Court File and Parties
Court File No.: Toronto D 50645/10 Date: 2013-09-16 Ontario Court of Justice
Between:
Dusanka Sabo, Applicant
— AND —
Misko Sabo, Respondent
Before: Justice Carole Curtis
On written submissions for costs
Endorsement released on: 16 September 2013
Counsel:
- Teresa Ciccone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . for the Applicant
- The Respondent appeared unrepresented
CURTIS, J.:
INDEX
- Overview
- The Parties' Claims re Costs
- Litigation History
- The Costs Analysis
- Order
Overview
This is the costs decision in a motion to change an agreement regarding spousal support. The separation agreement provided for spousal support of $1,000 per month for the wife.
The motion to change was brought by the husband in April 2012, asking to end spousal support, starting 1 April 2011. In response the wife asked the court to increase spousal support, starting 1 January 2012.
The evidence disclosed no change in circumstances that would be sufficient to justify changing the spousal support agreement. Both motions to change were dismissed (endorsement dated 25 March 2013).
The Parties' Claims re Costs
The wife was represented at the motion to change, and the husband was not.
The wife claimed substantial recovery costs in the amount of $17,194.70, all in, or partial recovery costs of $10,168.36, all in, under Rules 18 and 24 of the Family Law Rules, O. Reg. 114/99, as amended.
The husband claimed that there should be no costs for either party, that each should bear their own costs.
Litigation History
The litigation surrounding the motion to change was acrimonious. The motion to change was the second time in two years that the husband had tried to stop spousal support. After paying spousal support for only one year, the husband's lawyer advised the wife's lawyer on 11 March 2011 that he intended to stop paying spousal support. There were letters between the lawyers and the wife provided financial disclosure. Nothing happened for awhile.
In April 2012, the wife was served with the motion to change, retained a lawyer, and served and filed a response. The husband's lawyer suggested they do questioning, and they did in July and August 2012.
The first written Offers to settle were exchanged in August 2012. The husband proposed $350 per month, and the wife proposed $1,000 per month (the amount in the agreement). As the case continued without resolution, the wife's offers began to increase (to $1,500 per month) and to include her costs of the litigation, questioning and the negotiations. Negotiations continued but the husband did not increase his offer to settle until 8 November 2012, when he proposed $777 per month. The husband's lawyer stopped acting for him on 30 November 2012.
The husband did not incur any costs for preparing the disclosure materials filed on the motion, nor for the transcripts. The wife paid for those things, despite efforts to get the husband to agree to share those costs.
The husband finally offered $1,000 per month on 18 December 2012, but did not offer any specific costs. On 24 January 2013, the wife offered $1,350 per month and no costs. Both those offers were rejected.
The motion to change was argued over a full court day (on 29 January and 6 March 2013). On the first day the motion was argued, the husband conceded that he would continue to pay $1,000 per month to the wife, but that he would not pay costs.
The motion involved two days of cross-examinations and the preparation of transcripts. The wife's lawyer prepared a large brief of disclosure, and a factum with authorities included.
The parties had made offers to settle this matter, and they were not far apart on the settlement proposals, but they were unable to resolve the issue of costs.
Both motions to change were dismissed. There had been no material change in circumstances.
