Ex-husband faces harsh penalties for resisting financial disclosure in divorce proceedings

Financial disclosure is fundamental to the efficient resolution of the financial issues arising from separation. When a couple separates, the exchange of financial is an essential ingredient in the determination of child support, spousal support and sharing of property. Resisting one’s obligation to provide relevant and necessary disclosure will, almost certainly, be met with harsh criticism and sanctions from a judge.

That was the outcome of a recent case before Justice Melanie Kraft of the Ontario Superior Court of Justice. The two parties began living together in 2001, married in 2003 and separated in 2019. They have three children, all of whom have resided with the wife since separation.

Throughout their relationship, the couple lived an affluent lifestyle. In a prior decision in the same case, Justice Mario Faieta described the family’s lifestyle as including “a matrimonial home in Forest Hill, a nanny, private schools for the children, exclusive club memberships, private air travel, high-end clothing and shopping experiences, and deluxe spa and beauty treatments.”

The wife believes she is entitled to a payment from the husband in the range of $17 million to $19 million. She has spent four years in protracted court proceedings to determine and receive what the husband owes her. The husband’s refusal to provide financial disclosure has made it impossible to reach resolution.

Last month, the wife had had enough of the husband’s uncooperative behaviour. In the hearing before Justice Kraft on July 2, she asked the judge to strike the husband’s pleadings, based on his failure to provide certain financial disclosure in accordance with a 2021 court order. If granted, the husband would no longer have a right to participate in the court proceedings.

In response to the wife’s request, the husband said he has made “good faith efforts to comply with all of his disclosure obligations.” The judge disagreed.

Justice Kraft begins her analysis by determining if there has been a “triggering event” that would warrant striking the husband’s pleadings or imposing another appropriate sanction. According to the judge, a “triggering event exists when there has been non-compliance with a court order.”

Following a thoughtful and thorough review of the history of the case, the judge found the husband had not complied with two court-ordered disclosure obligations. First, the husband did not comply with his “rolling obligation” to provide details to the wife of all financial transactions of any kind involving his assets. These details were to be provided every 30 days on a rolling basis.

The husband argued the rolling obligation aspect of the order is “ambiguous and, therefore, any breach by him was not intentional.” The judge found the husband’s argument to be implausible and disingenuous and concluded the husband had failed to comply with the court order.

Second, Justice Kraft considers whether the husband failed to comply with his court-ordered obligation to “disclose his financial and corporate records for any corporation in which he had an interest.” According to the judge, it was not disputed that since separation, the husband “has not provided any information about what business he is in currently, where he does business, or what income he is making from his business.”

The husband argued that he provided authorizations and directions to the wife that would permit her to obtain the information and disclosure directly from financial institutions. According to the husband, the wife’s ability to obtain the documents herself satisfied the husband’s court-ordered obligation to provide the disclosure to the wife.

Again the judge disagreed. For Justice Kraft, “it cannot be that a payor can deliver a set of authorizations and directions enabling a recipient to obtain the payor’s required disclosure and that the payor can take the position that his providing signed authorizations is tantamount to him meeting his obligations to provide disclosure.” In other words, the owner of the asset cannot shift the burden of obtaining the disclosure to their former spouse. In the result, the husband was in breach of his court-ordered obligation to disclose his financial and corporate records.

Having found the husband to be in breach of the court order, Justice Kraft had to determine the appropriate sanction. Recognizing the “exceptional status of striking pleadings for non-compliance with court orders or disclosure obligations,” the judge ordered the husband to pay a fine of $3,000 for each day he remains in breach of his disclosure obligations. If, after 45 days, the husband has not brought himself into compliance, the wife can seek an order to strike the husband’s pleadings.

In a subsequent decision released on Aug 15, Justice Kraft ordered the husband to pay $50,000 towards the wife’s legal costs incurred on account of the hearing. In making that order, the judge found the husband “behaved unreasonably in relation to the issues of disclosure from the time they arose” and that his conduct “ought to increase the amount of costs he is ordered to pay the wife.”

Financial disclosure is fundamental to the efficient resolution of the financial issues arising from separation. A litigant’s decision to ignore those obligations is misguided and risky. Just as both spouses participated in the creation of their union, both spouses must meaningfully participate in its undoing.