Court File and Parties
COURT FILE NO.: 41913/19 DATE: 2021-02-19 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Gurnaik Gill, Applicant AND: Amarjot Kaur Gill, Respondent
BEFORE: Kurz J.
COUNSEL: Adrienne Lee, for the Applicant Farrah Hudani and Jessica Luscombe, for the Respondent
HEARD: January 21, 2021
Endorsement
Introduction
[1] This is a motion by the Respondent (“the wife”) to enforce the consent order of Fitzpatrick J. of November 21, 2019 (“the order”). The order requires the Applicant (“the husband”) to transfer his interest in the holding company, 2535787 Ontario Inc. (“253”), to her within ten days, as a spousal tax-free capital rollover under s. 73(1) of the Income Tax Act. In addition, the order required the husband to resign as officer or director of 253 and to take no steps to interfere with the sale of the wife’s dental practice (“the practice”), which is carried out through a professional dental corporation. There is no dispute that the husband has failed to take any of those steps and is in breach of the order.
[2] The husband states that he has a good reason to disobey the order even though he consented to it with the assistance of counsel. He wishes the wife to remove him as a guarantor on a bank line of credit for the practice, held by Scotiabank (“the line of credit”). That term is not included in the agreement that led to the order (“the agreement”) or the order itself.
[3] After the order was granted, the husband sought the second opinion of a corporate lawyer as to the transfer documentation. That lawyer, Jonathan Mackenzie, advised him against the transfer of the shares unless he was removed from the guarantee of the line of credit (“the guarantee”). Mr. MacKenzie wrote an opinion letter setting out the reasons that the transfer without a release of the guarantee is not in the husband’s interests. Even though the wife has offered to indemnify the husband for the guarantee, an offer that she was not required to make under the order, husband remains firm in his position that he should not be bound by the order.
[4] The husband has offered a number of reasons to justify his refusal to comply with the order. He states that the wife has offered more than one set of transfer documents to him, she was tardy on providing him with the financial statements and tax returns necessary to complete the transaction; and failed to make reasonable efforts to have him released from the guarantee. The latter justification is his central argument. Based upon the arguments, it is the one upon which I will focus.
[5] While the husband refuses to obey the order, the wife cannot sell the practice (which she is entitled to do by under the order and the practice’s shareholder’s agreement). Because the husband is the sole shareholder of the holding corporation that owns the practice’s office unit, the wife cannot pass on to a buyer the right to the permanent use on that unit (which is required to sell the practice). She remains saddled with a business that she has no desire to continue running.
[6] For the reasons that follow, I order the husband to transfer his shares of 253 to the wife upon the terms set out below. The husband agreed to the order and is bound by it. There is no valid reason to set aside the agreement or the order. Buyer’s remorse is not an excuse to disobey a consent court order.
Background
[7] The parties are married and separated in 2018. The wife is a dentist who operates her dental practice through a dental professional corporation (“the practice”). The husband is a shareholder of the practice. The practice’s premises are owned by 253. The husband is the sole officer, director and shareholder of 253. However he has conceded throughout these proceedings that he holds any interest in 253 in trust for the wife.
[8] In April 2018, six months before their separation, the parties opened the wife’s dental office, which was operated under the practice in space owned by 253. The wife was the senior dentist at the practice, while the husband operated its business. He was involved in the planning and construction of the office unit that housed the practice as well as the primary contact for all financial and operational issues involving the building unit in which the practice operated. He was effectively the office manager of the practice.
[9] At the time of separation, the husband stopped attending for work, leaving the wife to operate both the business and the dental aspect of the practice. She felt unable to perform both roles and decided to sell the practice, as she was entitled to do so under their shareholder’s agreement. That shareholder’s agreement states that:
a. The wife owns all of the voting shares of the practice;
b. She is entitled to buy the husband’s shares back on a call notice at anytime; and
c. if she wants to sell her shares to any third-party purchaser, she may do so. She is only obligated to give the husband notice, and the purchaser must agree to purchase all the husband’s shares on the same terms and conditions as the wife’s shares.
[10] But to sell the practice, the wife will have to sell all interest in 253 as well. While the wife is the beneficial owner of 253’s shares, as her funds exclusively purchased the unit owned by 253, the husband is the legal owner of the corporation’s shares. Thus, to sell her practice, the wife needs the husband to transfer his shares in 253, which he holds in trust for her, back to her.
