



COURT OF APPEAL FOR ONTARIO

CITATION: Hevey
    v. Hevey, 2021 ONCA 740

DATE: 20211021

DOCKET: C68436

Feldman, Harvison Young and
    Thorburn JJ.A.


BETWEEN

Lynne Marie Hevey

Applicant (Appellant)

and

Charles James Hevey

Respondent (Respondent)

Gary S. Joseph and Stephen P. Kirby, for the appellant

Bryan R.G. Smith and Sarah Conlin, for the respondent

Heard: April 14, 2021 by video conference

On appeal from the order of Justice Jonathon C. George of
    the of the Superior Court of Justice, dated May 27, 2020, with reasons reported
    at 2020 ONSC 3307.

Harvison Young J.A.:

[1]

The appellant, Lynne Hevey, appeals from an order granting summary
    judgment to the respondent, Charles Hevey, dismissing her application for
    equalization and other relief. At the time of her application, the parties had
    been divorced for more than 10 years. The dispute arises out of a complex
    financial arrangement.

[2]

Ms. Hevey claimed in her application to have recently discovered that
    Mr. Hevey had misrepresented material facts and failed to make significant
    disclosure at the time of the divorce application in 2008. In particular, she
    claimed Mr. Hevey had represented to banks that his net worth was approximately
    $21 million at the same time that he stated in a sworn financial statement that
    his total assets amounted to $0. At the time, the parties did not pursue
    equalization or spousal support. In his summary judgment motion, Mr. Hevey
    relied heavily on his submission that the parties had agreed not to pursue
    either, although there was no written agreement not to pursue equalization or
    spousal support. He also argued that Ms. Heveys claim for equalization was
    barred by s. 7(3) of the
Family Law Act
, R.S.O. 1990, c. F.3 [
FLA
].

[3]

The heart of the appeal is Ms. Heveys assertion that this was not an
    appropriate case for summary judgment. For the following reasons, I would allow
    the appeal and order that the matter be remitted for trial.

A.

Background

[4]

The appellant, Ms. Hevey, and the respondent, Mr. Hevey, married in
    1980, separated in 2006, divorced in 2008, and have two adult sons. They
    negotiated the issues arising from their separation in 2008 and did not pursue
    equalization, although the surrounding circumstances form part of the subject
    of this appeal. Both parties were represented by counsel at the time.

[5]

In 2019, Ms. Hevey brought an application for equalization and spousal
    support, alleging that Mr. Hevey had misrepresented his financial circumstances
    during their negotiations.

[6]

In her application, Ms. Hevey claimed to have recently discovered the misrepresentation
    when Mr. Hevey, who is a real estate developer, sold one of the familys
    commercial properties in April 2019 for over $16 million. During the
    disposition of the property, Ms. Hevey, through her commercial counsel,
    received documents that disclosed a trust arrangement involving PMP Trust, of
    which Mr. Hevey was the sole beneficiary. Ms. Hevey then discovered the alleged
    misrepresentation: while Mr. Heveys financial statement sworn in December 2008
    indicated a net family property value of $0, he was actually worth more than
    $21 million between 2007 and May 2008, based on his disclosure to a bank.

[7]

The relevant background to the family arrangements pre-separation may be
    briefly summarized. In 1986 and 1996, two family trusts were created which held
    various assets. Ms. Hevey was the trustee of both family trusts and Mr. and Ms.
    Heveys two sons were the beneficiaries. In 2006, the assets of those family
    trusts were transferred to three new numbered companies due to the pending
    expiry of the 21-year period from the date of creation of one of the family
    trusts. There is no dispute that this was required by tax laws. The dispute
    arises from the corporate arrangements established, into which the trust assets
    were transferred.

