Court File and Parties

Date: 2021 07 21 Court File No.: Toronto D 80892/15

ONTARIO COURT OF JUSTICE

Endorsement on Costs regarding Motion to Change heard 5 May 2021

Over-view

[1] This is the decision about costs of a motion to change brought by the mother regarding child support. The mother was successful at the motion to change and is entitled to her costs (Endorsement released 17 May 2021).

The Parties’ Positions re Costs

[2] The mother claimed costs of the motion to change on a full recovery basis of $4,648.44.

[3] The decision on the motion to change set up a timetable for the serving and filing of submissions regarding the amount of costs. The mother filed written submissions, and the father filed no material in response to the mother’s claim for costs. The amount of costs claimed by the mother is unopposed.

The Costs Analysis

The Law of Costs

Entitlement

[4] Under the Family Law Rules, O. Reg. 114/99 [1], rule 2(2), the court is required to deal with cases justly. This is the primary objective of the Family Law Rules. Parties and their lawyers are required to deal with their cases in ways which promote the primary objective of the Rules (Rule 2(4)). Costs are an important component in any decisions made by parties about continuing with a court case.

[5] The courts have a broad discretion to award costs. [2] The general discretion of the courts regarding costs is contained in the Courts of Justice Act, R.S.O. 1990, c. C. 43 [3], s. 131(1), which sets out three specific principles:

a) the costs of a case are in the discretion of the court; b) the court may determine by whom costs shall be paid; and, c) the court may determine to what extent the costs shall be paid.

[6] Modern costs rules are designed to foster four fundamental purposes: [4]

(a) to indemnify successful litigants for the cost of litigation; (b) to encourage settlement; (c) to discourage and sanction inappropriate behaviour by litigants; and, (d) to ensure that cases are dealt with justly.

[7] In addressing the issue of costs, the court must ultimately be guided by the primary objective of the Family Law Rules as set out in Rule 2(2), which is to enable the court to deal with cases justly. [5]

[8] Rule 2(2) needs to be read in conjunction with Rule 24. Rule 2(4) of the rules states that counsel have a positive obligation to help the court to promote the primary objective under the Family Law Rules. Rules 2(3)(a) and (b) set out that dealing with a case justly includes ensuring that the procedure is fair to all parties and saving time and expense. [6]

[9] Costs awards are discretionary. Two important principles in exercising discretion are reasonableness and proportionality. [7]

The Evolution of Costs as an Instrument of Social Policy

[10] The traditional purpose of an award of costs was to indemnify the successful party in respect of the expenses sustained. For some time, however, courts have recognized that indemnity to the successful party is not the sole purpose, and in some cases not even the primary purpose, of a costs award. The principle of indemnification, while paramount, is not the only consideration when the court is called on to make an order of costs; indeed, the principle has been called "outdated" since other functions may be served by a costs order, for example to encourage settlement, to prevent frivolous or vexatious litigation, and to discourage unnecessary steps. This change in the common law was an incremental one when viewed in the larger context of the trend towards awarding costs to encourage or deter certain types of conduct, and not merely to indemnify the successful litigant. [8]

[11] The traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner's litigation expenses to the loser, rather than leaving each party's expenses where they fall, they act as a disincentive to those who might be tempted to harass others with meritless claims. In addition, because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court's concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. In this sense it is a natural evolution in the law to recognize the related policy objectives that are served by the modern approach to costs. [9]

[12] Modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer. Costs can also 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. [10]

Behaviour of the Parties

[13] One of the purposes of costs is to change behaviour.

[14] The justice system is a precious public resource. Access to the justice system by individuals must be balanced with the need to ensure that the resource is available for all those who need it. This is one of the purposes of Rule 2.

[15] Family law litigants are responsible for and accountable for the positions they take in the litigation. [11]

[16] One of the most important functions of costs is to ensure that litigants conduct themselves in a manner that upholds the integrity of our justice system as a whole. A careful consideration of the conduct of the parties is therefore a key component to the costs analysis. The court has an obligation to ensure that litigation is not utilized as a tool to harass parties, and that the resources of the justice system are not unduly drained by unmeritorious claims. [12]

[17] Parties to litigation must understand that court proceedings are expensive, time-consuming and stressful for all concerned. They are not designed to give individual litigants a forum for carrying on in whatever manner they may choose, oblivious to the impact of that conduct on the other side and, perhaps most importantly, for the purposes of this case, oblivious to the mounting costs of the litigation. [13]

[18] Matrimonial litigation is an occasion for sober consideration and thoughtfulness rather than intemperate behaviour. [14]

[19] Rule 24(5) provides criteria for determining the reasonableness of a party’s behaviour in a case (a factor in determining quantum, Rule 24(12)). 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.

[20] A finding of bad faith is not a condition precedent to full recovery of costs by the other side under the Family Law Rules. [15] The court need not find that bad faith or other special circumstances exist to make a costs award approaching substantial or full recovery. [16]

[21] When awarded on a full recovery scale, costs can serve to express the court’s disapproval of unreasonable conduct during the litigation. [17]

[22] The unreasonable conduct of a litigant is a factor in both the awarding of costs and in fixing the amount of costs.

[23] It must be made clear to family law litigants that there is no right to a day in court, or at least, that the right to a day in court is tempered with the requirement that the parties take a clear-headed look at their case before insisting on their day in court. The court must sanction this behaviour clearly, or it will invite more of this behaviour.

