Court File and Parties

Court File No.: D81701/15 Date: 2016-09-08

Ontario Court of Justice

Between:

J.C.M. APPLICANT

- and -

K.C.M. RESPONDENT

Heard: In Chambers

Justice: S.B. Sherr

Costs Endorsement

Part One - Introduction

[1] On August 2, 2016, the court released its reasons for decision related to a trial about the parties' respective child support obligations.

[2] The court ordered the applicant (the father) to pay the respondent (the mother) $34,752 for retroactive child support. This took into consideration support credits for the father. The court also ordered that child support for the parties' daughter (the daughter) terminated as of January 31, 2016 and the father's child support obligation for the parties' son (the son) terminated as of August 31, 2014. The mother was ordered to pay the father ongoing child support of $724 per month for the son.

[3] The parties were given until August 26, 2016 to make written costs submissions and until September 7, 2016 to respond to the submissions of the other party.

[4] The father filed his costs submissions first. He claimed to be the successful party and sought costs of just under $67,000.

[5] The mother then responded to the father's costs submissions and made her own costs claim. She too, claimed to be the successful party and sought costs of $97,000.

[6] The father filed a response to the mother's costs submissions.

[7] The mother then filed a response to the father's responding costs submissions without seeking prior authorization from the court. The court reviewed her submissions. For the most part, these submissions echoed her prior submissions. They had no impact on this costs order.

Part Two – Legal Considerations

[8] The Ontario Court of Appeal in Serra v. Serra, 2009 ONCA 395 stated that modern costs rules are designed to foster three fundamental purposes, namely: to partially indemnify successful litigants for the cost of litigation, to encourage settlement and to discourage and sanction inappropriate behaviour by litigants bearing in mind that the awards should reflect what the court views is a fair and reasonable amount that should be paid by the unsuccessful party.

[9] Subrule 24(1) of the Family Law Rules (all references to rules in this endorsement are to the Family Law Rules) creates a presumption of costs in favour of the successful party. Consideration of success is the starting point in determining costs. See: Sims-Howarth v. Bilcliffe. To determine whether a party has been successful, the court should take into account how the order compares to any settlement offers that were made. See: Lawson v. Lawson.

[10] Subrule 2(2) adds a fourth fundamental purpose for costs: to ensure that the primary objective of the rules is met – that cases are dealt with justly. This provision needs to be read in conjunction with rule 24. Subrule 2(4) states that counsel have a positive obligation to help the court to promote the primary objective under the family law rules. Clauses 2(3)(a) and (b) of the rules set out that dealing with a case justly includes ensuring that the procedure is fair to all parties and saving time and expense. See: Sambasivam v. Pulendrarajah, 2012 ONCJ 711.

[11] Subrule 18(14) reads as follows:

Costs Consequences of Failure to Accept Offer

18(14) A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:

1. If the offer relates to a motion, it is made at least one day before the motion date.
2. If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.
3. The offer does not expire and is not withdrawn before the hearing starts.
4. The offer is not accepted.
5. The party who made the offer obtains an order that is as favourable as or more favourable than the offer.

[12] Even if subrule 18(14) does not apply, the court has a discretion to take into account any written offer to settle, the date it was made and its terms when exercising its discretion over costs (subrule 18(16)).

[13] Subrule 24(6) states that if success in a step in a case is divided, the court may apportion costs as appropriate.

Part Three – Analysis of Success

3.1 The Originating Claims

[14] The father issued his motion to change because both children were living with him at the time and the mother would not agree to terminate his support obligations. He sought a refund of child support he had paid to the mother while the children were not in her care. He also sought an order for custody of the children.

[15] The mother responded by seeking retroactive child support. She opposed the father's motion to change, including his request for custody of the children.

[16] The daughter ceased living with either parent as of January 31, 2016, so the issue of her custody became moot.

[17] The father confirmed that he was no longer seeking a sole custody order of the son on both May 4, 2016 and July 25, 2016. It was a reasonable action by the father to take as the child was over 16 years old. The court made it clear to the parties on May 4, 2016 that no custody order would be made regarding the son and it was not going to be an issue at the next trial date.

