Court File and Parties

Date: 2017-03-24

Court File No.: Toronto D 62219/13

Ontario Court of Justice

Between:

Catherine Elizabeth Melchior Applicant

–and–

Gregory Matthew Melchior Respondent

Before: Justice Curtis

Written submissions re the Amount of Costs

Endorsement released on 24 March 2017

Counsel:

• Solmaz Separy for the Applicant
• The respondent is unrepresented

Index

1. Overview
2. The Parties' Claims re Costs
3. Background
4. Litigation History
5. The Costs Analysis
6. Order

Overview

This is the costs decision regarding the trial of the father's motion to change the order of Sherr, J. made 14 November 2014 regarding child support. The motion to change sought to reduce support and rescind arrears. On 24 May 2016 the court dismissed the father's motion to change and ordered costs to the mother. The only issue outstanding is the amount of costs.

The Parties' Claims re Costs

The parents made written submissions regarding costs in accordance with a timetable ordered. The mother claims costs under Rules 18 and 24 of the Family Law Rules, in the amount of $7,534.58 all in (fees plus disbursements), on a full recovery basis. While the father opposed the mother's claim for the amount of $7,534.58, it was unclear in his written submissions what amount of costs he thought was appropriate.

Background

The father (the moving party), born 6 February 1967, is 50 years old. The mother (the respondent), born 16 March 1970, is 47 years old. The parties were married on 19 October 1996 and separated on 3 June 2007. They were divorced on 30 April 2010. They have one child, Ireland Alexandria, born 7 April 2002, now 14 years old.

Litigation History

The Original Application

The original litigation was contested but the father's pleadings were struck on 8 July 2014 by Sherr, J. for his failure to comply with disclosure orders and his failure to pay costs. On 14 November 2014 Sherr, J. made a final order for the following (among other things):

a. $1,114 child support per month on imputed income of $130,000 from 1 January 2011;

b. $243 per month for s. 7 expenses from 1 October 2014;

c. Arrears of s. 7 expenses fixed at $9,862.68; and,

d. Costs of $12,000 (enforceable as support).

The father did not appeal the order.

The Motion to Change

The motion to change was started by the father on 25 January 2016. The father asked to reduce support to $200 per month, based on his current income of 0, starting 1 March 2016, and to rescind arrears of $79,014 entirely.

[7] In the motion to change the mother was represented by a lawyer, and the father was unrepresented.

[8] The father is a well-educated, professionally accomplished person with a high-income earning potential and history. He was obstructive in producing financial disclosure and the court drew an adverse inference against him as a result. He was responsible for blameworthy conduct. He knowingly underpaid child support, and did not provide disclosure. These findings were all originally made by Sherr, J. in the decision in the original litigation on 14 November 2014, and were also made in the decision on the motion to change delivered 24 May 2016.

[9] In the original litigation, the father was given several opportunities to make disclosure and was warned of the consequences of failing to do so. As well, he did not pay $1,000 in costs awarded by Sherr, J. on 1 May 2014. His pleadings were struck on 8 July 2014, and four months later, on 14 November 2014, Sherr, J. made final orders. He had four months after the pleadings were struck in which to comply with the disclosure order, pay the costs order, and ask to be allowed to participate in the court case again, and he did not do so. He did not appeal either the order striking his pleadings, nor the final support order. Sherr, J. ordered costs of the original litigation of $12,000 on 14 November 2014, and he did not pay those costs.

[10] In the motion to change Sherr, J. also made a disclosure order on 6 May 2016 and put the father on notice that failure to comply with court orders allows the mother to ask the court to draw an adverse inference. As well, Sherr, J. set out a strict timetable for the conduct of the Rule 1 hearing, and ordered that no additional material would be filed by either side.

[11] The father was given several indulgences by the court in the motion to change. There was $13,000 in costs outstanding from the original application, and neither the case management judge (Sherr, J.) nor the trial judge (Curtis, J.) stayed or struck out or dismissed his motion to change for failure to pay those costs. Instead the motion to change was permitted to proceed and be determined on the merits. As well, despite Sherr, J.'s order of 6 May 2016 that no further evidence would be permitted, the father was allowed to file further affidavit material in the case, and was allowed to file it outside the time lines ordered.

[12] The motion to change was dismissed as no material change in circumstances had taken place. It was startling how many of the findings made by Sherr, J. in 2014 continue to be the case, and were expressly set out in the evidence presented in the motion to change.

[13] The Ontario Court of Appeal has stated clearly that a motion to change is not an appeal and that non-disclosure should not be rewarded: Gray v Rizzi 2016 ONCA 152, para. 26, 30, 34.

