Issue of interim costs important

An interesting case has emerged dealing with the issue of interim costs and disbursements. This seems to me to be one of those issues that is rarely considered by family lawyers. However, having your client’s interim costs funded by the opposing party is something that we should all keep in the backs of our minds. In Peerenboom v. Peerenboom, 2018 ONSC 5118, the Divisional Court considered just this issue and I am writing about it this month as a reminder to us all that this relief is out there and should be utilized more often than it is.

How often is it that one of the parties to a piece of matrimonial litigation has very little ability to fund any legal fees? In my practice, it happens quite often. That’s why rule 24(12) of the Family Law Rules is there — to assist the spouse who, as a result of the breakdown of the relationship, is left in an untenable financial situation, lacking the ability to retain counsel to help them through one of the most trying events in their life.

In Peerenboom, Nicole Peerenboom brought a motion against her former husband Robert Peerenboom for an order requiring him to advance to her the sum of $150,000 to allow her to fund her legal fees and disbursements through to trial. He contested the motion, arguing that he did not have the ability to fund her fees, that she had not proved that she would be left without an ability to pay her lawyers and, therefore, they would refuse to act for her, and that her claims lacked merit. The motions judge granted her the requested relief and he appealed the order to the Divisional Court. The Divisional Court deferred to the motion judge’s decision and dismissed his appeal.

In the court’s reasons for decision, Justice Wallan Low discussed and affirmed the test to be met by a party seeking an order for interim costs and disbursements. That four-part test requires the moving party to:

A. prove their anticipated fees and disbursements;

B. show that they are unable to fund the litigation without such an order;

C. show that the other party has the means to fund the interim costs and disbursements; and

D. show that their claim is meritorious.

In this case, the parties had entered into a marriage contract excluding certain property from the calculation of the spouses’ respective net family property upon marriage breakdown. One of the seemingly primary issues was treatment of the matrimonial home.

In my reading of the case, the primary issue on the motion was whether Robert Peerenboom had the resources to fund Nicole Peerenboom’s interim costs and disbursements, making his financial situation a crucial element for this motion and appeal. 

As is common in cases where there is a pre-existing cohabitation agreement or marriage contract, disclosure is often hotly contested on the basis of relevance: Why do you need disclosure of values if the asset is excluded? This is debatable. In some cases, it is clear that the asset is not included and, therefore, its value is completely irrelevant. But in other cases, including cases where support is an issue, even if not relevant for property division, it could still be relevant for a support analysis as a source of income. The Divisional Court highlighted a number of financial statements sworn by Robert, all of which had very divergent information, so clearly, disclosure (or lack thereof) was an issue for the Divisional Court. I point out (as did the motions’ judge) that, in Family Court, a sworn financial statement is required. Part of the sworn financial statement includes disclosure of values of excluded assets — it is simply required.

Ultimately, the motions judge ordered Robert to pay to Nicole her anticipated interim costs and disbursements, based on a finding that he had sufficient assets within his corporation — which had more than $500,000 in retained earnings on its most recent financial statement — to pay for her interim costs and disbursements. The Divisional Court affirmed this finding.

My reading of the decision suggests that there may have been some issues with this finding and conclusion both on the part of the motions’ judge and the Divisional Court, but the evidentiary record was spotty. What I think tipped the balance in her favour was the historical failure on his part to make full and frank financial disclosure, which in turn can increase the costs of litigation and/or prevent one party to meaningfully move forward with their case.

I highlight this case to bring to mind that this relief is out there. The test to meet to get it is not very difficult if you are struggling financially. And, as the Divisional Court affirmed, this relief is meant to level the playing field in family law litigation.

Marta Siemiarczuk is a lawyer practising family law litigation and collaborative family law at Nelligan O’Brien Payne LLP in Ottawa. She can be reached at [email protected].