ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: D853/09
DATE: 2012/11/05

BETWEEN:

TIMEA SARKOZI Applicant
– and –
PAUL PEREIRA Respondent

Yolanta Lewis, for the Applicant

Self Represented

TURNBULL, j.

Introduction

[ 1 ] This is a ruling on costs which was ordered upon release of a Judgment in this matter on July 23, 2012. I requested the parties provide written submissions on the questions of costs and finally received Mr. Pereira’s submissions, which were filed with the court on September 5, 2012.

[ 2 ] This was a nine and one half day trial. In paragraph 3 of the judgment, I noted the issues which the court had to determine:

a. Equalization of net family property;

b. The amount of retroactive and ongoing child support;

c. The amount of retroactive and ongoing extraordinary expenses under s. 7 of the Federal Child Support Guidelines ;

d. Whether the respondent’s claim under s. 9 of the Family Law Act on a retroactive basis could succeed;

e. Whether the applicant should be obliged to contribute to the carrying of the costs of the matrimonial home; and

f. Whether any disposition costs related to the sale of the respondent’s home should be taken into account in the calculation of the equalization of family property.

The Law:

[ 3 ] In this matter, Rule 24 of the Family Law Rules is central. It specifies the factors which a judge assessing costs must take into consideration. The provisions of that Rule which I consider most pertinent to this assessment of costs are as follow:

S. 24.(1) SUCCESSFUL PARTY PRESUMED ENTITLED TO COSTS

There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.

S. 24.(4) SUCCESSFUL PARTY WHO HAS BEHAVED UNREASONABLY

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.

S. 24.(5) DECISION ON REASONABLENESS

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.

S. 24.(6) DIVIDED SUCCESS

If success in a step in a case is divided, the court may apportion costs as appropriate.

S. 24.(8) BAD FAITH

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.

S. 24.(10) COSTS TO BE DECIDED AT EACH STEP

Promptly after each step in the case, the judge or other person who dealt with that step shall decide in a summary manner who, if anyone, is entitled to costs, and set the amount of costs.

S. 24.(11) FACTORS IN COSTS

A person setting the amount of costs shall consider,

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

(b) the reasonableness or unreasonableness of each party’s behaviour in the case;

(c) the lawyer’s 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 properly paid or payable; and

(f) any other relevant matter.

[ 4 ] It has been held that the preferable approach in family law cases is to have costs recovery generally approach full recovery so long as the successful party has behaved reasonably and the costs claimed are proportional to the issues and the results. Where the Rules leaves a discretion to the trial justice on how much to award it is reasonable to look at the full amount claimed, look at the impact of reasonableness of behaviour and divided success, test the amount against the factors listed in Rule 24 (11) and then look at factors such as ability to pay in deciding whether the costs awarded should be substantial (about 80%) or full recovery or somewhere in between. Biant v. Sagoo (2001) 2001 28137 (ON SC) , O.J. No. 3693 (S.C.J.)

[ 5 ] The Ontario Court of Appeal has directed that the overall objective in dealing with costs 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. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The Court is required to consider what is “fair and reasonable” having regard to what the losing party could have expected the costs to be. In applying this “reasonable expectations” analysis comparative information between the costs incurred by each party provides the Court with some perspective. Boucher v. Public Accountants Counsel (Ontario) (2004) 2004 14579 (ON CA) , O.J. No. 2634 ; Butty v. Butty (May 8, 2009) (ON S.C.).

[ 6 ] In Fong v. Chan 1999 2052 (ON CA) , 46 O.R. (3d) 330 (C.A.), the Court of Appeal noted that modern costs rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behaviour by litigants.

[ 7 ] I have attempted to apply these principles in rendering my decision in this matter.

Analysis

[ 8 ] Upon my review of my detailed notes of this matter, I am satisfied that approximately 40% of the trial was spent with respect to the valuation of the applicant’s business. In their respective Offers to Settle which have been submitted to the court, it is clear this has been a major issue between the parties. Early on in the proceedings, the respondent offered to pay $30,000.00 to the applicant as an equalization of family property. In my view, the applicant had no choice but to retain Mr. Heyl of BDO Dunwoody to prepare a business valuation report. From the summary provided to the court by Ms. Lewis, it appears that his firm charged $6,400.00 for that report which was dated June 30, 2010. In the end however, the court rejected Mr. Heyl’s calculations and relied on those of Mr. Marino.

[ 9 ] In due course, the respondent retained his expert, Mr. Marino, who prepared a critique of Mr. Heyl’s report. Clearly, Mr. Heyl had to review that critique and then meet with Mr. Marino for settlement discussions.

[ 10 ] Thereafter, on the issue of the equalization of family property, the respondent made an offer to settle the issue of equalization of family property in the amount of $60,671.21. However, the respondent’s December 16, 2011 offer to settle was a comprehensive “package” offer, the terms of which were not severable. Furthermore, that offer did not comply with Rule 18 (14) as it was made following the commencement of the trial.

