Court File and Parties
Court File No.: FS-19-60 Date: 2021-08-03 Superior Court of Justice - Ontario
Re: Gaietri Popat, Applicant And: Amit Popat, Respondent
Before: Justice D.A. Broad
Counsel: Emily Carroll (agent for Glenda D. McLeod), for the Applicant Valda Blenman, for the Respondent Andrew Nicholls for the non-party Vasant Popat
Heard: July 7, 2021
Endorsement
[1] The parties were married on September 20, 1999 and separated on November 30, 2017. There two children of the marriage, one of whom is an adult and not attending post-secondary education. The other child is under the age of 18.
Applicant’s Notices of Motion
[2] The applicant has brought three motions as follows:
(a) Notice of Motion dated December 22, 2020;
(b) Notice of Motion dated January 12, 2020 (misdated – the date should read January 12, 2021);
(c) Notice of Motion dated February 8, 2021
[3] It is evident that the relief sought in the first two Notices of Motion dated December 22, 2020 and January 12, 2021 is identical. The only difference between the Notices of Motion are the return dates.
[4] In order to avoid confusion, I will treat the Notice of Motion correctly dated January 12, 2021 as being the operative first motion. The second Notice of Motion is dated February 8, 2021.
Relief sought in the applicant’s first Notice of Motion
[5] The applicant seeks the following relief in her first Notice of Motion dated January 12, 2021:
(a) an order directing the respondent to produce the financial and documentary disclosure specified at subparagraphs 2(a) to (j) of the Notice of Motion;
(b) an order directing the respondent to attend for questioning for one day;
(c) an order combining this proceeding (file FS-19-60) together with the application commenced by Vasant Popat (the respondent’s father) in Superior Court of Justice file CV-20-216, on terms set forth at subparagraphs 4 (a) to (f) of the Notice of Motion;
(d) an order directing Vasant Popat to attend for questioning under oath for one-half day;
(e) an order directing the non-party M. Cristina DiFelice, Barrister and Solicitor, to produce to counsel for the applicant complete copies of any and all files in her possession and control respecting the matters specified at subparagraphs 6(a) to (c) of the Notice of Motion
[6] The Notices of Motion dated December 22, 2020 and January 12, 2021 each name the following four non-parties in the title of proceedings: Bahaa Hanane, Bhupinder Multani, Jasbir Patara and Krupesh. However, it is not apparent from a reading of the Notices of Motion that any relief is sought against any of these four non-parties.
[7] Pursuant to the second Notice of Motion dated February 8, 2021 the applicant claims the following additional relief:
(a) an order prohibiting the respondent from dispensing with, disposing of, or otherwise encumbering:
(i) any assets and/or real property in his possession and/or control;
(ii) any assets and/or real property registered in the names of other parties in which the respondent has an interest, equitable, proprietary or otherwise;
(iii) any assets and/or real property registered in the name of the corporation for which the respondent is a registered shareholder, or alternatively, over which the respondent is able to exert decision-making authority.
(b) an order requiring the non-party Miguel Martinez to attend for one half day of questioning;
(c) an order requiring the non-party Zsolt Racz to attend for one half day of questioning;
(d) an order requiring the non-party Craig Gallant and/or the non-party Williams and Partners LLP to produce to counsel for the applicant complete copies of all records, reports and/or files in their possession and/or control pertaining to the respondent and/or corporate entities over which the respondent has control for the period January 1, 2015 to present;
(e) an order requiring the respondent to pay to the applicant an additional sum on account of interim fees and disbursements in the amount of $35,000;
(f) an order assigning a Case Management Judge to this matter;
(g) an order for procedural direction in this matter pursuant to rule 14(1)(2) of the Family Law Rules; and
(h) an order establishing a schedule for the efficient processing of the matter, including the scheduling of mandatory “to be spoken to” dates and deadlines.
Adjournment of certain issues and partial Consent Order
[8] Mr. Nicholls, attending as counsel for the non-party Vasant Popat, advised that Vasant Popat is mentally incapable of participating in the proceeding and requires appointment of a litigation guardian. This is not disputed by the applicant.
[9] The applicant, the respondent and the non-party Vasant Popat, by their respective counsel, consented to an order providing for the following:
(a) Adjournment of the following relief sought by the applicant in her Notices of Motion:
(i) pursuant to section 15.2 of the Divorce Act and sections 12 and 40 of the Family Law Act the respondent be restrained from dispensing with, disposing of, or otherwise encumbering any assets and/or real property registered in the names of third parties in which the respondent has an interest, equitable or proprietary or otherwise, whether identified in the within litigation or not yet identified, and any assets and/or real property registered in the name of the corporation for which the respondent is a registered shareholder, or alternatively, over which the respondent is able to exert decision-making authority;
(ii) the proceedings in files FS-19-60 and CV-CV-20-216 be combined on terms;
(iii) Vasant Popat and/or his litigation guardian attend for questioning;
(iv) M. Christina DiFelice produce to counsel for the applicant complete copies of files in her possession and control as specified in the Notice of Motion;
(b) the non-party Vasant Popat is granted leave to file a motion for appointment of a litigation guardian;
(c) a Case Management Judge shall be assigned to the matter pursuant to the general provisions of the Family Law Rules and/or the inherent jurisdiction of the court and a “to be spoken to date” shall be scheduled with the assistance of the trial coordinator in November, 2021.
[10] I made an order dated July 7, 2021 to give effect to the said consent (the “July 7, 2021 Order”).
Remaining issues for determination
[11] In submissions the applicant withdrew her claims for production against the non-party Craig Gallant and/or the non-party Williams and Partners LLP.
