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Court of Appeal Ends Saga Where Even Uncontested Trial Is Appealed

In Manchanda v Thethi, 2021 ONCA 127, the Ontario Court of Appeal dealt with an appeal from an order obtained at an uncontested trial. This case is unique because it brings to close a matter that spanned nearly 10 years. This history link on CanLii shows a number of decisions and a review of those decisions reveal major determinations as far back as 2013.

As the Court of Appeal notes, the parties in this case had engaged in a high conflict dispute that resulted in “countless court attendances [and] court orders from at least ten different judges”. Because of the Husband’s failure to comply with orders, including orders for financial disclosure, the Husband’s pleadings were struck by the Hon. Justice Myers in a decision released on June 9, 2016 (2016 ONSC 3776 (CanLII)).

Remarkably, that decision itself had been unsuccessfully appealed by the Husband (2016 ONCA 909 (CanLII)). If that were not enough, the Husband had even sought leave to appeal at the Supreme Court of Canada (2017 CanLII 23864 (SCC)).

The matter eventually proceeded to an uncontested trial where the Father was allowed to attend as an observer. The trial was presided over by the Hon. Justice Monahan, who released his decision on July 12, 2019 (2019 ONSC 4239 (CanLII)). Notwithstanding, the long history of the case, the Wife chose to appeal that decision from the uncontested trial.

At the Court of Appeal, a preliminary issue that needed to be addressed was whether the Husband should be allowed to participate. The Court found that the Husband was not allowed because of his “deliberate and willful” non-compliance with orders. The Husband was in default of approximately $45,000 of court-ordered costs. The ONCA relied on its decision of Abu-Saud v. Abu-Saud 2020 ONCA 824 (our summary of which is here) in reaffirming the principle that “an audience will not be granted to a party who is in default of court orders”.

The ONCA then dealt with the Wife’s grounds of appeal.

 

First Ground of Appeal

The first argument the Wife raised on appeal was that the Hon. Justice Monahan had “indirectly” allowed the Husband to participate in the proceedings by failing to draw adverse inferences against the Husband, which ultimately led to the Husband being able to benefit from his own misconduct. The Wife argued that once the Husband’s documents had been struck, her documents should have been accepted essentially by default. To the Wife’s frustration, at the uncontested trial, there were three instances where the Hon. Justice Monahan had not accepted the information in the Wife’s documents:

  1. her claim to a constructive or resulting trust in the rental property;
  2. the Husband’s percentage of ownership in his company; and
  3. the Wife’s valuation of the home.

 

The Court of Appeal disagreed with the Wife’s submissions. It explained that Rule 1(8.4) of the Family Law Rules, which establishes the consequences when documents are struck, does not remove the party whose documents have been struck from the proceeding. Rather, Rule 1(8.4) removes the party’s entitlement to notice and participation in the matter. The fact that the Husband’s pleadings were struck did not mean that the trial Judge was compelled to accept the Wife’s evidence at face value. At an uncontested trial, the Judge is still required to examine the Wife’s evidence to ensure a just result. Trial Judges are after all gatekeepers of evidence and the non-participation of the Husband did not dissolve the evidentiary onus on the Wife to prove her case on a balance of probabilities. As the Court of Appeal states:

 

The trial judge’s approach appropriately reflected the court’s obligation to guard against the risk of factual errors in the face of only one party’s evidence and documents.

 

Second Ground of Appeal

The second argument that the Wife made was that the Hon. Justice Monahan erred by not awarding a constructive trust in her favour. The Wife argued that the concepts of net family property and constructive trust are linked and when the trial Judge used the value of the matrimonial home on the date of separation, as opposed to its present value, he failed to acknowledge her contributions to the property. The Wife’s position was that a trust was created because her financial contributions to the business and rental business were substantial.

The problem with the Wife’s argument is that equalization is intended to remedy unjust enrichment (in other words, constructive trust) in a “vast majority of cases” (McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 66). Litigants can make constructive trust arguments in addition to equalization per Rawluk v. Rawluk1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70. But that does not mean they should. This is because in the vast majority of cases “any unjust enrichment that arises as the result of marriage will be fully addressed through the operation of the equalization provisions under the Family Law Act” (McNamee v. McNamee, 2011 ONCA 533, 106 O.R. (3d) 401, at para. 66).

This means the next time you have a litigant that is in your office and hung up on contributions to the other side’s property, you could tell them that they might be wasting time if they already have entitlement under equalization. Is their case really an exception?

The Court of Appeal found that this case was not an “exceptional case” warranting the application of both construct trust remedy AND equalization. Any unfairness arising from unequal contribution could be addressed via equalization. The Court of Appeal noted that the trial judge’s decision was consistent with s. 5(6) of the Family Law Act.

 

Third Ground of Appeal

At the uncontested trial, the Hon. Justice Monahan had not awarded the Wife spousal support. On appeal, the Wife argued that the trial judge only considered “loss of opportunity” factors in coming to his decision as to whether to award compensatory spousal support and should have also considered sacrifices and contributions made during the marriage. The Wife’s position was that the trial judge ignored the objectives of spousal support as set out in s. 15(2) of the Divorce Act.

The Court of Appeal rejected this submission. It found that the trial judge had noted his own “expansive approach” to spousal support in his decision and thus was entitled to deference.

 

Fourth Ground of Appeal

At the uncontested trial, the Wife had also sought a vesting order (pursuant to s. 9(1)(d) of the Family Law Act) so that a property owned by the Husband would be transferred to her in satisfaction of judgment if he did not pay the amounts owing to her within 120 days. The Wife reasoned that this remedy was justified because of the Husband’s history of non-compliance. This seemed like sensible relief given the history of the case. Nevertheless, the Hon. Justice Monahan denied the remedy because:

  1. the value of the property exceeded the value of the judgment; and
  2. there could be third parties who had an interest in the property.

On appeal, the Wife argued the trial judge could have imposed a partial charge on the property but conceded that this argument was not raised at trial. Thus, she gave the Court of Appeal the very rope with which this argument was hung. As the Court of Appeal states:

 

The trial judge cannot be faulted for failing to grant a remedy that was not requested at trial.

 

Fifth Ground of Appeal

Lastly, the Wife sought leave to appeal costs in the event the appeal was dismissed. At trial, the judge awarded the Wife $80,000.00 in costs – about half of her total legal costs. The Wife argued that this was an unreasonably low amount and had the effect of punishing her for the Husband’s misconduct.

The Court of Appeal disagreed and found that while the Wife’s counsel’s rate and time spent on the matter were reasonable, the Wife put forward claims that ultimately were not successful at trial. The trial judge had commented that the Wife conducted the litigation in a way that added to its length and complexity (just the type of thing you want to hear as counsel for the reasonable party). The Court of Appeal held that the trial judge had identified the proper principles under Rule 24(12)(1) in making a costs award and dismissed the Wife’s application to appeal the costs order.

 

The Court of Appeal dismissed the appeal in its entirety and made no order as to costs.

 

If you need assistance in seeking relief at an uncontested trial, please contact one of the lawyers at our firm. We would be happy to help (416) 323-5092.