The Costs Analysis
- These are the findings on the motion to change that are relevant on the issue of costs:
a) The parties had reached a comprehensive agreement, with the assistance of lawyers, which they intended to be a final settlement of all the issues between them. The husband started trying to stop the spousal support only one year after he had started paying it;
b) The husband was represented by a lawyer at the signing of the separation agreement, at the time of the first request to end the support, and at the start of the motion to change;
c) At the motion to change, the parties agreed that the separation agreement was a valid subsisting contract. Neither party suggested the agreement was in any way subject to attack at the time it was signed. Neither party was asking to have the agreement set aside;
d) The spousal support provisions of the separation agreement were notable for what was not included:
i. There was no terminating event, time limit or review provision for the spousal support;
ii. There was no cost of living clause;
iii. There was no provision that the wife was expected to earn income;
iv. There was no clause terminating support if the wife lived with someone in a spousal relationship;
v. There was no statement of the incomes of the parties at the time the agreement was signed, and no statement of the income of the payor upon which the spousal support was based;
vi. There were no financial statements or income tax returns attached to the signed agreement;
e) The parties did not provide any evidence of the method used to calculate the $1,000 per month of spousal support;
f) The motion to change was not a hearing to determine whether or not the wife was eligible for spousal support, as the separation agreement acknowledged the wife's eligibility for spousal support. Unless there had been a material change in circumstances since the agreement was signed, that issue was decided;
g) Given the ages of the spouses at the signing of the separation agreement (the husband 66 and the wife 57) it would have been the intention of the parties that the wife would stop working at some point. The husband was already retired at both separation and at the signing of the separation agreement. There was no obligation in the separation agreement on the wife to earn any income, and no obligation for her to contribute to her own support. The wife worked until she was 60, as the husband had; and,
h) Both parties made offers to settle over a period of time. However, the husband held onto his position that he should pay no spousal support or very little spousal support for a long period of time, causing the wife to incur ever increasing legal fees in the court case. By the time the husband moved his position to the $1,000 per month that the agreement provided for, the wife had incurred substantial legal fees and was unwilling to settle without some costs.
The Law of Costs
Entitlement
- The courts have a broad discretion to award costs. The general discretion of the courts regarding costs is contained in the Courts of Justice Act, s. 131(1), which sets out specific principles regarding costs:
(a) the costs of a case are in the discretion of the court;
(b) the court may determine by whom costs shall be paid; and,
(c) the court may determine to what extent the costs shall be paid.
- Modern costs rules are designed to foster three fundamental purposes: Fong v. Chan, 46 O.R. (3d) 330, 181 D.L.R. (4th) 614, para. 24, and Serra v. Serra, 2009 ONCA 395:
(a) to indemnify successful litigants for the cost of litigation;
(b) to encourage settlement; and
(c) to discourage and sanction inappropriate behaviour by litigants.
Rule 2 (2) of the Family Law Rules adds a fourth fundamental purpose for costs: to ensure that the primary objective of the rules is met – that cases are dealt with justly. This provision needs to be read in conjunction with rule 24 of the rules: Sambasivam v. Pulendrarajah, 2012 ONCJ 711, para. 37.
Neither party is presumed to be entitled to costs under Rule 24(1), as neither was successful on their motion to change. The other criteria for determining costs must be taken into consideration, that is, the need to encourage settlement, the need to discourage and sanction inappropriate behaviour by litigants, and the need to ensure that the prime directive of the rules is met.
The Evolution of Costs as an Instrument of Social Policy
The traditional purpose of an award of costs was to indemnify the successful party in respect of the expenses sustained. For some time, however, courts have recognized that indemnity to the successful party is not the sole purpose, and in some cases not even the primary purpose, of a costs award. The principle of indemnification, while paramount, is not the only consideration when the court is called on to make an order of costs; indeed, the principle has been called "outdated" since other functions may be served by a costs order, for example to encourage settlement, to prevent frivolous or vexatious litigation, and to discourage unnecessary steps. This change in the common law was an incremental one when viewed in the larger context of the trend towards awarding costs to encourage or deter certain types of conduct, and not merely to indemnify the successful litigant: British Columbia (Minister of Forests) v. Okanagan Indian Band, [2002] S.C.R. 371, paras. 21-24.
The traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner's litigation expenses to the loser, rather than leaving each party's expenses where they fall, they act as a disincentive to those who might be tempted to harass others with meritless claims. In addition, because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court's concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. In this sense it is a natural evolution in the law to recognize the related policy objectives that are served by the modern approach to costs: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2002, S.C.C., supra, para. 26.
When awarded on a full recovery scale, costs can serve to express the court's disapproval of unreasonable conduct during the litigation: Prinzo v. Baycrest Centre for Geriatric Care, para. 76.
Modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer. Costs can also be used to sanction behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2002, S.C.C., supra, para. 25.