[11] While the husband chose to abandon the practice, he refused to transfer his shares in 253 to her. For that reason, she moved to require him to do so. In response to her motion, he asserted that the proceeding was unnecessary as he already agreed to the relief sought. He stated “I have already agreed to allow Dr. Gill to sell her dental practice and have already agreed to transfer the business unit to her. This is no need to have a motion with respect to these two issues.”
[12] As a result the parties agreed to the order on November 21, 2019. The key term of the order is found at para. 1, as follows:
- The Applicant shall transfer all shares in his holding company, 2535787 Ontario Inc. (“the company”), which holds the business unit to the Respondent within 10 days as a spousal tax free capital rollover under s.73(1) of the Income Tax Act. He will resign any positions as officer or director of the holding company. The Applicant and the Respondent shall cooperate to execute any documents necessary for this purpose so that the transfer can be completed within 10 days. They shall execute the joint election. The Respondent and/or the company shall pay any taxes assessed against either the Applicant or the company with respect to the transfer, and she will indemnity him for all taxes and costs relating to the transfer. This is without prejudice to the Respondent’s ability to claim those disposition costs, if incurred, as part of her net family property for purposes of equalization.
[13] Despite agreeing to the order with the assistance of counsel, who remains his counsel in this motion, the Respondent has refused to obey it. He says that he was originally willing to do so but changed his mind after he discovered that he signed a guarantee for the practice’s debts. He complained that he had not been released from that guarantee. He feels that the Applicant should have done more to have the bank release him from the guarantee and thus he is entitled to disobey the order.
[14] The husband further argues that in the course of trying to obtain his release, the wife misrepresented her support obligations to him. He complains that her statement of her legal obligations to him treated his claims to support as if they were actually ordered. He does not deny that he is seeking the amount of support that the wife reported to the bank, only that he has yet to obtain an order for it. That support motion was pending at the time that I heard this motion.
[15] Only after he agreed to the order did the husband seek the advice of corporate counsel, Mr. MacKenzie. The husband says that he was advised against transferring his shares in 253 unless he obtained a release of the guarantee. He does not indicate why he did not seek that legal advice beforehand.
[16] The wife says that she has tried to have the husband released from the guarantee, but the bank refuses. The husband says that the wife’s attempts have been insufficient. Yet he has made similar unsuccessful attempts.
[17] The wife adds that the husband is indemnified in any event by the terms of the shareholder’s agreement for the practice, which states that the wife will indemnify the husband for “any corporate liabilities, whether or not guaranteed or indemnified by the Seller.” In addition, the wife is a co-guarantor for 253. In further addition, she is willing to sign a further indemnity for those debts. That is not sufficient for the husband. He claims to be at great risk, even though the wife and the practice are the first debtor on the bank loan and he has not been called upon to honour his guarantee.
[18] The wife says that she is severely prejudiced by her inability to sell a practice she does not wish to continue running, She would prefer to work under the practice of another dentist who would assume the business responsibilities for her practice. She says that this motion is solely a result of the husband’s after-the-fact regret for a deal and order to which he agreed. The husband says that the order should be set aide because of his alleged ignorance of the guarantee.
Issues
[19] This motion raises the following issues:
Should this Court set aside the Order dated November 21, 2019 pursuant to s. 56(4) of the Family Law Act?
Should this court enforce the order?
Issue No 1: Should this Court set aside the Order dated November 21, 2019 pursuant to s. 56(4) of the Family Law Act?
[20] The husband says that the order should be set aside because the agreement underlying it is a domestic agreement, which can be set aside under s. 56(4) of the Family Law Act. That provision states:
A court may, on application, set aside a domestic contract or a provision in it,
a. If a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
b. If a party did not understand the nature or consequences of the domestic contract; or
c. Otherwise in accordance with the law of contract.
[21] The husband says that this provision should be invoked because he was unaware at the time of the agreement that he had signed the guarantee, but that the wife should have known he had done so. He also argues that the parties made a mutual mistake or in the alternative, he made a unilateral mistake, as the agreement and the order did not contemplate the guarantee. In any event, he says that enforcing the agreement would be unconscionable.
[22] I note, as set out above, that the husband was represented by his present counsel when he entered into the agreement and consented to the order. He does not argue that he did not understand its nature or consequences.
