COURT FILE NO.: FS-21-101830-00 DATE: 2023 02 27

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

O.K.

Shawn M. Philbert, for the Applicant Applicant

- and -

M.H. Respondent Kenna Bromley, for the Respondent

HEARD: In writing

COSTS ENDORSEMENT ON TRIAL OF AN ISSUE

MCGEE J.

Decision

[1] In my reasons released January 11, 2023, I set aside the parties’ Separation Agreement dated April 1, 2015, and found that their date of separation for Family Law Act purposes was December 18, 2019. Having now determined the threshold issues in this proceeding, the matter will proceed on the claims of child support, spousal support, equalization, and the sale of property.

[2] On this trial of an issue Ms. H seeks a full recovery of her costs in the amount of $49,025.26, inclusive of HST. Dr. K asks that neither party pay an award of costs to the other because success was divided, and Ms. H engaged in unreasonable litigation conduct.

[3] Each of Ms. H’s January 27, 2023 Costs Submissions and Dr. K’s February 3, 2023 Costs Submissions contain helpful summaries of the statutory provisions and the caselaw relevant to an award of costs. Within these reasons I will only reference those necessary to a reading of my decision.

[4] Ms. H’s Reply Costs Submissions received on February 7, 2023 were not helpful. Having released her counsel in the interim, her Reply Cost Submissions relitigate the issues decided in my reasons and give evidence on the balance of claims before the Court. None of her Reply Cost Submissions are within the scope of a Reply, that is, none of them respond to an issue relevant to an award of costs that came up for the first time in Dr. K’s Responding Costs Submissions. As a result, I must wholly disregard Ms. H’s Reply Costs Submissions and the attachments thereto.

[5] For the reasons set out below, I find that Ms. H was more successful than Dr. K in this step of the proceeding.

[6] With respect to the scale of costs, Ms. H served a Rule 18(14) Offer to Settle on August 25, 2022 with terms as favourable as the result at trial on the primary issue to be determined: the setting aside of the Agreement. As a result, she is entitled to a full recovery of her costs since August 25, 2022 unless I find that there is a basis to decide otherwise.

[7] In regard to the amount of costs, although Dr. K argues against the amount sought, he has chosen not to disclose his costs of the litigation, so it is difficult to take issue with the amount of costs claimed by Ms. H. After considering Dr. K’s allegations of unreasonable conduct and balancing the factors within Rule 24(12) of the Family Law Rules, I award Ms. H costs in the amount of $36,136.49, being $31,979.19 plus HST of $4,157.30.

[8] I then make a further award of costs to Ms. H because she served a second Rule 18(14) Offer to Settle with a term for the payment of costs that was more successful than the result. Dr. K shall pay a further Order for costs in the amount of $1,243, being the total of $1,100 in fees plus HST of $143.

Reasons

Ms. H is Entitled to Costs

[9] The starting point for an award of costs is deciding who was the successful party. Subrule 24(1) of the Rules creates a presumption of costs in favour of a successful party but sometimes both parties enjoyed a measure of success. Here, Ms. H was successful in setting aside the Separation Agreement and Mr. K was successful in establishing his alternative date of separation.

[10] When success in a case is divided, the court must undertake a comparative analysis and then apportion costs as appropriate. Divided success is not equal success. Most family cases have multiple issues and not all issues are equally as important, time-consuming, or expensive to determine, see Jackson v. Mayerle, 2016 ONSC 1556. When there are a number of issues before the court, it is the dominant issue at trial, and its relation to the Offers to Settle that will inform a costs award: Mondino v. Mondino, 2014 ONSC 1102.

[11] The dominant issue to determine in this proceeding was whether the parties’ April 1, 2015 Separation Agreement should be set aside. The date of separation was only relevant if the Agreement was set aside. If the Agreement was not set aside, it was the end of the litigation for Ms. H, but for a Motion to Change child support. As set out in my reasons for Judgement, the Agreement would have operated to cause her and the children to be out of the home, with no equalization payment, living on $100 per month while Dr. K wholly retained the home and paid no spousal support.

