Court File and Parties

Court File No.: D54126/11 Date: 2012-06-13

Ontario Court of Justice Toronto North Family Court

Between:

Dylan Jones Applicant

- and -

Johan Hugo Respondent

Counsel:

• Alex Finlayson, for the Applicant
• Reginald M. McLean, for the Respondent

Heard: In Chambers

Justice: S.B. Sherr

Costs Endorsement

Part One - Introduction

[1] On April 17, 2012 I made a temporary order that the respondent pay the applicant spousal support in the sum of $1,125 per month starting on June 1, 2011. I made a repayment order with respect to arrears and set out terms to secure the payment of support. I also made financial disclosure orders. Written costs submissions were invited.

[2] The applicant made costs submissions. The respondent, who was self-represented at the hearing of this motion, wanted to retain counsel, and sought an extension of time to serve and file his responding costs submissions. This request was granted. I have now received and reviewed those submissions.

[3] The applicant seeks costs of $20,615.23, payable forthwith and enforceable as support by the Family Responsibility Office.

[4] The respondent concedes that the applicant was the successful party on the motion and proposes that costs of the motion be fixed in the sum of $5,000.

Part Two – Legal Considerations

[5] The Ontario Court of Appeal in Serra v. Serra, 2009 ONCA 395 stated 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.

[6] The applicant's counsel included details of settlement negotiations in his costs submissions. I only considered actual offers to settle as set out in rule 18 of the rules in making this ruling.

[7] Neither party made an offer to settle that would attract the costs consequences set out in subrule 18 (14) of the Family Law Rules (the rules).

[8] In making this decision, I 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.

[9] This case was important to the parties. It was made far more difficult and complex by the respondent's behaviour.

[10] I find that the applicant's behaviour was reasonable in this case. While his offers to settle were not better than the final result, they were close.

[11] The rates charged by the lawyers for the applicant were reasonable. Mr. Finlayson (the second and current lawyer for the applicant) only charged his fees at a legal aid rate. He could have made a claim at his private rate. See: Ramcharitar v. Ramcharitar at paragraph 25 and Alvarez v. Smith at paragraphs 17-19.

[12] My analysis of the appropriate scale of costs and the time spent by counsel on the case will be discussed in two parts. The first part is the work that was performed by the applicant's first lawyer, Shulman Law Firm (Shulman). The second part is the work performed by Mr. Finlayson.

Part Three - The First Lawyer

[13] The applicant was represented by Shulman from May 19, 2011 until August 17, 2011, when he filed a Notice of Intention to act in Person. He retained Mr. Finlayson on October 12, 2011.

[14] The applicant claims Shulman's private fees of about $5,000 plus disbursements and H.S.T., within his overall costs claim. Shulman prepared the original application and motion materials on behalf of the applicant. The respondent did not attend on the first return date for the motion. On June 2, 2011, Justice Marvin Zuker made a temporary support order that the respondent pay the applicant $1,333 per month. Costs were reserved.

[15] The applicant then attempted to proceed on a default basis. I required him to serve his Form 23C affidavit in support of his request for a final order on the respondent.

[16] The respondent subsequently moved to set aside Justice Zuker's order claiming that he had not been properly served with the original motion materials. On August 8, 2011, I made Justice Zuker's order without prejudice, made my first financial disclosure order and reserved costs.

[17] The applicant is entitled to costs for this part of the case. The respondent refused to pay him any spousal support. He had to proceed to court to obtain this. However, the respondent achieved some success in preventing the applicant from proceeding on a default basis and having Justice Zuker's offer made "without prejudice". I will award the applicant partial indemnity costs for the first part of the case.

Part Four – The Second Lawyer

4.1 Court Appearances

[18] The matter returned before me on October 17, 2011. The parties entered into a consent order requiring further financial production by the respondent and questioning of him. Costs were not reserved on that day. The applicant is not seeking costs for that appearance.

[19] On January 17, 2012, the parties entered into another consent that required the respondent to provide further financial disclosure. This was processed by a Form 14B, over-the-counter motion.

[20] The applicant questioned the respondent over two days in 2012. The motion was argued on April 12, 2012.

4.2 Bad Faith and Scale of Costs

[21] The applicant seeks a finding that the respondent acted in bad faith. Subrule 24(8) of the rules states that 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. Persistent refusal by a party to make accurate financial disclosure and reveal their true income may rise to the level of bad faith. DePace v. Michienzi; Kardaras v. Kardaras, 2008 ONCJ 616. That is the case here.

[22] In my reasons for decision I made the following findings of fact that support making a finding of bad faith under subrule 24 (8):

(a) The respondent structured his business affairs to put his assets outside of the applicant's reach.

(b) The respondent appeared determined not to reveal his true income to the government, the applicant or the court. He knowingly failed to provide accurate financial disclosure.

(c) The respondent gave several different estimates of his income and prepared two different sets of income tax returns, none of which he filed.

(d) The respondent only partially complied with financial disclosure orders and did not provide reliable evidence about his income.

(e) The respondent attempted to deduct substantial personal expenses from his business income, in an effort to reduce his income for support purposes.