Withholding of Information
[23] I am not persuaded that the wife withheld any information from the husband in regard to his guarantee to Scotiabank. He was the one who signed it. He is presumed to have known what he signed. He was the person effectively acting as the business manager of the wife’s dental practice. She was the one performing the dental services. She had no higher knowledge of the practice’s business arrangements than him, and arguably even less.
[24] There is no evidence that the wife failed to disclose any relevant information or documentation to the husband before he agreed to the order. His response to her motion was to inform the court of his eagerness to return the shares of 253 to her. Further, the parties’ shareholder’s agreement for the practice includes an indemnity to the husband for any corporate debts he may assume. Thus, the issue of personal liability was on the table from the very beginning of the parties’ business relationship.
Mistake
[25] In Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co., 2003 ABCA 221, 17 Alta. L.R. (4th) 243, the Alberta Court of Appeal explained the taxonomy of legal mistakes and their implications as follows:
12 There are three types of mistake: common, mutual and unilateral: see Cheshire, Fifoot & Furmston, Law of Contract, supra at 252-53 for a summary of each. Common mistake occurs when the parties make the same mistake. For example, one party contracts to sell a vase to another when unbeknown to both, the vase was destroyed and no longer exists. Mutual mistake occurs when both parties are mistaken, but their mistakes are different. In this event, the parties misunderstand each other and are, to use the vernacular, "not on the same page". Unilateral mistake involves only one of the parties operating under a mistake. If the other party is not aware of the one party's erroneous belief, then the case is one of mutual mistake but if the other party knows of it, of unilateral mistake. What adds to the confusion is that the distinction between mutual and common mistake is sometimes blurred when courts use the two terms interchangeably.
13 The presence or absence of an agreement is one of the foundational differences amongst the three types of mistake. With common mistake, the agreement is acknowledged. What remains to be determined is whether the mistake was so fundamental as to render the agreement void or unenforceable on some basis. But in the case of a mutual or unilateral mistake, the existence of an agreement is rejected.
[26] The concept of mistake operates as an exception to the common law rule, cited by Rosenberg J.A. in Bogue v Bogue [1999] O.J. No. 3619 (Ont.C.A.) and taken from the 150 year-old British case, Smith v. Hughes (1871), L.R. 6 Q.B. 597 (Eng. Q.B.) at 607:
If whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.
[27] In seeking to set aside the agreement and claim mutual or unilateral mistake, the husband cites DeCraemer v. DeCraemer, 2012 ONSC 1182. There, Bielby J. refused to enforce an agreement that would have left a party with close to a half-million dollars in tax debt that neither party had anticipated. Both parties had stated that they would not have agreed to the settlement had they known that they would be responsible for the tax debt. Bielby J. set aside the agreement as a mutual mistake (although it may also have been seen as a common mistake). In obiter, he made some comments about unilateral mistake but did not base his decision on that ground.
[28] The husband says that the wife should have known of the guarantee and that he was not aware of it. But he does not explain why that is the case. At the very least, they were partners in running the dental practice, with him in charge of finances. He signed the guarantee. He fails to say why the wife had greater knowledge of the guarantee he signed than him. The notions of his personal liability for corporate debts and his indemnity are included in the practice’s shareholder’s agreement. So the ideas should not have been foreign to him.
[29] Further, the husband fails to say why he did not conduct his due diligence before consenting to the order. Nothing stopped him from doing so. Even so, he was represented when he consented to the order. Recall that his response to the motion that led to the order was explicit: that it was not necessary, as he already agreed to its terms. He freely conceded that he was holding the shares of 253 in trust for the wife. He intended to return them to her to allow her to deal with the practice as she saw fit, including selling it. The result of the order was what he intended.
[30] In his factum, citing C. (J.) v. M. (A.M.), the husband says that his consent to the order arose from a “fundamental mistake … one that negates the real intention of the parties or ‘deprives a party of the basic consideration for which he bargained’”. His factum states that his consideration for the “transaction” was to be removed from both his duties and responsibilities with the practice. Nonetheless, he remains liable for its debts.
