Court File and Parties

COURT FILE NO.: FC-17-FS-006600-00 (Simcoe) DATE: 2021/10/27

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Lynn Michelle Smith, Applicant AND: Darrin Smith, Respondent

BEFORE: Madam Justice J. Breithaupt Smith

COUNSEL: J. Lyons, Counsel for the Applicant W. Drescher and C. Muller, Counsel for the Respondent

HEARD: October 27, 2021 DECISION RELEASED: October 27, 2021

ENDORSEMENT

Scope of Motion

[1] In the midst of this family trial focused on financial issues between these separated spouses, the Applicant, Lynn Michelle Smith, brings an Emergency Motion, seeking the following relief [sic]:

1. An Order that the Trial for this matter be suspended to allow the forensic analysis including a comprehensive valuation of the Respondent, Darrin Smith's, assets including any corporation of which he has a 50% or greater shareholder stake.

2. An Order that the Respondent, Darrin Smith, pay for the required forensic accounting to complete the analysis and that he comply with any requests for the disclosure of documents required for the professional to complete the forensic analysis.

In the Alternative:

3. An Order that the court continue the Trial, but that the court find a negative inference from this lack of financial disclosure and failure to abide by the requirements of the Family Law Rules in providing financial disclosure.

4. Costs on a substantial indemnity basis.

5. Any other Order that this honourable court deems just.

[2] Submissions were heard at approximately 3:00 p.m. yesterday, shortly after the service and filing of the Motion and the Affidavit of Lynn Michelle Smith in support thereof. In the trial, the Applicant's case is completed and the Respondent, Mr. Darrin Smith, is being examined in chief. Ms. Smith attests in her Affidavit that during Mr. Smith's evidence in chief she heard the name of an individual with whom Mr. Smith conducts business which led her to search the database of the Ministry of Government and Consumer Services. This search, conducted during yesterday's lunch break, generated a Corporate Profile Report showing Mr. Smith as a Director (holding the positions of Secretary and Treasurer) of a corporation opened on April 21, 2016 with the name "Great Lakes Crane & Rigging Co. Ltd." The date of inception of that corporation pre-dates either party's alleged date of separation.

Background

[3] It is important to appreciate the parties' theories regarding the family finances, which are of course in direct opposition to one another: Ms. Smith's understanding is that the family enjoyed a luxurious lifestyle and that Mr. Smith continuously moved funds between numerous prosperous corporations to cloud the true financial picture; Mr. Smith's position is that the family had long been in desperate financial straits and that the worst was avoided only by reliance upon the charity of many now-unpaid creditors who advanced literally hundreds of thousands of dollars to the Smiths and the businesses over the course of the marriage.

[4] The litigation background includes the Trial Management Conference held by Broad, J. on January 29, 2020 which generated the Trial Scheduling Endorsement Form ("TSEF") included in the Trial Record. At page 9 of the TSEF, His Honour ticked the box: "There shall be no further motions without permission obtained from a judge." and added: "– possible need for motions re: outstanding disclosure."

[5] In view of Justice Broad's notation, Ms. Smith brought a motion for (amongst other relief) disclosure and to strike pleadings, which was first heard by Nightingale, J. on September 4, 2020 and then adjourned to September 16, 2020. His Honour's Temporary Order made on that date includes the following paragraph:

7. Pursuant to the Family Law Rules, the Respondent is required to complete all of his outstanding undertakings referred to in Exhibit D no later than September 14, 2020 as well as provide the financial disclosure referred to in paragraph 47 of the Applicant's affidavit of August 10, 2020.

Neither Exhibit D, nor paragraph 47, nor a compilation of the contents thereof, were appended to the Temporary Order. Thus, it is impossible for this Court to make head or tail of what disclosure was requested, what may have been provided, and/or what remains outstanding.

[6] The question of the need for Justice Nightingale's Temporary Order to be corrected, as it cannot be understood on its face, arose during the trial. Although I was prepared to require counsel to attend before His Honour to make submissions regarding the need and scope of any correction (pursuant to Rule[^1] 25)[^2], the concern appeared to evaporate such that Ms. Lyons on Ms. Smith's behalf effectively withdrew the request to address the disclosure issue by way of mid-trial argument.

[7] On September 16, 2020, MacLeod, J. booked the motion for argument on September 28, 2020 at 2:00 p.m. I am advised by counsel that there were two further adjournments of the motion, which was never substantively argued.

Parties' Positions on the Motion

[8] Ms. Lyons for Ms. Smith indicated that her client was seeking the direction of the Court in the conduct of the trial, relying upon the broad wording of Rule 1(7.2). She argued that the lack of disclosure was an ongoing theme, and that having regard to her client's view that there are multiple corporate assets in which Mr. Smith has an interest that have not been disclosed, the conduct of the trial should be "suspended" until a "forensic analysis" is provided.

