Court File and Parties
COURT FILE NO.: FC1787/13-01 DATE: March 17, 2022 SUPERIOR COURT OF JUSTICE – ONTARIO FAMILY COURT
RE: Adam Edward Campbell, applicant AND: Katie Campbell, respondent
BEFORE: MITROW J.
COUNSEL: Adam Edward Campbell in person Katie Campbell in person
HEARD: January 24, 2022
amended ENDORSEMENT
INTRODUCTION
[1] This is the respondent’s motion to require the applicant to comply with the order of Henderson J. dated November 13, 2020 (“the disclosure order”), which required the applicant to provide financial and other disclosure as ordered therein.
[2] For reasons that follow, the applicant is ordered to comply with the disclosure order subject to terms and conditions as set out in the order below.
BRIEF BACKGROUND
[3] The parties have been embroiled in high-conflict litigation for many years.
[4] A lengthy trial that included issues in relation to parenting and child support was heard by McSorley J. and resulted in the final amended order dated July 19, 2017. This order included a divorce.
[5] The parties have one child, age eight. The final order provided for the parties to share week-about parenting time with the child.
[6] In relation to child support, McSorley J. imputed $150,000 income to the applicant and $35,000 income to the respondent. The final order required the applicant to pay table child support of $1,263 per month; no child support was payable by the respondent to the applicant “having regard to s. 9 of the Child Support Guidelines.”
[7] The current litigation was commenced by the applicant in 2019, seeking a change to the parenting schedule. The respondent seeks an increase in child support.
[8] The applicant is involved in the moving business. He is one of the principals of a group of inter-related companies that at times have been described as the “Campbell Group of Companies.” The respondent deposes that the applicant has assumed new responsibilities within this business and describes the applicant as the “CEO.” The applicant does not challenge this description of his position. It is the respondent’s position that the applicant’s true income available to him for child support exceeds significantly the sum of $150,000 imputed to him at trial. The applicant resists any suggestions in that regard.
[9] The disclosure order required the applicant to provide the following documents and information within 90 days:
i. From the Applicant’s Accountant, a chart setting out the corporate structure of the Campbell Group of Companies.
ii. The Accountant shall disclose any interest the Applicant has, including any shareholdings, in any named company.
iii. The Accountant shall disclose total remuneration the Applicant has received over the last 3 years, including income, dividends, reimbursement of expense or any benefit from any named companies.
iv. The Applicant shall provide the financial statements and corporate income tax returns for each of the named companies for the past three (3) years.
v. A report from the Applicant’s doctor setting out the medical illness that prevented him from working from December 10, 2019 to August 10, 2020.
[10] The applicant sought leave to appeal the disclosure order; the motion for leave to appeal was dismissed by the Divisional Court [1] on February 26, 2021.
[11] The applicant has complied minimally with the disclosure order.
[12] Given the tendency of both parties to ignore the Family Law Rules and court orders as to filing material, it is important to clarify the documents that form the evidentiary record on the respondent’s motion.
[13] When the respondent initially brought her motion for compliance with the disclosure order, her motion was dismissed for failing to comply with an existing order of this court dated September 30, 2019. That order prohibited either party from bringing any further motions unless that party first sought leave to bring that motion, and the order provided specific provisions as to the bringing of the leave motion and the material to be filed on the leave motion.
[14] Eventually the respondent did obtain leave and served her motion. In order to clarify specifically for the parties the material that would constitute the evidentiary record for the respondent’s motion, my endorsement dated January 14, 2022 provided that the evidentiary record consists of the following documents:
a) the respondent’s form 14B motion for financial disclosure initially returnable August 5, 2021;
b) my order dated September 29, 2021, paragraph 1, granting leave to the respondent to bring the aforesaid motion;
c) the respondent’s affidavits sworn April 16, 2021 and May 26, 2021;
d) the applicant’s affidavit sworn May 25, 2021 and the applicant’s affidavit sworn July 27, 2021, paragraphs 15-22 inclusive and Ex. A; and
e) the order of Henderson J. dated November 13, 2020.
