Court File and Parties

Ontario Court of Justice

Date: January 30, 2018

Court File No.: 138/01

Applicant: Sherry Monique Ridley

Applicant Counsel: C. Hodgkin

Respondent: Stefano DeRose

Heard: By written submissions

Before: Tobin, J.

Costs Endorsement

Background

[1] On December 15, 2017 this Court released Reasons for Judgment following a trial that dealt with many issues concerning child support and spousal support.

[2] The Respondent was ordered to pay ongoing child support for the parties' two children based upon the amount of the structured settlement annuity payment he receives each month, grossed-up for taxes. The start date for the ongoing child support was the date the Application started. The Applicant's request for retroactive child support was dismissed. The Respondent's request that spousal support agreed to in a Separation Agreement be terminated was dismissed.

[3] The Applicant seeks costs of $115,000.00 all inclusive.

[4] The Respondent submits that costs be fixed in favour of the Applicant in the amount of $18,000.00, but that he be allowed to set off against that amount a $3,000.00 award of costs made in his favour during this proceeding.

Legal Framework

Fundamental Purposes of Costs

[5] In Serra v. Serra, 2009 ONCA 395, the Ontario Court of Appeal held that modern costs rules are designed to foster the following fundamental purposes:

a) to partially indemnify successful litigants for the costs of the litigation;

b) to encourage settlement; and

c) to discourage and sanction inappropriate behaviour.

[6] Sub-rule 2(2) of the Family Law Rules adds a fourth fundamental purpose for costs, that is, to ensure the primary objective of the Rules is met – that cases are dealt with justly. Sub-rule 2(2) is to be read in conjunction with Rule 24: See Justice Sherr's decision in Sambasivam v. Pulendrarajah, 2012 ONCJ 711.

[7] Rules 18 and 24 regulate the awarding and quantification of costs in family law cases.

Rule 18: Offers to Settle

[8] Rule 18(4) provides that an offer shall be signed personally by the party making it and also the party's lawyer, if any.

[9] The cost consequences for failing to accept an offer are set out at sub-rule 18(14). It provides that a party who makes an offer, unless the Court orders otherwise, is entitled to costs to the date that the offer was served and full recovery of costs from that date, if certain conditions are met.

[10] The Applicant is seeking full recovery costs – as that term is used in Rule 18(14) – for the entire case when asking for costs fixed at $115,000.00. In her costs submissions, the Applicant appears to rely primarily on her two offers to settle dated May 12, 2017 to engage the provisions of Rule 18.

[11] In this case, neither of the two offers were signed by the Applicant's lawyer.

[12] I agree with the Respondent that an offer that does not conform strictly with Rule 18(4) is not an offer that can attract the cost consequences of sub-rule 18(14): See Riss v. Greenough, [2003] O.J. 1574 (Ont. SCJ).

[13] The Applicant argues that even if the lawyer did not sign the offer, it meets the requirements of sub-rule 18(14) "as there can be little doubt the lawyer had input into the offer": See Gogas v. Gogas, 2011 11 R.F.L. (7th) 369. With respect, I disagree with this interpretation of Rule 18. An offer to which Rule 18(14) may apply is defined in Rule 18(4). This latter subsection confirms that the offer be signed by both the party and the lawyer.

[14] Though Rule 18(14) does not apply to the offer, the Court still can take into account any written offer to settle when exercising its discretion over costs: Rule 18(16). It can be a consideration in determining if behaviour was reasonable.

Successful Party

[15] There is a presumption that a successful party, in the absence of unreasonable behaviour, is entitled to costs of a case: Rules 24(1) and (4).

[16] Rule 24(5) provides that in dealing with whether a party has behaved reasonably or not, 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.

[17] One determinant of success is a party's offer to settle. As well, in measuring success, the Court will look to the positions of both parties and not just an individual's own claims.

[18] Rule 24(6) provides that if success in a step is divided, the Court may apportion costs as appropriate.

[19] Where success has been divided, the Court is to carefully consider the position of the parties and the factors in setting the amount of costs set out in Rule 24(11). As well, when the Court makes a determination that there has been divided success, it must consider how many issues there were, the complexity of each, the time spent and whether one party was predominantly successful on more of the issues.

