NEWMARKET COURT FILE NO.: FC-17-53759-00
DATE: 20191115
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Bella Nadia Milne, Applicant
AND:
Eric C. Milne, Respondent
BEFORE: The Honourable Madam Justice H. McGee
COUNSEL: R.A. Goddard, Counsel for the Respondent
HEARD: September 18, 2019
RULING ON MOTION
Application Dismissed
[1] In my decision released May 31, 2019 (Milne v. Milne, 2019 ONSC 3311, corrigenda issued June 7, 2019), I granted Ms. Milne’s fourth request to adjourn the trial of her Application to set aside a 2015 Separation Agreement on terms that included the payment of costs, compliance with an Order for disclosure and a stay on a January 2019 Order for temporary spousal support. Rather than place the matter directly to the November Trial Sittings, I ordered that the matter return to me on September 18, 2019 to assess compliance. I indicated that if the terms were in breach, I would dismiss the Application pursuant to Rule 1(8) of the Family Law Rules, O. Reg., 114/99.
[2] Ms. Milne’s request for leave to appeal that decision, and to lift the stay was dismissed by the Divisional Court on September 17, 2019, with costs payable by Ms. Milne in the amount of $5,000.
[3] Ms. Milne has paid no costs and I find that she has failed to comply with the Order for disclosure. For the reasons set out below, I dismiss her Application.
Relevant Events Leading to September 18, 2019
[4] A full reading of my May 31, 2019 decision is necessary to these reasons. For ease of reference the following facts will be of assistance:
The parties were common law spouses for a disputed period. In December of 2015 they executed a renegotiated Separation Agreement that provided for an $80,000 lump sum of spousal support, and a defined period of $4,000 a month in spousal support, in exchange for a spousal support release.
Ms. Milne issued this Application on June 12, 2017, not long after the periodic spousal support terminated.
All claims in the Application were dismissed by Justice McDermot in a summary judgment heard December 8, 2018 with reasons released January 17, 2019 (Milne v. Milne, 2019 ONSC 459; but for two narrow inquiries: whether a waiver of spousal support should be set aside based on present unconscionable circumstances, and whether the parties reconciled for more than 90 days between June 2016 and March 1, 2017. The circumstances around the time of execution were specifically dismissed as a basis for setting aside the spousal support release.
Justice McDermot also granted Ms. Milne temporary spousal support of $1,800 per month from September 1, 2018 until trial – at that time scheduled for the following month, February, or alternatively, May 2019.
Ms. Milne changed counsel and obtained an adjournment of the February Trial. She had not provided any of the previously ordered disclosure. She agreed to a list of disclosure to be provided.
By March 27, 2019, Ms. Milne’s failure to provide disclosure had become pervasive. On a motion that came before me, Mr. Milne sought several remedies, including the striking of pleadings. In reasons dated March 29, 2019 (Milne v. Milne, 2019 ONSC 1986, corrigenda issued April 18, 2019), I ordered that Ms. Milne produce certain disclosure and I gave her an extension to April 15, 2019.
Ms. Milne failed to produce the disclosure. On April 17, 2019 she brought a motion dated April 2, 2019 to remove her Application from the Trial List and to set aside the Trial Scheduling Order made January 24, 2019 and its corollary Order for disclosure. She was not successful, and costs were reserved.
On May 1, 2019 Ms. Milne brought another motion to adjourn the trial, which was continued on May 8, 2019. That motion was heard by Justice Douglas who made specific findings that Ms. Milne’s health assertions were unsubstantiated. Costs of that motion were reserved.
On May 21, 2019 Ms. Milne’s new solicitor, Mr. Vincent, requested to be removed as her counsel of record. The motion was denied.
The trial was called Monday May 27, 2019. For a third time, Ms. Milne asked that the trial be adjourned. The request was denied, but Justice Bennett placed the motion before me for a further hearing on the first day of trial, then scheduled for May 29, 2019.
On May 29, 2019 Ms. Milne attended on her own and argued again for an adjournment. Very little, if any of her case was prepared. She had not provided the necessary disclosure, some of which was quite basic, such as full Income Tax Returns.
The adjournment was vigorously opposed by Mr. Milne. He had completed extensive trial preparation, readied witnesses and incurred nearly a hundred thousand dollars in costs answering the claim. His counsel argued that Mr. Milne would suffer prejudice that could not be compensated through an award of costs if the trial did not proceed at that time.
