NEWMARKET COURT FILE NO.: FC-04-18706-02

DATE: 20190913

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Marc James Carter

Applicant

– AND –

Deborah Elizabeth Carter

Respondent

Self-Represented

J. Cox, Counsel for the Respondent

HEARD: June 5, 2019

RULING

JARVIS J.

Introduction

[1] This Ruling deals with a motion by the wife[^1] dealing with the husband’s contempt of six financial disclosure Orders. She seeks an Order asking, among other things, that the husband be incarcerated for 180 days and pay costs of $149,931.42. As of June 1, 2019 he owed $133,966 in child and spousal support.[^2] Currently, the husband’s driving licence and passport have been suspended. The husband says that he has done all in his power to comply with his disclosure obligations and that he does not have, and never had, the assets alleged by the wife.

Background

[2] This case began in 2004. The outstanding issues are support and equalization of the parties’ net family properties. The Continuing Record now spans 18 volumes and includes 62 Orders (including the Divorce Order). While there is a reference in an Order made by Douglas J. dated June 11, 2014 giving the husband until July 4, 2014 to comply with outstanding disclosure Orders failing which an Order would issue striking his pleadings on financial issues only and an endorsement made by Kaufman J. on August 5, 2015 noting that seven Orders had been breached thereby implying that pleadings had been struck, there is no Order formally striking pleadings unless that is the combined effect of the Order of Douglas J. and Kaufman J.’s endorsement. Even so Kaufman J. adjourned the proceedings before him on August 5, 2015 to permit the husband to obtain his file from his former lawyer. The husband has since participated in these proceedings.[^3]

[3] A final Order dealing with parenting matters was made on consent of the parties by Kaufman J. on September 16, 2015.

[4] In my endorsement made on April 3, 2019 I noted, and found, that the husband had breached five Orders made between January 26, 2011 and June 14, 2014 dealing with financial disclosure and the Order of Nicholson J. That finding has not been appealed. The Continuing Record now spans 18 volumes and includes 62 Orders (including the Divorce Order).

[5] On February 6, 2019 Sutherland J. made an Order without notice to the husband granting a Mareva injunction and requiring the husband to produce itemized financial disclosure. Paragraphs 4 and 5 of that Order were very detailed and provided as follows,

4. The Applicant’s assets are frozen, including any corporation or subsidiaries in which the Applicant has internet or control of, inside or outside Canada, including any bank accounts, and any other assets, business interests, or investment platforms in which the Applicant has an interest or control, such as corporations including but not limited to:

(a) Cloke Kirby Constriction Ontario (Corporation).

(b) 699531 Ontario Ltd.

(c) 2074811 Ontario Inc.

(d) Any and all accounts and assets at Bank of Montreal, 86 Main St. North, Markham, Canada L3P 1X8 (representative Franka Sriskandarajah (905) 294-4642) including but not limited to:

(i) Account number 1996766; and

(ii) Chequing Account number 23712-3982-990.

(e) Any and all accounts, assets, and trusts at Cayman National Bank and Trust, 8 Hope St, Douglas, Isle of Man, United Kingdom 1M1 1AQ, including but not limited to:

(i) Account number 25005001 (USD and CAD funds); and

(ii) MasterCard number 5429 7872 8368 0001.

(f) Any and all accounts, assets, and trusts at Cayman National Bank and Trust, including but not limited to, the location of 200 Elgin Avenue, Peter A. Tomkins Building, PO BOX 1097, Grand Cayman, KY1 1102, Cayman Islands, including but not limited to:

(i) Account number 25005001 (USD and CAD funds); and

(ii) MasterCard number 5429 7872 0001.

(g) Allied Sovereign and Equitable Assurance Company Ltd (ASEA), Venture Two, Dayrells Road, Christ Church, Barbados BB14030.

(h) Capital Group International portfolio number NST0812 portfolio name ASEA Re: 46001 in Barbados.

(i) Standard Bank, Isle of Man.

(j) Foreign currencies traded at Dukascopy, including any and all Swiss trading accounts, and account number 1047617.0501 USD.

(k) Investors Europe account through Dukascopy, including any and all Swiss trading accounts, and account number 2089619280.

(l) iWRAP Portfolio Bond portfolio management policy number 46001.

