Newmarket Court File No.: FC-19-58063-00
Date: 2020-10-09
Ontario Superior Court of Justice
Between:
Azadeh Soleimani Applicant
– AND –
Hamidreza Karimi Respondent
– AND –
Puya Karimi Respondent
Counsel:
Meysa Maleki and Sara Kun, Counsel for the Applicant
Marjan Sabet, Counsel for the Respondent Elliot Birnboim, Counsel for the Respondent[^1]
Heard: September 23, 2020
Ruling on Motion
Jarvis J.
[1] On January 31, 2020 Douglas J. released a lengthy Ruling dealing with child and spousal support and interim disbursements. An income of $225,000 was imputed to the respondent (“the husband”): he was ordered to pay $5,880 a month for spousal support, $1,839 a month for child support, a rateable share of s. 7 expenses for the parties’ child and $41,000 in interim disbursements. This Order (“the support Order”) was never appealed. There is no outstanding motion to vary it. The Order is $36,114 in arrears.
[2] On May 26, 2020 Douglas J. awarded the applicant (“the wife”) costs of the support Order motion in the amount of $16,000 to be paid by the husband. These costs have not been paid.
[3] Arrears of support and costs as of today are $52,114. For reasons unknown to the wife and this Court the Family Responsibility Office has been unable to enforce collection of the support Order.
[4] The wife has now brought a motion to have the husband found in breach of the Orders of Douglas J. as well as an asset preservation Order made by MacPherson J. on January 11, 2019 and to strike the husband’s pleadings. As an alternative to striking pleadings, the wife proposes that the husband be given an opportunity to pay the arrears owing within 15 days failing which his pleadings would be struck and she have leave to proceed by way of an uncontested trial.
[5] For the reasons following, the husband is declared in breach of the Orders of Douglas J.: he shall have until October 30, 2020 to bring into good standing all arrears owing under the support Order accruing before September 30, 2020, including costs, failing which the wife may move for an Order striking his pleadings on the non-parenting issues between the parties.
Discussion and the Law
[6] The parties married on February 20, 2003 and separated on September 18, 2018. There is one child of the marriage (“KK”) born June 2, 2008. He resides with his mother. When the parties separated, they owned three properties (two residences and one investment property, since sold, the proceeds of whose sale total slightly more than $60,000 being held in trust) and were involved in four business entities (“the businesses”). Each party occupies one of the two remaining residences.
[7] The ownership of the parties’ realty and businesses is disputed: the husband claims that any interest he may have in the businesses is held by him in trust for his brother (“PK”) who lives and resides in Iran. PK has never been to Canada. When the wife’s support motion was heard by Douglas J., PK filed an affidavit supporting the position of his brother about ownership of the businesses. In his Ruling Douglas J. commented that PK’s evidence had to be approached with “considerable caution”. PK has since been made a party to this litigation.
[8] As for the husband, Douglas J. was less than impressed with his financial probity. Douglas J. commented on the inconsistencies in the husband’s evidence about his finances, material deficiencies in that evidence and its opaque quality. An adverse interest was drawn that led to the husband being imputed with a $225,000 annual income.
[9] The husband complied with the support Order for the months of January to March 2020. In mid-April his former lawyer informed the wife’s lawyer that as a result of the Covid-19 pandemic and its impact on the businesses the husband would no longer be able to pay the mortgages on the parties’ residences (which he had been ordered to do in a previous Order of the court) or to pay the support ordered. Since April 1, 2020 he has only paid $9,300: he should have paid $46,314.
[10] The husband argued that the wife had sufficient funds or access to funds to supplement her support needs. These statements relate to events that occurred in late 2018 and in 2019 and were before the court when the support Order was made.[^2] Raising the same argument again is of no assistance to the husband. Nor is the allegation that the wife has not come to court with clean hands. There is no motion before the court to find the wife in breach of any Order (see Gordon v. Starr, 2007 CanLII 35527 (ON SC), 2007, 42 RFL (6th) 366 (Ont. Fam Ct) at para 20). In Gordon, Quinn J. flagged for family law litigants in words that have since been approvingly echoed by countless judges and lawyers the risks of Order non-compliance.
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.[^3]
[11] In Peerenboom v. Peerenboom,[^4] a case upon which the wife relies, Moore J. accepted the views expressed by Myers J. in Manchanda v. Theti,[^5] a case of Order non-compliance dealing with financial disclosure.
