BACKGROUND

The Applicant wife and the Respondent husband were married for 16 years, had 3 children together, and separated in July 2019. The Wife resided with the children in the matrimonial home and was their primary caregiver. She had not worked outside the home since 2011. The Husband was an entrepreneur, involved in financing high-growth biotechnology, technology, e-sports, and real estate companies. The Wife issued an application in December 2020 seeking equalization of net family property among making other claims. She had submitted that she was entitled to an equalization payment of about $17 million to $19 million. The parties have been in litigation since 2020, and as of the date of the hearing, the Husband had been ordered to advance almost $8 million towards the equalization payment. The Wife brought a motion under rule 1(8) of the Family Law Rules to strike the pleadings of the Husband due to his ongoing breaches of Justice Faieta’s court orders.

ISSUES

1. Is there a triggering event – is the Husband in breach of any of the 2021 Faieta Orders, and/or his obligations under the Family Law Rules?
2. If so, should the Court exercise its discretion to strike the Husband’s pleadings or make another order set out in Rule 1(8) of the Family Law Rules?

ANALYSIS

Is there a triggering event?

The Court followed the analysis set out in KM v JR 2024 ONSC for granting relief under Rule 1(8). The first step was to determine whether there is a triggering event. A triggering event exists when there has been non-compliance with a court order. So long as the court is satisfied that there has been a failure to obey an order “in the case or a related case” Rule 1(8) is triggered.

Paragraph 4 of Justice Faieta’s order dated October 5, 2021, stated that neither party can disparage the other or talk about financial matters. The Wife alleged that the Husband discussed financial matters with the children by advising them via text that their PayPal account would be cut off and to speak to their mother. The Husband clarified that he did so because he was closing his credit cards in Canada. The Court found that the text regarding the PayPal account alone was not sufficient to prove breach of the Order.

Paragraph 9 of the October 2021 Order stated that the Husband shall continue to pay the cost of tuition for the children. When the Husband’s credit card declined for the monthly tuition payment, he sent an email to the school and the Wife stating “I am no longer paying for this [tuition]. [the Wife] will be paying this.” Ultimately, the Wife did pay the tuition, and the Court found that the Husband’s conduct was a direct contravention of the October 2021 Order.

Paragraph 12(c) of the October 2021 Order required the Husband to provide rolling disclosure to the Wife every 30 days. The Wife’s position was that the Husband was in breach of this requirement. The Husband’s position was that the language in the Order is ambiguous and, therefore, any breach by him was not intentional. The Court found the Husband’s submissions on this topic to be disingenuous and, thus, ordered that he was in breach.

The Wife alleged that the Husband failed to disclose the financial and corporate records pertaining to his corporations as at the date of separation and subsequently. Pursuant to paragraph 13 of the October 2021 Order, the timeline for the Husband to provide the disclosure was expanded. His position was that he signed 21 authorizations and directions giving the Wife access to his information directly from various institutions, and thus, he was not in breach. The Court stated that signing a set of authorizations and directions is not equivalent to him meeting his disclosure obligations. The Court found that the Husband was in breach of this obligation.

Paragraph 15 of the October 2021 Order required that the Husband preserve his assets. The Wife submitted evidence that the Husband moved funds out of undisclosed accounts into new accounts and depleted those funds after the preservation order was made.

Should the Court exercise its discretion to strike the Husband’s pleadings?

The Husband argued that striking his pleadings would not be fair as he attempted to comply with the 2021 Orders of Justice Faieta in good faith. The Court stated that striking pleadings is an appropriate remedy in cases involving a persistent failure to provide disclosure that goes to the “heart of the issues to be tried.”

CONCLUSION

On April 26, 2024, Rule 1(8) of the Family Law Rules was amended to add (a.1) “an order to pay an amount to a party or into court as a penalty or fine.” The Court, thus, granted the Husband one final 45-day period to comply with the outstanding disclosure with an imposed fine of $3,000 every day onward that he does not rectify his breaches of Justice Faieta’s 2021 Orders. If after the 45 days, the Husband had not provided the disclosure, the Court found that striking the Husband’s pleadings would be an appropriate remedy in light of his conduct.