Court File and Parties

Court File No.: Toronto DFO 11129/10 Date: 2012-04-18 Ontario Court of Justice

Between: Clifford K. Boland, Applicant

— And —

Elizabeth Boland, Respondent

Before: Justice E. B. Murray

Reasons for Decision on Costs released on April 23, 2012

Counsel:

• Fareen L. Jamal, for the applicant
• Alexandra Seaton, for the respondent

MURRAY J.:

[1] Introduction

This is my decision about costs claimed in the motion brought by the Applicant Clifford Boland ("Cliff") seeking an initial reduction followed by a termination of his obligation to pay spousal support to his former wife Elizabeth Boland ("Elizabeth") pursuant to a 2004 separation agreement registered with this court. Cliff asked that the reduction in support payments be made retroactively, commencing January 1, 2010.

[2] Divided Success and Costs

Neither party enjoyed clear success in the action, whether success is measured against the claims made in the pleadings or against the offers to settle open for acceptance at the commencement of trial. Rule 24(6) provides that in such a case, the court may award costs "as appropriate." Courts have found that if success was divided but one party was markedly more successful than the other, that the more successful party is entitled to some costs, absent considerations of bad faith or unreasonable behaviour.

[3] Parties' Positions on Costs

Elizabeth submits that she was more successful than Cliff and asks that Cliff be ordered to pay her costs in an amount of $74,682.95. This represents complete indemnity to her for all her costs since the commencement of the action. Cliff argues that Elizabeth was not more successful than he, and submits that Elizabeth's litigation conduct was unreasonable. He asks that she pay him costs of $30,000 (which represents approximately 50% of his costs) or, alternatively, that each party should bear their own costs.

Parties' Positions and Offers

[4] The Separation Agreement and Initial Claims

The agreement provided that Cliff pay Elizabeth spousal support of $6,000 monthly, subject to a material change in circumstances and a review de novo after a specified time. In his motion to change issued in December 2010, Cliff asked that the support payment be reduced to $4,500 monthly. Elizabeth opposed any reduction, and asked that Cliff pay her monies owing under a cost-of-living clause in the agreement.

[5] Settlement Offers

Each party submitted two offers which were open for acceptance immediately before the trial commenced.

[6] Elizabeth's First Offer (July 5, 2011)

On July 5, 2011, Elizabeth offered to settle on the following terms:

• A reduction of support payments to $5,000 monthly commencing August 1, 2011, with no further reduction permitted regardless of any change in circumstances.
• Resolution of litigation between the parties about the Boland Family Trust on terms favourable to Elizabeth;
• A lump sum payment of $50,000.

[7] Cliff's First Offer (July 8, 2011)

On July 8, 2011, Cliff offered to settle on the following terms:

• Spousal support would be reduced in a step-down manner:
  • Commencing January 1, 2011, $3,500 monthly;
  • Commencing July 1, 2011, $3,000 monthly;
  • Commencing January 1, 2012, $2,500 monthly;
  • Termination as of December 31, 2012.
• Cliff would be at liberty to change the beneficiary of his IPP pension and his RRSP's (the agreement provided that he was to maintain Elizabeth as the beneficiary of these plans).
• The overpayment of support created by acceptance of the offer was to be credited to future support payments.

[8] Elizabeth's Second Offer (September 26, 2011)

On September 26, 2011, Elizabeth offered to settle the action by a reduction of support payments to $5,000 monthly commencing January 1, 2012, and payment of $15,390, her calculation of the amount owing to her pursuant to the cost-of-living clause. The additional terms of Elizabeth's July 2011 offer were removed from this offer.

[9] Cliff's Second Offer (October 7, 2011)

On October 7, 2011, Cliff offered to settle on the following terms:

• Reduction of support payments to $3,000 monthly, terminating on the earlier of December 31, 2012 or his death;
• Elizabeth to agree to rescission of the cost-of-living clause;
• Cliff to be at liberty to change the beneficiary of his IPP pension and his RRSP's.

[10] Amendment to Motion to Change

At the hearing scheduled for October 25, 2012, Cliff moved to amend his motion to change to claim more extensive relief. I allowed that amendment, and he claimed:

• Reduction of support payments to $3,000 monthly commencing January 1, 2010, to be terminated December 31, 2010, or,
• in the alternative, reduction of support payments to $3,000 monthly commencing January 1, 2010, with a further reduction to $2,000 monthly commencing January 1, 2011, and termination on December 31, 2011.
• Cliff to be at liberty to change the beneficiary of his IPP pension and his RRSP's.

[11] Withdrawal of Relief

Before the case came to a hearing, Cliff withdrew his application for this last head of relief.