[12] As a result of the foregoing, the following are the remaining issues from applicant’s two Notices of Motion for determination:
(a) whether the respondent should be required to produce the financial and documentary disclosure particularized in the applicant’s Notice of Motion dated January 12, 2021 at paragraphs 2 (a) to (j);
(b) whether the respondent should be required to attend for questioning for one full day;
(c) whether the non-party Miguel Martinez should be required to attend for questioning for one half day;
(d) whether the non-party Zsolt Racz should be required to attend for questioning for one half day;
(e) whether the respondent should be required to pay to the applicant an additional sum on account of interim fees and disbursements in the amount of $35,000; and
(f) whether the respondent should be restrained pursuant to section 15.2 at the Divorce Act and/or sections 12 and 40 of the Family Law Act from dispensing with, disposing of, or otherwise encumbering any assets and/or real property in his possession and/or control.
Disclosure
[13] The applicant set forth a lengthy list of items of disclosure which she seeks at paragraph 2 of her Notice of Motion dated January 12, 2021. Ms. Carroll advised in submissions that the various items primarily reflect information sought by the applicant’s accounting expert in order to complete his report.
[14] Ms. Blenman advised in submissions that the respondent has been providing the items of disclosure sought by the applicant as the documentation became available and that the respondent is not opposed to providing the disclosure sought, to the extent that it relates to documents that exist, and has already provided much of it. Ms. Carroll confirmed that respondent’s counsel provided certain disclosure as late as July 2, 2021 (5 days prior to the hearing date) which counsel and the applicant’s expert have not had an opportunity to review to determine what requested disclosure, if any, remains outstanding.
[15] Based upon the respondent’s acknowledgement, the respondent is ordered to produce the documents (to the extent that they have not already been produced and to the extent that they exist) referred to subparagraphs 2 c., d., e, f. ((i) to (xiii), g. (i) to (vii), h., i., j. (i) to (xvi).
[16] Ms. Blenman advised that the respondent is opposed in principle to two items of disclosure or production at the following subparagraphs of the Notice of Motion:
2(a) An authorization executed by the respondent which permits Pettinelli Mastroluisi LLP (the applicant’s accounting expert) to speak with him directly respecting his business and income;
2(b) A complete copy of the file of the respondent’s expert, including but not limited to the following:
(i) Mr. Fazzari’s notes, and correspondence exchanged as between Mr. Fazarri and Mr. Popat and/or Mr. Fazarri and the respondent’s counsel;
(ii) General Ledger printouts for Trip’s Auto Inc. for the fiscal years ending September 30, 2015 to September 30, 2017;
(iii)The respondent’s draft Form 13.1 Financial Statement, provided to Mr. Fazzari.
Claim for an authorization from the respondent to permit her expert to speak with the respondent directly respecting his business and income
[17] With respect to the question of whether the respondent should be ordered to provide written authorization for the applicant’s accounting expert to speak directly with him respecting his “business and income”, in response to questions from the court during reply submissions, Ms. Carroll agreed that it would be sufficient for any questions from the applicant’s expert to be submitted in writing to the respondent through his counsel. On this basis she withdrew the claim at paragraph 2(a) of the Notice of Motion. In my view there is an inherent problem in permitting the applicant’s expert to interview the respondent directly, as there would be no reliable record kept of their conversations. This could create the potential for a credibility issue to arise at trial if there is a disagreement on what was asked by the applicant’s expert and/or what information was provided by the respondent in response.
Claim for production of the complete file of the respondent’s expert
[18] In support of her claim for disclosure of the “complete file” of the respondent’s expert, the applicant relies upon the case of Bookman v. Loeb, 2009 33528 (ON SC), [2009] O.J. No. 2741 (S.C.J.).
[19] In Bookman the applicant served reports of four experts and sought leave to file the reports as she had not served them within the time specified in a previous order. The respondent opposed the relief sought by the applicant and, in the alternative, sought an order for production of particular foundational and other documents relating to the experts’ reports as a condition precedent to permitting the applicant to file and to rely upon one of the reports.
[20] The respondent sought production of a broad range of documents from the applicant’s experts namely production of their files, including letters of instruction, letters of retainer, correspondence with counsel and/or the client directly, or earlier drafts of reports, notes of meetings with counsel etc.
[21] The applicant took the position that the experts’ files were protected by litigation privilege, The applicant consented to produce certain documentation and information, including to advise of the instructions given to the experts if not already contained in their reports, all draft reports of all the experts, and accounts rendered by one of the experts. However, the applicant would not agree to produce all correspondence between previous counsel and one of the experts, the experts’ notes of meetings unless referred to in a report, notes of counsel, and retainer information respecting one of the experts.
[22] Mesbur, J. made reference to Rule 31.06(3) of the Rules of Civil Procedure on the basis that there is a lacuna in the Family Law Rules as its disclosure provisions are not tied to the discovery process. After reviewing the jurisprudence, she made the following dispositions with respect to the respondent’s claims for production:
(a) as the applicant agreed to produce previous drafts of the experts’ reports, they were ordered to be produced;
(b) solicitor’s notes of meetings with the experts prior to preparation of the experts’ reports were protected by solicitor-client privilege, however, the experts’ notes of any meetings that reflected any information each expert obtained that formed part of the foundation of his/her opinion, whether factual or by way of assumption, were required to be produced;
(c) letters of instruction to each of the experts from counsel were required to be produced, and if no such letters existed, particulars of the instructions that were provided were required to be produced. However, emails, letters or other correspondence passing between prior counsel and the experts were subject to litigation privilege that had not at that point been waived;
(d) although the applicant did not object to producing the accounts rendered by the experts, the request for any retainer agreements between the applicant and her experts was aimed solely at the impeachment of the experts and did not go to the foundation of the experts’ opinions;
(e) the experts’ files remained privileged until trial and did not need be produced prior to trial.
