Court File and Parties
DATE: November 18, 2022 COURT FILE NO.: D41776/21
ONTARIO COURT OF JUSTICE
B E T W E E N:
MERLENE THOMAS IKENNA ANIEKWE, for the APPLICANT APPLICANT
- and -
JEFFREY SAUNCHEZ ACTING IN PERSON RESPONDENT
HEARD: IN CHAMBERS
JUSTICE S.B. SHERR
Costs Endorsement
Part One – Introduction
[1] On October 19, 2022, the court released its reasons for decision after a trial regarding the applicant’s claim for spousal support from the respondent. See: Thomas v. Saunchez, 2022 ONCJ 467. The court ordered the respondent to pay the applicant ongoing spousal support of $475 each month for five years, after which time spousal support terminates.
[2] The parties were given the opportunity to make costs submissions. The applicant seeks her costs of $14,074. The respondent did not make costs submissions.
Part Two – General costs principles
[3] The Ontario Court of Appeal in Mattina v. Mattina, 2018 ONCA 867 set out that modern costs rules are designed to foster four fundamental purposes:
(1) to partially indemnify successful litigants;
(2) to encourage settlement;
(3) to discourage and sanction inappropriate behaviour by litigants and;
(4) to ensure that cases are dealt with justly under subrule 2 (2) of the Family Law Rules (all references to the rules in this decision are to the Family Law Rules).
[4] Costs can 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. See: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, paragraph 25.
[5] Costs awards are discretionary. Two important principles in exercising this discretion are reasonableness and proportionality. See: Beaver v. Hill, 2018 ONCA 840.
[6] An award of costs is subject to the factors listed in subrule 24 (12), subrule 24 (4) pertaining to unreasonable conduct of a successful party, subrule 24 (8) pertaining to bad faith, subrule 18 (14) pertaining to offers to settle and the reasonableness of the costs sought by the successful party. See: Berta v. Berta, 2015 ONCA 918, at paragraph 94.
Part Three – The offers to settle and subrule 18 (14)
[7] The applicant made two offers to settle. The respondent made one offer to settle.
[8] Subrule 18 (14) sets out the consequences of a party’s failure to accept an offer to settle that is as good as or better than the trial result of the person making the offer. It 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:
If the offer relates to a motion, it is made at least one day before the motion date.
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.
The offer does not expire and is not withdrawn before the hearing starts.
The offer is not accepted.
The party who made the offer obtains an order that is as favourable as or more favourable than the offer.
[9] The onus of proving that the offer is as or more favourable than the trial result is on the person making the offer. See: Neilipovitz v. Neilipovitz, 2014 ONSC 4509. Close is not good enough to attract the costs consequences of 18 (14). The offer must be as good as or more favourable than the trial result. See: Gurley v. Gurley, 2013 ONCJ 482.
[10] The technical requirements of subrules 18 (4) and 18 (14) must be met to attract the costs consequences in subrule 18 (14). See: Sader v. Kekki, 2014 ONCJ 41; Jakubowski v. Kopacz-Jakubowski; Weber v. Weber, 2020 ONSC 6855; Clancy v. Hansman, 2013 ONCJ 702; Ajiboye v. Ajiboye, 2019 ONCJ 894.
[11] The respondent made an oral offer to pay the applicant spousal support of $250 each month until the end of 2022. This offer was not more favourable to the applicant than the trial result.
[12] The applicant served her first offer to settle on June 14, 2022. She proposed that the respondent pay her a total of $25,000 in satisfaction of her spousal support claim. The offer provided that the $25,000 could be paid out in five instalments of $5,000 each year in consecutive years.
[13] This offer to settle was not withdrawn.
[14] This offer was more favourable to the respondent than the trial result. The trial resulted in the respondent paying total support to the applicant of $28,500 over five years. Broken down by year, the respondent will pay the applicant $5,700 each year compared to the $5,000 annual payment proposed by the applicant.
[15] The applicant made a second offer to settle three days before the trial. It was also more favourable to the respondent than the trial result. The applicant proposed that the respondent pay her spousal support of $400 each month for five years. The court ordered that the respondent pay the applicant $475 each month over five years.
[16] However, this offer did not meet the technical requirements of subrule 18 (14), since the subrule requires the offer to be served at least 7 days before the trial. The costs consequences of subrule 18 (14) do not apply to this offer. This won’t have much impact on this costs order since the first offer did meet the technical requirements of subrule 18 (14). The second offer was considered in determining the reasonableness of the parties under sub-clause (a) (iii) of subrule 24 (12) (a).