[6] Paragraph 5 of the Order required the husband to provide disclosure for those assets and accounts listed in paragraph 4.

[7] The matter returned to court on February 20, 2019 at which event the husband attended. Nicholson J. made an Order requiring the husband to sign a Direction to various Canadian and international banking institutions to release to the wife’s lawyer information and documentation about his accounts and assets. Most of the accounts and assets for which disclosure was requested were located in Barbados, the Cayman Islands, the Isle of Man and Switzerland. The husband signed this Direction (“the Direction”) in court before Nicholson J. but two days after he signed the Direction, the husband instructed his principal banker with the Cayman National Bank (“CNB”) in the Cayman Islands to disobey it. The exchanges between the husband, counsel (Ian Tong) for the Cayman National Bank (Cayman Islands) and a Director (Barry Williams) of the CNB in the Isle of Man (“CNBIOM”) are instructive. It is unknown what contact, if any, the husband had with the other offshore institutions.

[8] On February 22, 2019 the husband emailed Mr. Williams of CNBOIM.

Dear Barry

It was a pleasure to speak with you this morning. I wish to confirm in writing that it is not my wishes that Cayman National respond to the request or order of the Ontario Court and release information about myself or my accounts. (bolding added)

I wish to advise you that I signed the acknowledgement under duress and I did not have legal representation at the time.

It was my understanding based upon a legal opinion when I opened my accounts is that Cayman National would not be required to ever disclose this type of information in such a circumstance.

Please let me know if there is anything I could provide to you in order to preserve the discretion and privacy that I expected and have enjoyed from Cayman National Bank.

Thank you

Marc Carter

[9] On February 25, 2019 Mr. Tong advised Mr. Cox (the wife’s lawyer) about the husband’s instructions and that no documents would be provided.

[10] On March 7, 2019 the husband expressed to Mr. Williams his frustration and disappointment with Mr. Tong and the bank.

I would appreciate you discussing my concerns with Ian Whan Tong but I ask you not to forward this email to Mr Whan Tong as he has not provided me with any of the discretion and privacy that I was promised when I began banking with Cayman.

I am very disappointed and concerned that Mr Whan Tong would disclose anything related to private discussions I held with you as my representative at Cayman. I am further horrified to see that Mr Whan Tong stated to Mr Cox that I had not agreed to the release of documents. My first attachment to this email is an email from Mr Whan Tang to Mr Cox dated February 25, wherein he explicitly states that I have withdrawn the Court Direction. I am not sure how I will address this bold statement when I attend court to address the Contempt of Court Motion now filed by Mr Cox as a result of his communications with Mr Whan Tong. I am horrified that Mr Whan Tong would reference my conversation with you in this way.

When I first considered banking with Cayman, I was provided with a third party opinion that assured me that I would be provided with the utmost discretion and privacy. I was told in the event of an action or litigation against me, Isle of Man law would require prohibitive measures to be taken by the assailant and that my privacy was assured. I would like to know why Cayman cannot simply rely on and refer to the wording of the direction as noted in Mr Whan Tong’s February 26 email and not compromise me by further referencing private discussions I held with Cayman. (bolding added)

[11] In my endorsement made on April 3, 2019 I found that the husband had breached five Orders made between January 26, 2011 and June 14, 2014 dealing with financial disclosure and the Order of Nicholson J. That finding has not been appealed. I noted in the endorsement that the husband had attended court and said that there was some problem with the Direction but that the bank’s representative (obviously referring to Mr. Williams) could, or would not, tell him what that problem was. The husband produced a few pages of documents from the bank indicating that they were all he could obtain (it is noteworthy that the actual emails referenced above between the husband and Mr. Williams dated February 22, 2019 and March 7, 2019 were unknown to the wife and this court on April 3, 2019 -these were later revealed in an affidavit from an officer of the bank (Butterworth) sworn on April 25, 2019 and which led to the disclosure of 1,594 pages of financial documents).

[12] The husband was given an opportunity to purge his contempt or risk incarceration.

[13] On April 17, 2019 I found that the husband had not complied with the Order and remanded him into custody to May 1, 2019. The matter was then adjourned that day to June 5, 2019 to review Ms. Butterworth’s affidavit and the accompanying documents.

