SUPERIOR COURT OF JUSTICE

COURT FILE NO.: FC-09-33997-00
DATE: 20130328

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

HEDY BEATRICE WARSH

Applicant

Self-Represented

• and -

IAN GARRY WARSH

Respondent

Mark Greenstein, for the Respondent

COSTS ENDORSEMENT

LAUWERS J.:

[1] In my reasons for decision dated December 31, 2012, found at [2012] O.J. No. 6246, I invited costs submissions. I received submissions from Mr. Greenstein dated January 10, 2013; responding submissions from Ms. Warsh dated January 23, 2013; reply submissions from Mr. Greenstein dated January 30, 2013; and a surreply from Ms. Warsh dated February 4, 2013. I sent a letter to the parties requesting further information about legal bills paid by Ms. Warsh before she became self-represented. She sent additional submissions dated February 12, 2013 to which Mr. Greenstein responded on February 18, 2013, followed by more submissions from Ms. Warsh on March 4, 2013.

[2] Rule 24 of the Family Law Rules sets out the applicable principles in a costs award. There is a presumption that a successful party is entitled to the costs of the case. The court may also take into account the principles applicable under Rule 57.01 of the Rules of Civil Procedure.

[3] The relevant general principles were canvassed by the Court of Appeal in Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, per Epstein J.A. at paras. 51-52:

A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher (Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), [2004] O.J. No. 2634). The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 118 A.C.W.S. (3d) 341 (Ont. C.A.), at para. 4.

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said “[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice.”

[4] An element is the losing party's reasonable expectation as to the costs payable: Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440, [2004] O.J. No. 4651 (C.A.) at paras. 22, 35. Proportionality also plays a role: Rule 1.04(1.1).

[5] Mr. Greenstein submits:

4. The Respondent, Ian Warsh, candidly achieved mixed success in proving his case to the Honourable Court. His primary objective was to have this Court recognize the parties’ eldest child, Joel Warsh, as a legal “child of the marriage” for the purpose of ensuring that the payments for Joel’s medical school expenses would be shared between the parties. In this legal pursuit, he was not successful. He also did not convince this Court that the parties’ daughter, Erica Warsh, had unilaterally repudiated the father-daughter relationship, as the breakdown was found to be the shared responsibility of both Erica and Mr. Warsh.

5. However, the respondent did convince this Honourable Court that he should receive financial credit for payments which were made on behalf of the children of the marriage following the date of separation, which reduced the quantum of retroactive support to be paid to Mrs. Warsh. He also was successful in having this Court recognize that Mrs. Warsh should contribute to the payment of household expenses incurred by Mr. Warsh on behalf of the parties, including the Sears debt, the Visa payments and a share of household utility expenses. Finally it was his NFP statement which was utilized in determining the appropriate net family property of the parties and the payment from one party to the other of an equalization payment.

[6] The major issue at trial was Ian Warsh’s claim to a contribution from Hedy for Joel’s education expenses. Hedy Warsh’s exposure to risk on that head exceeded $180,000. While there was some mixed success in the other issues, as Mr. Greenstein submits, in my view the clear victor was Hedy Warsh. She is entitled to the costs of the trial although some offset may be due under Rule 24(6) and 24(7).

[7] I note however that Rule 24(10) requires the costs of each step in the action to be decided. I will take it that apart from the trial there are no other steps to be considered by me in addressing costs. The implication is that Hedy Warsh cannot recover for case conferences, motions and so on as part of this assessment.

[8] Hedy Warsh’s claim for costs exceeds $100,000. I discuss the components below.

Self-represented Fees

[9] Ms. Warsh’s submissions rely on the growing body of case law that self-represented parties who are successful may be entitled to costs. Her claim to more than $36,000 for her own time is based not on dockets or records but on a calculation that she describes as follows:

Costs: June 2010 – December 2012 (Total of 1212.5 days) Rate: $150.00 per hour

*(Minimum combined average of 2 broken hours spent per day): 242.5 hours

(Note: some days no work was done/good days minimum of 2 broken hours of time per day, trial 9 hours per day, same as Mr. Greenstein claim)

[10] In her submissions dated March 4, 2013, Hedy Warsh claims $3,394.05 composed of her time for the additional submissions, her mileage for serving documents on Mr. Greenstein and delivering them to court, copying charges, faxes and electronic mail.

