COURT FILE NO.: FS-21-23302
DATE: 2023/01/12
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Sanaz Rezaei Hariri, Applicant
AND:
Shervin Najafizadeh, Respondent
BEFORE: M. Kraft, J.
COUNSEL: Annie Noa Kenet, for the Applicant
Sadie R. Etemad, agent for Mehran Youssefi, for the Respondent
HEARD: January 10, 2023
ENDORSEMENT
M. KRAFT, J.
Nature of the Motion
[1] The respondent (“husband”) brings a motion seeking to strike the applicant’s (“wife”) Application, issued May 13, 2021, because of her failure to disclose an interest she has in a company in Iran on her initial financial statement. The wife brings a cross-motion to strike the husband’s Answer, dated August 17, 2021, on account of his failure to comply with a court order requiring him to make financial disclosure.
[2] This case has been in the system for 20 months with very little progress as a result of financial disclosure issues. There have been three case conferences and one telephone conference before three separate judges of this court, all of whom have made comments regarding the husband’s failure to make proper financial disclosure and/or comply with prior court orders. The husband alleges that the wife has not complied with her disclosure obligations under the Family Law Rules. O. Reg. 114/99 (“FLRs”). As has been found by the Ontario Court of Appeal in Roberts v. Roberts, 2015 ONCA 450, “the most basic obligation in family law is the duty to disclose financial information. This requirement is immediate and ongoing. Failure to abide by this fundamental principle impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication stalled“ [Emphasis added]. This long motion is the kind of motion that should be avoided in family law cases. When parties are ordered to make financial disclosure and fail to do so, the non-compliant party is breaching the primary objective of the FLRs.
[3] The wife issued the within Application on May 13, 2021. The husband argues that the wife has actively, willfully and deliberately failed to disclose an interest she has in a company in India, known as Gaz (GAS) Control Pars Company (“Gas company”). He submits that the wife has a 6% interest in this company, which is currently worth between $5 -10 million CAD; she has a duty to provide frank disclosure under the FLRs and was untruthful in her initial financial statement; and as a result, her Application should be struck. If the court is not inclined to strike the wife’s application, the husband asks that the wife be ordered to disclose the items he sets out in Schedule “A” to his notice of motion, all of which relate to her interest in the Gas company.
[4] The wife argues that the husband is in breach of an order for disclosure made by Davies, J., dated February 7, 2022 (“the Davies order”). Three days prior to the return of this long motion, well after both parties had filed motion material for the long motion, the husband delivered two complete updated financial statements to the wife using both dates of separation as required by the order. These financial statements were ordered to be produced by the husband 11 months earlier because his initial financial statement was replete with “TBDs”. Even though the husband has now rectified his breach with respect to the financial statements, the wife argues that he continues to be in breach of the Davies order, in respect to his failure to provide the disclosure ordered related to his share in a private hospital in Iran and his income. The wife’s cross-motion seeks an order striking his Answer. Alternatively, the wife seeks an order that the husband produce the outstanding court ordered financial disclosure within a specified short-period of time so her client’s claims can move forward.
[5] I heard this long motion on January 10, 2023 and reserved my decision. This is my Order and reasons for same.
Issues to be determined on the Motion
[6] The issues for me to decide on this motion are as follows:
(a) Should the wife’s Application be struck on account of her initial failure to disclose her interest in the Gas company?
(b) Should the husband’s Answer be struck on account of his failure to comply with court orders made for disclosure?
(c) If the answer to a. and/or b. is no, should further orders for disclosure be made?
Background
[7] The parties were married in Iran on April 6, 1988. They have two children of their marriage, both boys, E. and K, ages 21 and 17 respectively. The family immigrated to Canada in 2015 but the husband continued to reside and work in Iran.
[8] The husband is a cardiovascular surgeon and works at a clinic and at a private hospital in Iran. He generally visits Canada for about 3 months each year.
[9] Both boys reside with the wife in the matrimonial home in Toronto which she submits has a fair market value of about $4 million. The parties also own an investment property in Toronto worth about $1 million.
[10] According to the wife, the parties’ separated on September 1, 2019. The husband alleges that the date of separation is June 10, 2018. As a result, the Davies order required the parties to exchange two financial statements, using both dates of separation.
[11] According to the wife, prior to separation, the husband provided the wife with about $10,000 CAD a month. Once the wife initiated these court proceedings, the husband ceased making voluntary payments to her. Since then, any payments the wife has received from the husband have been sporadic and ad hoc.
[12] The husband has not paid child support or spousal support to the wife since either date of separation.
[13] During the parties’ long-term traditional marriage, the wife looked after the parties’ children and household while the husband pursued his medical career.
[14] In the last year of the parties’ marriage, the wife began to work full-time at The Bay in retail, earning minimum wage. This was the wife’s first job outside of the home since the parties became married in 1988. In early 2022, the wife obtained an entry level position at RBC Bank. She now earns $41,000 a year.
Issue One: Should the wife’s Application be struck on account of her initial failure to disclose her interest in a company?
[15] On November 10, 2022, the wife first requested financial disclosure from the husband. This was about 6 months before she issued this Application, in which she seeks, among other things, child support, spousal support and an unequal division of the parties’ net family properties. The husband seeks an equalization of the parties’ net family properties in his Answer.
[16] The husband owns property in India as well and has an interest in a private hospital. The wife has a 6% interest in the Gas company.
[17] Both parties agree that the husband was always aware of the wife’s interest in the Gas company during the marriage. The wife did not include her interest in this company on her initial financial statement, sworn on May 13, 2021, when she issued this application.