Offers to Settle
Offers to settle are a significant part of the costs landscape in family law in Ontario. They are important to the possible resolution of cases. In addition, they are important to determining costs.
Parties and their lawyers have a positive obligation to behave in ways which enable the court to move cases forward to resolution (Rule 2). Rule 2(4) imposes a duty on parties and their lawyers to promote the primary objective of the rules to deal with cases justly (Rule 2(2)). This includes taking appropriate steps to save time and expense (Rule 2(3)). Offers to settle play an important role in saving time and expense by promoting settlements, focusing parties and often narrowing issues in dispute: Laing v. Mahmoud, 2011 ONSC 6737, para. 7.
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.
The costs consequences of offers to settle are set out in Rule 18 (14) 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:
If the offer relates to a motion, it is made at least one day before the motion date.
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.
The offer does not expire and is not withdrawn before the hearing starts.
The offer is not accepted.
The party who made the offer obtains an order that is as favourable as or more favourable than the offer.
- The court has a discretion to take into account any written offer to settle, the date it was made and its terms, even if Rule 18(14) does not apply to the offer to settle, when exercising its discretion over costs (Rule 18(16)).
COSTS — DISCRETION OF COURT
18 (16). When the court exercises its discretion over costs, it may take into account any written offer to settle, the date it was made and its terms, even if subrule (14) does not apply.
Rule 18 (16) invites consideration of any and all offers to settle: Osmar v. Osmar, para. 7.
In deciding whether a party has acted reasonably or unreasonably in a case, the court shall examine the reasonableness of any offer the party made (Rule 24(5)(b)): M. (J.V.) v. P. (F.D.), 2011 CarswellOnt 13510, ONCJ 616.
Offers to settle are important and can be the yardstick by which to measure success. They are significant in determining both liability for costs and quantum: Osmar v. Osmar, 2000, Ont. Sup. Ct., supra, para. 7.
The husband's offers to settle were unrealistic and far from the results of the motion to change. There was no legal basis on which to stop the wife's spousal support.
Analysis
Costs and Reasonable Behaviour
- Rule 24 (5) provides criteria for determining the reasonableness of a party's behaviour in a case (a factor in Rule 24 (11)(b)). It reads as follows:
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.
Family law litigants are responsible for and accountable for the positions they take in the litigation: Heuss v. Sarkos, 2004 CarswellOnt 3317, 2004 ONCJ 141, and Peers v. Poupore, 2008 ONCJ 615, para. 62.
The unreasonable conduct of an unsuccessful litigant is a factor in both the awarding of costs and in fixing the amount of costs. The court should express disapproval of a litigant who proceeds to court without adequate evidence to prove their claims, and should send the message that the successful party should have redress by awarding costs on a full recovery basis.
A finding of bad faith is not a condition precedent to full recovery of costs by the other side under the Family Law Rules: Osmar v. Osmar, 2000 (Ont. Sup. Ct.), supra, para. 11.
Behaviour of the Parties
Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly for the purposes of this case, oblivious to the mounting costs of the litigation: Heuss v. Sarkos, 2004, Ont. Ct., supra, para. 20.
Matrimonial litigation is an occasion for sober consideration and thoughtfulness rather than intemperate behaviour: Heuss v. Sarkos, 2004, Ont. Ct., supra, para. 20.
One of the purposes of costs is to change behaviour. The justice system is a precious public resource, as is court time. Access to the justice system and to court time by individuals must be balanced with the need to ensure that the resource is available for all those who need it. This is one of the purposes of Rule 2.
It is regrettable that this much time and effort was spent on these two motions to change. These parties appear to be of modest means.
This case should not have come to court at all, and once it did come to court, it should have settled. Courts must discourage this behaviour. Unless courts discourage this behaviour, it will continue and increase. Orders for costs are one way to discourage this behaviour.
Costs and Ability to Pay
Ability to pay may be relevant to the issue of the quantum or scale of costs, but not to another party's entitlement to costs: Izyuk v. Bilousov, 2011 CarswellOnt 14392, 2011 ONSC 7476, para. 51.