[23] The respondent in the case at bar takes the position that his expert’s file is protected by litigation privilege and should not be ordered to be produced. He relies upon the cases of Blank v. Canada (Minister of Justice), 2006 SCC 39, [2006] 2 S.C.R. 319 and Moore v. Getahun, 2015 ONCA 55.
[24] In Blank, Fish, J. observed at para. 27 that the object of litigation privilege, which extends to communications between solicitors (and litigants) and third parties,
…is to ensure the efficacy of the adversarial process and not to promote the solicitor-client relationship. And to achieve this purpose, parties to litigation, represented or not, must be left to prepare their contending positions in private, without adversarial interference and without fear of premature disclosure.
[25] At para. 34 Fish J. stated that “the purpose of the litigation privilege is to create a ‘zone of privacy’ in relation to pending or apprehended litigation.”
[26] Sharpe, J.A., writing for the panel in Moore stated as follows at paras. 69-72:
In Blank, the court noted, at para. 34, that litigation privilege creates "a 'zone of privacy' in relation to pending or apprehended litigation." The careful and thorough preparation of a case for trial requires an umbrella of protection that allows counsel to work with third parties such as experts while they make notes, test hypotheses and write and edit draft reports.
Pursuant to rule 31.06(3), the draft reports of experts the party does not intend to call are privileged and need not be disclosed. Under the protection of litigation privilege, the same holds for the draft reports, notes and records of any consultations between experts and counsel, even where the party intends to call the expert as a witness.
Making preparatory discussions and drafts subject to automatic disclosure would, in my view, be contrary to existing doctrine and would inhibit careful preparation. Such a rule would discourage the participants from reducing preliminary or tentative views to writing, a necessary step in the development of a sound and thorough opinion. Compelling production of all drafts, good and bad, would discourage parties from engaging experts to provide careful and dispassionate opinions and would instead encourage partisan and unbalanced reports. Allowing an open-ended inquiry into the differences between a final report and an earlier draft would unduly interfere with the orderly preparation of a party's case and would run the risk of needlessly prolonging proceedings.
I recognize that the wisdom of extending litigation privilege to the preparation of expert reports has been questioned by some judges: see Browne (Litigation Guardian of) v. Lavery (2002), 2002 49411 (ON SC), 58 O.R. (3d) 49 (Ont. S.C.J.), at paras. 65-71; Aviaco International Leasing Inc. v. Boeing Canada Inc., [2002] O.J. No. 3799 (Ont. S.C.J.), 2002 21293, at para. 16. However, the law currently imposes no routine obligation to produce draft expert reports: Conceicao Farms Inc. v. Zeneca Corp. (2006), 2006 31976 (ON CA), 83 O.R. (3d) 792 (Ont. C.A.), at para. 14; Chiang (Trustee of) v. Chiang, 2011 ONSC 2341 (Ont. S.C.J.), at paras. 20-24.
[27] At para. 73 Sharpe, J.A. confirmed that the litigation privilege attaching to expert reports is qualified, and disclosure may be required in certain situations.
[28] At para. 76 and 77 Sharpe, J.A. observed that “litigation privilege yields where required to meet the ends of justice” such as “where the party seeking production of draft reports or notes of discussions between counsel and an expert can show reasonable grounds to suspect that counsel communicated with an expert witness in a manner likely to interfere with the expert witness's duties of independence and objectivity.” At para. 78 he concluded that “absent a factual foundation to support a reasonable suspicion that counsel improperly influenced the expert, a party should not be allowed to demand production of draft reports or notes of interactions between counsel and an expert witness.”
[29] The case of Edwards v. McCarthy, 2019 ONSC 3925 (S.C.J.), is a decision of Stinson, J. sitting on appeal from a decision of Master Sugunasiri (as she then was). It dealt with a claim by the plaintiff for disclosure of the letter of instruction from defence counsel to an expert and other foundational information and documents at the discovery stage, prior to trial and before a decision had been made by the defendant to actually call the expert as a witness at trial.
[30] At para. 14 of his Reasons, Stinson, J. observed that Moore “refined and clarified the law and procedure relating to the litigation privilege attaching to communications between counsel and expert witnesses and associated documentary disclosure” and “recognized that the requirement to disclose ‘foundational information’ was mandated by rule 53.03(2.1).”
[31] At para. 15 Stinson, J. noted that the situation in Edwards was on all fours with the case of Mexrelco Immeubles Inc. v. Jim Pattison Industries Ltd., 2017 ONSC 5836 (S.C.J.) in which Justice O’Bonsawin held that, where the expert report contains the instructions from counsel as required by rule 53.03(2.1) 3. and 4., the letter of instruction remains covered by litigation privilege and need not be produced.
[32] At para. 16 Stinson, J. found that there was no evidence in the case before him that might support a reasonable suspicion that counsel improperly influenced the expert and that, as observed in Moore, litigation privilege otherwise continues to attach to the communications and documents in question.
[33] In the case at bar the respondent has not served a report from his expert and has not confirmed an intention to call his expert at trial. Moreover, the applicant has led no evidence that might support a reasonable suspicion that counsel for the respondent has improperly influenced the expert.
[34] I find, on the authority of Moore, that litigation privilege extends to the file of the respondent’s expert and the applicant’s claim for its production in its entirety must therefore be dismissed.
Questioning of the respondent
[35] The counsel for the respondent advised in submissions that the respondent is not opposed to an order he be attend for questioning for one day, as requested by the applicant. Such questioning should therefore be ordered.
Questioning of two non-parties
[36] The applicant seeks an order for questioning of two business associates of the respondent Miquel Martinez and Zsolt Racz.
[37] The respondent opposes the applicant’s request to question these two non-parties.
