NEWMARKET COURT FILE NO.: FC-17-54359 and CV-22-3267-00

DATE: 20230811

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Rae Marie Ierullo

Applicant

– AND –

Vito Ierullo

Respondent

Martha McCarthy and Joy Casey, Counsel for the Applicant

Jaret Moldaver, Counsel for the Respondent

– AND –

Mulberry Hills Realty Inc.

Added Respondent

Vito Ierullo

Plaintiff

Rae Marie Ierullo and Forever Thyme Sanctuary

Defendants

Aeden Erica MacLean

Defendant

Christopher Gibson, Counsel for the Added Respondent in FC-17-54359 and CV-22-3267-00

Sean Zeitz, and Trung Nguyen, Counsel for the Plaintiff Vito Ierullo in CV-22-3267-00

Joy Casey, Counsel for the Defendants Rae Marie Ierullo and Forever Thyme Sanctuary in CV-22-3267-00

Gwendolyn Adrian, Counsel for the Defendant Aeden Erica MacLean in CV-22-3267-00

CASE MANAGEMENT RULING #4

JARVIS J.

[1] This case management ruling deals with four pre-trial issues involving amendments to pleadings in combined family and civil proceedings, disclosure, hearsay (the trial evidence will be a hybrid of affidavit and time-limited oral testimony) and costs. A lengthy (19-day estimate) trial is scheduled to proceed on September 18, 2023, for two weeks and continue into the regular November trial sittings of this court. This September 2023 trial date will be the fifth, the others being shortly before and after the pandemic (in 2020 and May 2022, respectively), November 2022 (adjourned on the eve of trial at the request of the respondent husband (“the husband”) because of a possible Law Pro issue involving one of his counsel)[^1] and the fourth, also on the eve of trial, when one of the counsel for the applicant wife (“the wife”) sustained a debilitating injury. Parenting issues are not involved. There are substantial sums of money involved, the issues are complex and there are (at least) seven experts retained on separate valuation issues.

[2] In compliance with trial scheduling endorsements, the parties for the family matter trials adjourned in November 2022 and May 2023 filed extensive (and then updated) affidavit evidence and, presumably, prepared for trial accordingly.

[3] Each trial adjournment has spawned new motions and complaints. On June 27, 2023, this court repeated its earlier caution to the parties about appropriate litigation conduct and prohibited the parties from filing anything more with the court, sending unsolicited correspondence to the court and sharing inter-counsel disputes, without leave or further direction. In this court’s second case management ruling dated June 19, 2023, the court reminded the parties of the observation of Kiteley J. in Greco-Wang v. Wang[^2] that “members of the public who are users of the civil courts are not entitled to unlimited access to trial judges…” That observation applies equally, if not more poignantly, to this case.

[4] Each of the issues will be addressed separately.

Amendment of pleadings

[5] The husband has already amended his pleadings in the family and civil proceedings once. He wishes to amend them again. These more recent requests were made after the wife was questioned in the civil proceedings in February 2023 (she was questioned in the family proceedings in 2019). The Trial Scheduling Conference Endorsement form (“TSEF”) dated May 3, 2023, combining the family and civil trial proceedings, mapped the trial outline, listed the issues for trial, the identity of witnesses, their experts and whose evidence-in-chief would be tendered by affidavit or report supplemented by oral testimony and subject to cross-examination (both the latter being time-limited). Among other things, the TSEF flagged whether the husband would be allowed to amend his pleadings in both actions, again. In the court’s June 19^th ruling, the court expressed the view that it was unimpressed with what appeared to be a weaponization of pleadings amendment requests by the husband.

[6] It is relevant to this pre-trial ruling that in her endorsement released on August 8, 2022, with respect to the husband’s motion to amend his pleadings in the family matter to add a party (Mulberry Hills Realty Incorporated (“Mulberry”)) and to add additional claims including (but not limited to) a claim of oppression after the May 2022 trial was adjourned[^3], Daurio J. noted in granting the relief sought that the husband’s position with respect to the claims other than oppression arose (according to his counsel) “out of a change in his position that has occurred over time.”[^4] The trial was targeted to proceed during the November 2022 sittings. On October 17, 2022, the husband started his civil action.

