NEWMARKET COURT FILE NO.: FC-20-1850-00
DATE: July 12, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Anna-Marie Di Sabatino
Applicant
– AND –
Mirko Di Sabatino
Respondent
Belinda Rossi/Hannah Rich, Counsel for the Applicant
Kim Larsen, Counsel for the Respondent
HEARD: July 9, 2021
Ruling on Disclosure
Jarvis J.
[1] The applicant (“the wife”) has brought a motion for disclosure involving the respondent (“the husband”) personally and twenty-two companies in which it is alleged that he has a direct and/or indirect interest. These requests are set out in a lengthy Schedule attached to her Notice of Motion and duplicated (with some additional requests) in a draft, proposed Order forwarded to the Court yesterday. A deadline is proposed for production of the disclosure failing which the wife seeks a series of Orders dispensing with the husband’s consent to obtaining the information ordered including production Orders against non-parties.
[2] The husband claims that the disclosure sought by the wife (which is substantial) “goes beyond what is reasonable, relevant, material and proportional to the issues”, her production deadlines unreasonable, dispensing with his consent to third party production an extreme remedy and that an Order involving third party production should not be made until he has been given an opportunity to comply, particularly since the wife wants him to pay the costs of any third parties affected by the Court’s Order.
[3] Before argument, the Court dealt with an objection by the husband with respect to the attendance of counsel (Mr. Kris Borg-Olivier) for three of the companies in which the husband has an interest (the wife had copied Mr. Borg-Olivier with notice of her motion). It appears that there are sensitive negotiations underway about which the husband was concerned he could be prejudiced by today’s event. In the circumstances, the Court ruled that Mr. Borg-Olivier’s attendance was not required (he agreed to make himself available should the need arise)
Background
[4] Since the wife started her Application there have been several court events and Rulings made. Most involve disclosure. Many background facts and events are set out in those Rulings, those relevant to this motion being the following:
(a) The parties were married on June 17, 1994 and separated on October 28, 2019;
(b) There are three children, ages 23-25, none of whom is a child of the marriage for support purposes;
(c) The wife is (as she described herself) a stay-at-home mother. The husband is a successful businessman with interests in approximately twenty-four companies in Ontario, Nevada and, more recently, the British Virgin Islands. While the aggregate value of the husband’s business interests is unclear, there is good reason to believe that the value ranges between $20,000,000 to $30,000,000, quite possibly substantially more;
(d) The wife retained an expert in 2020 to value the husband’s business interests and prepare an income analysis: despite his obligations to the wife and this Court to credibly value his assets and realistically disclose his income for family law purposes, the husband has not retained an expert;
(e) Complaining that the husband was unreasonably refusing to provide financial disclosure and acting in a manner prejudicial to her financial interests, the wife began these proceedings and moved for a broad preservation order involving the husband personally and a number of corporations and individual third parties involved with him and his business interests, which Order was granted on December 15, 2020 “the December Order”). Although the husband had been served with the wife’s urgent motion, neither he nor anyone appeared on his behalf when the Order was made;
(f) On January 5, 2001 this Court varied the December Order to provide more refined preservation terms and, among other things, provide next step directions involving deadlines for the exchange of pleadings and Requests for Information (and Answers to them)[^1];
(g) On January 11, 2021 a conference was held. The principal issues are (and remain) equalization and spousal support contingent (of course) on disclosure. Today’s date was scheduled for a settlement conference;
(h) On April 28, 2021 the wife brought a disclosure motion returnable during the May 2021 trial sittings of the court;
(i) On June 8, 2021 a conference with counsel was held. The husband’s (then) Solicitors of Record were discharged (on consent) and the husband’s new counsel (Mr. Larsen) appeared. The settlement conference event was vacated, converted into the wife’s disclosure motion, since amended on June 11, 2021, and directions given with respect to the material to be filed.
