Court File and Parties

Ontario Court of Justice

Date: June 6, 2019

Court File No.: Woodstock D92/03

Between:

L.M.L. Applicant

— AND —

S.L.G. Respondent

Before: Justice S. E. J. Paull

In Chambers

Reasons on Costs Released on June 6, 2019

Counsel:

• Lloyd St. Amand, for the applicant(s)
• James Battin, for the respondent(s)

PAULL J.:

Introduction

[1] Before the court is the issue of costs following the trial in this matter which proceeded over 2 days on April 15-16, 2019. Reasons for Judgment were released on May 2, 2019. In the reasons the court invited written submissions on the issue of costs if the parties were not in agreement.

[2] The respondent seeks costs in the amount of $16,944.43 inclusive based on her success at trial. The applicant submits there should be no order as to costs on the basis of the parties shared success.

Background and Positions of the Parties

[3] The parties are the parents of two children, T.L. born […], 1999 (male) and A.L. born […], 2001 (female). The trial resolved a motion to change brought by L.M.L. seeking to vary his child support obligation and adjust arrears that had accrued pursuant to the final order of January 27, 2016.

[4] L.M.L. brought his motion to change, which was issued November 28, 2017, seeking a termination of child support for T.L., a suspension of child support for A.L. effective February 1, 2016, and a rescission of any arrears owing. At trial he sought to adjust the child support back to the date of the order based on his actual incomes.

[5] He supported his claim on the basis that as a result of serious health issues he was no longer able to continue with his employment as a guard at EMDC. The order under review was made on the basis of his income from that employment.

[6] S.L.G. took the position that L.M.L. was intentionally underemployed and the income he earned in 2015 from EMDC, that was the basis of the current order, should be imputed to him. She also sought recovery of various section 7 expenses that she had incurred since the date of the order under review.

[7] The court concluded that there had been a change in circumstances following the final order. Child-support was varied for 2016 to reflect the applicant's actual income of $27,893.10.

[8] For 2017 onward the court imputed income on the respondent of $60,000 per year on the basis of a finding of intentional underemployment. Child-support was fixed for the years under review pursuant to this income with adjustments made for when the children were residing away for the school year. A further order was made regarding both arrears and ongoing section 7 expenses.

Law and Analysis

Principles of Costs Awards

[9] Modern costs rules are designed to foster four fundamental purposes (1) to partially indemnify successful litigants; (2) to encourage settlement, (3) to discourage and sanction inappropriate behaviour by litigants and; (4) to ensure that cases are dealt with justly under Rule 2 (2) of the Family Law Rules. Mattina v. Mattina, 2018 ONCA 867.

[10] 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. British Columbia (Minister of Forests) v. Okanagan Indian Band, 2002, S.C.C., paragraph 25.

[11] Rule 24(1) of the Family Law Rules creates a presumption of costs in favour of the successful party. Consideration of success is the starting point in determining costs. Sims-Howarth v. Bilcliffe, [2000] O.J. No. 330 (SCJ-Family Court). 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, [2008] O.J. No. 1978 (SCJ). The position each party took at trial should also be examined.

Offers to Settle

[12] Rule 18 (14) of the Family Law Rules 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.

[13] 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, when exercising its discretion over costs. (Rule 18(16)).

[14] The respondent claims costs on a solicitor and client basis from June 29, 2018 to the conclusion of trial given her success in comparison to her offer to settle.

[15] The respondent submits an offer to settle dated June 29, 2018 which included an imputed income on the applicant of $60,000 a year with the reduction in child support from the period of February to August 2018 when the parties' oldest child was not in school. It also included a continuation of the $150 per month for the younger child's dance costs. It also included a term that the applicant was responsible for all the outstanding arrears which had accrued under the final order.

[16] The offer also included a term that stated, "This offer to settle must be accepted in its entirety."

[17] The onus of proving that 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 (SCJ).

[18] Close is not good enough to attract the costs consequences of 18 (14). The offer must be as good as or more favourable than the trial result. However, even if the offer does not attract the costs consequences set out in Rule 18 (14), it may be considered under Rule 18 (16). Gurley v. Gurley, 2013 ONCJ 482.

[19] 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.