[11] On the scale of costs, Hedy Warsh submits that Ian Warsh’s relentless pursuit of her contribution to the cost of educating son Joel amounts to bad faith pursuant to Rule 24(8), which entitles her to costs on a full recovery basis. She also submits that Rule 18 applies to an offer to settle that her counsel issued in December 2009. It was served on December 14, 2009 and was open until December 15, 2009 at noon.

Hedy Warsh’s Entitlement to Counsel Fees as a Self-represented Litigant

[12] In Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330 (C.A.), Sharpe J.A. noted at paras. 23 and 28:

It is apparent from this review of the case law that the preponderance of modern authority supports the contention that both self-represented lawyers and self-represented lay litigants may be awarded costs and that such costs may include allowances for counsel fees.

I would also add that self-represented litigants, be they legally trained or not, are not entitled to costs calculated on the same basis as those of the litigant who retains counsel. As the Chorley case [London Scottish Benefits Society v. Chorley, (1884), 13 Q.B.D. 872], recognized, all litigants suffer a loss of time through their involvement in the legal process. The self-represented litigant should not recover costs for the time and effort that any litigant would have to devote to the case. Costs should only be awarded to those lay litigants who can demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation, and that as a result, they incurred an opportunity cost by foregoing remunerative activity. As the early Chancery rule recognized, a self-represented lay litigant should receive only a "moderate" or "reasonable" allowance for the loss of time devoted to preparing and presenting the case. This excludes routine awards on a per diem basis to litigants who would ordinarily be in attendance at court in any event. [Emphasis added.]

[13] In Mustang Investigations v. Ironside, [2009] O.J. No. 3848, at paras. 11-13 Perrell J. put a gloss on the entitlement to costs referred to in Fong v. Chan:

Relying on Master Dash’s judgment in Huard v. Hydro One Networks Inc., [2002] O.J. No. 4547 (Master), Mustang submits that under the second principle, for a lay litigant to recover costs he or she must present evidence that he or she could have been gainfully employed and, therefore, lost opportunities for remuneration during the course of the civil proceedings. I, however, do not read the second principle [in Fong] in this way.

As I read Justice Sharpe’s judgment, he was stating that for a lay litigant to recover costs, he or she must actually do a lawyer's professional work as distinct from the work that any litigant would do for his or her case.

To read the second principle as requiring evidence that a self-represented litigant must actually prove lost opportunities for remuneration in order to recover costs is to disqualify litigants who are homemakers, retirees, students, unemployed, unemployable, and disabled but not a party under a disability. To apply the second principle in the way suggested is to deprive courts of the tool that Justice Sharpe stated the court should have.

[14] Courts have taken this approach in family law cases. Hedy Warsh cites Jahn-Cartwright v. Cartwright, 2010 ONSC 2263, [2010] O.J. No. 3307, per Price J. In Izyuk v. Bilousov 2011 ONSC 7476, [2011] O.J. No. 5814, Pazaratz J. covers the relevant principles at para. 40.

[15] Since Hedy Warsh represented herself at the trial and did what a lawyer normally does, she is entitled to counsel fee even though, as a person on a disability pension, she suffered no lost opportunity for remuneration in doing so. The fact that she would have been in court anyway is in my view not relevant, as I interpret Fong v. Chan, given her actual functioning during the trial.

The Scale of Costs

[16] Hedy Warsh submits that Rule 18 applies to an offer to settle that her counsel issued in December 2009 with respect to the matrimonial home. As it turns out, it was sold for $558,000, which was considerably more than the $469,000 value she proposed to use in paying for Mr. Warsh’s interest in the property in the offer to settle. The home was sold prior to trial. I am not persuaded that an offer that stayed open for such a short period of time in the middle of the case development process, and that was superseded by the flow of time should attract the costs consequences in Rule 18.

[17] I do not agree that Ian Warsh’s relentless pursuit of a contribution by Hedy Warsh to the cost of educating son Joel amounts to bad faith pursuant to Rule 24(8), since I accept that Ian Warsh had a genuine belief that this ought to have been a family expense. See Cook v. Cook 2012 ONSC 1141, [2012] O.J. No. 677 per McDermot J. at paras. 29-34.

[18] In my view there is no basis for enhancing the costs otherwise payable to Hedy Warsh.

The Value of Hedy Warsh’s Self-representation

[19] Hedy Warsh has taken the hours multiplied by the hourly rate approach to value her time. This can be a useful approach even though I agree with Aston J.’s observation in Delellis v. Delellis and Delellis, 2005 36447 (ON SC), [2005] O.J. No. 4345, at para. 9:

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.