[38] Counsel for the applicant advised that Mr. Martinez, through his counsel, has advised that he is not opposed to an order requiring him to submit to questioning, and that Mr. Racz did not file any responding materials and has not contacted counsel for the applicant to advise of his position.
[39] The fact that neither Mr. Martinez nor Mr. Racz oppose the motion does not mean that the motion should be treated as undefended. In the case of Campbell v. Wentzell, 2015 ONSC 6097 (S.C.J.) Mitrow J. noted at para. 14 that there is nothing in the Family Law Rules (the “Rules”) that would suggest that a party to the proceeding is prohibited from defending the motion in circumstances where the non-party sought to be questioned filed no material and did not appear to oppose the motion.
[40] Rule 20(5) of the Rules provides that the court may order that a person (whether a party or not) be questioned by a party about any issue in the case if the following conditions are met:
(a) it would be unfair to the party who wants the questioning to carry on with the case without it;
(b) the information is not easily available by any other method;
(c) the questioning will not cause unacceptable delay or undue expense.
[41] In the case of Cavara-Aitoro v. Aitoro, 2019 ONSC 1460 (S.C.J.) Jarvis, J., relying largely on the decision of Madsen, J. in Weber v. Merritt, 2019 ONSC 1460 (S.C.J.), set forth at paras. 11-12 a summary of the applicable principles which apply to a motion for non-party disclosure and questioning as follows:
I adopt the thoughtful summary made by Madsen J. in Weber v. Merritt of the applicable principles and the contextual considerations relevant to ordering non-party disclosure and questioning:
The onus on a motion for non-party disclosure and/or questioning is on the moving party. Ontario (Attorney General) v. Ballard Estate, 1995 3509 (ON CA), 1995 CarswellOnt 1332 (Ont. C.A.) at 16.
The starting point is to consider the context, and the purpose for which the Rule is invoked. Ireland v. Ireland, 2011 ONCA 623(Ont. C.A. [In Chambers]) at 28.
The Court has held that the test under rule 19(11) is an objective test which requires an analysis outside the litigant's belief system: "suspicion and conjecture will not suffice." See Santilli v. Piselli, 2010 CarswellOnt 3317 (Ont. S.C.J.) at paragraph 12. There is no reason that the test would not be the same under rule 20(5).
In Ontario (Attorney General) v. Ballard Estate, supra at 15, in the context of the Rules of Civil Procedure, the Ontario Court of Appeal set out six factors to be considered by the Motions judge when faced with a motion for non-party disclosure:
a. The importance of the documents in the litigation;
b. Whether production at the discovery stage of the process as opposed to production at Trial is necessary to avoid unfairness to the Applicant;
c. Whether the discovery of the defendants with respect to the issues to which the documents are relevant is adequate and if not, whether the responsibility for that inadequacy rests with the defendants;
d. The position of the non-parties with respect to production;
e. The availability of the documents or their informational equivalent from some other source which is available to the moving party;
f. The relationship of the non-parties from whom production is sought, to the litigation and the parties to the litigation. Non-parties who have an interest in the subject matter of the litigation and whose interests are allied with the party opposing production should be more susceptible to a production order than a true "stranger" to the litigation.
- Rule 20(5) has been held to be more permissive than the comparable Rule in the Rules of Civil Procedure, and to give judges more liberal and generous discretion. As noted by Justice Turnbull in Hagey-Holmes v. Hagey, 2005 CarswellOnt 2840 (Ont. S.C.J.) at 32:
That makes eminent sense when one considers that in matrimonial litigation, spouses and family members may be "used" to shield income or other assets that might be relevant in the assessment of spousal support, child support, or net family equalization issues.
So too in Loeb v. Loeb, 2013 CarswellOnt 3247 (Ont. S.C.J.) at 42, the Court noted that it is not uncommon in the family law context for family members and their businesses to align themselves to support and protect a family member defending a property or support claim.
At the same time, as set out in Boyd v. Fields, 2006 CarswellOnt 8675 (Ont. S.C.J.) at 12, as with all disclosure requests in the family law context, whether from parties or non-parties, while full and frank disclosure is a fundamental tenet of the Family Law Rules, "there is also an element of proportionality, common sense, and fairness built into these rules." Disclosure obligations must be assessed in light of Rule 2(3).
As stressed by Justice Kristjanson in Politis v. Politis, 2018 ONSC 323 (Ont. S.C.J.), in the family law context, the test for compelling third party disclosure set out in Ontario (Attorney General) v. Ballard Estate, supra, "must be supplemented to take into account two critical values, privacy and proportionality." She notes, in the context of new partners, that privacy interests of third parties must be carefully balanced against the interests of the parties in the proceeding.
Non-parties are generally protected from potentially intrusive, costly, and time-consuming processes of discovery except in circumstances specifically addressed by the Rules. See Santilli v. Piselli, supra. As Justice McGee noted therein at paragraph 13: "The discovery process must be kept within reasonable bounds."
There must be an evidentiary basis to show that the documents sought or the questioning requested is relevant. The request for disclosure from a non-party and the request for questioning should not amount to a fishing expedition. Campbell v. Wentzell, 2015 CarswellOnt 15086 (Ont. S.C.J.) at 47. Disclosure is not a weapon and is not intended to overreach. Saunders v. Saunders, 2015 CarswellOnt 2209 (Ont. S.C.J.) at para. 13.
To this summary I would add the contextual filter noted by Kane J. in Loeb v. Loeb [2013 CarswellOnt 3247 (Ont. S.C.J.)] (cited above, at para.48) that "[w]hat is fair, relevant and needs to be produced increases with the complexity of the circumstances of the parties."
[42] In her affidavit in support of the motion the applicant referred to various text messages passing between the respondent and each of Mr. Martinez and Mr. Racz respecting the sale of Trip’s Auto Inc. and a proposed transaction involving the property adjacent to the business premises of Trip’s Auto Inc.