I granted Ms. Milne’s request for an adjournment. To remedy some of the resulting prejudice to Mr. Milne I set the following terms:
a. By September 4, 2019 outstanding costs of $18,875 were to be paid by Ms. Milne to Mr. Milne. Pending payment of those costs – which had accrued over four attendances in 12 months – Ms. Milne could take no further steps in the proceeding, absent leave.
b. Ms. Milne had to comply with my disclosure Order of March 29, 2019 by August 16, 2019, failing which the Application would be dismissed. This was a list of disclosure that I determined on March 29, 2019 was required for Ms. Milne to evidence a genuine issue for trial on the claims circumscribed by Justice McDermot.
c. Pursuant to section 106 of the Courts of Justice Act, R.S.O. 1990, c C. 43, I stayed the January 17, 2019 temporary Order for spousal support effective September 1, 2018.
d. The matter was to return to me on September 18, 2019 to assess whether any of the terms were in breach. If they were, I stated that I would dismiss Ms. Milne’s Application pursuant to Rule 1(8). If the terms were met, the day would proceed as a further Trial Scheduling Conference.
Dismissing a Claim per Rule 1(8) of the Family Law Rules
[5] Rule 1(8) reads as follows:
FAILURE TO OBEY ORDER
(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.
[6] Rule 1(8) of the Family Law Rules has its civil counterparts in Rules 60.12 and 53.07(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. It contains a broad selection of sanctions available to courts to change litigation conduct and to promote the objectives of Rule 2: timely, procedurally fair, cost effective and proportional management of family law cases.
[7] Amongst the subrule’s array of sanctions, Rule 1(8)(b) is the nuclear option. It is more than a stay pending compliance – it is the end of a claim even were there to be future compliance. It brings the claim itself to an end, not just the litigation. Because it is such a significant Order, it must always be an Order of last resort.
[8] Judicial treatment of Rule 1(8) generally begins with Justice Quinn’s admonition in Gordon v. Starr, [2007] W.D.F.L. 4107, [2007] (Ont. S.C.) that “court Orders are not suggestions” and that “[o]ne of the reasons that many family proceedings degenerate into an expensive merry-go-round ride is the all-too-common casual approach to compliance with court orders.”
[9] In Roberts v. Roberts, 2015 ONCA 450 Justice Benotto of the Ontario Court of Appeal spoke specifically about obeying Orders for disclosure, emphasizing that the most basic obligation in family law is the duty to disclose financial information and the failure to abide by this fundamental, immediate and ongoing obligation “impedes the progress of the action, causes delay and generally acts to the disadvantage to the opposite party. It also impacts on the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled. Financial disclosure is automatic. It should not require court orders – let alone three – to obtain production.”
[10] In Manchanda v. Thethi, 2016 ONSC 3776, appeal dismissed 2016 ONCA 909, Justice Myers at para. 22 was crystal clear about the consequence of failing to evidence one’s case on a timely basis.
A party should not have to endure order after order after order being ignored and breached by the other side. A refusal to disclose one’s financial affairs is not just a mis-step in the pre-trial tactical game that deserves a two-minute delay of game penalty. Failure to disclose is a breach of the primary objective. Especially if it involves breach of a court order, a party who fails to disclose evinces a determination that he or she does not want to play by the rules. It is time to oblige such parties by assessing a game misconduct to eject them from the proceeding.
[11] Courts serve the public by assisting litigants in the resolution or the adjudication of their legal disputes. They cannot and must not be used to unnecessarily further those disputes or for an improper purpose: such as making a temporary order effectively final by preventing the matter from ever reaching trial. As stated by Justice Diamond in Granofsky v. Lambersky, 2019 ONSC 3251, a just determination of any family proceeding is rooted in the protection of the administration of justice as a whole, and when a party chooses to consistently disobey a court order, the administration of justice itself is called into question.
Application of Rule 1(8) to this Matter
[12] On the evidence before him on December 8, 2018, Justice McDermot dismissed Ms. Milne’s claim to set aside the December 2015 Separation Agreement pursuant to Rule 16 of the Family Law Rules. Specifically, he found that there were no grounds to set aside the Separation Agreement arising from material non-disclosure of Mr. Milne’s assets, the course of negotiation leading to the Separation Agreement, duress, or lack of independent legal advice. His decision was not appealed, and I am bound by his findings.
