Falkener v. Falkener

2020 BCSC 538 Falkener v. Falkener

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Falkener v. Falkener, 2020 BCSC 538 Date: 20200213 Docket: E52916 Registry: Kamloops Between: Linda Christine Falkener Claimant And James Falkener Respondent Before: The Honourable Madam Justice Gropper Oral Reasons for Judgment In Chambers Counsel for the Claimant: P. Mennie Counsel for the Respondent: G. Lang Place and Date of Hearing: Vancouver, B.C. January 22, 2020 and February 13, 2020 Place and Date of Judgment: Vancouver, B.C. February 13, 2020 Introduction [1] There are two applications before me: a) Ms. Falkener's application to find Mr. Falkener in contempt of court for non‑payment of spousal support in the amount of $172,950; and b) Mr. Falkener's application for a stay of proceedings pending his appeal under s. 234 of the Family Law Act, S.B.C. 2011, c. 25. [2] The trial in this matter occurred February 5-8 and April 9-12, 2019. Spousal support and the division of family property were in dispute. Both parties were self‑represented. Madam Justice Dillon issued reasons for judgment on August 13, 2019, indexed at 2019 BCSC 1351. She ordered Mr. Falkener to pay lump‑sum spousal support to Ms. Falkener as follows: a) $22,950, those were arrears from the order of Madam Justice Matthews dated July 17, 2018, payable forthwith; b) $50,000 payable immediately; c) $100,000 payable no later than December 31, 2019; d) $100,000

payable no later than March 30, 2020; and e) $131,394 payable no later than June 30, 2020. [3] Mr. Falkener has not made any of those payments. Background [4] The parties began living together in 1985, married on August 2, 1992, and separated on February 24, 2016. They were divorced in April 2019. [5] Ms. Falkener did not work outside the home; Mr. Falkener did, as an insurance adjuster. Since 1994, he was self‑employed, specializing in catastrophic disaster work. In 2008, he started his own insurance adjusting company, Canada Cat Inc. [6] Since the separation, Mr. Falkener has provided sparse and sporadic spousal support. [7] Ms. Falkener cashed in a $22,000 guaranteed income certificate, an inheritance from her father, to pay her living expenses and expenses related to matrimonial property known as the "Pritchard property". The claimant was also forced to take out a second mortgage to meet her expenses. [8] On July 17, 2018, Ms. Falkener successfully applied for interim spousal support and received an order that Mr. Falkener pay her $1,227 per month. Mr. Falkener was also ordered to produce his medical records, tax returns, and business records. Division of property [9] Madam Justice Dillon noted at the outset of the judgment that both parties were self represented and the lack of expert evidence as to the valuation of real estate and corporations made valuation of those

assets particularly difficult. Despite those difficulties, she made the following findings regarding the value and the division of property: a) Pritchard property and the Airdrie property: valued in accordance with their assessed value in 2019. b) Canada Cat Inc.: in the absence of any other evidence of value and in the absence of any recent tax or corporate statements for Canada Cat Inc., Dillon J. used the respondent's own valuation in 2015 of $100,000 as the value at the time of trial. c) Fire Marque Inc.: Dillon J. used the share price from a 2014 sale to value the respondent's interest at $149,850. d) Eligio CRM Inc.: Dillon J. used the respondent's own valuation in 2015 to value the shares of that company at $65,625. e) Baja, Mexico: sold in 2019, and the proceeds of $28,722 were put toward the respondent's spousal support arrears. [10] A summary of the family property and debt is: Pritchard property $477,459 Baja property proceeds 28,722 Airdrie property 43,023 Canada Cat 100,000 Fire Marque shares 149,850 Eligio shares 65,625

RRSP 2.652 Total value $867,331 Credit card debt $36,314 Revenue Canada 36.903 Total debt $73,217 [11] Madam Justice Dillon reapportioned property in the claimant's favour on the basis that at para. 74: The respondent basically ran rough shod over the claimant financially over the years . . . [He] established himself in the insurance industry with his own business that operates internationally and with shareholder interests in related businesses. He has engaged in recent undisclosed financial transactions involving significant sums of money and undisclosed bank records. [12] She made similar comments at para. 82: The respondent kept control over the finances throughout the marriage. He paid for everything and was generally secretive about his worth. He underreported his income for tax purposes He held himself out as owner of the Pritchard property when it had previously been transferred to the claimant His declared farm expenses were both exaggerated and false He regularly blended financial transactions between himself and his companies without regard to personal versus corporate liabilities as evidenced Mr. Falkener's excluded property [13] Madam Justice Dillon found that the respondent's inheritance of a one‑third interest in property in Stansted, England had a value of $203,000 and he also had £114,200 (GBP) that he had inherited. He also had $25,000 in bullion, coins,