[14] On May 29, 2019 Ms. Butterworth was examined in the High Court of Justice of the Isle of Man before Needham J. about bank accounts in the names of the husband and ASEA. Her deposition was forwarded to this court but could not be adequately reviewed by the parties or this court before June 5, 2019 when the wife’s motion was heard. The following chronology incorporates the evidence of the parties, the evidence from Ms. Butterworth and the banking accounts most relevant to the husband’s financial affairs:

(a) The husband became a director of Allied Sovereign and Equitable Assurance Company Ltd (“ASEA”) in the Cayman Islands on or about February 4, 2014 and at the time of his departure from ASEA in November 2017 was a full-time managing director. ASEA is a Barbadian insurance company specializing in international client insurance and investment needs. It had accounts with CNB over which the husband had signing authority;

(b) According to Ms. Butterworth, ASEA had three sub-accounts with CNB that appeared to belong to the husband. These were in USD, CDN and Pound Sterling (GBP) denominations (it was from the USD and CDN accounts that funds were transferred in 2017 to personal accounts that the husband opened with CNBOIM-see paragraph (i) below);

(c) In an affidavit sworn September 26, 2016 in support of a motion by the husband for, among other relief, a refraining Order to avoid suspension of his passport, the father detailed difficulties since September 2013 in finding employment. While he identified prospective employment opportunities and employers, no disclosure was made with respect to ASEA or with respect to any bank accounts legally or beneficially owned by him with, or through, ASEA or with CNB;

(d) On October 6, 2016 the husband made an assignment in bankruptcy in Ontario. He claimed debts of $2,175,539 of which $1,994,820 related to tax arrears. He disclosed assets of $5,286;

(e) In 2016 the husband transferred a total of $114,134.83 into an account (“the corporate account”) of a numbered company (“699531 Ontario Limited”, hereafter “699”) owned by him and whose address was his residential address in Markham, Ontario. These funds were used to pay the husband’s living expenses. Deposits were made monthly in different amounts;

(f) In March 2017 the husband contacted CNBIOM inquiring about opening a personal account there;

(g) The husband was scheduled to be automatically discharged from bankruptcy on July 6, 2017 but that was opposed and a December 2017 hearing scheduled;

(h) A Settlement Conference proceeded on September 17, 2017. On that day the husband was represented by a lawyer and the wife represented herself. Kaufman J. noted that there was disclosure “allegedly…still outstanding” from the husband and that “[i]n view of Mr. Carter’s bankruptcy some of the alleged disclosure may be moot”;

(i) On October 12, 2017 the husband filled out and signed a personal bank application to CNBIOM. He identified himself as a principal and managing director of ASEA and that he intended to initially deposit $60,000 USD. He estimated that he would be making annual deposits totalling between 100,000 to 250,000 GBP (about $165,450 to $413,625 CDN based on the exchange rate then prevailing). His declared source of income was from ASEA, paid monthly. He disclosed that his source of wealth was his equity in ASEA, his shareholding in ASEA and his compensation from that company. The application was accompanied by a photocopy of a notarized copy of his passport and driver’s licence. There is no evidence that he informed CNBOIM that both had been suspended;

(j) The husband opened five accounts at CNBIOM, one each for four accounts in GBP, USD, EURO, and Canadian currencies and one a MasterCard Security Deposit account in USD. These were personal accounts. The Pound Sterling and Euro accounts do not appear to have ever been used;

(k) On October 30, 2017 the husband applied for, and was later given, a CNB Gold MasterCard. He signed the application. He estimated the value of his property as being $1,100,000 (denomination not noted but likely USD given the other references to that currency in the application), an annual salary of $150,000 USD, monthly investment income of $7,000 USD, that he paid nothing for child and spousal support (the logical implication being that there was no such obligation outstanding), and that he was a partner in, and had been associated with, ASEA for 10 years;

(l) On November 15, 2017 the husband was removed as a signatory of ASEA. It appears that he was no longer associated with ASEA after that date;

(m) On November 17, 2017, the husband deposited $9,260.40 and $70,976.11 respectively into his USD and CDN accounts with CNBIOM.;

(n) On December 12, 2017, the husband deposited $10,000 USD into his MasterCard Security Deposit account;

