Court File and Parties
Ontario Court of Justice
Date: April 5, 2018
Court File No.: D71110/14
Between:
Nadine Ayanna McKoy, Applicant
– AND –
Wayne George McKoy, Respondent
Before: Justice Debra Paulseth
Heard on: February 12 and 13, 2018
Costs Endorsement released on: April 5, 2018
Endorsement
Paulseth, J.:
Overview
[1] On February 12 and 13, 2018, I heard a focused hearing on an issue of an additional overnight of access to father on alternate weekends.
[2] This was the remaining issue on an Application from June of 2014. The parents have two children: A, born October 31, 2009 and T, born August 18, 2012.
[3] After hearing all of the evidence and the submissions of counsel for each parent, I made an order finalizing the temporary order that had been in place since May of 2015. Based on the best interests of the children, I was not able to agree with father's request for an additional overnight on the Sunday of his alternate weekends with the children.
[4] Counsel for mother has requested costs of $21,140.47, on a full recovery basis. Mother argues that:
a. The amount is reasonable after 3 and ½ years of litigation;
b. The focused trial was an efficient way to conclude the matter;
c. Mother was successful in the final decision; mother was reasonable;
d. Mother was more successful than her offer to settle. Mother served and filed a written offer on January 5, 2017. The offer was severable. The offer provided for access as eventually ordered by the court and so was as favourable. A similar offer was served on April 27, 2017. This offer was more favourable as it offered an access review in 2020. On January 5, 2018, the mother served a third written and open offer, which provided a creative solution of Sunday overnights but without Wednesday overnights, thus reducing the transitions for the children. The loss of the Wednesday overnights would be compensated for by additional summer access.
[5] Counsel for father argues that no costs should be awarded because:
a. The issue was important and reasonable to litigate
b. The written offers included costs for the mother on a substantial indemnity basis from a certain date which was before the commencement of the hearing, which amounts to a withdrawal of the offer before the hearing began;
c. The father at all times was acting in good faith;
d. $5300 of the proposed costs relate to conferences which do not attract costs;
e. $5600 of the proposed costs relate to largely administrative work; and
f. The proposed disbursements cost of $1049 does not have sufficient detail, description, or invoices.
The Purpose of Costs
[6] The ONCA in Serra v. Serra, 2009 ONCA 395, confirmed that modern cost 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 (FLR) 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 (FLR). 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. See: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, paragraph 25. 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, per Justice Carole Curtis.
[9] A costs order balances two conflicting principles:
a. A blameless litigant who is successful in a proceeding should not be required to bear the costs of prosecuting or defending the proceeding.
b. Citizens should not be made to feel unduly hesitant to assert or defend their rights in court by the prospect that, if unsuccessful, they will be required to bear all the costs of their opponent.
[10] The Supreme Court has held that the ultimate objective in balancing these principles is to ensure that the justice system works fairly and efficiently. British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, at paras. 25-26.
For Trial and Steps That Can Only Be Considered at the Conclusion of the Case
[11] The court lacks jurisdiction to deal with costs for prior steps. It should be dealt with at each stage. See Biant v. Sagoo, 20 R.F.L. (5th) 284 and Islam v. Rahman, 2007 ONCA 622. 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. Houston v. Houston, 2012 ONSC 233; Walts v. Walts, 2014 ONSC 98.
[12] In Czirjak v. Iskandar, 2010 ONSC 3778, the court allowed additional costs at trial, saying:
The father is correct in submitting that the mother is not entitled now to claim costs for any step along the way for which costs could have been claimed and awarded at the time. These would include conferences, motions and consent orders. See rule 24 (10) of the Family Law Rules; Islam v. Rahman, 2007 ONCA 622. However, there are a number of steps for which costs cannot be recovered until the final adjudication or settlement of the case. These include initial interviews, meetings and settlement discussions before filing the application, the application document itself, the reply, financial statements (not prepared for motions or conferences), questioning (in relation to issues for trial) and settlement meetings relating to issues for trial. The mother is entitled to have these costs considered now.
[13] Likewise in Houston v. Houston, the court wrote:
The Court of Appeal in Islam v. Rahman, accepted that there should be excluded from an award of costs at trial amounts claimed for steps taken in the course of the litigation where no order was made as to costs or where there was silence on the issue of costs. However, it is important to understand that the rule and the decision of the Court of Appeal speak to costs applicable to steps in a case which are addressed by a judge, such as motions and conferences. Surely the rule was not meant to extend to steps which do not require any form of judicial intervention, such as preparation of pleadings and financial statements, property evaluations, document production, attendance at questioning, review of transcripts, compliance with undertakings, and preparation for trial, to name but a few.