[31] It is worthwhile to consider the words of Aston J. in C. (J.) v. M. (A.M.,) to which the husband refers. At para. 16 Aston J. explained the difference between a fundamental mistake, which is in essence a mutual mistake, and a unilateral mistake, writing:
16 The second stage in the Bogue analysis is to examine the question of mistake. Does the failure to address the husband's claim for a notional tax deduction on the R.R.S.P.'s constitute a mistake, such that the parties were not ad idem? Does it deprive him of the consideration for which he bargained? Does equity assist him in the form of rescission or rectification? Or as a defence to the remedy of specific performance? A fundamental mistake, one that negates the real intention of the parties or deprives a party of the basic consideration for which he bargained, may lead to the conclusion the parties are not ad idem and, hence, that there is no contract. Lesser mistakes (including unilateral mistakes which the other party knew or ought to have known about) may not render the purported agreement void or a nullity but may, nevertheless, attract equitable relief if it is inequitable or unconscionable for a party to be permitted to take advantage of the mistake. Even if the mistake is not induced by one party, equity may come to the rescue of the mistaken party in the form of rescission or rectification, or in allowing an equitable defence to an equitable remedy such as specific performance.
[32] I do not agree with the husband’s assertion that this is a case of a fundamental mistake. In C. (J.) v. M. (A.M.), the moving party’s own mistake about the tax consequences of the agreement and order into which he entered was not a fundamental one. The parties’ intention was to enter into an equitable agreement. That is what they received. The difference was not so material that it deprived the moving party of the bargain into which he entered.
[33] Here, the caselaw regarding either mutual mistake or fundamental mistake does not apply to the facts of this case. I say this for three reasons.
[34] First, the husband received a result that was fundamentally the one for which he bargained. As he readily acknowledged, he held the shares of 253 in trust for the wife. He told the court that the wife did not have to move for that relief as he was readily agreeing to return them. He had no right to continue to hold on to them. All that the order required him to do was return them to the wife as he pleaded he intended to do. It imposed no further meaningful legal or financial burdens on him. Nor did it represent a global settlement of all issues between the parties. It was instead an interim solution, intended to allow the wife, if she so chose, to sell her practice after the husband walked away from it. That is all. The agreement did not change his personal liability to the third-party bank. It did not purport to do so.
[35] Second, it is not the role of this court to vary or rewrite the agreement into which the parties entered. It certainly cannot do so based on one party’s retroactive calculations of the costs and benefits of their arrangements or the court’s attempt to place itself into the shoes of the parties. The point is made at para. 20 of C. (J.) v. M. (A.M.), where Aston J. wrote:
20 The ability to set aside an agreement (or part of an agreement) is quite different from the ability to vary it. There is no overriding authority for the court to rewrite the bargain between the parties. The global settlement of many issues, some of them non-pecuniary, should not be interfered with lightly. To alter one issue in isolation, with the perfect vision of hindsight, ignores the dynamics of what transpires in settlement negotiations.
[36] It may well be that upon reflection, the husband would have preferred a different level of protection from liability for corporate debts than he already enjoyed. Perhaps, if he applied his mind to the issue, he could have managed to have applied even more pressure to the wife than he did at the time of the order. But he reached an agreement that was premised in part on his pre-existing liability protection in the form of an indemnity for corporate debts.
[37] Further, the husband had no defence to the wife’s request that he return the shares of 253 to her. He was required to return them to her because he was holding them in trust for her. In complying with his trust obligation, he lost nothing, either legally or financially. The risk of being called upon to personally pay any corporate debt had not increased. The bank would first come after the corporation and its assets and the wife before coming after him. He already had an indemnity in that regard.
[38] All that husband “lost” with the agreement and the order, if I can use that word to describe his after-the-fact attempt to rewrite them, is a lever that he could wield against the wife. That lever would prevent her from selling her practice before he is released from his guarantee. But that is simply an attempt to rewrite the parties’ bargain to his advantage, not rectify a mistake.
[39] Third, as Aston J. made clear in C. (J.) v. M. (A.M.), the court will not engage in speculation to determine whether the husband could have extracted a deal from the wife that was “better” from his point of view. On the facts of this case, I cannot see how he is in a worse situation that he was on the day before the order was made. It is unclear what he has lost by not tying his transfer of the shares to obtaining a release of his liability for corporate debt. He has not provided any evidence that he has been called upon to pay any of the practice’s corporate debts to the bank in the two plus years since the parties separated.
[40] Even if he were, he would still have the indemnity in the practice’s shareholder agreement. The wife has even offered him a further one as part of any order. In addition, the parties’ litigation is far from completed.
