponderance of evidence that returning to his previous line of work is not a realistic option and that achieving his past level of income, including capital gains, is no longer likely.
[23] The respondent in effect is “doubling down” on his argument advanced on the spousal support motion that employment in his previous line of work is not an option.
[24] By late November 2018, the respondent was aware of the pending motion for spousal support and that the applicant sought to impute significant income to him. A trite observation is that it was open to the respondent, acting prudently, to be fiscally careful about preserving his assets to meet a potential spousal support obligation.
[25] However, the respondent submits that the $410,000 in investments in November 2018 was “nearly all comprised of investments and stocks in marijuana companies.” He deposes that he made a “bet” that the stocks would increase but instead they plunged in value, reducing the respondent’s investment portfolio to a little over $32,500 by August 2019. The respondent explains that he made a “bad bet.”
[26] The respondent discloses that on April 10, 2019 (this would be six days prior to the release of the Reasons on the spousal support motion), that he gave Mercedes Benz London a cheque that day in the amount of $43,858.56.
[27] The respondent explains that the lease for his Mercedes Benz GLE350 expired in April 2019 and that, if he turned in the vehicle. he would be required to pay $8,000 as a penalty for excess kilometres. The respondent adds that the buyout represents “good value” as the vehicle was “worth” $50,000 when the lease expired.
[28] In his financial statement filed on the present motion, the “today” value of this vehicle is described as “n/a.” Accepting the respondent’s evidence that the vehicle was worth $50,000, it is noteworthy that there is no evidence that the respondent considered selling this vehicle, after learning about the interim spousal support order, and perhaps purchasing or leasing something more modest and applying the difference to his accumulating spousal support arrears.
[29] The respondent’s bank statements for his investment account, that he attached as exhibits, show that for the four months from April 2019 to July 2019 inclusive that he transferred $90,500 from his investment account to another “RBC” account. There is no dispute that this transferred money was for his own use.
[30] This includes $5,000 on April 5, 2019, $10,000 on April 12, 2019 and $45,000 on April 17, 2019. It appears that the $45,000 transfer, occurring the day after the Reasons on the spousal support motion were released, was intended to cover the cheque to Mercedes Benz London dated April 10, 2019.
[31] The respondent deposes that he cohabits with his current partner in her residence that he describes as “modest.” The respondent estimates in his financial statement that his partner’s annual income is $40,000.
[32] The respondent also deposes that he lives “simply, economically,” which, from the respondent’s perspective, presumably still allows for an expenditure of over $43,000 for a Mercedes Benz motor vehicle. The respondent deposes that he is not travelling as he cannot afford to do so, although he adds that he did take a “brief three day trip” with his partner, a travel agent, in “February or March 2019” and that his partner “defrayed” the expenses for the trip. The respondent does not disclose the location or cost of the trip.
[33] In her reply, the applicant deposes that the respondent has taken vacations at Club Med Grand Turk from November 28 to December 3, 2018; Nassau, Bahamas from December 27, 2018 to January 2, 2019; and Hotel Riu Palace and the Royal Hideaway, Cancun, Mexico from April 17 to April 21, 2019. The applicant further deposes that “the very week” that the respondent signed his affidavit that he purchased a new Apple computer for more than $3,000.
[34] During argument, the respondent submitted that the applicant failed to explain how she would know about the alleged trips and purchase of the computer and that little or no weight should be accorded to that reply evidence.
[35] The applicant submits that the court should take into account that the parties still have a joint RBC chequing account, as confirmed in the respondent’s financial statement filed on the motion. The applicant invites the court, in effect, to draw an inference that this joint chequing account is the likely source of the impugned reply evidence.
[36] While it would have been preferable for the applicant to have indicated clearly the source of her information, I find overall, in reviewing the applicant’s material in support of her motion, that it is factual and concise, with no indication of fabrication or embellishment.
[37] Accordingly, I am prepared to give some consideration to this reply evidence; however, I add that this evidence certainly is not determinative of the motion and, further, that the result on the motion would have been the same without this evidence.
[38] The spreadsheet appended to the respondent’s affidavit shows that he paid legal fees of $18,701.97 between December 2018 to April 2019 inclusive.
[39] The applicant deposes that the Family Responsibility Office has been unable to collect any money from the respondent as he remains unemployed.