[5] The following pleadings and evidence are before the Court:
(a) Application of Anna Di Sabatino dated December 7, 2020;
(b) Affidavit of Anna Di Sabatino sworn December 7, 2020;
(c) Answer of Mirko Di Sabatino dated February 1, 2021;
(d) Financial Statement of Mirko Di Sabatino sworn February 1, 2021;
(e) Affidavit of Armand Reale sworn December 24, 2020;
(f) Affidavit of Mirko Di Sabatino sworn December 21, 2020;
(g) Affidavit of Mirko Di Sabatino sworn December 31, 2020;
(h) Affidavit of Anna Di Sabatino dated January 4, 2021;
(i) Affidavit of Mirko Di Sabatino sworn February 18, 2021;
(j) Affidavit of Anna Di Sabatino sworn February 24, 2021;
(k) Affidavit of Anna Di Sabatino sworn June 11, 2021;
(l) Affidavit of Mirko Di Sabatino sworn July 1, 2021;
(m) Affidavit of Anna Di Sabatino sworn July 2, 2021;
(n) Affidavit of Amarit Sekhon (a legal assistant to the wife’s counsel) sworn July 6, 2021.
[6] Accompanying the parties’ affidavits were extensive exhibits, including correspondence from the wife’s expert (Martin Pont) outlining the disclosure required and communications between the parties’ counsel (former and current in the husband’s case). The parties also filed facta. The wife had been directed to deliver a disclosure chart: this accompanied her motion as Schedule “A” and was based on Mr. Pont’s disclosure requests: this chart identified the disclosure request, the date of the request, the sufficiency of the answer made by the husband or his advisers (if answered at all), the answer and the relevance of the request to the issues in the case. On July 8, 2021 the wife filed a draft, proposed Order. Appended to it was (also) a Schedule “A” that mostly mirrored the chart that accompanied her amended motion but added further requests never seen by the husband until either July 8th or during the argument of the motion (the parties dispute this).
[7] While both parties facta referenced the importance and limits of relevant disclosure there was little disagreement about the law or the guiding principles so this Ruling will not repeat those here, although they may become pertinent later in these proceedings should issues arise with respect to the husband’s compliance with the Order this Court intends to make. Reference will be made to the Family Law Rules (“the Rules”) dealing with non-party production Orders (Rules 20(4) and (5)) and appointing a court expert (Rule 20.3).
[8] The disclosure requested involves approximately ninety separate requests, some simple most detailed, covering at least eleven separate areas of inquiry. Almost all the disclosure sought is relevant to the issues pleaded. While time limits will be imposed on the husband’s answer to the requests, many of which are (as noted) quite detailed, the fact is that the husband has known about them for more than six months. In an earlier Ruling I noted that for several (still unanswered) requests the answers were within the husband’s personal knowledge and ability to easily obtain (in the case of documents).
[9] The Court’s disclosure Ruling will follow the chart appended to the wife’s amended motion, cross-referenced to the Schedule accompanying her draft, proposed Order. For clarity, it is the paragraphs in the latter which will be referenced in the Court’s Order.
Financial statement
[10] The husband’s financial statement was sworn February 1, 2021. It is materially deficient and non-compliant with the Rules. While it discloses a 2019 income ($300,208.49) there is clear evidence that the husband enjoys benefits through one or more of the various companies in which he is interested either as the sole owner or a substantial owner, none of which benefits is identified or otherwise disclosed: he shows nothing for his expenses. He acknowledges owning at least ten vehicles, none of the values for which is disclosed, except (possibly) recently. They are “TBD”, as are his pension, and all his business interests. The latter are identified as “En Bloc Value of Business Interest” as per an attached chart, referring to an org.chart that purports to identify the interests but which is itself materially deficient.
[11] The husband has been asked repeatedly by the wife to submit a properly completed and sworn financial statement pursuant to the Rules.
[12] The husband shall have until August 16, 2021 to provide a proper financial statement being #1 of Schedule “A” to the draft, proposed order (hereafter simply Schedule “A”) and explanations by affidavit with respect to the inquiries in #2 to #4 of Schedule “A”.
Personal
[13] The wife requested complete copies of the husband’s 2016-2020 income tax returns including Notices of Assessment. Mr. Larsen advised that these were provided on July 8th (with the exception being 2019 of which Mr. Larsen was uncertain). Ms. Rossi acknowledged being in receipt of disclosure shortly after 6 pm in the evening before the motion was argued which she had not yet had an adequate opportunity to review.