(f) The respondent showed no indication that he would comply with court orders. He was in substantial arrears of support, having almost completely disregarded Justice Zuker's temporary order.

(g) The respondent did not properly comply with undertakings given on questioning.

(h) The respondent threatened to go bankrupt if required to pay support to the applicant.

(i) The respondent was playing a game of "catch me if you can".

[23] A clear message needs to be sent to payors who act in this manner that such behaviour is unacceptable. It is critical to the integrity of the family law system that such behaviour be met with meaningful costs consequences. This was far more than bad record-keeping as alleged by the respondent. It went beyond the threshold of unreasonable behaviour to an attempt by the respondent to deceive the court about his income. See: S. (C.) v. S. (M.).

[24] The finding of bad faith applies to the second part of the costs claim – the work performed by Mr. Finlayson. This is when the respondent began to actively engage in behaviour that extended from unreasonable behaviour to bad faith.

[25] The applicant will be entitled to full recovery costs for the second part of the case after October 17, 2011.

4.3 Time Properly Spent on the Case

[26] The respondent argued that the time claimed by Mr. Finlayson (90 hours) was excessive. He submitted that there was an overlap between the time claimed by Mr. Finlayson and his law clerk and that the time charged by Mr. Finlayson for reviewing the file after he took it over from Shulman amounts to a duplication of charges. He submits that time claimed by Mr. Finlayson for settlement negotiations should not be included. He also argued that much of the time spent on questioning would also be attributable to the trial step and shouldn't be fully allocated towards the motion. The respondent relies on Delellis v. Delellis and Delellis, where Justice Aston 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.

[27] I carefully reviewed the dockets of Mr. Finlayson. There is some merit to the respondent's submissions. There appeared to be some overlap of time spent on the motion when there was a transition from Shulman to Mr. Finlayson. I won't include Mr. Finlayson's time spent preparing for the October 17, 2011 appearance as costs were not ordered. I also won't include all the time claimed for settlement negotiations, as the parties were attempting to resolve all issues between them, and some of that time would not be specific to this step in the case. See: Husein v. Chatoor, 2005 ONCJ 487 per Justice Robert Spence. There was also some duplication in the applicant's motion material. Mr. Finlayson prepared a fresh affidavit for the applicant, essentially redrafting the applicant's narrative once he was retained. I don't fault him for doing this, but the respondent shouldn't have to pay twice for the same work.

[28] The extensive amount of time spent on the case by Mr. Finlayson was primarily caused by the actions of the respondent. The respondent tried to hide his income. Mr. Finlayson did an outstanding job in revealing it. This was not an easy process. The applicant had a dilemma. While the time Mr. Finlayson spent on the case might at first blush appear to be out of proportion to the amount in dispute, his options in this case were to spend the time necessary to establish his imputed income claim or spend less time on the matter and possibly fail to prove the claim. The respondent placed the applicant in this dilemma by acting in bad faith. Such behaviour dictates that the court be generous in reviewing the time claimed by counsel faced with this situation. To do otherwise, only encourages the obstructive party. These "chase" files are time-intensive. Disclosure (what there is of it) usually comes in increments. The case requires constant review to stay on top of outstanding disclosure and undertakings. Continual analysis must be conducted by counsel to put together the financial puzzle pieces and establish the payor's true income. That was the case here. It was the meticulous nature of the applicant's presentation that was essential in establishing the respondent's income.

[29] Mr. Finlayson clearly had to spend considerable time organizing the partial disclosure received from the respondent about his two businesses and personal affairs in a form that was comprehensible for the court, as the respondent did not do this.

[30] I find that the entire time spent questioning the respondent, analyzing the questioning and incorporating it into the motion material was time properly attributable to the motion. All of this work was necessary for the applicant to achieve his successful result. However, none of it should be included in any future costs claim made by the applicant.

[31] I find the work claimed for Mr. Finlayson's law clerk to be reasonable. I reviewed the dockets and did not see duplication of services. The applicant's use of the law clerk saved the respondent from an even larger costs claim.

Part Five – Balance of Factors and Conclusion

[32] I find the applicant's claim for costs, subject to the comments set out above, to be fair and proportionate. He could have claimed Mr. Finlayson's fees at a private rate. He is only asking to be compensated for the actual time spent by counsel.

[33] I find that the disbursements claimed by the applicant were reasonable. The major disbursement was $2,633 for transcripts and reporter fees. My previous comment that the full costs of questioning apply to the motion, equally apply to the disbursements arising out of the questioning. There were also significant photocopy costs incurred by the applicant. There were six continuing records before the court.

[34] I have also considered the respondent's ability to pay the costs award. Based on the level of income imputed to him, I find that he has the ability to pay the costs that will be awarded.

[35] Taking into account of all of these considerations I fix the costs of the applicant for the appearance before Justice Zuker on June 2, 2011, the appearance before me on August 8, 2011 and this motion at $15,000, inclusive of H.S.T., fees and disbursements. The costs are to be enforceable as an incident of support by the Family Responsibility Office and are payable forthwith.

Date: June 13, 2012

Justice S.B. Sherr