[18] There was divided success based on the original claims of the parties. Ultimately, the court found that the father owed the mother money, but nowhere near the amount sought by her. No custody order was made. The court terminated the father's child support obligation and ordered the mother to pay ongoing child support for the son.

[19] If the court was assessing costs only on the basis of the original claims, the mother was somewhat more successful than the father. She wasn't the person who started this case, but she was the party who was awarded compensation. The court found that the father had engaged in blameworthy conduct by not disclosing his increases in income to the mother. This success was significantly mitigated by the mother's refusal to terminate the father's support obligation or to pay the father child support, despite the fact that the children were no longer living with her. It was reasonable in these circumstances for the father to start the case.

[20] On March 28, 2016, the father made an offer to settle. This offer shifted the analysis of success.

3.2 The Father's Offer to Settle

[21] The father's offer to settle dated March 28, 2016 included the following terms:

a) The father would pay the mother $78,961 for retroactive child support and out of pocket expenses for the daughter.

b) The mother's income would be imputed at $75,000 per annum.

c) The mother would pay child support to the father of $1,105 for January of 2016 and $682 per month, for the son, starting on February 1, 2016.[1]

d) The father would pay all section 7 expenses for the son.

e) The father would be entitled to claim the son as an eligible dependant for tax purposes for the tax years 2015 and beyond.

f) The son would continue to reside with the father and the father would have sole custody of him.

[22] The mother did not make an offer to settle pursuant to the rules.

[23] The father submits that the final order was more favourable to him than his offer and the costs consequences of subrule 18(14) apply.

[24] If one only looked at the financial terms of the offer made by the father the court would agree with him.

[25] However, the father included a term in the offer that he be granted sole custody of the son.

[26] The father's offer was not severable.

[27] The parties had executed a separation agreement dated October 30, 2007. They had agreed to joint custody of their children. The parties shared parenting time with the children at that time.

[28] On May 4, 2016, after a judicial interview of the children, the court found that as of September 1, 2014 the son had been primarily living with the father because the father's home was closer to his school.

[29] The mother clearly opposed relinquishing any custody rights for the son. This was an important issue for her.

[30] The inclusion of the custody term in the father's offer amounted to a "poison pill" clause. It made the balance of the offer unpalatable to the mother and unlikely to be accepted.

[31] The father submits that since he had advised the court and the mother that he was no longer seeking sole custody of the son the court should disregard the custody term in evaluating his offer.

[32] The court can't do that. If the mother had accepted the father's offer, she would have been agreeing to the father having custody of the son.

[33] The father's written opening statement (served in advance of the July 25, 2016 trial date) must have been confusing to the mother. It reiterated his request for sole custody of the son and the reasons why he felt that such an order should be made.[2] It is not surprising that the mother responded with her own custody claims in her opening statement.

[34] No custody order was made.

[35] It was surprising that the father did not serve a fresh offer to settle excluding the custody term once he advised the court that this issue wouldn't be pursued, or at the very least, serve a severable offer.

[36] Several courts have discussed the value of severable offers.

[37] In Lawson v. Lawson, Quinn J., wrote at paragraphs 25 and 26:

25 The wife's offer to settle of 28 April 2004 was a non-severable, all-or-nothing offer. This is apparent from the manner in which it was to be accepted. As such, I do not think much is to be gained by examining its provisions paragraph by paragraph except, perhaps, to gauge its general, overall reasonableness. It is difficult to prove that an order made is more favourable to a party than, or equal to, a non-severable offer.

26 I would discourage the making of all-or-nothing offers. The severable variety allows for the prospect that some of the outstanding issues might be settled, thereby reducing the length and expense of the motion or trial, as the case may be. All-or-nothing offers sometimes have a heavy-handed air about them and certainly they possess a much lower chance of being accepted than severable offers.