[14] The husband shall have until July 16, 2021 (3 pm) to satisfy disclosure requests #5, #6 and #7 of Schedule “A”.
[15] The wife requested disclosure of additional income received by the husband, including all benefits received directly and indirectly from any business in which he was interested (the parties separated in 2019 so a three-year scope of review is not unreasonable). Although the husband has known about this request for over six months, Mr. Larsen indicated that he needed forty-five days to work with the husband and his other professional advisers to prepare an affidavit answering #8 to #32 of Schedule “A”. So ordered but with these observations:
(a) Some of the disclosure requested such as the source of two large deposits to the husband’s RBC VIP account on August 7, 2020 (#22 and #23) and whether the wife is entitled to healthcare coverage (#27) and particulars of life and disability insurance policies (#28-#30) should be easily obtainable. The explanation requested in #31 dealing with the Mudman Holdings Inc. insurance policies should be provided with the affidavit referenced in [12] above, that is by August 16, 2021;
(b) Other information may require third party inquiries (i.e. #16 dealing with credit and lending applications and #17 backup documentation that supported credit instruments guaranteed personal or through a corporation since January 1, 2016).
[16] This disclosure is to be provided by August 16, 2021. To the extent that the husband cannot produce the disclosure ordered his affidavit must detail what he has done to obtain the information and when he has been advised the information can be made available. The names of the persons contacted and the institution or company employing them shall be disclosed.
Clean Soils
[17] Clean Soils is a company in which the husband is, or has been, interested through Mudman Holdings Inc. and which until the day the wife’s motion was argued she and the Court were unaware had been sold despite the Court’s preservation Order. Whether the husband has breached that Order is a matter not before the Court today but may become clearer very soon. The Court emphasized to the husband the broad reach of the Court’s jurisdiction should there be probative evidence that the husband has breached the Order, that he has acted to dissipate assets, move them out of the jurisdiction or otherwise defeat the wife’s family law rights.
[18] Mr. Larsen confirmed that the proceeds from the Clean Soil sale are now deposited in his firm’s trust account. That is where they shall remain until further order.
[19] The husband shall provide the disclosure listed as #33 to #43, some of which (such as the company’s tax returns and adjusting journal entries (#41 and #42)) should be easily produced. For those requests that involve third-party contact and co-operation the provisions of [12] and [16] above shall apply.
Calli-Anna Investments Inc. (“Calli-Anna”)
[20] Calli-Anna is a company owned equally by the parties and their three children (20% each) but which has been primarily operated by the husband. According to the wife, the company’s liquidity (cash) has been reduced by more than $1,800,000 since early March 2018. She wants an explanation from the husband about the reasons for twenty-one identified transactions recorded in accounts held with two Schedule 1 banks, together with supporting documents. She is entitled to that information.
[21] The husband shall provide the disclosure requested in # 45 (of Schedule “A”) by August 16, 2021. The request with respect to #44 being a tracing and accounting of all funds removed from the company’s account since its’ June 6, 2017 incorporation is too broad and so will not be ordered at this time.
[22] With respect to disclosure requests #46-#53, the provisions of [12] and [16] above shall apply to those inquiries which the husband says he cannot obtain by August 16, 2021. Some (such as #53 being the company’s General Ledgers) are easily producible in the Court’s view.
1505889 Ontario Ltd (“150”)
[23] This is a company whose jurisdiction was formerly that of Ontario but was changed to the British Virgin Islands by the husband for tax purposes (according to one of his previous counsel) after the parties separated. It is solely owned by the husband.
[24] The request made involves the tax planning memoranda and other communications relating to the change in the company’s location and identities of the professionals who provided advice to the husband. There was some suggestion that the change in jurisdiction related to the sale of the husband’s interest in Vickers Road (see below). The wife is also concerned that the husband may be trying to move assets outside of Ontario.
[25] In my view the report of any non-legal professional involved in this move including communications must be provided to the wife. The husband is ordered to provide the disclosure requested in #54 and #55 of Schedule “A”. The provisions of [12] and [16] above will not apply. This information is to be provided no later than August 16, 2021.