[8]

Ms. Hevey and Mr. and Ms. Heveys two sons owned special or preferential
    shares in the three numbered companies. However, PMP Trust, of which Mr. Hevey
    was the sole beneficiary, owned the only common, or growth share, in each of
    the three numbered companies. According to Ms. Hevey, Mr. Hevey thereby was the
    beneficiary of all the family assets, except for one half interest in the
    matrimonial home. She notes that when she raised Mr. Heveys interest in PMP
    trust through counsel in July 2009, Mr. Hevey emailed her stating that her
    lawyers [
sic
] concern about PMP trust is without merit, as the one
    common share held by PMP has absolutely no value and that [t]he boys control
    the corporation. Ms. Hevey claims that she relied on Mr. Heveys
    representations about his financial situation and his representations that he
    was making all efforts to ensure she and the children benefited from the family
    assets.

[9]

In response to Ms. Heveys application for equalization and spousal
    support, Mr. Hevey brought a motion for summary judgment under r. 16 of the
Family
    Law Rules
, O. Reg. 114/99 [
FLR
], dismissing Ms. Heveys
    application. He argued that the limitation period set out in s. 7(3) of the
FLA
had long expired and that he and Ms. Hevey had agreed not to pursue
    equalization or spousal support at the time of their divorce. The test,
    summarized by this court in
Ramdial v. Davis
, 2015 ONCA 726, 68 R.F.L.
    (7th) 287, at paras. 27-31, required the motion judge to ascertain whether
    there was a genuine issue for trial. At the time Mr. Hevey brought the motion,
    he had not filed an answer to Ms. Heveys application or a financial statement
    as required by the
FLR
.

B.

Issues on Appeal

[10]

The
    issues are whether the motion judge erred by

·

allowing Mr. Heveys motion for summary judgment when Mr. Hevey
    had not served an answer as required by r. 16 of the
FLR
; and

·

misinterpreting and misapplying s. 2(8) of the
FLA
.

C.

Decision Below

[11]

The
    motion judge granted summary judgment against Ms. Hevey, dismissing her
    application. Before addressing the motion directly, he spoke to Ms. Heveys
    argument that he did not have the authority to consider the motion when Mr.
    Hevey had not yet filed an answer and financial statement as required by r.
    16(1) of the
FLR
. The motion judge referred to an endorsement from
    September 12, 2019, which stated that Mr. Hevey was not required to file an
    answer or sworn financial statement pending determination of the summary
    judgment motion. Citing Ms. Heveys counsels lack of concern with that
    endorsement and his conduct afterward, he found that the parties had agreed to
    proceed without the filing of an answer.

[12]

The
    motion judge noted that, in any event, the primary objective of the rules was
    to ensure the court can deal with cases justly and to mandate a process that is
    fair, efficient, and appropriate given the importance and complexity of the
    issues. He stated that an answer would have done little to enhance Mr. Heveys
    position and that the record was sufficient to deal with the merits of the
    motion. The motion judge was puzzled as to why Ms. Hevey, if she had procedural
    concerns before, did not raise them prior to consenting to the timetables and
    foregoing cross-examinations.

[13]

Proceeding
    to the merits of the motion, the motion judge noted that Ms. Heveys claim for
    equalization was statute-barred under s. 7(3) of the
FLA
. To revisit
    the issue of equalization, Ms. Hevey needed to satisfy the conditions under s.
    2(8) of the
FLA
, which permits the court to extend a time prescribed
    by the
FLA
if it is satisfied that there are apparent grounds for
    relief, relief is available because of delay that has been incurred in good
    faith, and no person will suffer substantial prejudice by reason of delay.

[14]

The
    test for summary judgment is whether there is a genuine issue requiring a
    trial:
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87.