[24] These are the findings about the father’s behaviour made in the Reasons for Decision on the motion to change:

(a) The father did not provide annual financial disclosure despite the fact that the original order provided for this; (b) The father made very little disclosure in the motion to change and it was difficult for the court to determine what his income was for support purposes; (c) The father has income from at least three sources, the three businesses he owns and operates. He did not produce any disclosure about any of the three business. He did not produce even the minimum level of disclosure required for child support cases; (d) It was not believable that the father earned the income he says he earned from three businesses. It was not believable that he earned the income he says yet takes the kinds of vacations that he has taken. And it was not believable that he earned the income he says he does yet has the expenses he says he has. And the court did not believe him about his income; (e) The court drew an adverse inference against the father regarding his income for his failure to make adequate disclosure; and, (f) The court found that the father is capable of earning a great deal more income than he has disclosed. He was found to be intentionally under-employed, or he is not disclosing the income he is actually earning.

Offers to Settle

[25] Neither party made an Offer to Settle the motion to change.

Quantum of Costs

[26] Once liability for costs has been established, the court must determine the appropriate quantum of costs. These are general principles relating to the quantum issue:

a) ultimately, costs decisions should reflect what the court considers to be a fair and reasonable amount that the unsuccessful party should pay; b) costs need to be proportional to the issues and amounts in question and the outcome of the case; c) amounts actually incurred by the successful litigant are not determinative; and, d) in assessing what is fair and reasonable, the expectation of the parties concerning the amount of a costs award is a relevant consideration. [18]

[27] The court’s decision on the appropriate quantum of costs must also be informed by the principle of proportionality. Timeliness, affordability and proportionality are essential components of a legal system that ensures true access to justice. In the context of the costs analysis, these factors require the court to ensure that expenses claimed make sense having regard for the importance and complexity of the issues that were litigated. [19]

[28] The over-riding principle is reasonableness. 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. [20]

[29] In the context of family law disputes, a court need not find special circumstances to make a costs award approaching substantial recovery. [21]

[30] In considering the quantum of costs, the court should also consider Rule 1(8), which provides that the court may respond to a failure to follow the Rules or abide by an order by making an order for costs, and Rule 2(2), which provides that one of the primary objectives of the Rules is to ensure that cases are dealt with justly. [22]

[31] Determining the amount of costs is not simply a mechanical exercise. Costs must be proportional to the amount in issue and the outcome. [23]

[32] Costs awards should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties, rather than any exact measure of the actual costs to the successful litigant. It is not appropriate to simply take the number of hours spent by counsel on a particular matter and multiply those hours by a determined hourly or per diem rate. [24]

[33] Rule 24(12), which sets out factors relevant to setting the amount of costs, specifically emphasizes "reasonableness and proportionality" in any costs award. [25] These are the factors in Rule 24(12) to consider in determining the amount of costs in family law matters:

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.

[34] In determining the amount of costs in this matter, the court took into account these factors set out in R. 24(12):

(a) the reasonableness and proportionality of each party’s behaviour, as it relates to the importance and complexity of the issues: While the issues were important to the parents involved, the case was not complex. The father did not make annual financial disclosure as required in the original support order. He did not make disclosure in the motion to change. The court did not believe him about his income, and drew an adverse inference against him regarding his income for his failure to make adequate disclosure. He was found to be intentionally under-employed, or he is not disclosing the income he is actually earning. While a finding of unreasonableness is not necessary to the making of a costs order, this is unreasonable behaviour; (b) the reasonableness and proportionality of the time spent by each party, as it relates to the importance and complexity of the issues: The time spent by the mother’s lawyer in drafting her materials was reasonable, given the issues at stake and their importance to the parents. The father made no objection on that basis; (c) the reasonableness and proportionality of any written offers to settle, including offers that do not meet the requirements of rule 18, as it relates to the importance and complexity of the issues: Neither party made an Offer to Settle the motion to change. (d) the reasonableness and proportionality of any legal fees, including the number of lawyers and their rates, as it relates to the importance and complexity of the issues: The rate claimed by the mother’s lawyer in drafting her materials was reasonable. The father made no objection on that basis; and, (e) the reasonableness and proportionality of any other expenses properly paid or payable, as it relates to the importance and complexity of the issues: The disbursements claimed by the mother were modest under the circumstances ($128.44). The father made no objection on that basis.

[35] The mother claimed only those costs that she incurred that were out-of-pocket expenses. She may have been entitled to claim costs for her own time spent on this court case, but she did not. This was a very reasonable position for the mother to take. The total amount claimed by the mother, $4,648.44 was reasonable, even modest, in the circumstances.

[36] The court must determine an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of this case. This determination is not merely an arithmetical exercise of calculating time spent by a suitable hourly rate.

Order

[37] The father shall pay the mother’s costs of the motion to change. A fair and reasonable costs order, and one that is proportionate to the issues involved, in all of these circumstances, is an order for costs fixed at $4,648.44 all in (fees plus HST and disbursements plus HST).

[38] The motion to change dealt with support only. The costs are to be enforced by the Family Responsibility Office.

[39] The father shall not bring a motion to change without leave obtained in advance, with a Form 14B, maximum two pages in support, not to be served on the other side unless the court orders. The court shall take into account the payment of costs in determining leave.

Released: 21 July 2021 Justice Carole Curtis