Fedio v Krzywucki, 2021 ONSC 3228

COURT FILE NO.: FS-17-00415751

DATE: 20210430

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

OKSANA FEDIO

Applicant

– and –

MARCIN KRZYWUCKI

Respondent

Raymond A. Godard, for the Applicant

Bradley F. Berns, for the Respondent Marcin Krzywucki

– and –

PIOTR KRZWUCKI, NOTTINGHAM HOMES INC. and WIAR BRICK AND STONE LTD.

Added Respondents

No one appearing for the Added Respondents

HEARD: April 27, 2021

M.D. Faieta j.

reasons for decision

[1] The Applicant Oksana Fedio brings this motion for two orders: 1) disclosure of certain financial records; 2) an order for the payment of $60,000 in interim costs.

BACKGROUND

[2] The parties were married in Poland in 2004. The Applicant arrived in Canada in 2005 and was unable to find work as an occupational therapist, which had been her area of study in Poland. She took English classes and enrolled in the aesthetician program at George Brown College.

[3] The Respondent is a self-employed stone mason. He is the sole owner of Vintage Masonry. He states that he receives most of his work from his father’s companies however he sometimes works for other clients. The Added Party, Piotr Krzywucki, is the Respondent’s father. His companies are Nottingham Homes Inc and Wiar Brick and Stone Ltd. which are also Added Parties.

[4] Two years after they married, and until their separation, the parties moved into a house owned by the Respondent’s parents. They paid rent. Two years later, the Respondent’s parents transferred the matrimonial home to the Respondent’s brother, Andrzej, who was 18 years old at the time. Two written leases between the Respondent and his brother were produced by the Respondent. The first is dated November, 2015 and shows that the rent is $1,900 per month. The second is dated November, 2016 and shows that the rent is $2,000.00. There is no evidence of leases between 2006 and 2015. During the ten-year period in which they resided in the house, the Applicant asked the Respondent why they were not purchasing a home instead of paying rent. The Respondent told the Applicant that his parents were putting their rent into a savings account for them. There is no evidence showing that rent was ever paid from joint bank account held by the Respondent held with the Applicant or from any other bank account.

[5] The parties have two children: Victor, age 13 and Michael, age 11. During their marriage, the Applicant was the children’s primary caregiver.

[6] The parties separated in December, 2016. The Applicant moved out of the matrimonial home and into an apartment with the children in the Spring of 2017.

[7] This Application was commenced in March, 2017.

[8] On June 19, 2017 a temporary order was issued on consent:

The children shall reside with the Applicant in her apartment with the exception that on a two-week schedule, the Respondent shall have the children in his case from Wednesday after school until Saturday at 8 pm and in the following the Respondent shall have the children from Thursday after school until Sunday at 6 pm;
Without a determination of the Respondent’s income for support purposes and without a determination of whether this support meets the Applicant’s needs, commencing on June 1, 2017 the Respondent shall pay the sum of $810 per month in child support to the Applicant;
The child support order shall be enforced by the Director of the Family Responsibility Office unless it is withdrawn;
The issue of financial disclosure is not resolved and either may bring a motion for disclosure.

[9] In May, 2018 an order severing the divorce from the corollary relief was granted. In August, 2018 a divorce order was granted.

[10] The Applicant states that since separation she has been unable, at times, to provide basic necessities for the children or pay for extra-curricular activities for them. She regularly uses food banks and is unable to purchase clothes for herself or the children. The children sleep on a sofa bed and they live in cramped quarters as she cannot afford larger accommodations. Her electricity services have been suspended in the past due to non-payment. In mid-June, 2019, the Applicant could not afford to have her children primarily in her care and the children resided primarily with the Respondent. The Respondent ceased paying child support at that time. In August, 2020 the Respondent travelled to Poland and the children were returned to the Applicant’s care. After the Respondent’s quarantine period ended after his return in September, 2020, the parties resumed the shared parenting regime outlined in the June 2017 Order. However, despite the Applicant’s request for the Respondent to resume paying child support (see her emails to Mr. Berns dated November 10, 2020 and January 18, 2021) the Respondent has failed to do so.

