Court File and Parties
Court File No.: Halton 428/10 Date: October 23, 2014
Ontario Court of Justice
Re: Michael Anthony Krause – Applicant And: Georgia Zadow – Respondent
Before: Justice Roselyn Zisman
Counsel: Julie Quirt for the Applicant William Kort for the Respondent
Heard On: By written submissions September 23 and October 7, 2014
Introduction
[1] A trial regarding the Applicant's motion to change the terms of a separation agreement with respect to obligations to pay child and spousal support was heard on July 30th and August 27th, 2014 and with written reasons released on September 9, 2014. The Applicant began the motion to change based on his loss of employment. The parties made submissions relying on document briefs and the transcripts of questioning. The Applicant also testified and was cross-examined regarding his current circumstances as he had just obtained new employment prior to the trial.
[2] The terms of the separation agreement provided that the Applicant pay child support for the three children in the amount of $2,358 per month and spousal support in the amount of $1,654 per month. The separation agreement provided for no termination date of the spousal support but that it could be reviewed.
[3] The Applicant's position at trial was that he should pay child support based on his actual income of $72,000 whereas the Respondent's position was that income should be imputed to the Applicant in the amount of $100,000 based on his past ability to earn income in this amount. The Applicant also sought to reduce spousal support to $700 per month for three more years and then further reduce support to $500 per month to be terminated after five years. The Respondent sought spousal support to be continued based on the Applicant's imputed income of $100,000. The Applicant also sought an order rescinding any outstanding arrears that was opposed by the Respondent.
[4] The reasons for decision did not impute income to the Applicant, rescinded all arrears and reduced spousal support to $700 per month but upheld the terms of the separation agreement that spousal support would not be terminated but could be reviewed or changed as a result of a material change in circumstances.
[5] The Applicant was therefore successful on all of the issues except for the issue of terminating spousal support by a fixed date.
Position of the Parties
[6] The Applicant submits that he was the successful party and seeks costs on a partial indemnity basis of $17,022.75.
[7] The Respondent submits that the Applicant was not successful as his motion to change requested income be imputed to him at only $26,000 and he was not successful in his request to have his obligation to pay spousal support be time-limited. It is also submitted that the legal fees are excessive. It is further submitted that if costs are awarded the Respondent's limited financial circumstances should be considered.
Settlement Attempts and Offer to Settle
[8] The Applicant's counsel attempted to settle the issues informally by correspondence to the Respondent's counsel on September 18, 2013 and the Respondent's counsel made a counter-proposal on December 9th, 2013. Counsel for the Applicant characterized the correspondence as an offer to settle that was not withdrawn and that provided for child support higher than ordered at trial and provided for no readjustment of the arrears. Although such correspondence is not a proper offer to settle in accordance with subrule 18(4) of the Family Law Rules, it can still be considered in a determination of costs. However, in this case the settlement proposal for spousal support was lower and time limited and the settlement terms were not severable.
[9] Counsel for the Respondent served a formal offer to settle on June 17th, 2014 that provided that support be based on the Applicant's income of $100,000 with child support of $1,845 per month and spousal support of $778 per month and arrears fixed at $11,000.
[10] Counsel for the Applicant served a formal offer to settle on July 25th, 2014 and based on an income of $72,000 offered to pay child support of $1,393 per month, spousal support of $700 per month but time-limited, arrears being fixed at $4,000 and each party to pay their own costs. The terms of the offer to settle were not severable.
[11] The Applicant was the successful party on all issues except for time-limited spousal support. However, the results obtained at trial were not more favourable than the offer to settle made to the Respondent.
Applicable Legal Principles
[12] Subrule 24(1) of the Family Law Rules provides guidance on costs in a family law context. Subrule 24(1) sets out the basic assumption that a successful party is entitled to costs. Subrule 24(6) also confirms that if success is divided the court may apportion costs as appropriate. These provisions still permit a court broad discretion in determining if costs should be paid, by whom and in what amount.
[13] Subrule 24(11) provides a further list of factors a court should consider in dealing with costs:
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 behavior in the case;
c. the lawyer's rates;
d. the time properly spent on the case, including conversations between the lawyer and the party, 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.
[14] In Serra v. Serra, 2009 ONCA 395, at paragraph 8, the Ontario Court of Appeal confirmed that costs rules are designed to foster three important principles:
to partially indemnify successful litigants for the cost of litigation;
to encourage settlement; and
to discourage and sanction inappropriate behavior by litigants.
[15] I also agree with the comments by Justice Perkins in Biant v. Sagoo, at paragraph 3693, that:
the preferable approach in family law cases is to have cost recovery generally approach full recovery, so long as the successful party has behaved reasonably and the costs claimed are proportional to the issues and the result.
[16] I am also mindful that the court's role in assessing costs is not necessarily to reimburse a litigant for every dollar spent on legal fees. As was pointed out in Boucher v. Public Counsel (Ontario), the award of costs must be fixed in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceedings rather than an exact measure of actual costs to the successful litigant.
[17] Subrule 24(11)(b) relates to the reasonableness of each party's behavior in a case.