[15]

The
    motion judge considered the evidence before him, which was that the
    equalization claim was statute-barred; the parties were represented by
    experienced counsel when they decided to forego equalization; financial
    disclosure was exchanged in relation to that decision; Ms. Hevey was a savvy
    business-person and had run her own family company for years; Ms. Hevey had
    access to her own accounting and legal professionals; Ms. Hevey was directly
    involved with and had knowledge of Mr. Heveys finances and that of the trusts;
    and the correspondence from 2008-2009 during their negotiations addressed the
    issues Ms. Hevey now raised. The motion judge found no evidence of an intention
    to mislead, no evidence of fraud, and no evidence that Mr. Hevey acted in bad
    faith. He also found that the documents Ms. Hevey relied on lacked context and
    could not be fully attributed. The motion judge observed that the parties
    settled their affairs, motived by a desire for finality so that they could move
    on with their lives.

[16]

Lastly,
    the motion judge addressed the issue of spousal support. The parties made only
    limited submissions on spousal support and, in any case, those issues had been
    settled over 10 years earlier and there was no evidence of fraud. The motion
    judge concluded that there was no genuine issue requiring a trial.

D.

Discussion

[17]

For
    reasons that follow, I would allow the appeal.

[18]

As
    Iacobucci and Major J.J., writing for the majority, noted in
Housen v.
    Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235, the standard of review on a
    pure question of law is correctness: at para. 8. Questions of mixed fact and
    law, which involve applying a legal standard to a set of facts and which lie
    along a spectrum, are usually subject to the more stringent standard of
    palpable and overriding error:
Housen
,

at paras. 26, 36-37.

[19]

Here,
    the motion judge fell into reversible error by permitting the respondent to
    proceed with his summary judgment motion despite not having filed an answer to
    the appellants application as required by r. 16 of the
FLR
. In
    addition, he fell into error by misinterpreting and misapplying s. 2(8) of the
FLA
,
    which sets out the conditions to be applied by the court in considering whether
    an extension of time prescribed by the
FLA
should be granted.

(1)

Did the motion judge err by allowing the summary judgment motion to
    proceed in the absence of an answer?

[20]

Given
    the language of r. 16 of the
FLR
and the importance of disclosure in
    family law and in light of the opacity of Mr. Heveys financial arrangements,
    the motion judge made a palpable and overriding error in concluding that an
    answer was not required before proceeding with the summary judgment motion.

[21]

Summary
    judgment is governed by r. 16 of the
FLR
.

[22]

Rule
    16(1) specifically provides that summary judgment is available
after
the respondent has served an answer:

WHEN AVAILABLE

16. (1) After the
    respondent has served an answer or after the time for serving an answer has
    expired, a party may make a motion for summary judgment for a final order
    without a trial on all or part of any claim made or any defence presented in
    the case.

[23]

The appellant says that this rule is mandatory and that the appeal
    should be allowed on this basis alone. The respondent states that the
    appellants counsel did not raise any concerns about the motion judges order
    dispensing with the requirement that the respondent file an answer prior to the
    hearing of the summary judgment motion. In his reasons, the motion judge made a
    similar comment, stating that [a]s I recall it, Applicant[s] counsel did not
    object to this nor did he raise any concerns.

[24]

The
    appellants concern was, however, raised before the motion judge at the
    scheduling hearing. In response to a question from the motion judge as to
    whether granting an order dispensing with the request to file an answer before
    the summary judgment hearing would prejudice Ms. Hevey, the appellants lawyer
    stated that he was not agreeing to such an order but that it should be left to
    the judge hearing the summary judgment motion. The motion judge wrote an
    endorsement dispensing with the requirement that Mr. Hevey file an answer and
    financial statement, and the summary judgment hearing proceeded on March 6,
    2020, on that basis.

[25]

With
    respect, the motion judge erred in permitting the summary judgment motion to
    proceed to hearing in the absence of an answer and financial statement from Mr.
    Hevey.

[26]

As
    this court held in
Frick v. Frick
, 2016 ONCA 799, 132 O.R. (3d) 321,
    at para. 11, [t]he
Family Law Rules
were enacted to reflect the fact
    that litigation in family law matters is different from civil litigationThey
    embody a philosophy peculiar to a lawsuit that involves a family. Part of that
    philosophy is the recognition that [t]he most basic obligation in family law
    is the duty to disclose financial information:
Roberts v. Roberts
,
    2015 ONCA 450, 65 R.F.L. (7th) 6, at para. 11.

