ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Nagaveni Manjunath
Applicant
- and -
Manjunath Kuppa
Respondent
COUNSEL: D. Sherr, for the Applicant U. Cebulak, for the Respondent
HEARD: August 12, 2021
ENDORSEMENT
Overview
1The Applicant brought a motion to strike the Respondent’s pleadings and for leave to proceed by way of an uncontested trial because of the Respondent’s failure to comply with numerous court orders.
2In the alternative, the Applicant seeks an order declaring the Respondent requires leave of the court to participate in any further step in the proceedings until he makes payment in full for unpaid spousal support arrears and outstanding costs. If the Respondent fails to satisfy payment of costs within 150 days, his pleadings shall be struck, and the Applicant is to be granted leave to proceed with an uncontested trial.
3The Respondent submits he cannot comply with the court orders because he is impecunious. He also submits that he has provided the disclosure as ordered.
Background Facts
4In the main proceedings, the Applicant seeks to set aside a transfer of her interest in the former matrimonial home, or in the alternative she seeks a trust interest in the property. She also seeks to set aside a separation agreement and further payment for equalization of net family property, child support and spousal support and other corollary relief.
5The parties married on March 13, 1992. The Applicant submits that the parties separated on January 15, 2018. The Respondent submits the date of separation is 2011.
6On August 8, 2011, the Applicant signed a separation agreement. She stated she was forced to sign it.
7In October 2014, the Respondent filed for divorce. The Applicant stated that he told her he wanted his freedom while continuing to live with her as a couple. At his request, she did not respond to his Divorce Application. As a result, the court granted the divorce on December 18, 2014. The Applicant states the parties continued to live together.
8On June 15, 2016, the Respondent had the Applicant transfer sole title of the matrimonial home to him. After this, she continued to be a named debtor on the home mortgage and on their home equity line of credit. The parties then lived apart. The Respondent paid for the Applicant’s apartment.
9The Applicant states that the Respondent lives a lavish lifestyle, driving a luxury sports car and spending hundreds of thousands of dollars annually on travel, golf, and partying. The Respondent deposed to annual expenses of over $235,000. The Applicant states his credit card records demonstrate the amount spent is closer to $300,000.
10The Respondent left the relationship with sole ownership of the matrimonial home with approximately $1,600,000 in equity and two rental properties that were valued over $1,000,000 each.
11The Applicant states she left the marriage with no property, no significant assets, and lives off an annual income of $20,000 to $40,000.
Outstanding Costs Orders
12On December 31, 2018, Doi J. issued an interim preservation order with respect to the parties’ former matrimonial home located at 1525 Glenburnie Road, Mississauga.
13On February 11, 2019, Doi J. issued a further interim order for spousal support. The Respondent had been paying the Applicant’s rent in the since 2015. On February 6, 2019, after the Applicant had brough the interim preservation order, the Respondent stopped paying her rent. The Applicant brought an urgent motion for spousal support. Doi J. ordered that the Respondent pay the Applicant $5,000 per month in interim spousal support to maintain the financial status quo between the parties. The Respondent was also ordered to pay costs in the amount of $3,500.
14On July 17, 2020, Doi J. dismissed the Respondent’s motion for partial summary judgment and his request to discontinue the interim spousal support payments. Doi J.’s reasons stated that after the interim spousal support order was made on February 11, 2019, the Respondent made one payment in March 2019 and made partial payments until June 2019 when he stopped all payments.
15The Respondent claimed that he was medically disabled as a result of a home invasion that prevented him from working. Doi J. held that the Respondent exaggerated or overstated the extent of any physical abilities.
16Doi J. also found the Respondent did not disclose “crucial financial information or records related to his interest in 3 companies that are said to have loaned him hundreds of thousands of dollars.”
17Doi J. held that based on the financial information provided the Respondent was able to pay spousal support due and was not impecunious.
