Court File and Parties

Court File No.: D54419/11

Ontario Court of Justice Toronto North Family Court

Between:

Dianne Boehm Applicant

- and -

George Eric Peters Respondent

Counsel: Ken Nathens, for the Applicant Joan C. Manafa, for the Respondent

Heard: In Chambers

Justice: S.B. Sherr

Costs Endorsement

[1] On February 24, 2012 I made a temporary order that the respondent pay child support and a proportionate share of the child's orthodontic expenses starting on July 1, 2011. I rejected the respondent's request to reduce the child support based on a claim of undue hardship. I invited costs submissions in writing. Both parties have now made those submissions.

[2] The applicant seeks her costs of the motion fixed at $3,000 inclusive of disbursements and HST. The respondent asks that no costs be payable.

Legal Framework for Costs

[3] The Ontario Court of Appeal in Serra v. Serra, 2009 ONCA 395 confirmed 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.

[4] Subrule 24(1) of the Family Law Rules (the rules) creates a presumption of costs in favour of the successful party. Consideration of success is the starting point in determining costs. 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. Lawson v. Lawson. The position each party took at trial should also be examined.

Offers to Settle

[5] Subrule 18(14) of the Family Law Rules (all references to rules in this endorsement are the Family Law Rules) 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 The offer does not expire and is not withdrawn before the hearing starts.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.

[6] The applicant made two offers to settle the issues on the motion. The first offer to settle was dated December 14, 2011. The terms of my order were as favourable to the applicant as the terms set out in her offer. The offer to settle complied with all of the conditions set out in subrule 18(14).

[7] The respondent submitted that he did not receive the first offer to settle until he received the applicant's second offer to settle. The second offer to settle, he submitted, was contained in correspondence from the applicant's lawyer to the respondent's lawyer, dated February 10, 2012.

[8] The applicant provided the court with an affidavit of service with respect to the first offer to settle. The affidavit indicates that on December 16, 2011 the offer was mailed to the respondent, at the address provided by the respondent in his Answer. I am satisfied that the offer was properly served on the respondent.

[9] The second offer to settle contained a provision that the respondent transfer his interest in a property to the applicant to pay her support arrears. Such a provision is beyond the jurisdiction of this court to make. I cannot say that the second offer to settle was more favourable to the applicant than the final result. Further, the offer was not signed by the applicant and accordingly was not in the form prescribed by subrule 18(4). I do note that the amounts sought by the applicant in this offer for child support were more favourable to the respondent than the amounts awarded by the court and demonstrated a sincere effort by the applicant to fairly resolve the issues on this motion.

[10] The respondent retained counsel on February 1, 2012. He made his own offer to settle dated February 15, 2012. He offered to pay child support at $300 per month on a prospective basis. The order that the court made was more than double that amount. The respondent also proposed that the applicant pay all of the child's remaining orthodontic expenses, after he submitted the bills to his insurer (who insure 50% of this expense). This court ordered that the respondent pay his proportionate share of the remaining amount of the expense after insurance coverage. The respondent did offer to transfer his interest in his property to address the claim for support arrears. Overall, the respondent's offer to settle did not come close to the final result.

[11] The position taken by the applicant on the motion was similar to that contained in her first offer to settle, while the position taken by the respondent on the motion was similar to that contained in his offer to settle.

[12] The applicant was the successful party.

[13] My final comment with respect to the offers to settle is that both parties proposed a final custody order in favour of the applicant with reasonable access by the respondent. This was a minor issue, but some credit should be given to the respondent for quickly resolving this issue.

[14] I find no reason to deviate from the costs consequences set out in subrule 18(14). The applicant made a very reasonable offer to settle on December 16, 2011 and maintained that position through the hearing of the motion. The respondent maintained an untenable position. He clearly should have accepted the applicant's offer and needlessly increased the cost of this case.

Factors in Assessing Costs

[15] In making this decision I have also considered the factors set out in subrule 24(11) of the rules 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.

[16] This motion was important to the parties, but it was not complex or difficult.

[17] The applicant made reasonable offers to settle the motion. The respondent didn't.

[18] I have reviewed the lawyer's rates. They are reasonable for a lawyer of his skill and experience.

[19] I have reviewed the bill of costs of the applicant and find it to be fair and proportionate for a motion of this nature. Most of the work billed for the motion is attributable to the period after the first offer to settle was sent. The applicant is not claiming the full amount set out in the bill of costs ($3,254).

[20] I find the expenses claimed by the applicant to be reasonable.

[21] I have also 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.

Respondent's Financial Circumstances

[22] The respondent argued that any costs order should be reduced due to his difficult financial circumstances, relying on MacDonald v. Magel. I fixed the respondent's income at $71,321 per annum for support purposes. He has RRSPs that he valued at $20,000. I find that the respondent has the ability to pay this costs order and it shouldn't be reduced due to his financial circumstances.

Tax Deductibility of Legal Fees

[23] The primary issue on this motion was child support. In Pollitt v. Pollitt, 2011 ONSC 3162, Justice George Czutrin found that courts should take into consideration, when fixing costs, that a support recipient is entitled to fully deduct their legal fees when seeking or enforcing support. Justice Czutrin wrote in paragraph 66:

[66] The tax deductibility of Mrs. Pollitt's legal fees provides for a partial, even if minimal, indemnification of her costs beyond the costs award this court orders. As such, it works towards fulfilling the purpose of partial indemnification identified in Serra. As noted by the Court of Appeal in Boucher v. Public Accountants Council (Ontario), 48 C.P.C. (5th), 188 O.A.C. 201, at para. 37, "the failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice". In the past Mrs. Pollitt has received value from her ability to deduct her legal fees. The likelihood that she will be able to receive such value through a deduction again is reasonable when assessing costs. While I have not been provided with any calculations of the comparative after tax cost of legal fees of the parties, I did have tax calculations when I previously considered the issue as discussed. Costs are not intended to be a precise mathematical calculation. I am also mindful of the need to not discourage pursuit of legitimate support claims by concern over possible reduction of costs awards because of the tax deductibility, however, on a fact specific basis, based on amounts involved, and as part of the overall considerations and position of the parties.

[24] After receiving costs submissions, I asked counsel to provide me with software calculations of the income tax benefits the applicant would receive by deducting legal fees at various ranges. The calculations show that if the mother deducted $2,500 from her income for her legal fees she would reduce her annual tax liability by $1,140.

Costs Award

[25] Taking into account all of these factors I order that the respondent pay the applicant her costs of this motion fixed at $2,000, inclusive of fees, disbursements and HST. He shall have 45 days to pay these costs.

Justice S.B. Sherr

Released: March 30, 2012