[14] In Kardaras v. Kardaras, 2008 ONCJ 493, the court set out that some legal work is not attributable to any step in a case and some legal work has hybrid characteristics – it can apply to more than one step. If counsel can show what portion is attributable to the trial step, it can be claimed.
[15] The court should take a liberal view of what constitutes a step. For instance, a case conference might require several appearances. McSwain v. McSwain, 2010 ONCJ 539.
[16] Accordingly, I deduct the costs claimed for steps related only to issues that have been resolved.
Rule 24 (FLR)
[17] Rule 24 (FLR) governs the additional principles related to cost awards. A successful party who has behaved reasonably is presumed to be able to recover reasonable costs, proportionate to the issues involved.
[18] The issue of overnight access was an important one for both parents. They had already litigated on this very issue in the spring of 2015.
[19] Mother conducted a very child focused reasonable and efficient case at the hearing. Father's position lacked any real evidentiary support. He just asserted his right to maximum contact. He had not engaged in any of the children's activities or medical issues. Father's position did not go so far as to display bad faith but it was unreasonable in the circumstances, as he had very little evidence to back up his aggressive position.
[20] The rates charged by counsel for the mother were very reasonable. I have already deducted some time for unrelated and/or previous steps. The preparation of document and evidence briefs are, in my view, part of counsel's work. In fact, it would be hard to find a paralegal who would charge much less than counsel did for this work. It was well-prepared and permitted for a very efficient flow of the evidence in the hearing.
[21] In the absence of an itemized accounting, $500 for costs of disbursements is a reasonable request, taking into account photocopying and service expenses.
[22] Rule 24(11) (FLR) specifically outlines the work that should be considered in making a costs award; namely, "conversations between lawyers and the party and the witness, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order."
Offers to Settle
[23] Rule 24(5) (FLR) specifically mentions offers to settle as part of the reasonableness criteria.
[24] Rule 18 (FLR) also deals with properly constituted Offers to Settle: they must be in writing and signed by the party and his or her lawyer prior to the case being heard.
[25] Offers to settle are the yardstick with which to measure success and are significant both in considering liability and quantum. Osmar v. Osmar, 8 R.F.L. (5th) 387 (Ont. SCJ).
[26] Even if the terms of subrule 18(14) (FLR) are followed, the court still has the discretion not to order full recovery costs. C.A.M v. D.M [2003] OCA.
[27] Failure to make an offer to settle can be unreasonable behaviour. Klinkhammer v. Dolan and Tulk, 2009 ONCJ 774.
[28] The technical requirements of subrule 18 (4) (FLR) must be met to attract the costs consequences in subrule 18 (14) (FLR). In Clancy v. Hansman, 2013 ONCJ 702, when the offer expired 5 minutes before the hearing and the offer was served by email (not a proper form of service), 18 (14), couldn't be used.
[29] Close is not good enough to attract the costs consequences of 18 (14) (FLR). The offer must be as good or more favourable than the trial result. The offer can be considered under 18 (16) (FLR). Gurley v. Gurley, 2013 ONCJ 482.
[30] The onus of proving the offer is as or more favourable than the trial result is on the person making the offer. Neilipovitz v. Neilipovitz, [2014] O.J. No. 3842. To trigger full recovery costs a party must do as well or better than all the terms of any offer (or a severable section of an offer). Paranavitana v. Nanayakkara, 2010 ONSC 2257, [2010] O.J. No. 1566 (SCJ); Rebiere v. Rebiere, 2015 ONSC 2129 (SCJ); Scipione v. Scipione, 2015 ONSC 5982 (SCJ). The court is not required to examine each term of the offer as compared to the terms of the order and weigh with microscopic precision the equivalence of the terms. What is required is a general assessment of the overall comparability of the offer as contrasted with the order. Wilson v. Kovalev, 2016 ONSC 163 (SCJ).
[31] In the context of a civil proceeding, the Court of Appeal, in Celanese Canada Inc. v. Canadian National Railway, [2005] O.J. No. 1122 (Ont. C.A.), held that for a plaintiff to be entitled to the presumptive award of costs on a substantial indemnity basis, the offer to settle had to reflect a real element of compromise (at paras. 36-37). A similar conclusion was reached by Rutherford J. in a family law case: Kappler v. Beaudoin, [2000] O.J. No. 1558.
[32] Subject to the costs issue which I discuss below, mother served 3 offers to settle, and did as well or better than two of them. The third offer was a creative approach to the issue as well as being very child-focused.
[33] It is noteworthy that father did not serve any offers to settle. Father also did not respond to written requests from counsel for mother on at least two important issues: the extracurricular activities and travel permission. This was all unreasonable behaviour.