THE LAW
(a) [Family Law Rules](https://www.canlii.org/en/on/laws/regu/o-reg-114-99/latest/o-reg-114-99.html)
[40] Rule 1(8) of the Family Law Rules, O. Reg. 114/99 is applicable:
1(8) If a person fails to obey an order in a case or a related case, the court may deal with the failure by making any order that it considers necessary for a just determination of the matter, including,
(a) an order for costs;
(b) an order dismissing a claim;
(c) an order striking out any application, answer, notice of motion, motion to change, response to motion to change, financial statement, affidavit, or any other document filed by a party;
(d) an order that all or part of a document that was required to be provided but was not, may not be used in the case;
(e) if the failure to obey was by a party, an order that the party is not entitled to any further order from the court unless the court orders otherwise;
(f) an order postponing the trial or any other step in the case; and
(g) on motion, a contempt order.
[41] The order to be made under r. 1(8) is an order that the court considers “necessary for a just determination of the case.”
[42] Rule 1(8.4) provides for specific consequences when certain documents are struck, including an answer:
1(8.4) If an order is made striking out a party’s application, answer, motion to change or response to motion to change in a case, the following consequences apply unless a court orders otherwise:
The party is not entitled to any further notice of steps in the case, except as provided by subrule 25 (13) (service of order).
The party is not entitled to participate in the case in any way.
The court may deal with the case in the party’s absence.
A date may be set for an uncontested trial of the case.
[43] Given this rule, where a party’s application or answer is struck, the court must undertake a proportionality analysis in determining whether a party still can participate in the case and, if so, to what extent. This is discussed in more detail below.
(b) Jurisprudence
[44] In Roberts v. Roberts, 2015 ONCA 450, it was held that the power to strike pleadings is to be used “sparingly and only in exceptional circumstances”: para. 15.
[45] Other decisions of the Court of Appeal for Ontario also have emphasized the necessity of exceptional circumstances before pleadings are struck. In Chiaramonte v. Chiaramonte, 2013 ONCA 641, the court stated, at paras. 31-32:
31 In family law cases, pleadings should only be struck, and trial participation denied, in exceptional circumstances and where no other remedy would suffice: Purcaru v. Purcaru, 2010 ONCA 92, 75 R.F.L. (6th) 33 (Ont. C.A.), at para. 47. The exceptional nature of this remedy is rooted in the significance of the adversarial system, as this court recognized in Purcaru, at para. 49:
The adversarial system, through cross-examination and argument, functions to safeguard against injustice. For this reason, the adversarial structure of a proceeding should be maintained whenever possible. Accordingly, the objective of a sanction ought not to be the elimination of the adversary, but rather one that will persuade the adversary to comply with the orders of the court.
32 Striking a party's pleadings is a drastic remedy that should only be applied in exceptional circumstances. The rules authorizing this remedy must be interpreted in light of the draconian effect of rule 10(5)(b). That rule provides that a respondent whose answer has been struck is not entitled to participate in the case in any way. For example, in Kim v. Kim, 2001 CarswellOnt 502 (Ont. S.C.J.), on the basis of rule 10(5)(b), an uncontested hearing was held on custody, support and property without further notice to the party whose pleadings had been struck. Similarly, in Costabile v. Costabile, 2004 CarswellOnt 4860 (Ont. S.C.J.), a party whose pleadings had been struck was not entitled to notice of further proceedings nor was he entitled to participate in any way.
[46] In Manchanda v. Thethi, 2016 ONCA 909[^1], relied on by the applicant, the court held, in the context of non-compliance with financial disclosure obligations, that “willful non-compliance must be considered egregious and exceptional,” at para. 13:
13 Our second reason is this: after continual admonitions by the courts and the legislature that parties to a matrimonial proceeding must produce financial documentation, willful non-compliance must be considered egregious and exceptional. This court has stated that the most basic obligation in family law proceedings is the duty to disclose financial information. The requirement is immediate and ongoing: Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6 (Ont. C.A.), at para. 11.) In 2015, Family Law Rule 13 was amended to emphasize a party's financial disclosure obligations. A party's non-compliance must be considered in the context of this strict financial disclosure obligation. Rule 1(8) provides the court with the authority to strike claims. Those who choose not to disclose financial information or to ignore court orders will be at risk of losing their standing in the proceedings as their claims or answers to claims may be struck.
[47] I concur with Moore J.’s conclusion in Peerenboom v. Peerenboom, 2018 ONSC 5796 (Ont. S.C.J.), relied on by the applicant, as to the effect of Manchanda, supra, that earlier statements of the Court of Appeal for Ontario as to finding exceptional circumstances prior to striking pleadings for non-compliance with orders or disclosure obligations must be read with the more recent interpretation in mind: paras. 15, 16 and 22-24.
[48] In Mullin v. Sherlock, 2018 ONCA 1063, the court heard an appeal from a decision striking the husband’s answer for failing to comply with financial disclosure orders. In striking the husband’s answer, the motion judge did permit the husband to have limited participation in further steps in the case and at trial. On appeal, the court cited the motion judge’s finding that the husband wilfully breached the orders and found that the motion judge did not err in resorting to the strike out provisions found in r. 1(8(c): paras. 51-52.