[20] The respondent did not achieve equal or greater overall success than outlined in her offer to settle. A change in circumstances was found and the child support for 2016 was varied to reflect the respondent's actual income, and the $150 for dance costs was terminated on consent effective June 1, 2018. Unfortunately, the offer made was not severable, and the respondent would have had to do as well or better than all the terms in the offer in totality, in order to take advantage of the full recovery cost provisions of Rule 18(14). Severable offers are an underused tool that can confer considerable settlement and cost advantages. Because of the full recovery provisions of rule 18(14), they can provide much more flexibility to the court to award full recovery for at least a portion of the overall costs, if the party is successful on only some of the issues. Paranavitana v. Nanayakkara, 2010 ONSC 2257, [2010] O.J. 1566 (SCJ).

[21] The respondent further submits an earlier offer to settle by each party which was outlined in their settlement conference briefs from May 2018.

[22] However, with respect to offers in settlement conference briefs Rule 17 (23) of the Family Law Rules is clear that no brief, evidence or statement made at a settlement conference is to be disclosed unless an agreement is reached at a settlement conference or by order. The court in the case of Entwistle v. MacArthur, and the court in Farook v. Majeed, 2011 ONCJ 827, make clear that there is no exception in Rule 17 (23) for the offers to settle in settlement conference briefs to be disclosed in submissions for costs.

[23] As such, the offers to settle in settlement conference briefs do not constitute offers for consideration under Rule 18.

[24] Even were these to have been proper offers to settle they would not be of assistance to either party given that the offers were not met or exceeded by the order made. Neither were the offers severable, which would have required them to do as well or better on all issues, which was not the case.

Failure to Make Offers to Settle

[25] Failure to make an offer to settle by either party can be seen as unreasonable behaviour. Subrule 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(3)). Offers to settle play an important role in saving time and expense by promoting settlement, focusing parties and often narrowing the issues in the dispute. Laing v. Mahmoud, 2011 ONSC 6737. Failure to serve an offer to settle may be an adverse factor when assessing costs.

[26] There is no evidence of an offer to settle served on behalf of the applicant. There is no obligation on a party to serve an offer to settle. However, in the circumstances of the applicant's claim in his motion to terminate or suspend all child support and arrears and his position at trial that there would be some level of child support and arrears, his failure to provide a resolution position by way of an offer to settle is an adverse factor in assessing costs in my view.

Divided Success

[27] The next issue is to consider if there was divided success. Rule 24 (6) states that if success in the case is divided, the court may apportion costs as appropriate. Divided success does not equate with equal success. It requires a comparative analysis. Most family cases have multiple issues. They are not equally important, time-consuming or expensive to determine. Jackson v. Mayerle, 2016 ONSC 1556, paragraph 66.

[28] Where there are a number of issues before the court, it can have regard to the dominant issue at trial in light of those offers to settle. Firth v. Allerton, [2013] O.J. No. 3992 (S.C.J.); Mondino v. Mondino, 2014 ONSC 1102.

[29] While all the claims in this matter were related to child support there were numerous issues involved. These included whether there was a change in circumstances, and if there was then a determination of retroactive and ongoing child support, whether income should be imputed on the applicant for some or all of the years since the order, and retroactive and ongoing section 7 claims.

[30] Although the applicant was successful in establishing a change in circumstances in 2016, the most important issue involved the imputation of income on him for subsequent years which created a significant arrears liability for him. While the respondent was not successful with much of her retroactive section 7 claims, arrears for a portion were ordered as well as ongoing contribution to the children's post-secondary schooling. Guideline support was also reduced for when the children were residing away from home and attending school.

[31] On balance, while there was some shared success, the respondent was more successful, particularly based on the imputation of income on the applicant from January 1, 2017 onward.

Discretionary Factors and Proportionality

[32] Costs awards are discretionary. Two important principles in exercising discretion are reasonableness and proportionality. Beaver v. Hill, 2018 ONCA 840.

[33] An award of costs is subject to: the factors listed in Rule 24(12), Rule 24(4) pertaining to unreasonable conduct of a successful party, Rule 24(8) pertaining to bad faith, Rule 18(14) pertaining to offers to settle, and the reasonableness of the costs sought by the successful party. Berta v. Berta, 2015 ONCA 918 at para. 94.

[34] In making this decision the court has considered the factors set out in Rule 24 (12) of the rules which reads as follows:

24 (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.

