Donaghy v. Donaghy, 2025 ONSC 767
Court File No.: FS-19-11866
Date: 2025-01-17
Superior Court of Justice – Ontario
Re: Pierrette Donaghy, Applicant
And: Michael Donaghy, Respondent
Before: Natasha Mathen
Applicant Counsel: Shannon Beddoe, Elizabeth Cinco
Respondent Counsel: Todd Slonim, Toni Pascale
Heard: January 17, 2025
Endorsement
Relief Sought
The Applicant brings a motion for the following relief:
a. A finding that the Respondent is in breach of paragraph 1 of the consent Order of Justice Sharma dated May 12, 2023 (“Sharma Order”).
b. A finding that the Respondent is in breach of paragraph 1 of the Order of Justice Kristjanson dated January 10, 2024 (“Kristjanson Order”), in relation to spousal support.
c. A finding that the Respondent is in breach of paragraph 2 of the Kristjanson Order, in relation to disclosure, particularly but not limited to the production and delivery of business valuation reports as at the Date of Separation and the Current Date and an income determination report.
d. In accordance with the terms of adjournment of the Applicant’s compliance motion, as agreed to by the parties through counsel on July 5, 2024 (“Terms of Adjournment”), an Order finding that a penalty of $100 per day has applied since August 5, 2024, and continues to apply until the Respondent brings himself into compliance with the Kristjanson Order, subject to (e), below.
e. An Order that the Respondent is to comply with the Kristjanson Order by no later than 10 days from the date of this Order or February 7, 2025, whichever is earlier, failing which, the Respondent shall pay an increased monetary penalty of $300 per day to the Applicant.
f. An Order pursuant to r. 1(8)(e) of the Family Law Rules that until the Respondent complies with the Sharma Order and the Kristjanson Order, the Respondent shall not be entitled to any further relief from this Honourable Court unless the Court orders otherwise.
g. An order that the Respondent shall preserve all of his assets in Ontario and refrain from disposing of such assets within the jurisdiction or otherwise put assets beyond the reach of the Court until the issue is determined on a final basis, pursuant to s. 12 and s. 40 of the Family Law Act.
h. An order restraining the Respondent from transferring, assigning, pledging, paying, disposing of, depleting or otherwise dealing with property that is in his possession, power or control, or in the possession, power or control of any corporations in which the Respondent has an interest or in which the Respondent is an officer or director without the prior written consent of the Applicant or order of this Court on notice to the Applicant pending a determination of the issues in the within proceeding, pursuant to s. 12 and s. 40 of the Family Law Act.
i. An order restraining the Respondent from transferring, disposing or in any way dealing with any of the lines of credit, bank accounts, RRSPs, or any monies on deposit for him or under his control or the control of the corporations in which he has an interest or is a director or officer of, without the consent of the Applicant and an order that he preserve all such lines of credit, bank accounts and monies on deposit without the prior written consent of the Applicant or order of this Court, pursuant to s. 12 and s. 40 of the Family Law Act.
j. An order restraining the Respondent from depleting, selling, transferring or otherwise disposing of shares issued by Curaleaf Holdings Inc. or other companies related to Curaleaf Holdings Inc. (“Curaleaf”) pursuant to s. 12 and s. 40 of the Family Law Act.
k. Leave to bring a motion (by 14B or otherwise, as necessary) to strike the Respondent’s pleadings and proceed by way of an uncontested trial on all issues, including property and support, pursuant to rr. 2(2) and 2(3) of the Family Law Rules if the Respondent fails to provide disclosure in accordance with the Order of Justice Kristjanson dated January 10, 2024 or a sworn affidavit setting out his efforts to provide the disclosure and reasonable grounds as to why he has been unable to do so by March 1, 2025.
l. An order that the Respondent provide a full and detailed accounting of all shares issued to him by Curaleaf, along with all supporting documentation (including but not limited to share purchase agreements), within 14 days of this Order.
m. An order that, within 30 days, the Respondent shall pay to the Applicant interim disbursements in the amount of $150,000 pursuant to r. 24(18) of the Family Law Rules and s. 131 of the Courts of Justice Act. The funds shall be paid from the Respondent’s share of funds held in trust from the proceeds of sale of the matrimonial home, 14 Greenland Road, North York, ON, currently held in trust with Lloyd Daniel Hicks, which disbursement shall be credited to the Respondent as property, not support, on a final resolution.
n. Costs on a substantial indemnity basis.
