Court File and Parties

Court File No.: Toronto DFO-13-10563 Date: 2019-06-12 Ontario Court of Justice

Between: Ruth Margarita Moreno, Applicant

— And —

Harry Nay Mann Tuey, Respondent

Before: Justice Sheilagh O'Connell (In Chambers)

Ruling on Costs

Counsel:

• Mark DeGroot, agent for the applicant
• Valois P. Ambrosino, counsel for the respondent

O'CONNELL J.:

Introduction

[1] On November 10, 2018, the parties reached final Minutes of Settlement resolving the custody, access and support issues in the mother's motion to change the Final Order of Justice Heather Katarynych dated May 11, 2015. The only remaining issue was the issue of costs.

[2] The father seeks costs from the mother in the amount of $34,349.89 on a full recovery basis or $26,116.57 on a partial recovery basis. The mother submits that both parties should bear their own costs, or in the event that the court determines that the mother is liable to pay any costs to the father, then the quantum be nil.

Brief Background

[3] The parties were married on November 7, 2009. They separated on or about August 6, 2013. There is one child of the marriage, Rachel Chloe Moreno-Tuey, born […], 2011. Rachel is now 8 years old.

[4] The parties were in litigation after their separation and originally settled all issues in accordance with the Final Order of Justice Heather Katarynych, dated May 11, 2015. The Final Order provided that parties shall share all information regarding the health, education, religious instruction, extra-curricular activities, social environment or welfare of the child, but if they disagree on any issue, then they shall seek input from a Claire Watson, a court appointed mediator. In the event that they are unable to reach an agreement, then the mother shall make the final decision (paragraph 5 of the Final Order).

[5] The Final Order also provided that the father have regular alternating weekend to the child from Fridays at 4:30 PM to Mondays at 8:00 AM and every Wednesday from 4:30 PM to Thursday at 8:00 AM, in addition to holiday access, among other provisions, including child support and section 7 expenses.

[6] The mother commenced her motion to change on August 25, 2017. She sought sole custody of the child and a reduction of the father's parenting time, including the elimination of the father's mid-week access. This mother's motion to change followed an urgent motion brought by the father following the mother's decision to move Rachel's residence from the Leslie neighbourhood of Toronto (east end) to Etobicoke (west end of Toronto) without consulting the father. The move resulted in the unilateral change in Rachel's school and made it more difficult for the father to exercise mid-week access.

[7] In her motion to change, the mother raised serious concerns about the parties' ability to communicate (or at all) making the decision making provisions of the Final Order unworkable and therefore detrimental to Rachel's best interests.

[8] At the case conference on November 24, 2017, the parties consented to an order requesting the involvement of the Office of the Children's Lawyer (the "OCL"). The OCL accepted the referral and conducted a clinical investigation and report of the issues of custody and access, in accordance with section 112 of the Courts of Justice Act. Susan Walker Kennedy was the clinical investigator assigned.

[9] The OCL clinical investigator completed her investigation on April 27, 2018 and released her full report on May 16, 2018, following a disclosure meeting with the parties and counsel.

[10] The OCL recommended that the parties have joint custody of the child and that both parties try to work together for all decisions by using "Our Family Wizard". The clinical investigator further recommended that the father's regular parenting time be increased as follows, in addition to a holiday schedule:

• a. Week 1: Wednesday after school until Friday morning drop off at school;
• b. Week 2: Wednesday after school until Thursday morning drop off at school and weekend access from Friday after school until Monday morning, drop off at school.

[11] The parties attended court on May 29, 2018, approximately two weeks after receiving the final Report. The parties were unable to reach an agreement at that time. The father was willing to accept the OCL recommendations. At that time, the mother was not willing to accept the recommendations.

[12] At the next court appearance on September 10, 2018, the mother consented to a Final Order incorporating the OCL's recommendations regarding custody and the regular parenting schedule. The issues of child support, section 7 expenses and costs were adjourned to a further settlement conference on November 15, 2018.

[13] On November 15, 2018, the parties entered into a further final consent order addressing child support, section 7 expenses and several other additional parenting provisions regarding custody, the child's school, medical and dental appointments, the holiday schedule, including Thanksgiving, statutory holidays, travel, the child's health and SIN cards, and the access exchanges when Rachel is not attending school. These issues were not addressed in the previous Consent Order that the parties entered into on September 10, 2018.

[14] Regarding child support, the father agreed to pay the mother $150.00 per month in ongoing child support, based on the father's annual income of $49,286.00 and income imputed to the mother of $35,000.00 and the shared parenting provisions of their agreement. In addition, the parties agreed that the father shall pay 58% and the mother shall pay 42% of the child's section 7 expenses. The parties agreed that the following are section 7 expenses:

• a. Day-care;
• b. School uniforms;
• c. Medical/Dental;
• d. Gymnastics;
• e. Swimming Lessons;
• f. Any other activity agreed upon by the parties.