[35] Rule 24(5) provides criteria for determining the reasonableness of a party's behaviour in a case (a factor in clause 24(12)(a) (1) above). 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.

Applicant's Unreasonable Conduct

[36] The applicant has not behaved reasonably with respect to the level of financial disclosure he provided. As noted in the Reasons for Judgment the disclosure he provided was woefully inadequate related to his self-employment income which represented the only employment he sought in 2017. The income verification he provided for 2018 was a series of T4 slips which were all provided at trial. Although the trial took place in mid-April, I do not accept that he received all his T4's for 2018 in a way that precluded the opportunity to disclose any of them sooner.

[37] Further, he also provided virtually no evidence of any job search or other efforts to obtain employment outside his own business until he started working for his partner's business in the spring of 2019. He offered little evidence at trial to establish the reasonableness of his employment and business choices from 2017 onward.

[38] The applicant simply offered the very limited income he earned, without sufficient particulars to support it, and sought to significantly reduce child support on this basis. In the context of his own motion to change starting in 2017 he has not behaved reasonably with respect to his approach to his child support or his disclosure obligations.

Assessment of Costs Claimed

[39] Counsel for the respondent included an itemized Bill of Costs which claimed a total of 37.35 hours of work for responding to the motion to change and preparing for and conducting a trial which took place over two days. The hourly rate of counsel for the respondent pursuant to the Bill of Costs is $350 per hour which is not unreasonable given his years of experience. However, the dockets are not broken down and include counsel's time travelling to and from court. Claims for travel time were viewed as problematic by the Court of Appeal in Beaver v. Hill, 2018 ONCA 840, and I am not prepared to order recovery for it in this case.

[40] The costs determination must reflect proportionality to the issues argued. There should be a correlation between legal fees incurred (for which disbursement is sought) and the importance or monetary value of the issues at stake. The Rules do not require the court to allow the successful party to demand a blank check for their costs. O'Brien v. O'Brien, 2017 ONSC 2017.

[41] I have also considered the cases of Boucher et al. v. Public Accountants Counsel for the Province of Ontario, [2004] O.J. No. 2624 (O.C.A.), and Delellis v. Delellis and Delellis, [2005] O.J. No. 4345. Both these cases point out that when assessing costs it is "not simply a mechanical exercise." In Delellis, Ashton J. wrote at paragraph nine:

"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".

Conclusion on Costs

[42] The issues in this matter related entirely to child support and were not particularly complex but were important to both parties in the context of this family. While there was some mixed success the respondent was clearly the more successful party based on the finding of intentional underemployment and the imputation of income on the applicant from January 1, 2017 onward. She did not, however, meet or exceed her offer to settle.

[43] The applicant failed to provide an offer to settle which in the context of this matter the court views as an adverse factor in assessing costs. Most importantly the applicant has behaved unreasonably starting in 2017 in the position he took with respect to child support and his income based on the limited evidentiary record he offered at trial, and with respect to his failure to satisfy his financial disclosure obligations. Further, there was a near complete and conspicuous absence of evidence of any job search, and he also failed to establish the reasonableness of his choice to pursue self-employment. All this conduct was unreasonable, particularly since he was aware that the responding party to his motion was seeking to impute income on him.

[44] Family law litigants are responsible for and accountable for the positions they take in the litigation. Heuss v. Surkos, 2004 ONCJ 141.

[45] It is appropriate to award costs to the respondent, given her greater success and the respondent's unreasonable behaviour, and to make an appropriate adjustment to account for the divided success on the less dominate issues.

[46] Having considered all these issues, partial indemnity recovery for the applicant is appropriate. Taking into account all the factors outlined herein, I find that a fair and reasonable quantum in the particular circumstances of this case to be $8,500.00 (inclusive), payable by the applicant to the respondent forthwith. Since all the issues at trial involve child support it is also appropriate that this costs order be enforceable by the Family Responsibility Office.

Final Order

[47] Final order shall issue as follows:

1. Costs in the amount of $8,500.00 (inclusive) shall be payable by the applicant to the respondent forthwith.

2. This costs award is a support order within the meaning of section 1(1)(g) of the Family Responsibility and Support Arrears Enforcement Act, 1996, and as such, is enforceable by the Director of the Family Responsibility Office.

Released: June 6, 2019

Signed: "Justice S. E. J. Paull"