[11] During a short break, which followed a question from the court about why the Respondent was not paying child support, Mr. Berns advised that the Respondent would recommence paying child support in the amount of $810 per month commencing May 1, 2021. The payment of arrears of child support will be a question for another day unless the Respondent acts in the interim.

[12] The Endorsement from a Trial Management Conference/Settlement Conference held before Goodman J. in June, 2019 addressed several issues. Her Endorsement states:

On the material before me on the S/C, it was impossible to provide any views about the likelihood of success of either party on either the support or property claims at trial as compared to the offer to settle the party has made.

Ms. Fedio must consider the steps that she needs to take and/or the work that needs to be done depending on the specific position she intends to take at trial respecting the property issues, if she is intent on seeking an equalization of property. At a minimum, if the property issues are going to go forward to a trial, she needs to be able to seeks answers to questions either through questioning under oath or through questioning in writing, if such questioning is even viable in a case such as this one.

Certainly, however, Ms. Fedio needs the assistance of her counsel and/or an accountant/valuator to review the issue of the income over which Mr. Krzywucki has reasonable access and control even if he provides an analysis that addresses his income on the basis of the information in his income tax return alone.

I am concerned that without questioning, further disclosure and or the aid of a valuator, Ms. Fedio may not be in a position to reasonably settle this case or proceed to trial, particularly if Mr. Krzywucki does not provide an income analysis of his income for support purposes. [Emphasis added]

[13] In July, 2019 the Applicant retained McCabe Valuations Inc. (“McCabe”) to provide her with an assessment of the Respondent’s income for the years 2014 through 2019 for support purposes.

[14] In a report dated April 9, 2020, McCabe concluded that he did not have enough information to determine the Respondent’s income for the years 2017, 2018 and 2019.

[15] The Respondent identifies himself as a sole proprietor on his 2019 Income Tax Return. The following are the available gross and net incomes are reported by the Respondent to the Canada Revenue Agency as well as the estimates provided by McCabe regarding his income.

Year

Respondent’s Gross Income (As Reported to the CRA)

Respondent’s Line 150 Income (As Reported to the CRA)

Respondent’s Income (Estimated by McCabe)

2013

40,047

2014

46,103

$765,726

2015

42,320

$264,389

2016

49,623

$759,559

2017

43,237

2018

78,648

42,942

2019

68,947

36,456

[16] In Part 3 of his report, McCabe summarized his reasoning for the above conclusions as follows:

Based on our review of the information provided (discussed in further detail in Section 6, below), it is clearly evident that Marcin, his family, and his family’s companies were and continue to be involved in real estate investment and development in the Greater Toronto Area (“GTA”). The information reviewed indicates that Marcin had direct involvement in his family’s companies despite not being a shareholder. We specifically note the following:

i) Marcin bought and sold residential property during the marriage including 106 Westhampton Drive and 185 Edenbridge Drive in Etobicoke, Ontario;

ii) Marcin’s name appears on the 2017 general ledger (“GL”) for Nottingham Homes Inc (“Nottingham”) under a transfer of $85,000 from “POL Marcin”;

iii) Marcin’s name appears on the Wiar GL as having paid interest on a Wiar line of credit in 2016 in the amount of $11,577.90;

iv) Marcin listed 185 Edenbridge Drive as an asset with value of $4,000,000 on a credit application dated March 31, 2016;

v) A letter dated October 11, 2016 from Re/Max Professionals Inc. (“Remax”) brokerage was addressed to Marcin regarding the sales of 185 Edenbridge Drive and the commission payable on the sale price of $4,625,000;

vi) Marcin signed and dated a letter January 11, 2017 to Mr. Roman Zarowsky regarding the sale of 185 Edenbridge Drive directing Mr Zarowsky to “make your cheque for the proceeds of sale in the above transaction payable in favour of Nottingham Homes Inc”; and

vii) Marcin’s bank accounts in 2014, 2015 and 2016 indicate deposits of over $765,000, $264,000 and $759,000, respectively. Some of these deposits correspond with the sale of real estate.

[17] The Respondent denies that he has any beneficial interest in the properties referenced in the McCabe report. He states that he was a bare trustee of 185 Edenbridge Drive and 106 Westhampton Drive for one of the Added Parties. He states that this arrangement was for “tax purposes”. If that is so, the Applicant suggests that “tax evasion” may be more apt description of the purpose as the Respondent has never reported the income from the sale of those homes on his income tax returns and there is no evidence that any of Added Parties did so.

