NEWMARKET COURT FILE NO.: FC-08-030894-00

DATE: 20120216

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JACQUELINE COOK, Applicant

AND:

STEVEN COOK, Respondent

BEFORE: McDermot J.

COUNSEL: A. Abramian, for the Applicant
R. A. Fernandez, for the Respondent

HEARD: By written submissions

COSTS ENDORSEMENT

INTRODUCTION

[ 1 ] On October 6, 2011, I issued my judgment in this matter. I allowed the parties the opportunity to make written submissions as to costs. These submissions have now been provided by counsel.

[ 2 ] This matter was tried over a period of three days during the May, 2011 sittings. Although there were issues concerning the amount of equalization of property and the quantum of retroactive child support, the major issue argued was entitlement by the Respondent to spousal support. Unlike the spousal support issue, the remaining issues were not questions of “whether” relief was available; they were limited to questions of “how much?”

[ 3 ] I determined that that the Respondent was entitled to spousal support. The amount of ongoing spousal support awarded was $900 per month; due to the length of the marriage, the duration of spousal support was indefinite. The net amount payable by the Applicant to the Respondent was $12,324.77; this took into account the parties’ respective retroactive support obligations including the s. 7 costs for the children’s education as well as the equalization payment owing by the Applicant to the Respondent.

[ 4 ] Offers to settle were made by each party. Neither offer contained a provision allowing for the severability of the respective terms of the offer nor a term which would allow a party to accept a portion of the offer while reserving the remaining issues for trial.

[ 5 ] The Applicant’s offer to settle was well removed from the result at trial. It called for retroactive child support in the amount of $513 per month plus a proportionate share of the s. 7 expenses of the children. This amount was not quantified. No spousal support was payable under the offer and the Respondent was to pay one half of the amount of $29,065.15 for the home repairs paid for by the Applicant (the costs claimed at trial were actually $18,908.30 plus the mortgage payments, all of which I disallowed). Although there was a provision for equalization according to a net family property statement which was not provided to me, the only specific asset to be equalized was the “lost past wages” allocation in the Applicant’s motor vehicle settlement quantified in the amount of $9,100, which was an amount substantially less than the amount proposed by the Applicant at trial of $26,079.10 which was the amount equalized.

[ 6 ] The Respondent also did not better his offer at trial. Although the spousal support offered was less than the amount awarded at trial, this was in exchange for a waiver of any claim for retroactive and ongoing child support including s. 7 expenses; I awarded the Applicant $8,651.00 as a net amount of retroactive support payable. The equalization payment proposed to be made by the Applicant within that offer was $49,356.52, which was substantially more than the equalization payment awarded at trial of $20,975.77.

ANALYSIS

[ 7 ] There are two costs issues which have been placed before me:

a) On January 26, 2011, the Applicant brought a motion which was withdrawn once she obtained counsel; the parties agreed that the Respondent would have his costs of that motion to be determined by the trial judge.

b) I am to determine whether costs are payable in the within proceeding including the trial, and if so, in what amount?

[ 8 ] Under Rule 24(1) of the Family Law Rules , [1] costs follow the event, and a successful party is presumed to be entitled to costs. I may take into account unreasonable conduct of either party (Rule 24(4)) and if success is divided, I may apportion costs as appropriate (Rule 24(6)). Under Rule 24(11), I may take into account the “importance, complexity or difficulty of the issues” as well as “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”.

[ 9 ] I can also take into account the conduct of the parties to this proceeding: see Rule 24(8) of the Family Law Rules. Under that rule, I am obliged to order full indemnity costs payable forthwith if a party has acted in “bad faith.” Moreover, I may generally take into account under Rule 24(11) “the reasonableness or unreasonableness of a client’s behaviour” in assessing costs.

[ 10 ] Under Rule 18(16), when I am ordering costs, I may further take into account any offers to settle, even if they do not comply with Rule 18(1).

[ 11 ] For the reasons set out below, I am awarding costs to the Respondent on a substantial indemnity basis in a total amount of $36,852.23.

(a) Costs of January 26, 2011 Motion

[ 12 ] There is no issue as to the liability for costs of this motion; that was agreed upon when the motion was withdrawn. The Respondent claims substantial indemnity costs of $2,538.43 for the motion. He states that no notice was given but, as he attended at court, I believe that what he means to say is that little notice was given. He states that Ms. Veldhuis refused to adjourn the motion. As a result, he states that he had to attend court on several occasions; the first on January 19, 2011 was to obtain an adjournment; the second attendance on January 26, 2011 was to file the Minutes of Settlement which resolved the motion.