[41] Further, it cannot be ignored that the husband is trying to impose a condition on the wife that she lacks the power to deliver – a bank release. From the evidence in this motion, I am not convinced that the wife is able to persuade the bank to release him from his guarantee. Both parties have attempted to convince the bank to do so, to no effect. The husband claims that the wife has sabotaged his attempts by failing to act with sufficient expeditiousness and overstating his support obligations to him. But she has no reason to oppose his release in light of the already existing indemnity. Further, she accurately represented to the bank the support that he was seeking.
[42] The wife’s arguments are confirmed in a recent email exchange between the wife and her bank manager. On January 17, 2021, the wife emailed Scotiabank manager, Chris Xenophontos, with the following question:
Nick [the husband] has advised that you think my support payments will be $17,000 monthly. This is not the case. The support issue is still to be decided. A separation agreement may take some time. Is there any other way to remove Nick as guarantor?
[43] In response, Mr. Xenophontos wrote:
In order for us to submit a credit application to our Credit Department, with the recommendation to have Nick removed as a Guarantor, we would first need to have a copy of the finalized Separation Agreement. This would crystalize the numbers that we need to use in our debt service calculation, so that our Credit Department can provide a firm approval. If we submitted a request now, citing what we believe the Support Payments may be and if they approved this, it would still be subject to receipt of a copy of the finalized Agreement. Once received, if the payments were higher than we applied for, we really would not have an approval and would need to go back to the drawing board.
[44] That correspondence shows that any statements that the wife made to the bank which conflated the husband’s claims with his entitlement had no effect on Scotiabank’s refusal to provide a release to the husband.
Unilateral Mistake
[45] In Royal Bank of Canada v. Futurecom Inc., 2009 ONCA 590, Weiler J.A., writing for the Ontario Court of Appeal, succinctly stated at para. 15 that “[a] self-induced unilateral mistake is not ordinarily a basis for setting aside a contract.”
[46] In Bogue v. Bogue, [1999] O.J. No. 4310 (Ont. C.A.), Rosenberg J.A. explained for the court why the failure to include certain terms regarding a release in the parties’ agreement did not invalidate it on the basis of unilateral mistake:
18 In cases of unilateral mistake, if the unmistaken party is ignorant of the other’s mistake the contract is valid in law: Fridman supra at 261. Assuming a mistake was made in this case, in that the husband agreed to the settlement without realizing that it did not contain a repayment clause, there was no evidence that the wife or her lawyer were aware of the mistake. Nevertheless, the husband may be entitled to an equitable remedy if the wife ought to have known of his mistake:
[47] In Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, Binnie J., writing for the majority of the Supreme Court of Canada, made clear that the test for rectification for unilateral mistake, the prime equitable remedy available for that form of mistake, is a high one. He wrote at para. 38:
Mere unilateral mistake alone is not sufficient to support rectification but if permitting the non-mistaken party to take advantage of the document would be fraud or equivalent to fraud, rectification may be available.
[Citations omitted]
[48] The term “fraud or equivalent to fraud” in this context does not refer to the tort of deceit or fraud in the strictest legal sense, but rather a “broader category of equitable fraud or constructive fraud ...where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained.” The broad terms encompass “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken” (at para 39, citations omitted.)
[49] Binnie J. explained the rationale for so high a bar as follows:
35 As stated, high hurdles are placed in the way of a business person who relies on his or her own unilateral mistake to resile from the written terms of a document which he or she has signed and which, on its face, seems perfectly clear. The law is determined not to open the proverbial floodgates to dissatisfied contract makers who want to extricate themselves from a poor bargain.
[50] The test to determine whether the other side should have known of the first party’s mistake is an objective one. As Stewart J. stated in McCabe v. Tissot, 2015 ONSC 2557, “[t]he question is what a reasonable observer would have thought in the circumstances, taking into consideration the evidence of the parties and the documentary evidence.”
[51] Here my comments with regard to the facts of the claim of mutual and fundamental mistake apply equally to the claim of unilateral mistake. Further, I am not persuaded that that the wife was aware, let alone took advantage of any failure by the husband to consider his potential personal liability to the bank as a factor in their agreement. Unlike many cases of unilateral mistake, obtaining a release from the bank was not a term of their agreement that was inadvertently omitted from their minutes of settlement. They did not discuss it.
[52] As set out above, the wife had already provided an indemnity to the husband. That indemnity assumed the potential for personal liability for corporate debt. The husband did not conduct any due diligence regarding the debt before agreeing to return the shares in 253 to the wife. Arguably, he would have been required to have returned them in any event. To the extent that the husband made a unilateral mistake, I cannot say that wife should have known of it.
