Court File and Parties

Court File No.: FD408/18 Date: 2020-06-04 Superior Court of Justice - Ontario

Re: M.P.M., Applicant And: A.L.M., Respondent

Before: Grace J.

Counsel: Jelena Buač, for the Applicant Kenneth Duggan, for the Respondent

Heard: In Writing

Costs Endorsement

[1] I have reviewed the cost submissions delivered in accordance with reasons released on April 7, 2020.

[2] The applicant seeks payment of the all-inclusive sum of $111,479.20. [1] That amount represents the costs incurred on a total recovery basis after deducting approximately $22,000 in relation to two motions in which the issue of costs was addressed by the presiding judge. [2]

[3] In support of his request, the applicant submitted that: (i) he was successful on the parenting issues; (ii) absent the COVID-19 emergency, the court’s order would have been as favourable as his August 16, 2019 offer to settle save for the issue of retroactive child support; (iii) the respondent’s offer to settle was unreasonable and made it impossible to resolve the financial issues; and (iv) the respondent acted in bad faith generally and in her conduct of the proceeding.

[4] The respondent’s disagreement with the applicant’s position starts with entitlement. She seeks a cost award in her favour of $21,000 plus H.S.T. A.M. reasons that the custody and access orders mirror, “albeit as a result of the Covid-19 Pandemic”, what she sought. Insofar as the financial issues are concerned, she alleges that the result was a mixed one.

[5] In the circumstances, what is the appropriate disposition?

[6] It is well-established that three fundamental purposes underlie provisions dealing with costs. They are designed to: (i) indemnify successful litigants, at least in part, for the costs of the proceeding; (ii) encourage resolution; and (iii) discourage inappropriate behaviour by a litigant and provide sanctions when it occurs: Serra v. Serra, 2009 ONCA 395 at para. 12.

[7] A successful party is presumptively entitled to a costs order: rule 24(1). By any standard, the applicant was successful in relation to the issue that predominated. The COVID-19 emergency arose well after the trial. It affected the disposition, not the underlying findings that were favourable to the applicant, not the respondent.

[8] The applicant seeks an award of costs on a full recovery basis. He advances two reasons. First, he points to an offer he made on August 16, 2019. Rule 18(14) sets forth the conditions that must be satisfied in order to trigger presumptive entitlement to such an award. Notably, the order obtained must be at least as favourable as the terms of the unaccepted offer: rule 18(14) 5. Even had the world been unaffected by COVID-19, I cannot say that the requirement would have been fulfilled. Ms. DeVeto’s role would not have continued. The police enforcement clause would not have been made. Spousal support may have been ordered. While still a relevant consideration, [3] the August 16, 2019 offer does not lead to the result advocated by the applicant.

[9] M.M. also relies on rule 24(8). The subrule is reproduced below:

If a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately.

[10] In S. (C.) v. S. (M.), 2007 ONSC 20279, [2007] O.J. No. 2164 (S.C.J.) at para. 17, Perkins J. offered these comments concerning the phrase “bad faith”:

In order to come within the meaning of bad faith…behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party…to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to inflict harm, to conceal information or to deceive, saves the activity from being found to be in bad faith. The requisite intent…does not have to be the person’s sole or primary intent, but rather only a significant part…

[11] The unsuccessful party’s failure to obey orders of the court, blaming of professionals as a “form of punishment and vengeance” and their “campaign…to alienate the children” were found to constitute bad faith. [4] In affirming the decision, the Court of Appeal agreed with the trial judge’s “description of the father’s conduct and its consequences.” [5] Sadly, A.M. engaged in the same behaviour insofar as the custody and access issues are concerned. To that extent, costs on a full recovery basis are to be ordered to the extent properly and reasonably claimed. [6]

[12] There is no basis for an elevated award in relation to the financial issues. As mentioned, the respondent argues that success was mixed insofar as those matters are concerned. Where success in a step is divided, the court may apportion costs as appropriate: rule 24(6). M.M. was required to pay retroactive and ongoing child support to A.M. It is important to remember that his obligation to pay future child support flowed from the change in disposition attributable to a post-trial pandemic. A.M.’s “success” related to one issue (retroactive support) that occupied little time at trial.