18On August 31, 2020, Doi J. awarded costs to the Applicant for the motion in the amount of $17,900 to be paid within sixty days. Doi J. held that “the Respondent act dishonestly and wilfully to deprive the Applicant of interim spousal support knowing that his physical disability claim was untrue.”
19On October 22, 2020, the Respondent was also ordered to pay costs in the amount of $1,500 for failing to provide disclosure prior to the case conference as had been previously ordered. The case conference could not meaningfully proceed because of the Respondent’s failure to provide adequate disclosure.
20At the time of this motion, the Respondent had not paid the costs of $17,900 which was due as of October 30, 2020, and he has not paid the $1,500 in costs.
21The Respondent submits that he cannot afford to pay the costs orders in full, but he is making good faith efforts. He made e-transfer payments of $2,500 on July 2, 2021, and $2,525.00 on August 5, 2021. The motion to strike was filed on July 14, 2021.
Outstanding Spousal Support Owing
22The Respondent is also significantly in arrears for spousal support. As of December 1, 2020, the Respondent was in arrears of $84,377.05. He began to pay $500 per month pursuant to an agreement with the Family Responsibility Act but the amount of arrears has continued to grow.
23The Respondent submits that since his business revenues have decreased, he can not longer pay spousal support as he needs support for himself. On July 17, 2020, the Respondent’s motion for summary judgment to dismiss the Applicant’s claim for spousal support was dismissed as was his motion to vary the interim spousal support order if the summary judgement motion was not successful.
24With respect to spousal support, the Respondent states he has made good faith payments in the following amounts:
May 12, 2021: $500
June 14, 2021: $500
July 5, 2021: $1,000
July 6, 2021: $500
Disclosure Orders
25On July 17, 2020, Doi J. ordered the Respondent to provide a list of disclosure within 60 days. On January 18, 2021, the Respondent provided some disclosure and an explanation for why he was not able to provide the remaining items.
26The Applicant submits that there remains outstanding disclosure from the Respondent including documents related to the power of sale of the rental properties, invoices related to repair work and rental income.
27It is the Respondent’s position that the Applicant has not provided the disclosure he requested on December 24, 2020.
Legal Principles
28Striking pleadings and denying trial participation is an order of last resort that should only occur in the most exceptional and egregious of circumstances where no other remedy will suffice: Purcaru v. Purcaru, 2010 ONCA 92 at para. 47.
29Rule 1(8) of the Family Law Rules sets out the types of orders that the court may make where a party fails to obey a court order:
If a person fails to obey an order in a case or a related case, the court may deal with the failure by making any order that it considers necessary for a just determination of the matter, including,
(a) an order for costs;
(b) an order dismissing a claim;
(c) an order striking out any application, answer, notice of motion, motion to change, response to motion to change, financial statement, affidavit, or any other document filed by a party;
(d) an order that all or part of a document that was required to be provided but was not, may not be used in the case;
(e) if the failure to obey was by a party, an order that the party is not entitled to any further order from the court unless the court orders otherwise;
(f) an order postponing the trial or any other step in the case; and
(g) on motion, a contempt order. O. Reg. 322/13, s. 1.
30Rule 1(8.4) provides that:
If an order is made striking out a party’s application, answer, motion to change or response to motion to change in a case, the following consequences apply unless a court orders otherwise:
The party is not entitled to any further notice of steps in the case, except as provided by subrule 25 (13) (service of order).
The party is not entitled to participate in the case in any way.
The court may deal with the case in the party’s absence.
A date may be set for an uncontested trial of the case.
31The first issue the court must determine is whether there is a breach of a court order. If there is, the court has a wide discretion to determine what is the appropriate remedy. In doing so, the court must consider whether the actions of the Respondent are willful or not. In this case, this requires the court to consider whether the Respondent is impecunious as he claims.
Issue #1: Has the Respondent Breached the Court Orders?