[15] Regarding the issue of costs, the parties agreed to the following two provisions:

• a. "There shall be no costs of today's attendance or the preparation of materials for today's attendance or the issues contained in this consent." (paragraph 16)
• b. "The issue of costs shall be decided by way of written submissions. The Respondent shall serve and file their [ sic ] cost submissions within 14 days of this Order. The Applicant shall file her costs submissions within 28 days of this Order." (paragraph 17)

The Law and Governing Principles

[16] The starting point in addressing the issue of costs is Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C-43. Section 131 gives the court discretion as to determination of costs. However, that discretion is structured by Rule 24 of the Family Law Rules, O. Reg. 114/99 (all references to rules in this endorsement are to the Family Law Rules).

[17] Rule 24 governs the determination of costs in family law proceedings.

[18] The sections of Rule 24 relevant to the circumstances of this case are as follows:

Successful Party Presumed Entitled to Costs

24. (1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal. O. Reg. 114/99, r. 24 (1).

Successful Party Who Has Behaved Unreasonably

(4) Despite subrule (1), a successful party who has behaved unreasonably during a case may be deprived of all or part of the party's own costs or ordered to pay all or part of the unsuccessful party's costs. O. Reg. 114/99, r. 24 (4).

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. O. Reg. 114/99, r. 24 (5).

Divided Success

(6) If success in a step in a case is divided, the court may apportion costs as appropriate. O. Reg. 114/99, r. 24 (6).

Bad Faith

(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. O. Reg. 114/99, r. 24 (8).

Deciding Costs

(10) Promptly after dealing with a step in a case, the court shall, in a summary manner,

• (a) determine who, if anyone, is entitled to costs in relation to that step and set the amount of any costs; or
• (b) expressly reserve the decision on costs for determination at a later stage in the case. O. Reg. 298/18, s. 14.

(10.1) Revoked: O. Reg. 298/18, s. 14.

Same

(11) The failure of the court to act under subrule (10) in relation to a step in a case does not prevent the court from awarding costs in relation to the step at a later stage in the case. O. Reg. 298/18, s. 14.

Setting Costs Amounts

(12) In setting the amount of costs, the court shall consider,

• (a) the reasonableness and proportionality of each of the following factors as it relates to the importance and complexity of the issues:
  • (i) each party's behaviour,
  • (ii) the time spent by each party,
  • (iii) any written offers to settle, including offers that do not meet the requirements of rule 18,
  • (iv) any legal fees, including the number of lawyers and their rates,
  • (v) any expert witness fees, including the number of experts and their rates,
  • (vi) any other expenses properly paid or payable; and
• (b) any other relevant matter. O. Reg. 298/18, s. 14.

Supporting Materials

(12.1) Any claim for costs respecting fees or expenses shall be supported by documentation satisfactory to the court. O. Reg. 298/18, s. 14.

[19] In Mattina v. Mattina, 2018 ONCA 867, the Ontario Court of Appeal confirmed that modern costs rules are designed to foster four fundamental purposes:

1. to partially indemnify successful litigants for the cost of litigation;
2. to encourage settlement;
3. to discourage and sanction inappropriate behaviour by litigants bearing in mind that the award should reflect what the court views is a fair and reasonable amount that should be paid by the unsuccessful party;
4. to ensure that cases are dealt with justly under subrule 2 (2) of the Family Law Rules.

[20] Costs awards are discretionary. In Beaver v. Hill, 2018 ONCA 840, the Ontario Court of Appeal clarified a number of aspects of the costs' rule, in particular that there is no provision in the Family Law Rules that provides for the general approach of fixing costs at "close to full recovery". The Court held that "proportionality and reasonableness are the touchstone considerations" to be applied in fixing the amount of costs.

[21] As is clear from subrule 24(1), the Family Law Rules create 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, [2000] O.J. No. 330 (S.C.J.).

[22] When determining whether a party has been successful, the court should take into account how any final order compares to any settlement offers that were made. See: Lawson v. Lawson, [2008] O.J. No. 1978 (SCJ).

[23] Subrule 18 (14) reads 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.

[24] The onus of proving that the offer is as or more favourable than the final result is on the person making the offer. See: Neilipovitz v. Neilipovitz, [2014] O.J. No. 3842 (SCJ).

[25] The technical requirements of subrule 18 (4) must be met to attract the costs consequences in subrule 18 (14). See: Clancy v. Hansman, 2013 ONCJ 702; T.M.B.-P. v. B.P.G., 2018 ONCJ 517.