[27]

Here,
    the appellants position was that she had received inadequate disclosure
    initially. She put forward some evidence to substantiate her claim  in
    particular, the roughly contemporaneous $0 sworn net family property statement
    and the May 2008 bank disclosure asserting that the respondent had assets in
    excess of $21 million, which she stated she never saw until 2019.

[28]

Mr.
    Hevey insists that, as a sophisticated business woman who ran her own business,
    had been a trustee of the trusts, and was a preferential non-voting shareholder
    in one of the companies, Ms. Hevey understood exactly how his financial affairs
    were managed and what his interests were at the time. He says she also knew
    that his net worth vacillated as he bought and sold properties, and, in
    addition, that times were especially bad in December 2008 following the
    financial crash in the fall of 2008.

[29]

In
    my view, and without deciding whether an answer is always needed, an answer was
    needed here as required by the rules. Specifically, the answer would have been
    accompanied by a new sworn financial statement upon which Mr. Hevey could have
    been cross-examined. Cross-examinations, particularly about the nature of the respondents
    interest in the PNP trust could in fact be very helpful in this case. In their
    absence, the respondents affidavits could rely upon the complexity of the corporate
    arrangements and the PNP trust to skirt what might be, and might have been, a
    significant beneficial interest. For example, a cross examination on a
    financial statement might include a question such as Despite not being a
    shareholder, have you received any benefit in any form from the trust, which
    holds your common shares in the corporations? At the same time, the motion
    judge may have been inferring from the fact that neither party sought to
    cross-examine the other on the sworn affidavits that were in evidence that
    there would also not have been cross-examinations on a sworn financial
    statement.

[30]

The
    requirement for both parties to provide financial statements at the outset is
    closely related to the importance of disclosure in family law proceedings, a
    particularly salient principle in the present case. This court has repeatedly
    emphasized this point in recent years, and it has been recently emphasized in
    the Supreme Court of Canada decision in
Colucci v. Colucci
, 2021 SCC
    24, 458 D.L.R. (4th) 183
.

[31]

While
    the respondent argues that the appellant waived equalization, the record
    suggests that she merely did not pursue it at that time. There was no written
    waiver or domestic contract. In support of his argument that the appellant was
    sophisticated, knew all the arrangements, and had access to all the financial
    information, the respondent provided a letter. This letter dated December 17,
    2008, from his lawyer Donald Kilpatrick to Ms. Heveys lawyer, sets out the
    general structure of the family assets and the roll-over of the trust assets to
    the three numbered companies. It also mentions that Mr. Hevey was not a
    shareholder of any of the companies, going on to state that PNP trust did own a
    common share in each one and that Mr. Hevey is the beneficiary of the PNP
    trust.

[32]

The
    evidence about what Ms. Hevey understood about the new corporate structure into
    which the trust assets were moved is very conflicting. Mr. Hevey states that
    she had open access to Brian Chapman, the commercial lawyer who made the
    arrangements. Ms. Hevey states that at one point Mr. Hevey called her and said,
    I dont have anything but if you dont believe me then talk to Brian Chapman.
    She also states that she never had independent legal advice on these issues and
    that Mr. Chapman was effectively Mr. Heveys own commercial lawyer. She also
    points to other contemporary correspondence she learned about later suggesting
    that while Mr. Hevey was being kept out of the limelight, he was retaining
    the control of the companies.

[33]

Against
    this backdrop is the May 2008 statement to a bank in which Mr. Hevey disclosed
    assets of approximately $21 million. There may well be good explanations for
    the disparity between this amount, the $0 amount on his December 2008 financial
    statement, and the fact that he did not disclose any beneficial interest in PNP
    or any other corporate interests. In the absence of an answer and sworn
    financial statement, Ms. Hevey was at a significant disadvantage in the course
    of this summary judgment motion where she was required to put her best foot
    forward.