Background
The parties married on July 30, 1994, and separated October 18, 2017. There are two adult children of the marriage.
During the majority of the marriage, the Respondent was the sole earner. The Respondent was and is self-employed. He has been involved with numerous companies, including in their development and putting in “sweat equity”. He owns property in Toronto and Florida. His most recent Financial Statement lists holdings or interests in five companies. One of those companies held shares in Northern Green Canada Inc., which was sold to a company called Curaleaf which, he says, will issue 75,000 shares to him over time.
This case has been ongoing for years. Numerous endorsements of this Court admonish the Respondent for lack of disclosure and failure to comply with court orders including on consent.
Previous Court Orders
This Court granted the Applicant:
a. Leave to bring a preservation order motion, or a motion for a Certificate of Pending Litigation in respect of a Toronto Condominium and/or a Florida property (Kristjanson order).
b. Leave for “motions” (Sharma order).
c. Leave to bring a motion pursuant to Rule 1(8) of the Family Law Rules, “to seek any remedy” for breach of the Order of Kristjanson J. dated December 7, 2023 (Ramsay J. Endorsement May, 2024).
d. Leave to bring “motions” for compliance and release of funds (Nakonechny J. Endorsement September, 2024).
Issues
This motion raises the following issues:
a. Is the Respondent in breach?
b. If the answer to (a) is yes, should the Respondent be prevented from seeking any relief from this Court until he cures those breaches?
c. Should the Respondent pay an increased monetary penalty?
d. Is it appropriate to issue preservation and/or restraining orders against the Respondent?
e. Should the Applicant be granted leave to bring a motion to strike the Respondent’s pleadings?
f. Should the Respondent provide an accounting for his shares in Curaleaf Holdings?
g. Is the Applicant entitled to interim disbursements?
h. Is either party entitled to costs?
Analysis
Is the Respondent in Breach?
The Applicant argues that the Respondent is in breach. As a result, she has been unable to advance her matter in any meaningful way and forced to pay significant legal fees. I agree. The following statements from this Court validate the Applicant’s claims:
January 10, 2024: Justice Kristjanson noted that the Respondent breached a consent order requiring him to prepare income determination and business valuation reports by September 8, 2023. As of December of 2023, “the husband had not even paid his experts a financial retainer, and work had not begun. Yet…the husband has received well over $500,000 from the sale of various properties.” Her Honour stated that “the problem is the husband’s failure to produce disclosure” and “[f]our years after separation, and a year after the Applicant was served, the court has no credible information about the husband’s income or assets.” She described the Respondent’s approach to disclosure as “completely bewildering.”
May 28, 2024: Following a settlement conference she called “premature”, Justice Ramsay noted that “there is a significant amount of disclosure outstanding from the respondent.” She said that the husband repeated arguments trying to justify the delay which already had been rejected by Justice Kristjanson.
September 24, 2024: Following another unproductive settlement conference, Justice Nakonechny stated that “the parties’ next steps including comprehensive mediation cannot proceed until disclosure is completed.”
At the hearing, the Respondent acknowledged that he is in breach of the court orders as noted by the Applicant in her Notice of Motion. An order shall therefore issue.
Should the Respondent be Prevented from Seeking Relief Until Breaches are Cured?
The Respondent is in serial breach of several court orders, including orders on consent.
The Respondent argues that he is acting in good faith, but has encountered delays due to events outside his control.
