Court File and Parties
Court File No.: Toronto D47289/09
Date: 2019-01-03
Ontario Court of Justice
Between:
Lalaine Tanhehco Applicant (Responding Party)
ā And ā
Jin Cao Respondent (Moving Party)
Before: Justice Curtis
Written submissions regarding Costs
Reasons for Decision released on: 3 January 2019
Counsel:
- Patricia Smyth, counsel for the Applicant
- Randall Montgomery, counsel for the Respondent
Index
- Over-view
- The Parties' Positions re Costs
- Background
- Litigation History
- The Motion to Change
- The Costs Analysis
- a. The Law of Costs
- i. Entitlement
- ii. The Evolution of Costs as an Instrument of Social Policy
- b. Success
- c. Behaviour of the Parties
- d. Costs and Ability to Pay
- e. Offers to Settle
- f. Quantum of Costs
- a. The Law of Costs
- Order
Over-view
- This is the decision about costs of the father's motion to change the support provisions of two child support orders made 1 November 2011 and 1 June 2012. These orders provided (among other things) for on-going support of $441 per month from 1 January 2010 on annual income of $47,727 (for 2010), special and extra-ordinary expenses (section 7 expenses) of $490 per month from 1 December 2011, and retroactive s. 7 expenses up to 1 November 2011 in the total amount of $18,522.
The Parties' Positions re Costs
The mother claimed costs as the successful party on the motion and asked for full recovery costs of $12,161.96
The father conceded the mother's entitlement to costs. He claimed that the amount sought by the mother was excessive and that he had no ability to pay such an amount. He did not, however, suggest an amount of costs that might be appropriate.
Background
- The Respondent (the moving party) is the father, Jin Cai Cao, 35 years old (born 1983). The Applicant (the responding party to the motion) is the mother, Lalaine Tanhehco, 39 years old (born 1979). The parents were not married to each other, and never lived together. There is one child of their relationship, Summer, who is 13 years old (born 2005).
Litigation History
There was a lengthy and extensive litigation history, starting in 2009. The original application resulted in the two final orders (1 November 2011 and 1 June 2012) that were the subject of the father's motion to change.
The father was unsuccessful on the motion to change. The court made these orders (among other things):
a) support is changed from 1 January 2011, and is to be based on imputed income of $60,000;
b) additional lump sum s. 7 expenses (total $5,106.12);
c) the on-going s. 7 expense $490 per month in the order of 1 June 2012 is to terminate on 1 November 2018;
d) the on-going s. 7 expenses from 1 November 2018 at 68% of the s. 7 expenses; and,
e) the father shall not bring a motion to change without permission obtained in advance.
There was a support enforcement case in Newmarket Superior Court (Family Court) and at this courthouse regarding the support order. The default proceeding concluded on 22 June 2018 with a consent order for payment of $556 per month for the on-going support (from 1 July 2018) and $400 per month towards arrears, from 1 November 2018 (similar terms to those in the final order from the motion to change made on 31 May 2018), with a three day jail term attached for each default in payment.
The Motion to Change
On the motion to change, the court made these findings about the father:
a) the father has failed to provide full and complete income information when under a legal obligation to do so;
b) he has not proven that he is earning less money than he did when the original orders were made;
c) the onus is on the party asking to change the court order to provide a complete financial picture, which he has not. An adverse inference was drawn against him;
d) his non-compliance with the disclosure order in the motion to change is fundamental and significant. He continued to provide some but not all disclosure needed in the motion to change that he started, as he has in the past, in the original application, and in the default case;
e) he has repeatedly and intentionally avoided his responsibility towards his child over a great many years. He has demonstrated a long-term, wilful and deliberate disregard for his obligation to comply with court orders;
f) he has undisclosed sources of income;
g) the court drew adverse inferences regarding his income and his assets, based on his lack of disclosure, and his long-standing pattern of failing to disclose and misleading the court;
h) he provided no justifiable reason for his inadequate payment history;
i) he has not shown reasonable, diligent or legitimate efforts to comply with the court order;
j) he has not acted in good faith, and has a long history of not complying with court orders for disclosure;
k) he has misled the court and the mother about his financial affairs;
l) he openly and intentionally lied to the court and to the mother about his assets, and his income, and without apology or explanation;
m) he has no plan on how to meet his ongoing support obligation in the future nor to retire the existing arrears;
n) he is not an inexperienced litigant, nor is he lacking in understanding of the court process or of the possible consequences of not paying support orders. He has been involved in litigation with the mother since 2009;
o) he says that he earns nominal income, but still appears to have his needs met; and,
p) he has no credibility and the court cannot rely on any aspect of his evidence.
