• by Amruta Ponkshe
Originally published in the OFLM 2024-05 edition
Overview
The general principles of financial disclosure are relevance and proportionality. In attempting to understand the foundation and the applicability of those principles, we are guided by the Family Law Rules and seminal cases that continue to be referenced in recent decisions.
This article reviews the above principles from their legislative sources as well as the case law that elucidate and apply them. Included in this review is the recent case of Frost v. Frost (2024 ONSC 2594), where Justice Jain agreed to order one party’s disclosure requests, but not the other.
Basic Obligation of Financial Disclosure
In Roberts v. Roberts (2015 ONCA 450), the Court of Appeal made three important comments:
- The most basic obligation in family law is the duty to disclose financial information.
- This requirement is immediate and ongoing.
- Financial disclosure is automatic. It should not require court orders to obtain production.
As discussed in McDowell v. McDowell (2021 ONSC 1954) at paragraph 40, Rule 13 requires each party to make full and frank disclosure of their financial situation, sufficient to allow a full understanding of their financial circumstances by way of a sworn financial statement. The information set out in a party’s financial statement is a baseline for that party’s obligation to provide disclosure, and the information in the financial statement (or lack of it) will often be the driving force behind subsequent disclosure requests that engage the principle of proportionality.
Beyond statutory obligations of disclosure under Rule 13, Form 20: Requests for Information are an effective tool to seek production of documents from the other party. These further requests may be made under Rule 19(1) that allows one party to request a list of documentary disclosure from the other.
Similarly, under Rule 20(5), a court may make an order for disclosure if the following conditions are met:
(a) It would be unfair to the party who wants the questioning or disclosure to carry on the case without it;
(b) The information is not easily available by any other method; and
(c) The questioning or disclosure will not cause unacceptable delay or undue expense.
Under Rule 20(16), an order for questioning may also require the person to bring any document or thing that is relevant to any issue in the case and in the person’s control or available to the person on request.
While responding to or requesting foundational disclosure required under Rule 13 is quite straightforward, it becomes difficult to analyze the relevance, proportionality and adequacy of further disclosure requests.
The Rules also impose sanctions for parties who fail, especially deliberately, to disclose required financial information and documents. Consequences of such failure include an order for costs, dismissing a claim, or striking pleadings. In the words of Justice Rogers in Chernyakhovsky v. Chernyakhovsky (2005 CanLII 6048), “the severity of the sanctions serves to emphasize the importance of disclosing the necessary information in a file quickly”.
When so much is at risk, it becomes pertinent for family lawyers to answer the litigants’ common question – “how do we determine whether or not to produce the requested disclosure?”
The answer to this question is usually based on the facts and nuances of the particular case. For example, where a party is claiming spousal support, it may be proportionate to request the corporation’s general ledger, receipts and statements of personal expenses run through the corporation, etc. to accurately determine their self-employment income. Or, where a party is unemployed and unable/unwilling to pay support, it may be appropriate to request them to share proof of the efforts they have made to seek new employment opportunities.
Another important factor that must be considered is costs related to producing disclosure. In determining the necessity of disclosure, lawyers must consider the probative value of the disclosure requested and compare it to resources (including legal fees) consumed in making it available.
Proportionality and Relevance
Referencing Chernyakhovsky (above), the Ontario Court of Appeal in Kovachis v. Kovachis (2013 ONCA 663), stated:
Although full and frank disclosure is a necessary component of family law litigation, exhaustive disclosure may not always be appropriate. Courts and parties should consider the burden that disclosure requests bring on the disclosing party, the relevance of the requested disclosure to the issues at hand, and the costs and time to obtain the disclosure compared to its importance. Disclosure orders must be fair to both parties and appropriate to the case. (emphasis added)
It is widely accepted that the introduction of Rule 2 has reinforced the proportionality-and-relevance analysis to determine the adequacy of financial disclosure requests. As pointed out in Kochar v. Kochar (2015 ONSC 6650), the principle of proportionality is enshrined in the Family Law Rules by Rule 2.
Rule 2 establishes that the primary objective of the Rules is to enable the court to deal with cases justly. This encompasses ensuring fairness to all parties, saving time and expenses, ensuring matters are adjudicated in accordance with their complexity, and allowing judicial resources to be appropriately allocated.
In the recent case of Recker-Perera v. Perera (2024 ONSC 2452), at paragraph 18, Justice Bula reiterated the considerations summarized in Tonogai v. Tonogai (2016 ONSC 2366) with respect to proportionality of financial disclosure:
In addition to relevance, in assessing requests for additional financial disclosure, the court must also consider the concept of proportionality. That is, the burden of the disclosure request upon the disclosing party, including the time and expense involved in producing the information, must be assessed in context of the relevance and importance of the content. This involves a balancing of fairness to the parties on the specific facts of each case… These considerations of fair process, expense and time, importance and complexity, and allocation of resources are all fundamental components of the court’s obligation to promote the primary objective of the Family Law Rules, to deal with cases justly. (emphasis added)
While discussing the concept of relevance in financial disclosure, Justice Aston in Kochar stated at paragraph 4:
…Merely proving the relevance of a document may be insufficient to warrant production. To order production the court must be satisfied that it would be “unfair” to the party seeking production to go on with the case without the document or information. In essence the document must be found to be important to a party’s case, especially in relation to the amount at stake.