[12] Ms. H made a number of efforts to resolve the enforceability of the Separation Agreement, including a Rule 18 Offer to Settle dated August 25, 2022 [1] which read:

1. The Separation Agreement dated April 1, 2015 executed by the parties shall be set aside.
2. There shall be no costs payable from one party to the other.

[13] Dr. K made no Offer to Settle. At any time. He put his former spouse to the full cost and inherent stress of a court proceeding to set aside a Separation Agreement that I ultimately found to be a sham Agreement.

[14] The failure to make an Offer to Settle is a factor to be considered in an award of costs. When a party fails to provide a reasonable alternative to a judicial determination, and is unsuccessful, he has put the other party to significant and unnecessary costs. There are exceptions, such as when a party does not have sufficient information to make an Offer to Settle. That is not the case here.

[15] As I wrote in Lazare v. Heitner, 2018 ONSC 4861, a comparison of what was sought in the litigation, rather than within the Offers is the primary consideration within a Rule 24(6) (divided success) analysis when parties take an “all or nothing” approach to litigation. In this proceeding, Dr. K made no compromise to his position, not even a partial compromise such as offering to set aside the spousal support release contained in the sham agreement.

[16] As I stated M.Q v. R.C, 2022 ONSC 3349, family law litigants are responsible not only for their own litigation positions; but they are also responsible for the costs of an unreasonable litigation position to the family as a whole. Excessive litigation depletes both parents’ ability to meet future expenses, including the future expenses of their children.

[17] I find that Ms. H was by far the more successful party on the issues that I determined in this Trial. She is entitled to an award of costs.

Scale of Costs

[18] Rule 18(14) of the Family Law Rules provides that

COSTS CONSEQUENCES OF FAILURE TO ACCEPT OFFER

(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. O. Reg. 114/99, r. 18 (14).

On the Setting Aside of the Separation Agreement

[19] Ms. H’s August 25, 2022 Offer to set aside the Separation Agreement without costs entitles her to a full recovery of her costs after August 25, 2022 unless the Court orders otherwise.

[20] Dr. K argues that Ms. H’s costs should be reduced, or she should be deprived of her costs because she behaved unreasonably pursuant to Rule 24(4); but he does not address in his submissions the context in which I must assess reasonableness, which can be found in Rule 24(5):

Successful party who has behaved unreasonably

(4) Despite subrule (1), a successful party who has behaved unreasonably during a case may be deprived of all or part of the party’s own costs or ordered to pay all or part of the unsuccessful party’s costs. O. Reg. 114/99, r. 24 (4).

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. O. Reg. 114/99, r. 24 (5).

[21] Instead, he asks that Ms. H’s costs be reduced for the following reasons:

1. Her deemed participation in the sham agreement diminishes her entitlement to costs.
2. Her refusal to produce full financial disclosure.
3. Her proliferation of affidavit evidence that I found at trial to be inadmissible.
4. Her objection to Dr. K’s attendance by Zoom at the Trial. [2]

[22] I will deal with each reason in turn, the most significant being the first.

[23] To suggest that Ms. H’s participation should reduce her recovery of costs in this proceeding is a misapprehension of the litigation effect of the Agreement. As emphasized in paragraph 62 of my reasons, I found that Ms. H never intended to release her entitlement to spousal support, or her claim of equalization should the parties actually separate.

[24] Upon their actual separation, only Dr. K benefitted from the terms within the sham Agreement. Rather than recognize the document for what it was, he chose to wield it to his advantage. It was an audacious gamble that he lost. On this ground, I see no reason to deprive Ms. H of a full recovery of her costs from the date of the Offer, or, of a partial recovery of her costs for the period prior to August 25, 2022.

[25] Ms. H’s participation in the sham agreement will have its consequence in the mandatory refiling of her Income Tax Returns from 2016 to present. Dr. K will also have a consequence, albeit indirect, as any tax arrears and penalties resulting from the reassessments will reduce Ms. H’s Net Family Property and consequently, increase the equalization payment owing from Dr. K to Ms. H.