[18] In considering if a party acted reasonably, subrule 24(5) directs the court to consider if a party served an offer to settle and the reasonableness of any offer to settle.
[19] Subrule 24(5) provides that:
(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.
[20] Offers to settle are an essential part of family litigation. The parties and counsel have a positive obligation to conduct their cases to ensure that the primary objective of subrule 2(2) is met, that is, to deal with cases justly. This includes taking appropriate steps to save time and expenses, per subrule 2(3). Offers to settle play an integral role in saving time and expenses by promoting settlements, focusing parties and often narrowing the issues in dispute. Offers to settle are therefore important in any consideration of the issues of costs. It is often more productive to serve severable offers to settle as such a practice assists in narrowing the issues.
[21] The consequences of an offer to settle are set out in subrule 18(14) as follows:
(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.
Application of Legal Principles to the Facts
[22] In this case, as outlined above, the Applicant's offer to settle was less favourable than the order. It is submitted by counsel for the Respondent that it was not served within the proper timelines as it was not served at least seven days prior to the hearing. Although it is debatable as to whether a motion to change is still only a motion and only one day's notice is required once a trial is ordered on a motion to change, the better practice in my view is for any offer to settle to be served seven days in advance. Also from a practical point of view, motions to change are complex and counsel and a party require more than one day's notice to seriously consider an offer to settle. In this case, I find that the provisions of subrule 18(14) do not apply with respect to the Applicant's offer to settle.
[23] The Applicant was successful on the main issue of whether or not income should be imputed to him and on the issue of arrears being rescinded but not successful on the issue of setting a time-limit on his obligation to pay spousal support. Although success was divided, the most contentious issue and the issue that involved the majority of the time was imputing income to the Applicant. The issues of the amount of support and the rescinding of arrears flowed from that issue. Much less time was spent on the issue of time-limited spousal support.
[24] Overall, I find that the Applicant was more successful than the Respondent and is presumed to be entitled to his costs. I do not agree with the Respondent's submission that the level of success should be measured against the Applicant's position in his motion to change as opposed to his position at trial. When the Applicant commenced his motion to change he was not employed and it was reasonable that he request support be reduced accordingly. However, just before trial the Applicant obtained employment and he quite reasonably took the position that his support obligations be based on his new income.
[25] In determining the amount of costs, I have considered the legal principles and the following factors as set out in Rule 24(11):
a. The importance, complexity or difficulty of the issues: The issues were not legally complex although the results of the case were very important to both parties.
b. The reasonableness or unreasonableness of each party's behavior in the case: The Applicant acted reasonably throughout the proceedings. He paid half of his employment income to the Respondent, drew on savings and did not seek a retroactive adjustment of support for any overpayment he made. Although the Respondent was unsuccessful in having income imputed to the Applicant she did not act unreasonably in view of the financial issues at stake. Counsel conducted the trial in a cost-efficient manner.
c. The lawyer's rates: Ms. Quirt who was counsel at trial has 4 years of experience and her hourly rate is $250 and no issue is taken with this rate being reasonable. Time was also docketed for senior counsel Douglas Quirt who has 38 years of experience and bills $467.50 per hour. It is submitted by the Respondent's counsel that this hourly rate is excessive as compared to his own hourly rate of $350 per hour and based on his 36 years of experience. I am not prepared to find Mr. Quirt's hourly rate excessive as in my experience it is within the range of rates charged by senior counsel.
d. The time properly spent: In addition to the 10.7 hours spent by Douglas Quirt and the 37.45 hours spent by Julie Quirt, the bill of costs indicates that three law clerks and one legal assistant spent a further 40.83 hours. The hourly rate for these assistants is $80.00. There are only general headings for the work done by both counsel and their legal assistants. The headings are mostly for the same work so that it is impossible to know who did what and when and if there is duplication. It is also not possible to determine whether the work done by the law clerks is actual legal work or if it is purely clerical work that should not be chargeable to the opposite party. A bill of costs should clearly set out the dates and times and the specific work done so that the court can then determine if the time spent was appropriate and if the work done should properly be considered legal as opposed to clerical work. I am prepared to allow the time spent by both counsel despite the lack of clarity regarding the specific work done by each counsel as that time is reasonable but I would not allow any time for the work of either the law clerks or legal assistant.
e. The expenses properly paid and payable: The usual disbursements are claimed and the amount of $1,514.70 that includes the cost of transcripts from the questioning are reasonable.
f. Any other relevant matter: The Respondent's ability to pay is a relevant factor. The Respondent's income apart from spousal support is less than $10,000. She has no savings and her only assets are her home and her motor vehicle. The Respondent was required to re-mortgage her home when the Applicant could no longer pay support in accordance with the terms of the separation agreement.
[26] In considering all of these factors, I find that the Applicant is entitled to costs fixed at $9,500.00 inclusive of disbursements and applicable taxes.
Order
The Respondent, Georgia Zadow shall pay to the Applicant costs fixed at $9,500.00 inclusive of disbursements and applicable taxes.
The Family Responsibility Office shall enforce this order as a support order.
Support Deduction order to issue.
Justice Roselyn Zisman
Date: October 23, 2014