In the recent case of Hohl v Hohl 2021 ONSC 2182, the court was tasked with determining whether it was necessary to make an order for the production of documents by a third party in order to properly assess the father’s income for support purposes. They answered this question in the affirmative.

BACKGROUND

The parties were married and subsequently separated. The mother in this case commenced an Application seeking child and spousal support in addition to other relief.

The father works for multiple corporations that are run by his family. The father had been resistant to producing certain financial disclosure. As such, the mother brought a Motion for production of financial information from the family companies in order to determine the father’s income for support purposes. The father brought a cross claim seeking a reduction in his interim child and spousal support.

Throughout the parties marriage, the father had earned an income in excess of $200,000. Post separation he is claiming that his income is only $115,000 and he has suffered from health issues post separation. The father retained an expert to prepare an income for support report. The mother retained a separate expert to prepare a critique of the father’s expert report. The mother’s expert claims that without certain financial disclosure from the corporations, he is unable to properly complete his report.

ANALYSIS

The court found that there was no indication that the family business had been negatively impacted by COVID-19 such that it would explain an income reduction. The mother requested an order for a lengthy disclosure request by the corporations including but not limited to general ledgers, corporate registers, tax returns, financial statements, information pertaining to shareholder’s loan accounts, expenses and renumeration structures.

The mother argued that it would be prejudicial to her in calculating incomes for support purposes and equalization without having the disclosure requested because her expert would be unable to complete a proper analysis without that information.

The father’s mother, who is also the officer, director and shareholder of both corporations argued that she should not have to disclose the documents because they are not relevant, especially since the parties signed a marriage contract that excluded the companies from any net family property division on the breakdown of the marriage. She also claims that her son, the father, has no ownership interest in one of the two corporations and receives no income or personal benefit from that company.

Her main argument in objecting to the disclosure request was that there were other sources available to the mother that she could use to ascertain his income such as her personal tax returns and financial records from his own corporation (separate from the two corporations in question).

In determining whether or not to make the order and grant the third party disclosure request, the court reminds us that “The importance of relevant financial disclosure in family law cases is well-recognized. Delays in disclosure impede the progress of an action, act to the disadvantage of the opposite party, and impact the administration of justice”.

The court also points to the fact that if the payor spouse does not control the relevant corporation, there are two provisions of the Family Law Rules, O. Reg. 114/99, that permit the court to make orders for document disclosure from a non-party:

i. If a document is in a non-party’s control that is not protected by a legal privilege, and it would be unfair to a party to go on with the case without the document, the court may order the non-party to produce the document to the party: Rule 19(11).

ii. The court may order a non-party to disclose information where:

a. it would be unfair to the party who wants the disclosure to carry on with the case without it;

b. The information is not easily available by another method; and

c. The disclosure will not cause unacceptable delay or undue expense: Rule 20(5).

The onus was on the mother in this case to satisfy the court that production should be ordered. After analyzing the circumstances of this specific family and the father’s income structure, the court determined that it would be unfair to proceed without the disclosure as the documents are directly relevant and material to the determination of the father’s income. The court also analyzed and determined that the information is not easily available by any other method, nor will obtaining it cause an unacceptable delay or undue expense.

In balancing the privacy rights of the third party with the importance of full and frank financial disclosure, the court was comfortable to make the order request as it was proportionate to issues at hand and was required for the fairness of the trial.

The court added measures to ensure the privacy of the corporation.

The father’s Motion for the reduction of his interim child and spousal support was dismissed.

For more information, please call us at Feldstein Family Law Group P.C. or contact our firm online.