(a) The Family proceedings

[7] Prior to the May Trial Scheduling Conference, the husband circulated a draft Amended Amended Answer to which objection to any amendment was made by at least one of the wife’s counsel.[^5] This was noted (as above) in the TSEF and referenced in the court’s first Case Management Ruling. Any party objecting to the amendments was directed to deliver an affidavit setting out the basis for their objection and the husband was given an opportunity to respond.

[8] The proposed pleading seeks to add (or withdraw) allegations either of fact and/or to expand the scope of relief. There are five amendments which this court can identify, each of which (grouped together as may be warranted) are as follows:

(a) Paragraph 31 of the Amended Answer alleged that the wife diverted, and hence dissipated, substantial funds of the parties without the husband’s knowledge. The husband sought a remedy pursuant to the unconscionability provisions of the Family Law Act, s. 5(6). Proposed paragraphs 33-38 allege a “scheme” by the wife and one of the parties’ financial advisers (Simpson, more on him later), facilitated by legal advice from a prominent Toronto law firm to “strip and/or distribute assets… to [the wife]’s benefit and to [the husband]’s detriment” (proposed paragraph 33). The wife alleged in her October 31, 2022, affidavit filed for the November 2022 trial that there had been disclosure of trust distributions. There is no explanation from the husband why he did not seek to amend his original pleading, as now proposed, when his first pleadings amendment motion was determined by Daurio J. in August 2022 except that he learned “new facts” after the wife’s questioning in the civil matter on February 21, 2023. It is noteworthy that the husband had this information when the Trial Scheduling Conference was held and when he agreed to the issues for trial and the time limits. In this court’s view the proposed amendments reflect an ever evolving series of allegations by the husband which, contrary to his submissions, add more issues, complexity and, inevitably, trial time. While the husband has accused the wife of a “catch me if you can” strategy with respect to disclosure, his positional strategy, when viewed overall, is a moving target, with new amendments sought on the eve of trial, retooling his narrative. There seems to be a pattern here. The relief sought with respect to proposed added paragraphs 33-38 is dismissed;

(b) The husband seeks to amend paragraph 40 of his Amended Answer to ask that he be awarded 100% (instead of 50%) of the current value of the parties’ joint accounts at the valuation date or, in the alternative for the 50% already pleaded, without prejudice to his claim for damages. This amendment is allowed as the only issue is the amount of recovery (%) that is already disputed by the wife;

(c) The husband seeks to replace paragraph 47 of the Amended Answer with a new paragraph 54 by adding a pleading that one of the properties involved in the equalization calculus (Taylor Mills) was not a gift. The evidentiary onus to prove a gift excluded by the Family Law Act rests squarely with the wife. The husband’s request as now pleaded requires no amendment. His request in this regard is dismissed;

(d) Paragraphs 48 to 68 of the Amended Answer incorporated the pleadings allowed by Daurio J. The husband has ignored those pleadings entirely and proposes to add under the “Oppression” part of his pleadings new allegations reflecting a revised narrative which allegations, directly if not indirectly, are inconsistent with his Amended Answer. Paragraph 53 of the Amended Answer is simply ruled out. The husband proposes to, respectively, add new paragraphs 64.a to plead evidence about his “reasonable expectation” and new paragraphs 75a and b. to plead discoverability. These allegations will add to the issues in this case and will likely require further pleadings amendments by the wife and the parties added in August 2022: they may also require (yet again) further affidavits from the parties, all of which raise the spectre of an ever-expanding litany of issues for a trial in a case six years old and on its fifth trial list. The husband’s request to amend the Oppression pleadings in the Amended Answer and to add paragraphs 64.a and 75.a and b is denied;

(e) The husband seeks to add paragraphs 79 and 80 alleging that on January 25, 2022, the wife breached an Order of the court. This adds nothing to his existing pleading in paragraphs 69 to 74 of his Amended Answer. Request denied.

[9] If the court has overlooked dealing with any of the proposed amendments, counsel shall advise the court in writing by August 25, 2023, of the omission (without argument).