[26] The court's role in assessing costs is not necessarily to reimburse a litigant for every dollar spent on legal fees. As was pointed out in Boucher et al. v. Public Accountants Council for the Province of Ontario, 71 O.R. (3d) 291, 188 O.A.C. 201, 48 C.P.C. (5th) 56, [2004] O.J. No. 2634, 2004 CarswellOnt 2521 (Ont. C.A.), the award of costs must be fixed in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceedings rather than an exact measure of actual costs to the successful litigant.

[27] A party's ability to pay costs is a relevant consideration. However, a party's limited financial circumstances should not be used as a shield against any liability for costs but will be taken into consideration regarding the amount of the costs, particularly when that party has acted unreasonably and is the author of her/his own misfortune. See Macdonald v. Magel (2003), 67 O.R. (3d) 181 (Ont. C.A.); Snih v. Snih at paras. 7-13.

Awarding Costs in a Case that has Settled

[28] Courts have often held that where parties reach a settlement, the court should be very slow to award costs in favour of one of the parties unless there are compelling reasons to do so. Courts want to encourage parties to settle their cases in order to avoid costs. It is also sometimes very difficult to determine who is the "winner" and the "loser" in a negotiated settlement. See Witherspoon v. Witherspoon, 2015 ONSC 6378; Davis v. Davis, [2004] O.J. No. 2256 (S.C.J.); Talbot v. Talbot, 2016 ONSC 1351.

[29] Some courts have held that it is not appropriate to go behind the freely negotiated terms of settlement and to engage in an exercise of determining which party's position on each issue would have been accepted by the trial judge if the matter had proceeded to trial. See O'Brien v. O'Brien, [2009] O.J. No. 5019, 2009 CarswellOnt 7194 (Ont. S.C.J.), Gzechowski v. Percy, [2011] O.J. No. 5507, 2011 ONCJ 644; Benoit v. Kerr, 2014 CarswellOnt 12838, (Ont. S.C.J.), Upton v. Harris, 2016 CarswellOnt 6721, (Ont. S.C.J.).

[30] However, there are cases when costs may be awarded when parties reach a signed agreement. There may be instances where a settlement is a "clear capitulation" by one party in favour of another, and it is obvious who the successful party is in the litigation, particularly if one party has behaved unreasonably throughout. See Atkinson v. Houpt, 2017 ONCJ 316.

Application and Analysis

[31] This is not one of those cases in which the settlement agreement was a "clear capitulation" by the mother or the father.

[32] In carefully reviewing the final OCL Report, it is clear that both parties sought sole custody of Rachel. [1] Neither was successful. Further, the father sought a "week-about" parenting schedule. This was not recommended by the OCL or agreed upon in the Final Consent, although it is certainly true that the father's parenting time with Rachel was significantly increased.

[33] Further, it was not unreasonable for the mother to be initially reluctant in accepting the OCL recommendations, in particular regarding joint custody. The clinical investigator was very aware of the conflict between the parties and their history of poor communication. She states as follows at page 10 of her Report: "Communication is also an issue between Ms Moreno and Mr. Tuey… It is crucial that Ms Moreno and Mr. Tuey find a way to communicate with each other in order to work together for Rachel's best interests and be able to do so in a respectful and informative way." In her Final Recommendations, also at page 10, she states: "Despite the conflict between the parties as well as a lack of communication between them, it is recommended that joint custody remain.."

[34] There was no guarantee that joint custody would be ordered if this matter proceeded to a trial, given the history of poor communication between the parties. The mother's position was not unreasonable given the governing legal principles regarding joint custody. Further, although the mother was initially reluctant to reach a settlement on May 29, 2018, only two weeks after receiving the OCL report, she did agree to incorporate all of the OCL recommendations at the next court appearance on September 10, 2018.

[35] As counsel for the mother submitted, in total, the parties were in litigation for just over one year and all issues were resolved on consent. This was not an unduly lengthy period to resolve this court case. The father's position that the mother's conduct in changing counsel during the litigation thereby resulting in "significant delay" is not substantiated.

[36] The court does not accept the father's submission that the mother's conduct around the Thanksgiving weekend of 2018 warrants sanction from the court by way of costs. It was clear as events unfolded after that weekend, that there was a sincere misunderstanding by both parties regarding the 2018 Thanksgiving schedule and the 2018 consent as it was drafted, which replaced the provisions of the Final May 2015 Order.