[18] The husband deposes that he was surprised that the wife failed to disclose her interest in the Gas company in her financial statement. He raised the absence of this asset in his Answer, which he filed on August 30, 2021.
[19] On February 7, 2022, the parties attended their first case conference, at which Davies, J. ordered, among other things,
(a) the husband to provide the wife with 17 items of financial disclosure she set out in a draft order;
(b) the parties to each provide each other with two fully completed financial statements using a separation date of September 1, 2019 and a separation date of June 10, 2018;
(c) the wife to provide three items of financial disclosure requested by the husband; and
(d) the wife to produce her statements for all bank accounts held in her name for the past 3 years, commencing December 2018, not previously provided on February 4, 2022, not to include accounts she held jointly with the husband.
[20] The Davies order gave the parties until April 4, 2022 to provide the ordered disclosure, failing which they were to file an affidavit explaining why the disclosure cannot be provided, what steps have been taken to comply with the order and when the disclosure is expected to be made. The Davies order also provided that the parties could exchange Requests for Information, and provided that costs associated with the conference were to be ordered by a judge hearing a motion for non-disclosure.
[21] In her Endorsement, Davies, J. made the following comments about the husband’s failure to provide the wife with financial disclosure to that date:
(a) The parties were not able to discuss the resolution of any substantive issues (such as child support, spousal support or equalization of net family property) because the husband had not made full financial disclosure;
(b) The wife had requested financial disclosure from the husband on November 10, 2020. The husband served and filed a financial statement, but it is incomplete. Other than his bank accounts, the value for most of his assets, including several properties and businesses in Iran, are listed as TBD;
(c) Full, fair and frank financial disclosure is the linchpin of our family law system: Colucci v. Colucci, 2021 SCC 24 at para. 4. The Court’s intervention should not be required before a family litigant provides clearly relevant and necessary financial disclosure. Of course, disputes can arise about the scope of a litigant’s disclosure obligation. Those disputes should, however, be rare and should only arise after good faith efforts have been made to provide all relevant information.
(d) The wife now requests an order requiring the husband to produce 17 items of disclosure. Counsel for the husband agree that is required to provide financial disclosure….in [Davies, J.’s] view, the husband should have already provided financial disclosure or, at the very least, a written response to the disclosure request he received 15 months ago.
[22] The husband deposes that on February 22, 2022, he served the wife with a Request for Information (“RFI”) in which he requested disclosure regarding her interest in the Gas company. The wife did not provide the husband with the disclosure about her interest in the Gas company.
[23] In accordance with the Davies order, the parties attended a further case conference on May 2, 2022, at which disclosure was discussed again, particularly about the parties’ two properties in Canada. Steele, J.’s Endorsement indicates that both parties are of the view that the other party had outstanding financial disclosure. Steele, J. ordered the wife to provide the husband with copies of her bank statements with CIBC, if any, from 2016 to the date of separation within 30 days; the husband to provide the wife with an appraisal for the Jamshidieh property in India as at the date of marriage; and a copy of the deed and transfer for this property; the wife’s motion for relief relating to her alleged non-disclosure by the husband was to be heard on June 28, 2022; a Settlement Conference was to take place on September 14, 2022; and the costs of the conference were reserved to the judge hearing the wife’s disclosure motion.
[24] Despite Steele, J.’s order scheduling the wife’s disclosure motion for September 14, 2022, the wife did not bring that motion. Instead, husband brought a motion seeking to strike the wife’s Application because she did not disclose documents related to her interest in the Gas company at the end of August. In or around July 2022, the husband gained access to public records in Iran about the Gas company, including, among other things, a list of the company’s shareholders and copies of the Gas company’s income tax returns for the period March 2021-March 2022. The husband provided the wife with copies of these documents between August 4th and August 10th, 2022 and he then brought this motion to strike her Application.
[25] The wife’s position is that the husband has always known about her interest in the Gas company. She submits that she never actively attempted to conceal this asset; the information about her 6% interest in the Gas company is available on the public record to which the husband gained access; and she did not include this asset in her initial sworn financial statement because she took the position that her minority interest in the Gas company has no value since an estate planning transaction akin to an estate freeze took place and her father maintains complete discretion to revoke her shares at any time.
[26] The wife deposes that she took steps initially to find a corporate lawyer in Iran to explain the operations of the Gas company and the “estate freeze” transaction to address the husband’s concerns. The wife was not able to find a corporate lawyer in Iran and on August 18, 2022, she instead provided the husband with a letter from the President of the Gas company, Ali Alizadegan, in an effort to explain her minority shareholder interest in the company, which attached Minutes signed by three members of the Board of Directors, including Mr. Alizadegan and her uncle, Mr. Khalil Tabrizian. The husband deposes that the Minutes produced by the wife are a forged document. In support of this allegation, the husband produced a letter from Mr. Khalili Tabrizian, the wife’s uncle, in which Mr. Tabrizian claims he did not sign the letter the wife had produced to the husband and that it was forged.
[27] The letter the wife produced from the President of the Gas company explains that Gas’ shareholders, including the wife’s father, transferred a portion of their shares to their spouses and children in 1996 for estate planning purposes. The letter goes on to explain that it was agreed internally that none of the children or spouses would receive any profits, losses or salaries and that, as is a common practice in Iran, the shares were distributed in a “frozen state and have no legality [sic] claim as long as the original shareholder is alive.” The wife’s position is that the Minutes attached to Mr. Alezadegan’s letter signed by the three Board of Directors was not forged and instead, the letter the husband attaches from her uncle as Exhibit “I” to his affidavit is forged by the husband.
