Court File and Parties

Court File No.: D81454/15

Ontario Court of Justice

Between:

Ling Liu Applicant

- and -

Sai Meng Acting in Person Respondent

Heard: In Chambers

Justice: S.B. Sherr

Costs Endorsement

Background

[1] On September 1, 2017, the court heard the trial of the respondent's (the father's) motion to change, where he sought to substantially reduce child support arrears that had accumulated under a default order made by the court on August 5, 2015 (the existing order).

[2] The court had imputed annual income of $133,000 to the father, for the purpose of calculating his support obligation for the parties' 2 year old child. The existing order required the father to pay the applicant (the mother) the Child Support Guidelines table amount of $1,136 per month. The father asked the court to reduce his support payments to be based on a minimum wage income ($183 per month), from the date of the existing order until the date of trial.

[3] The court gave oral reasons at the conclusion of the trial, dismissing the father's motion to change his support arrears.

[4] The court provided the parties with the opportunity to make written costs submissions and gave a strong message to the father that it would be wise for him to settle the costs issue. It was not settled.

[5] The applicant (the mother) seeks her full recovery costs of $8,249. The father asks that no costs be paid.

Legal Framework for Costs

[6] 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.

[7] Sub-rule 2(2) of the Family Law Rules (all references to rules in this endorsement are to 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. See: Sambasivam v. Pulendrarajah, 2012 ONCJ 711.

[8] Modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. Costs can 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. When awarded on a full recovery scale, costs can serve to express the court's disapproval of unreasonable conduct during the litigation. See: Sabo v. Sabo, 2013 ONCJ 545.

Entitlement to Costs

[9] Subrule 24(1) creates a presumption of costs in favour of the successful party. Consideration of success is the starting point in determining costs. See: Sims-Howarth v. Bilcliffe. The mother was the successful party and the presumption that she is entitled to costs was not rebutted.

Bad Faith Analysis

[10] The mother asked the court to make a finding of bad faith against the father, pursuant to subrule 24(8), based on the findings of facts made by the court at trial. Subrule 24(8) reads as follows:

BAD FAITH

24(8) 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.

[11] Subrule 24(8) requires a fairly high threshold of egregious behaviour, and as such a finding of bad faith is rarely made. See: Cozzi v. Smith, 2015 ONSC 3626; Scipione v. Del Sordo, 2015 CarswellOnt 14971. There is a difference between bad faith and unreasonable behaviour. The essence of bad faith is when a person suggests their actions are aimed for one purpose when they are aimed for another purpose. It is done knowingly and intentionally. See: S.(C.) v. S.(M.). Bad faith is not synonymous with bad judgment or negligence; rather, it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity.

[12] Persistent refusal by a party to make accurate financial disclosure and reveal their true income may rise to the level of bad faith. See: DePace v. Michienzi; Kardaras v. Kardaras, 2008 ONCJ 616; Jones v. Hugo, 2012 ONCJ 381. That is the case here.

Findings of Fact at Trial

[13] In dismissing the father's motion to change the court made the following findings of fact:

a) The father was not a credible witness.

b) The father attempted to misrepresent his income.

c) The father failed to disclose in his financial statement large sums of cash that he kept in his safe at home.

d) The father was earning additional undeclared income as an underground card dealer.

e) The father could not reasonably explain his finances. He had claimed that he earned nominal income in 2015 and 2016. This evidence was clearly false.

f) The court did not accept the father's explanations about the sources of large sums of money going in and out of his bank account and noted his explanations kept changing.

g) The father led a very comfortable lifestyle during the relevant period, despite his claim of earning nominal income. He spent significant money on his vehicle, trips, liquor and clothes.

h) The father had chosen not to work (for declared income) for about one year – instead frequently gambling with his friends.

i) The father had selfishly failed to support his child.

Bad Faith Finding

[14] 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 behaviour 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.); Ayow v. James, 2013 ONCJ 563.

[15] The court finds that the father acted in bad faith. The mother is entitled to her full recovery costs, payable immediately.

Quantum of Costs

[16] In making this decision, the court considered the relevant factors set out in subrule 24(11), 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.

[17] The case was important for the parties. It was not complex or difficult.

[18] The rates claimed by counsel for the mother are reasonable.

[19] The mother claimed costs for two case conferences where costs were not reserved. Subrule 24(10) sets out that costs are to be determined in a summary manner after each step in the case by the presiding judge. A "step" in the case is one of the discrete stages recognized by the rules such as a case conference, settlement conference and the like. See: Husein v. Chatoor, 2005 ONCJ 487. The trial judge should not deal with requests for costs that were addressed or should have been addressed at these prior steps in the case. See: Islam v. Rahman, 2007 ONCA 622. The mother is not entitled to her costs for these conferences.

[20] However, a party is entitled to claim time spent for meetings with the client and reviewing and preparing pleadings and financial statements as this is time not attributable to any one step in the case. See: Czirjak v. Iskandar, 2010 ONSC 3778. Costs accrued from activity not specifically related to the step (not requiring judicial intervention) should be dealt with at the end and not by the motions judge. See: Houston v. Houston, 2012 ONSC 233; Walts v. Walts, 2014 ONSC 98.

[21] The costs of the June 23, 2017 case conference were reserved. The mother is entitled to her costs for that appearance. She will also be entitled to some, but not all of her time spent preparing for that conference, as much of that time claimed was also applicable to the subsequent case conference dates, where costs were not reserved.

[22] The father made late disclosure of his financial records. The mother's counsel needed to spend additional time to review this disclosure and identify the inconsistencies in the father's evidence. The court finds that this additional time spent was reasonable.

[23] The court considered both Boucher et al. v. Public Accountants Council for the Province of Ontario, and Delellis v. Delellis and Delellis. Both these cases point out that when assessing costs it is "not simply a mechanical exercise." In Delellis, Aston J. 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.

Order

[24] Taking into account these considerations, an order shall go that the father shall pay the mother's costs fixed in the amount of $6,000, inclusive of fees, disbursements and HST. The costs are payable immediately.

Released: September 27, 2017

Justice Stanley Sherr

Footnotes

[1] The parties agreed to change the father's ongoing child support payments on August 3, 2017.

[2] The father had been employed as a Master Chef.

[3] The relevant factors are those that relate to how much the full recovery costs should be – not those that relate to the mother's entitlement to full recovery costs.