The father had at least three legal obligations to make full and frank disclosure, as follows, and did not do so:
a) the final order on 1 November 2011 contained a clause requiring annual financial disclosure;
b) as the moving party in the motion to change, the father had disclosure obligations under the Family Law Act, the Family Law Rules and the Child Support Guidelines; and,
c) there was an order for disclosure in the motion to change made 18 July 2017.
The father has hidden his income and has misled the mother and the court about his income over the years. It was difficult to determine an appropriate amount of income to impute to him. Part of the reason for this is his lack of disclosure. Another reason for this is his complete lack of credibility. But a payor cannot fail to comply with the rules about disclosure and then benefit from his behaviour. The onus was on him to produce adequate disclosure about his income. He failed to do so.
The father engaged in blameworthy conduct in the original ligation, from the time that the orders were made in 2011 and 2012, and he continued to engage in blameworthy conduct throughout the period of the motion to change. The lack of disclosure, the level of the father's non-disclosure, and his conduct regarding his support obligation to his child, over a long period of time, is egregious. Following are examples of his blameworthy conduct:
a) he did not disclose that he owned a house in the original application;
b) he did not make regular support payments under the orders of 2011 and 2012;
c) he did not provide annual financial disclosure as ordered on 1 November 2011;
d) he did not disclose any increases in his income;
e) he did not make regular support payments under the orders made in the default case in 2015 and 2016;
f) he did not comply with the financial disclosure order made in the motion to change;
g) he had the means to pay an increased amount of support and to contribute to the s. 7 expenses and he refused to do so; and,
h) he has repeatedly been openly dishonest with the court, he has intentionally misled the court, has lied in sworn documents, and has failed to disclose income and assets, as required and as ordered.
The Costs Analysis
The Law of Costs
Entitlement
- The courts have a broad discretion to award costs. The general discretion of the courts regarding costs is contained in the Courts of Justice Act, s. 131(1), which sets out three specific principles:
a) the costs of a case are in the discretion of the court;
b) the court may determine by whom costs shall be paid; and,
c) the court may determine to what extent the costs shall be paid.
- Modern costs rules are designed to foster three fundamental purposes:
(a) to indemnify successful litigants for the cost of litigation;
(b) to encourage settlement; and
(c) to discourage and sanction inappropriate behaviour by litigants.
Rule 2(2) of the Family Law Rules adds a fourth fundamental purpose for costs: to ensure that the primary objective of the rules is met ā that cases are dealt with justly. This provision needs to be read in conjunction with Rule 24 of the rules.
In addressing the issue of costs, the court must ultimately be guided by the primary objective of the Family Law Rules as set out in Rule 2(2), which is to enable to the court to deal with cases justly.
The exercise of discretion in a costs issue is subject to the overriding principles of fairness and "reasonableness." The important inquiry is to ascertain the reasonable expectations of the parties as to costs.
The Evolution of Costs as an Instrument of Social Policy
The traditional purpose of an award of costs was to indemnify the successful party in respect of the expenses sustained. For some time, however, courts have recognized that indemnity to the successful party is not the sole purpose, and in some cases not even the primary purpose, of a costs award. The principle of indemnification, while paramount, is not the only consideration when the court is called on to make an order of costs; indeed, the principle has been called "outdated" since other functions may be served by a costs order, for example to encourage settlement, to prevent frivolous or vexatious litigation, and to discourage unnecessary steps. This change in the common law was an incremental one when viewed in the larger context of the trend towards awarding costs to encourage or deter certain types of conduct, and not merely to indemnify the successful litigant.
The traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner's litigation expenses to the loser, rather than leaving each party's expenses where they fall, they act as a disincentive to those who might be tempted to harass others with meritless claims. In addition, because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court's concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. In this sense it is a natural evolution in the law to recognize the related policy objectives that are served by the modern approach to costs.
Modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer. Costs can also be used to sanction behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.
Success
The starting point in any costs analysis is the presumption that a successful party is entitled to costs. Rule 24(1).
Success must be measured not only against the parties' offers to settle, but also against the claims made by each.
An award of costs, however, is subject to the factors listed in rule 24(11), the directions set out under rule 24(4) (unreasonable conduct), rule 24(8) (bad faith) and rule 18(14) (offers to settle), and the reasonableness of the costs sought by the successful party.
The mother was the successful party on the motion, and she is entitled to costs. The father conceded that the mother is entitled to her costs as the successful party.
Behaviour of the Parties
One of the purposes of costs is to change behaviour.
The justice system is a precious public resource. Access to the justice system by individuals must be balanced with the need to ensure that the resource is available for all those who need it. This is one of the purposes of Rule 2.