The Quantum of Costs

[20] Rule 24(11) provides that in setting the amount of costs, the Court shall consider:

a) the importance, complexity or difficulty of the issues;

b) the reasonableness or unreasonableness of each party's behaviour in a case;

c) the lawyers' 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 paid or properly payable; and

f) any other relevant matter.

[21] The proper determination of the amount of costs to be awarded in a family law case requires the Court to reflect on many factors. It is more than a simple mathematical exercise: Delellis v. Delellis.

[22] In assessing costs, the award must be fixed in an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount that is fixed by the actual cost incurred by the successful litigant: Boucher v. Public Accounts Council for the Province of Ontario.

Analysis

Determination of Success

[23] The Respondent concedes that the Applicant is entitled to costs. The dispute concerns quantum.

[24] Based on the respective positions of the parties at trial and their offers to settle the Applicant was more successful on the issue of ongoing child support for both children than was the Respondent. She was also successful in resisting the Respondent's attempt to terminate spousal support.

[25] The Respondent was successful in resisting the Applicant's claim for retroactive child support, which was for the period that predated the commencement of the Application. The Respondent was also successful in resisting the Applicant's claim that an amount for undisclosed income be imputed to him.

[26] In this case, the Applicant was more successful than the Respondent on the significant issues raised in this case.

Reasonableness of Offers to Settle

[27] The Applicant acted reasonably in this case in that she delivered five offers to settle while it was ongoing. The last offer she made was dated May 12, 2017. It was comprised of two separate offers to settle, one dealing with ongoing child support and the other dealing with retroactive child support.

[28] The Table support ordered was substantially more favourable to the Applicant than was her offer. However, the Applicant did not define the start date for ongoing child support in her offer.

[29] The Order for special and extraordinary expenses was not as favourable as the Applicant's offer on these issues. In her offer she did not address Adrian's contribution toward his post-secondary education expenses and her request for Luca's orthodontic expense was not granted.

[30] With respect to the issue of retroactivity, the Applicant's offer did not define the period of retroactivity. If it had been for the period prior to May 12, 2017, the Applicant would have been successful. However, the Order dealt with retroactive child support being the period before the date the case was started consequentially the Applicant was not successful.

[31] The only offer referred to by the parties that was made by the Respondent was dated February 27, 2017. He offered to pay child support for two children in the monthly amount of $3,000. The offer does not make reference to the income upon which this was based. He also sought termination of spousal support effective February 28, 2017 and that all claims for retroactive support be dismissed.

Application of Rule 24(11) Factors

[32] I will now consider the Rule 24(11) costs factors.

The Importance, Complexity or Difficulty of the Issues

[33] The outcome of this case was of great importance to both parties as it was expected to affect their respective financial circumstances in a significant manner.

[34] The Applicant's counsel spent considerable amount of time in dealing with the issues raised in this case. The trial consisted of 7 days of evidence followed by the parties providing detailed and lengthy written submissions. The parties attended again to make oral submissions on issues raised by me following my review of the evidence and their written submissions.

[35] While I have no doubt that Respondent's counsel, who acted on a limited scope retainer, spent a lot of time on this case he did not provide a docket or estimate of time spent.

[36] The issues identified and argued by the parties were difficult and complex.

[37] The issues were difficult in that counsel were required to marshal much evidence that covered many years, and to research and argue a wide range of substantive and evidence law. For example, the Respondent endeavoured to distinguish Hunks v. Hunks, 2017 ONCA 247 from the case at bar and resist the proposition that the structured settlement annuity payments should be considered as income for child support purposes. As well, he also relied upon a number of statutory provisions and case law to end his spousal support obligation.

[38] This case was complex in that there were many issues that were interconnected making it a challenge to analyze and explain them.

The Reasonableness or Unreasonableness of Each Party's Behaviour in a Case

[39] I am satisfied that both parties' behaviour in this case was reasonable. Both parties delivered offers to settle as described above in an attempt to resolve or narrow issues. Also, while this case was forcefully litigated, the parties adhered to the rules, for the most part, and adopted a civil manner throughout.