Sale of 85 Vickers Road, Etobicoke, Ontario (“Vickers”)
[26] Vickers is a property which the husband through one of his business/partnership entities is an owner with third parties. The property has substantial value and until the day that the wife’s motion was argued the closing date of its sale was constantly a moving target. The value of the sale is in the tens of millions of dollars. The Court was informed that the completion date for the sale is August 23, 2021. There is already an Order that the husband’s share of the net sale proceeds (personally or through any entity in which he is interested) is to be retained in trust and not distributed.
[27] Earlier in these proceedings the husband was insisting that the wife sign a Non-Disclosure Agreement before information would be provided. That demand, the Court now understands, has been withdrawn. While the husband says that the wife has been in contact with the solicitors handling the sale transaction, she is entitled to the information requested in #56 to #72 with the exception that the requests at #70 and #71 dealing with, respectively, written communications dealing with the closing date and extensions and waivers relating to the sale agreement seem unnecessary at this time.
[28] Subject to the exceptions noted the husband shall answer the requests made by August 16, 2021.
Husband’s affidavit sworn December 31, 2020 (Exhibit “B”)
[29] The requests at #73 and #74 of Schedule “A” relate to monies owed to the husband from “Core” referring to either Core Demolition Inc. or Core Excavation Ltd., both companies identified by Mr. Pont as business interests of the husband (the Court is unsure which company is the target of the request). The request at #74 relates to monies owed to non-parties.
[30] These requests shall be answered by August 16, 2021.
2230 Lakeshore Blvd West, Suite 2306, Toronto (“Lakeshore property)
[31] This request (#75) seeks the husband’s disclosure of the source of the funds used by the husband for this property and corroborating documentation relating to that payment.
[32] The husband shall answer this by August 16, 2021.
Corporate Disclosure
[33] Disclosure requests #76 to #82 involve general information from and after January 1, 2016 about the husband’s corporate and partnership interests. Some of the requests are detailed and involve the collation of substantial information. For example, #82 seeks disclosure of about twenty-three companies’ tax and financial information including property appraisals of any corporate-owned realty. Mr. Larsen advised that this information could be provided by August 16, 2021 and consented to an Order being made. So ordered.
[34] The provisions of [12] and [16] above shall apply.
[35] Disclosure #83 is similarly very broad but the information requested is relevant to the issues in these proceedings. Subparagraph (q) requesting copies of all business bank account statements and credit card statements was made on July 8, 2021. Notwithstanding the Court’s observations about the length of time that the husband has had to address these requests, I will only order him at this time to make his best efforts to comply with this request by August 16, 2021: the provisions of [12] and [16] shall apply.
Real Estate Interests (Personally or through a Business Entity)
[36] The husband shall provide the disclosure requested in #84 to #87 by August 16, 2021. These requests include appraisals of realty.
Interest in a Trust (direct and indirect)
[37] The disclosure requested at #88-#90 relate to the husband’s interest in his late father’s estate. The Court was advised a Certificate of Appointment was made in favour of the husband’s sister but that a brother is contesting the Will (although the Court was not made aware of the nature of the dispute). The information sought is publicly available and otherwise in the husband’s possession. He shall provide copies the Certificate, the Application for the Appointment, a copy of the Will and the applicant’s estimate of the value of the estate. The husband shall also confirm whether there was a secondary Will dealing with corporate assets not passing by the deceased’s personal Will and the status of the existing estate dispute, including the identities of the counsel (if any) involved.
[38] As for assets passing outside the Will such as life insurance or RRSP proceeds the husband is to disclose whether he was the beneficiary or recipient of any part of those assets (#90) and, if so, what he received and where the funds were deposited.
[39] This is to be done by August 16, 2021.
Other
[40] The husband shall provide the disclosure requested in #91 and #92 dealing with dispositions of property since January 1, 2016 (#91) and all monies owed to him as of the October 28, 2019 valuation date (#92). This information may be captured by the husband’s delivery of his financial statement as already ordered.