32On this motion, the Respondent attempted to litigate the merits of the Applicant’s original application. That is not what this motion is about. Court orders have been made and the issue for the court to determine is if the Respondent has failed to comply with the orders and if so, what is the proper remedy.
33There is really no dispute that the Respondent has failed to pay all of the cost orders and failed to pay the spousal support ordered.
34Turning now to the disclosure orders. The most basic obligation in family law is the duty to disclose financial information. This duty is immediate and ongoing. When parties fail to provide timely disclosure, it creates delay and impedes the process of the action: Roberts v. Roberts 2015 ONCA 450 at paras. 11 and 12. When considering whether to strike the pleadings for the failure to provide disclosure, the court must consider the importance or material of the disclosure that has not been provided: Kovachis v. Kovachis, 2013 ONCA 663 at para. 34.
35When the court is faced with an allegation that there is a failure to obtain a disclosure order, the court must first be satisfied that there has been noncompliance with a court order. If that is satisfied, the judge may have other recourse.
36On July 17, 2020, the Respondent was ordered to provide the following disclosure,
- Within 60 days, the Respondent shall deliver the following financial disclosure to the Applicant:
i. all BMW purchase agreements and financing applications;
ii. all mortgage applications made within the last 5 years;
iii. all credit applications made within the last 5 years;
iv. all records for all alleged loans from private lenders, including but not limited to proof of initial transfers of funds, any loan agreement and charge terms, any amortization schedule, proof of all payments towards the alleged loans, and any discharge statements;
v. corporate financial statements and tax returns for Imax Real Estate and 2015314 Ontario Inc. for 2016, 2017, 2018 and 2019;
vi. corporate financial statement and tax return for Indus Mortgage Inc. for 2019, including supporting documents for all business expenses;
vii. 2019 T-statements from all sources and 2019 personal income tax return and notice of assessment;
viii. Supporting documentation for personal income tax returns for 2017, 2018 and 2019, including but not limited to T-statement
ix. and supporting documents for alleged business expenses listed on Statement of Business or Professional Activities for each year;
x. Supporting documents for all rental income;
xi. Personal and corporate bank and credit statements from January 1, 2017 to the present; and
xii. All scope of review documents, including client notes, for the August 14, 2019, income report by Gilmore & Company LLP;
37The Respondent did not comply with this order within 60 days. Rather, the Respondent’s provided disclosure that was somewhat responsive to this order in January 2021, some six months after the order was made. The Respondent has provided some information and provided “explanations” for why he cannot provide further information. In that sense, the disclosure is now complete but as will be explained below, there are significant gaps in the disclosure that would likely permit a trier of fact to draw an adverse inference about the Respondent’s true financial picture.
Issue #2: Is the Respondent’s Failure to Comply with the Court Orders Wilful?
38The Applicant submits the Respondent has the means to pay the outstanding amount owing pursuant to the court orders. He lives in a 3.2-million-dollar home that costs $9,000 to operate a month. The Applicant submits that the Respondent’s bank statements demonstrate that he spends around $300,000 per year on personal and largely discretionary expenses. This includes trips and a golf membership.
39The Respondent submits that he cannot pay the outstanding amounts owing pursuant to the court orders. He submits that he received no money from the sale of the rental properties. He also submits that he is unable to work and that there is very little equity in the former matrimonial home which he and his adult so reside in.
40I do not accept that the Respondent is not able to pay the outstanding cost and spousal support orders for the following reasons.
41First, the Respondent admits that he sold his vehicle for $25,000. He did not use those funds to pay the amounts owing to the Applicant. The Applicant provided Canada book value estimates of between $80,000 and $87,000 for the vehicle. The Respondent sold the vehicle for $25,000 but there was still a loan on the vehicle that the purchaser had to accept but it still sold for significantly less than $80,000. In addition, the buyer is not named in the supporting documentation which makes one question if this was truly an arms length deal. Regardless, the fact remains that the Respondent did not use these funds to pay the monies owed to the Applicant pursuant to the court orders.