I find it unnecessary to determine whether the Respondent is acting in bad faith. He has admitted to being in breach. As explained below, I am giving him another chance to contribute to these proceedings. The Applicant states that she does not want to “punish” the Respondent. She seeks relief such as a motion to strike as a last resort.
Whether the Respondent’s behaviour has been wilful, careless or inadvertent, I am persuaded that he has caused harm to the Applicant and wasted this Court’s time and resources. Under the authority provided under Rule 1.8(e) of the Family Law Rules, I find it just that the Respondent be disentitled to further relief from this Court until such time as he cures his breaches or the Court orders otherwise.
Should the Respondent Pay an Increased Monetary Penalty?
The Respondent is currently subject to a $100 per day penalty owing to his non-compliance with a consent order to adjourn a prior compliance motion. The Applicant argues that his behaviour to date shows that he is “unphased” by this penalty and requires a higher amount of $300 per day.
Under Rule 1(8)(a.1), the Court has the power to make an order “to pay an amount to a party or into court as a penalty of fine.” Whether to impose a penalty, and at what level, is at the court’s discretion.
While I find that the Respondent’s delay has been egregious, I am not persuaded that in this case a higher penalty is useful. I am not persuaded that the current penalty has left the Respondent “unphased”. I find it more likely that the Respondent is overwhelmed by the significant amounts already owing such that increasing the penalty will have little effect. The Applicant stresses that she seeks compliance rather than retribution. I am persuaded that there are other ways to motivate the Respondent. I therefore decline to increase the daily penalty at this time.
Is it Appropriate to Issue Preservation and/or Restraining Orders?
The Applicant seeks very broad preservation and non-dissipation orders against the Respondent.
Sections 12 and 40 of the Family Law Act provide courts with the following jurisdiction to order the preservation of property:
In an application under section 7 or 10, if the court considers it necessary for the protection of the other spouse’s interests under this Part, the court may make an interim or final order,
(a) restraining the depletion of a spouse’s property; and
(b) for the possession, delivering up, safekeeping and preservation of the property.The court may, on application, make an interim or final order restraining the depletion of a spouse’s property that would impair or defeat a claim under this Part.
The object of a preservation order is to protect the Applicant’s claims for equalization and support: Adler v. Adler, 2016 ONSC 2414, para 49.
The three-part test on a motion for a preservation order is found in Price v. Price, 2016 ONSC 728, para 6:
a. Is there a serious issue to be tried?
b. Will the moving party suffer irreparable harm if relief is not granted?
c. Which party will suffer the greater harm from granting or refusing the remedy pending a decision of the merits?
The Respondent argues that the requested orders are far too broad, that the Applicant has sufficient security in the monies currently held in trust and that there is no evidence of risk of dissipation.
The Applicant acknowledges that preservation and restraining orders should generally be restricted to specific assets. However, “due to [the Respondent’s] lack of disclosure, [she] is unable to provide more particularized requests for the preservation of specific assets beyond what has already been requested.”
I agree. The Respondent’s delays create a knowledge vacuum such that the Applicant does not know his financial picture. Consequently, she cannot calculate equalization or any support payments which might be owing to her. She had little choice but to seek a broad preservation order.
Therefore, all three prongs of the test are met in this case:
a. I am persuaded on a balance of probabilities that there is a serious issue to be tried in respect of an equalization payment to the Applicant. The Applicant has presented evidence that the parties accumulated millions of dollars of real estate during the marriage. The marriage was long-term and traditional. Given his failure to disclose, the Respondent’s attempt to rebut an equalization obligation rings hollow.
b. I am also persuaded that the Applicant is at risk of irreparable harm because (a) she has no idea of the Respondent’s financial picture and (b) the Respondent has indicated that he needs his assets to fund this litigation and pay for outstanding costs. The knowledge gap, the Respondent’s varied assets and the significant amounts already owing make this case complex: Barbini v. Edwards, 2014 ONSC 6762, para 91.
