27 July 2013

Important Supreme Court Decision Addresses Penalties for Nondisclosure

Mr. Justice Punnett of the Supreme Court has released his judgment on an application for a fine under s. 213 of the Family Law Act for failing to make proper financial disclosure in the timely manner required by the rules of court. The judgment in this caseJ.D.G. v. J.J.V., is the first decision on the nondisclosure provisions of the new act.

The background facts relevant to the application are these: 
  • Under SCFR 5-1 the application respondent's financial statement (an important court form used to describe a party's income, assets, expenses and debts) was due on 7 December 2012. It was not produced. 
  • It was not produced at a Judicial Case Conference heard on 8 January 2013, contrary to SCFR 7-1
  • It was not produced by 18 Janaury 2013, contrary to an order made at the JCC. 
  • In fact, it was not produced until 10 April 2013, two days before the application was heard.
This is how the court summarized the applicant's position at the hearing:
"[8] The [applicant] notes that at the date of hearing of this application the [application respondent] was 124 days past the date that the Rules required for production of his financial statement and 84 days after the date set by the JCC order. She argues that last minute production should not be countenanced and notes no evidence was given in support of the [application respondent's] excuse for the delay. As a result she seeks costs thrown away in the sum of $1,500 and a fine in the sum of $2,500."
Fair enough. In the oft-quoted case of Cunha v. Cunha, a 1994 case of our Supreme Court, cited again my Mr. Justice Punnett in his introduction to J.D.G., nondisclosure is the "cancer of matrimonial property litigation."

Section 213(2) of the new act says that where a person has failed to comply with a disclosure requirement of the rules of court, the court may:
(a) make [another disclosure] order under section 212; 
(b) draw an inference that is adverse to the person, including attributing income to that person in an amount that the court considers appropriate, and make an order based on the inference; 
(c) require a party to give security in any form that the court directs; 
(d) make an order requiring the person ... to pay
(i) a party for all or part of the expenses reasonably and necessarily incurred as a result of the non-disclosure of information or the incomplete, false or misleading disclosure, including fees and expenses related to family dispute resolution, 
(ii) an amount not exceeding $5,000 to or for the benefit of a party, or a spouse or child whose interests were affected by the non-disclosure of information or the incomplete, false or misleading disclosure, or 
(iii) a fine not exceeding $5,000;
(e) make any other order the court considers appropriate.
This is a better and much expanded version of s. 92(2) of the old Family Relations Act, which said this:
If a person fails to comply with rules respecting disclosure information in proceedings under this Act that are made under the authority of the Court Rules Act, the court may order an amount not exceeding $5,000 for the benefit of the spouse, parent or child on whose behalf the request was made.
In considering s. 213, the court firstly observed that in the Attorney General's 2010 White Paper on Family Relations Act Reform (PDF), the government says that fines under s. 92 are "seen as ineffective and is rarely used, even though securing adequate disclosure can be an extremely time consuming and costly exercise for a party." The court then cites the explanatory materials on the new act provided by the Ministry of Justice, which say that s. 213 "provides both courts with a broad spectrum of measures to compel disclosure, including making an order based on attributed income, ordering payment of security or a fine, or payment to the other party for expenses incurred as a result of the non-compliance," and that "the wide range of remedies will ensure both courts may effectively compel adequate disclosure and will deter parties from delaying full disclosure." The court then cites the comments of the Attorney General in the debates leading to the enactment of the Family Law Act, expressing the government's hope that the act "will encourage full and truthful disclosure very early in the process so that it promotes settlement and ensures that people have all the information that they need."

Clearly, then, the broadened provisions of s. 213 beyond the old s. 92 were meant to achieve the Ministry's stated objectives of (1) more effectively compelling disclosure and (2) deterring parties from delaying disclosure. As Mr. Justice Punnett put it,
"[19] Section 213 expands on s. 92(1). Firstly it makes it clear that the remedy for non-disclosure is now available under a wide range of circumstances including situations where a party has provided incomplete, false or misleading information. Secondly the range of remedies available is broader. Some were already available such as the ability to draw an adverse inference. What is new is the ability to order a party to give security to the court, to pay a fine (although previously available if a contempt finding was made), to make any other appropriate orders and to award expenses beyond what would normally be considered costs. The circumstances under which the $5,000 can be paid for the benefit of another party also differs in that instead of being paid on behalf of whom it is requested it can be paid to any child, spouse or party 'whose interests were affected'. It also expands the remedies available to the Provincial Court and provides some consistency in the remedies available in both the Provincial and Supreme Courts. ...

"[21] Section 213 recognizes that non-disclosure is a barrier to the speedy and inexpensive determination of cases. In many cases considerable resources, both private and public, are expended on pre-trial disclosure. This before any consideration of the real issues can be carried out. It is a barrier that should not be countenanced. Private and public resources are better spent on resolving the real issues between the parties rather than being depleted on such matters. 
"[22] Section 213 ... should be read in the context of the FLA's regime of encouraging earlier disclosure. Section 5 of the FLA provides:
(1) A party to a family law dispute must provide to the other party full and true information for the purposes of resolving a family law dispute. 
(2) A person must not use information obtained under this section except as necessary to resolve a family law dispute. ...
"[30] The court in my view should approach the application of the rule so that the significance of timely disclosure is brought home. It should not be taken lightly. Proper and timely disclosure will be enforced."
Having reached this conclusion, the application respondent's goose was cooked. The court held that:
"[33] In my view there should be some penalty imposed in order to make clear the importance of providing financial disclosure in a timely manner. The [application respondent] should have been aware of the obligation from the inception of his claim. Given the circumstances of this case the [applicant] is entitled to her costs thrown away. I fix those costs, inclusive of disbursements and taxes at $1,500.00. Pursuant to s. 213 there shall also be a penalty of $500 imposed payable to the [applicant]. The costs and the penalty are to be paid to the [applicant] within 30 days of the date of this judgment."
This excellent, and very well written, decision is important for two reasons. Firstly, it demonstrates the court's willingness to consider, as I suspected it would, all of the material made available by the government in connection with the Family Law Act, including the white paper and the explanatory materials. (This approach is relevant to the court's interpretation of all of the act, not just the provisions relating to disclosure.) Secondly, the court has taken up the gauntlet thrown by the government and accepted that a more rigourous, proactive approach to disclosure is demanded by the new act and must be applied by the court. Nondisclosers take heed; Cunha has come home to roost.

My thanks to my colleagues Thomas Wallwork and Todd Bell for bringing this important case to my attention.

1 comment:

  1. After 2 years of chasing my X for financial disclosure at the cost of having to take him to questioning it was satisfying to see justice applied with the Judges pronouncement of an Adverse Inference. I appreciated the truth of the Judges pronouncement that "actions of this sort hurt families, mostly, the children."


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