[38] In Paranavitana v. Nanayakkara, 2010 ONSC 2257, Wildman J. writes at paragraphs 13 and 14 as follows:

13 Unfortunately, this offer was not severable. There would have been no disadvantage to the wife in making the custody offer, in particular, severable from the financial and property terms. Severable offers are an underused tool that can confer considerable settlement and cost advantages. Because of the full recovery provisions of Rule 18(14), they can provide much more flexibility to the court to award full recovery for at least a portion of the overall costs, if the party is successful on only some of the issues. Had the custody terms of the wife's offer been severable from the other terms, I would have been prepared to consider ordering full recovery costs on the custody issue from the date of the offer forward. As this was the majority of the trial time, that would have been a significant cost advantage to the wife.

14 However, as the offer was not severable, the wife would have to do as well or better than all the terms of the offer, in order to take advantage of the full recovery cost provisions of Rule 18(14). Since the husband got an additional week of access, as well as an order that spousal support would reduce from $1000 in three years, Ms. Nanayakkara did not do as well as or better than her offer in its totality. Rule 18(14) does not apply but I can take this offer into account in determining costs under Rule 24, along with any other offers that have been made (Rule 18(16)).

[39] In Paragraph 35 of Jackson v. Mayerle, 2016 ONSC 1556, Pazaratz J. writes:

Offers to settle are to be encouraged, and severable offers (or offers on specific issues) are particularly helpful to the settlement process.

[40] Due to the inclusion of the custody term, the court finds that the father's offer to settle was not more favourable than the order. The costs consequences set out in subrule 18(14) do not apply.

[41] This finding does not mean that the father's offer has no value. It was a serious attempt to resolve the case. It is very possible that the continued inclusion of the custody term in his offer was an unfortunate oversight by the father.

[42] Once the father made his offer to settle, the mother had the opportunity of resolving the case by making a counter-offer that excluded the custody term. This would have likely led to a resolution of the case. Instead, the mother did not make an offer to settle. The failure to make an offer to settle is unreasonable behaviour. See: Laing v. Mahmoud, 2011 ONSC 6737.

[43] The fact that the mother was self-represented does not excuse her from failing to make an offer. She was represented by counsel when the father made his offer. Further, the court urged the parties to resolve these issues at the conclusion of the judicial interview of the children on May 4, 2016 and went to great lengths to explain to the parties why formal offers to settle should be made, how they could be made and specifically the costs consequences associated with offers to settle made pursuant to subrule 18(14). It is disappointing that the mother did not make an offer as suggested.

[44] While the father's offer was not more favourable than the final order, the court finds that the father was the more successful party based on his offer. It was much closer to the final order than anything presented by the mother. The financial order made by the court was better than the offer. The father did not obtain a sole custody order, but he did not take up court time pursuing this issue.

[45] The father's financial offer reflected a realistic acknowledgement of the frailties of his case. It recognized his blameworthy conduct and that he would have to compensate the mother due to his failure to report to her his increases in income. It was a serious effort to fairly resolve this matter and end this case.

[46] The mother showed no willingness to compromise. Instead, she continued to seek support from the father even after the court found that the son was living with the father from September 1, 2014.

The mother could have and should have settled this case.

3.3 Positions at Trial

[47] At trial, the father asked the court to award him $37,144 for all retroactive support adjustments. He also sought ongoing child support of $895 per month, based on an annual imputed income of $102,000 to the mother.

[48] The mother asked the court to pay her the sum of $253,652 for all retroactive support adjustments. She did not offer to pay any ongoing child support for the son.

[49] The final award to the mother was $34,572. The mother was ordered to pay ongoing child support for the son based on her actual income of $80,000 per annum.

[50] Neither party was successful based on these positions. The court order was $71,716 more than the father's position and $219,080 less than the mother's position.

[51] The parties had varying levels of success on the various issues that had to be decided to arrive at the final order. The father was ordered to pay 5 years of retroactive support – he proposed going back 3 years.[3] The father sought to impute the mother's income at $102,000 per annum. She asked for no imputation of income. The court imputed her income at $70,000 per annum from 2011 to 2014. The father sought an order that the daughter had withdrawn from parental control when she spent two years at a treatment center. The court disagreed. However, the court significantly reduced the father's table child support obligation during this period. It also readjusted, in the mother's favour, the parties' shares of the daughter's expenses at the treatment center. The father sought to include RRSP withdrawals in the mother's income. The court declined to do this.