[34]

Suggesting
    that she could have cross-examined Mr. Hevey misses the mark. It is up to the
    party with the assets to make the disclosure and the valuation of assets.
    According to the Ontario family law regime, and as already stated, financial
    disclosure is a paramount consideration. That also applies to a summary
    judgment motion such as this one. Moreover, it is not up to the claimant to
    ferret out information, as the appellant put it, about income and assets from
    the other party
.
Although, in
Colucci
, the Supreme Court was
    dealing with retroactive child support, the same imperatives apply when dealing
    with issues of retroactive spousal support, namely that courts must encourage
    proactive financial disclosure and in no way reward those who improperly
    withhold, hide or misrepresent information they ought to have shared: at para.
    54.

[35]

There
    is nothing in the record that presents any valuation of the common shares of
    any of the companies at the time of Mr. Heveys December 2008 financial
    statement. Nor is there anything in his financial statement that disclosed his
    beneficial interest in the three companies.

[36]

A
    continuing theme in Mr. Kilpatricks letter was that the respondent was
    considering claiming equalization and spousal support from the appellant. This
    suggests that her understanding at the time was that Mr. Hevey had little or
    nothing in the way of assets and that she decided to not pursue any claims to
    pre-empt him from claiming anything from her. There is nothing in the record to
    indicate that Mr. Hevey had produced any valuation of his beneficial interest
    in the PNP trust at the time. Ms. Heveys evidence is that he had not, and that
    she did not understand the nature of his interests in the companies.

[37]

In
    short, in my view, the motion judge fell into palpable and overriding error in
    dispensing with the requirement that the respondent file an answer and
    financial statement, as required by r. 16 of the
FLR
, before
    proceeding with a summary judgment motion in these circumstances.

(2)

Did the motion judge err in interpreting and applying s. 2(8) of the
FLA
?

[38]

The
    motion judge reasoned that summary judgment was available to dismiss the
    appellants claims largely because the limitation period for equalization
    claims set in the
FLA
had long expired.

[39]

Section
    2(8) of the
FLA
provides:

The court may, on motion, extend a time prescribed by
    this Act if it is satisfied that,

(a) there are apparent grounds for relief;

(b) relief is unavailable because of delay that has
    been incurred in good faith; and

(c) no person will
    suffer substantial prejudice by reason of the delay.

[40]

Each
    of the requirements must be met as a pre-condition to granting the relief:
Vivier
    v. Vivier
, 5 R.F.L. (3d) 450 (Ont. Dist. Ct.). The relief is not the
    extension of time but the relief claimed under the
FLA
such as
    equalization:
Scherer v. Scherer
(2002), 59 O.R. (3d) 393 (Ont. C.A.),
    at para. 16. In determining whether apparent grounds for relief exist, the
    court may make a limited inquiry into the merits of the proposed claim. The
    question to be answered is [b]ut for the limitation period that acts as a bar,
    are there apparent grounds to support the claim?: see
Werth v. Werth
,
    2004 ONCJ 43, at para. 14. The relief must be unavailable because of a delay
    that has been incurred in good faith. The good faith requirement requires the
    applicant for an extension to show that they acted honestly and with no
    ulterior motive:
Hart v. Hart
(1990), 27 R.F.L. (3d) 419 (Ont.
    U.F.C.), at p. 432. Lastly, it must be demonstrated that no person will suffer
    substantial prejudice by reason of the delay. The mere showing of prejudice is
    not sufficient; rather, it must be demonstrated that the prejudice will be
    substantial. Generally, the length of time occasioned by the delay is a factor,
    along with the extent to which the responding party has rearranged their
    financial affairs: see e.g.,
Douthwaite v. Douthwaite
(1997), 32
    R.F.L. (4th) 90 (Ont. Gen. Div.).

