|
Family - Remedies for Non-Disclosure. Matos v. Driesman
In Matos v. Driesman (Ont CA, 2024) the Ontario Court of Appeal considered the remedy of striking pleadings, here for failure to make family law disclosure:[25] The father’s pleadings were struck for his failure to comply with his disclosure obligations. As the Supreme Court of Canada has emphasized recently, disclosure is the linchpin on which fair child support depends: Colucci v. Colucci, 2021 SCC 24, [2021] 2 S.C.R. 3, at para. 48. . Cohen v. Cohen
In Cohen v. Cohen (Ont CA, 2023) the Court of Appeal considered (and allowed an appeal from) a family law equalization order, here where there was an uncontested trial, and the respondent (for whom equalization was initially ordered) "made no financial disclosure at any stage of the proceedings":[21] ... we agree with the appellant that the trial judge erred in finding that the respondent was entitled to an equalization payment. On the record before the trial judge, that finding was a palpable and overriding error. There was a wholly inadequate factual basis to assess the net family property of the respondent. Absent that information, there was no basis on which to order an equalization payment.
[22] None of the information about the respondent’s assets and liabilities that would have been necessary to calculate his net family property was disclosed by the respondent or in the trial record: Hamilton v. Hamilton (1996), 1996 CanLII 599 (ON CA), 92 O.A.C. 103 (C.A.), at paras. 23-26. There was no evidence of the respondent’s assets or debts and liabilities at the date of the marriage or on the valuation date, and no evidence of any of the other financial information required to be disclosed under s. 8 of the FLA.
[23] The respondent made no financial disclosure at any stage of the proceedings. This court has repeatedly stressed that the duty to disclose financial information is the most basic obligation in family law proceedings: Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, at paras. 11-12; FLA, s. 8; Family Law Rules, O. Reg. 114/99, r. 13 (“FLRs”).
[24] In the absence of any disclosure from the respondent, the trial judge did not have a record before her on which equalization could be assessed. Depending on the record, in the absence of disclosure, it may be open to the court to make an adverse inference. However, in this case, the trial judge accepted that the respondent was in debt (i.e., he had a net family property of zero, pursuant to s.4(5) of the FLA), which was a finding in his favour.
[25] Further, ordering an equalization payment in favour of the respondent in the face of such non-disclosure creates incentives that are contrary to the objectives of both the FLA and the FLRs. It gives the non-disclosing spouse the benefit of a finding in their favour while denying the other spouse and the court any evidence to assess the assets of the non-disclosing spouse.
[26] In our view, it was also unfair to the appellant to order her to make an equalization payment to the respondent in circumstances where he failed to make disclosure and where the evidence from the appellant was that she was in the dark about his financial situation during the marriage. The appellant explained in her affidavit in the uncontested trial that she knew very little about the true nature of the respondent’s finances. He had a gambling problem throughout the marriage. He recklessly ran up debts during the marriage due to his gambling, compulsive shopping, and perhaps, given what the appellant learned after the date of separation, other illicit activities of which she was unaware. In early 2020, the appellant found out that the respondent had forged her signature to secure more debt against the matrimonial home.
[27] As noted above, the appellant does not seek an equalization payment in her favour. In the circumstances of this appeal, given the total failure of financial disclosure by the respondent and the evidence that, because of the respondent’s secrecy about his finances during the marriage, the appellant was not in a position to know anything about his finances, we find it appropriate to make an order that no equalization payment is owing. . Aslezova v. Khanine
In Aslezova v. Khanine (Ont CA, 2023) the Court of Appeal cites provisions of the Family Law Act which are essentially contempt provisions, here for financial non-disclosure:[8] Section 1(8) of the Family Law Rules, O. Reg. 114/99, provides that if a person fails to obey a court order, the court may deal with the failure by “making any order that it considers necessary for a just determination of the matter” including, under (c), an order striking out a party’s pleadings.
[9] It is well established that while discretionary, the remedy of striking pleadings is extraordinary and should only be used sparingly and in limited and exceptional circumstances, and when no other remedy would suffice: Martin v. Watts, 2020 ONCA 406, at para. 7; Mullin v. Sherlock, 2018 ONCA 1063, 19 R.F.L. (8th) 1, at para. 33; Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, at para. 15; Purcaru v. Purcaru, 2010 ONCA 92, 75 R.F.L. (6th) 33, at para. 47. Such a decision is “driven by the particular facts of each case”, including the importance or materiality of the items of disclosure not produced, and the context of the proceedings: Martin, at para. 7; Kovachis v. Kovachis, 2013 ONCA 663, 367 D.L.R. (4th) 189, at para. 34; Ferguson v. Ferguson, 2022 ONCA 543, at para. 29.