The Lawyers' Rates

[40] Ms. Hodgkin's hourly rate of $325.00 is reasonable for a lawyer with her 25 years of experience. This was not challenged by the Respondent. Ms. Hodgkin's daily rate for the trial of $3,500.00 was challenged. The Respondent suggests that the sum should be $2,400.00. With respect, I find that the trial rate of $3,500.00 per day was reasonable in all the circumstances of this case as described above and in the trial decision. In this case, it is clear that counsel were required to prepare both before and after attending court.

The Time Properly Spent on the Case and Expenses Paid

[41] Ms. Hodgkin docketed 234.35 hours beginning December 18, 2014, not including trial attendances. The services were those referred to in sub-rule 24(1)(d) and do not appear to relate to steps at which a court could or did make a cost order. The time spent was not challenged by the Respondent as being unreasonable, nor were the disbursements claimed.

Any Other Relevant Matter

[42] The Respondent argues that in determining the amount of costs to be ordered, the Court should consider that the decisions of Hunks v. Hunks supra and Phelps v. Childs, 2017 ONSC 1443 (Ont. Div. Ct.), were cases decided close in time to the case at bar. Both cases were unknown to counsel until I told them about them. The Respondent submits that until these cases were reported, the weight of judicial authority favoured the exclusion of the structured settlement payments as income. The Respondent argues this is an unusual circumstance and that neither trial counsel could have been aware of or anticipated that the law on this issue would change contemporaneous with the trial. With respect, Hunks was decided months prior to the commencement of this trial and could have been used to inform the positions taken by the parties.

[43] The Respondent also argues that costs should be awarded in an amount that meets the reasonable expectations of the unsuccessful party. As set out above, I agree that this is an appropriate consideration. The Applicant's request for costs $115,000.00 is, according to the Respondent, excessive in relation to what he should have reasonably expected to have paid as costs. However, as noted above, the Respondent did not challenge the amount of time spent by Applicant's counsel nor did the Respondent provide details of what time was spent and what costs were incurred on his behalf. This would have been helpful to assess the Respondent's assertion that the costs claimed by Applicant's counsel are unreasonable.

[44] Finally, the Respondent argues that the Court should take into account his financial obligations toward his wife and her three children. This is a relevant consideration insofar as quantum is concerned. I found that at present his grossed-up income is $452,662.00 for the year 2017. It will increase again in February 2018. I find that the Respondent has the ability to pay the costs that will be ordered.

[45] Included in the Applicant's claim of costs in the amount of $115,000.00 are fees and disbursements incurred in respect of the Applicant's previous counsel. The amount claimed in respect of that previous counsel is $7,603.74. This covers the period from February 7, 2011 until November 17, 2014. A portion of the fees charged relate to the issue of custody which was eventually resolved.

[46] I will take into account that custody was an outstanding issue for a period and resolved following the release of an assessment report. Neither party suggested the amount of costs that should be attributable to the issue of custody. On the information provided, I am not able to determine what amount of costs relates to custody. As well, as this issue was resolved, I am not able to determine whether the parties acted unreasonably in addressing that claim. Consequently, no amount of costs shall be attributable to that claim.

Conclusion

[47] Having regard to all of the considerations referred to in these reasons, I find that a reasonable and proportionate costs award to the Applicant is $47,000.00 inclusive of recoverable disbursements and HST. In the determination of this amount, I have not taken into account any costs that may be owing to the Respondent by the Applicant in this case.

[48] I also take into account that under the trial judgment, the Respondent will owe an amount of arrears of ongoing child support. Those arrears are to be paid over time. The costs award should also, at first instance, be paid over time. The Respondent will be given a brief grace period before being required to start paying costs ordered.

[49] The costs may be paid at the rate of $1,200.00 per month without interest commencing on July 1, 2018 until the costs are paid in full. These costs shall be payable and enforceable as support by the Director, Family Responsibility Office: See s. 1(1)(g) of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31 (as am.); Wildman v. Wildman (2006), 82 O.R. (3d) 401 (Ont. C.A.).

Date released: January 30, 2018

Original signed and released: Tobin, J.