[37] The court agrees that the father's parenting time with Rachel was significantly increased in the Final Consent Order. The mother's resistance to increased parenting time between Rachel and her father was unreasonable, given the OCL's findings that Rachel has "a close relationship with both parents" and that "both parents are attentive and loving parents and want the best for Rachel." [2]

[38] However, the mother's unreasonableness on this issue did not amount to bad faith, thereby triggering Rule 24(8) of the Rules, as submitted by father's counsel. Rule 24 (8) requires a high threshold of egregious behaviour and as such a finding of bad faith is rarely made. 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. Bad faith involves intentional duplicity, obstruction or obfuscation. To find bad faith the court must find some element of malice or intent to harm. See S. (C.) v. S. (C.), 2007 O.J. No. 2164 (SCJ); Chomos v. Hamilton, 2016 ONSC 6232 at para. 45 and cases cited therein.

[39] Further, neither party served an offer to settle. Offers to settle play an integral role in saving time and expenses by promoting settlements, focusing parties and often narrowing the issues in dispute. Severable offers to settle or separate offers to settle specific issues are particularly helpful in attempt to settle cases. Offers to settle trigger the full recovery provisions under Rule 18 (14).

[40] Both parties behaved unreasonably in not serving offers to settle. Given that no offers to settle were served, it is difficult to determine what compromises, if any, were made by either party during the course of their negotiation of the final minutes of settlement.

[41] I have also considered the provisions of the November 15, 2018 Final Consent Order reached by the parties regarding the issue of costs. These provisions are confusing and inherently contradictory. On the one hand, paragraph 16 provides that "There shall be no costs of today's attendance or the preparation of materials for today's attendance or the issues contained in this consent" while paragraph 17 provides that "the issue of costs shall be decided by way of written submissions."

[42] Many of the issues in the November 15, 2018 Final Consent dealt with the issues of custody, parenting issues, the holiday schedule, access exchange, travel, in addition to the child support and section 7 issues. It is difficult, if not impossible to go through the father's Bill of Costs to determine what costs are related to the issues resolved in the November 15 2018 Consent and therefore not included in any calculation of costs.

[43] Finally, I consider the mother's ability to pay costs. Although the law is clear that a party's limited financial circumstances should not be used as a shield against any liability for costs, it must be considered in determining costs. See Macdonald v. Magel (2003), 67 O.R. (3d) 181 (Ont. C.A.); Murray v. Murray, 79 O.R. (3d) 147; [2005] O.J. No. 5379 (C.A.).

[44] The mother was unemployed at the time the parties entered into the final settlement. She has been inconsistently employed for a number of years. According to the OCL Report, the mother and the child are living in a bachelor apartment. It is not disputed that the mother has had difficulty finding affordable housing in Toronto. The mother is in significant debt and her expenses exceed her income. The father is in a significantly better financial position than the mother.

[45] As a result of the shared custodial arrangement, the mother only receives $150.00 per month in child support from the father. A cost award will result in significant hardship for the mother, which will indirectly affect Rachel while she is in her mother's care.

[46] In fixing costs the courts cannot ignore the best interests of the child and thus cannot ignore the impact of a costs award against a custodial parent that could seriously affect the interests of the child. In C.A.M. v. D.M., [2003] O.J. No. 3707; 43 R.F.L. (5th) 149;, Justice Rosenberg of the Ontario Court of Appeal, stated the following at paragraph 42 of that decision:

"I am also of the view that the financial situation of the parties can be taken into account in setting the amount of the costs award either under Rule 24 or Rule 18. Thus, while subrule 24(11) enumerates a number of factors that must be taken into account, the person setting the amount of the costs is directed to take into account "any other relevant matter". I agree with Aston J. in Sims-Howarth at para. 4, that the "Family Law Rules demand flexibility in examining the list of factors in subrule 24(11) without any assumptions about categories of costs". In my view, a consideration of particular relevance may be the financial position of the parties, especially of an unsuccessful custodial parent. See Biant at para. 17 and Brennan v. Brennan, [2002] O.J. No. 4743 (S.C.J.) at para. 11. In fixing costs the courts cannot ignore the best interests of the child and thus cannot ignore the impact of a costs award against a custodial parent that would seriously affect the interests of the child."

Conclusion

[47] In exercising my discretion and considering all of the circumstances above, including the final settlement that the parties reached, there shall be no costs awarded to either party. Each party will bear their own costs of this proceeding.

Released: June 12, 2019

Signed: Justice Sheilagh O'Connell

Footnotes

[1] Although the clinical investigator states that the father was seeking joint custody at page 2 of her Report, she later states at page 7 of her Report that "Mr. Tuey is requesting joint custody be eliminated as it has not been followed to date in his opinion and he would like sole custody." [Emphasis added.]

[2] See page 9 of the OCL Report.