[15] Notwithstanding the January 14, 2022 order, the applicant served and filed a further affidavit sworn January 18, 2022 for use on the motion. The applicant was advised during the motion that this affidavit would not be considered by the court, as it was in breach of the order of January 14, 2022.
DISCUSSION
[16] Shortly after the dismissal of the applicant’s motion for leave to appeal, the applicant forwarded a letter to the respondent dated March 1, 2021. In relation to subparagraph (i) of the disclosure order, requiring the “Applicant’s Accountant” to provide a chart setting out the corporate structure of the “Campbell Group of Companies,” the applicant’s response was that he has not ever had an accountant and that he does not own a corporation with that name. That response was glib and disingenuous. The applicant was well aware that the intent of the order was to provide disclosure as to the entire corporate structure of the “Campbell Group of Companies.” This information would need to come from the accountant or controller of the main umbrella corporation.
[17] In relation to subparagraph (ii) of the disclosure order, the applicant repeated that he had never had an accountant and that his shareholdings have been disclosed in his “financial statement signed and served.” The applicant’s subsequent financial statement sworn July 22, 2021 discloses his business interests as “Campbell Bros Movers – 25% Owner.” The applicant’s financial statement does not disclose any indirect interest the applicant would have in corporations that may be owned by “Campbell Bros Movers.” Further, the applicant’s financial statement is inaccurate as it fails to show the correct name of the corporation of which he is a shareholder. Also noteworthy is that the applicant’s financial statement discloses a net worth slightly in excess of $2.3 million.
[18] The applicant’s letter demonstrates that the applicant has failed to comply entirely with subparagraph (ii) of the disclosure order. Further, the proper interpretation of subparagraph (ii) infers that the disclosure should be provided by the corporate accountant or controller.
[19] As to subparagraph (iii) of the disclosure order, the applicant again repeats that he has no accountant, and that his “complete income” has been provided with his “complete income tax returns and notices of assessment.” This is not responsive to the specific terms of subparagraph (iii) as to the information that was to be provided. Also, a proper interpretation of the order inferred that the information is to be provided by the corporate accountant or controller. However, as discussed below, the applicant subsequently did provide some disclosure required by subparagraph (iii).
[20] In relation to subparagraph (iv) of the disclosure order, the applicant responds that he does not have such documents in his possession and suggests that other shareholders are preventing the disclosure of those documents. Given the applicant’s senior corporate position for the business, any claims by the applicant that he is unable to procure the financial statements and corporate income tax returns of all the corporations as required in subparagraph (iii) are not believable.
[21] In relation to subparagraph (v) of the disclosure order, requiring a medical report from the applicant’s doctor setting out what prevented the applicant from working between December 10, 2019 and August 10, 2020, the applicant refers to some pages attached to his letter.
[22] The “medical information” that accompanied the applicant’s letter to the respondent was included, at least in part, in the respondent’s affidavit. One document included a handwritten note from Dr. Kelland dated February 1, 2021. It was written on a prescription sheet. The handwritten note indicates that the applicant could not wear a facemask during exercise workouts due to medical reasons. The other information provided in relation to subparagraph (v) also is not remotely responsive to the order.
[23] The applicant failed to comply with subparagraph (v) of the disclosure order.
[24] Given the applicant’s aforesaid responses in his letter dated March 1, 2021 to the disclosure order, this prompted the respondent to bring her motion for compliance with the disclosure order.
[25] In his affidavit sworn May 25, 2021, in relation to subparagraph (i) of the disclosure order, the applicant does provide some corporate information. He tells the court that he is a 25% owner of “Ontario Incorporated 5004990.” He then lists nine other corporations, using a similar nomenclature structure for each corporation, and he deposes that every one of those corporations is owned in part by “Ontario Incorporated 5004990,” ranging from 49% to 100%. For four of those corporations, the ownership is 100%, for two of the corporations it is 90%, for two of the corporations it is 75% and for the remaining corporation it is 49%.
[26] It appears that none of the corporate names shown are proper full names of each corporation. Further, and importantly, the information should be coming from the corporate accountant or controller. I find that the applicant still has not complied with subparagraph (i) of the disclosure order.
