Court File and Parties

Court File No.: FS-13-388644 Date: 2019-07-12 Ontario Superior Court of Justice

Between: Jastinder Manchanda, Applicant – and – Sukhvir Thethi, Respondent

Counsel: Evelyn K. Rayson, for the Applicant

Heard: In Writing

Reasons on Costs

P.J. Monahan J.

[1] On March 21, 2019, I released my reasons resolving the legal issues arising from the breakdown of the parties’ marriage and granted either party leave to take out a divorce on an uncontested basis. The pleadings of the Respondent, Mr. Thethi, had been struck out by Myers J. in June 2016. Accordingly, the matter proceeded before me as an uncontested trial involving the Applicant, Ms. Manchanda and her counsel. Mr. Thethi attended the trial as an observer but did not participate directly.

[2] In my reasons I ordered Mr. Thethi to make an equalization payment to Ms. Manchanda in the amount of $263,600.96, as well as to repay $100,000 that Ms. Manchanda had transferred to him shortly after the parties’ separation. However, I dismissed a number of the claims advanced by Ms. Manchanda, including her claim for a constructive trust in relation to the matrimonial home, her claim for a lump-sum payment on account of spousal support, and her claim for an order that the matrimonial home should be transferred to her if Mr. Thethi did not satisfy the judgment within 120 days.

[3] I invited Ms. Manchanda to make written costs submissions, provided that she not include a claim for costs that had been considered in the context of previous court proceedings involving the parties. Those cost submissions were provided on June 7, 2019. In accordance with the June 2016 Order of Myers J., Mr. Thethi was not permitted to make costs submissions.

[4] Ms. Manchanda argues that Mr. Thethi conducted himself in bad faith and, accordingly, she is entitled to her costs on a full indemnity basis in the amount of $159,845.14. Ms. Manchanda argues that Mr. Thethi’s consistent refusal to comply with court-ordered disclosure, his failure to pay numerous costs awards, and his unsuccessful attempt to appeal the June 2016 order of Myers J. all the way to the Supreme Court of Canada, are all evidence of his bad faith conduct.

[5] Alternatively, Ms. Manchanda argues that, as the successful party in the litigation, she is entitled to her costs on a partial indemnity basis in the amount of $95,388.11.

[6] I would decline to make a finding of bad faith against Mr. Thethi. Mr. Thethi did not participate in the proceedings before me and any bad faith on his part has been dealt with in prior costs awards. While Ms. Manchanda was partially successful in this proceeding, a significant number of her claims were rejected in whole or in part. Moreover, as discussed more fully in the reasons below, she conducted the litigation in a manner which added needlessly to its length and complexity. I find that a fair and appropriate award of costs in her favour to be $80,000.

Legal Framework Governing Costs Awards in Family Law Proceedings

[7] It is well established that modern family cost rules are designed to foster three fundamental purposes: (i) to partially indemnify successful litigants; (ii) to encourage settlement; and (iii) to discourage and sanction inappropriate behaviour by litigants. [1] Moreover, as the Court of Appeal emphasized in Mattina v. Mattina, 2018 ONCA 867 ("Mattina"), a fourth fundamental purpose of costs awards in family law proceedings is to ensure that cases are dealt with justly, in accordance with Rule 2(2) of the Family Law Rules, O. Reg. 114/99.

[8] Rule 24(1) of the Family Law Rules creates a presumption of costs in favour of the successful party. [3] While consideration of success is the starting point in determining costs, this presumption does not automatically require that the successful party be awarded his or her costs. [4] Entitlement to costs is subject to a variety of factors, including whether the successful party has behaved unreasonably, [5] whether there has been bad faith conduct, [6] and the nature of any offers to settle made by either party. [7]

[9] In determining the appropriate quantum of costs, Rule 24(12) of the Family Law Rules sets out the relevant considerations. It provides as follows:

(12) SETTING COSTS AMOUNTS – 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.

[10] While Rule 24(12) sets out the relevant considerations, the key principles governing awards of costs in family law proceedings are proportionality and reasonableness. As Nordheimer J.A. observed in Beaver v. Hill, 2018 ONCA 840, [8] “[p]roportionality is a core principle that not only governs the conduct of proceedings generally, but is specifically applicable to fixing costs in family law matters.” This conclusion flows directly from the fundamental Boucher principle, applied by Ontario courts on innumerable occasions, that costs awards should reflect “what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties.” [9]

[11] Nor is there any principle mandating that a successful party should receive costs that “generally approach full recovery”. [10] In fact, any such “full recovery” principle would be inconsistent with the first objective of costs awards as set out by the Court of Appeal in Serra v. Serra, 2009 ONCA 395, which is that costs are intended to “partially indemnify successful litigants”. While the Rules contemplate full recovery in specific circumstances, such as bad faith under Rule 24(8) of the Family Law Rules, or besting an offer to settle under Rule 18(14) of the Family Law Rules, the quantum of costs must always meet the test of proportionality and reasonableness in light of the importance and complexity of the issues at stake in the litigation.

Analysis

a. Ms. Manchanda was only partially successful at trial

[12] Ms. Manchanda argues that she was the successful party at trial and that the “general approach in family law cases” is that the costs awarded to the successful party should generally approach full recovery. In fact, contrary to Ms. Manchanda’s submission, there is no such presumption of full costs recovery in favour of the successful party in family law litigation.

[13] Nor, in any event, was Ms. Manchanda entirely successful at trial. In fact, the majority of the claims she advanced were rejected in whole or in part, including her claim for a constructive trust in the matrimonial home, for spousal support, for a permanent restraining order against Mr. Thethi, and for an order transferring her title to the property in the event that Mr. Thethi did not satisfy the court’s judgment within 120 days.