[18] Given his lifestyle as outlined in the affidavits of the Applicant, the views expressed by McCabe, and the fact that the Respondent has not provided a report in the more than four years following their separation and the commencement of this Application that provides a valuation of his income despite her assertions in the Application (as originally filed) that his income and assets are much greater than he has stated, I am not prepared to accept the Respondent’s position on the evidence before me.

[19] On January 21, 2021 the Applicant was granted leave to amend her Application to add Piotr Krzywucki, Wiar Brick and Stone Ltd. and Nottingham Homes Inc as parties. The added parties were required to provide financial disclosure by February 15, 2021. Questioning of all parties was to be completed no later than March 31, 2021. The parties were ordered to schedule a settlement conference/trial management conference to take place in April 2021. That event will occur on June 25, 2021.

[20] In her Amended Application, the Applicant claims:

(a) As against the Respondent, amongst other things, spousal support, child support, equalization of net family properties, imputation of income, damages arising from the Respondent conspiring with the Added Parties to restructure their affairs and business relationships to minimize and altogether decimate the Applicant’s claim for an equalization of net family properties and support claims advanced by the Applicant against the Respondent;

(b) As against the Added Parties, amongst other things, a declaration that the Added Parties are holding the proceeds of sale of 185 Edenbridge Drive, Toronto in trust for the Respondent, an order for damages arising from the Respondents conspiring to restructure their affairs and business relationships to minimize and altogether decimate the Applicant’s claim for an equalization of net family properties and support claims.

[21] The Added Parties’ will bring a motion for summary judgment to have the claim against them dismissed that will be heard on July 22, 2021. I expect that the parties may be asked about the appropriateness of that motion in light of the Ontario Court of Appeal’s comments about partial summary judgment in Leitch v. Novac, 2020 ONCA 257, paras. 29-40.

ISSUE #1: DISCLOSURE OF FINANCIAL RECORDS

[22] The Applicant seeks an order requiring the Respondent Marcin Kryzwucki to produce the following documents on or before April 30, 2021:

a. Ukrainian Credit Union (UCU) Account ending 4102 Statements for February 2014, March 2014, and May 2014.

b. UCU Account Ending 4202 Statements for January 2014 to December 2016, January 2019 to the present.

c. UCU Account Ending 4200 Statements January 2014 to May 2015 and July 2015.

d. Master Card Credit Card Statements for January 2020 to the present.

e. UCU Account ending 6101 Statements for January 2019 to the present.

f. UCU Account Ending 4102 Statements for January 2018 to the present.

g. UCU Account Ending 4202 Statements for January 2019 to the present.

h. UCU Account Ending 4290 Statements for January 2017 to the present.

i. UCU Account Ending 4200 statements for January 2017 to the present.

j. Scotiabank Account Ending 7786 Statements for 2017, and January 2020 to the present

[23] At the outset of the hearing of this motion, the parties advised that the above order would be made on consent of the parties.

[24] The Applicant has demonstrated that the Respondent has been slow to provide financial disclosure. I remind the Respondent of his obligations under Rule 13 of the Family Law Rules and under section 7.4 of the Divorce Act to provide complete, accurate and up-to-date information. In Leitch, the Ontario Court of Appeal stated:

44 As the Supreme Court suggested in Leskun v. Leskun, 2006 SCC 25, [2006] 1 S.C.R. 920 (S.C.C.), at para. 34, nondisclosure is the cancer of family law. This is an apt metaphor. Nondisclosure metastasizes and impacts all participants in the family law process. Lawyers for recipients cannot adequately advise their clients, while lawyers for payors become unwitting participants in a fraud on the court. Judges cannot correctly guide the parties to a fair resolution at family law conferences and cannot make a proper decision at trial. Payees are forced to accept an arbitrary amount of support unilaterally determined by the payor. Children must make do with less. All this to avoid legal obligations, which have been calculated to be a fair quantification of the payor's required financial contribution. In sum, nondisclosure is antithetical to the policy animating the family law regime and to the processes that have been carefully designed to achieve those policy goals.