Success is given presumptive pre-eminence in Rule 24. While Rule 24(11)(f) does permit the consideration of ability to pay (under the umbrella of "any other relevant matter"), it is given significantly less prominence than the presumption that costs will follow success: Biant v. Sagoo.
Ability to pay alone cannot, nor should it, over-ride the other factors in Rule 24(11): Peers v. Poupore, 2008, (Ont. Ct.), supra, para. 42.
The (financial) means of the unsuccessful party may not be used to shield him from liability for costs, particularly when he has acted unreasonably: Gobin v. Gobin, 2009 ONCJ 278, para. 24.
The husband was unreasonable in bringing the motion to change in these circumstances, and in not making more reasonable settlement proposals earlier. He is the author of his own misfortune. He should not be shielded from liability for costs in this case merely due to a limited ability to pay costs. To do this would allow those of limited financial means free license to litigate unreasonably. That is not consistent with the current law of costs.
Quantum of Costs
Determining the amount of costs is not simply a mechanical exercise. Costs must be proportional to the amount in issue and the outcome: Boucher et al. v. Public Accountants Council for the Province of Ontario.
The over-riding principle is reasonableness. 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: Boucher et al. v. Public Accountants Council for the Province of Ontario, 2004, Ont. C.A., supra.
The factors to consider in determining the amount of costs in family law matters are (Rule 24(11)):
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.
- In determining the amount of costs, the court took into account the factors set out in R. 24 (11), as follows:
a) The importance, complexity or difficulty of the issues: although the case was important to the parties, it was neither complicated nor difficult. This case should not have come to court, and once it did, this case should have settled;
b) The reasonableness or unreasonableness of each party's behaviour in the case: The husband was unreasonable in bringing the motion to change in these circumstances, and in not making more reasonable settlement proposals earlier. However, the wife also brought a motion to change in which she was unsuccessful. She, too, must accept responsibility for some of the cost of the litigation;
c) The lawyer's rates; the rates claimed by the wife's lawyer were reasonable for her level of experience, and the expertise required to prepare for and conduct this motion; and,
d) The time properly spent on the case: both sides spent too much time on this case, given the facts and the circumstances. The court is obliged to bring a proportionality analysis to the time spent.
The dynamics on this case are all too common, and cry out for judicial response. In a troubled economy there are more unrepresented parties in family court, and certainly more people with limited finances. Inevitably, these ingredients create greater strains on the administration of justice. Combined with limited judicial resources, the need to encourage settlement and discourage inappropriate behaviour by litigants has never been more pressing: Izyuk v. Bilousov, 2011, Ont. Sup. Ct., supra, para. 58.
It must be made clear to family law litigants that there is no right to a day in court, or at least, that the right to a day in court is tempered with the requirement that the parties take a clear-headed look at their case before insisting on their day in court. The court must sanction this behaviour clearly, or it will invite more of this behaviour.
The wife is entitled to some costs of this motion to change, as she took more reasonable positions throughout, and for a substantial period of time, while the husband was continuing to seek no spousal support (an unrealistic expectation in these circumstances), or dramatically reduced spousal support. But the wife is not entitled to full recovery costs, as she also brought an unsuccessful motion to change. Had she not asked to increase support, she would likely have been awarded her full recovery costs of this matter.
Order
The court must determine an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case. This determination is not merely an arithmetical exercise of calculating time spent by a suitable hourly rate.
The costs award in this case should take into account and reflect the amount of work necessary for the wife to respond to the husband's claims.
The over-riding principle in determining the amount of costs is reasonableness. A fair and reasonable costs award, in all of these circumstances, is $10,000 all inclusive (fees + HST, disbursements + HST). The husband shall pay the wife's costs in the amount of $10,000, enforceable as support.
The husband shall not bring a motion to change without permission from the court obtained in advance, with a Form 14B motion and no more than two pages in support. The request for permission shall not be served on the other side unless the court orders. The payment of the costs ordered shall be a factor for the court in determining whether permission should be granted.
Released: 16 September 2013
Justice Carole Curtis