COURT FILE NO.: FS-16-15042
DATE: 2019/11/19
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Nicole Ann Martin
Applicant
– and –
Chip Gavin Sterling Foster
Respondents
Pepper Morgan Foster
Robert John Martin
Mary Margaret Kerr Martin
Classic Concepts Inc.
The Marco Corporation
The Marco Corporation, USA
George Karahotzitis, Melanie Larock for the Applicant
Ben Fortino, for the Respondent Chip Gavin Sterling Foster
Esther L. Lenkinski, for the Respondent Pepper Morgan Foster
HEARD: November 6, 2019
THe honourable mr. justice r john harper
Issues
[1] The Respondent Chip Gavin Foster (Chip) brings this motion to seek the following relief:
a. Order setting aside the Order of the Honourable Justice Broad date May 10, 2018.
b. Order reinstating the pleadings of the Respondent, Chip.
c. Order staying the Applicant, Nicole Ann Martin (Nicole) from initiating and/or proceeding with any claims on an uncontested basis.
Background
[2] Nicole brought an Application that was filed on July 12, 2016 for the following:
a. Divorce;
b. Custody and access;
c. Child and spousal support;
d. Equalization of the net family property;
e. Sale of family property;
f. Restraining order;
g. Prejudgment interest;
h. Costs.
[3] An Order for financial disclosure was made on November 21, 2017. This order was not taken out until the Order of Justice Broad on May 10, 2018. At that time, Justice Broad ordered that the draft order of November 21, 2017 be issued and entered. The draft Order was made on consent of the parties. It provided for a detailed list of financial disclosure to be provided by Chip. It also provided that the separately listed items be provided in different and specified time lines.
[4] After legal argument on May 10, 2018, Chip’s pleadings were struck by Order of Justice Broad.
[5] However, that same Order provided that if the Respondent, Chip, complied with his outstanding disclosure by June 15, 2018, the Respondent would be permitted to set aside the said Order. In addition, the Order provided that if Chip did not comply by that date, Nicole could proceed by way of an uncontested trial.
[6] Paragraph 6 of Justice Broad’s Order of May 10, 2018 provided:
If the Respondent does comply with the foregoing paragraph 3 (a through d) the parties shall confer on a date for the Respondent’s motion to set aside paragraph 1 of the order as contemplated by paragraph 3of this order. If no agreement is reached on a date, the Respondent may bring his motion returnable on a regular motions date in August 2018.
Subsequent Chronology of Disclosure
- Letter from Chip’s Accountant
[7] On June 11, 2018, 4 days prior to the dead line for disclosure as set out in Justice Broad’s Order, Elisa Schwartz, an accountant retained by Chip, sent a six paged letter to Mr. Karahotzitis, the lawyer for Nicole.
[8] That letter started out by identifying that Ms. Schwartz’s accounting firm had been engaged to prepare a response to Mr. Foster’s Court Ordered disclosure of May 10, 2018. Ms. Schwartz went on to state that:
… below are responses to the list of requests as outlined in the offer to settle dated November 14, 2017. Additionally, Mr. Foster will send you an invitation to his Dropbox account for he has several hundred pages of source documents and back-up to substantiate our claims.
- Email for Chip Foster to George Karahotzitis dated June 14, 2018
[9] Chip asked Mr. Karahotzitis to confirm receipt of the Dropbox file regarding the court order. Chip went on to state: “the request has been fulfilled and satisfied, if we have inadvertently missed anything please let us know, we are still engaged.”
- Email from Chip Foster to George Karahotzitis dated June 26, 2018
[10] In this email. Chip is still asking for confirmation that the Dropbox was received as he had no reply to his June 14, 2018 email. Once again, he asks if any of the disclosure is missing.
- Email from George Karahotzitis dated June 26, 2018 to Chip with a copy to the accountant Elisa Schwartz.
[11] This email stated:
We are reviewing what you have provided and will let you know of our position on whether you complied in due course.
- Letter from Brian Ludmer to George Karahotzitis dated July 12, 2018.
[12] In part, that letter provided:
I have seen that Mr. Foster has written you several times to confirm that you have received all of the required outstanding financial disclosure. He worked closely with his accountant to assemble of these materials.