[13] Within his reasons, Justice McDermot noted section 33(4) of the Family Law Act, R.S.O. 1990, c F. 3, which provides that a court may set aside a release if the waiver of the right to support results in unconscionable circumstances. He summarized the law as to unconscionability and compared the parties’ present circumstances, placing weight on Ms. Milne’s evidence that she had gone through her funds, she could not work and could not pay rent. He accepted her allegation that she suffered from a continuing disability arising from a motor vehicle accident that occurred during cohabitation. He took at face value the list of conditions from which she states that she suffers: fibromyalgia, chronic pain, arthritis, osteoporosis, MGUS blood disorder and peripheral neuropathy.
[14] Mr. Milne vigorously argued that all the assertions of illness were unsubstantiated and without credibility, but Justice McDermot was persuaded that there was a sufficient basis upon which to find that there was a genuine issue for trial. In paragraph 80 of his reasons Justice McDermot specifically writes that he assumes that the medical evidence is supported by physical examination of Ms. Milne “by the medical practitioners who have provided their notes and records.” He also found that there was enough evidence to raise a genuine issue for trial on the alleged period of reconciliation. He ordered that a focussed trial on these two remaining issues return before him on the next sittings. He ordered temporary spousal support of $1,800 per month until trial, starting as of the prior September.
[15] The matter never proceeded to trial.
[16] The record shows that within weeks of the temporary Order for spousal support, Ms. Milne took her foot off the proverbial litigation pedal. She discharged her counsel and took a casual approach to the litigation. She made no contribution to her outstanding costs Order. At a Trial Scheduling Conference held on January 24, 2019 she agreed to provide disclosure, then she did not. In lengthy reasons released March 29, 2019 I ordered Ms. Milne to produce ten paragraphs of disclosure, including full Income Tax Returns, medical evidence and the court file number for the civil litigation matter which she states is the personal injury action for the alleged disability. She gave none of it.
[17] In a motion dated April 2, 2019 Ms. Milne sought an Order not only removing the case from the May trial list, but an Order setting aside the Trial Scheduling Order made on January 24, 2019 and its corollary Order for disclosure. Now her foot was firmly on the litigation brake.
[18] In April 2019 Ms. Milne initiated a series of attendances designed to adjourn the trial so that it was not heard in May – which was the next trial sittings in York Region. She failed to evidence her previously alleged health issues, and then asserted a further and more serious illness.
[19] On April 2, 2019 Ms. Milne instructed her then counsel to advise Mr. Milne’s counsel that she had developed a serious anemia/iron deficiency and multiple myeloma for which she would be shortly commencing chemotherapy. This was also given as a reason why Ms. Milne could not provide disclosure. In an affidavit sworn April 2, 2019 Ms. Milne deposed at paragraph 7 that her treatment would not allow her to participate in a trial until at least November 2019, and at paragraph 8 she stated that she was starting chemotherapy in April 2019. She attached a letter to that effect.
[20] Through a lengthy (and expensive) third party records process, Mr. Milne’s counsel was able to obtain a transcribed report of Ms. Milne’s April 5, 2019 Progress Report written by her Oncologist at Sunnybrook Health Sciences Centre. It was before me on this motion. It shows that Ms. Milne has a smoldering myeloma that has a 10 percent chance of progressing to myeloma, a form of cancer. The Note rules out any evidence of myeloma in any form at this time. Ms. Milne was not to receive chemotherapy. There is no independent evidence that she has ever received chemotherapy. Neither were her other health concerns substantiated in the manner that they had been asserted.
[21] Meanwhile, the disclosure process was turning up tax information that was not before Justice McDermot when he heard the motion for summary judgement. In addition to spousal support and a redemption of RRSPs, Ms. Milne’s 2015 Income Tax Return shows business income of $1,350,942 resulting in a net tax loss of $88,162.63. In 2016 she shows $2,053,084 in business income resulting in a net tax loss of $61,877. Undisclosed at the time, it now turns out that Ms. Milne was day trading under her legal and business name of Nadia Hama. (She changed to her present name after the parties separated. Milne is not a married surname as the parties were never married.)