[14] I accept that Ms. Manchanda was partially successful at trial and is presumptively entitled to an award of at least some of her costs. I also find that Ms. Manchanda was hampered in her ability to provide complete information with respect to Mr. Thethi’s financial affairs due to the limited disclosure that he had earlier provided. This added to her costs and delayed the ultimate resolution of the issues between the parties. These are relevant considerations in determining the quantum of her costs entitlement.

b. Mr. Thethi’s Bad Faith

[15] Apart from the “general approach” in family law cases, Ms. Manchanda urges me to make a finding of bad faith on the part of Mr. Thethi and to award her full indemnity costs on this basis.

[16] I would decline to make such a finding, for two reasons.

[17] First, Mr. Thethi did not participate in the proceedings before me since his pleadings had already been struck out. I have no direct evidence of any bad faith conduct on his part, and no basis for making any such determination.

[18] Second, to the extent that Mr. Thethi conducted himself in bad faith in earlier proceedings, such conduct would have, or could have, been taken into account through prior costs awards. The judges presiding over those earlier proceedings were best situated to determine the costs consequences that should flow from any inappropriate or bad faith behaviour on Mr. Thethi’s part. I note, for example, that in June 2016 Myers J. awarded Ms. Manchanda her full indemnity costs on the basis of Mr. Thethi’s deliberate breach of multiple court orders. In my view it would be inappropriate for me to penalize Mr. Thethi through an enhanced costs award, based on my second-hand reading of earlier decisions of this court.

c. Ms. Manchanda’s approach to the litigation added to its length and complexity

[19] Rule 24(12)(a) of the Family Law Rules requires the court to consider the reasonableness and proportionality of various factors, as they relate to the importance and complexity of the issues.

[20] In my view while the issues were undoubtedly important to the parties, they were not legally complicated. There were no children of the marriage, and the issues were limited to property and spousal support. Ms. Manchanda had continued her employment throughout the entire marriage and during the parties’ separation. The trial was uncontested. Yet a proceeding which should have been concluded in, at most, 2 days ended up taking 5 days of court time. This was largely attributable to the manner in which Ms. Manchanda conducted the litigation.

[21] First, Ms. Manchanda advanced a number of claims which were legally dubious and ultimately rejected. For example, she attempted to claim a constructive trust over the matrimonial home. As I explained in my reasons, this argument was contrary to well-established authority and was ultimately rejected. Nevertheless, evidence and argument on this point consumed a considerable amount of court time.

[22] Second, even issues which should have been dealt with in an entirely straightforward manner were presented in a complex, confusing and disorganized way, which required considerable effort to clarify. For example, the original Net Family Property (NFP) statement submitted by Ms. Manchanda, in which she sought an equalization payment of approximately $550,000, contained numerous mistakes, calculation errors, and questionable claims. Ms. Manchanda was instructed to revise the NFP statement to address these concerns. However, the revised version of the NFP statement, which claimed an equalization payment of approximately $513,000, did not address many of the concerns that had been identified at trial. It was necessary to schedule an additional day of legal argument in order to permit Ms. Manchanda to prepare a third and final version of her NFP statement. This third version of the NFP statement claimed an equalization payment of approximately $322,000. Yet even this third version continued to include a number of claims which were calculated incorrectly and reduced further. Ultimately the equalization payment of $263,000 that was ordered was approximately one-half of what was originally claimed by Ms. Manchanda.

[23] Third, Ms. Manchanda’s submissions were not prepared with appropriate care and attention to detail. For example, the expert retained to calculate Mr. Thethi’s income from self-employment made an error in the calculation of the income tax gross up to be applied on certain of his income. This error was only discovered through questions raised by the court in the course of the expert’s testimony. Ms. Manchanda was instructed to prepare a revised calculation of Mr. Thethi’s income with this error corrected. However, her subsequent written submissions continue to make the same error in the income tax gross up that had been specifically identified earlier. This required further discussion and consideration by the court.

d. Offers to settle

[24] Both parties submitted offers to settle. However, neither party bettered any of these offers in the result at trial. Accordingly, I do not regard these offers to settle as being material considerations in determining the appropriate award of costs.

Conclusion

[25] Ms. Manchanda was partially successful at trial and is entitled to some of her costs. Having reviewed the Bill of Costs submitted by Ms. Manchanda’s counsel, the rates charged are reasonable and much of the time spent by counsel was necessary and appropriate.

[26] Nevertheless, taking into account the considerations set out in Rule 24(12)(a) of the Family Law Rules, her costs entitlement should reflect the fact that many of her claims advanced were rejected in whole or in part at trial. I also find that Ms. Manchanda conducted the litigation in such a way as to add needlessly to its length and complexity.

[27] Taking all the circumstances of this litigation into account, I would award Ms. Manchanda costs against Mr. Thethi on an all-inclusive basis in the amount of $80,000, which is approximately half of the amount claimed on a full indemnity basis, payable within 60 days.

P. J. Monahan J.

Released: July 12, 2019

Footnotes

[1] Serra v. Serra, 2009 ONCA 395 at paragraph 8. [2] Mattina v. Mattina, 2018 ONCA 867 ("Mattina") at paragraph 10. [3] Berta v. Berta, 2015 ONCA 918 at paragraph 94. [4] Mattina at paragraph 13. [5] Rule 24(4) of the Family Law Rules, O. Reg. 114/99. [6] Rule 24(8) of the Family Law Rules, O. Reg. 114/99. [7] Rule 18(14) & (16) of the Family Law Rules, O. Reg. 114/99. [8] Beaver v. Hill, 2018 ONCA 840 at paragraphs 12 and 19. [9] Boucher v. Public Accountants Council (Ontario) (2004), 71 O. R. (3rd) 291 (Ont. C.A.) at paragraph 24. [10] Beaver v. Hill, at paragraph 13.