Family law litigants are responsible for and accountable for the positions they take in the litigation.
The decision respecting liability is ultimately a discretionary one that must be informed by the overall conduct of the parties and all of the circumstances and dynamics of the case. One of the most important functions of costs is to ensure that litigants conduct themselves in a manner that upholds the integrity of our justice system as a whole. A careful consideration of the conduct of the parties is therefore a key component to the costs analysis. The court has an obligation to ensure that litigation is not utilized as a tool to harass parties, and that the resources of the justice system are not unduly drained by unmeritorious claims.
Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly, for the purposes of this case, oblivious to the mounting costs of the litigation.
Matrimonial litigation is an occasion for sober consideration and thoughtfulness rather than intemperate behaviour.
Rule 24(5) provides criteria for determining the reasonableness of a party's behaviour in a case (a factor in Rule 24(12)(a)(i)). It reads as follows:
DECISION ON REASONABLENESS
(5) In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,
(a) the party's behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle;
(b) the reasonableness of any offer the party made; and
(c) any offer the party withdrew or failed to accept.
A finding of bad faith is not a condition precedent to full recovery of costs by the other side under the Family Law Rules. The court need not find that bad faith or other special circumstances exist to make a costs award approaching substantial or full recovery.
When awarded on a full recovery scale, costs can serve to express the court's disapproval of unreasonable conduct during the litigation.
The unreasonable conduct of a litigant is a factor in both the awarding of costs and in fixing the amount of costs.
The dynamics on this case are all too common, and cry out for judicial response. In a troubled economy there are more unrepresented parties in family court, and certainly more people with limited finances. Inevitably, these ingredients create greater strains on the administration of justice. Combined with limited judicial resources, the need to encourage settlement and discourage inappropriate behaviour by litigants has never been more pressing.
It must be made clear to family law litigants that there is no right to a day in court, or at least, that the right to a day in court is tempered with the requirement that the parties take a clear-headed look at their case before insisting on their day in court. The court must sanction this behaviour clearly, or it will invite more of this behaviour.
The father's "behaviour in relation to the issues from the time they arose" was unreasonable. Here are some examples:
a) the father repeatedly failed to comply with disclosure orders and the disclosure requirements under the Family Law Rules, the Child Support Guidelines, and the Family Law Act;
b) the disclosure provided by him was incomplete, disorganized, misleading, and, in part, openly false. This required additional work by the mother to understand and digest the disclosure. He needlessly amplified the complexity and difficulty of the issues in the motion to change;
c) he acted in a deliberate manner to mislead the court and the mother as to his financial circumstances, resulting in unnecessary and protracted litigation;
d) he has not acted in good faith, and has a long history of not complying with court orders, for child support and for disclosure. He has demonstrated a long-term, wilful and deliberate disregard for his obligation to comply with court orders; and,
e) he has no credibility and the court found that it could not rely on any aspect of his evidence.
- The conduct of the father directly contributed to the time, effort required and the length of the case. The father's behaviour was unreasonable. The mother is entitled to costs.
Costs and Ability to Pay
A party's ability to pay costs is not listed as a factor regarding either the award of costs or the fixing of an amount of costs under rule 24.
Success is given presumptive pre-eminence in Rule 24. While Rule 24(11)(f) does permit the consideration of ability to pay (under the umbrella of "any other relevant matter"), it is given significantly less prominence than the presumption that costs will follow success.
Ability to pay may be relevant to the issue of the quantum or scale of costs, but not to another party's entitlement to costs.
Ability to pay alone cannot, nor should it, over-ride the other factors in Rule 24(11).
The (financial) means of the unsuccessful party may not be used to shield him from liability for costs, particularly when he has acted unreasonably.
A party's limited financial means will also be accorded less weight in quantifying costs if the court finds that the party acted unreasonably.
The father argued that he had no ability to pay costs. That issue may be relevant to quantum, but is not relevant to determining entitlement to costs.
Offers to Settle
Offers to settle are a significant part of the landscape in family law in Ontario. They are important to the possible resolution of cases. In addition, they are important to determining costs.
Parties and their lawyers have a positive obligation to behave in ways which enable the court to move cases forward to resolution (Rule 2). Rule 2(4) imposes a duty on parties and their lawyers to promote the primary objective of the rules to deal with cases justly (Rule 2(2)). This includes taking appropriate steps to save time and expense (Rule 2(3)). Offers to settle play an important role in saving time and expense by promoting settlements, focusing parties and often narrowing issues in dispute.
Neither party made an offer to settle this motion. The father's lack of disclosure and incorrect and misleading disclosure made an offer to settle by the mother a difficult proposition. The mother should not be deprived of her costs, as her position on the motion was clear, and she qualifies for costs as the successful party and the party who was reasonable.