[43] The applicant deposed that she requires an opportunity to question Messrs. Martinez and Racz “respecting the sale of Trip’s Auto Inc.[which she says was not a true arm’s length transaction] and the nature of their respective involvement in the respondent, Amit Popat’s previous and new business ventures” and that “I believe that the respondent Amit Popat, Miguel Martinez and Zsolt Racz are colluding with one another in an attempt to shield the respondent, Amit Popat from his financial obligations to me, being property division and spousal support.”
[44] The respondent, in his responding affidavit, set forth at length details of the transactions referred to in the applicant’s affidavit,
[45] The respondent deposed that the applicant’s request to question Messrs. Martinez and Racz represents an attempt to further increase costs in the proceeding and that the applicant “took documents about which she has suspicions and wants to question persons based merely on unfounded speculation.” He denied that Messrs. Martinez, Racz and he are colluding in an attempt to shield him from his financial obligations to the applicant for property division or spousal support or at all. He stated that the Marriage Contract between the parties excludes Trip’s Auto Inc. from equalization, and that he has been fully supporting the applicant and their children for over three years without the need for an order or written agreement.
[46] As indicated above, the onus of showing that the test for non-party questioning under rule 20(5) has been met is on the applicant. It has been held that the discretion of the court to order questioning ought not to be exercised unless the three-part statutory test is clearly met (see Zafir v. Diamond (2008) 53 R.F.L. (6th) 609 (S.C.J.), per J. Wilson, J.).
[47] In my view, the applicant has not, at this stage in the proceeding, clearly satisfied her onus of showing that it would be unfair for her to carry on with the case without conducting examinations of the two non-parties. The applicant’s theory in support of the motion consists largely of suspicion and conjecture which does not satisfy the objective test which requires an analysis outside the moving party’s belief system. Although she stated her “belief” that the respondent, Miguel Martinez and Zsolt Racz are “colluding with one another in an attempt to shield the respondent from his financial obligations” to her, she does not explain how they are doing so.
[48] Moreover, the applicant has not satisfied her onus of showing that the information she seeks from the non-parties is not easily available by any other method. She has sought and obtained an order for extensive financial and documentary disclosure from the respondent, which the respondent did not oppose in submissions. Moreover, the respondent has agreed to submit to a full day of questioning, as requested by the applicant.
[49] In my view, the applicant’s motion for questioning of Miguel Martinez and Zsolt Racz is premature and must be dismissed, without prejudice to the applicant renewing her request for questioning of the non-parties, if so advised, by motion following the completion of questioning of the respondent.
Payment of Interim Disbursements
[50] In support of her claim for payment by the respondent of an additional $35,000 in interim disbursements, the applicant deposed inter alia, as follows:
(a) the magnitude of the litigation between the parties has expanded astronomically. She has spent approximately $35,000 in legal and expert fees to date, and anticipates spending tens of thousands of dollars more to get through questioning of the respondent and other third parties, and completion of expert reports;
(b) it is patently unfair that she continues to be subjected to the “smoke and mirrors” orchestrated by the respondent and his several friends and business associates;
(c) she is of extremely modest means, having no savings and no ability to work to support herself at the present time given that she continues to receive regular treatment for cancer;
(d) the family’s finances were controlled exclusively by the respondent and he continues to control them presently. She is at the mercy of the respondent as he could cut off his deposits to the parties’ joint bank account, revoke her credit cards and leave her truly destitute;
(e) the respondent has the financial means to fund the long and drawn-out litigation;
(f) the issues which have arisen are legally complex and without her counsel she would be unable to effectively pursue her claims in court. The respondent has allegedly sold his business for $90,000 in October 2020 and in September 2020 allegedly sold a property in Brantford, and he ought to have significant financial resources at his disposal to advance her an additional $35,000 for legal fees and disbursements;
(g) had it not been for the deceit and purposeful withholding of information and disclosure by the respondent, this “tremendous amount of legal fees” would not have been necessary;
(h) without further disclosure and questioning and a further sum for interim disbursements and legal fees, she has no ability to quantify her claim as against the respondent and his father, nor will she be able to evaluate any offers of settlement made by the respondent.
[51] In response to the applicant’s motion for payment of an additional amount for interim disbursements the respondent deposed, inter alia, as follows:
(a) he does not have the financial means to fund a long and drawn-out litigation and will have to sell assets to pay for the legal fees he is incurring as a result of the disclosure the applicant is requesting and to defend against her claims. The applicant has a false impression that he is a wealthy person and is attempting to make it seem that he is wealthy by attempting to include his father’s assets with his;
(b) he does not have the resources to pay the applicant interim disbursements of $35,000. He has been fully supporting the applicant and their two sons since separation. He provided the applicant with $5000 shortly after separation, a further $40,000 in June 2020 when she first brought a motion for interim disbursements. In addition, he provided the applicant with an advance on equalization of $16,571 to purchase a vehicle and to fund one year of insurance premiums;
(c) the applicant is not impecunious. The parties jointly own their former matrimonial home which is mortgage free. He is offered to sell or mortgage the property to provide both parties with funds to pay legal expenses;
(d) he did not receive $90,000 from the sale of Trip’s Auto Inc.’s. His father was a 49% shareholder and the respondent received $45,900 which he has used for living expenses, supporting the applicant and the children of the marriage and to pay legal fees. These proceeds have been spent;
(e) he denies that he is subjecting the applicant to “smoke and mirrors” or that his business associates have. The applicant is on a fishing expedition which is costly for both parties. The applicant appears to have no regard for the mounting legal costs.
[52] Rule 24(18) of the Family Law Rules provides that “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.”