c. Finally, with respect to the balance of harm, I am persuaded that the Applicant stands at greater risk. I have already described her perilous position. In addition, at the hearing the Applicant was amenable to a narrower preservation order limited to the Respondent’s assets in Ontario, and his shares in Curaleaf Holdings. The Respondent objected to this because, he says, he needs money from these assets to pay for the valuation reports. In the interests of moving the case forward, I will grant a modified version of the Applicant’s request which also permits the Respondent to withdraw up to $60,000 to be paid for his income and business valuation reports shortly expected from Michael Ornstein (discussed below).
In the circumstances, I find on a balance of probabilities that a modified preservation order that permits the Respondent to fund the outstanding reports is warranted.
Should the Applicant be Granted Leave to Bring a Motion to Strike the Respondent’s Pleadings?
The Applicant seeks leave to bring a motion to strike the Respondent’s pleadings. She has crafted her remedy to apply after March 1, 2025, if the Respondent fails to provide the disclosure required by Justice Kristjanson on January 10, 2024, or a sworn affidavit setting out his efforts to provide the disclosure and reasonable grounds as to why he has been unable to do so.
The Applicant stresses that she would prefer not to proceed via an uncontested trial, but she requires that option if the Respondent fails again to provide the necessary disclosure. She points out the parties’ pattern where she agrees to a delay or future date for compliance, only to have that date pass without satisfaction of the terms, leaving her no better off than she was at the beginning of these proceedings.
The Respondent stresses that striking out pleadings is a last resort. He cites Lamothe v. Ellis, 2021 ONSC 4833, para 42 for the following five factors which this Court should consider:
a. The non-compliance is extensive and persistent;
b. The non-compliance is wilful;
c. The Respondent has not made reasonable efforts to comply and is unable to provide acceptable explanations for the breaches;
d. The Respondent has not provided adequate financial disclosure to the Applicant or the underlying documentation that would allow her (and the court) to make adequate determinations as to his income and employment; and
e. The remedy must not go beyond what is necessary.
The Respondent notes, correctly, that proportionality is a paramount consideration: Manjunath v. Kuppa, 2024 ONCA 668, paras 10-12.
In this case, I find that the record contains adequate evidence that a motion to strike is a proportionate remedy, should the Applicant wish to bring one:
a. There can be little dispute that the Respondent persistently has failed to comply with court orders, including orders on consent.
b. I am unable to decide whether the Respondent has acted wilfully. However, at a certain point, dilatoriness in complying with court orders has such a serious effect on an opposing party that it amounts to the same thing. That point was certainly reached in September 2024, when the parties’ last settlement conference was aborted, again, because of the Respondent’s delay.
c. I acknowledge the Respondent’s many explanations such as the effect on him and third parties of the Florida hurricanes in September and October. Given the persistent nature of the delay, these anecdotes do not constitute reasonable explanations.
d. With respect to the fourth factor from Lamothe, at the heart of this case is the lack of adequate disclosure as recognized by numerous judges of this Court.
e. The final factor is whether a motion to strike goes no further than is necessary. In the interests of proportionality, I will give the Respondent a chance to produce the required reports from Michael Ornstein. The Respondent produced correspondence from Mr. Ornstein that the reports would be ready by early February. Should the Respondent fail to produce the reports by February 15, 2025, the Applicant has leave to bring a motion to strike the Respondent’s pleadings and move to an uncontested trial. I find that this is a proportionate remedy. I reiterate that the Respondent has permission to access the funds necessary to pay for the reports.
Should the Respondent Provide an Accounting for His Shares in Curaleaf Holdings?
The Applicant asks the Respondent to provide an accounting of his shares in Curaleaf Holdings within 14 days. She describes these shares as a “swing asset” that could have a significant impact on the case, but about which she knows virtually nothing.