[ 11 ] On the other hand, the applicant’s last offer to settle with respect to the equalization of family property was dated October 4, 2011. It sought an equalization payment in the amount of $65,000.00. At the end of this trial the court ultimately ordered an equalization of $62,308.00. In other words, approximately 40% of this trial time with the attendant expenses involved a dispute over $5,000.00.

[ 12 ] In my view, both parties should be responsible for their own costs and not costs should be awarded with respect to the portion of the trial related to the valuation of the applicant’s business and the equalization of net family property.

[ 13 ] The applicant, Ms. Sarkozi, was substantially successful on the issue of retroactive child support. Mr. Pereira was not successful with respect to the claims which he made for retroactive child support and child support based on s. 9 of the Child Support Guidelines. He also was not successful in his claim that the applicant be required to contribute to the carrying costs of matrimonial home from the date of separation. Furthermore, the respondent’s claim that the notional disposition costs in relation to the matrimonial home should be deducted from his net family property was not allowed. The judgment instead provided that Ms. Sarkozi will be required to pay 50% of the disposition costs only if the respondent sells the matrimonial home.

[ 14 ] In assessing costs in this matter, I have taken into account the presumption in Rule 24(1) of the Family Law Rules that the successful party is entitled to costs. While arguably Mr. Pereira was minimally successful on the issue of the valuation of the applicant’s business, I have taken into account his significant delays which lead to the prolongation of this trial. The expert’s report of Mr. Marino was not ready when the trial was scheduled to start in early 2011 and the trial was delayed for four months due to the delay in producing the “critique report”. During the course of the trial, Mr. Pereira delayed the trial on several occasions in order to consult with legal aid representatives. In the meantime, Ms. Sarkozi was required to continue paying counsel fee to Ms. Lewis. Mr. Pereira gave a copy of the applicant’s business records on a CD to Mr. Lewis on December 22, 2010 but could not run off hard copies for her. He ultimately did provide hard copies but not until the very last day of the court ordered deadline namely, February 14, 2011. At the outset of the trial on October 24, 2011 Mr. Pereira produced, for the first time, a document brief of his emails to Ms. Lewis. During the course of the trial, the matter had to be delayed while Mr. Pereira properly retained and instructed Mr. Marino with respect to the preparation of a full valuation report with respect to the applicant’s business. He was required to pay a costs penalty of $5,000.00 with respect to this order being granted. In these circumstances I do not feel it is appropriate that he should be awarded costs relative to the portion of the trial in which he was arguably successful.

[ 15 ] The remaining 60% of the trial related to issues on which the applicant was clearly successful. I would be remiss in stating that the court is indebted to Ms. Lewis for her professional performance during the course of the trial. In my view, without her presence, the presentation of the case would have been much more difficult for me to understand and the trial would have been extremely prolonged. In an indirect sense, the respondent has benefited from her reasoned and fair approach in attempting to present this case to the court.

[ 16 ] I have had an opportunity to review the bill of costs prepared by Ms. Lewis. In that bill of costs, the applicant asks that costs be awarded to her in the amount of $57,231.00 for fees inclusive of G.S.T. and H.S.T. and disbursements in the amount of $27,884.82. I have taken into consideration that the applicant made a number of offers to try to settle this action before the respondent provided a valuation report of his valuator Mr. Marino. Although the respondent, throughout these proceedings, had disputed the valuation of the business as estimated by the applicant initially, and as determined by Mr. Heyl in his valuation report, he did not retain Mr. Marino to provide an independent valuation of the business until shortly before the trial, and the report itself was not produced until after the trial had commenced. Mr. Pereira reasonably explained his delay as being related to a lack of finances. However, his decision to proceed with the litigation carried with it financial ramifications, not just for himself but also for Ms. Sarkozi.

[ 17 ] In assessing costs I am to take into account, under Rule 24(5), the conduct of the parties during the proceedings. I concur with the submissions made by Ms. Lewis on behalf of the applicant, that throughout much of these proceedings, the respondent has acted unreasonably and his actions have contributed significantly both to the duration of the trial and the inability of the parties to reach a compromise that would have avoided this trial. I find the respondent took an unreasonable position with respect to the claim he made for retroactive child support and s. 7 expenses against the applicant by maintaining that the children were in his care more than 40% of the time from and after separation in 2008. A substantial amount of trial time was spent in relation to evidence on the time sharing evidence arrangements. I further find he acted unreasonably by including values for the applicant’s financial practise in his net family property statements which were not based on any independent opinion on the value of the practise. Upon review of the respondent’s net family property statements filed as exhibits at trial, it is clear that his values for the financial planning practise were estimated to be substantially higher than the value determined at trial, and also were higher than the value for the business as determined by Mr. Marino.

[ 18 ] In paragraph 20 of the decision rendered by this Court I noted the number of times the respondent had not provided accurate and complete information in the financial statements he had filed during the course of these lengthy proceedings.

[ 19 ] In the circumstances I find that the applicant is entitled to:

a. Substantial indemnity costs on the issues relating to retroactive child support in s. 7 expenses (including determination of whether the time sharing arrangements were over the 40% threshold for s. 9 of the Guidelines ), based on my estimation that approximately one-half of the trial was spent on those issues;

b. Partial indemnity costs for the time spent in preparation for the trial and the remaining half of the trial time being spent in relation to the property issues;

c. Substantial indemnity costs in relation to the costs incurred by the applicant for preparation for the trial which did not proceed in November 2010, as well as for the subsequent attendances before Justice Pazaratz in January and February 2011.