[22] More recently, in Manchanda, Justice Myers questioned the degree to which striking of pleadings should still be reserved for drastic and extreme cases and I accept and value his views:
Moreover, I respectfully question the degree to which striking of pleadings should still be reserved for drastic and extreme cases. How many orders does a party get to breach on top of ignoring the primary objective that requires early, voluntary, and complete disclosure without an order even being made? It is not the remedy that should be exceptional. Rather, it is the continued existence of cases with parties who ignore their disclosure obligations that ought to be exceptional. The remedy will become exceptional when the Rules are followed and enforced as written and as interpreted. That is, once cases with non-disclosure issues are exceptional, then the need to consider striking pleadings for non-disclosure too will be exceptional. Failing to provide consequences however is tacit, if not explicit, permission to continue the course that countless courts have already said is inappropriate. Deferred disclosure, delayed disclosure, and non-disclosure cannot be accepted as normal, tactical give and take in 2016…
Implementing a culture shift to enhance access to justice by promoting efficiency, affordability, and proportionality requires the court to re-draw the line between limiting drastic measures and applying the law robustly. In my respectful view, a little less judicial diffidence, a little less reluctance to hold accountable those who would deny justice to their former spouses, and a little more protection of abused parties from abusers, might be a better fulfillment of our critical responsibility as so aptly phrased by Justice Chappell[^6]. After 17 years, it is time for the court’s words were taken to mean what they say. (bolding added).
[23] The Court of Appeal affirmed Justice Myers’ ruling, adding at paragraph 13:
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…Rule 1(8) provides the court with the authority to strike claims. Those who choose… 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. Manchanda v. Thethi, 2016 ONCA 909, 84 R.F.L. (7th) 374 at para. 13. (bolding added)
[12] Manchanda was a case dealing with non-disclosure: Peerenboom dealt, among other things, with non-disclosure and non-payment of Orders for costs. Each case dealt with financial issues. In each case pleadings were struck. Each case was upheld on appeal.
[13] The financial context of the reasons given by Douglas J. is relevant:
[40] The respondent’s financial statement sworn January 7, 2020 contains the following salient information:
(a) He is “currently employed by Persica”;
(b) His gross income last year from all sources was $55,000;
(c) His only income is from “self-employment” in the amount of $4,600 per month;
(d) His total annual expenses are $61,233;
(e) 20 Beaufort Hills, Richmond Hill is registered in the names of the applicant and respondent but held in trust for his brother. Estimated valued $2.2 million;
(f) The matrimonial home, 16 Kilbarry Court, Richmond Hill, is registered to the applicant and her brother-in-law but the applicant’s share is held in trust for the respondent who himself holds it in trust for the respondent’s brother. A 50% value is $550,000;
(g) 107 John Bowser Crescent, Newmarket was held in the applicant’s name with a friend, applicant’s share held in trust for the respondent who holds it in trust for the respondent’s brother. A 50% value of $500,000. Property now sold with net sale proceeds of $60,306 held in trust;
(h) Household goods and furniture, vast majority owned by respondent’s brother;
(i) Boat and jet ski estimated value on date of separation $80,000 and present $42,000;
(j) 2014 Mercedes ML350 $30,000 estimated value;
(k) Only one bank account disclosed, $5,886 as of date of separation, $8,500 as of date of the financial statement;
(l) All business interests noted above held in trust for his brother. Persica: sold. Taj: locked out by landlord, no longer operating. Kish: sold and proceeds given to the applicant. Shabestan: Net proceeds of sale (approximately $54,000) held in trust by his lawyer.
(m) He alleges a loan owing to his brother with values on dates of separation and statement: “TBD”. Under “details” he indicates owing over $300,000 to his “brother and others” for carrying costs and other expenses of real property, Lamborghini, legal fees, etc.
[41] The respondent’s 2016 Notice of Assessment indicates income of “zero”.
[42] The respondent’s 2017 Notice of Assessment indicates income of “zero”.
[43] The respondent’s 2018 Notice of Assessment indicates total income of $53,360.
[44] The respondent has produced no personal income tax returns. He has produced some corporate returns and assessments for Kish, Persica and Shabestan. He has not in his evidence meaningfully touched upon or explained the content of these documents.