[28] On a conflicted written record, I am not able to determine whether or not the letter produced by the wife or the letter produced by the husband is a forged document. In any case, I need not determine this issue to make a decision as to whether or not the wife’s Application ought to be struck.
[29] Initially, the husband served the wife with his motion material to strike her pleadings, which was to be returnable on August 30, 2022, when her counsel was on vacation. The motion was adjourned to September 6, 2022, before Sharma, J. However, the wife’s counsel contracted Covid after returning from vacation and was unable to proceed with the motion on September 6, 2022. At the September 6, 2022 return date, the husband’s counsel consented to an adjournment and, as a result, Sharma, J. scheduled this long motion given the allegations of non-disclosure by each party, to be heard on January 10, 2023. He also adjourned the Settlement Conference, which was scheduled for September 14, 2022, to a date to be fixed by him on October 21, 2022. Costs of the conference were reserved to the motion judge. Sharma, J. made the following comments about disclosure in his Endorsement:
(a) He was troubled by the fact that the husband had scheduled his motion when the wife’s counsel was not available.
(b) He was also troubled by the fact that there had now been two case conferences where disclosure was fully canvassed, yet there remains outstanding disclosure. Davies, J. made an order on February 7, 2022 that the husband provide requested disclosure, and that he provide a second complete financial statement using the second disputed date of separation. The wife’s counsel advised him that the husband still had not complied with that order.
(c) The second case conference was before Steele, J. on May 2, 2022, where she confirmed that both parties were of the view that there are outstanding disclosure. Steele, J. granted the wife leave to bring a motion with respect to his outstanding disclosure by June 28, 2022. That motion was not brought.
(d) He indicated that the court will not tolerate anything less than full, fair and frank disclosure. This is especially so when there have been court orders compelling a party to produce information.
(e) He concluded that part of the challenge in this case is that many of the alleged disputed assets are in Iran, and some of them are business interests for which valuations may be necessary. It is not sufficient to simply indicate “TBD” as the value of an asset and not take any further steps to value the asset. It is common for third party valuators to be retained to provide business valuations. If there is financial information that the parties are unable to produce, the party should provide a full explanation in writing as to why the information cannot be provided, which explanation may come from a third party, as well as contact information for the third party who can independently verify why the disclosure cannot be produced or why the asset cannot be valued. Parties should attempt to get sworn statements to explain any non-disclosure. Alternatively, or in addition, parties may consider agreeing upon certain valuations for the purpose of an interim settlement of their financial dispute, subject to further review on a future date when the asset can be more readily valued, with adjustments to reflect the value on the date of separation.
[30] On October 21, 2022, the scheduled Settlement Conference was adjourned at the request of the husband to November 25, 2022. The November 25, 2022 date was then further adjourned by the court, without a new date being set.
[31] On November 21, 2022, the wife’s lawyer advised the husband’s lawyer that she was willing to make additional disclosure in response to his disclosure concerns regarding her interest in the Gas company since it was clear that the husband was not satisfied with the letter she had produced from the President of the company regarding her share interest.
[32] On December 15, 2022, the parties had a conference call conference before Sharma, J., at which the wife’s counsel asked to schedule a Settlement Conference before the long motion was heard on January 10, 2023. The husband’s counsel would not agree and, as a result, Sharma, J. ordered the parties to participate in a telephone conference before him. The wife’s counsel indicated that there remained outstanding financial disclosure from the husband as set out in the Davies order. The husband was seeking an adjournment of the January 10, 2023 long motion. The husband’s counsel indicated that her client required the adjourned because he is in Iran, cannot leave the country and she was having difficulty getting in contact with him because of political developments in Iran. The next available long motion date was March 28, 2023. Sharma, J. declined to adjourn the long motion scheduled for January 10, 2023, leaving it open to the motions judge to determine whether the motion should be adjourned as sought by the husband and for the motions judge to determine the date of the settlement conference.
[33] On December 22, 2022, the wife provided the husband with two updated sworn financial statements, using both dates of separation, and in these financial statements, she fully discloses her 6% interest in the Gas company and provides a value for her interest, although she maintains that this is an excluded asset under the Family Law Act, R.S.O. 1990, c.F.3 In addition to an updated sworn financial statement, the wife provided the husband with disclosure that he had requested regarding her 6% interest in the Gas company. The husband alleges that this disclosure from the wife is “trivial and frivolous” because the documents replicate what he was able to find from public records in July of 2022.
[34] The long motion proceeded before me on January 10, 2023. The husband did not make a request for an adjournment.
The Law
[35] Under Rules 2 and 13 of the FLRs, parties have duty/obligation to produce complete, sufficient and correct disclosure. Failing to comply with the Rules, pursuant to r.(8.1) and (8.4), provides this Honourable Court with the discretion to strike pleadings.
[36] Rules 1(8.1), 1(8) and 1(8.4) provides as follows:
Failure to follow rules
(8.1) If a person fails to follow these rules, the court may deal with the failure by making any order described in subrule (8), other than a contempt order under clause (8) (g). O. Reg. 322/13, s. 1.
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. O. Reg. 322/13, s. 1.
Consequences of striking out certain documents
(8.4) 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:
(1) The party is not entitled to any further notice of steps in the case, except as provided by subrule 25 (13) (service of order).
(2) The party is not entitled to participate in the case in any way.
(3) The court may deal with the case in the party’s absence.
(4) A date may be set for an uncontested trial of the case. O. Reg. 322/13, s. 1.
[37] The test applied on a motion to strike a pleading on any basis, is set out in Mullin v. Sherlock, 2018 ONCA 1063 (C.A.), at paras 44-47. The three broad issues that must be determined by the court are:
(1) First, is there a triggering event justifying the striking of the pleading?