[52] However, the main reason why the mother's trial position bore no resemblance to the final order was her inability to accept that the children were primarily living with the father and he had no further obligation to pay her support.

[53] The mother took the position that the daughter did not live with the father from September 1, 2015 until January 31, 2016. It required a judicial interview of the daughter to determine that the father's position was correct. The mother then did not agree to pay support for the daughter for this period. The court found that she had an obligation to pay child support.

[54] The mother took the position that the son did not live primarily with the father until September 1, 2015. The father said that the son had lived primarily with him since July 1, 2014. A judicial interview was conducted to determine this issue.

[55] It became very clear to the court that the son had primarily lived with the father since at least September 1, 2014, and the court made this finding.

[56] Despite this finding, the mother continued to take the position that the father should still pay her child support for the son and she should not have to pay child support to him.

[57] The mother's position on this issue was unreasonable.

3.4 Findings on Success

[58] The court finds that:

a) There was divided success based on the original positions taken by the parties. Until the father made his offer to settle, the mother was more successful than the father.

b) The father was the successful party based on his offer to settle.

c) There was divided success based on the positions taken by the parties at trial. The trial was unnecessarily lengthened due to the mother's unreasonable position about the living arrangements of the children and her insistence that the father continue to pay her support when the children were primarily living with him.

d) Overall, the father was the more successful party.

e) The mother did not rebut the presumption that the father is entitled to costs.

Part Four – Considerations for the Successful Party

[59] In making this decision, the court considered the factors set out in subrule 24(11), which reads as follows:

24(11) A person setting the amount of costs shall consider,

(a) the importance, complexity or difficulty of the issues;

(b) the reasonableness or unreasonableness of each party's behaviour in the case;

(c) the lawyer's rates;

(d) the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;

(e) expenses properly paid or payable; and

(f) any other relevant matter.

[60] The case was important for the parties. There were multiple legal issues involved, some of which were complex and difficult.

[61] The father made a reasonable attempt to resolve the issues. The mother did not.

[62] The mother alleged that the father engaged in unreasonable behaviour since he missed filing timelines for the trial record and joint document brief. The father did miss these timelines but the court recognizes that he had the difficult task of collating much of the documentation. The mother was not prejudiced by this.

[63] The father engaged in blameworthy conduct by not disclosing his significant increases in income to the mother. This conduct, though, was mitigated by his acknowledgement of blameworthy conduct as reflected in his offer to settle.

[64] The father, by claiming that he was still seeking sole custody in his opening statement, caused the mother unnecessary distress and resulted in her wasting time preparing a response to this claim.

[65] The mother took unreasonable positions regarding the children's living arrangements. This unnecessarily complicated the proceedings. She also unreasonably claimed tax credits for the son during 2015.

[66] Both parties were reasonable in structuring a focused hearing. They also presented their claims in an organized manner. The father's presentation of the documentary evidence was exemplary and an excellent template for all lawyers to follow. In particular:

a) He prepared a joint document brief with an easy to navigate index.

b) The documents were clearly tabbed.

c) All pages in the document brief were numbered, making them easy to locate.

d) A copy of the document brief was provided for the court to make notes.

e) Multiple charts of support calculations were provided based on possible court findings.

[67] The father's presentation of the evidence significantly reduced the length of the trial. The court recognizes that it takes considerable effort to present a case in such a seamless manner.

[68] The mother also worked very hard at presenting her case in an organized manner. She too, presented a clearly marked document brief with easy to understand charts with her support calculations. She presented relevant case law. The mother was a high-functioning self-represented litigant.

[69] The rates claimed by the father's counsel were reasonable for a lawyer of his skill and experience.