[41] As for the balance of the wife’s requests, #93 deals with dispositions of company equipment and anything else not captured above as requested by Mr. Pont (#94). The former request was only added on July 8, 2021 and the latter is really a “kitchen-sink” invitation for the Court to scope through Mr. Pont’s requests. The Court will not do that-that is counsel’s duty. No order is made with respect to either of those requests at this time.
Non-Party production.
[42] The wife also requested an Order, or a series of Orders, premised on the husband’s failure to provide the disclosure now ordered by the times required. The Court was asked to make an Order dispensing with the husband’s consent and, furthermore, requiring the non-parties (about twenty-two) to produce the information ordered within a defined time, the costs for which to be borne by the husband. The entities involved were apparently served with the wife’s motion. Mr Borg-Olivier appeared (as noted above) for three companies (Clean Soils, Portlands Redi-Mix Inc, 85 Vickers Road Holding Corp.) but was excused by the Court before argument began.
[43] Rules 20(4) and (5) provide as follows:
Other Cases – Consent or Order
(4) In a case other than a child protection case, a party is entitled to obtain information from another party about any issue in the case,
(a) with the other party’s consent; or
(b) by an order under subrule (5). O. Reg. 114/99, r. 20 (4).
Order for Questioning or Disclosure
(5) The court may, on motion, order that a person (whether a party or not) be questioned by a party or disclose information by affidavit or by another method about any issue in the case, if the following conditions are met:
It would be unfair to the party who wants the questioning or disclosure to carry on with the case without it.
The information is not easily available by any other method.
The questioning or disclosure will not cause unacceptable delay or undue expense. O. Reg. 114/99, r. 20 (5).
[44] Ms. Rossi acknowledged that the request to dispense with the husband’s consent and for the production Orders involving non-parties was predicated on less than robust disclosure-Order compliance by the husband and should be viewed as a “graduated”, or process, Order. While there may be some merit to that approach in principle, it is premature in light of the Order now made. The Rules require evidence of actual non-compliance by the husband, or inability to comply attributable to a non-party, particularly where compliance failure by the non-party could invite court sanctions.
[45] The relief requested by the wife in paragraphs 2 and 3 of her Amended Notice of Motion will not be considered at this time and are dismissed without prejudice to their renewal should the circumstances warrant.
Court-Appointed Experts
[46] Family law litigants are required to credibly value their assets and debts and, where relevant, their available income for, respectively, property and support purposes. In many cases these tasks are easily and inexpensively done in a timely way. Where, however, a litigant’s financial affairs are complex, it is incumbent that expert assistance be obtained.
[47] In this case, the husband’s financial affairs are complex. And opaque. Soon after the parties separated (October 2019) and the husband became aware (if not before then) that the parties would need to deal with the division of their property (or rather, the values of their properties) and likely deal with support, he should have retained an expert to value his business interests and to undertake an analysis of his income. Mr. Larsen confirmed to the Court during argument that no such expert had been engaged by his client. Which is surprising given the senior status of the husband’s family law counsel (former and current).
[48] In his responding evidence, the husband lamented that he had already incurred over $400,000 in legal fees and other expenses related to this litigation, mostly (as it appears) dealing with his disclosure. Previous counsel agreed with the Court’s estimate that the valuation costs could exceed $150,000. However one parses the allocation of these costs between the parties, they are now well beyond the earlier estimate and will rapidly escalate. The husband’s abdication of his valuation and income analysis obligations is, at its most generous, puzzling: viewed at its worst, it is (as the wife suspects) suspicious. It is not, and never was, the wife’s primary obligation to retain, and pay for, expert work that the husband should have authorized well before the wife started her Application.
[49] Those parts of Rule 20.3 relevant to this case are (1), (2) and (5) to (8). They provide as follows:
Appointment of Expert by Court
20.3 (1) The court may, on motion or on its own initiative, appoint one or more independent experts to inquire into and report on any question of fact or opinion relevant to an issue in a case. O. Reg. 250/19, s. 8.
Requirements of Order
(2) An order under subrule (1) shall,
(a) name the expert being appointed, who shall be a person agreed on by the parties if possible;
(b) specify the instructions to the expert; and
(c) require the parties to pay the expert’s fees and expenses and specify the proportions or amounts of the fees and expenses that each party is required to pay. O. Reg. 250/19, s. 8.