(b) The Civil proceedings

[10] The husband started his civil action on October 17, 2022, a month before the regular start of family law trials in Central East Region. He was permitted to amend his claim in December 2022. That amended claim pleaded that the defendants (the wife, the parties’ daughter, Mulberry and a Not-for-Profit Corporation (Forever Thyme) operated by the wife and two daughters) had engaged in fraudulent activities involving Mulberry over a period of years which included mortgages and, in mid-June 2022, a transfer of title to land, Mulberry’s principal asset, to one of the daughters (the defendant Maclean).[^6] The property was subject to a Preservation Order made by Douglas J. in early 2020: this formed one of the husband’s complaints in his claim. The Litigation Plan approved by the court for the combined cases granted the husband leave to amend, gave directions with respect to the delivery of amended pleadings by the defendants, and set discovery and documentary exchange and filing deadlines. The pleadings were amended as directed, documents exchanged and filed with the court in readiness for the projected May 2023 trial. The Plan did not address a more expanded series of claims, nor did the TSEF (at least not to the extent now proposed). The value of Mulberry and the parties’ interests in that property (and those of third parties) are already part of the family law proceedings.

[11] The husband seeks to further amend his claims to include:

(a) A claim of misappropriation of a property transferred in 1997, allegedly pursuant to a “scheme” by the wife and one of the party’s financial advisers (Mervin Simpson) to progressively strip him of his assets, the details of which the husband pleads he was unaware for over two decades until her February 2023 discovery (even though the property was rolled into Mulberry, a company acknowledged by the husband to be still owned by the wife and him, and she was questioned in 2019 in the family matter);

(b) In the alternative, a derivative action (which is in addition to his oppression claim in the family proceedings) that he should be declared sole owner of Mulberry;

(c) Unwinding over twenty years of transactions involving Mulberry (this is the practical consequence of the proposed amendments);

(d) A declaration that the wife is a “fraudulent person” pursuant to the Land Titles Act by adding allegations involving transactions in which the wife’s sister and mother participated, one a divorce proceeding between the sister and her former spouse and the other a transfer of property owned by the wife’s late mother to herself and ultimately to a son;

(e) A claim for repayment of a loan by the wife’ sister to the wife that the husband claims should have been disclosed, and paid, to him.

[12] In his affidavit the husband claims credit that it has been he who has urged the combining of the two actions and that the addition of further claims will not prejudice the defendants nor impact the trial direction Orders contained in the TSEF. In his affidavit sworn on June 27, 2023, he claims that the amendments sought in paragraphs 8, 9, 11, 12(a)-(b) of his new proposed pleading and paragraphs 4 (b)-(d) of his Amended Answer merely particularize material facts (even though there is no motion by the defendants before the court for particulars). In no affidavit does he explain why he seeks to add allegations involving the wife’s sister and late mother, except (possibly) to support his allegation that the wife is a “fraudulent person.” and (perhaps) to embellish his complaints in that regard. Ignored too are allegations crossed out of the Fresh as Amended Statement of Claim (or recast) that operate to withdraw inconvenient allegations. That the husband should think that his proposal to further amend his pleadings is inconsequential to the TSEF Orders and the time allowed to conclude the borborygmi of the parties’ marriage breakdown is disingenuous at its most generous. This effort strikes the court as procedural sandbagging.

[13] The husband’s motion to amend his Fresh as Amended Statement of Claim is dismissed.

Disclosure

[14] On March 2, 2023, the husband brought two motions in the family proceedings. One motion sought seven heads of substantive financial disclosure relief from the wife and a third party (Northland Investment Wealth Management (“NWM”)) involving identified bank and investment accounts and the other an urgent motion to have the first motion heard on an urgent and expedited basis no later than March 22, 2023. The wife brought a cross-motion on March 10, 2023, to dismiss the husband’s urgent motion.

[15] On March 27, 2023, Himel J. dismissed the husband’s request for a disclosure motion noting that “[T]he disclosure issues have been addressed throughout the proceeding, including in 2019 when the wife was questioned (and a refusals motion was contemplated)” by the husband. Any material gaps in a party’s evidence could be addressed by adverse inferences being drawn, and non-disclosure in costs. The court also noted that “[A]ccess to justice is reserved for everyone, not merely litigants who have seemingly unlimited resources to litigate.”

[16] As already noted, the TSC was held on May 3, 2023. There is no reference in the TSEF to disclosure, but the TSEF identified two principals of NWM (Mervin Simpson (“Simpson”) and Arthur Salzer (“Salzer”)) whom the husband proposed to call as witnesses. The topics for which the evidence these witnesses were being tendered involved the husband’s allegations of depletion of assets by the wife before the valuation date (April 1, 2017), the wife’s failure to disclose NWM statements sent to the parties and a purported failure by NWM to answer his production requests, follow his instructions and, essentially, protect his interests.

[17] On May 5, 2023, the husband brought a motion to validate witness summons for Simpson and Salzer allegedly emailed to them on May 2, 2023, and in the possession of one of the wife’s counsel on May 3^rd. The husband claimed that the evidence of these witnesses was required by him for the upcoming trial. The summons were reviewed by this court: they referenced eleven separate groups of documents involving, among other things, over twenty-eight banking and investment accounts, communications between NWM and the parties and regulatory, accreditation, compliance and disciplinary proceedings involving Salzer, Simpson and NWM. Some of the accounts involved were the same as those in the husband’s March motions dismissed by Himel J. as was some of the relief sought from NWM.

[18] In the May 31, 2023, Case Management Ruling (#1) this court expressed its concern about “why so expansive a document request was being made, why obtaining production of the material was not pursued earlier in these proceedings and how [the husband] proposes to deal with whatever may be provided in the trial time available.” The husband was ordered to deliver an affidavit answering these concerns: the wife and the parties’ daughter were granted leave to respond.

[19] Before the deadline for the husband’s delivery of his affidavit (June 16, 2023) the court was contacted by a lawyer acting for Salzer, Simpson and NWM (Carey) who advised that he acted for those clients in an action started against them by another client in the law firm acting for the husband in the family proceedings. This action (“the Mascard action”) involved another principal of NWM. The lawyer had been in contact with the husband’s family counsel in early May 2023 and had been provided with a copy of the May 31, 2023, Case Management Ruling. The Carey letter prompted a series of unsolicited letters to the court from most counsel and led ultimately, and in part, to the court’s June 27, 2023, ruling that no further material from any party would be permitted to be filed and reminding the parties (especially their counsel) that “serial affidavits and uninvited communications with the court are unacceptable.”

[20] In his affidavit sworn on June 16, 2023, the husband swore that the critical period of time for which he needed NWM records (including those for a family trust, “IFT”) was between June 1, 2015, to December 31, 2017 (“the relevant period”). He claimed that he was entitled to records maintained by NWM, but his affidavit is silent about his efforts since these proceedings began in 2017 to obtain any of these documents apart from an April 2022 letter to NWM by his counsel and the March 2023 motions for disclosure dismissed by Himel J. For example, in her affidavit sworn on March 10, 2023 (for the Himel J. motions), the wife outlined all the disclosure provided to the husband and stated that the husband’s counsel had stated on the record during her 2019 questioning that his client would be bringing a disclosure motion (this was not challenged by the husband). She also stated that she didn’t have the statements sought by the husband and pointed to an affidavit from a representative of the husband’s law firm (April Bollers, sworn on June 29, 2022, paragraph 14 c) that one of the husband’s counsel (Ordon) understood that neither the wife nor NWM had joint account statements for the parties and were unable to retrieve them.

[21] The disclosure dispute between the parties really boils down to whether the NWM records for the relevant period can be retrieved. A party is not entitled to perfect disclosure[^7] or to use the disclosure process to delay or reap tactical advantage.[^8] The wife says that she has provided everything she can. Should the court find that she has not, or has acted unreasonably, the appropriate inference can be drawn. Glossing over his delay, the husband says he will be prejudiced without the disclosure requested. There is no admissible evidence from NWM before the court explaining why the records sought in items #1 and #2 of the summons can’t be provided (the Carey letter is not evidence). Salzer and Simpson have had over three months to determine (and gather, if possible) the documents requested in those items. If NWM has already provided them to the husband, if the documents/records can’t be retrieved, or for any other reason they are unavailable, then there should be admissible evidence before the court in that regard. NWM and Salzer and Simpson shall file with the court by August 25, 2023, an affidavit setting out their answers to these concerns (including, if available, evidence of their disclosure to the husband or any of his representatives). One collective affidavit will suffice. Salzer, Simpson and NWM are relieved from providing the balance of the documentation otherwise requested in the summons. Service on Salzer and Simpson is validated with the foregoing guardrails. The court will deal with the issue of their evidence after their affidavit is filed, possibly at the start of trial, if not before. There shall be no motion or other material filed by any party responding to this affidavit without direction of the court.