[70] Subrule 24(10) sets out that costs are to be determined in a summary manner after each step in the case by the presiding judge. A "step" in the case is one of the discrete stages recognized by the rules such as a case conference, settlement conference and the like. Husein v. Chatoor, 2005 ONCJ 487. The trial judge should not deal with requests for costs that were addressed or should have been addressed at these prior steps in the case. See: Islam v. Rahman, 2007 ONCA 622.

[71] However, a party is entitled to claim time spent for meetings with the client and reviewing and preparing pleadings and financial statements as this is time not attributable to any one step in the case. See: Czirjak v. Iskandar, 2010 ONSC 3778. Costs accrued from activity not specifically related to the step (not requiring judicial intervention) should be dealt with at the end and not by the motions judge. See: Houston v. Houston, 2012 ONSC 233; Walts v. Walts, 2014 ONSC 98.

[72] The court considered that the mother was the more successful party when the originating documents (not attributable to any step) were prepared. She paid counsel to assist in their preparation.

[73] A review of the father's bill of costs shows that considerable time and expenses were claimed for work attributable to prior steps in the case. These costs were not reserved by the case management judge and will not be awarded at this stage of the case.

[74] The court considered the mother's ability to pay the costs order. See: MacDonald v. Magel. A party's limited financial circumstances will not be used as a shield against any liability for costs but will be taken into account regarding the quantum of costs, particularly when they have acted unreasonably and are the author of their own misfortune. See: Snih v. Snih. In the case of Takis v. Takis, [2003] O.J. No. 4059 (S.C.J.), the court found that the respondent's lack of income and assets, though a relevant consideration, could not be used as a shield in unnecessary litigation.

[75] The mother's standard of living is much lower than the father's, but this does not equate to financial hardship. She earns $80,000 per annum. She has $24,000 in savings and the father has been ordered to pay her $34,573.[4]

[76] The mother was clearly angry with the father. The court understands why. She did not seek a reduction of child support, even when she left her job in 2009. The mother only learned that the father had failed to disclose significant increases in income when he started his motion to change. He should have paid her much more child support at a time when she needed it. This betrayal of her good faith made it difficult for her to accept when the children went to live primarily with the father and also to accept that she (and not the father) had a child support obligation.

[77] While this helps explain the mother's position, it does not justify it. Parties are responsible for the positions they take in the litigation. See: Heuss v. Surkos, 2004 ONCJ 141.

[78] There is also a policy reason for awarding the father costs. We want to encourage payors who have not properly fulfilled their support obligations to recognize and rectify this behaviour as soon as possible – not to deny their responsibility or stall the case. Payors can do this by making a reasonable (and early) offer to settle the case. Once they have done this, there is then an expectation that the support recipient will negotiate in good faith and not unnecessarily prolong the litigation. If the support recipient does not take a reasonable position and forces the reasonable payor to incur unnecessary legal fees, costs should follow. Otherwise, there is a reduced incentive for payors to make reasonable offers. This would be to the detriment of other support recipients.

[79] The court considered both Boucher et al. v. Public Accountants Council for the Province of Ontario and Delellis v. Delellis and Delellis. Both these cases point out that when assessing costs, it is "not simply a mechanical exercise." In Delellis, Aston J. wrote at paragraph 9:

However, recent cases under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended have begun to de-emphasize the traditional reliance upon "hours spent times hourly rates" when fixing costs....Costs must be proportional to the amount in issue and the outcome. 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, rather than an amount fixed by the actual costs incurred by the successful litigant.

Part Five – Conclusion

[80] Taking into account all of the considerations set out above, an order shall go that the mother pay the father's costs fixed in the amount of $12,000, inclusive of fees, disbursements and H.S.T. The mother's claim for costs is dismissed.

Released: September 8, 2016

Justice S.B. Sherr

Footnotes

[1] The total support owing by the mother to the father as of August 2, 2016 under this offer would have been $5,879. This would have left a balance owing to the mother of $73,082.

[2] On July 25, 2016, the father's counsel indicated that it was a mistake to include the custody submission.

[3] The mother sought 6 years of retroactive support.

[4] The mother deposed that she has debts of over $106,000, including $69,500 for legal and consulting fees.