[27] In this affidavit, the applicant also deposes that he and the other shareholder partners operate the companies under the terms of a shareholders’ agreement. That agreement is not provided, nor is any excerpt from the agreement provided.
[28] This affidavit also lists eight other persons who are shareholders of the various corporations within the group of companies.
[29] The applicant also deposes that no shareholder can release company documents without the consent of 75% of the shareholders unless the shareholder obtained greater than 50% ownership of the shares of a corporation.
[30] The applicant then deposes that, if he was to breach the shareholders’ agreement, then he could “be removed as President and/or shareholder.”
[31] The clear inference is that this shareholders’ agreement predates the disclosure order.
[32] The applicant’s refusal to provide disclosure on the basis of an alleged shareholders’ agreement is unconvincing in the extreme and deserves little or no weight. It is demonstrative of the applicant’s attitude to withhold from the respondent, despite a court order to the contrary, important financial information from the corporations that will help explain the true income available to the applicant to meet his child support obligation.
[33] In that affidavit, the applicant attaches an excerpt from the parties’ cohabitation agreement, alleging that the respondent has agreed to terms which prohibit the release of corporate documents. Nothing in that extract assists the applicant in relation to proper disclosure required by the relevant legislation and Child Support Guidelines in relation to income disclosure from all sources, including corporations. In any event, the cohabitation agreement predates the disclosure order.
[34] In his later affidavit sworn July 27, 2021, the applicant does acknowledge some limited understanding that he has an obligation to comply with the disclosure order.
[35] The applicant appends as an exhibit a letter from Mr. Chris Gordon, controller of “Campbell Bros Movers Limited.” It appears that the applicant does understand that the disclosure order, properly interpreted, required the information to be provided by the controller of the umbrella corporation.
[36] That letter, dated July 14, 2021, indicates that Mr. Gordon has reviewed the applicant’s reimbursements paid for the period March 1, 2017 to February 1, 2021. The letter covers four fiscal years, each fiscal year ending in February. Therefore, the fiscal year ends for February 2018, 2019, 2020 and 2021 are covered and, for each of those fiscal years, totals are set out for reimbursements paid to the applicant for business travel, business meals and fuel. It is not clear whether the reimbursements came from Campbell Bros Movers Limited or other corporations within the group of companies.
[37] The letter indicates that the applicant receives his full and only income from “Campbell Bros Movers Ltd.” for any of the group of companies for “2017 and after to date.” The letter does not confirm what the income is to the applicant for each of those fiscal years, nor does the letter address clearly whether the applicant has received any “income, dividends … or any benefit from any named companies” as required by subparagraph 2(a)(iii) of the disclosure order. The letter discloses amounts received by the applicant but only in relation to reimbursement of the expenses set out above. The remaining portions of subparagraph (iii) of the disclosure order are not answered.
[38] The applicant also appends as an exhibit to that second affidavit an email from “PwC,” indicating that an expert report outlining the income available to the applicant from the various corporations would cost an estimated $25,000 to $35,000. That email was sent to the applicant on July 15, 2021 by Iain J. Fraser of PwC.
[39] While the respondent’s motion does not include a request for an income report, the applicant is urged to give strong consideration to obtaining such a report. There appears to be some complexity to the corporate structure and it appears unlikely that a true picture will emerge of the income available to the applicant unless an expert report is prepared. The best way that the applicant can meet his obligation for full disclosure, and assist the court as he is required to do, is to engage an expert, such as PwC, to prepare an income report. The order below permits the applicant an opportunity to do that voluntarily, failing which the order provides for the respondent to pursue an order for an income report.
[40] The applicant harbours a simplistic analysis that his income that is available for child support is solely what is disclosed in his personal T1 general income tax returns. The applicant ignores entirely that his senior corporate position allows him to control his income. Also, there is a significant potential that, within the corporate structure, that the applicant receives benefits from monies paid by various corporations to others that properly should be included in income available to the applicant for child support purposes.
[41] The applicant has been engaging in a process of patent non-disclosure, even in the face of a court order. Except for some minimal disclosure as discussed above, the applicant has refused compliance with the disclosure order for over one year since his motion for leave to appeal was dismissed. The financial information that was ordered is totally within the knowledge of and available to the applicant. On the applicant’s own evidence as to the number of corporations, it is apparent that the business the applicant is involved with has a complex corporate structure with corporations throughout Canada.