Part Four – Subrule 18 (14) and costs for prior steps in the case
[17] The applicant’s claim for costs includes costs for two appearances at First Attendance Court, a case conference held on March 10, 2022, and for a settlement conference held on June 22, 2022. Costs were not ordered or reserved at any of these appearances. This raises the question of whether costs should be awarded for prior steps in a case where costs were not addressed or reserved by the presiding judge at those steps when the costs consequences in subrule 18 (14) apply.
[18] Pursuant to subrule 18 (14), the applicant is entitled to costs to the date the offer is made and her full recovery costs from the date of the offer unless the court orders otherwise.
[19] Prior to July 1, 2018, pursuant to subrule 24 (10), costs for any step in the proceeding were required to be determined at the time or expressly reserved. In Islam v. Rahman, 2007 ONCA 622, the Ontario Court of Appeal set out that the trial judge should not deal with requests for costs that were addressed or should have been addressed at prior steps in the case.
[20] Subrule 24 (11) came into force on July 1, 2018, and now provides that the failure of the court to order costs in relation to a step in a case does not prevent it from awarding costs in relation to the step at a later stage in the case.
[21] However, courts continue to be cautious about awarding costs at the trial stage where costs were not awarded at earlier steps in a case. See: Baezner v. Brunnenmeir, 2018 ONCJ 956; Nabwangu v. Williams, 2019 ONCJ 171.
[22] In Cameron v. Cameron, 2018 ONSC 6823, Justice Marvin Kurz interpreted the changes to the costs rules regarding prior steps in a case as creating a rebuttable presumption against ordering costs for these steps if they were not addressed or reserved by the judge hearing the step. He wrote at paragraphs 83 to 88:
[83] In sum, a trial judge has the jurisdiction under R. 24(11) to determine the costs of earlier steps in the proceeding. However, in light of the continued application of R. 24(10), it should be presumed that a judge who does not determine or reserve the costs of a step before her or him does not find that the conduct of the parties during the course of that step merits an award of costs.
[84] That presumed finding should be entitled to deference by subsequent judges. It should be accorded even greater deference when, as here, the previous step was conducted before R. 24(11) was formally amended on April 23, 2018.
[85] If the judge of a step prior to trial does not wish the presumption to apply, I suggest that he or she should say so. The judge can then expressly reserve the costs of the step to a later date, such as the trial. If that occurs, brief reasons would be helpful. I know that many judges are reluctant to award costs of a conference or even reserve them for fear that such a decision may adversely affect the potential for settlement. However, with the increasingly onerous costs of family litigation, it is always salutary for the parties to be reminded at every stage of the proceeding of the potential costs consequences of their litigation.
[86] In light of the presumption, a judge hearing a trial should only grant the costs of a previous step in one of the following circumstances:
a. when they have been reserved to the trial judge; or
b. when, in light of subsequent events, the trial judge is better situated to determine the costs of the prior step than the judge presiding over that step. In that case, the process of determining costs will involve a broad consideration of the prior step within the context of the case as a whole; or
c. in exceptional circumstances.
[87] If a party seeks the previously undetermined and unreserved costs of a previous step, the onus rests on him or her to set out why those costs should now be awarded in their favour. To meet that onus, the party should offer a detailed summary of each prior step for which he or she is seeking costs. The party should add an explanation of why he or she should now be granted the costs of that step. That summary should include:
a. the positions that each party took at that step;
b. the manner in which the party’s participation in that step advanced the case or contributed towards the ultimate result;
c. an explanation of why the later judge is in a better position than the judge who actually dealt with the particular step to assess the significance or reasonableness of the conduct of the parties during that step;
d. a comparison of any relevant offers to settle, particularly as they may impact on the prior step; and
e. any other consideration that the party relies upon to claim the costs of that step.
[88] The principles set out above also apply, with any necessary adjustments (considering their more summary nature), to motions and any other proceedings in which a judge is asked to award the undetermined costs of prior steps. Those principles can apply, for example when a motions judge is asked to determine the costs of a previous case conference or when the balance of a partially completed conference is adjourned to another date, without costs being reserved.
[23] In Laidman v. Pasalic and Laidman, 2020 ONSC 7068, the court set out that the presumption remains that costs should be determined at each stage, and there are good reasons for this. Parties should have an ongoing awareness of the cost consequences of litigation decisions they make. Reserving costs may impede final resolution by needlessly inflating and complicating the list of future issues still to be dealt with. A judge who has just completed a step in a case will usually be in the best position to evaluate all of the relevant Rule 18 and 24 considerations. Reserving costs to a future event – often to a different judge – can result in later confusion and controversy about what really happened at the earlier step.