[54] Whether I accept or reject the respondent’s evidence regarding his borrowing of funds to propel the parties’ lifestyle and the businesses, the result, for the purposes of this motion, is the same. If such evidence is rejected, then it must be concluded that the respondent is drawing upon his own undisclosed resources and his income will be determined accordingly. If such evidence is accepted, such that the respondent is funding his lifestyle with the resources of a third party, he should be expected to maintain the same practice post-separation that he had adopted pre-separation in this regard, and again his income determined accordingly. By whatever path one takes, the destination is the same.
[14] It is inferentially clear from these reasons that the husband failed in his fundamental duty to provide meaningful information to his wife, and probably more importantly, to the court.[^7] In the same vein, the simple fact is that the husband disagrees with the support Order. This was made plain by his lawyer in a July 15, 2020 letter to Ms. Malecki:
As indicated… my client is not in the position to be paying spousal and child support based on the imputed income, since my client did not make anywhere near the income that was imputed on him during your Motion in January of 2020.
In addition to not being able to satisfy his child and spousal support obligations, my client’s actual income also declined about $1,000 per month as a result of the pandemic; therefore, my client’s ability to satisfy the Order is far less than it was at the time the Order was made.
[15] The husband did not appeal the support or costs Orders. There is no motion to vary the Order before the court.
[16] It is noteworthy too that when this case was conferenced the husband declined to have any business interest valued or to have an analysis of his income done. On the eve of this motion being heard, he apparently agreed for these investigations to be undertaken but no specifics were provided such as identifying who would be undertaking the investigations, their qualifications, the scope of the retainer, the business interests involved, estimated timeline, or who would assume responsibility for payment.
[17] The wife’s evidence is that since the support and costs Orders were made, notwithstanding the pandemic, the husband has, more or less, continued to maintain a lifestyle not unlike what the parties enjoyed before they separated. The husband also acknowledged that he recently “celebrated” his union with a new partner. The wife described the event as a wedding: the husband explained that the event was part of his culture and its costs paid by others. While this is not a matter directly relevant to the issues before this court, the husband’s explanation about third party contributions to his lifestyle and that of the family before the parties separated is at least consistent - not his assets, not his money, a lifestyle funded over the years by extensive borrowing from third parties, a declared income inconsistent with his expenses and an imputed income with which he disagreed and simply chose to ignore when it suited him. PK said to Douglas J. that there was an obvious reason why his alleged business assets in Canada were not registered in his name. Nothing was “obvious” as Douglas J. remarked.
[18] There is no dispute that striking pleadings is a serious, drastic step and a last resort. In Van v. Palombi,[^8] the Divisional Court dealt with a husband’s appeal from an Order striking his pleadings for non-compliance with Orders dealing with payment of children’s expenses and his failure to pay costs Orders: the husband claimed impecuniosity. A three-pronged test is involved.
[30] The legal principle governing the exercise of judicial discretion to strike a party’s pleadings is a three-pronged test as follows:
(1) Is there a triggering event justifying the striking of pleadings?;
(2) Is it appropriate to strike the pleadings in the circumstances of the case?;
(3) Are there other remedies in lieu of striking pleadings that might suffice?
[31] These three-pronged principles are well established in the case law. (See Kovachis v. Kovachis, 2013 ONCA 663, 367 DLR (4th) 189; Chiaramonte v. Chiaramonte, 2013 ONCA 641, 370 D. L. R. (4th) 328; Purcaru v. Purcaru, 2010 ONCA 92, 265 O.A.C. 121 at paras. 47-48; King v. Mongrain (2009), 2009 ONCA 486, 66 R. F. L. (6th) 267 (Ont. C.A.); Haunert-Faga v. Faga (2005), 2005 CanLII 39324 (ON CA), 203 O.A.C. 388 (C.A.) ; and Marcoccia v. Marcoccia (2009), 2008 ONCA 866, 60 R. F. L. (6th) 1 (Ont. C.A.).
[35] The jurisprudence indicates that even in the event of a court finding a “triggering event”, justifying the striking of pleadings, it is still within the discretion of the court to decide to strike or not on all of the circumstances of the case. Furthermore, the striking of pleadings and the denial of trial participation which follows as a result, should only be done in exceptional circumstances and where no other remedy would suffice. The third step of the test is the examination of other remedies that might be appropriate in lieu of striking pleadings, a step that the motion judge fails to mention.