[ 13 ] The Applicant’s counsel does not dispute the need to prepare materials or the time it took to settle the motion. She does, however, dispute Mr. Fernandez’ two attendances at court as set out in his Bill of Costs. She states that the first appearance was not necessary as the motion could have been adjourned by way of 14C; the second appearance could have been avoided as the Minutes could have been filed by way of 14B motion and because she never agreed to these costs being included when settling the motion. In any event, she disputes the claim by the Respondent’s counsel for travel time of two hours on each appearance and states that travel time is not an “appropriate” expense. She finally states that the correspondence sent on January 31, 2011 is not chargeable to the motion herein.

[ 14 ] Regarding the first appearance, the Bill of Costs states that the Respondent refused to consent to an adjournment of the motion. This is not denied by the Applicant in her reply costs submissions. The motion appears to have been dated January 13, 2011 and was returnable on January 19; the Applicant certainly appears to have given the Respondent little notice of the motion. This being the case, Respondent’s counsel apparently needed to attend on January 19, 2011 in order to secure an adjournment of the motion. These costs are allowable.

[ 15 ] The second appearance was to file the Minutes of Settlement, which the Respondent’s solicitor signed and filed on everyone’s behalf. The endorsement of Rogers J. makes it apparent that the Respondent was appearing for everyone. Ms. Abramian states in her submissions that she was not aware that Mr. Fernandez would be claiming costs for this attendance; I do not know who she thought should pay for that appearance when it was already agreed that her client would pay the costs of the motion? Her client could, I expect, have agreed to pay Ms. Abramian’s full costs to attend rather than those of Mr. Fernandez, but this would probably have been an equivalent amount to the partial indemnity costs claimed. The costs necessary to attend and file the Minutes of Settlement are allowed.

[ 16 ] The Respondent claims travel costs; his office is in Brampton, and there is two hour claim for each day that Mr. Fernandez attended. No reason was given why travel expenses were thought not to be appropriate. Travel by a solicitor to a court house from his office is properly chargeable, especially where a party unreasonably refuses an adjournment, which appears to have been the case here. The travel time claimed, especially in traffic, is reasonable. The travel claim is allowed in the amount of two hours for each court date.

[ 17 ] Finally, Ms. Abramian takes exception to several pieces of correspondence, one enclosing the endorsement to her and the second to the trial coordinator. It appears that the parties had agreed to expedite the trial of the matter as part of the settlement; the letter to the trial coordinator to implement that part of the settlement is properly chargeable and related to the result of the motion. The correspondence to Ms. Abramian is also related to the motion and the result. That charge is allowed.

[ 18 ] Accordingly, I am allowing Mr. Cook’s claim for costs of the motion. The Respondent’s offer to settle is on par with the settlement which occurred and accordingly, the Respondent is entitled to substantial indemnity costs. Had the matter been argued, it is conceivable that the costs would have been much greater as a full day may have been necessary to complete argument. I am accordingly allowing the Respondent his costs as claimed for the motion in the amount of $2,559.67.

(b) Costs of this Proceeding

[ 19 ] Mr. Fernandez claims costs of this proceeding in the amount of $39,904.40, which are calculated on a substantial indemnity basis. He states that his client is entitled to costs as the successful party in the cause; he says that costs should be awarded on a substantial indemnity basis because his client has effectively bettered his offer to settle made prior to trial. As well he suggests that the Applicant acted in bad faith in her conduct of the litigation in failing to pay spousal support ordered by Healey J. on March 30, 2010 as well as her failure to make timely disclosure.

[ 20 ] Ms. Abramian submits that success was divided. As such, and pursuant to Rule 24(6), there should be no order as to costs of this trial. She submits that her client was successful on a number of issues: she notes that the Applicant was successful on several income issues including certain business deductions being brought back into income, income of the children being applied without deduction to their university budgets, legal fees attributable to the lost wages award, occupation rent and the value of the Applicant’s business. In light of these findings in my decision, the Applicant states that there was divided success and no costs award should go against the Applicant.

[ 21 ] As noted above, however, the major issue between the parties which was an obstacle to settlement was the spousal support claim of the Respondent. This was a lengthy marriage, and Ms. Veldhuis would not agree to spousal support; she even refused to pay the temporary spousal support ordered by Healey J. which took into account the Respondent’s child support obligation. This is apparent as well from the offer to settle submitted by the Applicant; it did not acknowledge any sort of spousal support obligation and neither was that obligation acknowledged at trial. On that major issue, the Respondent had complete success, far beyond his own offer to settle.