[9] Mr. Drescher responded with four specific arguments: (1) the Court has no jurisdiction to hear such a motion mid-trial as same is not contemplated by Rule 14; (2) the TSEF specifically addressed the question of disclosure motions, and the Applicant chose not to pursue the still-unresolved motion brought in September of 2020; (3) the proper procedure is for the existence of Great Lakes Crane & Rigging Co. Ltd. to be raised in cross-examination of Mr. Smith, with reply evidence from the business colleague (and President of that corporation) to be tendered as necessary; and (4) that Mr. Smith cannot be ordered to produce disclosure or to conduct any kind of valuation for a corporation in which he holds no ownership interest,[^3] which productions would be irrelevant to the determination of his Net Family Property if the assets valued do not belong to him.

[10] In reply, Ms. Lyons points out that it would be impossible for her client to request specific disclosure regarding unknown corporations in which Mr. Smith has an interest. She argues that this is the whole point – that Ms. Smith cannot know what is being hidden from her.

Law & Discussion

Jurisdiction

[11] Dealing first with the question of jurisdiction, I find that the Trial Judge has jurisdiction to address mid-trial motions in the context of Rule 14(1)(2) ("Directions on how to carry on the case."). I note further that Rule 1(8)(f) specifically names the relief of "postponing the trial" for non-compliance with an existing Order, which relief would not be available if Trial Judges were precluded from hearing mid-trial motions. If I am wrong, and there is indeed a gap in the Family Law Rules on this point, regard must be had to the Rules of Civil Procedure, and in particular Rule 37.02(1) which confirms that "A judge has jurisdiction to hear any motion in a proceeding."

Negative Inference

[12] Dealing next with the request that the Court "find a negative inference from this lack of financial disclosure and failure to abide by the requirements of the Family Law Rules in providing financial disclosure," I reiterate my comments made during the argument of this motion that the making of such an Order mid-trial and before Mr. Smith's evidence has even concluded would be prejudicial and unnecessary. Should any trial judge decide, in his or her Reasons for Judgment produced after having heard all of the evidence, that a negative inference is to be drawn, so be it. Ms. Smith's position is one left for closing argument, and to make such a request on a mid-trial motion is inappropriate.

A Second Expert

[13] Regarding the request that a forensic analysis be conducted and that "the Respondent, Darrin Smith, pay for the required forensic accounting to complete the analysis and that he comply with any requests for the disclosure of documents required for the professional to complete the forensic analysis," it is unclear who would be retained to conduct this forensic accounting/analysis. It is clear, based on the wording of Rule 13, that Mr. Smith is not obligated by the Family Law Rules to produce a valuation of his corporate interests; rather, his obligation is to produce evidence regarding share ownership and the financial statements and income tax returns of the corporation for the three years preceding the date of separation.[^4]

[14] Presumably, Ms. Smith would have no confidence in the work of a forensic accountant retained by Mr. Smith. It flows therefore that Ms. Smith is asking the court to appoint an expert pursuant to Rule 20.3. The complete text of Rule 20.3 is produced as Appendix "A" to this Endorsement. Suffice it to say that I have not been provided with the information necessary to enable me to seriously consider a request for a court-appointed expert.

Adjournment of the Trial

[15] This leaves the request to adjourn the trial. I would point out here that the Court has not been provided with a satisfactory explanation as to why Ms. Smith did not pursue her motion for disclosure and for the striking of Mr. Smith's pleadings in the Fall of 2020. Regarding the allegedly missing disclosure and the absence of an expert critique of the valuations produced by Mr. Smith, the situation as a whole seems suggestive of an inattentiveness to trial preparation. I am not convinced that there were no options open to Ms. Smith to attempt to elicit information in advance of trial, including pursuing her outstanding motion. Certainly, it was always open to Ms. Smith to retain an expert to critique the valuations prepared by Mr. Smith's expert or to provide an alternate opinion. If she found herself unable to fund an expert's involvement in that regard, she could have brought a pre-trial motion under Rule 20.3 asking the court to appoint an expert and to apportion the lion's share of the fees to Mr. Smith.

[16] Having said this, I appreciate that the existence of unknown corporate interests could change Mr. Smith's Net Family Property and thus the calculation of the equalization payment. While Ms. Lyons could most certainly use the existence of Great Lakes Crane & Rigging Co. Ltd. to impugn Mr. Smith's credibility in cross-examination, that could arguably generate a circumstance where the Court is faced with a determination of Net Family Property founded on shaky and/or non-existent valuation evidence.