Unconscionability
[53] The husband argues that even if he fails to meet the test of mutual or unilateral mistake, it would nonetheless be unconscionable to enforce the terms of the order. In saying this, he effectively relies on the arguments that he has made as set out above.
[54] In Miglin v. Miglin, 2003 SCC 24 (S.C.C.), the Supreme Court of Canada explained that the test for unconscionability in the family law context is different than that in the commercial context. The evidence necessary to show a power advantage that one party has taken advantage of in a family law context may be lower than in a commercial dispute.
[55] In Rick v. Brandsema, 2009 SCC 10 (S.C.C.) the Supreme Court of Canada, picking up where Miglin left off, set out the circumstances in which a court will intervene in an agreement negotiated between two former spouses. It stated:
[49] Whether a court will, in fact, intervene will clearly depend on the circumstances of each case, including the extent of the defective disclosure and the degree to which it is found to have been deliberately generated. It will also depend on the extent to which the resulting negotiated terms are at variance from the goals of the relevant legislation. As Miglin confirmed, the more an agreement complies with the statutory objectives, the less the risk that it will be interfered with. Imposing a duty on separating spouses to provide full and honest disclosure of all assets, therefore, helps ensure that each spouse is able to assess the extent to which his or her bargain is consistent with the equitable goals in modern matrimonial legislation, as well as the extent to which he or she may be genuinely prepared to deviate from them.
[56] The court in Brandsema also looked at the impact of independent legal advice on the determination of unconscionability, finding that it is an important but not necessarily determinative factor. It stated:
[60] It may well be that in a particular case, professional assistance will effectively compensate for vulnerabilities. But the Court of Appeal appears to have assumed that the mere presence of professional assistance automatically neutralized vulnerabilities in this case. This interpretation does not, with respect, accord with a plain reading of para. 83 of Miglin, which states:
Where vulnerabilities are not present, or are effectively compensated by the presence of counsel or other professionals or both, or have not been taken advantage of, the court should consider the agreement as a genuine mutual desire to finalize the terms of the parties’ separation and as indicative of their substantive intentions.
[61] This passage indicates that when vulnerabilities have been compensated for by the presence of professionals, the agreement should be respected. This is an important observation. Given that vulnerabilities are almost always present in these negotiations, the parties’ genuine wish to finalize their arrangements should, absent psychological exploitation or misinformation, be respected. One way to help attenuate the possibility of such negotiating abuses is undoubtedly through professional assistance. But exploitation is not rendered anodyne merely because a spouse has access to professional advice. It is a question of fact in each case.
[57] Here, the factors cited above do not rise to the level of unconscionability, and even, in the circumstances, unfairness.
[58] In making this finding, two things stand out. First the wife did not take advantage of the husband. He can point to no vulnerability other than his having forgotten about having signed a guarantee. But even there, the wife who has agreed to indemnify him and is willing to further agree to a more specific form of that relief, takes no advantage of the husband. In that he has not been called upon by the bank to honour his guarantee in the almost three years since he signed it and over two years since separation, it is not clear that the husband has been disadvantaged by the failure to include the term. Further, as set out above, there is no evidence that even if the term were included in the order, he would have obtained a release from the bank as of today. The word of the bank manager argues to the contrary.
[59] I add that the fact that the father was represented by counsel at that time, the same counsel who represents him today is a relevant factor, if not determinative factor in finding that there was no inequality between the parties at the time the agreement.
[60] One other factor that I consider is the fact that the order represents just one step in the parties’ unfinished matrimonial litigation. If the husband is called upon to honour the guarantee, he has further recourse against the mother within the context of this proceeding.
[61] For those reasons, I do not set aside the agreement or the order.
Issue No. 2: Should this court enforce the order?
[62] As I do not find that I should set aside the order, I consider whether I should enforce it.
[63] Under FLR r. 1(8):
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.
[64] The wife asks me to require the obedience of the order within seven days. She points out that an order is not a suggestion, or to use the words of Quinn J. in Gordon v. Starr, [2007] O.J. No. 3264 (S.C.J. [Fam. Ct.]) at para. 23:
Court orders are not made as a form of judicial exercise. An order is an order, not a suggestion. Non-compliance must have consequences.