42Second, I agree with Doi J.’s assessment of the Respondent’s inability to work. There is nothing in the new motion material that warrants coming to a different conclusion.
43Doi J. rejected the Respondent’s narrative that he was unable to work due to Posttraumatic stress disorder suffered from a home invasion on the motion to change the spousal support order. Doi J. found that the Respondent acted dishonestly and wilfully to deprive the Applicant of interim spousal support knowing his physical disability was untrue. Doi J. found at para 8 of his August 31, 2020, cost decision at para. 8,
By swearing an affidavit in which he claimed to have a total physical disability, I find that the Respondent acted dishonestly and wilfully to deprive the Applicant of interim spousal support knowing that his physical disability claim was untrue. As set out in my decision on the motion, the Applicant convincingly disproved the Respondent’s claim of total physical disability with publicly accessible social media evidence. Without pronouncing on the balance of his evidence, I find that the Respondent knowingly gave false evidence about his alleged total physical disability in a bad faith effort to mislead the court into ordering a discontinuation of his interim spousal support obligation. In turn, the Applicant incurred unnecessary costs in responding to his evidence on this point. The Respondent cannot act in bad faith with impunity. To address his misconduct, this costs award will include a component to reflect the need to discourage and sanction this kind of improper behaviour.
44Third, the Respondent has considerable equity in the former matrimonial home that could be used to pay the money outstanding from the court orders.
45In December 2018, the Respondent listed the house for sale for $3,200,000. The Respondent attested that it costs nearly $9,000 per month to maintain the home. The Applicant stated at that time the home had encumbrances of $1,584,960 and the property held approximately 1,600,000 in equity.
46The Respondent submits there is not as much equity in the former matrimonial home as the Applicant claims. The Respondent states there are two liens on the property; $1,850,000 mortgage to Nagaveni Manjunath dated 2010/11/08 and a further charge of $600,000 on 2013/04/11. There are no other encumbrances on the property since that date. The Respondent submits that the full charge of $600,000 is still outstanding on the property.
47The Respondent also submits that at the time of the transfer of the home in 2016, the debts exceeded the value of the property. He stated that since the market turned around in 2018 and 2019, he has some equity in the property “which he needs to protect for his own future.” He states that if he sells the home, he will need to be compensated for all of the carrying costs which he has paid for since 2010 to date. The Respondent submits there would not be a lot of funds left to pay the Applicant after these adjustments.
48I have serious reservations about the legitimacy of the $600,000 that the Respondent claims is due in full on the former matrimonial home. Given the complete lack of confirmatory evidence provided and that it was a private mortgage that has not changed in eight years. Regardless there is still considerable equity available in the former matrimonial home.
49Fourth, the Respondent’s evidence that he did not receive any funds from the sale of the two rental properties is suspect.
50The rental property located at 1181 Vanier Drive was sold under a power of Sale to Ali & Mirza for $1,163,635.37. There were no proceeds to the Respondent based on the trust ledger filed.
51The Respondent also sold 1299 Mineola Gardens on April 1, 2021. The trust ledge statement indicates that $1,312,153.79 was received on closing. $428,152.94 was paid to Danashankar Mallappa as a Second mortgage.
52I agree with Doi J.’s comments on the motion to change the interim spousal support order, that the Respondent is not being truthful regarding the rental properties. As Doi J. held,
In his affidavit sworn May 22, 2020, the Respondent first advised that one of his two rental properties, namely the property at 1181 Vanier Driver in Mississauga, had been sold. The parcel register for the Vanier property shows a power of sale transfer by a private lender, RBK Financing Inc., for $1.3 million which closed on April 21, 2020.