Additional orders
(5) In making an order under subrule (1), the court may make any further order it considers necessary to enable the expert to carry out the specified instructions, including,
(a) an order for the inspection of property; or
(b) an order under section 105 of the Courts of Justice Act (physical or mental examination of a person), if the requirements of that section are met. O. Reg. 250/19, s. 8.
Report
(6) The expert shall prepare a report of the results of his or her inquiry containing, at a minimum, the information listed in paragraphs 1 to 6 of subrule 20.2 (2) and an acknowledgement of expert’s duty (Form 20.2) signed by the expert, and shall file the report with the clerk and provide a copy of it to each of the parties. O. Reg. 250/19, s. 8.
Admissibility of report
(7) The expert’s report is admissible in evidence in the case. O. Reg. 250/19, s. 8.
Cross-examination
(8) An expert appointed under this rule may be cross-examined at trial by any party. O. Reg. 250/19, s. 8.
[50] The wife has engaged an expert well known to the Court. Mostly all of his information requests are well within acceptable disclosure parameters: some involve a due diligence that is more confirmatory than revelatory but that is within the expert’s prerogative and, ultimately, the Court can determine how deep should be the disclosure dive. The point is that given the husband’s abdication of his valuation/income analysis duty, Mr. Pont’s expert opinions may be the only expert evidence that this Court will permit be tendered in evidence. There is no indication that the husband is inclined to retain an expert. Wait and See is not a very smart strategy.
[51] So this is what will happen.
[52] The husband will have until August 16, 2021 to retain an expert to undertake a valuation of his business interests and an analysis of his income. He shall provide to Court by that time an affidavit (separate from his disclosure affidavit) that meets the requirements of Rule 20.3. but with terms. The proposed expert must undertake to complete his engagement by October 31, 2021. The wife need not agree with the choice of expert but she and the husband should be aware that before this matter can proceed to a settlement conference the experts will be required to comply with Rule 1(7.2)k which provides as follows:
Procedural Orders
(7.2) For the purposes of promoting the primary objective of these rules as required under subrules 2 (4) and, particularly, (5), the court may make orders giving such directions or imposing such conditions respecting procedural matters as are just, including an order,
(k) that any expert witnesses for the parties meet to discuss the issues, and prepare a joint statement setting out the issues on which they agree and the issues that are in dispute;
[53] The experts’ joint statement shall be made available for the settlement conference.
[54] If the husband is unable or unwilling to retain an expert or if the expert proposed is unable to commit to the deadline of October 31, 2021 the Court will consider appointing Mr. Pont as its expert pursuant to Rule 20.3, the expense for which shall be paid by the husband from the Clean Soils funds held in trust by Mr. Larsen’s firm or from the husband’s share (or that of any of his companies) of the forthcoming Vickers sale by the law firm handling the sale transaction as already ordered.
Disposition
[55] An Order shall issue in accordance with paragraphs [12], [14], [16], [18], [19], [21], [22], [25], [28], [30], [32], [33], [35]-[40], [52] to [54].
[56] The relief requested by the wife in paragraphs 2 and 3 of her Amended Notice of Motion is dismissed without prejudice to their later renewal.
[57] Court administration will bring this file to the Court’s attention after August 16, 2021 for review of the husband’s affidavit compliance with the terms of this Order. Directions will be given for next steps, one of which will involve setting a date and time for a spousal support motion. The Court was advised that when these proceedings erupted in court activity the husband discontinued providing to the wife at least $10,000 in monthly support. He has said that the wife owns the unencumbered matrimonial home and “can use [its’] equity if she needs to” support herself.[^2] The husband may wish to reconsider that approach.
[58] The costs of the wife’s motion are adjourned to be determined after the Court assesses the husband’s compliance with the disclosure ordered
Justice David A. Jarvis
Date: July 12, 2021
[^1]: 2021 ONSC 169.
[^2]: Paragraph 24 of the husband’s affidavit sworn July 1, 2021.