45 There is a related malady that often works hand-in-hand with nondisclosure to deny justice in family law proceedings. The problem is what I will call "invisible litigants." These are family members or friends of a family law litigant who insert themselves into the litigation process. They go beyond providing emotional support during a difficult time to become active participants in the litigation. Usually their intentions are good, and their interference makes no difference in the ultimate result. However, sometimes they introduce or reinforce a win-at-all-costs litigation mentality. These invisible litigants are willing to break both the spirit and letter of the family law legislation to achieve their desired result, including by facilitating the deliberate hiding of assets or income.

ISSUE #2: INTERIM COSTS

[25] Rule 24(18) of the Family Law Rules states:

The court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees.

[26] The leading cases on the principles associated with the award of interim costs are Stuart v. Stuart 2001 28261 (ON SC), [2001] O.J. No. 5172 and Ludmer v. Ludmer, 2012 ONSC 4478. A judge's discretion under Rule 24(18) is to be exercised to further the primary objective of fairness by levelling the playing field between the parties: Ma v. Chao, 2016 ONSC 585 (Ont. Div. Ct.), at para. 4.

[27] In Ludmer, Mesbur J. summarized the applicable principles as follows:

15 The jurisprudence surrounding rule 24(12) was neatly summarized by Rodgers J in Stuart v. Stuart and has been followed in many cases since then. Simply put, when considering a request for interim disbursements under the Family Law Rules, it is no longer necessary to find exceptional circumstances in order to make an order. The order is a discretionary one. In exercising discretion under the rule, the court must ensure the primary objective of fairness under the Family Law Rules is met.

16 As the court said in Stuart,

The discretion should be exercised to ensure all parties can equally provide or test disclosure, make or consider offers or possible [sic] go to trial. Simply described the award should be made to level the playing field.

An order under section [sic] 24(12) should not immunise a party from cost awards. The order is to allow the case to proceed fairly and should not be such that a party feels a license to litigate. ...

The claimant must clearly demonstrate that the disbursements are necessary and reasonable given the needs of the case and the funds available ...

The claimant must demonstrate that he or she is incapable of funding the requested amounts.

The claim or claims being advance in the case must be meritorious as far as can be determined on the balance of probabilities at the time of the request for disbursements.

17 Thus, the wife's evidentiary burden includes establishing the necessity and reasonableness of the fees and disbursements, given the nature of the case and the funds available. She must also show she is incapable of funding the fees and disbursements herself. Last, she must show that her claims are meritorious.

[28] I agree with the Applicant’s submission that the web of transactions between the Respondent and the Added Parties is complex and requires disclosure, questioning and expert legal and valuation services to understand.

[29] The Applicant earned about $42,000 per year as an aesthetician until the onset of the COVID-19 pandemic in March, 2020. Since that time she lived on Canada Emergency Response Benefits of $2,000 per month until September, 2020. There is no work for her as an aesthetician. The Applicant now works as a casual labourer and has earned $300-$500 per month from January, 2020 to December, 2020. The Applicant currently received Canada Recovery benefits of $1,800 per month. The Applicant states that her legal fees will exceed $50,000,00. In addition, there are McCabe’s fees for future work of up to $8,475 without allowing for attending court.

[30] As stated earlier, I prefer McCabe’s evidence over the Respondent’s evidence regarding the Respondent’s income. As a result, the playing field is far from level in this case.

[31] Based on the evidence before me, and on a without prejudice basis to whatever other evidence the parties may adduce at a later date, I find that: (a) the Applicant has a meritorious claim for child support, spousal support and a net family property equalization payment; (b) the disbursements are necessary and reasonable given the nature of the case; (c) the Applicant is incapable of funding the requested amounts from her own savings and other resources; (d) an interim disbursements order is required to level the playing field.

[32] There shall therefore be an order that the Respondent shall, within 30 days, pay the sum of $60,000.00 to the Applicant to cover part or all of the expenses of carrying on the case, including legal fees and the fees of the business valuator.

ORDER

[33] Pursuant to the Family Law Rules, I order that:

(1) The Respondent shall, within 30 days, pay $60,000.00 to cover the Applicant’s expenses of carrying on this case; and,

(2) On consent, the Respondent shall produce the following documents on or before April 30, 2021: