Elbadawy v. Moustafa, 2023 ONSC 6024

Court File and Parties

COURT FILE NO.: FC-21-1711 DATE: 2023/10/25 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: AMROU ELBADAWY, Applicant -and- SARA MOUSTAFA, Respondent

BEFORE: Justice D. Summers

COUNSEL: Hana Ahmad-Yousuf, for the Applicant Respondent is self-represented

HEARD: October 12, 2023

Endorsement

Overview

1The applicant father moves under rule 1(8) of the Family Law Rules, O. Reg. 114/99 (FLRs), for an order striking the respondent mother’s Answer. He asserts she is in breach of four orders: two are disclosure orders; two are costs orders. He says the respondent has all but ignored her disclosure obligations.

2The respondent did not defend the motion, although properly served. She did not file materials or appear at the hearing.

3It is only financial issues that remain before the court. All parenting issues were determined by final order of Justice Doyle, dated June 25, 2023, made on the applicant’s motion for summary judgment. The respondent mother did not participate in the motion despite engaging with the court to schedule the return date.

4Justice Doyle’s order awards the applicant primary residence and sole decision-making authority for the parties’ four children, discretion over the respondent’s contact with them, temporary exclusive possession of the matrimonial home, permission to obtain travel documents for the children, and the ability to travel with them outside of Canada without need of the respondent mother’s consent. The applicant was awarded costs in the amount of $4,000.

5For reasons I will explain, I am satisfied the relief sought is appropriate and make an order striking the respondent’s Answer and the claims made in it. In addition, I award costs to the applicant of $5,000, to be paid by the respondent forthwith, either by money order, or certified cheque.

Factual Context

6The parties married in Egypt in 2006, moved to Canada in or around 2012, and separated on March 9, 2021. Ottawa had been the family home for many years before the marriage broke down.

7The respondent mother is a dentist. She operated her practice through 10663468 Canada Inc. Her clinic, known as Clinique de Santé Dentaire St. Joseph, was located at 129 Boulevard St. Joseph, Gatineau, Quebec.

8The applicant, although trained as a pharmacist, worked with the respondent during the marriage managing her dental clinic. His position there ended with the separation. The applicant then returned to his work as a pharmacist, first in Northern Ontario until he could secure a position in Ottawa.

910663468 Canada Inc. also owns the building located at 129 Boulevard St. Joseph, and the property at 803 Notre Dame, Embrun, Ontario. The applicant states he is an equal shareholder in the company but did not specify the class, or attributes, of the shares he holds. Nor did he identify whether he is an officer or director of the corporation.

10At separation, the respondent was the sole owner of rental property at 576 Paul Metivier Drive, Ottawa, and also owned shares in 1030183 Canada Inc., with her mother. The applicant describes her interest as equal to that of her mother. The company, in turn, owned the property at 297 Boulevard St. Joseph, in Gatineau.

11On July 26, 2022, the Royal Bank of Canada gave notice to 10663468 Canada Inc. that, for reasons of default under various credit facilities totalling approximately $1,000,000, and the debtor having ceased operations, it would be exercising its’ hypothecary rights against immovable and movable property. The applicant had personally guaranteed the loan.

12In early August 2022, the applicant learned that the respondent had listed Paul Metivier Drive for sale and brought a motion seeking leave to proceed on an urgent basis for an interim order requiring the respondent to preserve assets. Leave was granted, however, by the time the motion came before Audet J., on August 30, 2022, the respondent had taken the property off the market. On consent, the motion was adjourned. The parties said they wanted to consider the possibility of mediation/arbitration.

13Without further notice to the applicant, the respondent sold the properties at Paul Metivier Drive and 297 Boulevard St. Joseph, that fall. The evidence suggests she may have sold both properties for less than market value.

14On June 27, 2023, the Royal Bank obtained a default judgment against the applicant for $990,865.70, plus interest. He is now engaged in further litigation in an effort to protect the jointly owned matrimonial home from seizure.

15The applicant and children have been living together in the matrimonial home since September 2021, when the respondent mother left without notice and relocated to Barrie, Ontario.

16Following the respondent’s move to Barrie, parenting time was ad hoc and generally took place every other week, on either Saturday or Sunday. The last time she saw the children was January 23, 2022. Any contact since then has been sporadic and through social media.

17In June 2022, in the midst of the clinical investigation undertaken by the Office of the Children’s Lawyer’s (OCL), the applicant learned that the respondent was in Egypt. The OCL was unable to complete their mandate. The observation visit between the respondent mother and children had not yet occurred, nor had the clinician been permitted to speak to the necessary collaterals, in particular, the respondent’s health care providers, as she withheld her consent. As a result, the OCL report, released July 2022, was incomplete. The information obtained by the clinician to that point indicated the respondent mother was withdrawing from the process to focus on her mental health, in Egypt.

18Once the court received the OCL report, it attempted to schedule a settlement conference. The respondent did not advise of her availability.

19In February 2023, for purposes of an upcoming case management meeting, the respondent advised the court that she was still living in Egypt. She sought and received permission to participate virtually but did not file material or prepare in any way that lent itself to a productive conference. The respondent was ordered to pay costs of $800.

20The respondent told the court then that she intended to return to Canada in May 2023 but did not specify to what location in Canada. Whether she did, in fact, return is unknown.

21The respondent has not paid any child support.

The Legal Framework

22If a person fails to obey an order in a case, rule 1(8) of the FLRs provides the court with the discretion to make any order it considers necessary to arrive at a just determination, 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.

23I further note r. 1(8.1) that allows for the same relief, with the exception of an order for contempt, as set out above should a party fail to follow the FLRs.

24The consequence of striking a party’s pleadings in a case, unless the court orders otherwise, are set out in r. 1(8.4), as follows:

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.

25In family matters, the case law directs that the court’s authority to strike pleadings and deny trial participation should be used sparingly and only in exceptional circumstances. An order eliminating a party from participating in a case is a drastic remedy, one of last resort when no other will suffice. See Purcaru v. Purcaru, 2010 ONCA 92, at para. 47, and Chiaramonte v. Chiaramonte, 2013 ONCA 641, 36 R.F.L. (7th) 11, at paras. 31 and 32.

26In Kovachis v. Kovachis, 2013 ONCA 663, paras. 27-36, the court set aside the lower court’s order striking pleadings saying the judge failed to consider the substantive disclosure already made, the lack of evidence that the responding party willfully disobeyed the disclosure order, the principle of proportionality fundamental to all civil proceedings in Ontario, and further failed to identify the disclosure still outstanding and the importance of it.

27In Roberts v. Roberts, 2015 ONCA 450, at paras. 11, 12 and 13, our Court of Appeal had this to say about a party’s obligation to make financial disclosure:

11The most basic obligation in family law is the duty to disclose financial information. This requirement is immediate and ongoing.

12Failure 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 is stalled.

13Financial disclosure is automatic. It should not require court orders – let alone three – to obtain production.

28In 2016, the Court of Appeal in Manchanda v. Theti, 2016 ONCA 909, leave to appeal refused, [2017] S.C.C.A. No. 29 (S.C.C.), upheld the motion judge’s decision and stated:

13… after continual admonitions by the courts and the legislature that parties to a matrimonial proceeding must produce financial documentation, willful non-compliance must be considered egregious and exceptional. This court has stated that the most basic obligation in family law proceedings is the duty to disclose financial information. The requirement is immediate and ongoing: Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, at para. 11. In 2015, Family Law Rule 13 was amended to emphasize a party’s financial disclosure obligations. A party’s non-compliance must be considered in the context of this strict financial disclosure obligation. Rule 1(8) provides the court with the authority to strike claims. Those who choose not to disclose financial information or to ignore court orders will be at risk of losing their standing in the proceedings as their claims or answers to claims may be struck.

See also Sparr v. Downing, 2020 ONCA 793, at para. 4; Peerenboom v. Peerenboom, 2020 ONCA 240; and Martin v. Watts, 2020 ONCA 406.

29In Mullin v. Sherlock, 2018 ONCA 1063 the court established the following framework for decisions under rule 1(8):

44First, when faced with an allegation of failure to obey a disclosure order, before granting a remedy, the judge must be satisfied that there has been non-compliance with the court order.

45Second, once satisfied, 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:

• the relevance of the non-disclosure, including its significance in hindering the resolution of issues in dispute;
• 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;
• the extensiveness of existing disclosure;
• the seriousness of efforts made to disclose, and the explanations offered by a defaulting party for the inadequate or non-disclosure; and
• any other relevant factors.

30I turn now to consider the factors set out above, in the context of this case.

Has the Respondent Mother Failed to Obey a Court Order, and If So, Did She Do So Willfully?

31The record shows that disclosure has been problematic from the outset. On October 14, 2021, Kaufman A.J., now Justice A. Kaufman, ordered the parties to make all reasonable efforts to exchange the necessary disclosure ahead of the next appearance. Nevertheless, two months later, when the matter came before Justice Shelston on December 17, 2021, disclosure was still in dispute. The issue was adjourned to a further case conference.

32By the end of April 2022, the record shows the applicant had received or was otherwise in possession of the following documents: the respondent’s Financial Statement sworn November 4, 2021 as filed with her pleadings; copies of her 2018 and 2019 Income Tax Returns; a CRA notice addressed to the respondent advising of child tax benefits; copies of overdue bills dated August 2022 as sent to the respondent and to 10663468 Canada Inc., at the dental clinic in Gatineau; a 2020 T4 issued to the respondent by the clinic for $13,040; a single date of separation statement for each of the respondent’s Mastercard, RESP in her name, personal bank account, and the 2020 Financial Statement for 10663468 Canada Inc. That is the extent of the disclosure made.

33On August 30, 2022, Justice Audet ordered the court counter staff to “issue a standard financial disclosure order”. I interpret that to be the automatic order required under r. 8.0.1 of the FLRs to be issued by the clerk, in a proceeding involving financial claims commenced after February 1, 2022. The order is readily available on the internet. Accordingly, I need not reproduce it here.

34A second disclosure order was made by Audet J. on February 27, 2023, saying the respondent had not yet provided “the most basic disclosure” in relation to the support and property claims in the case that, in turn, involved significant business assets and real estate. The respondent was given 30 days to comply. If unable to comply, the order further provided 30 days for the respondent to explain, in writing, why and when she expected to be in a position to comply. The applicant was awarded $800 in costs.

35Pursuant to the order, the respondent was directed to produce the following: an updated sworn Financial Statement; Income Tax Returns and Notices of Assessment for 2020, 2021, and when available, 2022; all pay stubs from September 2021 to the present date; real estate documents confirming the proceeds from the sale of Paul Metivier Drive and 297 Boulevard St. Joseph, how the sale funds were disbursed, and the accounts to which they were transferred. The disclosure ordered also required that the respondent produce copies of personal and business bank and credit card statements from September 2019 to the present date, documents detailing her employment since separation to include copies of employment contracts, pay stubs, proof of hours worked, and documents setting out her efforts to find employment commensurate with her earning abilities.

36It is the applicant’s evidence that neither the disclosure, nor an explanation, was forthcoming.

37Nor has the respondent made any payment toward costs.

38Accordingly, I find the respondent has not complied with any of the four orders discussed above. There is no evidence to suggest otherwise.

39I also conclude that the respondent’s failure to comply has been willful. The information and documentation required to answer much, if not all, of the disclosure ordered was either readily available to her or should have been. To the extent it was not, she had an opportunity to explain and did not do that either. There is no evidence to suggest that her choices were other than deliberate.

The Relevance of the Non-Disclosure, Including Its’ Significance in Hindering the Resolution of Issues in Dispute

40Fulsome financial disclosure is a pre-condition to an informed resolution of financial issues. Support cannot be determined without meaningful evidence of past and present income and, if a party is unemployed or under-employed, what steps they have taken to find employment commensurate with their abilities. Similarly, property claims cannot be resolved, or potential enforcement issues addressed, without evidence to establish the value and location of each party’s assets and liabilities. To the extent the respondent did provide disclosure, it was inadequate to determine either support or the equalization of net family property.

Are the Issues in the Case Straightforward or Complex?

41To the extent there is any complexity to the financial issues, it rests in the nature of the disclosure needed to determine the value of the respondent’s dental practice, real estate holdings, and the income available to her to pay support in accordance with the Child Support Guidelines, S.O.R./97-175, as amended. It has been 2 years since this proceeding began. More than sufficient time has passed to produce the necessary disclosure.

Exceptional Circumstances

42In my view, the circumstances here are exceptional. There are four children to be supported. It appears the respondent has completely withdrawn from the process and turned her back on her obligation to contribute to their support and address the other financial issues arising out of the marriage breakdown. Prior to abandoning her dental practice, the respondent was the primary income earner in the household. In addition, the applicant has been left to deal with significant debt incurred for the clinic while also trying to protect the matrimonial home where the children reside. Against these circumstances, it is appropriate the applicant be in a position to move forward on the remaining financial issues, without further delay. Accordingly, I make an order striking the respondents pleadings. I am satisfied no other order would be appropriate or effective to bring about the respondent’s compliance and ideally, participation in the proceeding. The court has twice expressed its displeasure with the respondent by ordering her to pay costs, without consequence. The costs remain unpaid. Similarly, I see little point in dismissing only the claims made by the respondent in her Answer. Considering her failure to engage in this motion, and the summary judgment motion on parenting issues, it is hard to imagine that an order preventing the respondent from pursuing her claims would result in any meaningful consequence.

43The applicant may proceed with an uncontested trial. He is also entitled to his costs, fixed at $5,000, payable forthwith.