Hearsay

[22] The evidence in this trial will be a hybrid of affidavits, expert reports and oral testimony, supplemented by time-limited direct examination and cross-examination. Paragraph 20 of the TSEF ordered that if a party objected to any part of the filed affidavit evidence of a party that objection was to be identified in a memorandum filed with the court before the start of the projected May 2022 trial. In anticipation of the November 2022 trial, both parties had delivered affidavits sworn on October 31, 2022. Each party has complied with the TSEF and filed a memorandum of objections but, as noted, that trial date had to be adjourned. The goal of this approach is to make the best use possible of available trial time unburdened by pre-trial objections at the start of, or during, trial.

[23] In the family proceedings, the wife has identified 19 paragraphs of the husband’s 56 paragraph affidavit, and various statements in those paragraphs, to which she objects on the basis of hearsay, speculation, uncorroborated estimates of value or simply argument. So does the husband with respect to 13 of the wife’s 109 paragraph affidavit. Each party also challenges the admissibility of certain exhibits referenced in the impugned paragraphs of the other’s affidavit as hearsay. The parties’ objections go beyond mere hearsay and, but for this hybrid approach involving affidavits, would be rather unremarkable during a trial involving oral testimony.

[24] The court has reviewed the affidavits and memoranda and provides the following observations:

(a) Statements about declarations made by, or the state of mind of, persons not testifying are inadmissible unless the proposed evidence falls within one of the hearsay category exceptions or satisfies the twin tests of necessity and reliability;

(b) Statements (or speculation) about the mindset of the other party’s litigation behaviour are not evidence;

(c) An estimate of value is not proof of value absent consent or admissible evidence (mostly expert) of value;

(d) There is nothing objectionable about an informative narrative explaining or linking events within the affiant’s personal knowledge, even though the events may be subject to dispute and, later, proof;

(e) Paragraphs commingling some evidence but mostly argument (such as paragraphs 51 and 52 of the husband’s affidavit) are little more than camouflaged submissions and of limited value (submissions are not evidence);

(f) That, for example, there was an exchange of correspondence in which certain facts are alleged is not proof of those facts. That a letter was sent is a fact. What a party may say they did after, or as a result of receiving, that letter is evidence too. But not what was stated, absent other admissible evidence.

[25] The court is mindful of the concerns expressed in the parties’ memoranda. The same observations apply to the civil proceedings.

May 2023 Trial adjournment costs

[26] When the November 2022 trial as adjourned, the husband was ordered to pay $35,000 costs ($25,000 to the wife and $10,000 to Mulberry) on the basis that the award could be revisited by the trial judge. In this court’s May 31, 2023, Ruling adjourning the trial to September 2023, this court suggested (perhaps too subtly) that it was not inclined to treat the wife any differently than the husband. The parties were encouraged to resolve the issue of “costs thrown away.” Unsurprisingly, the parties resolved nothing.

[27] In the family part of these proceedings the husband seeks full recovery costs of $44,095 (no HST is claimed on this amount at this time): in the civil part, the husband seeks $44,137.67, inclusive of HST. The total is $88,232.67.

[28] The wife submits that the actual costs thrown away are minimal, would have had to be incurred anyway and should be deferred until final disposition.

[29] Following the court’s suggestion, the husband offered to accept from the wife the same all-inclusive amount of $35,000 for both proceedings as he had been ordered to pay. The wife rejected this proposal. Big mistake. Whatever her objection to the husband’s litigation conduct (and the court expresses no view on this issue) she had, and like the husband continues to have, an obligation to act reasonably on, in this instance, this discrete issue. She has not.