[41]

With
    respect, the motion judges reasons do not interpret and apply s. 2(8) of the
FLA
correctly.

[42]

First,
    the motion judge erred in his interpretation of s. 2(8)(b), which refers to the
    delay incurred in good faith. This clearly refers to the delay occasioned by
    the party claiming the extension:
Hart
, at p. 432. However, the motion
    judge appears to have focussed on whether the appellant had established fraud
    on the part of the respondent. At para. 10, he notes:

More than that, however, [namely,
    the fact that she was at the relevant time, in the loop so to speak and kept
    up to speed on all issues relating to the trusts] while recognizing that
    limitation periods can be extended and that
an established fraud would
    indeed allow one to revisit these issues
.[Emphasis added].

[43]

This
    articulation holds the appellant up to a higher standard for revisiting the
    limitation period than s. 2(8) sets out. Specifically, while s. 2(8) only
    requires apparent grounds for relief, unavailability of relief because of delay
    that has been incurred in good faith, and no substantial prejudice, the motion
    judges statement at para. 10 suggests that he was holding the appellant to a
    standard of established fraud before revisiting the limitation period
    question. There is no authority to support that interpretation, and it is not
    consistent with the clear wording of the provision.

[44]

Second,
    the motion judge fell into palpable and overriding error in inferring that Ms.
    Hevey knew or ought to have known all information about the trusts and the
    corporations.

[45]

The
    appellants evidence explaining the delay is that she began her claim after
    receiving information in 2019 indicating that the respondent had been in a much
    stronger financial position in the period leading up to the application for
    divorce than he had led her to believe. If true, this explains her delay. As I
    have indicated earlier in these reasons, the appellant was not in a position to
    put her best foot forward in the summary judgment motion because Mr. Hevey
    had not filed an answer and financial statement.

[46]

A
    related concern is the motion judges inference, as argued by the respondent
    both below and in this court, that because the appellant had book-keeping
    experience and access to some (though not all) of the trust information, she
    understood the complexity and consequences of the corporate and trust
    arrangements. In my view, it was unfair to infer that the appellant did
    understand all this at the time. She does not appear to have received
    independent legal advice concerning the structure of the new corporations and
    the PNP trust, although she was represented by an experienced family lawyer.
    Again, given the absence of a clear written agreement between the parties, the
    record before this court might have supported the inference that she did not
    understand the arrangements, whether as a result of a lack of disclosure,
    misrepresentation, or other factors. As already mentioned, the record includes
    the letter from Mr. Kilpatrick referred to above clearly indicating that Mr.
    Hevey was considering claiming spousal support and equalization from Ms. Hevey
    as well as the evidence of the discrepancy between the $0 on the respondents net
    family property statement and the bank statement earlier in 2008 that his net
    worth was $21 million.

[47]

These
    determinations relate both to the explanation for Mr. Heveys delay and to her
    good faith and could not be made on a summary judgment motion, at least in the
    absence of an answer by the respondent, which undermined her ability to put her
    best foot forward.

[48]

Finally,
    this was not simply a claim for equalization but also a claim for spousal
    support which is not subject to the same limitation period. There is no
    discussion of this point. It may well be that Ms. Heveys claim for spousal
    support would not be strong. That said, the circumstances of disclosure in
    December 2008 and the question as to whether the respondent did mislead the
    appellant are material issues that would be very relevant to whether Ms. Hevey
    could have been entitled to spousal support. That could not be determined in
    this summary judgment motion.

E.

Disposition

[49]

For
    the foregoing reasons, I would allow the appeal and remit the matter to trial,
    without prejudice to the right of the parties to bring a fresh motion for
    summary judgment in accordance with these reasons. Costs are payable by the
    respondent to the appellant for this appeal in the amount of $15,000.

Released: October 21, 2021 K.F.

Harvison Young J.A.

I agree. K. Feldman
    J.A.

I agree. Thorburn
    J.A.