[ 22 ] As also noted above, on the other issues, the questions were not a question of whether an amount was payable, but how much. The Applicant states in her submissions that Mr. Cook did not acknowledge a retroactive child support claim; in fact, he did agree that there was a valid claim but differed with the Applicant as to how much was payable. When making submissions in the trial, there was never a claim that no guideline child support was payable, and no hardship claim was made by the Respondent in his materials. More often than not, as well, the Respondent was successful in the various adjustments made in income and property calculation made in this matter. The Respondent succeeded in having the Applicant’s rental losses removed from consideration of income, and also in disputing the Applicant’s claim for one half of the expenses of repairing the home, and also in paying the mortgage. He succeeded in disputing the claim by the Applicant to impute income to him and also in having a significant value being attributed to the business (although the claim to the business having goodwill was rejected).

[ 23 ] In sum, on the issues of “how much”, the success of the parties was divided, although on balance, the Respondent was more successful than was the Applicant. On the issue of entitlement to spousal support, the major “whether” issue, the Respondent enjoyed complete success. Had the Applicant acknowledged her spousal support obligation based upon her income and the relative positions of the parties, a trial would most probably not have been necessary. I find that the Respondent was successful in the result and is entitled to costs of this proceeding.

[ 24 ] The next issue is the range of costs to be ordered: Are costs payable on a partial or substantial indemnity basis? Generally, although costs awards are generally intended in part to compensate a party for the costs of a trial or other proceeding, the rule is against full indemnity costs without good reason: see Hunt v. TD Securities Inc. (2003), 66 O.R. (3d) 481 (C.A.). Accordingly, the Respondent must demonstrate to me some good reason why costs should be awarded on a greater than partial indemnity basis.

[ 25 ] Mr. Fernandez firstly submits that costs should be so payable because his client enjoyed greater success at trial than his offer to settle allowed. He states that although the equalization payment set out in the offer is well in excess of that awarded, that taking into account the indefinite spousal support combined with the amounts actually awarded, the amount that his client would receive could be well in excess of $97,200; under the Respondent’s offer to settle, all that Ms. Veldhuis would have had to pay was $88,356.52. As such, he states that Mr. Cook had a better result than the offer to settle and as such, and pursuant to Rule 18(1), he is entitled to full indemnity costs after the offer was made.

[ 26 ] That may be the net result of my order as opposed to the offer, but it is pure speculation as to how much the non-time limited spousal support order means in financial terms. It also means different things to different people; the tax that Mr. Cook pays on the spousal support may very well differ from the deductions which would be enjoyed by Ms. Veldhuis. Moreover, the offer was not severable and did not allow a portion of the offer to be accepted and success is largely measured on particular issues than overall financial success. I do not find that the offer to settle provides a more favourable result than that enjoyed at trial within the meaning of Rule 18(14).

[ 27 ] The other basis for the claim for substantial indemnity costs by the Respondent is the conduct of the Applicant. The Respondent says that the Applicant acted in bad faith entitling him to substantial indemnity costs as set out in Rule 24(8). The Respondent notes that the Applicant failed to pay the spousal support ordered by Healey J. in March, 2010. She also failed to make disclosure as required by the Healey J. order; she failed to provide year end financial statements. This was not the first difficulty with disclosure that the Respondent had to deal with in this litigation; Mr. Fernandez filed a number of letters requesting disclosure from the Applicant. In one of those letters in August, 2009, Mr. Fernandez notes that, “Comments like ‘cut the crap’, ‘quit the nonsense’ and “chaulk ( sic .) one up for your math’ do nothing other than to antagonize an already tense situation.” In November, 2010, when Mr. Fernandez asked for disclosure according to the Healey J. order, Ms. Veldhuis told him not to “waste my time.” It was apparent to me, in observing Ms. Veldhuis and in reviewing the materials, that not only was Ms. Veldhuis dismissive of the legitimate requests for disclosure made by Mr. Fernandez; her responses were both rude and insulting to counsel.

[ 28 ] I have difficulty with individuals hiding behind their self-represented status in order to make statements in the context of litigation which would result in a lawyer who made similar statements to suffer discipline by the Law Society of Upper Canada for a breach of the civility rules governing the profession. See Eberhard J.’s statement in Schaer v. Barrie Yacht Club , [2003] O.J. No. 2673 (ON S.C.) wherein she states at para. 22 that, “Self-represented litigants may be held to the standards of civility expected of lawyers and a proper reprimand for failure to do so is an award of costs on a substantial indemnity basis.” That being said, I have to determine whether the actions of the Applicant in failing to pay support, in failing to make disclosure, and in her general incivility, constitute “bad faith” behaviour which would result in full indemnity costs sanctions as set out in Rule 24(8).