[10] This court has found that wilful failure to comply with disclosure obligations “must be considered egregious and exceptional,” and 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”: Manchanda v. Thethi, 2016 ONCA 909, 84 R.F.L. (7th) 374, at para. 13, leave to appeal refused, [2017] S.C.C.A. No. 29.
[11] We reject the appellant’s submission that the court should have given him another opportunity to comply because this was the first time that a court had found him in breach of his disclosure obligations. The appellant’s submission not only ignores the plain reality that he was in ongoing breach of his disclosure obligations but also his failure to comply with other orders including support payments. Further, the respondent ought not to have been put to the expense and effort of bringing a motion to ensure his compliance.
[12] The obligation to provide financial disclosure in a case such as this does not simply flow from the disclosure order, but also more broadly from fundamental principles of family law. As this court reiterated in Roberts, at para. 11: “The most basic obligation in family law is the duty to disclose financial information”; and, at para. 13, that “[f]inancial disclosure is automatic. It should not require court orders…to obtain production.” Recent jurisprudence from this court is clear that non-compliance with disclosure orders – and particularly intentional, repeated, and ongoing non-compliance – will constitute exceptional circumstances in which an order to strike pleadings may reasonably be made: Manchanda, at para. 13; Lalande v. Lalande, 2023 ONCA 68, at para. 6; Martin, at paras. 23-25; Ferguson, at para. 30. Further, as this court recently held in Lalande, wilful, repeated non-compliance with disclosure orders may leave the motion judge with “no viable alternative remedy available” to balance both parties’ interests fairly: at para. 6.
[13] The appellant’s financial disclosure obligations arose at and were ongoing from the commencement of the proceedings in 2017. As a result, his conduct as found by the motion judge in ignoring court orders and failing to comply with his basic disclosure obligations “put him in the exceptional category of cases where the judge’s discretion to strike his pleadings was reasonably exercised”: Roberts, at para. 15.
[14] While the threshold for striking pleadings is high, a motion judge’s decision to strike pleadings is entitled to deference on appeal when exercised on proper principles. It will be upheld when the motion judge fashions a remedy that is appropriate for the conduct at issue: Mullins, at para. 49; Purcaru, at para. 50.
....
[19] In Manchanda, at para. 13, the court repeated the caution that: “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.” The appellant failed to heed that caution and his pleadings were properly struck. We see no basis to intervene. . Ferguson v. Ferguson
In Ferguson v. Ferguson (Ont CA, 2022) the Court of Appeal considers non-disclosure in a family law context:[27] There can be no question that the striking of pleadings is an exceptional remedy for non-compliance: Martin v. Watts, 2020 ONCA 406, at para. 7, citing Kovachis v. Kovachis, 2013 ONCA 663, 367 D.L.R. (4th) 189, at para. 24.
[28] That said, our courts have repeatedly emphasized that individual disclosure is the lynchpin of our family law system. There must be serious consequences for those who prevaricate. This was most recently re-articulated by the Supreme Court of Canada in Colucci v. Colucci, 2021 SCC 24, 458 D.L.R. (4th) 183, at para. 48, where Martin J. wrote “the child support system … depends upon adequate, accurate and timely financial disclosure.”
[29] In my view, disclosure’s foundational importance, and the circumstances of this particular case, warranted an exceptional remedy for non-compliance.
[30] The importance of the context of this proceeding cannot be overstated. Bruhn J.’s order striking the appellant’s pleadings and the subsequent uncontested trial followed two years of the respondent’s fruitless efforts to obtain the appellant’s disclosure. These efforts forced her to expend significant funds on legal fees for even the most basic disclosure. Yet, despite several court orders granting last chances to the appellant, any disclosure he provided was half-hearted, incomplete and failed to respond to the numerous legitimate requests and court orders that followed.
[31] Indeed, the appellant never provided a valuation of his business or full financial disclosure. This was central given that the business was both his source of income for support purposes and his major asset. As the respondent’s material before this court indicates, the limited disclosure he did provide suggests that his income was considerably greater than the approximately $49,000 he claimed to receive annually. His purported income even falls short of his reasonable monthly expenses.
[32] The appellant’s pleadings were struck only after repeated court conferences, requests, orders, and extensions of time.
|