[24] In Berge v. Soerensen, 2020 ONCJ 265 Justice Roselyn Zisman set out the following circumstances where costs of a prior step should be awarded by a trial judge:
a) Costs have been reserved to the trial judge.
b) When, considering subsequent events, the trial judge is better situated to determine the costs of the prior step than the judge presiding over the step or,
c) In exceptional circumstances.
[25] In Tintinalli v. Tutolo, 2022 ONSC 6276, the paying party accepted an offer to settle that provided that he must pay full recovery costs from a fixed date until the date of acceptance. The other party claimed full recovery costs for steps taken in the case after the fixed date and before the offer was accepted. The court emphasized the importance of determining the reasonable expectation of the paying party in deciding whether full recovery costs should be ordered for these steps.
[26] The court in Tintinalli found that the paying party should have reasonably expected to pay full recovery costs from the fixed date until he accepted the offer. This included costs for steps taken during this period where costs were not addressed or reserved by the presiding judge at that step.
[27] So, is there an inconsistency between the presumption that full recovery costs should be paid from the date of the offer as provided in subrule 18 (14) and this case law which creates a presumption that costs should not be ordered by the trial judge for prior steps in a case if they were not addressed or reserved by the presiding judge at those steps? This court does not think there is for the following reasons:
a) The trial judge will usually be better situated to determine costs for steps taken after the offer has been made than the judge presiding over the prior step. This is because the trial judge will have the benefit of comparing the offer to settle to the final result in assessing reasonableness and success. This is one of the exceptions to the presumption against awarding costs for prior steps in a case as set out in Cameron and in Berge.
b) It is a reasonable expectation that a paying party pay full recovery costs for every aspect of the case from the date of the offer if the conditions in subrule 18 (14) are met – the wording of the subrule is clear. This is an important incentive for parties to take reasonable positions, resolve cases and not put the other party to unnecessary costs.
In Tintinalli, supra, the court discussed the impact of the term in the offer to settle that explicitly stated that full recovery costs would be payable after the fixed date until accepted and found that this included steps where costs were not addressed or reserved by the presiding judge. The analysis in that case regarding the reasonable expectations of a paying party should also apply here. Subrule 18 (14) is also very clear that if the conditions in the subrule are met full recovery costs are payable from the date the offer is made.
c) The court can always order otherwise, as set out in subrule 18 (14), if it finds that the judge presiding over the prior step in the case was better situated to determine costs of that step.
[28] In most cases, full recovery costs should include costs for all steps taken after the date of the offer to settle, if the costs consequences set out in subrule 18 (14) apply. That said, it is still advisable to request that any costs not determined at these steps be reserved to the trial judge.
[29] The court also finds that there is no inconsistency between the presumption that costs should be ordered to the date of the offer as provided in subrule 18 (14) and the case law which creates a presumption that costs should not be ordered by the trial judge for prior steps in a case if they were not addressed or reserved by the presiding judge at the prior steps, for the following reasons:
a) In most cases, the trial judge will not be better situated than the judge presiding over the prior step to assess costs. In this scenario, the trial judge does not have the benefit of an offer pre-dating the step to assess reasonableness and success.
b) An offer to settle that attracts the costs consequences of subrule 18 (14) is a key demarcation point in this analysis. In the absence of such an offer, a paying party should not be reasonably expected to pay costs for a prior step if costs were not addressed or reserved at that step by the presiding judge. They would not have had the option of accepting a favourable offer at that step.
c) Subrule 18 (14) does not set out how costs up to the date of the offer are to be determined. The court has considerable discretion in making this assessment.
d) Even if subrule 18 (14) is interpreted to include the costs of steps in a case pre-dating the offer to settle, the court has discretion in the subrule to order otherwise.
[30] In most cases, costs up to the date of an offer that attracts the costs consequences set out in subrule 18 (14) should not include costs for prior steps in the case. The exceptions set out in Cameron and Berge can be applied in appropriate circumstances.
[31] This does not preclude the court from awarding costs accrued from activity not specifically related to a step in the case. Activity not requiring judicial intervention is often better dealt with at the end of the case and not by the motions judge. This includes the drafting of pleadings, financial statements and seeking financial disclosure. See: Houston v. Houston, 2012 ONSC 233; Walts v. Walts, 2014 ONSC 98.
Part Five – Application of subrule 18 (14) to this case
[32] The applicant will be awarded her costs up to the date of her June 14, 2022 offer to settle. This will include time spent drafting pleadings and financial statements, reviewing the respondent’s pleadings and financial statements and corresponding with the respondent.