[12] The Court's Order

My order was as follows:

• Cliff to pay support to Elizabeth in an amount of $5,000 monthly commencing January 1, 2011; $4,600 monthly commencing January 1, 2012; and $3,900 monthly commencing January 1, 2013.
• Cliff to pay Elizabeth $9,412.98 owing under the cost of living clause in the agreement.

I did not order a termination.

Preliminary Motions

[13] Rulings on Preliminary Issues

I made rulings on two preliminary issues with respect to the hearing, one made on a 14B motion brought by Cliff to clarify the procedure for the hearing, and the other on the motion referred to above brought by Cliff seeking to amend his motion to change.

1. Procedure for the hearing. Cliff's lawyer argued that the hearing should be conducted on affidavit evidence alone, and Elizabeth's lawyer argued that the hearing should be viva voce. The case management judge had not given direction on this point. Rule 15 provides for a hearing on affidavit evidence, unless the court orders otherwise. I ordered a hybrid process.

2. Motion to amend motion to change support. Elizabeth opposed the motion. Following the principle that such amendments should be permitted, unless the opposing party is prejudiced in a way that cannot be accommodated (for example, by an adjournment or by an award for costs thrown away), I allowed the amendment.

[14] Reservation of Costs Decision

I reserved a decision about costs on both motions until the conclusion of the trial, and will decide those issues now.

[15] Costs on Hearing Procedure Motion

With respect to the motion concerning hearing procedure, given the default rule in Rule 15, the onus was on Elizabeth to take steps if she wished a viva voce hearing. The issue could have been resolved at an earlier conference, but was left until a few days before the hearing and required a separate, although brief, attendance. I find that Elizabeth should pay costs of $750 to Cliff with respect to this motion.

[16] Costs on Amendment Motion

With respect to the motion to amend, I would have awarded costs against Elizabeth, but I also take into account that Elizabeth would be entitled to receive her costs thrown away with respect to the additional work caused by the amendment. For that reason, I award no costs on that motion.

Success

[17] Overall Success

I have concluded that Elizabeth was more successful than Cliff in this litigation.

[18] Disputed Sub-Issues

I did not accept either party's arguments on many of the sub-issues in the case.

[19] Issues Decided Against Cliff

With respect to Cliff:

• I did not accept Cliff's submission that his Suncor pension should not be included in his income for the purposes of support.
• I did not accept Cliff's contention that he was completely retired from business, and imputed income to him.
• I assessed the amount of Cliff's IPP pension that should be included in income for support purposes as higher than the figure he submitted.
• I did not make the retroactive order requested by Cliff.

[20] Issues Decided Against Elizabeth

With respect to Elizabeth:

• I found that the hearing was a review de novo, and not, as she argued, a case in which Cliff was required to demonstrate that there had been a material change in circumstances since the date of the agreement.
• I found that Elizabeth had not made reasonable efforts to contribute to her own support, and imputed income to her.
• I found that, although Peter Spellicsy had no obligation to contribute to Elizabeth's support, she derived a financial benefit from the cohabitation, and ordered a lower amount of spousal support than I would have otherwise.
• I ordered a lower amount payable pursuant to the cost-of-living clause in the agreement than Elizabeth requested.

[21] Quantum of Support

With respect to quantum of support, the amounts in my order were higher than those proposed by Cliff and lower than those proposed by Elizabeth.

[22] Key Issue: Termination of Support

However, Elizabeth was more successful than Cliff on the key, overarching issue in this case—whether Cliff's support obligation should be terminated. Cliff asked for a termination by December 31, 2011, or alternatively by December 31, 2012. His offers to settle put forth a similar position, adding another possible earlier termination date, the date of his death. I did not make an order that terminated Elizabeth's support. I ordered ongoing spousal support in a step-down amount, with a continuing quantum of $3,900 monthly, subject to change upon a material change in circumstances in the future.

Was Elizabeth's Litigation Conduct Unreasonable?

[23] Finding on Conduct

Because of the success which Elizabeth enjoyed on the issue of whether her support should be terminated, I would order that Cliff contribute to some of her legal costs, unless her litigation conduct was so unreasonable as to deprive her of any costs. I do not make that finding, and address the issue of the reasonableness or unreasonableness of each party's conduct below. Elizabeth is entitled to some costs from Cliff.

Quantum of Costs

[24] Relevant Factors

I address the factors set out in Rule 24(11) relevant to the determination of quantum of costs.

[25] Importance, Complexity or Difficulty of the Issues

The issue of Cliff's obligation to pay support to Elizabeth was important to both parties. Some of the legal issues involved some difficulty—e.g., whether Cliff's Suncor pension was included in income for support purposes.