[26] Dr. K’s second and third objections do offer a modest basis for a reduction in costs. Ms. H’s litigation conduct in failing to provide the whole of her Income Tax Returns on a timely basis was unreasonable, as was the extensive evidence tendered at trial that was not admissible.

[27] I cannot consider any costs arising from the last proposed ground, being the motion before Justice Baltman necessary to securing Dr. K’s trial attendance by Zoom. It was not before me, and its costs were not preserved to the trial Judge.

[28] I find that Ms. H’s costs on the issue of setting aside the Separation Agreement should be awarded at a partial recovery basis up to August 25, 2022 and a near full recovery for the period thereafter.

On the Date of Separation

[29] The date of separation was an ancillary issue, arising from the setting aside of the Separation Agreement. Dr. K’s position at trial was that the parties separated in 2013. The date determined at Trial was his alternative position: December 18, 2019. Nonetheless, the date of separation it attracts a separate analysis of costs because on this issue, Ms. H was unsuccessful.

[30] A date of separation is distinct from a date of divorce. The former is the date upon which statutory financial obligations between former spouses are determined pursuant to the Divorce Act and the Family Law Act. The latter is the date upon which the legal union between the former spouses is dissolved so that parties are free to remarry.

[31] Ms. H maintained an unreasonable litigation position on the date of separation throughout this proceeding. Her insistence that the parties did not separate until May 29 2021 when Dr. K left the country or thereafter, when his counsel sent a letter inviting a resolution of the legal issues has been unhelpful and a barrier to resolution.

[32] On the issue of the date of separation, Dr. K is entitled to an award of costs. Because he never served an Offer to Settle, I cannot assess a scale of costs beyond a partial recovery. In the absence of a Bill of Costs, I cannot determine what costs were devoted to this stream of the litigation. I am left to consequence this lack of success through a modest reduction to Ms. H’s claim for costs, proportionate to the litigation as a whole.

Amount of the Costs Award

[33] Rule 24(12) requires that when setting an amount of costs, the court 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.

[34] Mr. B has provided a comprehensive Bill of Costs which itemizes Ms. H’s legal fees of $41,288.50 from July 5, 202[2] to the completion of the written closing statements on December 23, 2022, inclusive of fees for associate counsels, law students and law clerks. A further $1,117.50 in legal fees was incurred by counsel thereafter, being the preparation of costs submissions (exclusive of the Reply Costs Submissions that Ms. H later prepared herself.) Disbursements on the trial were capped at $979.19.

[35] Only $9,311.50 of the $41,288.50 incurred in fees accrue to the period prior to the date of service of the August 25, 2022 Offer to Settle, inclusive of fees incurred on August 25, 2022.

[36] Dr. K argues that Ms. H’s legal fees are excessive. Subrule 24 (12.2) of the Rules provides that a party who opposes a claim for costs respecting fees or expenses shall provide documentation showing the party’s own fees and expenses to the court and to the other party. (Emphasis added)

Same, opposing party

(12.2) A party who opposes a claim for costs respecting fees or expenses shall provide documentation showing the party’s own fees and expenses to the court and to the other party. O. Reg. 522/21, s. 9.

[37] Dr. K’s decision not to file a Bill of Costs within his Costs Submissions has significant consequences. I have no way of measuring Dr. K’s objections to the reasonableness and proportionality of Ms. H’s litigation costs in the absence of his own Bill of Costs. Neither can I determine what Dr. K would have reasonably expected to pay in costs were he unsuccessful. The amount that an unsuccessful party has paid in fees and disbursements is a useful benchmark when determining whether costs claimed are fair, reasonable, and proportionate, see Scipione v. Del Sordo 2015 ONSC 5982 (SCJ) and more recently, Zhang v. Guo, 2019 ONSC 5767 (Div. Ct).

[38] An adverse inference may be drawn against a party who fails to provide a Bill of Costs, see: S.W.-S. v. R.S., 2022 ONCJ 11; M.H.S. v. M.R., 2022 ONCJ 28. In other words, Dr. K cannot criticize his former spouse’ legal account while shielding his own.

[39] Justice Aston established the baseline for all awards of costs when he wrote in Delellis v Delellis and Delellis, [2005] O.J. No. 4345 that the overall objective in an award of costs 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.