(o) The December 15, 2017 hearing for the husband’s discharge from bankruptcy that had been adjourned from July was adjourned because, among other things, the husband had failed to perform the duties required of him as a bankrupt. The Trustee reported that the husband “was an unemployed construction contractor. He claims to be financially supported by friends”. An unsworn Declaration signed by the husband indicated that he worked at odd jobs and earned about $500-$800 a month, that he could not afford to pay spousal support and that he had no after-acquired property that he had not disclosed to his Trustee. Not disclosed was that from October to December 2017 the husband had deposited funds totalling $22,757 to his 699 account;

(p) In 2017 the husband transferred a total of $96,139.89 into his 699 account. These funds were used to pay the husband’s living expenses. Deposits were made monthly;

(q) On January 2, 2018 a further Settlement Conference was held. The husband was represented by a lawyer and the wife represented herself. Paragraph 5 of the endorsement made noted that the court did not have the jurisdiction to strike pleadings “based on Settlement Conference Briefs”;

(r) In 2018 the husband transferred a total $43,408.06 into his 699 account. These funds were used to pay his living expenses. Deposits were made monthly. The husband’s bank records show that he was receiving social assistance. This continued into (at least) April 2019;

(s) On February 14, 2019 CNB froze all the husband’s accounts, including his MasterCard account, following receipt of the February 6, 2019 Order of Sutherland J.;

(t) Between January 1 to April 30, 2019 the husband deposited $5,670 into his 699 account.

[15] The husband used his USD and CDN accounts to transfer funds from CNB and CNBIOM to his 699 account in Markham, Ontario, to pay his living expenses (transfers were made to the husband’s personal Bank of Montreal account), to his MasterCard account to pay his credit cards (mostly for living expenses), to other international financial institutions and to the Dukascopy Bank in Switzerland.

[16] The Dukascopy Bank (“Dukascopy”) is a Swiss online bank headquartered in Geneva, Switzerland specializing in online and mobile trading, banking and financial services. On January 12, 2018 the husband instructed CNBIOM to wire $7,000 USD to Dukascopy. It is unclear what other funds were transferred by the husband to Dukascopy although it is likely that additional funds were, in fact, transferred. On May 1, 2019 this court issued Letters Rogatory to Dukascopy in Switzerland. The husband was ordered not to communicate with representatives of any of the institutions identified in the Order of Sutherland J. except to ensure full compliance with that Order and then only in writing copied to the wife’s lawyer.

[17] In an affidavit sworn June 4, 2019 the husband said that he had several accounts with Dukascopy but all were “demo’s” (whatever that is supposed to mean) except for one that was used as a forex[^4] trading account and had a $0 balance. There was no disclosure as to how much the husband deposited to the non-forex accounts or the aggregate amount deposited. On June 12, 2019 the Judicial Branch (Civil Court) of the Republic and Canton of Geneva, Switzerland, declined to assist this court’s request for disclosure of the husband’s accounts. The husband has a copy of that ruling. No disclosure with respect to any account with Dukascopy has been provided by the husband contrary to paragraphs [5] (j) and (k) of the February 6, 2019 Order of Sutherland J.

[18] Between January 1, 2016 to December 31, 2018 a total of $260,029.19, or $86,676.40 on average a year, was transferred by the husband to his 699 account from offshore accounts and used to pay his living expenses. As of March 31, 2019, the aggregate was $260,589.19. None of the funds transferred was subject to tax and none of this information has ever been voluntarily disclosed by the husband to the wife, to his Trustee in Bankruptcy or to this court.

Wife’s position

[19] The wife wants the husband incarcerated to compel his compliance with the many financial disclosure Orders made by this court and as more recently reflected in the Order of Sutherland J. In my endorsement made on April 3, 2017, I noted her concern that, given the history of these proceedings, there was little likelihood that the husband would meaningfully comply with these Orders. The wife proposes that the husband be incarcerated for 180 days and thereafter on a serial basis until he purges his contempt.

Husband’s position

[20] The husband maintains that he has made all relevant and comprehensive disclosure and that he has been unable to accept dozens of lucrative employment opportunities that would have enabled him to pay support because of the wife’s litigation conduct. He claims that he is, in essence, a victim of his wife’s relentless plan to have him incarcerated, that he was defrauded by his former ASEA business partner (Lipton) and that his decision to misrepresent to the court why CNB/CNBOIM could, or would, not comply with both the Order of Nicholson J. and his (the husband’s) Direction was suggested to him by director Williams of CNBOIM, a decision that the husband now says he regrets.