Quantum of Costs
- Once liability for costs has been established, the court must determine the appropriate quantum of costs. These are general principles relating to the quantum issue:
a) ultimately, costs decisions should reflect what the court considers to be a fair and reasonable amount that the unsuccessful party should pay;
b) costs need to be proportional to the issues and amounts in question and the outcome of the case;
c) amounts actually incurred by the successful litigant are not determinative; and,
d) in assessing what is fair and reasonable, the expectation of the parties concerning the amount of a costs award is a relevant consideration.
The court's decision on the appropriate quantum of costs must also be informed by the principle of proportionality. Timeliness, affordability and proportionality are essential components of a legal system that ensures true access to justice. In the context of the costs analysis, these factors require the court to ensure that expenses claimed make sense having regard for the importance and complexity of the issues that were litigated.
The preferable approach in family law cases is to have costs recovery generally approach full recovery, so long as the successful party has behaved reasonably and the costs claimed are proportional to the issues and the result. This approach to the determination of costs has been repeatedly endorsed by the Ontario Court of Appeal in family law cases.
The over-riding principle is reasonableness. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case.
In the context of family law disputes, a court need not find special circumstances to make a costs award approaching substantial recovery.
In considering the quantum of costs, the court should also consider Rule 1(8), which provides that the court may respond to a failure to follow the Rules or abide by an order by making an order for costs, and Rule 2(2), which provides that one of the primary objectives of the Rules is to ensure that cases are dealt with justly.
Determining the amount of costs is not simply a mechanical exercise. Costs must be proportional to the amount in issue and the outcome.
Costs awards should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties, rather than any exact measure of the actual costs to the successful litigant. It is not appropriate to simply take the number of hours spent by counsel on a particular matter and multiply those hours by a determined hourly or per diem rate.
The factors to consider in determining the amount of costs in family law matters are the following (Rule 24(12)):
SETTING COSTS AMOUNTS
(12) In setting the amount of costs, the court shall consider,
(a) the reasonableness and proportionality of each of the following factors as it relates to the importance and complexity of the issues:
(i) each party's behaviour,
(ii) the time spent by each party,
(iii) any written offers to settle, including offers that do not meet the requirements of rule 18,
(iv) any legal fees, including the number of lawyers and their rates,
(v) any expert witness fees, including the number of experts and their rates,
(vi) any other expenses properly paid or payable; and
(b) any other relevant matter. O. Reg. 298/18, s. 14.
- In determining the amount of costs in this matter, the court took into account these factors set out in R. 24(12):
(a) The importance and complexity of the issues: The case was important to the mother and the father. However, it was neither legally complex nor difficult. The case was high conflict. The father admits that the case was financially complex, involved a years-long history of litigation, and many bankers' boxes full of documents. The father also admits that a very long amount of time and effort went into trying to get the father to disclose his full income, which, the father says, is probably not known to anyone, including not even the father;
(b) Each party's behaviour: A finding of unreasonableness is not necessary to the making of a costs order. The mother's behaviour on the motion was reasonable. The father's behaviour was not reasonable (details are provided above);
(c) The time spent by each party: The time spent by the mother's lawyer was reasonable, under these circumstances, given the issues at stake, the claims made by the father, the inadequacy of his disclosure, and the material filed. The father took no objection to the time spent on this "financially complex" case;
(d) Any legal fees, including the number of lawyers and their rates: The rates claimed by the mother's lawyer (for her work, and for the work of a junior lawyer) were reasonable, and the involvement of a junior lawyer was reasonable, under these circumstances. The mother's lawyer has 30 years' experience in family law. Given her seniority and experience, the hourly rate claimed for her work ($200) was extremely modest. The father took no objection to the hourly rate of the mother's lawyer; and,
(e) Any other expenses properly paid or payable: The disbursements claimed by the mother (total $497.96) were reasonable. The father took no objection to the disbursements claimed.
- The court must determine an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of this case. This determination is not merely an arithmetical exercise of calculating time spent by a suitable hourly rate.
Order
- The court made the following findings regarding the motion:
a) the conduct of the father was unreasonable;
b) the mother was successful on the motion; and,
c) the father shall pay the mother's costs of the motion.
A fair and reasonable costs order, and one that is proportionate to the issues involved, in all of these circumstances, is an order for costs based on full recovery. The father shall pay the mother her costs of $12,161.96 all included (fees + HST, disbursements + HST). In all of the circumstances of this case, this is a modest amount.
The payment of costs shall be taken into account by the court in determining a request by the father for permission to bring a motion to change.
Released: 03 January 2019
Justice Carole Curtis