The Respondent did not appear to specifically object to this request, but has stated that the process by which the shares are held and disbursed is complicated.
I am persuaded that this is a reasonable request. However, I shall vary it slightly to order disclosure by February 15, 2025, when the other reports are due.
Is the Applicant Entitled to Interim Disbursements?
The Applicant seeks interim disbursements of $150,000. The Respondent does not object if the disbursements were taken from the amount currently being held in trust from the sale of the matrimonial home. An order shall issue.
Costs
At the close of submissions, I heard each party’s position on costs.
The Applicant submitted costs of $22,516.95. At the hearing she requested substantial indemnity costs of $18,013.56.
The Respondent says that the within motion was premature, unreasonable and punitive.
This motion clearly was not premature. I disagree that the Applicant has acted unreasonably. Nor do I accept that she is motivated by retribution, as evidenced by her flexibility on certain issues during the hearing.
The Applicant prevailed on this motion and is entitled to costs. With that said, she did not succeed on every argument. In addition, I find the amount quoted for a one-hour motion excessive. The motion was not complicated and many of the materials were already prepared. The Applicant shall be entitled to costs in the amount of $10,000.
Order
In conclusion, I make the following order:
a. The Applicant’s request for a declaration that the Respondent is in breach of the orders noted at Paragraph 1 (a), (b) and (c) of these reasons is granted.
b. The Applicant’s request with respect to the current $100 a day penalty as noted at Paragraph 1(d) of these reasons is granted.
c. The Applicant’s request for an increased $300 a day penalty as noted in Paragraph 1(e) of these reasons is dismissed without prejudice.
d. The Applicant’s request that the Respondent be subject to no further relief from this Court as outlined in Paragraph 1(f) of these reasons is granted.
e. The relief noted at Paragraph 1(g), (h) and (i) of these Reasons is granted in part. Except with the Applicant’s prior written consent or on order of this Court which shall be with notice to the Applicant:
i. The Respondent shall preserve all of his assets in Ontario and refrain from disposing of such assets within the jurisdiction or otherwise put assets beyond the reach of the Court until the issue is determined on a final basis, pursuant to s. 12 and s. 40 of the Family Law Act.
ii. The Respondent is restrained from depleting, selling, transferring or otherwise disposing of shares issued by Curaleaf Holdings Inc. or other companies related to Curaleaf Holdings Inc. (“Curaleaf”) pursuant to s. 12 and s. 40 of the Family Law Act.
iii. Notwithstanding the above preservation and retention orders, the Respondent may withdraw up to $60,000 to pay for the reports currently under retainer with Mitchell Ornstein of Fruitman Kates Ornstein Valuations (“FKOV”).
f. The Respondent shall provide a full and detailed accounting of all shares issued to him by Curaleaf, along with all supporting documentation (including but not limited to share purchase agreements), by February 15, 2025.
g. The Respondent shall provide the reports currently under retainer with FKOV by February 15, 2025.
h. The Applicant’s request for leave to strike as set out in Paragraph 1(k) of these reasons is dismissed without prejudice.
i. If the Respondent fails by February 15, 2025 to provide the reports currently under retainer with FKOV noted in (g), above, the Applicant may bring a motion (by 14B or otherwise, as necessary) to strike the Respondent’s pleadings and proceed by way of an uncontested trial on all issues, including property and support, pursuant to Rule 2(2) and (3) of the Family Law Rules.
j. The Applicant’s request for interim disbursements as noted in Paragraph 1(m) of these reasons is granted.
k. The Respondent shall pay to the Applicant costs in the amount of $10,000 inclusive of HST and disbursements.
l. The Applicant may prepare an order for my signature that reflects the relief granted in this endorsement. It may be sent care of linda.bunoza@ontario.ca. The parties shall not otherwise communicate through this email address without the Court’s permission. The parties are advised that I am unable to sign any orders until Monday January 27, 2025.
Natasha Mathen
Date: January 17, 2025