[22] Ms. Milne’s 2017 Income Tax Return shows $67,011 in business income resulting in a loss of $135,813 and in 2018 she reports $62,855 in business income resulting in a loss of $14,888. The losses have permitted her to receive spousal support and redeem all or a portion of her RRSPs net of tax. What happened to her RRSPs or any sale gains is unknown. They were not used to pay her costs awards. She has never made an assignment in bankruptcy.
[23] Ms. Milne continued to be unready for trial on September 18, 2019. In breach of the May 31, 2019 Order that she could bring no further motions until costs were paid, and an August 8, 2019 Order by Justice Jarvis that she could bring no further motions without leave, she filed an unscheduled motion to be heard on September 18, 2019 to:
a. Extend the payment of costs ordered to date until the conclusion of Trial.
b. That Mr. Milne attend a further 2½ days of Questioning.
c. That Mr. Milne provide documents that she requested in a prior motion (that had been dismissed, as they speak to claims dismissed on January 17, 2019).
d. That Mr. Milne’s pleadings be struck in the absence of such disclosure.
e. That Mr. Milne be imputed with income (amount unstated).
f. That Mr. Milne pay $1,800 in monthly spousal support.
g. That in the alternative to the payment of spousal support that Mr. Milne be found in contempt.
[24] The motion is without leave and is hereby dismissed.
[25] Should Mr. Milne’s remaining two claims in this Application be dismissed? It is not contested that Ms. Milne has paid nothing toward the four (now five not including Divisional Court) costs awards made against her to date in this proceeding. Her Income Tax Returns show that she had the ability to pay, even if only from her redeemed RRSPs. There is a sound basis in law to dismiss a claim when there has been a failure to pay an award of costs, but in these circumstances, I rely primarily on the failure to disclose.
[26] Ms. Milne did finally comply with much of the required list of disclosure that I ordered on March 29, 2019 be provided by April 15, 2019, which was then extended for a final time to August 16, 2019. From that disclosure it has been learned that she is a day trader. A full picture of her finances remains unknown.
[27] Critical disclosure remains outstanding and is charted within Mr. Milne’s materials. For example:
Long form Tax Returns with attachments are missing or incomplete.
T2125 Statement of Business or Professional Activities for 2013, 2014 and 2015 as well as part 1 for 2018 T2125 are missing.
T4RSP slip and T3 (Statement of Investment Income) for 2016 are missing.
T4A(P) for 2018 disability benefits is missing.
Her RSP account statements are missing.
There are significant gaps in her TD Canada Trust Deposit Account History.
A TD Canada Trust Personal Assessment lists three accounts that have never been previously disclosed: another TD account, a GIC and a US dollar account.
10 credit card accounts are listed on the Canada Trust Personal Assessment, none of which have ever been disclosed.
Three TD Direct Investing Accounts are missing statements for key periods relevant to this litigation.
A ScotiaBank trading account is missing account statements for the four months prior to it being closed.
Mr. Milne’s counsel issued a summons to witness to Ms. Milne’s accountant. When the accountant’s file was received, it contained documentation for additional undisclosed accounts, nine other credit cards and TD Trading Summaries for 2015 and 2016 which showed at least one undisclosed trading surplus.
Ms. Milne has not produced the full trading schedules for 2017 and 2018. Mr. Milne points out in his affidavit and I have been able to confirm through my own inspection that there are inconsistencies between the records and what was reported for tax purposes.
The required Equifax report was given under her present name, Bella Milne and not her legal name of Nadia Hama.
Ms. Milne has failed to provide an unredacted and complete copy of her application for CPP Disability and any supporting documents.
Ms. Milne has failed to provide a copy of the pleadings and any Minutes of Settlement regarding the personal injury claim that she states arises from a May 30, 2014 motor vehicle accident that left her disabled.
There has been a Failure to Obey the Terms of the Adjournment
[28] Rule 1(8) of the Family Law Rules is available to the court when there has been a “failure to obey an order in the case.” There is no requirement that the order be made on motion; and it matters not who obtained the order. As long as the judge is satisfied that there has been a failure to obey an order in “the case or a related case”, subrule 1(8) is triggered.
[29] The three-step process for assessing non-compliance within the context of rule 1(8), as articulated by Justice Spence in Ferguson v. Charlton, 2008 ONCJ 1, at para. 64, regarding its predecessor Rule[^1] is that
• First, the court must ask whether there a triggering [sic] event that would allow it to consider the wording of either subrule 1(8) ... That triggering event would be non-compliance with a court order “in the case or a related case” ...