Mr Foster would like to reinstate his case on consent so that the necessary matters can be advanced wither to settlement or adjudication.
If this matter is not immediately resolved I am instructed to bring a Motion on this point.
- Email from Chip Foster to George Karahotzitis July 21, 2018.
[13] In this email Chip Foster. Once again, he asks for a reply with respect to whether any of the disclosure provided is missing. He also seeks a resolution with respect to his parenting time with his children.
- Letter from George Karahotzitis to Brian Ludmer dated June 13, 2019
[14] One year after certain disclosure was made by Chip Foster and his accountant and almost one year after the Respondent’s lawyer wrote that he would advise if the disclosure is not complete “in due course”. The Respondent’s counsel wrote to Mr. Ludmer advising that there were numerous items of disclosure that had not been provided.
The Respondent’s letter ends with:
Mr. Foster’s continued non-compliance and non-pardcipation (sic) in this case will not continue. We are now proceeding with an uncontested trial as your client remains non-compliant with the Court Order and therefore took no steps to reinstate his pleadings.
Subsequent Court Involvement
[15] On June 18, 2019 the applicant, Nicole Martin filed an affidavit for uncontested trial.
[16] On August 16, 2019, Justice Braid made the following endorsement:
… Balance of the claims against R. Chip Foster (whose pleadings were struck May 10, 2018) shall proceed to uncontested trial without further delay.
[17] Chip Foster brought this motion to set aside the striking of his pleadings and seeking reinstatement in these proceedings.
Position of the Moving Party, Chip Foster
[18] Chip Foster submits that he has been diligent in his effort to comply with the disclosure orders. He caused a letter to be sent to counsel for Nicole, containing disclosure that he alleged placed him in compliance with the disclosure Order, before the deadline set out in Justice Broad’s Order of May 10, 2018.
[19] Chip Foster’s current counsel, Mr. Fortino, submitted that his client then had multiple contacts with counsel for Nicole Martin with the continuous request to seek Ms. Martin’s position on whether she felt that some of the disclosure was missing.
[20] Mr. Fortino argues that Chip Foster was led to believe from counsel for Nicole Martin that he would be advised “in due course” if they felt something was missing.
[21] Despite numerous requests for a response, there was no response about this central issue for one year. After one year, the response of mid June 2019th was followed by the filing of an uncontested hearing affidavit.
[22] Mr. Fortino submits that Chip Foster made efforts at complying with the disclosure Order that were substantial and timely. He immediately engaged the services of an accountant who put together what she thought was significant disclosure that complied with the Court Order. In addition, a drop-box was provided that contained supporting data to the many statements that were provided.
[23] Chip Foster, through Mr. Ludmer, who was providing him with legal assistance at that time sought to clarify Nicole Martin’s position on compliance in order to achieve a consent to reinstatement rather than continued litigation.
[24] There was delay of one year before any reply was given to Chip Foster relative to the issue of compliance. Once Nicole Martin set out her position that the disclosure did not comply with the Order, she then sought to urgently end this matter by way of an uncontested hearing.
[25] Mr. Fortino argues that Chip Foster’s attempts to comply with the disclosure orders with respect to his complex finances were bona fide, diligent and timely. He submits that under the circumstances of this case, Chip Foster’s situation can be distinguished from all the cases that did not allow reinstatement, as those cases amounted to only token attempts at compliance.
[26] Mr. Fortino relies on the Court of Appeal decision in Chiaramonte v. Chiaramonte, 2013 ONCA 641.
[27] In that case, the Court of Appeal reviewed the law with respect to the striking of pleadings in family law. The court stated commencing at para. 30:
The Family Law Rules
[30] The Family Law Rules provide as follows, in relevant part:
1(8) The court may deal with a failure to follow these rules, or a failure to obey an order in the case or a related case, by making any order that it considers necessary for a just determination of the matter, on any conditions that the court considers appropriate, including:
(a) an order for costs;
(b) an order dismissing a claim made by a party who has wilfully failed to follow the rules or obey the order.
