Court File and Parties

Court File No.: 72147/14 Date: December 14, 2015

Ontario Court of Justice

Re: Alexandra Pascal – Applicant And: Alexander Mostafev – Respondent

Before: Justice Roselyn Zisman

Heard On: by written submissions

Counsel: Reide L. Kaiser, for the Applicant David Nuri, for the Respondent

Endorsement

Background

[1] This is my decision with respect to costs relating to a motion by the respondent to set aside the default order of January 29, 2015 or in the alternative, to reduce his child support obligations. On November 10, 2015 I released my decision dismissing the Respondent's motion. Counsel were invited to make costs submissions which have now been received.

Position of the Parties

[2] The applicant seeks full recovery of her costs in the amount of $5,800 on the basis that:

a) She was totally successful on the motion;

b) She acted reasonably;

c) Although no formal offer to settle was made, she did informally make an offer to consider the support issues on terms not accepted by the respondent; and

d) The court found that the respondent acted unreasonably.

[3] It is the position of the respondent that there should be an order of no costs or if costs are payable they should not be payable on a substantial indemnity scale on the basis that:

a) The applicant is legally aided and any order of costs will not indemnify the applicant;

b) An order of costs will diminish the respondent's already limited ability to pay child support and therefore adversely affect the best interests of the child;

c) A finding that the respondent did not act in good faith is not a finding that he acted in bad faith;

d) Although the respondent did not make a formal offer to settle he did offer to have income of $35,000 imputed to him outside the courtroom just prior to the motion being argued and at the same time provided disclosure that the applicant had requested as a condition of the order being set aside;

e) The applicant acted unreasonably by making a false allegation in her affidavit in support of the default hearing by alleging that the respondent earned $60,000 of income based on her statement that the parties filed joint returns and it was only when the respondent provided proof that he did not earn that income that she then alleged that he earned a cash income; and

f) The court relied on unsworn evidence from the applicant's counsel regarding the alleged location of ATM deposits and withdrawals when the respondent provided additional disclosure of his bank records, and the applicant's counsel used those records and the court relied upon those records to draw a negative inference against the respondent. As the statements of the applicant's lawyer should not have been admitted, the prejudice caused to the respondent at this stage could be redressed by dismissing the applicant's request for costs.

Applicable Legal Principles

[4] Rule 24(1) of the Family Law Rules ("Rules") provides guidance on costs in a family law context. Rule 24(1) sets out the basic assumption that a successful party is entitled to costs. This provision still permits a court broad discretion in determining if costs should be paid, by whom and in what amount.

[5] Rule 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.

[6] In Serra v. Serra the Ontario Court of Appeal confirmed that the costs rules are intended:

1. to partially indemnify successful litigants for the cost of litigation;

2. to encourage settlement; and

3. to discourage and sanction inappropriate behavior by litigants.

[7] I adopt the comments by Justice Perkins in Biant v. Sagoo:

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.

[8] I am also mindful that the court's role in assessing costs is not necessarily to reimburse a litigant for every dollar spent of legal fees. As was pointed out in Boucher v. Public Council (Ontario):

Overall, as this court has said, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.

[9] The reasonableness of a party's behaviour is an important consideration in family law proceedings. It is a specific factor in Rule 24(11)(b). Further, Rule 24(5) directs the court to consider a party's behaviour from the time the issues arose and if a party served made an offer to settle and the reasonableness of any offer to settle.

[10] 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 Rule 2(2) is met that is, to deal with cases justly. This includes taking appropriate steps to save time and expenses, per Rule 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 issue of costs.

Application of Legal Principles to the Facts of This Case

Offer to Settle

[11] In this case neither party served a formal offer to settle but both counsel in their written costs submissions refer to informal discussions and verbal offers to settle that were made just prior to the motion being argued. It is impossible for a court to determine if either party acted reasonably if such offers to settle are not reduced to writing. Counsel should consider the benefit of serving offers to settle on all motions, as offers to settle only need to be served one day in advance of a motion at which time counsel should be in a position to assess the merits of their case and in many cases motions only deal with single issues which in turn makes an offer to settle easy to draft. Counsel should not be waiting until the morning of the motion to have such settlement discussions.

Scale of Costs

[12] In this case, the applicant is represented by counsel from the Family Law Office and thus is in receipt of legal aid. Although the applicant's counsel has prepared his Bill of Costs on the legal aid scale of $136.43 per hour he submits that costs should be paid at the rate of private counsel with his years of experience. Applicant's counsel relies on the case of Ramcharitar v. Ramcharitar. Counsel for the respondent submits that as a result of applicant's counsel being retained through legal aid, she does not need to be indemnified. Further, he submits that the case of Ramcharitar can be distinguished as in that case the court did not actually award costs but merely concluded that the successful party could submit a Bill of Costs at the counsel's regular rate and not at a substantial indemnity rate and he also distinguished the decision as costs were being requested after a trial.

[13] I find that the case law is well settled that the receipt of legal aid is not a factor that the court should consider in determining costs. It is irrelevant if costs are sought for a motion, a trial or for any other step in a proceeding. As stated in Ramcharitar at para. 25:

the party paying costs simply pays the same amount as they would if the client were not legally aided, in fact to hold otherwise would grant an inadvertent windfall to the party fortunate enough to only have to pay costs to an opposing party on Legal Aid, since the rates would be accordingly reduced.