(2) Second, should the pleading be struck in whole or in part, or is a less drastic remedy more appropriate?
(3) Third, if the pleading is struck in whole, what are the appropriate consequences for the party whose pleading was struck?
[38] According to the husband, the triggering event is that the wife committed untruthfulness in her sworn financial statement by willfully and deliberately concealing her 6% interest in the Gas company; she filed to provide a shred of any meaningful disclosure of the concealed asset for 11 months; and she produced a forged document in bad faith.
[39] On a written record which is conflicted, I am not in a position to make any determinations about either party’s credibility, nor can I determine whether the letter the wife produced from the Board of Directors of the Gas company was forged as the husband alleges. I do, however, agree that the wife did not include her interest in the Gas company in her initial financial statement sworn on May 13, 2022, filed when she issued the within Application.
[40] The wife did however, subsequently, provide the disclosure for her interest in the Gas company. The evidence is clear that the husband was always aware that the wife owned this asset and admits to this knowledge in his Answer, dated August 17, 2021, at paragraph 12. Accordingly, I do not agree with the husband’s characterization that the wife willfully and deliberately concealed her interest in the company. The wife deposes that the husband was always aware that she had an interest in the Gas company, she did not list it on her initial financial statement because she believed it had no value. In any event, the husband was clearly aware that she had an interest in this company at all times. To suggest that he was “shocked” by her untruthfulness is simply not believable.
[41] Regardless of whether or not the wife’s interest in the Gas company qualifies as an excluded asset as defined in the Family Law Act, I agree with the husband that the wife is obliged under the FLRs to disclose and value her interest in the company. She did not do so initially, however, she explained why, proceeded to obtain an explanation as to her shareholdings from the President of the company in August 2022, and then rectified the non-disclosure in December 2022. On December 22, 2022, the wife provided the husband with disclosure pertaining to her interest in the Gas company by producing the Declaration, Balance Sheet, Statement of Income of Entities, dated September 7, 2020 and August 4, 2021; Notices of Resolution, dated April 9, 1995 and April 22, 2018; and Final Tax Assessments for the year ended March 20, 2020; November 15, 2021 and September 18, 2022.
[42] In the wife’s updated financial statement, she lists her 6% interest in the Gas company, which is 120 of 2000 shares, and she provided a value of this interest as at the date of marriage; as at the 2018 date of separation; and as at the current date. Again, whether or not the wife is correct that this asset is excluded as defined in the Family Law Act is a triable issue.
[43] I do not believe, therefore that there is a triggering event that justifies the striking of the wife’s Application.
[44] Even if I am wrong, and the wife’s initial non-disclosure of her 6% interest in the Gas company in her first financial statement, filed is a triggering event, I would then advance to the second step of the test, in which the court must (i) consider the substantial disclosure already made; (ii) itemize what disclosure the party had failed to provide; (iii) make a finding of willful disobedience of the order; and (iv) consider proportionality; Manchanda v. Thethi, 2016 ONCA 909, para 9 to 13.
[45] Given the disclosure the wife has made to date, I am not persuaded that the appropriate remedy in these circumstances is for the wife’s pleadings to be struck. I find that the wife has made substantial disclosure to the husband. She disclosed all of her bank account statements as ordered. She produced two updated sworn financial statements using both valuation dates. The husband does not claim that the wife is in breach of any disclosure orders made by the court thus far. In considering proportionality, and how best this case ought to advance so both parties’ claims can be determined, I find that striking the wife’s pleadings does not assist the parties in any way, is not proportional in the circumstances and is not an appropriate remedy.
Issue Two: Should the husband’s Answer be struck on account of his failure to comply with court orders made for disclosure?
[46] The wife asks the court to strike the husband’s Answer because he has not only failed to comply with the disclosure obligations provided for in the FLRs, but he has also failed to comply with the Davies order to produce specified financial disclosure ordered 11 months ago.
[47] The wife submits that the husband provided her counsel with multiple excuses as to why he could not comply with the financial disclosure set out in the Davies order, including that he was not able to determine the exchange rate for Iranian currency to the CAD. In the husband’s affidavit sworn on January 3, 2023, he deposes that the TBDs in his financial statements, which he filed on August 30, 2021, are there because “of the volatile political situation in Iran and Iran’s currency crises that has been stringent since before the start of these proceedings”. He goes on to swear that the value of his assets cannot be accurately determined because of the volatile political situation in Iran and Iran’s currency crises since 2019. I do not accept this excuse. Nor do I take judicial notice of these events in Iran as requested by the husband. The husband could provide a value for his assets in Iran based on the listed exchange rates. To suggest that there is no way to determine the value of any his assets for valuation dates in 2018 and 2019 is simply disingenuous.
[48] The five areas of non-disclosure by the husband under the Davies order were summarized by the wife to be as follows:
(1) His failure to produce a fully completed financial statement using a date of separation of September 1, 2019;
(2) His failure to produce a fully completed financial statement using a date of separation of June 10, 2018;
(3) His failure to produce an appraisal and/or valuation of his share in a private hospital in Iran on the date of marriage and both dates of separation;
(4) His failure to produce documents pertaining to the purchase of his share in a private hospital in Iran;
(5) His failure to produce documents pertaining to his medical practice in Iran for 2018, 2019 and 2020, including as may be applicable: financial statements, corporate tax returns and a general ledger; and
(6) If not contained in e. above, documents indicating the husband’s billing per calendar year for 2018, 2019 and 2020.