• Second, if the triggering event exists, the court should then ask whether it is appropriate to exercise its discretion in favour of the non-complying party by not sanctioning that party under subrule 1(8) ... [T]his discretion will only be granted in exceptional circumstances. In my view, the court's decision whether or not to exercise its discretion in favour of a non-complying party, ought to take into account all relevant history in the course of the litigation and, more specifically, the conduct of the non-complying party.
• Third, in the event that the court determines that it will not exercise its discretion in favour of the non-complying party, it is then left with a very broad discretion as to the appropriate remedy pursuant to the provision... of ... subrule 1(8).
[30] In Levely v. Levely, 2013 ONSC 1026, Justice Chappel stated at paras. 12 and 13 that
Family Court proceedings are intended to be a means by which aggrieved parties can have their disputes arising after separation adjudicated upon by the court in a just, efficient and timely manner. Unfortunately, they all too often become a destructive tool which one party wields and manipulates in order to create further financial and emotional hardship for the other party. The frequency with which Family Law litigation degenerates into an abusive game of delay tactics, stonewalling, and dodging of judicial authority is a concern which must remain at the forefront of the judge's mind in considering remedies for a party's failure to participate as required in court proceedings or to comply with court orders. Family Law litigants who come to the court for assistance must come with a strong sense of assurance that the process will be an effective means of mending and stabilizing the family fabric, rather than a futile money pit of failed justice…
The Rules referred to above [1(8), 13(17) and what was then 14(23] are the main tools which a judge presiding over Family Law matters has in their toolbox to prevent a party from embarking upon the game of litigation abuse. The scope of these Rules must be interpreted broadly in order to protect the integrity of the court process and the beneficial intention of Family Law proceedings, and to ensure that parties who do respect the court system are able to achieve justice in a timely, affordable and emotionally respectful manner. Judicial response to a party's failure to respect the court process and court orders should be strong and decisive. [emphasis added] The judge should be as creative as necessary in crafting remedies so as to ensure that the noncompliance identified and the resulting damage to the other party are addressed as fully, justly and quickly as possible.
[31] First, I am satisfied that Ms. Milne has not sufficiently complied with my Order of March 29, 2019 and that this breach is a triggering factor that allows me to consider rule 1(8). The onus is on the offending party to show, on a balance of probabilities, that rule 1(8) is not applicable, see Dumont v. Lucescu, 2015 ONSC 494 at para. 42. Ms. Milne has not shifted that onus. She has paid no costs. More importantly, and the primary basis upon which I dismiss her claim, I find that Ms. Milne remains in breach of my March 29, 2019 Order for disclosure by failing to provide previously ordered key financial evidence.
[32] Second, I am not prepared to exercise my judgment in her favour because her actual financial and medical circumstances were not accurately disclosed at the time of the motion for summary judgment and during the subsequent litigation.
[33] Third, in considering my broad discretion to fashion an appropriate remedy, I am mindful of my comment in paragraph 7 above. An order for dismissal is an order of last resort because it brings the claim itself to an end, not just the litigation.
[34] On these facts, I find that dismissal of Ms. Milne’s Application is an appropriate and just order. But for two narrow issues that were intended to be tried at the next sittings, Ms. Milne’s claims would have been dismissed by summary judgment in January 2019. Since January 2019 she has actively resisted trial and avoided disclosure. Key disclosure remains outstanding. She has exhausted a remarkable amount of court resources in a transparent attempt to preserve a temporary order for spousal support by avoiding further scrutiny of her claim. She has caused Mr. Milne to incur significant legal fees while refusing to pay any amount towards multiple awards of costs in his favour.
[35] Order to issue that this Application is dismissed.
Costs
[36] Mr. Milne has been successful and is entitled to his costs. If he seeks an award of costs he may serve and file submissions by November 28, 2019. Response by December 12, 2019. Reply, if any by December 19, 2019. Submissions in writing are limited to two pages, exclusive of any Bill of Costs or Offer to Settle.
McGee J.
Released: November 15, 2019
[^1]: Confirmed by the court in Myers v. Myers, 2014 ONSC 1804 at para. 29.