[ 29 ] It is obvious from reading the rule that “bad faith” is something more than “unreasonable behaviour” which is one of the factors that I can take into account in setting costs under Rule 24(11)(b). Bad faith is not just a factor in assessment of costs, but will result in full indemnity costs being ordered once the finding is made. Moreover, once bad faith is found, the justice hearing the matter loses discretion in setting a costs amount; Rule 24(8) states that if a party acts in bad faith, the court “ shall decide costs on a full indemnity basis and shall order the party to pay them immediately.” (emphasis mine).

[ 30 ] The issue of bad faith was canvassed extensively by Blishen J. in Piskor v. Piskor , 2004 5023 (ON SC) , [2004] O.J. No. 796 (S.C.J.) where a support payor failed to pay his support and failed to provide disclosure in the proceeding. The failure to pay the support left the recipient “destitute.” Blishen J. found that the paying spouse was had the ability to pay the support but “unilaterally and intentionally refused to pay”. At para. 13, the court found as follows:

Mr. Piskor's failure to provide full and timely disclosure and to abide by the disclosure orders made by the Court, along with his unreasonable and unilateral refusal to make support payments pending the hearing of his application, in my view, amount to bad faith. Therefore, Ms. Piskor is entitled to full recovery costs pursuant to R. 24(8).

[ 31 ] Mr. Fernandez cites the case as authority for the proposition that a finding of bad faith results from a failure to pay support combined with a failure to disclose. With respect, a close reading of the case leads me to believe that there must be more. At para. 8 of the report, Blishen J. cites Campbell J. who, in Hendry v. Martins , [2001] O.J. No. 1098 (S.C.J.) , adopted the definition of “bad faith” from Black’s Law Dictionary , 6 th ed. (1990):

Bad faith is not simply bad judgment or negligence but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity ... it contemplates a state of mind affirmatively operating with furtive design or ill will.

[ 32 ] She later states at para. 9 that bad faith “can be established by the intentional failure to fulfill an agreement in order to achieve an ulterior motive or, an intentional breach of court order ( sic .) with a view to achieving another purpose.” See also Nairn v. Lukowski , 2002 CarswellOnt 2319 (S.C.J.) where bad faith also was said to include “[c] onduct that is intended to deceive or mislead” (at para. 7).

[ 33 ] A useful evaluation of the distinction between bad faith and unreasonable behaviour can be found in S.(C.) v. S.(C.), 2007 20279 (ON SC) , [2007] O.J. No. 2164 (Ont.S.C.J.) where Perkins J. states:

In order to come within the meaning of bad faith in Rule 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith. The requisite intent to harm, conceal or deceive does not have to be the person's sole or primary intent, but rather only a significant part of the person's intent.

[ 34 ] In all of this, it is apparent that great care must be taken prior to making a finding of bad faith within the meaning of Rule 24(8). The conduct appears to require a finding of ulterior motive or dishonest purpose behind the actions complained of. For example, in Piskor , the failure to pay support left the recipient destitute and failure to provide financial disclosure in that case went to the heart of the “true financial state of affairs of Mr. Piskor and his family”. In that case, the breach of the order was both intended to financially bury Mrs. Piskor as well as to hide the financial affairs of Mr. Piskor in a motion to vary support. As such, there appears to have been a dishonest or wrongful motivation behind the actions of the support payor in that case. There must be more than bad behaviour; there must be an element of malicious intent or underhanded behaviour for there to be bad faith within the meaning of Rule 24(8).

[ 35 ] I cannot make that finding in the present case. The Respondent was not made destitute by the failure to pay a fairly minor net support amount. The disclosure that the Applicant failed to make did not go to the major issue (spousal support) in this matter; it went to the issue of the value of the business and resulted in an adverse inference which increased the equalization payment in this matter. As noted by the Applicant’s counsel, the Applicant testified that she did not think that she needed to provide the balance sheets because the other disclosure covered that issue. Although I stated in my judgment that the Applicant’s failure to make the disclosure was “cavalier” and “contemptuous”, I do not find the malice necessary to make a finding of bad faith, resulting in full indemnity costs.