[65] For his part, the husband asks me to relieve him of his obligation to comply with the order. Pointing to the decision of the Court of Appeal for Ontario in Chiaramonte v. Chiaramonte, 2016 ONSC 1309 at para. 33, the husband states that I should apply the following three-part test.:
(1) Is there a triggering event that would allow consideration of Rule 1(8)?
(2) Is it appropriate to exercise discretion in favour of the non-complying party? and
(3) If discretion is not exercised in favour of the non-complying party, what is the appropriate remedy to the provisions of Rule 1(8)?
[66] Applying that test, there clearly has been a triggering event. The husband refuses to sign the papers necessary to carry out his obligations under the order. It is true that there has been a delay in her sending the proper papers to him for signature. But she did so by January 21, 2020. The husband then delayed matters by seeking independent legal advice only then. By May 27, 2020, the transfer documents were finalized, but Mr. Gill’s corporate counsel, sought further financial documentation. It was then that the husband refused to sign the papers and obey the order unless the wife obtained a release from the bank.
[67] At the very least the husband could have signed those papers some eight months ago. That delay cannot be laid at the wife’s feet. Thus, even by the husband’s own evidence the triggering event occurred on May 27, 2020.
[68] With regard to my exercise of discretion, the husband raises the same issues as those he raised with regard to setting aside the order. I have rejected them.
[69] The husband’s further argument in favour of the exercise of my discretion to refuse to enforce the order is that:
The wife has not done enough to remove him as a guarantor. I have already responded to that argument.
The wife could have found an alternate guarantor. He fails to say, let alone who, that should be. Further, the wife has no obligation under the order to obtain an alternate guarantor.
The husband is acting in accord with the advice of his corporate counsel. That counsel did not and could not advise him to disobey a court order. Further, and with respect to that counsel, his advice does not trump a court order. The remedy in the face of that advice is to move to set the order aside not disobey it. The argument has no merit.
The husband has reason to believe that the wife will not pay the practice’s bank debt. The evidence upon which he relies, arising from a conflict over her responsibility for a tax liability, is a thin reed upon which to perch that argument. I have no reasoned belief, based on the evidence to find that to be the case. As I said above, there is no evidence that the practice is in breach of its obligations to its bank.
[70] I add that there is no evidence that the husband would obtain a release one minute faster if I were to refuse to enforce the order. The opposite may occur as the wife remains saddled to a practice she is trying to sell. Presumably when she sells the practice, she will be able to pay off the underlying bank loan.
[71] For all of the reasons set out above, I find that this is not a case in which I should forebear from enforcing the order. It is a valid and subsisting order. It must be obeyed.
[72] Accordingly, I order as follows:
a. The Applicant shall fully comply with the terms of paragraph 1 of the order within seven days of the release of this endorsement.
b. If the Applicant fails to comply with the terms of paragraph 1 of the order within seven days of the release of this endorsement, his consent to transfer his interest in 2535787 Ontario Inc. is henceforth dispensed with. In that event, he will be deemed to have resigned from any positions as officer or director of 2535787 Ontario Inc. as of seven days from the date of release of this endorsement.
c. The transfer set out above shall occur whether or not the Applicant is released from his guarantee to the Bank of Nova Scotia for any corporate debts of the practice.
d. The Respondent shall sign a further form of indemnity to the Applicant for any debts that he may owe to Scotiabank as a result of the guarantee for the debts of the practice, upon terms agreeable to the parties. If they are unable to so agree, each may submit their draft indemnity terms to me with a one-page, double-spaced explanation. In that event, I will determine which form will be binding (and determine any costs consequences of that exercise).
Costs
[73] The parties should attempt to resolve the issue of costs on their own. If they are unable to do so, the Respondent may submit her costs submissions of up to three pages, double spaced, one inch margins, plus and bill of costs/costs outline and offers to settle within 14 days of release of this endorsement. She need not include the authorities upon which she relies so long as they are found in the commonly referenced reporting services (i.e., LexisNexis Quicklaw, or WestlawNext) and the relevant paragraph references are included. The Applicant may respond in kind within a further 14 days. No reply submission will be accepted unless I request it. If I have not received any submissions within the time frames set out above, I will assume that the parties have resolved the issue and make no costs order.
“ Marvin Kurz J. ”
Electronic signature of Justice Marvin Kurz,
Original will be placed in court file
Date: February 19, 2021