[33] The applicant will also be awarded costs for her attendances at First Appearance Court. These are appearances before a court clerk to ensure that the case is ready to send to a judge for a case conference. There should be no expectation that costs will be addressed at this step of a case.
[34] The applicant will not be awarded costs for the case conference step that took place on March 10, 2022. Costs were not ordered or reserved at that step. None of the exceptions set out in Cameron or Berge apply.
[35] The applicant will be awarded full recovery costs from the date of her first offer dated June 14, 2022. This will include the costs of the settlement conference step on June 22, 2022. There is no basis to order otherwise. The respondent should have accepted the applicant’s offer to settle. If the respondent had accepted it in a timely manner, the applicant would not have incurred such significant costs.
Part Six – The amount of costs
[36] An award of full recovery costs does not necessarily mean that the applicant will receive the full amount of costs claimed. The claim must still be reasonable and proportionate. It must also reflect, to some extent, the reasonable expectations of the paying party. See: Tintinalli v. Tutolo, 2022 ONSC 6276, supra.
[37] In Jackson v. Mayerle, 2016 ONSC 1556 the court wrote at paragraph 91:
Even where the "full recovery" provisions of the Rules are triggered -- either by an offer which meets Rule 18(14) requirements, or by a finding of bad faith -- quantification of costs still requires an overall sense of reasonableness and fairness. Goryn v. Neisner, 2015 ONCJ 318. The Rules do not require the court to allow the successful party to demand a blank cheque for their costs. Slongo v. Slongo, 2015 ONSC 3327. The court retains a residual discretion to make costs awards which are proportional, fair and reasonable in all the circumstances. M.(C.A.) v. M.(D.), [2003] O.J. No. 3707(supra); Scipione v. Scipione, 2015 ONSC 5982, [2015] O.J. No. 5130 (supra).
[38] In determining the appropriate quantum, the court should consider the amount that the unsuccessful party could reasonably have expected to pay in the event of lack of success in the litigation. See: Arthur v. Arthur, 2019 ONSC 938.
[39] Subrule 24 (12) sets out factors for the court to consider in determining the reasonableness and proportionality of a costs claim. It reads as follows:
24 (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.
[40] The court should also take into consideration the ability of a party to pay costs. See: M.(C.A.) v. M.(D.) (MacDonald v. Magel), 67 O.R. (3d) 181 (Ont. C.A.).
[41] However, the ability to pay will be less of a mitigating factor when the impecunious party has acted unreasonably, or where their claim was illogical or without merit. See: Gobin v. Gobin, 2009 ONCJ 278; D.D. and F.D. v. H.G., 2020 ONSC 1919. Those who can least afford to litigate should be most motivated to seriously pursue settlement and avoid unnecessary proceedings. See: Mohr v. Sweeney, 2016 ONSC 3338; Balsmeier v. Balsmeier, 2016 ONSC 3485.
[42] This case was important to the parties. There was some complexity and difficulty as the case involved issues of spousal support entitlement, duration and amount.
[43] The applicant acted reasonably and made two offers to settle that the respondent should have accepted.
[44] The respondent did not act reasonably. He did not provide timely disclosure. This included his late production of his banking and credit card statements. His failure to provide timely disclosure hindered the applicant’s ability to make informed offers.
[45] The respondent’s offer to settle was not realistic.
[46] The rates claimed by the applicant’s counsel are very reasonable ($250 per hour).
[47] The court finds that the time claimed by the applicant is reasonable and proportionate. Legal issues were involved that required legal research.
[48] The disbursements claimed by the applicant are reasonable.
[49] The court imputed the respondent’s annual income at $73,749. Any hardship to the respondent can be ameliorated by permitting him to pay costs over a reasonable period of time.
[50] The court finds that it is reasonable and proportionate for the respondent to pay the applicant’s costs in the amount of $12,000, inclusive of fees, disbursements and HST. The respondent should have reasonably expected to pay this amount of costs if the applicant was successful at trial.
[51] The court will address any hardship to the respondent by permitting him to pay costs over two years, in the amount of $500 each month.
Part Seven – Conclusion
[52] A final order shall go on the following terms:
a) The respondent shall pay the applicant’s costs fixed at $12,000, inclusive of fees, disbursements and HST.
b) The respondent may pay the arrears at the rate of $500 each month, starting on December 1, 2022. However, if he is more than 30 days late in making any spousal support payment starting on December 1, 2022, or costs payment, then the entire amount of costs then owing shall immediately become due and payable.
Released: November 18, 2022
Justice S.B. Sherr