[20] The range of rates given by courts to self-represented litigants is fairly broad, as Pazaratz J. notes in Izyuk at para. 41 and following.

[21] I am not prepared to value Hedy Warsh’s time at $150 per hour as she proposes; that would be a good fee for a well-experienced and well-qualified law clerk. There is no doubt that Ms. Warsh worked hard to pull things together as best she could, but what she did provide was a somewhat disorganized bank of documents, only some of which were helpful. In my view the figure of $30 per hour is reasonable. It equates to an annual income of more than $62,000.

[22] The other element of the valuation is the time spent. The time that Hedy Warsh seeks to bill is excessive although understandably so given her perseverant tendencies. Taking Mr. Greenstein’s daily time estimate of 9 hours for each trial day and doubling by the rule of thumb that one hour of trial time necessitates one hour of preparation time, the number of hours to be billed amounts to 144 for the trial. The calculation comes to $4,320 which I round up to $5,000 to cover the post-trial work.

Disbursements Paid by Hedy Warsh

[23] On her claim for disbursements, apart from those contained in the accounts from her lawyers, Hedy Warsh adds a claim for $11,331.95 for disbursements described as “Tangible Costs (Copying, Supplies, Communication)”. From her March 4, 2013 submission I infer that she is seeking to recover for her mileage for serving documents and delivering them to court, copying charges, faxes and electronic mail charges. She provides mileage estimates which she charges at varying rates relying on the Canada Revenue Agency allowable rates from time to time. These total $2,487.72. The balance of the disbursements is unsubstantiated.

[24] I have totalled the disbursements paid by Hedy Warsh’s lawyers. The total is $1503.18 and $75.16 for taxes. In my view they are entirely recoverable from Ian Warsh. To this figure I add $250 to cover her post-judgment disbursements, inclusive of taxes. Finally, I add $55.00 for a fee paid to a witness from Toyota.

Reimbursement for Legal Accounts Paid by Hedy Warsh

[25] Ms. Warsh seeks reimbursement for legal accounts in the amount of about $35,000. I have reviewed the accounts and I find them to be out of line. On a partial indemnity basis, and taking into account the requirement that costs should be dealt with at each step, I would value the accounts at $7,500 for my purposes, all-inclusive. The time spent on pleadings and on the financial statements was plainly excessive and unreasonable and should not be Ian Warsh’s responsibility.

Recovery of Interest Payments on Funds Borrowed to Pay Legal Fees

[26] Hedy Warsh seeks to recover as a disbursement about $13,000 that she claims to have paid as interest on the amounts she borrowed to pay her lawyers. In her submission of February 4, 2013 she states that she owes more than $10,000 on each of a personal line of credit at 7.75 % and a credit card at 19%, along with a debt owed to her son Steven of $10,000 with no interest rate disclosed.

[27] It is arguable that Rule 24(12) in conjunction with Rule 24(11)(e) and (f) could be construed to give the court such jurisdiction. I point out, however, that the subject of interest is addressed by the Courts of Justice Act. Section 128(4)(c) specifically excludes an award of pre-judgment interest on an award of costs in the proceeding. That said, the discretion of the court under s. 130 of the Courts of Justice Act is also quite broad.

[28] I am reluctant to award costs on loans to cover legal fees as a proper disbursement. Ms. Warsh referred me to no Ontario cases that have permitted such a recovery. Quite understandably, the matter was not properly argued.

[29] A precedent that allowed interest on litigation loans to be recovered as a disbursement could create a perverse incentive on litigants to borrow to finance lawsuits. This would have the effect of reversing s. 128(4) of the Court of Justice Act for practical purposes by making a form of pre-judgment interest payable on costs.

[30] It is not clear to me how such recovery would work in a situation where, under the Family Law Rules, a significant proportion of solicitor and client costs are not recoverable from the other side (in this case I awarded less than one-third of those costs to Hedy Warsh), and where costs are usually awarded and paid on a step-by-step basis.

[31] The possibility of awarding borrowing costs as a disbursement was somewhat implicit in the decision of Murray J. in Giuliani v. Halton (Regional Municipality), 2011 ONSC 5119. He refused to award interest in that case in part because, adopting the language of the defendants’ counsel in that case, he stated, at para. 59, “this Court should not reward, sanction or encourage the use of such usurious litigation loans.” He considered that awarding interest in such circumstances “would not facilitate access to justice and would probably bring the administration of justice into disrepute” (at para. 59). See also Campbell v. Swetland, 2012 BCSC 423, where Wong J. concluded, at paras. 103 and 104, that in British Columbia the cost of litigation financing is not a recoverable head of damage or a proper disbursement. The Alberta Queen’s Bench reached the same result: Do v Sheffer, 2010 ABQB 422, [2010] A.J. No. 1567.