silver, and diamonds. Dillon J. accepted that these were excluded property. Nevertheless, she found that the miscellaneous bullion, coins, diamonds, and silver were not adequately itemized or evaluated. She also found that there was no reliable valuation given to two corporations: Canada State or Perihelion, as the two companies were struck from the corporate registry in 2018 for failure to file corporate records. [14] Dillon J. was critical of Mr. Falkener's non‑disclosure of his overseas account, finding at para. 43 that there had been a deposit of £52,253 (GBP) from Peter Meronek into his U.K. account in February 2019, and that Mr. Falkener transferred €1,700 and £20,000 (GBP) into his personal accounts from overseas. He stated that the purpose of the transfer into his TD account in Canada was to pay bills and for personal use. Mr. Falkener's income [15] At para. 99, Madam Justice Dillon reviewed Mr. Falkener's income from 2015 to 2017: The respondent's income tax returns indicate income as follows: for 2015, net commission income of $126,725 excluding farm loss; for 2016, net self employed income of $50,575; for 2017, net business income of $59,619 excluding farm loss. This sudden decreasing pattern runs parallel to the respondent closing down certain of his businesses in the year of separation. The respondent failed to adequately explain why these changes occurred. [16]

Dillon J. noted that in his 2016 and 2018 financial statements, the respondent failed to explain all of his banking transactions. She referred to Bank of America account documents that showed that there were significant deposits in 2017 and 2018, which led to her inference that Mr. Falkener was still working in the United States in 2018. She was critical of his failure to explain his banking transactions and his financial statements. She found that in the Bank of America accounts, there were deposits made between September 2017 and January 2019, and the bank accounts also show that Mr. Falkener incurred expenses in Texas, Arizona, Utah, and California (at para.9). [17] Dillon J. considered Mr. Falkener's claim that he had been unemployed for two years due to a disability, based on those bank records. Ultimately she deemed Mr. Falkener's income to be $110,200 based on the following at para. 103: After consideration of all of the evidence, it is concluded that the respondent has not been forthright with the court as to his true income. The circumstances include: failure to disclose bank and other assets; failure to disclose and adequately explain 2017 income from the United States; failure to factor rental from the Airdrie property into income; failure to adequately explain the U.K. Santander bank and foreign bank transactions in February 2019; and deduction of business expenses

from income and intermingling of business and personal expenses. Another factor in the imputation of income to the respondent is the respondent's previous statements of income for purposes other than income tax or court and the likely rental income to be received from the Airdrie property. The average income over the 3 years 2015-2017, with deemed income of $126,000 attributed in 2017, is $101,100, giving the benefit of a low of $50,575 in 2016. . [18] On that basis, the respondent was deemed to have an annual income of $110,200. Spousal support [19] After considering the jurisprudence related to spousal support and specifically rejecting Mr. Falkener's position that the 69‑year‑old claimant who had not been employed for 30 years should seek to retrain to become financially self‑sufficient, Dillon J. applied the Spousal Support Advisory Guidelines ("SSAG") that provided a range between $2,745 to $3,620 per month for an indefinite period. [20] Dillon J. awarded lump‑sum spousal support in the total amount of $381,394 (at para. 110) based on the following considerations: [107] The advantage of [a lump sum] award here would be to terminate ongoing contact in a situation where a s. 183 FLA order has been made, there is a real risk of non-payment of periodic support, there has been a lack of financial disclosure on the part of the respondent, and arrears of court ordered support

have accumulated. It is unlikely that the claimant's ongoing needs will be adequately met or that she will be fully compensated for the economic disadvantage that she suffered in the marriage. [109] The SSAG lump sum recommended after tax range for payment by the respondent is $381,394-$513,650 based upon indefinite duration. The demonstrated concern here is that the respondent will not pay periodic support and has hidden assets. It is also acknowledged that the claimant acts for herself and continuation of proceedings is not in her interest. [21] Madam Justice Dillon found that Mr. Falkener had the means to pay the lump‑sum award of spousal support at para. 108: The means of the respondent for spousal support includes his capital base, his income earning capacity, and "any other available source of benefits or gains" A lump sum award would likely result in the sale or transfer of either Fire Marque or Eligio shares, or in the dissipation of excluded inheritance property: however, provision of compensatory and non-compensatory support may not be otherwise achieved. New evidence [22] After the trial, Mr. Falkener filed an income tax return for 2018 showing his line 150 income as $8,489.73. He also qualified for a disability pension from Canada Pension Plan retroactively and prospectively, and he has received payments from that pension. Mr. Falkener produced a financial statement