[49] The husband’s position is that he has now complied with the financial disclosure set out in the Davies order. I do not agree for the following reasons:
(1) The four Endorsements of Davies, J.; Steele, J. and Sharma, J. all indicate that they spoke with the parties about their respective financial disclosure obligations and, particularly, about the husband’s failure to comply with the court ordered disclosure. Those discussions began in February 2022; and continued in May 2022, September 2022 and December 2022. For 11 months, the husband failed to comply with the Davies order. While he has now provided his two financial statements for both dates of separation, he did so three days before the return of this long motion and in my view, this was unreasonable and will be addressed in my determination of costs;
(2) The financial statement the husband initially filed with his Answer was replete with “TBDs”. While the wife agrees that the husband provided the two fully completed sworn financial statements there still remains disclosure which remains outstanding in the Davies order as follows:
i. With respect to providing an appraisal and/or valuation of his share in a private hospital in Iran on the date of marriage and both dates of separation, the husband deposed that “since the Nikan Hospital is fairly new, still under constructions and still in the process of selling shares, the shareholder agreement is not yet finalized and no formal deed has been provided to the shareholders. Therefore, the letter of Dr. Sirus Tabest, the CEO of Nijah Hospital is the only document available” [Emphasis added]. The wife’s evidence is that the Nikan Hospital has been in existence since 2010/2011, over a decade ago, which evidence was not disputed by the husband. It follows, therefore, that there must be some other form of evidence that exists in Iran to either appraise or value the husband’s share in the private hospital. I do not accept the husband’s statements that a letter from the CEO of the hospital is the only document available.
ii. With respect to producing documents pertaining to the purchase of his share in a private hospital in Iran, the husband has produced no documentation. As listed above, the husband claims that there is no available documentation. It troubles me that the husband’s updated financial statement, sworn on January 3, 2023 lists the value of his 1 share in the Nikan Hospital as having a value of $55,000 on the September 2019 valuation date and being worth $35,000 today, when he also states in his affidavit material that there is no possible way for him to value his assets in Iran. The notation in the husband’s financial statement states that $15,000 of the purchase price is “still remaining to be paid”. The husband fails to provide any documentation to support either value listed for his share in the private hospital at either date. He also fails to provide any documentation to support the debt. The husband’s affidavit and sworn financial statement are inconsistent. Either there is no way for him to value his asset and his share in the private hospital should be listed as “TBD” or he is obliged to provide the wife with the documentation to support his listed value of his share in the private hospital on the September 2019 valuation date and today’s value.
iii. With respect to the husband’s obligation to produce income information to the wife, be it documents pertaining to his medical practice in Iran for 2018, 2019 and 2020, including as may be applicable: financial statements, corporate tax returns and a general ledger; and/or documents indicating the husband’s billing per calendar year for 2018, 2019 and 2020, the husband has provided no documentation whatsoever. It is extremely concerning to the court that the husband provided the wife with five years of his personal bank statements in Iran and advised the wife that his income information is contained somewhere in these bank statements, without any direction as to where the income information may be found. This position from the husband suggests that he has only one bank account into his personal and medical practice monies are intermingled. This also suggests that there is no invoicing or billing system in place for the husband’s medical practice at both the private clinic and the private hospital where he works. I do not accept that this is accurate.
[50] It is the obligation of the husband to provide his income information to the wife. Since May 13, 2021, the husband has been aware that the wife is claiming child and spousal support. The wife cannot move forward with her claims without knowing the husband’s income. The husband is not an employee, rather, he is self-employed. Even if the wife were to have brought a motion for temporary support and argue that income ought to be imputed to the husband pursuant to s.19 of the Child Support Guidelines, there is no information on which the wife could have based an imputation of income argument, without having information from the husband as to his billings. It is not the responsibility of the wife to try and find information in Iran to verify the husband’s income when she is in Canada and he has the access to the information.
[51] The husband has produced no financial statements for his medical practice; no billing summaries; no invoices; and no corporate income tax returns. Instead, his updated sworn financial statement, dated January 3, 2023, provides a range for his annual income as being something in between $48,000 and $60,000. There is no dispute that the husband is self-employed. It simply cannot be that there are no invoices or records of his billings for his medical practice at either or both the private clinic and the private hospital in Iran. The suggestion that his personal bank statements will reflect his income is not an answer to the financial disclosure set out in the Davies order as it does not provide the wife with the necessary income information to determine his child and/or spousal support obligations.
[52] Furthermore, there is no dispute on the evidence that the parties accumulated two properties in Canada, worth about $5 million in total and that the parties had saved $929,000 in a high-interest mutual fund, generating between $3,000 and $4,000 a month for the parties. This means, therefore, that the husband earned sufficient income to generate these savings as well as to provide the wife with monthly sums of monies, even if he does not agree that he gave her at least $10,000 a month around the time of separation. Even if, as the husband deposes, his income has declined dramatically since the separation, it is his onus to provide the wife with the financial production to verify this decline.
[53] I find that even though on January 5, 2023, the husband finally produced the two fully completed financial statements for the two valuation dates, he remains in breach of the Davies court order, which is the triggering event, justifying the striking of his Answer.
[54] The second step of the analysis requires me to determine whether his failure to provide disclosure about his share in the private hospital and/or his income in breach of the Davies order is sufficient to strike the husband’s Answer.
[55] Courts have repeatedly exercised their discretion by striking the pleadings of parties who have a history of failing to provide financial disclosure pursuant to the Rules or court order. In Peerenboom v. Peerenboom, 2020 ONCA 240, affirming, Peerenboom v. Peerenboom, 2018 ONSC 5796, the Court struck Mr. Peerenboom’s pleadings for failure to comply with orders for costs and non-compliance in respect of financial disclosure and asset valuations. Justice Moore’s decision was upheld on appeal by the Ontario Court of Appeal.