[36] The rationale for such a cautious and restrained test was explained in the case of Kovachis v. Kovachis, supra, at paragraph 25. The consequence of an order striking the pleadings of a party effectively prohibits that person from participating in any way at the trial of the matter. Without that participation there is a risk that the court will not have all necessary and accurate information to reach a just result. If the judgment provides for continuing obligations or relationships that can only be varied on changed circumstances, as often happens in family law judgments, then injustice may be perpetuated.
[19] The triggering events in this case are the husband’s failure to fully comply with the support Order and to comply at all with the Order for costs. But are the circumstances sufficiently exceptional to warrant striking of the husband’s pleadings and, even if so, are there other, appropriate remedies in lieu of that being done?
[20] There is clearly an inverse correlation between striking pleadings and the choice of alternative remedies. The more egregious a party’s non-compliance, whether with respect to an Order or the Family Law Rules, the more limited the remedies. Most often it is the aggregation of non-compliant behaviour and its severity that drives the outcome. Conversely, where the circumstances of the case suggest that the denial of trial participation may incentivize a party’s compliance the broader are the court’s options. In this case there has been some compliance with the support Order but none with respect to the costs Order. Faced with the prospect of his pleadings being struck the husband should have proposed acceptable alternatives. He didn’t.
[21] Despite the need for a culture shift in robustly enforcing Orders and the Family Law Rules I am not persuaded that the husband’s conduct in this case yet approaches the requisite level of exception warranting that his pleadings be struck. However, I share with Douglas J. his skepticism about the husband’s truthful financial situation and am dubious of the husband’s last-minute conversion to, or acknowledgement of, the need for expert valuation and income analysis assistance. If he is as impecunious as alleged how possibly can the husband fund those inquiries? Unless, of course, he has the funds or his brother is providing them. As Douglas J. remarked “[b]y whatever path one takes, the destination is the same”.
[22] The husband should be given an opportunity to comply with the outstanding Orders failing which his pleadings should be struck.
Disposition
[23] The following is ordered:
(a) The husband shall have until October 30, 2020 to pay the costs Order of $16,000;
(b) The husband shall pay arrears of support accruing before September 30, 2020 in the amount of $36,114 by October 30, 2020;
(c) If the husband fails to comply with (a) and (b) above, the wife may move by 14B notice to my attention on 10 days notice to the husband for an Order striking his pleadings on all non-parenting issues.
[24] If the parties are unable to agree upon the costs of this motion, the following directions shall apply:
(a) The wife shall deliver her submissions by November 6, 2020
(b) The husband shall deliver his submissions by November 13, 2020;
(c) Reply (if any) by the wife by November 18, 2020;
(d) All submissions shall be single page, double-spaced. In the case of (a) and (b) the limit shall be four pages; reply shall be two pages. These submissions shall be filed in the Continuing Record;
(e) Offers to Settle, Bills of Costs and any authorities upon which a party may wish to rely shall be filed by the above deadlines but shall not form part of the Continuing Record;
(f) Counsel are to advise the judicial assistant (Meghan.Billings@ontario.ca) when they have filed their material.
[25] The wife also asked that the costs Order made by Douglas J. on May 26, 2020 be enforced as a support Order pursuant to the Family Responsibility and Support Arrears Enforcement Act.[^9] While the motion resulting in the award of costs related to support, that request should properly be made to Douglas J. by 14B motion on notice to the husband.
Justice David A. Jarvis
Date: October 9, 2020
[^1]: Mr. Birnboim did not participate in the motion nor was any material filed by his client. [^2]: One source of funds was the wife’s sale of a Lamborghini automobile purchased by the husband for $300,000 and registered in the wife’s name. It cost another $7,000 a month to operate (with additional financing). Douglas J. queried why and how the husband represented that this was a business expense and how possibly it could be afforded ($84,000 a year) by a person earning only $54,000 a year (see paragraphs 52 (a) and (b): 2020 ONSC 717. There was also a yacht. [^3]: Gordon v. Starr, op.cit. at para 23. [^4]: 2018 ONSC 5796. [^5]: 2016 ONSC 1679. [^6]: Levely v. Levely, 2013 ONSC 1026. [^7]: Roberts v. Roberts, 2015 ONCA 450, at paras. 11 and 12. [^8]: 2017 ONSC 2492. [^9]: 1996 S.O. 1996 C. 31 as am.