[13] The fees and disbursements incurred by M.M. on a full recovery basis during the course of this proceeding aggregated $123,370.70 plus H.S.T. The applicant acknowledges that some adjustments are required. The Family Law Rules contemplate costs being dealt with upon completion of every step along the way: rule 24(10). Costs were awarded in the applicant’s favour after argument of his motion seeking an order for the sale of the matrimonial home. Each party was required to bear their own costs following the dismissal of the competing motions for summary judgment. The amount the applicant seeks for costs of the case total $101,586.02 plus H.S.T., reflecting a reduction of approximately $22,000 in relation to those motions. [7] A further $3,000 all-inclusive is claimed in relation to the cost submissions.

[14] A.M. submits that further deductions must be made. I agree.

[15] The applicant seeks costs of the case, settlement and trial management conferences. Generally, however, costs of those attendances are not to be awarded: rule 17(18). Lack of preparation, a failure to serve required documents or to make required disclosure, a failure to follow the rules or a contribution to an unproductive conference are the circumstances in which an exception can be made. However, costs orders were not made. The endorsements made by the presiding justices were silent on the issue.

[16] Silence also reigned on the numerous other occasions this matter was in court.

[17] The law is clear that a trial judge should not make an order for costs in relation to any earlier step in the proceeding where no costs were ordered or where there was silence on the issue: Bortnikov v. Rakitova, 2016 ONCA 427 at para. 34; Islam v. Rahman, 2007 ONCA 622 at para. 2.

[18] I recognize that the Family Law Rules contemplate the possibility that costs may be awarded in relation to a conference or other step at a later stage: rules 17(18.1) and 24(11). However, I did not preside over any of the conferences, motions or other attendances that occurred along the way. Even if I have jurisdiction to make a costs order in relation to an earlier step, it is impossible to make a just determination at this late stage.

[19] Consequently, no costs can be awarded in relation to the April 18, August 29, October 17, 2018, March 13, 20, April 10, 24, May 15, August 26, September 13, 16 or October 1, 2019 in-court attendances.

[20] In determining the amount of a costs award, all relevant matters are to be considered including the time spent and the terms of any written offers to settle and the reasonableness and proportionality of each party’s behaviour: rule 24(12). In fact, proportionality and reasonableness are the touchstone considerations to be applied: Beaver v. Hill, 2018 ONCA 840 at paras. 12 and 19.

[21] This proceeding culminated in a high-stakes and fiercely contested trial that was conducted over a period of eleven days. Fourteen witnesses testified in person. The respondent filed twelve affidavits. There were more than four dozen numbered and two dozen lettered exhibits. The applicant’s counsel was necessarily and appropriately prepared to respond if A.M. proceeded with her stated intention to call the children as witnesses.

[22] Only one aspect of the applicant’s bill of costs seems to have caught the respondent’s eye. She argues that it was unreasonable for two counsel to have represented M.M. during the trial. In Y. (J.) v. F. (L.), [2017] O.J. No. 5228 (S.C.J.) at para. 30, McGee J. agreed “that fees for a second counsel are usually not recoverable.” [8]

[23] This is not the usual case. Some allowance on account of the more junior lawyer is warranted. The applicant’s lawyers conducted the trial in an exceedingly efficient and commendable manner. They were well organized. They were well prepared. Witnesses were called and examined efficiently. The applicant declined the opportunity to cross-examine any of the deponents of the affidavits the respondent filed. It is clear from the dockets provided that Mr. Spriensma played a meaningful role in the preparation for and conduct of the trial. He was much more than a spectator. Further, a significant concession was made by M.M.’s counsel to ensure that any duplication of time was eliminated.