[ 36 ] That being said, I have no difficulty in making a finding that the Applicant’s behaviour was unreasonable. She was contemptuous of the process and as noted above, she took advantage of her unrepresented status in order to make rude and insulting statements to counsel. Her failure to pay support was wilful and appears to have resulted from her mistaken belief that she would not be found to be liable to pay spousal support. She did not provide the disclosure as ordered. The Applicant furthermore attempted to obtain a restraining order without this being requested in her application; she also told the realtor that the Respondent was subject to a restraining order when he was not. I find that this failure to provide disclosure and pay support, the Applicant ’s rude and cavalier treatment of counsel , as well as the ill founded requests for a restraining order and the misrepresentations to the realtor both lengthened proceedings and impeded settlement. The Applicant’s behaviour was unreasonable and a factor to be taken into account in setting the quantum of costs in this matter. Accordingly, I find that costs should be assessed in on a substantial indemnity basis.

[ 37 ] The Applicant states that the costs of the settlement and case conferences should not be included in the costs in this matter. In doing so, she relies upon Islam v. Rahman , 2007 ONCA 622 , [2007] O.J. No. 3416 (C.A.) wherein the Court stated (at para. 2):

However, we accept the appellant's submission that the trial judge erred in failing to exclude from the award of costs amounts claimed for steps taken in the case where no order was made as to costs or where there was silence on the issue. Rule 24(10) of the Family Law Rules provides that the judge who deals with a step in a case shall decide who, if anyone, is entitled to costs. If a party who has served an offer to settle the case as a whole wishes that fact taken into consideration in relation to a particular step, it is incumbent on that party to raise that issue with the judge who deals with that step. In this case, various steps were taken (e.g. motions, conferences) in relation to which either there was an endorsement that there be no order as to costs or the issue of costs was not addressed. In the absence of a specific order for costs in favour of the respondent, the trial judge should have disallowed costs claimed by the respondent in relation to such steps.

[ 38 ] In Houston v. Houston , [ 2012] O.J. No. 75 (Div’n’l Ct.) R.D. Gordon J. confirms at para. 8 that the Islam decision speaks “ to costs applicable to steps in a case which are addressed by a judge , such as motions and conferences.” (emphasis his).

[ 39 ] These cases appear to be stating that in family law litigation, counsel should speak to costs at every step of the litigation, including case conferences and settlement conferences. This may be an unfortunate constraint as many of these steps are taken with the intent to settle issues, and raising costs issues at those events may both be inappropriate and unproductive under the circumstances: see S.E. Healey J.’s endorsement in Gogas v. Gogas , 2011 ONSC 5368 , [2011] O.J. No. 4085 at para. 4 of that decision. Conferences often are mostly a process of negotiation and there is often no appearance necessary before the presiding justice on a busy conference day because the parties enter into a temporary consent or minutes at that time. The vast majority of conferences result in an endorsement which does not speak to the issue of costs whatsoever.

[ 40 ] The endorsements made at the various conferences are accordingly crucial to the overall determination of costs as the Court of Appeal of this province has interpreted Rule 24(10) to exclude from an overall costs award the time taken to prepare and attend on conferences which may well have been productive events, but where the endorsement is often silent as to costs. In order to obtain costs of those events as part of an overall costs award, counsel must speak to the issue of costs and reserve those costs to the trial judge. Without that, the law of this province as interpreted by the Court of Appeal is that costs of those events cannot be included in an overall costs award.

[ 41 ] In the present case, I have reviewed the endorsements made at those case conferences. I am excluding from the Respondent’s claim the costs of the Settlement Conference, Case Conference and Trial Management Conference as set out in the Respondent’s Bill of Costs; I find his Bill of Costs otherwise reasonable for a trial of this length and nature. The costs of the conferences according to the Respondent’s Bill of Costs on a full indemnity basis total $5,915.50 plus HST of $760.02 for a total of $6,684.52. As the claim for substantial indemnity costs allowed in this matter are 80% of the full indemnity costs, I am excluding 80% of that amount ($5,347.62) from my award of costs. I am accordingly awarding costs for these proceedings, excluding the motion, in the amount of $34,292.56 against the Applicant for the trial ($39,640.17 - $5,347.62).

(c) Award

[ 42 ] Accordingly, the Respondent is entitled to his costs of the motion and of the remainder of these proceedings on a substantial indemnity basis in the amount of $36,852.23 ($34,292.56 + $2,559.67).

McDERMOT J.

Date: February 16, 2012

[1] O. Reg 144/99