10(5) If a respondent does not serve and file an answer as this rule requires, or the answer is struck out by an order,
(a) the respondent is not entitled to any further notice of steps in the case (except as subrule 25 (13) (service of order) provides);
(b) the respondent is not entitled to participate in the case in any way;
(c) the court may deal with the case in the respondent’s absence; and
(d) the clerk may set a date for an uncontested trial.
14(23) A party who does not obey an order that was made on motion is not entitled to any further order from the court unless the court orders that this subrule does not apply, and the court may on motion, in addition to any other remedy allowed under these rules,
(a) dismiss the party’s case or strike out the party’s answer or any other document filed by the party;
(b) postpone the trial or any other step in the case;
(c) make any other order that is appropriate, including an order for costs.
Striking a Party’s Pleadings
[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, 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 (ONSC), 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 (ONSC), a party whose pleadings had been struck was not entitled to notice of further proceedings nor was he entitled to participate in any way.
[33] It is true that a motion judge’s decision to strike pleadings and deny participation at trial is entitled to deference if exercised on proper principles: Purcaru, at para. 50. Absent palpable and overriding factual error, appellate courts ought not to interfere with a motion judge’s properly exercised discretion to strike pleadings. However, given the exceptional nature and significant implications of denying a party participation at trial, it is essential that this remedy of last resort be granted only on a proper evidentiary basis.
[28] In Chiarmonte, the court went on to state at para 37:
[37] In my view, the motion judge clearly mischaracterized the husband’s disclosure. The efforts made by the husband to comply with the court orders were more than just token attempts at compliance. Keeping in mind that the husband’s financial situation is considerably more complex than that of the average family law litigant, it is apparent from the record that the husband had been making serious efforts to comply with his disclosure obligations. The exhibits attached to the husband’s affidavit of April 27, 2012, include a personal income tax return and year-end financial statements for two of the husband’s corporations. The exhibits attached to the husband’s affidavit of July 10, 2012, many of which were also attached to an earlier affidavit, include personal and corporate bank statements for various accounts; a chart listing approximately 40 properties owned by the husband, including purchase price and mortgage information; a property appraisal; listing agreements for certain properties owned by the husband; and an invoice for valuation services. None of this evidence was referred to by the motion judge. It is not clear from her reasons that she even considered the affidavit evidence tendered by the husband.
[38] I do not mean to suggest that the husband’s disclosure has been perfect. However, in my view, the motion judge committed palpable and overriding errors in finding that the husband had willfully breached the existing court orders. Justice would be best served in this case by allowing the husband to participate at trial. The extent of the husband’s disclosure may well lead a trial judge to conclude that his income or assets exceed the figures disclosed. That determination is best left to the trial judge, based on all the evidence, including such further evidence as the husband may provide to substantiate his position.
[39] For these reasons, I would allow the appeal and set aside those portions of the motion judge’s order striking the husband’s pleadings and allowing the matter to proceed by way of an uncontested trial.
[29] Chip submits that although Justice Broad already struck his pleadings, he gave Chip another opportunity to reinstate his position as a party with the opportunity to respond and fully participate in these proceedings so long as he complied with the disclosure order within an extended time line.
[30] Chip argues that not only did he make substantial efforts to comply he sought to avoid further costly steps in these proceedings by seeking Nicole’s position of the state of compliance and consent to reinstatement. However, Chip’s own recent correspondence to Mr. Karahotzitis concedes that he is still not in full compliance with the disclosure order made approximately 2 years ago.
[31] It is Chip’s submission that he should not now be penalized for his efforts to comply and his efforts to avoid further costly litigation. He submits that he should be allowed to reinstate his position in this litigation that would allow the proceedings to proceed in a manner that is fair and allow for a maximum opportunity for a just result.
Position of the Responding Party, Nicole Martin
[32] On behalf of Nicole, Ms. Larock argues that this case should be distinguished from Chiarmonte because the pleadings have already been struck. She submits that Chip has already been found to have willfully disregarded that disclosure Order of the court. There are different considerations when a party is attempting to restore their position in the litigation.
[33] Ms. Larock submits that the onus does not shift to her client once Chip alleges that he has complied. It was Chip who had to demonstrate to the Court that he did comply and within the timelines set out in the Order.