[49] However, the court held that the motion judge erred in the determination of the parameters of trial participation by the husband, considering that there had been extensive disclosure made and that outstanding undertakings and referrals were few and, accordingly, the court varied the order by augmenting the husband’s rights of participation: para. 54.
[50] The court emphasized in Mullin v. Sherlock that when a decision to strike is made, that the motion judge must consider whether the consequence is responsive to the breach. In essence, this requires consideration of proportionality between the nature of the breach and the consequence. The court stated, at para. 47:
47 If the judge decides to strike, as in the case under appeal, Rule 1(8.4) becomes applicable. As mentioned, this subsection provides that certain consequences apply unless a court orders otherwise. Accordingly, a party is not entitled to participate in a case in any way unless the court orders otherwise. This provision gives the judge the ability to frame the procedural consequences to a party in default. In making this determination, consideration should be given to whether the consequence is responsive to the breach and whether it achieves a just outcome.
DISCUSSION
[51] The applicant submits that the respondent’s failure to pay spousal support and costs was willful and that dismissal of his answer is the appropriate remedy.
[52] The respondent argues that he is unable financially to comply with the orders. He frames the issue as to whether his “fecklessness” invites the order sought. The respondent resists any suggestion that his failure to pay spousal support and costs is willful.
[53] The respondent further submits that he should be able to defend, at trial, his position that it was appropriate for him to retire and that income should not be imputed to him.
[54] The respondent deposes that since the date of separation that his “extravagance of voluntary payments and support” made to the applicant should put him into a “credit” position when all the evidence is considered at trial and that the amount of credit will exceed any current spousal support arrears. This evidence is recycled from the spousal support motion and was disputed at that time by the applicant (Reasons, para. 77).
[55] The applicant relies on Gordon v. Starr, 2007 CanLII 35527 (ON SC), 2007 CarswellOnt 5438 (Ont. S.C.J.), where a party had failed to comply with a $2,500 interim costs order. The court rejected that party’s argument that ability to pay should be considered when defending a motion to strike pleadings for failure to pay costs. J.W. Quinn J. stated, at para. 19:
19 I do not want to spend any more time on this aspect of the motion, for I am not convinced that the ability of Gordon to pay the May costs order is a relevant consideration. When I made that order, I did not attach any provisos, conditions or exceptions. I did not say, for example, that Gordon need comply with the May costs order only if she felt like it or if it was financially convenient for her to do so. If the ability to pay costs is ever relevant, it is upon the making of the order, not when compliance is in issue.
[56] The submissions of the respondent fail to consider sufficiently, if at all, that the respondent has been found able to pay interim spousal support as ordered given the imputation of income. Accordingly, the respondent’s reliance on having no income as an explanation for not complying with the interim spousal support order is not persuasive and is rejected. In relation to costs, the respondent relied on the same rejected argument. Further, neither order was appealed.
[57] The respondent’s reliance on capital depletion, because of plunging share values for marijuana companies, is an excuse having little or no merit. The respondent unilaterally terminated paying voluntary spousal support based on his self-analysis that he had paid enough, or even more than enough, to discharge his spousal support obligation. Faced thereafter with an almost immediate motion for interim spousal support, it was open to the respondent to recognize that he faced the potential of being ordered to pay spousal support, and that he should take reasonable steps to preserve his assets through low-risk investments. The respondent’s willful self-induced proclivity in making a “bad bet” forms no part of a valid excuse to justify non-compliance with the orders.
[58] I find particularly egregious that the respondent was readily able to find over $43,000 to buy out the Mercedes Benz lease, while at the same time claiming he was financially impoverished to the extent that he could pay nothing towards the orders.
[59] The Court of Appeal for Ontario, in Manchanda, supra, teaches lower courts that willful non-compliance must be considered egregious and exceptional. Although that case dealt with financial disclosure, there is nothing to suggest that willful non-compliance with support and/or costs orders should be treated differently. In Holly v. Greco, 2019 ONCA 464, the Court of Appeal for Ontario endorsed this analysis for a child support order, upholding the motion judge’s analysis in striking the appellant’s answer and claim on the basis that the appellant’s failure to pay child support was “flagrant and willful” and that this conduct was one of the exceptional and egregious cases that fit within the test for striking pleadings: paras. 7 and 10[^2].
[60] The respondent relies on Segeren v. Segeren, 2019 ONSC 2376, a trial decision where the husband had retired but the court declined to impute income to the husband. This case does not assist the respondent as it is distinguishable on the facts, in particular, the trial judge’s finding, at para. 41, that the husband’s retirement was not voluntary.