[53] In the case of Ludmer v. Ludmer, 2012 ONSC 4478 (S.C.J.) Mesbur, J., drawing largely on the earlier decision of Rogers, J. in Stuart v. Stuart, 2001 28261 (ON SC), [2001] O.J. No. 5172 (Ont. S.C.J.), summarized the applicable legal principles at paras.15-16 as follows:
(a) orders may be required in order to "level the playing field" between the litigants;
(b) 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.
(c) the discretion should be exercised to ensure all parties can equally provide or test disclosure, make or consider offers or possibly go to trial;
(d) an order under the rule 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;
(e) the claimant must clearly demonstrate that the disbursements are necessary and reasonable given the needs of the case and the funds available;
(f) the claim or claims being advanced in the case must be meritorious as far as can be determined on a balance of probabilities at the time of the request for disbursements.
[54] On the basis of these principles, Mesbur, J., at para. 17 summarized the claimant’s evidentiary burden in Ludmer to include 1) establishing the necessity and reasonableness of the fees and disbursements, given the nature of the case and the funds available, 2) showing that she is incapable of funding the fees and disbursements herself and 3) that her claims are meritorious.
[55] With respect to the requirement that the claimant’s case must be meritorious, McDermot, J., in the case of Romanelli v. Romanelli, (2017) ONSC 1312 (S.C.J.) observed as follows at paragraphs 24-25:
It is clear that a case with little or no chance of success is not a "meritorious claim" for the purposes of Rule 24(12) [now 24(18)]. However, this does not mean that the claimant has to prove his or her case prior to obtaining an order for interim fees or disbursements. That would be too high a requirement: if someone has proven their case they would then not necessarily need an order for an advance to prove his or her case. For this reason, the case presented at a motion must be a prima facie case only. It must be a case which, based upon the facts presented in the affidavits, makes sense to prosecute. It may be close to the test for approval of a legal aid certificate: Would counsel advise a client of modest means to proceed with the claim?
However interim fees and disbursements are not meant to fund a fishing expedition: see McIlvenna v. Pinkowski, 2010 ONSC 4801 (Ont. S.C.J.). In other words, if there is no reasonable case on the face of the facts before the court, interim disbursements should not be granted in order to track down evidence which might in the end prove there to be a meritorious claim. There must be enough on the face of the material filed to allow the court to find that the claims being made by the applicant are reasonable.
[56] With respect to the question of the necessity for an order for interim disbursements, McDermot, J. at paras. 44-45 stated as follows:
The case law appears to confirm that a motion for interim fees and disbursements must contain proper evidence of the reason for the fees and disbursements and the estimated costs of those disbursements. As noted in the Mcllvenna case above [McIlvenna v. Pinkowski (2010), 2010 ONSC 4801 (S.C.J.)], there must be a purpose behind the fees and disbursements and not just a fishing expedition.
In Hall v. Sabri, [2011] O.J. No. 4178 (Ont. S.C.J.) the applicant requested interim disbursements and costs. Based upon the lack of evidence provided by valuators or estimates of the cost of litigation, Bielby J. was unwilling to order interim disbursements or costs. He asserted that, "The amount claimed seems to have been pulled out of the air without any evidence of anticipated costs" [para. 78]. The motion was dismissed subject to leave to the applicant to reapply with "proper evidence".
[57] In the case of Samis (Litigation Guardian of) v. Samis, 2011 ONCJ 273 (O.C.J.) Sherr, J. gave particular emphasis to the critical need for proof of the necessity for interim disbursements, stating at para. 100 (11) as follows:
Certainly, the proof of the necessity of interim disbursements would be critical to the successful claim. The claimant must clearly demonstrate that the disbursements are necessary and reasonable given the needs of the case and the funds available. In particular, if an expert is the subject of a requested disbursement, the claimant must demonstrate there is a clear need for the services of said expert.
[58] In the case of Green v Whyte, 2017 ONSC 4760 (S.C.J.) Madsen, J. echoed the guiding principles outlined above, noting at para. 19 that an order for interim fees and disbursements is a discretionary remedy and at para. 28 that the party seeking the order has the burden of proof.
[59] Madsen J. observed at para. 43 that an important limitation in the applicant’s motion materials in Greene was her failure to set out how the requested funds would be used or how those funds would advance the litigation. Specifically, at para. 45 Madsen, J. noted that the applicant did not provide information regarding the steps anticipated to be taken by counsel to advance the case or what those steps would likely cost and provided no information regarding the estimated fees of the valuators she proposed to use to critique the respondent’s income valuation. She concluded that the applicant’s request was not grounded in evidence about proposed concrete steps in the litigation.
[60] In consideration of all of the principles and factors set forth above, I find that the applicant has not discharged her onus of demonstrating that the court should exercise its discretion to order the respondent to advance a further sum of $35,000 to fund legal and expert fees.
[61] Concerning the merits of the applicant’s claim, the applicant seeks to set aside the Marriage Contract between the parties dated September 15, 1999 in respect of which the applicant received the benefit of independent legal advice. The basis for setting the Contract aside is not clear. However, she submits that the respondent established a new business when Trip’s Auto Inc. was incorporated which does not fall under the umbrella of the Contract. In the alternative she says that the Contract was unconscionable.
[62] Although the specific mandate of the applicant’s expert was not particularized, it may be inferred from the nature of the disclosure sought by the applicant that an important aspect relates to the value, and the post-separation sale, of the respondent’s interest in Trip’s Auto Inc., an asset which the respondent says was specifically excluded by the Marriage Contract from his net family property and shielded from any claim to an interest on the part of the applicant.
[63] The applicant also advances a claim that the respondent’s father holds a property on Blackfriars Lane, Brantford, in trust for the respondent and her.