[14] The nature of the applicant's financial arrangements with legal aid, including the question of whether or not her certificate is contributory or non-contributory, is protected by solicitor-client privilege and is irrelevant to the determination of costs. As stated in Ramcharitar, the costs in the circumstances of a legally-aided client should be assessed as if legal aid were not applicable.

[15] Accordingly, costs to the applicant's counsel should be assessed at a reasonable rate for counsel with his years of experience and whether or not costs are assessed at a substantial or partial indemnity rate should be determined in accordance with the applicable legal principles.

Bad Faith

[16] Rule 24(8) provides 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." The meaning of bad faith in this context was explained by Justice Perkins in C.S. v. M.S.:

In order to come within the meaning of bad faith in subrule 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or other persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith. The requisite intent to harm, conceal or deceive does not have to be the person's sole or primary intent, but rather only a significant part of the person's intent. At some point, a party could be found to be acting in bad faith when their litigation conduct has run the costs up so high that they must be taken to know their behaviour is causing the other party major financial harm without justification.

[17] In this case, although I made a finding that the respondent "did not act in good faith" in his attempt to set aside the default order, that is not the same as finding that the respondent acted in bad faith for the purpose of awarding costs on a full recovery basis. The finding made on the motion that the respondent was not acting in good faith was related to his attempts to conceal his whereabouts from the applicant and therefore his attempts to avoid paying child support or otherwise gain some advantage by using an Ontario address while actually residing in Quebec.

[18] Although I do not find that the respondent acted in bad faith, full recovery of costs can still be awarded absent a finding of bad faith.

Factors to be Considered

(a) Importance, complexity or difficulty of the issues:

I do not accept the submissions of the respondent's counsel that the motion was "not important, complex or difficult" and if it was important it was only important to the respondent who was attempting to reduce the level of child support he was required to pay. The motion was obviously important as it affected the financial best interests of the child. If the respondent was successful in setting aside the final default order, the applicant would have had to begin the proceedings from the outset with further attendances, orders for disclosure and even a possible trial. Both counsel filed facta as the law with respect to setting aside a default order is subject to considerable case law.

(b) Reasonableness or unreasonableness of each party's behaviour in the case:

It is submitted by the respondent's party that the applicant acted unreasonably in misleading the court as to the respondent's income and in the court permitting submissions on facts not in evidence. However, the respondent's counsel is attempting to relitigate the motion. The respondent did not act reasonably in his conduct of this motion; it was his obligation to come to court with full and complete financial disclosure, to submit a reasonable position and to provide a reasonable explanation for his failure to attend court. The respondent's explanations for non-attendance were not accepted by the court. The court also did not accept the respondent's stated financial circumstances. The respondent initially took the position that he should only pay child support of $63 per month based on his income as stated on his income tax return namely, $13,200, he admitted that he made cash but did not quantify the amount and then during submissions offered to pay child support based on $35,000. Both counsel allege that the other party was unreasonable in not accepting the offers to settle made just prior to the motion being argued but as these offers were not in writing and any terms attached to the offers were not specified, I make no findings with respect to the reasonableness or unreasonableness of either party with respect to these offers.

(c) The lawyer's rates:

Counsel for the applicant was called to the bar in 1992 and seeks an hourly rate of $500 per hour which he submits is a reasonable rate commensurate with his experience. Counsel for the respondent submits that the rate should only be based on the legal aid rate but this position is not consistent with the case law. Further, I reject his further submission that to award such a rate would be "cruel". Other than submitting that the legal aid hourly rate should be paid the respondent's counsel has not submitted what he considered to be an appropriate hourly rate or for example indicated what his hourly rate was. Despite the years of experience of the applicant's counsel I find that the hourly rate is high and that generally senior counsel's hourly rates range from $300 to $400.

(d) Time properly spent on the case:

The applicant's counsel spent 11.6 hours on this motion which I find reasonable for meetings with his client, reviewing the respondent's affidavit, preparing a responding affidavit, researching the law, drafting a factum and arguing the motion.

(e) Disbursements:

No disbursements were requested.

(f) Any other relevant matter:

It is submitted that the respondent's financial circumstances are an important factor and that an order for costs would reduce the respondent's ability to pay child support. I accept the general proposition that the financial means of the unsuccessful litigant and the impact a cost award would have on a child should be considered. In this case, the respondent is not the custodial parent and he is not exercising access to the child so the impact of a cost award will not affect his ability to care for the child. Any cost award will of course impact him financially but as the only finding is that income should be imputed at $60,000, a cost order that can be paid in installments will not significantly impact him.

Conclusion

[19] I find that the applicant as the successful party is entitled to her costs. Although it was reasonable for the respondent to bring this motion once he was notified by the Family Responsibility Office that it was enforcing the order, nevertheless he must have been aware there was always a risk that costs would be awarded if his motion was unsuccessful. Therefore there should have been a high incentive for him to provide full and complete disclosure to the applicant and to take a very reasonable position if he wished to be successful in convincing the applicant and the court that the default order should be set aside.

[20] I find that a fair and reasonable amount of costs on a close to full recovery basis but based on a reduced hourly rate is $3,500 payable at the rate of no less than $100 per month.

[21] Order as follows:

1. The Respondent shall pay to the Applicant her costs of $3,500.00 inclusive of all applicable taxes payable at the rate of no less than $100.00 per month.

2. This order shall be enforced by the Family Responsibility Office as a support order.

3. Support Deduction Order to issue.

Justice Roselyn Zisman

Date: December 14, 2015