The parcel register for the Vanier property also shows that a $300,000.00 loan was registered on August 18, 2015 by Annapurna Tims, who is a mutual acquaintance of the parties. Ms. Tims transferred the charge to RBK Financing Inc. on August 3, 2018. The original charge was for $300,000.00, but the charge registration shows that only $145,000.00 was advanced to the Respondent.3 The only document in the record for this debt is an email dated April 3, 2019 from Bakhsho Bains (i.e., one of three directors for RBK Financing Inc.) advising the Respondent that his interest payments were in arrears. The Respondent did not mention being in arrears to RBK Financing Inc. in his earlier affidavits sworn December 10, 2019 and January 24, 2020 when he purportedly detailed his debts. According to the Respondent, the notice of power of sale apparently was dated February 26, 2020, which he briefly mentioned at this motion on March 10, 2020. Although the Respondent owed private loans to six (6) other lenders as his Financial Statement of December 10, 2019 reveals, Mr. Bains’ email is the only evidence of a private debt that he disclosed before this motion returned on March 10, 2020.
A title search on the Vanier property disclosed a construction lien by Facility Maintenance Solutions, located at 5-2450 Dunwin Drive in Mississauga, for $166,449.00 in services and materials supplied to the Respondent between August 15, 2017, and January 15, 2020, to “refinish and renovate basement, powder room, and two washrooms.”4 Earlier, the Respondent did not disclose any ongoing renovations to the Vanier property or disclose this $166,449.00 debt. His affidavit sworn January 24, 2020, made no mention of a construction debt, despite the fact that this debt apparently crystallized on January 15, 2020 (i.e., just over a week before he swore his affidavit).
Notably, the construction lien by the alleged lien claimant, Facility Maintenance Solutions, is signed by Ravi Ramanand and lists an address for service at 5-2450 Dunwin Drive in Mississauga. But the corporate profile for Facility Maintenance Solutions Corporation has its registered address as Unit 6, 2422 Dunwin Drive in Mississauga. A different company operates from 5-2450 Dunwin Drive, which is the address listed in the construction lien. Facilities Maintenance Solutions Corporation operates as “TBM Service Group Inc.” which is advertised as a business that does environmental cleaning and infection control (ECIC) and facility maintenance. Despite the Respondent’s claims to the contrary, Facility Maintenance Solutions Corporation does not seem to operate as a construction or renovation business, which raises questions about the work that it is said to have performed for 2 ½ years on the tenanted Vanier property. The Respondent did not disclose any records to confirm his account of the Vanier property renovations.
53Justice Doi, also questioned the legitimacy of the rental income as follows:
I question the Respondent’s claim that he had “negative” income from two rental properties in Mississauga. According to his valuator, the properties (i.e., which includes the Vanier property that sold under a power of sale) had been rented below fair market value and persistently yielded rental losses. This seems difficult to accept.
54The concerns about the construction lien repayment remain on this motion. There is very little documentation to support that repayment. There concerns about the proceeds from the rental property also remain. There are no receipts for the repair work that was allegedly done on the rental property or any correspondence with the tenants regarding the renovations. There are no receipts for rental income. There is also no very little documentation with respect to the private loans including meaningful proof of receipt of the funds and repayment of the funds with respect to the rental properties.
55Even if I were prepared to accept that the Respondent did not receive any money from the sale of the rental properties, this does not alter the fact that the equity in the matrimonial home alone is sufficient to pay the costs that remain outstanding.
56Finally, I note that the Respondent’s payments since May 2021, that he says demonstrates best efforts, were only made after the Applicant indicated that she was boing to bring a motion to strike the Respondent’s pleadings.
57Based on the foregoing, I find that the Respondent has not demonstrated that he is unable to afford to pay interim spousal support due to impecuniosity or that he cannot pay the outstanding cost awards.
Issue #3: What is the Proper Remedy?
58The court has various options where there is a failure to obey court orders. With respect to the issue of disclosure, I have considered the relevance of the nondisclosure, the extensiveness of disclosure provided, the efforts made, and explanations provided for nondisclosure.