[64] Although the merits of the applicant’s claims are not perfectly clear, on the authority of Romanelli, cited above, I am not prepared to find that the case does not “make sense to prosecute.”
[65] Notwithstanding that the applicant has cleared the hurdle relating to the merits of her claim, I find that the applicant has failed to establish the necessity and reasonableness of her claim to $35,000, given the nature of the case and the funds available. The applicant’s material is devoid of particularity with respect to how the sum of $40,000 already advanced by the respondent has been utilized, and how she proposes to use the proposed further sum of $35,000 to advance the litigation to allow the court to evaluate the reasonableness of her claim for payment of interim disbursements.
[66] With respect to the ability of the applicant to fund the fees and disbursements herself, the parties jointly own the former matrimonial home which is unencumbered. The respondent has proposed, in my view reasonably, that the parties agree to sell or mortgage this property and divide the proceeds to help fund the cost of the litigation. (See for comparison Samisat paras. 101-102). It is not, in my view, inappropriate to permit both parties in the circumstances to access their equity in the former matrimonial home to fund their respective costs of the litigation.
Preservation Order
[67] The applicant seeks a broad preservation order (or non-depletion order) against the respondent. The Notice of Motion dated February 8, 2021 states that the relief is sought pursuant to sections 12 and 34 of the Family Law Act and s. 15.2 of the Divorce Act.
[68] In her Factum the applicant makes reference to sections 12 and 40 of the Family Law Act but not section 34.
[69] Section 12 of the Family Law Act provides as follows:
In an application under section 7 [for an equalization payment] or 10 [for a declaration as to ownership or possession of particular property], if the court considers it necessary for the protection of the other spouse's interests under this Part, the court may make an interim or final order,
(a) restraining the depletion of a spouse's property; and
(b) for the possession, delivering up, safekeeping and preservation of the property.
[70] Section 40 is the parallel provision to section 12 in respect of support proceedings, providing as follows:
The court may, on application, make an interim or final order restraining the depletion of a spouse’s property that would impair or defeat a claim under this Part.
[71] Subsection 15.2(2) of the Divorce Act provides as follows:
Where an application is made under subsection (1) [for spousal support], the court may, on application by either or both spouses, make an interim order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse, pending the determination of the application under subsection (1).
[72] In support of her motion for a non-depletion order the applicant deposed as follows:
(a) the respondent has failed to disclose particulars of the business transactions involving the sale of Trip’s Auto Inc. and the alleged sale of the Brantford property and has attempted to hide his income and assets to deceive both her and the court to avoid his financial obligations to her;
(b) the respondent has previously evidenced his preparedness to dispose of a significant portion of his property without disclosing it to her or her counsel and failing to seek prior permission and/or guidance from the court, in the face of her claim for a non-dissipation order in her application
[73] in response, the respondent deposed as follows:
(a) he has not dissipated any assets or real property since the date of separation. He sold Trip’s Auto Inc. because it was no longer cost efficient to keep it. The Corporation Smartek-Brant Inc. was being wound down around the time of the separation and has been valued as of the date of separation and the valuation provided to the applicant;
(b) he has not sold any of the real estate in which he has an interest since the date of separation;
(c) he does not hold a beneficial interest in any assets or real estate registered in the names of third parties and there are no undisclosed assets and/or real estate registered in the name of the corporation for which he is a shareholder;
(d) when he sold Trip’s Auto Inc. in 2020, there was no court order preventing him from doing so. His decision to make the sale was not made to disadvantage the applicant. The business was in financial crisis, as he advised the applicant prior to the sale.
[74] The principles governing the making of non-dissipation orders pursuant to section 12 of the Family Law Act were usefully reviewed by Sachs J. in the case of Bronfman v. Bronfman, 2000 22710 (ON SC), [2000] O.J. No. 4591 at paras. 19-31. These principles include the following:
(a) the purpose of section 12 is to ensure that if the court does determine that an equalization payment is owing, there are sufficient assets available to satisfy that payment;
(b) a section 12 preservation order is not a Mareva injunction and accordingly, the very high legal threshold necessary to obtain such an injunction is not the standard to apply under section 12;
(c) the court does not issue orders restraining parties from dealing with property without some evidence, as opposed to bare allegations;
(d) any restraining order under section 12 should properly be restricted to specific assets, and there should be an onus on the party seeking the restraining order to show prima facie that he or she is likely to receive an equalization payment equal to the value of the specific assets;
(e) the Court will want to consider how likely it is that the moving party will receive an equalization payment. It will also want to consider the effect that granting, or not granting, such an order will have on the parties. The objective is to protect the spouse’s interests under the Family Law Act so that if a spouse is successful in obtaining relief under the Act there are assets available to satisfy that relief. Relevant to this exercise is an assessment of the risk of dissipation of the assets in existence prior to trial;
(f) there are certain cases where the factual record and the applicable legal principles make it very clear that a spouse will be entitled to an equalization payment in a particular amount. In such cases, considerable weight will be given by the court to this factor and perhaps less weight to the other factors.
(g) There are other cases where the facts and the law are disputed and complicated and in addition the record may not be fully developed as both sides may not yet have been in a position to obtain their experts’ reports on some of the more difficult valuation issues. Even if the reports have been obtained, it may be impossible for a court on an interim motion to assess with any degree of certainty which expert’s report will prevail at trial. In such cases the Court will want to go on and give serious consideration to the other factors, being the balance of convenience and the risk of dissipation prior to trial
[75] In the recent case of Fraser v Fraser, 2021 ONSC 1900 Desormeau, J. at para. 68 quoted from the decision of Price v. Price, 2016 ONSC 728 as follows:
The onus lies on the party asserting that a preservation order is necessary to protect his or her interests under Part I of the FLA, or that his or her claim for support under Part III of the Act would be impaired or defeated unless a preservation order was made, to demonstrate that on the balance of probabilities.