[21] The husband also says that he never received any benefit, financial or otherwise from ASEA. In particular, the husband said that Mr. Lipton told him what to say in his CNBOIM application and that the information provided was based on false compensation promises made by Lipton. The husband challenged the wife to prove that he had ever received anything of value from ASEA. Mr. Lipton filed an affidavit in these proceedings disclosing the husband’s involvement in ASEA, evidence that the husband disputes.

[22] In mid-June 2019 the husband began work with an Ontario company. The husband and the Director agreed that he would make payments pursuant to the Order but the wife opposed that arrangement given the amount of support arrears. On June 13, 2019 Bennett J. approved the arrangement on a temporary basis and ordered that the husband to pay $2,145 on August 1, 2019 and $3,100 a month support effective September 1, 2019 until further Order. The enforcement proceedings were otherwise adjourned to September 26, 2019.

Analysis

[23] It is impossible to reconcile the husband’s representations to his wife, his Trustee in Bankruptcy, the CNBIOM, the Director and this court about his financial affairs. It is clear to the court that the husband sought to suppress disclosure of his offshore income and banking affairs, has misled his Trustee in Bankruptcy and has deliberately, and repeatedly, misled this court. It is equally clear that the husband has failed to comply with paragraphs 5(a) to (c) and (f) to (l) of the Order of Sutherland J. There is no evidence of steps taken by the husband to comply with those terms of the Order. It was the wife who obtained the husband’s banking records from the Bank of Montreal (paragraph 5(d) of the Order) and it was CNBOIM that produced its records (paragraph 5(e) of the Order). Even though the husband is aware of the decision of the Swiss Civil Court declining its assistance with respect to disclosure of the husband’s Dukascopy Bank records, there is no evidence of any step taken by the husband to obtain that information himself.

[24] In Blatherwick v. Blatherwick[^5], a case upon which the wife relies and whose approach to sentencing for contempt the wife adopts, Richetti J. observed that there was “…extensive and conclusive evidence of a course of serious, deliberate, flagrant and continuing misconduct by Mr. Blatherwick including lying to this court, disregarding numerous court orders, continued financial non-disclosure, deliberate obfuscation and misrepresentation of his financial affairs”.[^6] The same may be said in this case of Mr. Carter.

[25] In Surgeoner v. Surgeoner[^7] Blair J. (as he then was) noted that “[t]he need for the sanction of contempt proceedings is of significant importance in the field of family law”[^8] earlier observing that “[a] society which countenances [defiance of court orders] is a society tottering on the precipice of disorder and injustice”.[^9] Richetti J. in Blatherwick echoed those words in finding that incarceration (in that case lengthy) was appropriate for deliberate and flagrant disobedience of court Orders. In this case, there is no question in my mind that a period of incarceration is warranted for Mr. Carter but the challenge is fashioning a disposition that will be restorative to the wife and that sanctions the husband and deters others like him.

[26] The husband has excused his conduct in these proceedings as being the fault, or responsibility, of others - his wife (for her relentless and unnecessary pursuit of disclosure, and his incarceration); his lawyers (to whom the husband says he gave the disclosure ordered but for whom he has no explanation why the disclosure was not provided); his former ASEA partner (upon whom the husband relied to provide false financial information to CNBOIM, and who the husband now claims defrauded him); and CNBOIM director Williams (who the husband says persuaded him to lie to this court about why CNB/CNBOIM could, or would, not, comply with the direction signed in court by the husband on February 20, 2019 before Nicholson J.). Undoubtedly there are others.

[27] The husband is no deer in the headlights. As noted in my endorsement made on April 17, 2019 he is a sophisticated businessman. He operated his own company before the parties separated and was clearly involved in ASEA handling international client insurance and investment needs. He is knowledgeable about forex and offshore banking jurisdictions.

[28] Family Law Rule 31(5) deals with the broad range of dispositions available to the court where a person has been found in contempt and provides:

CONTEMPT ORDERS

(5) If the court finds a person in contempt of the court, it may order that the person,

(a) be imprisoned for any period and on any conditions that are just; (b) pay a fine in any amount that is appropriate; (c) pay an amount to a party as a penalty; (d) do anything else that the court decides is appropriate; (e) not do what the court forbids; (f) pay costs in an amount decided by the court; and (g) obey any other order. O. Reg. 114/99, r. 31 (5).