[32] The New Brunswick Court of Appeal came to a different conclusion in LeBlanc v. Doucet, [2012] N.B.J. No. 358, construing the language of the applicable rules in New Brunswick. Drapeau C.J.N.B. concluded that in certain circumstances such interest was recoverable:

43. The appellant, Francis LeBlanc, lacked the means to finance his action in damages against the respondents. His impecuniosity compelled him to take out loans from an independent third party to cover litigation expenses, all for the purpose of securing access to justice. While no provision of the Rules of Court expressly allows interest on such loans as a “disbursement”, sub-para. 2(14) of Tariff “D” of Rule 59 fills the gap. It suffices that those loans were “necessarily incurred” to secure the just determination of the proceeding and that the interest rates were “reasonable”. The evidence shows that these conditions were met in the present case. Accordingly, the clerk was duty bound to allow, as a disbursement, the interest ($12,665.41) on the loans required to cover the other disbursements he had approved. In short, these are the reasons that caused me to join my colleagues in reversing the decision of the judge of the Court of Queen’s Bench, sitting on appeal, which upheld the clerk's rejection of Mr. LeBlanc’s interest reimbursement claim.

[33] In my view Ms. Warsh was not impecunious. Further, the parties had assets that could have been utilized to assist in providing her with some legal assistance at much lower cost than credit card interest rates; this prospect was raised in an endorsement, dated January 25, 2012, but was not pursued.

[34] In my view the policy implications of awarding interest on litigation costs as a disbursement are significant and I decline to exercise my discretion to make such an award where the issue has not been properly argued and where a more fulsome policy development process is plainly required.

[35] To summarize the foregoing, I have found that Hedy Warsh is entitled to costs in the amount of $16,870, rounding down slightly.

An Offset for Ian Warsh?

[36] Ian Warsh relies on Rule 24(7) of the Family Law Rules which provides that if a party is not properly prepared to deal with the issues at that step of the case the court may order costs. Mr. Greenstein submits that Hedy Warsh’s approach unduly prolonged the trial:

The basis for the request for costs is related to the conduct of the Applicant during the tendering of her evidence. Specifically, there was a distinct lack of preparedness in the manner in which the Applicant gave here evidence, much disorganization with respect to the presentation of her financial documentation and repeated warnings from the Court about the Applicant maintaining a focus on the fiscal issues in the case, which were very narrow in scope, rather than pontificating on events which occurred during the marriage which were designed to cast Mr. Warsh in a negative light instead of providing substantive evidence to the Court on the issues of support and the equalization of net family property. The Applicant had to be continually reminded during the course of the hearing to deal with the legal issues instead of giving speeches from the witness box.

[37] Mr. Greenstein argues that four days of the trial were wasted by Hedy Warsh for which Ian should not have to pay. He asks for costs for four days of trial for $12,600.00 plus HST of $1,638.00 for a total of $14,238.00. His hourly rate is $350 and his law clerk is charged out at $150. He counts trial attendance at nine hours per day.

[38] I do not agree that four trial days were wasted by Hedy Warsh alone. The length of the trial reflected in part Hedy’s awareness that she was fighting for her financial life in the face of Ian Warsh’s unreasonable demand for a contribution to Joel’s education expenses. Much time was spent extracting Ian’s balky memories. All in all Hedy Warsh conducted herself reasonably well as a self-represented litigant.

[39] That said, in my view some apportionment is appropriate under Rule 24(6). I also note that without Mr. Greenstein’s able assistance the trial might well have been longer and the issues even more difficult to resolve.

[40] I therefore fix costs payable to Hedy Warsh in the amount of $12,500 inclusive of disbursements and taxes. I consider this amount to be reasonable, proportional and within the losing party’s reasonable expectation. Assuming the proceeds of sale of the matrimonial home have not already been disbursed, the amount to be paid out of the proceeds to Hedy pursuant to the judgment will accordingly be increased by $12,500 to be paid from Ian’s share, which shall be reduced accordingly. If the proceeds have already been disbursed then the obligation is Ian Warsh’s debt to Hedy Warsh.

Justice P.D. Lauwers
Released: March 28, 2013