[34] It is Nicole’s position that the Order of Justice Broad is clear. Chip had to comply with production of specific documentation within a clearly defined time line. If he asserts that he has complied, the parties were then directed to attempt to come to an agreement on a date in which Chip could bring his motion in order to satisfy the Court of his compliance in order to be allowed to be reinstated. If there was no agreement, the Order provided for Chip to bring his motion for reinstatement by a specified date.
[35] Nicole takes that position that the onus to establish compliance that would allow for reinstatement always stayed with Chip. Despite this Chip never brought his motion for reinstatement until well over a year after the deadline to bring such a motion was set in Justice Broad’s Order and that deadline was August of 2018. Chip’s motion for reinstatement was brought in October 2019. In support of his motion he relied on his affidavit dated October 4, 2019.
[36] Ms. Larock submits that Chip should not be allowed to be reinstated given this history of continuous disregard for the court orders and directions.
[37] Nicole brought her Application on July 19, 2016. The parties separated on October 18, 2015. They have three children Lake, (13), Finn (12) and Cedar (7).
[38] Chip lives in both California and Ontario. He has numerous businesses that require him to travel extensively. His business endeavours and corporate structures are complex.
[39] Nicole’s lawyers had difficulty serving Chip and had to bring a motion for substitutional service. He was finally served on or about September 29, 2016. His Answer is dated November 2, 2016.
[40] The parties came to an agreement to have a CLRA Section 30 Assessment conducted by Lourdes Geraldo. This assessment was never completed. Chip claimed that he could not afford to pay the retainer of Ms. Geraldo.
[41] There has been no resolution with respect to parenting time between the father and the children.
[42] Chip was originally represented by Mr. Buck. He then represented himself until Mr. Ludmar represented him as an “agent”. Mr. Ludmar never became solicitor of record.
[43] The Order of Justice Broad striking Chip’s pleadings was granted on May 10, 2018 after hearing argument from the solicitor for Nicole, George Karahotzitis and a lawyer Jesse R. Herman as agent for Brian Ludmar (not on the record).
[44] Justice Broad had considered the willful non compliance with court ordered disclosure on the part of Chip and after careful consideration he made his Order striking his pleadings. Justice Broad gave Chip a chance to restore his position in this action by abiding by a new and specific order for disclosure within a new time frame.
[45] Justice Broad’s Order put the onus on Chip to comply with the new Order by specifying a deadline for Chip to bring a motion to demonstrate to the Court that he had complied with all of the directions of the Court and that his pleadings should be reinstated.
[46] Ms. Larock submits that Chip’s chronic and consistent lack of compliance is not unlike the Respondent in Oelbaum v. Oelbaum, 2011 ONCA 300. In that case the Court of Appeal dismissed the Appeal of a Respondent who sought to restore his pleadings. The Court stated at para 3:
[3] The appellant then moved before Murray J. for an order staying or setting aside the trial judgment and reinstating his answer. The motion was dismissed.
[4] In his lengthy, comprehensive reasons, the motion judge pointed to the appellant’s failures to: pay outstanding awards; make any effort to have his answer reinstated for a period of some three years; provide meaningful disclosure; respect court orders; and, appeal the order striking his answer. The motion judge also noted that the appellant offered no explanations for these failures. He found that he was unable to assess any possible prejudice to the appellant because of the appellant’s own failure to provide financial disclosure. He also noted that this was not a case where the appellant was denied a chance to present a defence on the merits; rather, it was the appellant who had intentionally failed to provide the necessary information to the court so that the court could fairly and expeditiously resolve the issues.
[5] Further, the motion judge found that there was no evidence of misleading or fraudulent tactics on the part of the respondent. Moreover, he found that the appellant had been “gaming the process” in order to prevent the respondent from receiving the financial support to which she was entitled.
[47] In her summary of argument Ms. Larock submits that in order for the Court to make a determination that an order/reinstating of a parties’ pleadings should be made the Court must also consider the potential prejudice to the moving party if the motion is dismissed and any potential prejudice to the responding party if the motion is allowed. In addition, the Court must consider the effect of any Order the motions judge might make on the overall integrity of the administration of justice.