[56] Similarly, in Manchanda v. Tethi, 2016 ONSC 3776, the Respondent’s pleadings were struck after he refused to provide disclosure. The Respondent claimed he had provided significant disclosure, but Justice Myers was “less moved by the quantity than by the quality of the respondent’s breaches”, finding that “[t]he respondent has not disclosed basic documents such as his income tax returns, financial statements, bank account statements, credit card statements, and investment account statements.”, at paragraph 51. The decision was affirmed by the Ontario Court of Appeal.
[57] As set out in Mullin v. Sherlock, at paragraph 44, once satisfied that there has been non-compliance with a court order, a judge may have recourse to the alternatives described in Rule 1(8). In assessing the most appropriate remedy, a judge should consider the following factors:
(1) the relevance of the non-disclosure, including its significance in hindering the resolution of issues in dispute;
(2) the context and complexity of the issues in dispute, understanding that an uncomplicated case should have little tolerance for non-disclosure, whereas a case involving extensive valuation of assets may permit some reasonable delay in responsiveness;
(3) the extensiveness of existing disclosure;
(4) the seriousness of efforts made to disclose, and the explanations offered by a defaulting party; and
(5) any other relevant factors
[58] I am not persuaded that the husband made serious efforts to comply with the Davies order and I find that the explanations he provided for his failure to comply with the order are disingenuous and inconsistent with the updated financial statements he swore on January 3, 2023, which were not served on the wife until January 5, 2023. When the husband brought this motion to strike the wife’s Application, it was initially returnable in September, 2022. There is no reasonable explanation provided by the husband as to why he did not provide the complete financial statement for both valuation dates until three working days prior to the hearing of this long motion, four months after he had initially brought this motion before the court.
[59] While I am prepared to accept that there is political unrest and protests taking place in Iran and that such unrest may have contributed to some delays in the husband’s ability to produce some of the ordered disclosure, I cannot accept that the husband has not been able to provide his Canadian counsel with instructions, since there is no evidence that his use of the telephone has been hindered in any way. Further, the financial disclosure with respect to the husband’s assets in Iran are entirely within his control since he is in Iran and can access the necessary information from the various institutions directly.
[60] Further, I find that the husband’s non-disclosure is highly relevant to the determination of his income, which goes to two of the wife’s claims, child support and spousal support and the non-disclosure of his share in the private hospital in India is relevant to the determination of his net family property, which impacts the wife’s claims for an unequal division of the parties’ net family properties.
[61] The difficulty with striking the husband’s Answer and limiting his participation in the ultimate trial of this case is that the court will then be left in the position of being asked to make findings in the absence of evidence that is needed to properly determine the wife’s claims. I am inclined in these circumstances, in the interest of proportionality, to give the husband one last opportunity to produce the ordered disclosure, within a short period of time and during this time, the husband will have no right to participate in the proceeding. If the husband fails to produce the outstanding disclosure within the specified time frame, then the wife will be permitted to proceed with her claims by way of an uncontested trial, and the matter will proceed without his participation.
Issue Three: Should further orders for disclosure be made?
Additional Disclosure sought by the Husband
[62] As alternative relief the husband asks for an order that the wife be asked to produce the 7 items of disclosure set out in the Schedule “A” attached to his Notice of Motion, dated December 21, 2022, all of which relates to the wife’s 6% interest in the Gas company.
[63] The wife submits that of these 7 items, either she has already produced the documentation requested or the requested production is not relevant to the issues before the court. Her argument can be summarized in the chart below:
Production request by Husband in Schedule “A”
Response by Wife
#1. Initial official newspaper article announcing the inception/incorporation of the Gas company, indicative of the initial corporate structure and shareholders at the date of the company’s inception/incorporation
Production of a newspaper article is not appropriate.
#2. Copies of the Gas company’s Articles of Incorporation on the date of marriage, April 16, 1998; June 1, 2015 (3 years prior to separation); June 1, 2018 (the husband’s V-date) and September 1, 2019 (the wife’s V-date
The purpose of this request is to show the number of shareholders the wife owns. The documents obtained show that the wife owns 6% of the shares in the Gas company. This is not disputed by her. There is no reason for further production.
#3. Copies of official newspaper articles announcing changes (if any) to the corporate structure, shareholder agreement, shareholder composition of the Gas company in the following years: 1998; 2015; 2018 and 2019
Production of a newspaper articles are not relevant or appropriate.
#4. Copies of shareholder agreements of the Gas company indicative of the wife’s number of shares as at the date of marriage; June 1, 2015; June 1, 2018 and September 1, 2019.
Same answer for #2 above.
#5. Copies of the profit and loss statements of the Gas company indicative of the profit or loss the wife incurred/received as a result of her shares in 1998, 2015, 2018 and 2019
The wife produced these documents for 1995 in the form of the Balance Sheet. She cannot obtain the Balance Sheet for 1998. The wife also provided these documents for 2018, the husband’s date of separation, not for 2019, the wife’s date of separation. She is not able to access any more documents relating to the Gas company because of the disagreement that has ensued between her father and her uncle as a result of the husband involving her uncle in this matrimonial dispute. The wife submits that she is at the mercy of her father in terms of being able to access these corporate documents. The wife has also provided the corporate income tax returns for 2020 and 2021 but she is not able to access the returns for 2019.