on February 14, 2020, attaching his 2018 income tax only. That return says that his income is limited to his CPP pension. Stay of proceedings [23] Section 234 of the Family Law Act states: Despite any other enactment, if an order made under this Act is appealed, the order remains in effect until the determination of the appeal unless the court that made it orders otherwise. [24] A successful party should not be deprived of their judgment unless the interests of justice require that they be withheld pending an appeal. The legal test for a stay was expressed in Negus v. Yehia, 2018 BCSC 2319, at paras 52-53. a) Is there a serious issue to be tried? b) Would the applicant suffer irreparable harm if the application were refused? c) Which of the parties would suffer greater harm from the granting or refusing of the stay pending a decision on the merits (the balance of convenience)? [25] Ms. Falkener argues that Mr. Falkener meets the first test. There is a serious issue to be tried. [26] I agree with Ms. Falkener that the second test is not met. Mr. Falkener has not established irreparable harm using the definition from Negus at para. 55: "harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other." Mr. Falkener will be able to reapportion his interest in the Pritchard property if he is

successful on appeal. [27] Mr. Falkener is also unable to meet the balance of convenience test. The balance of convenience favours Ms. Falkener. She is suffering financial hardship as a result of Mr. Falkener's continuing failure to comply with court orders. She has depleted her savings and remains in a precarious financial situation. In the circumstances, I find that Mr. Falkener has not established the test for a stay of proceedings. His application is therefore dismissed. Contempt [28] At the outset of her response to the application, Ms. Lang raised that her client had not been personally served with the application to find him in contempt of court. Proceedings for contempt of court are quasi‑criminal in nature and the rules of strictissimi juris apply. Strict adherence with the procedural requirements is required. [29] Rule 22‑8(11) of the Supreme Court Civil Rules, B.C. Reg. 168/2009 require that the alleged contemnor must be personally served with the application at least seven days before the hearing. Mr. Falkener was not personally served. All of the material was served upon his counsel. Mr. Falkener was served after the applications were heard on January 31, 2020. [30] Mr. Falkener provided application responses, filed responsive affidavits sworn by himself and others in support of his position in these applications, and provided a financial statement. [31] I asked

the parties to provide case authorities on the matter of service and whether the lack of personal service of the application and support materials prevents a finding of contempt. The parties have provided those authorities. I have reviewed them. There are many cases that find that the lack of personal service may result in the dismissal of a contempt application. However, I adopt the reasons of Madam Justice Horsman in LLS America LLC (Trustee of) v. Dill, 2018 BCSC 2316, because they are apposite in this case. At paras. 52-54 and 56, she states: [52] I am of the view that the defendant's argument takes the rule of strictissimi juris too far. The defendant did not refer me to any case standing for the proposition that any procedural irregularity, however insignificant, is a ground for dismissing a contempt application. The authority is to the contrary. [53] In Claggett v. Claggett, [1945] 2 W.W.R. 191 (B.C. C.A.) [Claggett], the B.C. Court of Appeal set aside an order for committal following a contempt finding on the basis that the affidavits in support of the notice of motion were not served on the alleged contemnor along with the notice of motion. The affidavits had been previously served on the alleged contemnor in relation to an unrelated motion. In concluding that this method of service was inadequate, the Court stated at p. 192: I am of opinion that irregularities in

compliance with the rule should not be condoned under rule 1037 unless it be shown that the party affected has had reasonable notice of the grounds of the application and of the material to be used in support thereof . . . [Emphasis added] [54] The rule of strict compliance articulated in Claggett is qualified in the passage quoted above by the recognition that procedural non-compliance may be excused where the alleged contemnor has had reasonable notice of the grounds of the application and of the material to be relied on in support. Where the applicant can demonstrate that the alleged contemnor clearly knows the case to be met and has an opportunity to respond, then the object of the service rules are met and the procedural irregularity may not vitiate the proceeding . . . [56] In the present case, there can be no doubt that the defendant had reasonable notice of the grounds of the contempt application and of the material to be used in support thereof. He has fully responded to the application, while maintaining the technical objection that the material was not personally served on him. The procedural irregularity in this case is minor and inconsequential, and I am satisfied that the object of the service rules have been met. I therefore conclude that the lack of personal service does not vitiate the contempt proceeding. [32] I make the same finding for the same reasons in