[42] In Leitch v. Novac, 2020 ONCA 257, the Court of Appeal for Ontario repeated why “non-disclosure is the cancer of family law,” stating at para. 44:
44 As the Supreme Court suggested in Leskun v. Leskun, 2006 SCC 25, [2006] 1 S.C.R. 920 (S.C.C.), at para. 34, nondisclosure is the cancer of family law. This is an apt metaphor. Nondisclosure metastasizes and impacts all participants in the family law process. Lawyers for recipients cannot adequately advise their clients, while lawyers for payors become unwitting participants in a fraud on the court. Judges cannot correctly guide the parties to a fair resolution at family law conferences and cannot make a proper decision at trial. Payees are forced to accept an arbitrary amount of support unilaterally determined by the payor. Children must make do with less. All this to avoid legal obligations, which have been calculated to be a fair quantification of the payor's required financial contribution. In sum, nondisclosure is antithetical to the policy animating the family law regime and to the processes that have been carefully designed to achieve those policy goals.
[43] The applicant, in his affidavit material, attempts to argue why he should not have to provide some of the disclosure that was ordered. That evidence is misguided. The order has been made. The order is not a suggestion – it is an order and must be obeyed.
[44] The Family Law Rules provide consequences if a party fails to obey an order of the court. Rule 1(8) states:
Failure to obey order
(8) 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.
[45] Where a file begins to be infected with the “cancer of family law” – financial non-disclosure – the court has a responsibility to make an order designed to eradicate the continuation of financial non-disclosure. Having regard to r. 1(8), the order below includes terms and conditions designed to ensure that the applicant does what he has been ordered to do.
[46] The applicant needs to readjust his attitude, to push the “reset button” and to provide the disclosure as ordered. Failure to do so will result inevitably in unwelcome consequences being visited upon the applicant.
ORDER
[47] A temporary order shall go as follows:
It is declared that the applicant has failed to comply with the order of Henderson J. dated November 13, 2020 in its entirety, save and except partial compliance with paragraph 2(a)(iii) of the aforesaid order, by providing details as to reimbursements of expenses for business travel, business meals and fuel.
Within 28 days, the applicant shall comply fully with the order of Henderson J. dated November 13, 2020 (at times referred to as “the disclosure order”) in the manner set out below.
Compliance with the disclosure order shall require the following: (a) where the disclosure order requires information from the “applicant’s accountant” or the “accountant,” that information shall be provided in a document signed by the controller of Campbell Bros Movers Limited; and (b) in relation to paragraph 2(a)(i) of the disclosure order, the chart setting out the corporate structure shall provide the full and correct name of every corporation.
The applicant shall provide proof to the court that he has complied with the disclosure order as follows: (a) within 28 days, the applicant shall serve and file an affidavit signed by the applicant (hereinafter described as the “compliance affidavit”) containing the information described in this paragraph; (b) the compliance affidavit shall list all the documents that the applicant has provided to the respondent as required by subparagraphs 2(a)(i) and (ii) of the disclosure order and, further, copies of those documents shall be appended and marked as Exhibits A and B, respectively, to the compliance affidavit; (c) the compliance affidavit shall list the balance of the documents that the applicant has provided to the respondent as required by subparagraph 2(a)(iii) of the disclosure order, and copies of the balance of those documents shall be appended and marked as Exhibit C to the compliance affidavit; (d) the compliance affidavit shall list and identify every financial statement and every corporate income tax return that is required to be provided pursuant to subparagraph 2(a)(iv) of the disclosure order, and the applicant shall confirm in the compliance affidavit that all of those financial statements and income tax returns as listed have been provided to the respondent; and (e) the compliance affidavit shall list the documents as required by subparagraph 2(a)(v) of the disclosure order, and the applicant shall confirm in his affidavit that those documents have been provided to the respondent, and copies of those documents shall be appended and marked as Exhibit D to the compliance affidavit.