#6. An appraisal of the wife’s shares of the Gas company as at the date of marriage, April 16, 1998; June 1, 2015 (3 years prior to separation; June 1, 2018 (the husband’s date of separation: and September 1, 2019 (the wife’s date of separation)
The wife submits that this documentation is not required. She has provided a value on her updated financial statement for her 6% interest in the Gas company on both valuation dates, using the highest value of the shares set out in the corporation income tax returns, without taking a discount for her minority shareholding interest or reducing the value for income tax liabilities. She submits that if the husband wishes to obtain a valuation of her 6%interest in the Gas company, he is free to do so but she does not have an onus to obtain an independent valuation/appraisal of her interest in this corporation.
#7. All Gas company bank account statements including but not limited to Melli Bank, account #46009; Saderat Bank, account #46008; and 21019; Toseeh Saderat Bank, account #57513; Mellat Bank, account #42960; and Tejaret Bank, account #05809 as at the date of marriage; June 1, 2015; June 1, 2018; September 1, 2019, for all of 2020, 2021 and 2022.
The husband has not established the reason for this request. The wife was asked to produce all of her personal bank statements from 2015 to present, which she produced. She has answered that she has receive no income as a result of her 6% interest in the Gas company.
[64] The husband’s response to the wife’s objection to the #7 items of additional disclosure he seeks is as follows:
(1) In terms of items #1 and #3, newspaper articles is how the incorporation of companies are announced in Iran. There is no equivalent necessarily to Articles of Incorporation which is why he asked for these newspaper articles, which is relevant to the share structure of the Gas company and/or the wife’s interest in the company and whether or not it changed over time;
(2) In terms of #6, the husband seeks an order requiring the wife to obtain a valuation of her interest in the Gas company because she has control over obtaining the necessary information to obtain such a report and she has the onus to provide a valuation; and
(3) In terms of #7, the bank accounts for the Gas company are listed in the corporate documentation the husband found on the public record and this information could be relevant as to available funds that could be distributed to the shareholders of the company or whether the wife received income on account of her corporate interest and are, therefore, relevant to the issues in this case. The husband would also be willing to assist the wife in obtaining these bank statements if she signs an Authorization and Direction as a shareholder of the Gas company to enable him to obtain the bank balances as at the dates requested. Further, while the husband agrees that the wife provided her Canadian bank accounts statements from 2015 onward, she has not provided statements for any of her Iranian bank accounts.
[65] I find it appropriate to order the wife to provide further disclosure regarding her interest in the Gas company as set out in the Order below. If the wife is unable to obtain these documents, then she will need to make the request of the company and obtain correspondence from the company indicating why it will not release the court ordered disclosure to her, as a minority shareholder. If the husband continues to want to access this production and the Gas company refuses to provide it to the wife, the husband may bring a motion to obtain the documents in a non-party’s control as provided for in rule 19(11) of the FLRs.
Additional Disclosure sought by the Wife
[65] As alternative relief, the wife seeks an order that the husband not be permitted to participate in this proceeding until he has established that he has fully complied with the Davies order. As further alternative relief, the wife seeks an order that the husband’s Answer be struck if does not produce the disclosure set out in Schedule “A” to her notice of motion, dated December 22, 2022 by January 31, 2023.
[66] While I am not prepared to strike the husband’s Answer, I am prepared to order that the husband not be permitted to participate further in this proceeding until he has complied with the Davies order. Once he has done so, then he shall be permitted to continue to participate in this matter. If the husband does not comply with the Davies order, in the timeframe set out below, then the wife shall have leave to bring a motion to strike the husband’s Answer and to proceed with her claims by way of an uncontested trial.
[67] Schedule “A” to the wife’s notice of motion contains 6 items of requested production, which are as follows:
(1) A percentage of what the husband alleges his ownership interest is in the “Jamshidieh property” as at: April 16, 1998, June 10, 2018, September 1, 2019, and October 31, 2022 along with documents supporting the ownership interest alleged.
(2) A figure of what the husband alleges his income to be for each of: 2016, 2017, 2018, 2019, 2020 and 2021 along with back up documents supporting the income alleged.
(3) A detailed explanation of how the documents provided in response to paragraph 2 support the income figure provided in response to 2 for each year such that a direct link can be made between the documents provided and the income alleged.
(4) An explanation of how the husband’s income for 2016, 2017, 2018, 2019, 2020 and 2021 is divided between (i) seeing private patients at his clinic; and (ii) procedures completed at a hospital.
(5) A figure of what the hubsand alleges is the value of his share in a private hospital in Iran as at: (i) June 10, 2018, and (ii) September 1, 2019.
(6) Any and all disclosure still outstanding pursuant to the Order of Justice Davies dated February 7, 2022 and the Family Law Rules, which includes:
(i) An appraisal and/or valuation of the husband’s share in a private hospital in Iran on the date of marriage, and both alleged dates of separation;
(ii) Documents pertaining to the purchase of the husband’s share in a private hospital in Iran;
(iii) Documents pertaining to the Respondent’s medical practice in Iran for 2018, 2019 and 2020 including as may be applicable: financial statements, corporate tax returns and general ledger; and
(iv) If not contained in paragraph (iii) above, documents indicating the Respondent’s billing per calendar year for 2018, 2019 and 2020.
[68] The husband’s counsel made no submissions about the specific items of disclosure sought by the wife set out in Schedule “A” to her notice of motion. Instead, she argued that the husband is in full compliance with the Davies order and she referred to Exhibit “C” of the husband’s affidavit sworn on January 3, 2023, which is an affidavit sworn by the husband on March 30, 2022, in which he provided some disclosure to the wife. I have already found that the husband continues to be in breach of the Davies order and accordingly, I make an additional order for disclosure by the husband as set out in the order below.