[17] Counsel did not refer me to any caselaw connected with this unusual request. My own research, although not exhaustive having regard to the urgency of this matter, turned up no reported Ontario family court cases on point. Two reported cases provide guidance, however, the Ontario Court of Appeal decision respecting a personal injury case in Graham v. Vandersloot[^5] and the British Columbia Supreme Court family law matter of Cao v. Chen[^6].

[18] In Graham v. Vandersloot, the plaintiff sought an adjournment of the trial because she did not have up-to-date medical reports to prove her claim for damages. The motion judge denied the plaintiff's adjournment request and the trial proceeded. The plaintiff called no evidence at trial and her claim was dismissed. On appeal, Blair, J.A. set out the statement of principles regarding a trial judge's discretion on an adjournment request[^7]:

A trial judge enjoys wide latitude in deciding whether to grant or refuse the adjournment of a scheduled civil trial. The decision is discretionary and the scope for appellate intervention is correspondingly limited. In exercising this discretion, however, the trial judge should balance the interests of the plaintiff, the interests of the defendant and the interests of the administration of justice in the orderly processing of civil trials on their merits. In any particular case several considerations may bear on these interests. A trial judge who fails to take account of relevant considerations may exercise his or her discretion unreasonably and if, as a result, the decision is contrary to the interests of justice, an appellate court is justified in intervening.

[19] In holding that the motions judge gave undue weight to the plaintiff's lawyer's failure to arrange for the medical report to be updated, the Court cited Halton Community Credit Union Ltd. v. ICL Computers Canada Ltd.[^8]:

Undoubtedly counsel is the agent of the client for many purposes . . . but it is a principle of very long standing that the client is not to be placed irrevocably in jeopardy by reason of the neglect or inattention of his solicitor, if relief to the client can be given on terms that protect his innocent adversary as to costs thrown away and as to the security of the legal position he has gained.

[20] In holding that the interests of justice favoured the plaintiff "having her day in court to put forward her claim for damages on the merits," the Court agreed with Perell, J.'s comment on the primary concerns of the Court in the context of a request to adjourn a trial[^9]:

In my opinion, a concern for the principles of natural justice and the appearance of justice being done explains why, perhaps to the chagrin of those opposing adjournments and indulgences, courts should tend to be generous rather than overly strict in granting indulgences, particularly where the request would promote a decision on the merits. This liberality follows because it is in the public interest that whatever the outcome, a litigant should perceive that he or she had their day in court and a fair chance to make out their case.

[21] The Court of Appeal set aside the motions judge's order refusing the adjournment of the trial; reinstated the action; and ordered a new trial.

[22] In Cao v. Chen, the Applicant Wife sought an adjournment of the trial for four reasons, one of which was an alleged failure by the Respondent Husband to comply with an order for the production of documents and to serve and file an updated Financial Statement. In an argument similar to the one made by Mr. Drescher on Mr. Smith's behalf in this litigation, the Respondent Husband asserted that "the allegation of the lack of document production[^10] is a red herring… the claimant has all relevant documents that pertain to the issues between the parties." The BC Supreme Court cited Graham v. Vandersloot and listed a number of additional factors for consideration, noting[^11]:

It has been said that simple neglect to get properly ready for a hearing, while irksome for the other party, will still usually lead to an adjournment on the theory that the prejudice to the person denied the adjournment will be greater than prejudice to the person who is forced to accept an adjournment. It would be unjust to decide, without more, that a party who has been less than diligent will be forced to go to trial unprepared.

[23] Pointing out that the Court has an obligation to ensure that a fair standard of support would be made, Forth, J. concluded that the trial was not ready to proceed and ordered an adjournment "so that appropriate pre-trial steps and the receipt of expert evidence can be obtained" to "ensure a fair trial on the merits…"[^12]

[24] As in Cao v. Chen, it appears clear that this matter was not actually ready to proceed to trial, despite the hearing of six days of evidence. Because of the nature of the outstanding motion and the possibility that Ms. Smith may ask the Court to appoint an expert to address the alleged deficiencies in the evidence regarding the value of Mr. Smith's corporate interests, I do not see how this trial could continue on the basis of Ms. Smith's now completed case. As in Graham v. Vandersloot, the absence of evidence warrants a new trial, which could well be the result of any appeal from a trial decision arising from the adjournment and continuation of this trial. For clarity, as an amendment to the TSEF prepared by Broad, J., I will grant leave to Ms. Smith to revive her outstanding motion for argument and to bring a motion under Rule 20.3 seeking a court-appointed expert.