[14] What the father wanted at the motion to change was a "do over"[1]. He had this evidence available to him in 2014 in the original application, but he did not present it to the court, and he wanted to present it to the court now. He did not take any steps in the four month period between the two orders in 2014 (the order striking his pleadings and the final order for support). He did not appeal either of those orders. He cannot now come to court with the same evidence that was available in 2014 and ask the court to make a different order. That is an appeal, not a motion to change.

The Costs Analysis

The Law of Costs

Entitlement

[15] 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 three specific principles:

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.

[16] Modern costs rules are designed to foster three fundamental purposes: Fong v. Chan, 46 O.R. (3d) 330, para. 24:

(a) to indemnify successful litigants for the cost of litigation;

(b) to encourage settlement; and

(c) to discourage and sanction inappropriate behaviour by litigants.

The Evolution of Costs as an Instrument of Social Policy

[17] 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.

[18] 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., para. 26.

[19] 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., para. 25.

Offers to Settle

[20] Offers to settle are a significant part of the landscape in family law in Ontario. They are important to the possible resolution of cases. In addition, they are important to determining costs.

[21] 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.

[22] 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, para. 7.

[23] 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.

[24] 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 the motion should also be examined.

[25] 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:

1. If the offer relates to a motion, it is made at least one day before the motion date.
2. 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.
3. The offer does not expire and is not withdrawn before the hearing starts.
4. The offer is not accepted.
5. The party who made the offer obtains an order that is as favourable as or more favourable than the offer.

[26] Both parties served Offers to Settle.

[27] 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.

[28] Rule 18 (16) invites consideration of any and all offers to settle: Osmar v. Osmar, 2000 (Ont. Sup. Ct.), para. 7.

Behaviour of the Parties

[29] One of the purposes of costs is to change behaviour.

[30] Family law litigants are responsible for and accountable for the positions they take in the litigation: Heuss v. Sarkos, 2004 ONCJ 141, and Peers v. Poupore, 2008 ONCJ 615, para. 62.

[31] 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., para. 20.

[32] Matrimonial litigation is an occasion for sober consideration and thoughtfulness rather than intemperate behaviour: Heuss v. Sarkos, 2004, Ont. Ct., para. 20.

[33] 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.

[34] 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.), para. 11.

Quantum of Costs

[35] 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.

[36] 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..

[37] 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.

[38] In determining the amount of costs on this motion, the court took into account these factors set out in R. 24 (11), as follows:

a) The importance, complexity or difficulty of the issues: Although the motion was important to the parents, it was neither complicated nor difficult. However, the mother's lawyer needed to review the materials from the original application to prepare for the motion to change;

b) The reasonableness or unreasonableness of each party's behaviour in the case: A finding of unreasonableness is not necessary to the making of a costs order. There were findings about the father's unreasonable behaviour made by Sherr, J. on 14 November 2014, which findings were echoed and made again at the decision in the trial on 26 May 2016. He failed to make court ordered disclosure, and failed to pay costs orders. He filed a large amount of material on the motion to change. He was essentially asking the court in the motion to change for a "do over". He did not provide evidence of a material change in circumstances. The mother made a reasonable offer to settle. The father's offer to settle was far below the amounts in the order made. His behaviour in the motion to change was unreasonable;

c) The lawyer's rates: The rate claimed for the mother's lawyer was reasonable, given her level of experience and expertise. The rate was not the subject of comment or objection by the father;

d) The time properly spent on the case: The time spent by the mother's lawyer was reasonable, under these circumstances, given the issues at stake, the claims made by the father, and particularly given the need to review material from the original application, and the large amount of material filed by him on the motion to change; and,

e) Expenses properly paid or payable: The disbursements claimed by the mother (total $169.70) were very modest. These items were not the subject of comment or objection by the father.

[39] The father has previously been ordered to pay costs twice in the original litigation and he has not paid any of the costs ordered:

a) $1,000 on 1 May 2014 by Sherr, J.; and,

b) $12,000 on 14 November 2014, by Sherr, J.

[40] Substantial costs have been ordered against the father in this matter, and those costs have not been paid. Despite costs orders against him, the father has not changed his behaviour in this litigation. He continues to pursue matters he has been unsuccessful in. He has not got the message that this litigation is not a forum for carrying on in whatever manner he chooses, and that there are consequences for the choices he makes about the conduct of the court case.

Order

[41] The father was ordered on 24 May 2016 to pay the mother's costs of the trial. A fair and reasonable costs order, and one that is proportionate to the issues involved, in all of the circumstances of this motion to change, is $7,500 all in (fees plus HST, and disbursements plus HST). The costs shall be enforced as support.

[42] The costs orders against the father now total $20,000. The payment of costs by him shall be taken into account in any further request by him to bring a motion to change.

Released: 24 March 2017

Justice Carole Curtis

[1] "Do over": this kind of request by payors and the use of this term to describe this request is now so frequent in motion to change litigation that it hardly merits the continuing use of quotation marks.