Full Recovery Costs
[34] In Biant v. Sagoo (2001), 20 R.F.L. (5th) 284 (Ont. S.C.), the court wrote at paragraph 20:
The preferable approach in family law cases is to have costs 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. There remains, I believe, a discretion under r. 24(1) to award the amount of costs that appears just in all the circumstances, while giving effect to the rules' preeminent presumption, and subject always to the rules that require full recovery or that require or suggest a reduction or an apportionment.
[35] This case was cited with approval in Forrester v. Dennis, 2016 ONCA 918, subject to the factors listed in subrule 24(11), the directions set out under subrule 24(8) (bad faith) and subrule 18 (14) (offers to settle), and the reasonableness of the costs sought by the successful party.
[36] In Berta v. Berta, 2015 ONCA 918, the court relied on Biant, but limited the presumption to a presumptive recovery of costs (not necessarily full recovery) subject to the factors listed in subrule 24(11), the directions set out under subrule 24(8) (bad faith) and subrule 18 (14) (offers to settle), and the reasonableness of the costs sought by the successful party.
[37] Counsel for mother argues that because the offers included a clause that provided for substantial indemnity costs after a certain date (but before the hearing), then the offer does not qualify. Counsel submits that the date that triggers more costs is equivalent to a withdrawal of the offer prior to the date of the hearing. She relies on the decision of Walsh v. Davidson, 2017 ONSC 196. In that case the court reasoned that costs were generally payable on a partial or substantial recovery basis, such that the use of the term substantial recovery indicated the offer was not open until the hearing began.
[38] Rule 18 speaks to the distinction between costs prior to the offer and full recovery costs from the date the offer is served.
[39] This issue is also canvassed by Justice Pazaratz in Chomos v. Hamilton, 2016 ONSC 6232, as follows:
Indeed, both the Applicant's non-severable offer dated August 5, 2016 and her severable offer dated February 3, 2016 suffer from an additional – and fatal – defect.
The August 5, 2016 offer specified that if the Respondent accepted by August 9, 2016, he would have to pay $16,000.00 costs; and if he accepted after August 9, 2016 he would have to pay $28,000.00 costs.
Her February 3, 2016 offer quite astutely divided various topics into individual sections, any of which could be accepted.
a. Unfortunately, the offer included the additional requirement that sections could only be accepted without costs for 30 days.
b. Any acceptance after 30 days would entail a requirement that the Respondent pay to the Applicant her costs incurred on a partial indemnity basis, from the November 6, 2013 commencement of the proceedings to the commencement of trial.
c. In each case, the Respondent couldn't accept a substantive term without also accepting a specific (and potentially quite onerous) costs penalty.
An offer to settle substantive terms which also includes a predetermination of costs perverts the Rule 18(14) analysis, because the party ends up trying to claim credit for accurately predicting a costs determination a judge has not yet made.
The ordinary sequence:
#1 The judge hears the evidence at a trial.
#2 The judge hears submissions on substantive terms.
#3 Judgment is rendered.
#4 The judge then hears submissions on costs.
#5 Only then are the issues of entitlement and quantum of costs determined.
The Applicant now seeks full indemnity costs, arguing that she obtained "an order that is as favourable as or more favourable than" her offer, using the language of Rule 18(14)(5).
But my August 17 2016 judgment included none of the costs requirements the Applicant inextricably linked to her proposed substantive terms. At that stage I merely invited submissions so that – on a future occasion – I would be in a position to embark upon a detailed costs analysis.
Even the "no costs if accepted within 30 days" provision of the Applicant's February 3, 2016 offer jeopardizes the ability to seek full indemnity costs: What if the Respondent agreed to all of the Applicant's proposed terms, but wanted an opportunity to argue that he should be on the receiving end of costs? There are all sorts of reasons why predetermined costs penalties can discourage litigants from accepting otherwise attractive offers.
Rule 18(14) contemplates full indemnity for costs where all of the terms of an offer have been obtained in the trial judgment. An offer which includes costs obligations not yet determined by the court, cannot satisfy the strict requirements of this section.
However, even if Rule 18(14) doesn't apply, Rule 18(16) allows the court to consider any written offer, the date it was made, and its terms. This provision allows me to take into account the fact that the Applicant consistently made good faith settlement proposals. In contrast, none of the Respondent's offers come even close to reflecting the overall result of this case.
[40] Although the strict requirements of Rule 18(14) have not been complied with here, I am able to take into account the offers, as part of Rule 18 and Rule 24. The offers were made in good faith and were reasonable.
Conclusion
[41] Overall I would exercise my discretion and award costs to the Applicant of $17,000, inclusive of disbursements and HST, for the above reasons but in particular because:
Mother was reasonable and child focused;
Mother was completely successful;
Mother served reasonable offers to settle;
Father did not serve any offers to settle; and
Father did not provide much evidence to support his position at the hearing and can thus be described as unreasonable.
[42] I thank counsel for their court presentations and submissions on costs.
Debra Paulseth
April 5, 2018