[24] The respondent noted that the legal costs she incurred from the trial management conference on October 1, 2019 onward totaled $41,998.89. The costs incurred by the opposing party are a relevant consideration: Y. (J.) v. F. (L.), supra at para. 32. However, it is no surprise that the applicant’s costs were higher. It was his case to prove. His counsel assumed responsibility for preparing the lion’s share of the documentary record and legal authorities that were filed with the court. Greater expense was necessarily and reasonably incurred.

[25] The respondent also raised the issue of impecuniosity. According to A.M.’s financial statement, expenses exceed income. Nothing was paid on account of municipal taxes in 2019. The Canada Revenue Agency demanded payment of a small amount owing to Employment and Social Development Canada in March 2020. Her legal accounts are outstanding. Her mother claims to be owed $17,500. Her father-in-law seeks payment of the principal sum of $60,000 in an action commenced in February 2019. A.M. says that she owes members of the Douglas family slightly more than $416,000.

[26] The latter item relates to the former matrimonial home. At trial, A.M. testified that she owned the property free and clear. She said that a dear friend and her friend’s spouse had advanced the funds needed to acquire M.M.’s interest and to discharge the existing mortgage. A.M. told the court that after a six-month grace period, she had commenced paying her friends $500 per month. The payments were to continue indefinitely. No interest was payable.

[27] A May 21, 2020 letter from A.M.’s friend was attached to the respondent’s cost submissions. The author noted that the former matrimonial home had been valued at $550,352.71 in October 2018. After describing the payments made on A.M.’s behalf totaling $416,107.28, the author wrote in part:

…we entered into a verbal agreement with [A.M.]. While her name is on the deed for the house, we reserve the right to change the property title into our names at any time, without notice.

In exchange for living in the house [A.M.] pays us $500 per month, at 0% interest until the house is paid off or another arrangement is made. During this agreement, [A.M.] is not able to obtain another mortgage/loan on this property and is not permitted to have a lien on the property. Should either of these stipulations be broken, we will immediately sell the property.

Should the property be sold at any point, all amounts profited in the sale will go directly to us as a return on our investment and expenses incurred.

[28] With respect, the mind spins. What, exactly, is the arrangement insofar as the former matrimonial home is concerned? To the outside world, A.M. owns an unencumbered property worth well over a half a million dollars. However, according to the May 21, 2020 letter there is an oral agreement behind the scenes that allows A.M.’s close friend and her spouse to transfer the home into their name at their whim. Really? And then what?

[29] Even if that does not occur, the property is to be immediately sold if a mortgage or lien is registered. In that event, “all amounts profited” are to be paid to the lenders. What about A.M.’s apparent equity? Why has the amount owing not been adjusted by A.M. to reflect the monthly payments she has been making? Hasn’t her equity increased since October 2018? Why did A.M. testify that she owned the home in her own right?

[30] According to the May 21, 2020 letter, A.M.’s backers are also funding the costs A.M. is incurring in defending the action commenced by her father-in-law, despite the fact that the full amount of the claim is, for present purposes, listed in a schedule bearing the heading “Respondent’s Debts”. A.M. can’t have it both ways. Frankly, the correspondence raises many more questions than it answers.

[31] While highly dubious, for the purposes of this analysis I will assume that A.M.’s financial circumstances fall into the category of dire.

[32] In Sutherland v. Manulife, 2011 ONSC 1170 (S.C.J.), the court was faced with a request that the court refrain from making a costs order against a person in financial distress. At para. 9, D.M. Brown J. (as he then was) wrote:

Where a court is faced with a request by a litigant not to award costs against her because of her impecunious financial position, a court must weigh two competing policy considerations. First, those with arguable claims (or defences) should not be denied access to their “day in court” solely because of their lack of financial resources. The Ontario Superior Court of Justice is not a court for the rich, but a court for all who live in this province or who have a claim connected to this province. On the other hand, the “loser pays” principle which informs this court’s costs regime reflects, in part, the important policy considerations that exposing a civil litigant to a potential costs award should prompt the litigant to conduct her case in a reasonable manner which avoids imposing unnecessary costs on the other party.