[30] The wife shall pay to the husband costs thrown away of $40,000, as follows:

(a) The sum of $5,000 by August 25, 2023;

(b) The sum of $35,000 by the earlier of September 18, 2023, or the start of trial (if for any reason the trial is further adjourned), being $25,000 for the family proceeding (Mr. Moldaver) and $10,000 for the civil proceeding (Mr. Nguyen);

(c) This award is made without prejudice to the husband’s right to claim further costs of the adjourned May 2023 trial on final disposition;

(d) Failure to pay shall result in a $500 daily penalty for each day of default.

[31] The parties have substantial resources. Failure to comply with this costs award (the court is unaware whether the husband has complied with the award made in January 2023 but presumes compliance) may result in the court favourably entertaining a motion to strike when the trial starts.

Summary

[32] Accordingly:

(a) The husband’s motions to amend his pleadings in the family and civil proceedings are dismissed, except for his request to amend the degree of recovery now sought in paragraph 40 of his Amended Answer (no refiled pleading in this regard is required from either party: the court will accept the pleading as amended by this Ruling);

(b) The wife shall be entitled to the costs of responding to the husband’s motions to amend when the issue of costs of the combined proceedings is determined after final disposition;

(c) Messrs Salzer, Simpson and NWM shall file an affidavit by August 25, 2023 with respect to the concerns expressed by the court in paragraph 21 above. The costs of the disclosure motion involving Messrs. Salzer, Simpson and NWM are reserved to final disposition;

(d) The wife shall pay to the husband costs as set out in paragraph 30.

[33] Two Orders shall issue. The first will reflect the terms of paragraph 32 (a) to (c) and shall be prepared by the wife: the second will reflect the terms set out in paragraph 30 and shall be prepared by the husband. Drafts, and approved drafts, of the Orders shall be forwarded to the judicial assistant.

[34] The terms of this court’s May 31, 2023, Case Management Ruling with respect to the timing of the trial and related matters (see paragraphs 3(e) and 6) continue to apply. Further directions may follow after the court’s receipt of the Salzer/Simpson/NWM affidavit.

Justice D.A. Jarvis

Date: August 11, 2023

[^1]: 2022 ONSC 74. While this ruling dealt with costs thrown away, the procedural context that led to the trial being scheduled was summarized. The wife was consistent in her opposition to any trial delay. In November 2022 the husband was unsuccessful in persuading Himel J. to adjourn the trial beyond the November 2022 sittings. It was noted that he had also started a civil action against the wife, their daughter and another entity in which the daughter was involved.

[^2]: 2014 ONSC 5366.

[^3]: The “other claims” were “newly identified issues… regarding trust claims, the parties’ joint accounts, etc.”:

[^4]: Paragraph 17 of the August 8, 2022, endorsement. At a Trial Scheduling Conference held on March 21, 2022, before which on October 18, 2021, Himel J. had advised the parties that the trial would proceed during the May 2022 sittings, the husband advised that he wanted to amend his pleadings. The wife opposed the adjournment request and any amendments.

[^5]: The proposed pleading (as do its’ predecessors) does not simply respond to the wife’s Application but also advances new and expansive claims by the husband.

[^6]: In her submissions, Ms. Maclean asserts that the husband’s motion to amend is his fifth iteration of the pleading. The original claim was issued in October 2022 and then, before obtaining an Order to amend, the husband served a Fresh as Amended Claim. Whether it was this pleading or another, a Fresh as Amended Claim was served on April 4, 2023, but leave was not sought for its issuance. By June 13, 2023, the husband delivered what Ms. Maclean suggests is a fifth version. She did not provide a comparison of the pleadings nor has the court undertaken that task, not a productive use of the court’s time anyway. Suffice it that the husband’s motion represents, at the very least, his third version of an evolving series of complaints.

[^7]: Boyd v. Fields, [2007] W.D.F.L. 2449 (ONSC) at paras 12-14

[^8]: Chernyakhovsky v. Chernyakhovsky, 2005 CanLII 6048 (ON SC) at paras 6-8.