[ 20 ] I have taken into consideration that the amounts claimed in the bill of costs for fees by the applicant do not include any of conference attendances (case conference, two settlement conferences and two trial management conferences) or the several attendances in court in the spring of 2010 to speak to the matter with respect to the scheduling of the trial date. Counsel has advised that Ms. Sarkozi’s legal fees and disbursements (excluding the BDO Dunwoody fees, which were billed directly to her) totalled just over $73,000.00 inclusive of H.S.T. and G.S.T.

[ 21 ] In the circumstances I have taken into account the fact that Ms. Lewis was called to the bar in 1979. She is a specialist in the practise of family law. Her partial indemnity scale for fees in the amount of $250.00 and her substantial indemnity scales for fees in the amount of $325.00 per hour are eminently reasonable. I find the partial indemnity fees sought by the former solicitor for the applicant in the amount of $225.00 to be reasonable as well. That former solicitor also was a specialist in family law. In assessing these costs, I have been guided by the applicant’s bill of costs. I allow the following amounts:

a. Preliminary steps in preparation: $2,162.50, plus G.S.T. of $108.10;

b. Trial preparation – 2010: 23.1 hours at $250 per hour (partial indemnity rate) equals $5,775.00, plus H.S.T. of $750.75;

c. Trial preparation – September 2011 to March 2012: I allow the applicant her costs in the amount of $15,200.00 plus HST of $1,976.00 as claimed. The work is reasonable and the time expended well within the reasonable expectations of the parties. The evident preparation of Ms. Lewis at trial is reflected in the work done for trial preparation. I find the time expended of 60.8 hours and the hourly partial indemnity rate of $250.00 per hour to be fair and reasonable.

d. Offers to settle: I find the time expended for the preparation of these offers to be reasonable. While the offers were not more advantageous to the respondent than the ultimate judgment on all issues, they were reasonable, detailed and specific to the points in litigation. I therefore find the time reasonable and necessary as part of this litigation. Ms. Lewis has docketed and claims 8.7 hours at $250.00 per hour. The respondent shall pay the applicant $1500.00 plus HST of $195.00 with respect to these offers as the applicant was not totally successful on any of her offers.

e. Counsel fee at trial (which includes preparation on trial dates): I have reviewed my notes and find that the time claimed by Ms. Lewis for this heading of 76.4 hours is eminently reasonable. However, as I indicated 40% of this trial was spent with respect to the valuation of the applicant’s business and the amount claimed should be discounted by $8,800.00 to reflect a net allowable assessment for this heading of costs of $13,200.00, plus H.S.T. of $1,716.00.

f. Preparation of written submissions: The amount claimed is reasonable and the work done is appropriate and was of great assistance to the court. I allow the amount claimed of $600.00 plus HST of $78.00 based on 2.4 hours at $250.00 per hour.

g. Costs: The time spent for the preparation of the submissions on costs is reasonable and constituted a very important financial element in this litigation. I find the time and hourly rate charged to be reasonable. I allow the applicant her costs of $1750.00 plus HST of $227.00.

[ 22 ] The court orders the respondent to pay the applicant her costs fixed in the sum of $45,238.35 inclusive of G.S.T. and H.S.T.

[ 23 ] The respondent is ordered to pay the applicant the following disbursements:

Disbursements not subject to H.S.T.

Court Filing Fees: Issue application $ 167.00

Paid to set application down $ 280.00

Disbursements subject to G.S.T.

Process Server Fees: to file Notice of Change $ 11.00

LSUC Transaction Levy $ 50.00

Disbursements subject to H.S.T.

Process Server Fees: court filings $ 90.00

Photocopying: 800 pages x $0.25 $ 200.00

Courier charges $ 238.83

Transcripts $ 145.75

TOTAL: $ 1182.58

Total G.S.T. at 5% on Disbursements ($61.00) $ 3.05

Total H.S.T. at 13% on Disbursements (674.58) $ 87.69

Total of Disbursements and G.S.T. and H.S.T. $ 1273.32

Conclusion:

[ 24 ] It is ordered that the respondent shall pay to the applicant her costs fixed in the sum of $45,238.5 inclusive of H.S.T. and G.S.T. and her disbursements fixed in the sum of $1273.32 inclusive of H.S.T. and G.S.T.

[ 25 ] It is ordered that paragraph 90 of the judgment should be amended to reflect that the date of marriage was June 16, 2001 and not June 16, 2011.

[ 26 ] I received written submissions after judgement about changing terms of the judgment as they relate to the amount payable for child support. I decline to do so.

Turnbull, J.

Released: November 5, 2012

COURT FILE NO.: D853/09

DATE: 2012/10/04

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: TIMEA SARKOZI Applicant - and – PAUL PEREIRA Respondent REASONS FOR JUDGMENT re costs Turnbull J.

Released: November 5, 2012