[26] Reasonableness or Unreasonableness of Each Party's Behaviour

In their initial offers to settle, each party included terms on issues outside the purview of this litigation, terms that were unfavourable to the other party. Cliff asked that he be permitted to amend the provisions of the separation agreement to change the beneficiary of his IPP pension and his RRSP's; Elizabeth included terms which would have resolved the litigation about the Boland Family Trust in her favour. It was unreasonable to expect that the other party might accept a term clearly unfavourable to him or her, a term which could not be ordered by the court if the matter proceeded to trial. In my view, these tactics indicate unreasonable litigation behaviour, in that they compounded the issues and did not advance settlement. In Elizabeth's later offer, she omitted these extraneous terms; Cliff did not.

[27] Lawyer's Rates

Cliff had no criticism of the rates of Elizabeth's lawyer. I find the rates to be reasonable.

[28] Time Properly Spent on the Case

Overall, a similar amount of time on the case was spent by the lawyers, law clerks, or articling students for each party. (Cliff's legal costs are lower than Elizabeth's in part because the time of the law clerk and articling student was written off as a learning experience.)

[29] Exceptions to Reasonableness of Time Spent

I find the time spent by Elizabeth's lawyer to be reasonable, except in two respects:

1. I agree with the submission of Cliff's lawyer that time for reviewing or organizing the file in intra-office meetings is not properly included in a bill of costs. See Beneteau v. Young, 2010 ONSC 33.

2. The bill of costs submitted by Elizabeth's lawyer did not discriminate between time spent on prior steps in the case, such as the two case conferences held, and time properly considered by me—time devoted to the initial pleadings and to preparation for and attendance at trial. There was substantial work done to obtain and review disclosure, work which could properly be attributed to both preparation for a case conference and to preparation for trial. No order as to costs was made in either case conference and, pursuant to Rule 24(10), I should not now consider costs stemming from work related to those conferences.

[30] Reduction of Bill of Costs

The itemization in the bill of costs does not allow me to easily reduce the amount charged in reference to these two factors. In the absence of a better guideline, I will reduce it by 1/3, leaving an amount of $49,788.63 for consideration by me.

[31] Tax Deductibility of Legal Fees

I agree with the submission of Cliff's lawyer that the fact that Elizabeth can claim a tax deduction for legal fees spent to obtain spousal support should be considered in this analysis. However, I do not agree with the submission that I should take this factor into account by reducing the fees under consideration by a marginal tax rate of 43%. Justice George Czutrin considered this issue in Pollitt v. Pollitt, 2011 ONSC 3162. In determining costs to be awarded, he took into account that the tax deductibility of legal fees provides a partial indemnification of costs, but he did not deduct any specific sum from costs to be awarded on account of this factor. He observed:

"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."

In Peraud v. Peraud, 2011 NSSC 80, Justice Elizabeth Jollimore took the support recipient's ability to take a tax deduction for her legal fees into account by deducting from total fees the amount of her projected tax saving.

[32] Application of Tax Deductibility Factor

In this case, I think that it would be fair and reasonable to reduce Elizabeth's total costs by her projected tax savings stemming from tax deductibility. I was not given a calculation of these savings. Taking into account the reduced support I have ordered, Elizabeth's average tax rate is approximately 22%; the legal fees which I consider, if reduced by that proportion, total $38,835.13.

[33] Final Costs Award

Taking into account all the relevant factors discussed, I order that Cliff pay costs of $19,000 to Elizabeth, less the $750 ordered against her with respect to the preliminary motion, leaving an amount of $18,250 owing. All of this amount shall be enforceable as support.

Released: April 23, 2012 Signed: "Justice E. B. Murray"

Footnotes

[1] E.g., Likins v. Mackenzie, (2004) O.J. 2236 (S.C.J.)

[2] Except for 2011—the order for that year is the same amount proposed by Elizabeth.

[3] In assessing the issue of "success" Cliff urged me to consider that it was, until October 25, 2011 (the date I allowed an amendment to Cliff's motion to change), open to Elizabeth to simply consent to the relief originally sought—a reduction of support to $4,500 monthly. Cliff points out that this result would have been more advantageous to Elizabeth than what I eventually ordered, and asks that I reject any argument that Elizabeth enjoyed success in this action. I decline to do so for two reasons. First, as I observed in the trial decision, Cliff, in his motion to change, significantly underestimated his income for the years in question. Elizabeth could not be expected to agree with Cliff's request to reduce support until she had accurate income information. Second, as Cliff's lawyer acknowledges, even if Elizabeth had agreed with his initial request to reduce support, Cliff would have quickly brought a second motion asking for a further reduction and termination of support.