When a couple separates, financial issues almost inevitably arise. To answer these questions, financial disclosure is essential. But, what happens when one spouse refuses to provide necessary and relevant information?
In a recent case before the Ontario Superior Court of Justice, Justice R. John Harper was asked to determine if one party should pay costs to the other. That determination followed a long and arduous court process, the hallmark of which was the husband’s failure to provide financial disclosure. According to Justice Harper, the husband’s lack of “timely, accurate and complete disclosure with respect to his finances was a central cause to this litigation being infused with extended conflict that was both emotionally and financially costly.”
A prolonged scavenger hunt the main theme of which is “catch me if you can
Justice R. John Harper
From a review of the litigation chronology, the theme of the husband’s failure to disclose quickly emerges. The wife commenced court proceedings in August 2015. Nearly one year later, the matter was first in court for a conference, at which time the presiding judge noted that a meaningful conference could not be held owing to the paucity of the husband’s financial disclosure.
One year later, the matter was in court again at which time the judge noted the husband’s financial statements are “missing significant information.” Understandably, Justice Harper described the litigation as a “lengthy and drawn out saga that took a torturous path through the courts.”
Remarkably, after nearly four years of litigation and on the eve of a five-day trial, the parties resolved all issues, with the exception of the costs, if any, that should be paid by one party to the other. Against that backdrop, Justice Harper embarked upon a determination of costs.
At the outset of his analysis, Justice Harper found the husband “purposely misled” the wife and the court with respect to his finances. Justice Harper noted: “Not only did he delay the production of his finances, he also omitted assets and was inconsistent in the multiple financial statements that he did file. One example was his lack of any satisfactory explanation for why he left out of any of his financial statements a bank account that he had in the Cayman Islands that exceeded US$130,000.”
Given the husband’s conduct, it is no wonder Justice Harper quickly focused his discussion on whether the husband’s failure to provide disclosure amounted to bad faith. In the event of a finding of bad faith, the cost consequences are severe. According to Justice Harper, a litigant acts in bad faith when he or she “purposely embarks on a path during the course of family litigation that looks more like a prolonged scavenger hunt the main theme of which is “catch me if you can.”
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In this case, Justice Harper found the husband to have done just that.
For good reason, the failure to provide timely, accurate and complete financial disclosure is routinely described as the cancer of family litigation. It unnecessarily protracts litigation and makes an informed settlement nearly impossible. As Justice Harper correctly pointed out, one party’s failure to provide disclosure limits the other party’s ability to formulate an appropriate compromise.
In that regard, Justice Harper observed: “Because of the pathway created by (the husband) of at least a reckless disregard for the rules relating to earlier and accurate disclosure, (the wife) could not assess her case. She was not in a position to do a risk analysis, formulate a reasonable offer in order to settle. In short, she had to navigate the maze created by (the husband) and she was put to significant time and expense in order to withstand such a process.”
In this case, neither party was represented by a lawyer. The wife sought costs in the amount of $39,852 based on her hourly rate of $100. With a helpful summary, Justice Harper discussed the principles governing the determination of costs for self-represented litigants. He noted that costs “should only be awarded to those lay litigants who can demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation and that, as a result, they incurred an opportunity cost by foregoing remunerative activity.”
Justice Harper goes on to discuss that, in other cases, self-represented litigants have been awarded costs based on an hourly rate between $20 and $200, depending on the demonstrated level of skill. He pointed out that $60 per hour appears to be commonly used.
In the result, the husband was ordered to pay costs to the wife in the amount of $32,752. This decision serves as a warning to individuals who refuse to provide financial disclosure: do so at your peril.
Adam N. Black is a partner in the family law group at Torkin Manes LLP in Toronto.