[25] Similarly, and without suggesting that I have in fact reached any conclusions that would be prejudicial to either party, I am concerned that an "informed person, viewing the matter realistically and practically -- and having thought the matter through"[^13] would conclude that my having already seen the entirety of Ms. Smith's testimony could impact upon any attempt at a fresh assessment of her credibility in a second trial. Impartiality is the hallmark of justice, and the Court owes litigants an over-arching duty to deal with cases justly (per Rule 2(2)). Thus, I will recuse myself from hearing the new trial.

[26] Finally, it cannot be known at this point in time whether costs incurred by Mr. Smith, who asks that the trial proceed, are in fact "thrown away." Arguably, if Mr. Smith has actively misled the Court by failing to make full and frank disclosure, it would be disingenuous for costs incurred by him for these last six days of trial to be paid to him by Ms. Smith. Thus, I see no alternative but to order that costs of this aborted proceeding be addressed by the judge ultimately trying the case.

Order

[27] Pursuant to the Courts of Justice Act and the Family Law Rules, Temporary Order to go:

1. The trial of this matter is discontinued, and a new trial ordered, to be scheduled through the Trial Co-ordinator's office.

2. The new trial is not to be heard by Breithaupt Smith, J.

3. The Applicant is granted leave to bring a motion under Rule 20.3 of the Family Law Rules.

4. The Applicant is granted leave to revive the still-outstanding motion originally addressed by means of the Temporary Order of Nightingale, J. dated September 4, 2020.

5. Costs of the proceedings held between Tuesday, October 19, 2021 and Wednesday, October 27, 2021 (inclusive), are reserved to the Trial Judge.

J. Breithaupt Smith, J.

Date: October 27, 2021

APPENDIX "A" to the Endorsement of Breithaupt Smith, J. dated October 27, 2021

Excerpt from [Family Law Rules](https://www.canlii.org/en/on/laws/regu/o-reg-114-99/latest/o-reg-114-99.html), O. Reg. 114/99

RULE 20.3: COURT-APPOINTED EXPERTS

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.

(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.

(3) Despite clause (2) (c), the court may relieve a party from a requirement to pay any of the expert's fees or expenses if the court is satisfied that requiring the payment would cause serious financial hardship to the party.

(4) If a motion is made under subrule (1) that is opposed, the court may, as a condition of the appointment, require the party making the motion to give such security for the expert's fees and expenses as is just. O. Reg. 250/19, s. 8.

(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.

(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.

(7) The expert's report is admissible in evidence in the case.

(8) An expert appointed under this rule may be cross-examined at trial by any party.

(9) This rule does not apply to requests by the court that the Children's Lawyer act under subsection 112 (1) of the Courts of Justice Act or to appointments of persons by the court under,

(a) subsection 30 (1) of the Children's Law Reform Act (assessment of needs of child); or

(b) subsection 98 (4) or (5) of the Child, Youth and Family Services Act, 2017 (assessment orders).

(10) Despite clause (9) (a), the report required under subsection 30 (1) of the Children's Law Reform Act shall contain, at a minimum, the information listed in paragraphs 1 to 6 of subrule 20.2 (2), unless the court orders otherwise.

[^1]: All references to "Rule" are to the Family Law Rules, O. Reg. 114/99 as am., unless otherwise specified.

[^2]: I note here that Mr. Drescher on Mr. Smith's behalf argued that, as the Temporary Order had already been issued by court staff, "settlement" of its contents as contemplated by Rule 25(5) – (7) was not available. Had the matter been brought before Nightingale, J., His Honour would have addressed that submission.

[^3]: The Corporate Profile Report, of course, does not contain information regarding share ownership.

[^4]: Rule 13(3.3)7. and 8., and note that the corporate tax returns are required to be produced by the shareholder only "if the interest was a majority interest."

[^5]: 2012 ONCA 60.

[^6]: 2017 BCSC 1851.

[^7]: Graham v. Vandersloot, supra note 4 at page 644, quoting Khimji v. Dhanani, 2004 CanLII 12037 (ONCA).

[^8]: Graham v. Vandersloot, supra note 4 at page 646, citing [1985] O.J. No. 101 at paragraph 11.

[^9]: Graham v. Vandersloot, supra note 4 at page 646, quoting Ariston Realty Corp. v. Elcarim Inc., 2007 CanLII 13360 (ON SC) at paragraph 38.

[^10]: In Cao v. Chen, regarding the Respondent Husband's previously-litigated assets in China.

[^11]: Cao v. Chen, supra note 5 at paragraph 24.

[^12]: Cao v. Chen, supra note 5 at paragraph 47.

[^13]: R. v. S. (R.D.), 1997 CanLII 324 (SCC) at paragraph 111.