[33] The issue is important in family litigation. In C.A.M. v. D.M. (2003), 2003 ONCA 18880, 67 O.R. (3d) 181 (C.A.), the Court of Appeal expressed the view that the financial position of an unsuccessful custodial parent was a relevant consideration when determining the amount of costs to be paid. Writing for the Court, Rosenberg J.A. said at para. 42:

In fixing costs, the courts cannot ignore the best interests of the child and thus cannot ignore the impact of a costs award against a custodial parent that would seriously affect the interests of the child.

[34] In this case, however, it cannot be forgotten that A.M.’s alienating behaviour led to the commencement, continuation and complication of the proceeding and ultimately and sadly, a more than two-week trial. Decisions were made and bad behaviour perpetuated despite full knowledge of the state of the parties’ modest financial circumstances. As in Y. (J.) v. F. (L.), supra at para. 38, A.M. “has not conducted her case as would a person of modest means.” Furthermore, pleas of poverty should not shield a party from the consequences of their conduct or cripple the innocent party who necessarily and reasonably incurred costs in seeking redress from the court: M. (A.C.) v. M. (D.) (2003), 2003 ONCA 18880, 67 O.R. (3d) 181 (C.A.) at para. 45; Y. (J.) v. F. (L.), supra at para. 41. In short, impecuniosity cannot be used to insulate a party from bad faith or from misfortune they created. [9]

[35] This is such a case. To that end, A.M. maintained that the children rejected their father because of his failings. I will not repeat the trial decision. Suffice to say I fundamentally disagree. No costs order will make M.M. whole. However, in the circumstances of this case his share should not be increased on account of A.M.’s financial position.

[36] Taking all that I have written into consideration, including A.M.’s modest success on one of the financial issues, I am of the view that a fair and reasonable cost award for the compensable steps involved in this tragic odyssey is $70,000 on account of fees, $8,160.20 for disbursements plus H.S.T. on both amounts. Those amounts are payable by A.M. to M.M. forthwith.

Grace J. Date: June 4, 2020

Footnotes

[1] That sum was stated to be comprised of fees and disbursements of $101,586.02 plus H.S.T. of $13,206.18. Those numbers total $114,792.20. The applicant’s math doesn’t quite work. Nonetheless, I have used the applicant’s total.

[2] On September 19, 2018, George J. awarded the applicant $1,500 in relation to the applicant’s motion for the sale of the matrimonial home. On June 5, 2019, Tobin J. released reasons dismissing the parties’ motions for summary judgment. The motion judge concluded it was not an appropriate case for costs.

[3] See rule 24(12)(a)(iii).

[4] At para. 21.

[5] 2010 ONCA 196 at paras. 11 and 12.

[6] At para. 11 of her submissions on costs A.M. asserted that she “has been and continues to seek out strategies to help support the children in [sic] access with the Respondent [sic].” The para. referred to a six-page schedule. Under the heading “Strategies to Foster Access”, the respondent listed almost thirty persons/organizations and set forth a narrative concerning each of them. To some extent the schedule is clearly intended to supplement the evidence A.M. provided at trial. That is not permitted. To some extent the schedule also purports to summarize efforts allegedly made after the end of the trial. Those items are irrelevant to the issue of costs of the proceeding to date.

[7] On September 19, 2018, George J. awarded the applicant $1,500 in relation to the applicant’s motion for the sale of the matrimonial home. On June 5, 2019, Tobin J. released reasons dismissing the parties’ motions for summary judgment. The motion judge concluded it was not an appropriate case for costs.

[8] Citing Sepiashvili v. Sepiashvili, 2001 ONSC 25708, 2001 CarswellOnt 3459 (S.C.J.).

[9] See, too, Rappazzo v. Venturelli, 2018 ONSC 4760 (S.C.J.) at para. 17.