Order
[69] This court makes the following order:
(1) On or before February 8, 2023 at 5:00 p.m. the applicant, Sana Rezaei Hariri, shall produce the following disclosure:
a. A copy of any official corporation documentation detailing the incorporation of the Gaz (GAS) Control Pars Company (“Gas company”), indicative of the initial corporate structure and shareholders at the date of the company’s inception/incorporation.
b. A copy of the shareholdings of the Gas company as at the date of marriage; June 1, 2018 (the husband’s V-date) and September 1, 2019 (the wife’s V-date);
c. A copy of any official corporate documentation reflecting any changes (if any) to the corporate structure, shareholder agreement, shareholder composition of the Gas company in the following years: 1998; 2018 and 2019;
d. Copies of the profit and loss statements of the Gas company indicative of the profit or loss the wife incurred/received as a result of her shares in 1998, 2015, and 2019;
e. An appraisal or valuation report of the fair market value of wife’s shares of the Gas company as at the date of marriage, April 16, 1998; June 1, 2018 (the husband’s date of separation: and September 1, 2019 (the wife’s date of separation);
f. A copy of the Gas company bank statements for account statements including but not limited to Melli Bank, account #46009; Saderat Bank, account #46008; and 21019; Toseeh Saderat Bank, account #57513; Mellat Bank, account #42960; and Tejaret Bank, account #05809 as at the date of marriage (only if the wife had an interest in the Gas company on the date of marriage; June 1, 2018; September 1, 2019, and at December 1, 2022.
(2) If the applicant is not able to obtain the documents from the Gas company as set out in subparagraph (1) above, she shall produce, in the form of an affidavit, the efforts she has made to obtain such documentation and the response from the Gas company; including any estimates as to when such documentation may be available. In terms of the valuation of the applicant’s corporate interest in the Gas company, if the report is not completed by February 8, 2023, she shall produce a copy of her retainer letter with the forensic accountant she has retained to complete the valuation along with a letter from the accountant estimating when the report will be completed.
(3) On or before February 8, 2023 at 5:00 p.m. the respondent, Shervin Najafizadeh, shall produce the following disclosure:
a. A percentage of what he alleges his ownership interest is in the “Jamshidieh property” as at: April 16, 1998, June 10, 2018, September 1, 2019, and October 31, 2022 along with documents supporting the ownership interest alleged.
b. A figure of what he alleges his income to be for each of: 2016, 2017, 2018, 2019, 2020 and 2021 along with back up documents supporting the income alleged.
c. A detailed explanation of how the documents provided in response to paragraph (ii) support the income figure provided in response to (ii) for each year such that a direct link can be made between the documents provided and the income alleged.
d. An explanation of how his income for 2016, 2017, 2018, 2019, 2020 and 2021 is divided between (i) seeing private patients at his clinic; and (ii) procedures completed at a hospital.
e. A figure of what he alleges is the value of his share in a private hospital in Iran as at: (i) June 10, 2018, and (ii) September 1, 2019.
f. Any and all disclosure still outstanding pursuant to the Order of Justice Davies dated February 7, 2022 and the Family Law Rules, which includes:
i. An appraisal and/or valuation of his share in a private hospital in Iran on the date of marriage, and both alleged dates of separation;
ii. Documents pertaining to the purchase of his share in a private hospital in Iran;
iii. Documents pertaining to the Respondent’s medical practice in Iran for 2018, 2019 and 2020 including as may be applicable: financial statements, corporate tax returns and general ledger; and
iv. If not contained in paragraph (3) above, documents indicating the Respondent’s billing per calendar year for 2018, 2019 and 2020.
(4) If the respondent is not able to obtain the documents set out in subparagraph (3) above, he shall produce, in the form of an affidavit, the efforts he has made to obtain such documentation and the response from all third parties he has made, including any estimates as to when such documentation may be available. In terms of the valuation of the respondent’s share in the private hospital in Iran, if the report is not completed by February 8, 2023, the respondent shall produce a copy of his retainer letter with the forensic accountant he has retained to complete the valuation along with a letter from the accountant estimating when the report will be completed.
(5) The respondent shall not be permitted to participate in this proceeding until he has established that he has fully complied with the order of Davies, J., dated February 7, 2022, particularized in subparagraph (3)(f) above. If by February 8, 2023 at 5:00 p.m. the respondent has not provided the applicant with the ordered disclosure set out in subparagraphs (3)(f), his Answer shall be struck and the applicant shall proceed to an uncontested trial, which she shall schedule with the trial coordinator’s office to take place orally. The respondent shall not be permitted to file any further material nor shall he be permitted to participate in the uncontested trial.
(6) The applicant shall take immediate steps to schedule a combined Settlement Conference/Trial Management Conference on the first available date, after she obtains the husband’s counsel’s availability in April and May 2023, which is when the next such dates are available from the trial coordinator’s office.
(7) A case management judge shall be assigned to this case to manage compliance with this order and to ensure the matter proceeds to trial as soon as practicably possible.
(8) The costs associated with this long motion and the case conferences before Davies, J.; Steele, J. and Sharma, J. remain to be determined. The applicant shall serve and file written costs submissions of no more than 3 pages (double spaced and 12 point font) not including a Bill of Costs and/or Offers to Settle within 10 days of the release of this Endorsement. The respondent shall serve and file written responding costs submissions of no more than 3 pages (double spaced and 12 point font) not including a Bill of Costs and Offers to Settle within 7 days of being served with the applicant’s costs submissions. Counsel shall delineate the costs for each party associated with the long motion and each of the case conferences in his/her Bill of Costs or dockets. Reply submissions, if any, shall be no more than one page in length and served and filed within 3 days of receipt of responding submissions.
M Kraft, J.
Released: January 12, 2023