[61] Considering all the evidence on the motion, the respondent's failure to comply with the orders rises above fecklessness. I find that the respondent's conduct is contumacious and that his failure to comply with the two orders is willful, deliberate and flagrant.
[62] In considering the sanction to be imposed having regard to r. 1(8) and (8.4), I find that the appropriate consequence is to strike the respondent’s answer, but with an opportunity to avoid that consequence by paying all arrears within a specified time. The only exception would be the preservation of the respondent’s claim for divorce.
[63] The applicant needs to know whether she has to prepare for a contested trial in November 2019. Hence, the respondent’s right to purge his non-compliance should be time-limited.
[64] This is not a case where the respondent has breached portions of orders but complied with other portions of orders, as in Mullin v. Sherlock, supra. The respondent’s breach is simple and total – he has paid nothing.
[65] Given the nature of the respondent’s breach, I find that a just determination of the consequences of the breach should not include any order that relieves the respondent from the consequences of r. 1(8.4), except in circumstances where the respondent pays the full amount owing within the timeframe specified below and except for the divorce claim.
[66] While the respondent has a right in an adversarial system to present his case at trial, that right is not absolute. Court orders must be obeyed and the order below strikes the appropriate balance, on the facts, between the respondent’s right to participate at trial and the applicant’s right to have court orders obeyed.
ORDER
[67] I make the following order:
The respondent’s answer is struck and all claims by the respondent made in the answer, except the claim for divorce, are dismissed pursuant to r. 1(8) of the Family Law Rules.
Paragraph 1 of this order is stayed until 1 p.m. Friday, October 4, 2019, subject to paragraph 3 of this order and subject to the following terms:
(a) the sole purpose of the stay is to allow the respondent to pay the sum of $79,561.32, representing the full amount of spousal support and costs owing as at August 31, 2019, exclusive of interest, pursuant to the interim orders of this court dated April 16, 2019 and July 10, 2019, plus the payment of any further interim spousal support payments that have accrued on or after September 1, 2019;
(b) before 1 p.m. Friday, October 4, 2019:
(i) the amount of $79,561.32 shall be paid;
(ii) if the payment is made prior to October 1, 2019, then the interim spousal support of $8,000 due September 1, 2019 also shall be paid;
(iii) if the payment is made on or after October 1, 2019, then the additional sum of $16,000 shall be paid for the interim spousal support payments due September 1, 2019 and October 1, 2019, each in the amount of $8,000; and
(iv) the respondent shall serve and file a brief affidavit verifying that payment has been made in full as provided in clauses (i), (ii) and (iii), together with proof of payment appended as an exhibit to the affidavit.
(c) while the stay affecting paragraph 1 of this order remains in effect, the respondent is prohibited from taking any steps in this case or serving or filing any documents, except as provided in clause 2(b)(iv) of this order.
On the day that the respondent complies with all the conditions in paragraph 2(b) of this order, then the stay is removed and paragraph 1 of this order is deemed vacated and the issue of interest on the arrears of spousal support and costs shall be paid as determined by the trial judge or as agreed by the parties.
If the respondent fails to comply with all the conditions in paragraph 2(b) of this order, then the stay affecting paragraph 1 of this order is vacated effective 1 p.m. Friday, October 4, 2019, and the applicant is at liberty to obtain from the trial coordinator a date for an undefended hearing without notice to the respondent and the trial management conference date of October 21, 2019 at 10 a.m. is vacated.
If the respondent complies with all the conditions in paragraph 2(b) of this order, but fails thereafter to make any ongoing payment of interim spousal support, or fails to comply with any other interim order that may be made, then this order is without prejudice to the applicant’s right to bring a further motion to strike the respondent’s answer, including bringing a motion to strike before the trial judge.
If the respondent fails to comply with all the conditions in paragraph 2(b) of this order, then in relation to the respondent’s claim for divorce, if the applicant elects not to obtain a divorce at the undefended trial, then the respondent is at liberty to seek a divorce pursuant to Rule 36 of the Family Law Rules.
If the parties are unable to resolve costs, written submissions may be filed with the trial coordinator within 21 days, limited to two typed pages, double-spaced, plus copies of any offers, bills of costs, time dockets and authorities.
“Justice Victor Mitrow”
Justice Victor Mitrow
Date: September 11, 2019
[^1]: Leave to appeal dismissed with costs: 2017 CarswellOnt 6262 (S.C.C.).
[^2]: However, the appellant nonetheless was permitted to participate at trial on the basis that, at the opening of the appeal, the court was advised that the appellant had paid the arrears and was complying with the child support order.