[48] In her submissions, Ms. Larock highlighted the lengthy history of the Respondent’s disregard for the court process and his consistent conduct of obstruction that has delayed this matter proceeding in a fair and expedition manner. She argues that it is a greater and more significant prejudice to the Applicant to allow reinstatement after approximately three years of this type of conduct. If allowed to continue the integrity of the administration of justice will be seriously and negatively impacted.
The Law and Analysis
[49] In Peerenboom v. Peerenboom, 2018 ONSC 5796, Justice Moore reviewed the law with respect to the importance of disclosure in family law and striking pleadings.
[50] Overview of Case Law - Striking Pleadings for Failure to Comply with Court Orders
[11] In support of her request for an order striking Robert’s Answer, Nicole cites and relies on several cases in which courts have granted such orders.
[12] In Levely[^4], Justice Chappell heard an interim motion prior to trial and wrote:
12 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 court has a critical responsibility and role to play in ensuring that proceedings which are intended to protect families and lead to resolution of pressing and emotionally divisive issues are not hijacked by a party and transformed into a process for further victimizing the other party and the children in their care.
13 … Judicial response to a party’s failure to respect the court process and court orders should be strong and decisive. 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.
[13] Although Levely predates the Family Law Rules in their current form and content, the observations made by Justice Chappell ring as true today as they did when he wrote that decision.
[14] More recently, Gordon[^5] addressed the failure of a party to comply with court orders by saying:
Court orders are not made as a form of judicial exercise. An order is an order, not a suggestion. Non-compliance must have consequences. One 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.
[51] In Chiaramonte v. Chiaramonte, supra, the Court of Appeal stated at paragraph 32 of that decision:
[32] Striking a party’s pleading 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 (ONSC), 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 (ONSC), a party whose pleadings had been struck was not entitled to notice of further proceedings nor was he entitled to participate in any way.
The Analysis
[52] In this case I find that there has been a significant delay in moving this case forward substantially as result of the disclosure issue.
[53] As I stated in Green v. Whyte at para 9:
[9] In addition to the above I draw the parties’ attention to the following:
a. Timely, accurate and complete disclosure is the foundation of family law.
b. The Family Law Rules make it clear that cases must proceed in a manner that promotes the primary objective of the Rules and that is the enable cases to court to deal with cases justly
c. It is the duty of the Court to promote the primary objective and the parties and their lawyers are required to help the court promote the primary objective.
d. Financial Statements must fully and accurately discloser a party’s financial situation and attach any documents to prove the party’s income that the financial statement requires.
[54] I find that although Chip did make efforts to comply with his disclosure obligations after he had already been found to have willfully ignored them, he continued to fall short of the clear and specific orders and time lines on Justice Broad’s Order of May 2018.
[55] Although he sought the Applicant’s position on what he did disclose, he had a clear onus placed on him to bring a motion by August 2018 to reinstate and he failed to comply with that Order. He did not bring his motion to reinstate until the Applicant filed her uncontested hearing affidavit. Not only had she the right to do that, this was reinforced by the Order of Justice Braid dated August 16, 2019, who wrote in her endorsement of that date:
Balance of the claims against R. Chip Foster (whose pleadings were struck May 10, 2018) shall proceed to uncontested trial without further delay.
[56] The message to litigants cannot be that delay and obstruction of the process will be rewarded. Family law litigants must be able to exchange disclosure and assess their positions early on. Otherwise, lengthy and destructive conflict becomes the path forward. A path that seriously impedes the family and most importantly the children from moving on with their lives. That cannot and will not be the message to be sent as it will certainly cause the administration of justice to be in disrepute.
[57] The motion of the Respondent is dismissed.
Costs
[58] Counsel may submit brief written costs submissions of no more than 3 pages in length together with a bill of costs no later than December 20, 2019.
The Honourable Mr. Justice R. J. Harper
Released: November 19, 2019
Copy and Paste Citation/Style of Cause DELETE EXTRA LINE SPACE IF APPLICABLE
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Copy and Paste from Table Style of Cause DELETE EXTRA LINE SPACE IF APPLICABLE
REASONS FOR JUDGMENT
Judge
Released: [Click and Type Date]