If within 28 days the applicant has not provided to the respondent proof that he has retained PwC to provide an expert report regarding his income for the years 2017 to 2021 inclusive, in accordance with the email from Iain J. Fraser of PwC to the applicant sent July 15, 2021, or if within 28 days the applicant has not provided proof to the respondent that the applicant has retained another expert to provide a similar report, then the respondent is at liberty to seek leave to bring a motion to require the applicant to do so. For the purpose of this paragraph, proof that the applicant has retained an expert shall consist of written verification from the expert confirming that the expert has been retained to provide a report regarding the applicant’s income for the years 2017 to 2021 inclusive, and shall indicate when the report shall be prepared.
The applicant shall provide to the controller of Campbell Bros Movers Limited copies of the signed and issued orders of Henderson J. dated November 13, 2020 and this order, and the applicant shall confirm in his compliance affidavit, referred to in paragraph 4 of this order, that he has provided copies of those orders to the controller.
The respondent is at liberty to seek leave to bring a motion or motions as follows: (a) the leave motion shall follow the procedure set out in the order dated September 30, 2019, which required both parties to seek leave prior to bringing any further motions, and the leave motion shall be before Tobin J., unless otherwise ordered by Tobin J.; (b) if the applicant fails to comply with any provision of this order or the disclosure order of Henderson J. dated November 13, 2020, the respondent’s leave motion may include permission to bring a motion for appropriate sanctions against the applicant pursuant to r. 1(8) of the Family Law Rules, including an order striking all of the applicant’s pleadings as they relate to the issue of child support, allowing the respondent’s child support claim to proceed on an undefended basis without further notice to the applicant and a motion for contempt; (c) where the applicant has not responded to any reasonable written requests for particulars as to information by way of follow-up relating to any productions provided pursuant to the order of Henderson J. dated November 13, 2020, then the respondent’s leave motion may seek permission to bring a motion for further particulars and oral questioning of the applicant; (d) regarding the respondent’s right to bring a leave motion pursuant to paragraph 5 of this order, that leave motion may be for permission to bring a motion for an order to compel the applicant to obtain at his expense in the first instance an income report from PwC for the years 2017 to 2021, as specified in the aforementioned email from Iain J. Fraser at PwC sent July 15, 2021 or, alternatively, that the income report for the years 2017 to 2021 be prepared by another named expert who is prepared to do the report; (e) if the applicant fails to provide any information or documents from the corporations, as required by the disclosure order, including financial statements and income tax returns, then the respondent may seek leave to bring a motion compelling any of the corporations, the controller or any person who has access to the information or documents, to attend in court for the motion, including by way of subpoena, and to bring to the court, and deposit with the court, all documents necessary to comply with the disclosure order, with all such documents to be released to the respondent as may be ordered by the court; and (f) the foregoing is without prejudice to the respondent’s right to seek leave to bring a motion for any other relief related to the applicant’s failure to comply with this order and the order of Henderson J. dated November 13, 2020, or the applicant’s failure to engage an expert to provide an income report.
The respondent shall keep confidential all corporate financial statements and all corporate income tax returns received by the applicant pursuant to the order of Henderson J. dated November 13, 2020 or this order. The respondent shall not share those documents with any other person, or transmit or publish those documents in any manner whatsoever, including electronically. The respondent shall use those documents only for the purpose of this court case. The restrictions in this paragraph do not prohibit the respondent from sharing those documents with her lawyer or any expert retained by the respondent in this court case.
The parties may make written submissions as to the costs of this motion within two weeks of the date of this order. Each party’s written submissions shall be served on the other party and shall be filed with proof of service through the portal in the usual way. All written submissions shall be typed, double-spaced, minimum font 12 and shall not exceed 3 pages. No attachments are permitted, with the exception of any accounts for legal fees incurred by either party regarding the respondent’s motion or copies of any formal offers to settle pursuant to r. 18 which have been served in relation to this motion. If either party is requesting an order for costs, then the written submissions shall specify how the costs amount has been calculated. If no written costs submissions are received, then each party is responsible for their own costs of the motion.
“Justice Victor Mitrow” Justice Victor Mitrow
Date: March 17, 2022