[29] This court has considerable latitude in the choice of sanction. In this case the wife seeks (as already noted) an Order similar to that made in Blatherwick that the husband be incarcerated for 180 days and on a serial basis thereafter until the husband purges his contempt. But what distinguishes this case from Blatherwick is that there had been a lengthy trial in the latter case and Mr. Blatherwick was proven to have significant offshore assets, neither of which facts obtains in this case, although the husband’s third-party representations would suggest otherwise. Still outstanding are the wife’s support and equalization claims.

[30] The court is presented with a Hobson’s choice: incarcerate the husband as the wife proposes with the likelihood that he will lose his new employment and, consequently, no support will be paid; or, defer a sentence of incarceration while support is being paid, with conditions. That is the risk that the wife is apparently prepared to take. She is convinced that the husband’s incarceration will result in compliance with his disclosure obligations and will facilitate a final resolution of the parties’ outstanding support and property affairs, notwithstanding the husband’s bankruptcy. While her submissions have considerable merit, I am not persuaded that the husband’s lengthy, possibly serial, incarceration as was done in Blatherwick will at this time result in the outcome that the wife seeks or that this court deems appropriate despite having given the husband a “last opportunity” once before to comply with the Order of Sutherland J. Incarcerating the husband for 180 days defers compliance with the Order in my view. It is preferable to obtain the disclosure ordered with the husband clearly knowing well in advance the consequences of non-compliance. His compliance will determine the scope of his penalty.

[31] The following is ordered:

(a) The husband shall have until October 31, 2019 to file with the court an affidavit that complies with paragraphs [5] (a) to (c) and (f) to (l) of the Order of Sutherland J. dated February 6, 2019. That affidavit shall set out the steps that the husband has taken to comply with the Order and to obtain the documents required. Copies of those documents shall be appended to the affidavit or referenced in a separate indexed Record to be filed by the October 31st deadline;

(b) The parties shall appear before me on a date to be scheduled by the trial co-ordinator during the November trial sittings of the court to determine whether the husband has complied with paragraph 31 of this Order. Directions will be given after the deadline;

(c) The husband should be prepared to show cause on the return of this matter to court why he should not be sentenced to not less than 30 days incarceration on such terms as may be appropriate, such terms including but not limited to continuous incarceration and without release on electronic monitoring. A factor in any sentence imposed will be the court’s assessment of the husband’s significant and bona fide efforts to comply with the terms of the Order of Sutherland J. and this Order. To be perfectly clear there will be an Order for incarceration made;

(d) Additional terms to any Order made on the return of this matter may include leave being granted to the wife to bring this matter back before this court for a further contempt hearing;

(e) This court shall retain jurisdiction to sentence the husband to a further penalty if he has not purged his contempt;

(f) Approval of the form of Order by the husband is dispensed with.

[32] The date of October 31, 2019 will give the husband plenty of opportunity to contact the institutions identified in the Order of Sutherland J., to contact former counsel, to obtain the disclosure required, to seek counsel, and to prepare the affidavit and his affairs accordingly. He has already had six months to do that anyway.

[33] A separate ruling on costs will follow.

Justice David A. Jarvis

Date: September 13, 2019

[^1]: The parties were divorced by Order of Kaufman J. dated April 20, 2018. They are called “husband” and “wife” for convenience of reference. [^2]: The support Order was made by Nelson J on January 25, 2011 and ordered that the husband pay to the wife $3,000 a month starting February 1, 2011 on an uncharacterized and without prejudice basis. The support owed was reflected in a Statement of Arrears from the Family Responsibility Office filed in concurrent support enforcement proceedings. [^3]: An endorsement made on February 22, 2017 indicated that the court was unable to determine whether the husband had provided the disclosure and that it appeared that the husband’s pleadings had been struck by an Order of Howden J. No such Order can be found in the Record. [^4]: Foreign exchange. [^5]: 2016 ONSC 4630 [^6]: Ibid, para. 27(a). [^7]: 2016 ONSC 4630. [^8]: Ibid, para. 6. [^9]: Ibid, para. 5.