59I would invite the Applicant at trial to request the trial judge draw an adverse inference from the Respondent’s failure to provide adequate disclosure. At this point, the absence of evidence by the Respondent bodes well in favour of the Applicant if she is successful on setting aside the separation agreement.
60In considering the proper remedy with respect to the outstanding cost orders and outstanding spousal support owing, I have considered the impact of the Respondent’s failure to pay the outstanding court orders and spousal support has had on the Applicant. The Applicant earns approximately $44,000. The Respondent claims the Applicant earns cash that she does not declare. He has not provided any evidence to support such a finding.
61The Applicant states that she is in significant debt trying to fund this litigation and significant sums of money to friends and family. She submits that the Respondent is trying to wear her down by attrition by resisting production of disclosure and by bringing a motion to vary the support order before a case conference. I accept that the Applicant is being significantly hampered in funding her litigation as a result of the Respondent’s actions.
62The Respondent’s failure to comply with the spousal support order and costs orders is wilful. There is enough equity in the former matrimonial home for the Respondent to pay the money that is outstanding. The Respondent has shown repeated disregard for paying the Applicant pursuant to the court orders. He sold his car and did not use those proceeds to pay the outstanding cost orders or spousal support arrears. The Respondent has chosen to live in a very expensive home that costs him approximately $9,000 per month to maintain. The Applicant has demonstrated that the Respondent has led a lavish lifestyle up until at least July 2020, when he brought the motion to vary the interim spousal order.
63Recognizing that striking of pleadings is a remedy of last resort, I am giving the Respondent one last chance to comply with the court orders. The Respondent is to pay the Applicant the amount owing for the outstanding cost orders and spousal support owing within 150 days.
64The Respondent may choose to remortgage or sell the house to satisfy the court orders. If the Respondent has not paid the Applicant the outstanding monies owed for costs and spousal support, the Applicant is granted has leave to have the motion to strike the pleadings be heard without further leave of the court. If the Respondent fails to repay the Applicant the outstanding amounts owed for costs and the amount of arrears owing for spousal support, the Respondent is likely to have his pleadings struck and the court order that the Applicant may proceed to trial on an uncontested basis.
Conclusion
65The court makes the following orders:
The Respondent is to pay the Applicant the outstanding amounts owing for the cost orders dated February 11, 2019, July 17, 2020, and August 31, 2020, and October 22, 2020, within 150 days of this receiving this endorsement.
The Respondent is to pay the Applicant the outstanding amounts owing for spousal support as of September 30, 2021, within 150 days of receiving this endorsement.
The Applicant is to provide reasonable consent to permit the Respondent to either sell the former matrimonial home or remortgage the former matrimonial home to fund the payments to the Applicant.
The Applicant is to be provided all documents regarding the sale or remortgaging of the former matrimonial home prior to providing her consent to ensure that the Respondent is not unnecessarily depleting the assets in the former matrimonial home.
If the Respondent has not paid the outstanding amounts owed for costs and spousal support within 150 days of receipt of this endorsement, the Applicant is granted leave by this court to renew her motion to have the Respondent’s pleadings struck so that she may proceed with an uncontested trial. This motion may be heard on any regular motion day. I am not seized with the matter.
Costs
66If the parties are unable to resolve the issue of costs, the Applicant shall serve and file written submissions of no more than two pages, double spaced, twelve-point font, relevant case law, a detailed bill of costs, and any offers to settle within ten days of receipt of this endorsement.
67The Respondent may file a response consisting of written submissions of no more than two pages, double spaced, twelve-point font, relevant case law and a detailed bill of costs, if not already provided and any offers to settle within ten days receipt of the Applicant’s submissions.
68The Applicant may file a one-page reply, double spaced, twelve-point font, within five days of receipt of the Respondent’s submissions on costs.
Dennison J.
Released: October 01, 2021