[40] Here, the reasonable hourly rates charged by Ms. B’s firm and the time spent on the various docketed tasks result in an account that was lower than is often the norm across the GTA. Much work was delegated to the lower cost associate lawyer, law students and law clerks. The overall account is efficient and judicious. I see no duplication of roles between counsels and students, or administrative tasks inappropriately charged as legal fees. The costs incurred were proportionate to the importance and the complexity of the issues.

[41] One can observe throughout the dockets a consistent effort by Ms. H’s legal team to narrow and resolve the issues. Her costs submissions describe and document how those efforts were not reciprocated. I accept that Ms. H’s written closing submissions in reply were lengthier than anticipated because Dr. K exceeded the page limit that I prescribed for his written closing submissions. I see no basis to reduce a full recovery when applying the considerations in Rule 24(12.)

[42] To determine the specific amount of costs payable, I start with an award of costs of $31,977 being a full recovery award on the fees incurred on, and since August 26, 2022. I modestly reduce that amount to $30,000 to reflect my findings in paragraph 26; and then add a partial recovery of the fees charged up to and including August 25, 2022 in the rounded figure of $6,000. I then reduce the total of $36,000 by $5,000 because Ms. H was not successful on her claimed date of separation.

[43] Order to issue that Dr. K shall forthwith pay costs to Ms. H of $36,136.49 being fees of $31,000 and disbursements of $979.19, plus HST of $4,157.30.

Costs of the Costs Submissions

[44] In my reasons for decision, I urged counsels to resolve the issue of costs because this Trial of an Issue is only the first step in a proceeding that is far from over. Ms. H accepted that direction, and on January 16, 2023 she served a formal Rule 18(14) Offer to Settle the costs. She offered an amount of $32,500 to settle a payment of costs, inclusive of fees, disbursements and HST. The Offer was open for acceptance until January 23, 2023. Dr. K made no Offer to Settle the award of costs.

[45] Dr. K’s counsel argues that it was reasonable for him to refuse the Offer to Settle because Ms. H had not yet served her Bill of Costs. This would be an effective argument but for the fact that Dr. K has never served his Bill of Costs. As a result, I am able to make an adverse inference that his costs were as high, or higher than those of Ms. H. His own costs were the measure of the reasonableness of Ms. H’s costs.

[46] In Mattina v. Mattina, 2018 ONCA 867 the Ontario Court of Appeal underlined the purposes of a costs award within a family proceeding: to indemnify a successful litigant, to sanction inappropriate litigation behaviour, to encourage settlement, and to ensure that cases are dealt with justly.

[47] Dr. K has made no Offer to Settle throughout this entire proceeding. Before leaving the country, he was earning at least $225,000 per annum. He has left Ms. H no option but to litigate. She is of modest means, is a single parent to their two children and carries the costs of maintaining a home titled to Dr. K. As written in her January 27, 2023 costs submission, Ms. H has felt “buried in the paperwork and is on her last dollar in funding the litigation.”

[48] Costs orders change litigation conduct when they are consistently awarded to a successful party. Costs are necessary to ensure access to justice. Without the prospect of a meaningful sanction of costs, there is no downside to taking a “catch-me-if-you-can” approach to litigation.

[49] Order to issue that Dr. K shall pay a further amount of $1,243 in costs to Ms. H, being the total of $1,100 in fees, plus HST of $143.

McGee J.

COURT FILE NO.: FS-21-101830-00 DATE: 2023 02 27 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: O.K. - and - M.H. COSTS ENDORSEMENT ON TRIAL OF AN ISSUE McGee J. Released: February 27, 2023

Footnotes

[1] Although originally served in anticipation of a long motion, I consider this an Offer to Settle the proceeding before me as the original motion was converted to a Trial of an Issue.

[2] Dr. Kasmieh offered a fourth ground – that the terms in the August 25, 2022 Offer to Settle were not severable. I have not dealt with this proposal as the fused terms: setting aside the Separation Agreement and there being no costs were to Dr. Kasmieh’s advantage. There was no prejudice to those terms being non-severable.