[76] The case at bar falls within the category of cases identified by Sachs J. in which the facts and the law are disputed and the record is not fully developed as both sides have not obtained their experts’ reports on the valuation issues. Moreover, the threshold issue of whether the Marriage Contract should be set aside remains outstanding. Accordingly, it is far from clear whether the applicant will be entitled to an equalization payment, and if so, its quantum.
[77] Accordingly, the factors of the balance of convenience and the risk of dissipation prior to trial take on greater prominence in the consideration of whether to grant the order sought by the applicant.
[78] With respect to the risk of dissipation, the applicant points to the respondent’s sale of his interest in Trip’s Auto Inc. However, the evidence disclosed that, by detailed correspondence from his counsel to the applicant’s counsel on June 16, 2020, the respondent disclosed that the business was operating at a loss due to the pandemic and would not “weather the storm.” He deposed that the corporation was in financial crisis, it was no longer cost effective to continue to maintain it. He explained the reasons for his business decision to sell the corporation, including the fact that the lease on the business premises was expiring and it did not make business sense in the face of mounting losses for the corporation to enter into a new five-year lease. He disclosed the sale to the applicant following the date of closing.
[79] I am unable to find that the sale of Trip’s Auto Inc. was indicative of any intention or motive on the Respondent’s part to defeat the applicant’s claims for equalization and support. He disclosed to the applicant that the business could not be sustained and informed her of the sale following its completion.
[80] The applicant has not, in my view, pointed to any real risk that the respondent intends to dissipate assets in order to defeat her claims for equalization and spousal support. The applicant’s assertions in this respect are conclusory and based largely on speculation.
[81] In addition to the foregoing, a final issue relates to the breadth of the preservation order sought by the applicant. Kristjanson, J. made specific reference to this issue in Laliberte v. Monteith, 2018 ONSC 7032 stating as follows at paras. 41-42:
The final concern is the breadth of the Order sought. The Court of Appeal in Chitel cautioned that a party on a Mareva injunction must seek to establish the assets to be subject to the injunction with as much precision as possible. In Lasch v. Lasch, Justice Granger held that a preservation order under s. 12 of the FLA should be restricted to specific assets. This is because these orders represent execution before judgment, and run the risk of significantly interfering with the operation of businesses. In this case, the applicant sought an overbroad order as follows:
An Order restraining the Respondent, Scott Monteith, from directly or indirectly, personally, through a corporation or trust or other entity, by any means whatsoever, transferring, alienating assigning, mortgaging, encumbering, disposing of, depleting, or removing, or otherwise dealing with, any property in any jurisdiction in which he may have an interest, directly or indirectly, legally or beneficially as a trustee, pursuant to Sections 12 and 40 of the Family Law Act, save and except with the consent of the Applicant or further Court Order.
While the applicant's counsel indicated his willingness to seek a more targeted order, he has sought an order far beyond the breadth of the FLA, and fails to identify specific assets to be preserved. A preservation order should be targeted to protect the interests claimed, not all assets controlled by the party.
[82] The applicant has not demonstrated, on a balance of probabilities, that her claim for equalization and for support would be impaired or defeated unless a preservation order were made.
[83] I therefore find that a preservation order under sections 12 and 40 of the Family Law Act is not warranted in the circumstances.
[84] Although the respondent also grounded her motion on subsection 15.2(2) of the Divorce Act, I did not understand her to draw a distinction between the Divorce Act provision and sections 12 and 40 of the Family Law Act in her Factum or oral submissions.
Case Management
[85] As indicated above, the parties consented to an order providing for Case Management of this proceeding and I made an order to that effect based upon their consent. I am prepared to act as the Case Management Judge for this matter, with the proviso that I, and the Trial Coordinator, will retain the authority to refer or assign particular attendances and events to be presided over by different judges as circumstances warrant in order to provide the parties with timely access to judicial resources.
Disposition
[86] For the reasons set forth above, it is ordered as follows:
(a) the respondent shall produce the documents (to the extent that they have not already been produced and to the extent that they exist) referred to subparagraphs 2 c., d., e, f. ((i) to (xiii), g. (i) to (vii), h., i., j. (i) to (xvi) of the applicant’s Notice of Motion dated January 12, 2021 within 30 days hereof;
(b) the applicant’s claim that the respondent give written authorization to permit her expert to speak with the respondent directly respecting his business and income is dismissed;
(c) the applicant’s claim for production to the respondent of the complete file of the applicant’s expert is dismissed;
(d) respondent shall attend for questioning for one day to be completed by September 30, 2021;
(e) the applicant’s claim that Miquel Martinez and Zsolt Racz attend for questioning for one-half day each is dismissed without prejudice to the applicant renewing her request for questioning of these non-parties by motion following the completion of questioning of the respondent;
(f) the applicant’s claim that the respondent pay to her an additional sum of $35,000 in interim disbursements is dismissed; and
(g) the applicant’s claim for a preservation or non-dissipation order against the respondent is dismissed;
Costs
[87] The parties are strongly urged to settle the issue of the costs of the motion.
[88] If the parties are unable to do so, the respondent may make written submissions as to the costs of the motion within 14 days of the release of this Endorsement. The applicant has 10 days after receipt of the plaintiff’s submissions to respond. The written submissions shall not exceed three (3) double-spaced pages exclusive of Bills of Costs or Costs Outlines, offers to settle and authorities. All such written submissions are to be forwarded to me via email to the Trial Coordinator at Brantford, at the same email address as was utilized for the release of this Endorsement.
[89] If the parties are able to settle the question of costs or if a party does not intend to deliver submissions on costs, counsel are requested to advise the court accordingly.
D.A. Broad, J.
Date: August 3, 2021