this case. [33] There are four elements that must be satisfied to establish contempt: a) the alleged contemnor had notice of the order that he is alleged to have breached; b) the alleged contemnor has not complied with the terms of the order that he is alleged to have breached; c) the failure to comply with the order was wilful, that is deliberate and not accidental; and d) the alleged contemnor has the ability to make the payment at the time of the order. [34] Mr. Falkener acknowledged that the first three aspects of the test are satisfied. His position is that he ought not to be found in contempt on the basis that he does not have the ability to make the payment at this time. [35] Madam Justice Dillon found that the respondent had considerable means from excluded property, his inheritance, real estate, and bank funds to make the lump‑sum payment. [36] Despite this, Mr. Falkener relies on the decision of Swann v. Swann, 2009 BCCA 335, where the court has previously found a party's ability to pay on an application seeking support, the standard of proof on an application for contempt is much higher and circumstances may have developed that would show the court's order was beyond the capacity of the payor to fulfil. The applicant must demonstrate beyond a reasonable doubt that the respondent does not have the means to pay. [37] In Swann, the court notes that Mr. Swann had made

some payment of support. He was not simply flouting court orders. The court found that to be significant. [38] In this case, Mr. Falkener has flouted the court orders. He did not pay support in accordance with the Matthews order of July 2018. He did not make disclosure that he was ordered to make or that he was obliged to make in accordance with the Family Law Act or the Supreme Court Family Rules. While Madam Justice Dillon did the best she could to value the parties' property and Mr. Falkener's income, she was critical of Mr. Falkener's failure to disclose. I have reviewed the reasons for judgment extensively to demonstrate Madam Justice Dillon's view of Mr. Falkener's consistent lack of forthrightness and non‑disclosure. [39] I find that Mr. Falkener has continued in his path of non‑disclosure and lack of forthrightness. He has filed the minimum of financial information and the only document he has provided is his 2018 income tax return. Everything he has disclosed supports his view that he has no income and no assets. [40] Mr. Falkener's obligation is to disclose all of his financial information and to provide supporting documents. In his financial statement filed in 2020, he ascribes values for his financial and business assets as no value; they have already been determined by Dillon J. to have value. He does not refer to property that Dillon J. found he had, for example,

the one‑third interest in the property in England that she valued at $203,000, or the money that he received from Mr. Meronek. Mr. Falkener does not provide any documentation regarding his corporate assets, but maintains in the financial statement, as he did at trial, that they had no value. Madam Justice Dillon found otherwise. In his financial statement of 2020, Mr. Falkener does not describe any assets that he disposed of. I find that the financial statement is entirely self‑serving and contradicts or ignores the explicit findings that were made at trial and were the basis of the orders made. [41] Mr. Falkener suggests that he can be cross-examined on his affidavit. His evidence about his income and assets has been examined through intense judicial scrutiny only months ago. What point would there be to cross-examination? Mr. Falkener has been found to be untruthful and to not disclose his assets. Unlike Swann, Mr. Falkener has been found to have ample ability to pay after a full trial and it was determined that at the time of the court's order, he had the ability to pay. [42] Ms. Lang asserted that Ms. Falkener has not proven beyond a reasonable doubt that he has no funds to pay the arrears. He has not. His paltry financial statement does not demonstrate an inability to pay, only his desire to continue to deny that he has assets and not disclose anything related to

them. [43] As Ms. Falkener points out, the evidence established and found by Dillon J. demonstrates that the respondent has the ability to pay the spousal support, the lump‑sum spousal support, through the £52,253 paid into his account by Peter Meronek; the £20,000 paid into his TD account in February 2019; the £114,200 received as an inheritance in October 2018; from the sale of shares in Canada Cat, Fire Marque, or Eligio CRM, which are worth a combined $292,873; from the sale of his interest in property located in Stansted, England, worth $203,000; the sale of bullion, coins, silver, and unmounted diamonds which the respondent owns; from the remortgaging of his Airdrie property; or by using funds in his undisclosed overseas account and other undisclosed assets. [44] I find beyond a reasonable doubt that Mr. Falkener had notice of the order that he is alleged to have breached. He has not complied with the terms of the order. The failure to comply with the order is wilful: deliberate and not accidental. Mr. Falkener had to make the payment at the time of the order, and continues to have the ability to pay. [45] I find that Mr. Falkener is in contempt of the court. As suggested by counsel for Ms. Falkener, Mr. Falkener should be given 14 days to comply with the trial order. I so order. Special Costs [46] I agree with the claimant that she is entitled to special costs based on

Buckland v. Buckland, 2019 BCSC 1023, at para. 34: Special costs are often ordered in contempt proceedings. Having gone to the cost and expense of obtaining a court order, an individual should not have the additional cost and expense of trying to enforce it. [47] The claimant here has been successful on both matters. She should not have to pay further legal fees to enforce the court orders. She is therefore entitled to special costs. "Gropper J."