It is important to note that Rules 19 and 20 require the court to assess relevance and proportionality of one party’s disclosure requests before requiring the other to produce the disclosure.
In Korn v. Korn (2017 ONSC 4934), when presented with both parties seeking orders for disclosure from the other, Justice Faeita discussed the application of these particular rules. His Honour reiterated that:
The test under Rule 19(1) and Rule 20(16) is narrower than the “semblance of relevance” test traditionally applied given that the Rules require disclosure when the question or request for production is "relevant to any issue in the case" rather than the former, broader test of whether the question is one “relating to any matter in issue”. The focus on “relevance” as opposed to the “semblance of relevance” is also consistent with the primary objective of the Family Law Rules described in Rules 2(2) and 2(3), particularly on promoting the saving of expense and time.
In Boyd v. Fields (2006 CarswellOnt 8675), Justice Perell made the often-quoted statement “the fundamental question is whether the various items of information are relevant or whether they have a semblance of relevance having regard to the material issues in this case” (see para. 11).
Justice Rogers provides a very helpful roadmap in Chernyakhovsky for the court and lawyers alike to assess the nature of disclosure requests.
- The analysis begins with the primary consideration of the burden certain disclosure requests bring for the disclosing party.
- Is the probative value of the sought-after disclosure so great in relation to the difficulty of obtaining the disclosure that said disclosure would be ordered and sanctions imposed for failure to comply?
- The second consideration is relevance.
- How does the disclosure request fit into the overall context of the case?
- Is the issue for which disclosure is requested a central issue in the case? Or is it peripheral?
- As the case develops, is the disclosure still related to an important issue in the case?
- The third is proportionality.
- Does the cost of obtaining the disclosure outweigh the value of the issue in the case?
- Is there a more expeditious and cheaper way of getting the same information?
- As always, the court must balance these competing interests to ensure fairness.
Justice Rogers finally reminds us that the key factor is to “balance these competing interests to ensure fairness” (see para. 8).
Frost v. Frost (2024 ONSC 2594)
In a recent case from May 2024, Justice Jain had to decide a motion brought by the husband, shortly before trial, seeking reli ef regarding the wife’s alleged breaches of court orders and non-compliance with Rule 13.
The husband also required non-party disclosure from TD Waterhouse Canada Inc. to trace his claims for an exclusion under section 5(2) of the Family Law Act. TD advised that they no longer have the statements in their system as the records being requested were over seven years old. Justice Jain found this response reasonable. On further inquiry, TD advised that some limited records (screenshots) may be available.
Justice Jain held that the order sought regarding the non-party disclosure were relevant, reasonable and proportionate to the equalization issue. The husband had also fulfilled procedural requirements under Rule 19(11). Her Honour granted the order for the non-party disclosure.
With respect to disclosure sought from the wife, the husband’s counsel prepared a 15-page chart entitled “Schedule A – Outstanding Disclosure Required from the Applicant” with an itemised list of each alleged outstanding item. She submitted that she was relying on the Form 8.0.1 Automatic Order and a previous order of Justice Krause, as well as rules 13 and 19 of the Family Law Rules.
During the course of the ongoing litigation, the wife had been served five Requests for Information. The wife’s counsel submitted that in his experience, this appeared excessive.
The husband’s counsel argued that the requests were relevant and that she did not want her client to be “ambushed” at trial. She also attacked the wife’s credibility and tried to have the wife “admonished” by the court for not providing the disclosure requested by the Respondent. Justice Jain disagreed.
Her Honour took issue with the husband’s requests for disclosure related to the wife’s divorce from her former husband. When asked about the relevance of these requests, the husband’s counsel advocated that the documents would speak to the validity of the parties’ marriage and the property claims that followed. Justice Jain commented that raising the issue on the eve trial amounted to a “fishing expedition” and was “a complete waste of the parties’ time and the court’s resources”.
The court concluded that the husband had been provided with “ample, relevant and proportionate disclosure”. Her Honour concluded that the husband’s additional requests for disclosure were “excessive, unnecessary, and/or irrelevant and/or disproportionate”. The balance of the husband’s motions was dismissed pursuant to Rule 2(2) to (5) of the Family Law Rules. Justice Jain also confirmed that the wife was the successful party and was presumed to be entitled to costs.
Conclusion
There are two extremes in the spectrum of financial disclosure. On one end, there is inadequate disclosure that may hinder a just and fair resolution of the issues between parties. The opposite end of the spectrum is excessive and unnecessary demands for disclosure. Such demands often increase costs and delay resolution.
As lawyers, our duty is to ensure that disclosure we advise our clients to provide as well as disclosure we request from the opposing party falls somewhere in between the two extremes.
In seeking this balance, we are guided by the principles of relevance and proportionality.