SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: D1122-10
DATE: 2013-08-26

RE: TYLER DIXON MICHAEL FIRTH, Applicant

AND:

STACEY ALLERTON, Respondent

BEFORE: THE HONOURABLE MR. JUSTICE D. A. BROAD

COUNSEL:
David J. Sherman, for the Applicant

Harold Niman and Katharine Rajczak, for the Respondent

COSTS ENDORSEMENT

[1] The Parties have made written submissions respecting costs as directed in my Reasons for Judgment released May 22, 2013. The following is my disposition on the question of costs.

Positions of the Parties

[2] The Respondent argues that she achieved a greater overall success at trial and, in particular, was successful on the central issue being the Applicant’s claim for indefinite spousal support. She seeks costs in the range between the full recovery, being at least 80% of her actual legal fees and disbursements and partial indemnity of at least a 66%. The quantum claimed is in the range of $233,962.00 to $283,590.00

[3] The Applicant disputes that the Respondent was the more successful party at trial and argues that, as there was divided success between the parties across the various issues, there should be no award of costs in favour of either party. In the alternative, he argues that, if it is found that the Respondent should be entitled to some award of costs, it should be on a partial indemnity scale at hourly rates for counsel reflective of the Applicant's Bill of Costs.

Guiding Principles

[4] Pursuant to subrule 24(1) of the Family Court Rules, the successful party is presumed to be entitled to recover costs. Subrule 24(11) requires the court, in setting the amount of costs, to consider a number of factors including the importance, complexity and difficulty of the issues, the reasonableness or unreasonableness of each party's behavior in the case, the lawyer’s rates, the time properly spent on the case, expenses properly paid or payable, and any other relevant matter.

[5] Rule 18 deals with the impact of Offers to Settle which may have been served by the parties on the costs determination. Subrule 18(14) provides that a party who makes an offer at least seven days before the trial, and obtains an order as favorable as or more favorable than the offer, is entitled to costs to the date that the offer was served and full recovery costs from that date. Even if subrule (14) does not apply, the court may, under subrule 18(16), take into account any written offer to settle served by a party, the date the offer was made and its terms.

[6] Consideration of the relative success of the parties on the issues in the case is the starting point in determining costs (see Butty v. Butty 2009 23111 (ON SC), [2009] O.J. No. 1887 (SCJ) at para. 4, citing Sims-Howarth v. Bilcliffe 2000 22584 (ON SC), [2000] O.J. No. 330 (SCJ). In the case of Johanns v. Fulford 2010 ONCJ at para. 13 Justice Murray held that, for the purpose of Rule 24(1), “success” is assessed by comparing the terms of an order against the relief originally requested in the pleadings and against the terms of any offers to settle.

Offers to Settle

[7] Each of the parties served Offers to Settle shortly before trial. The Respondent also served an Offer to Settle earlier in the proceeding. The parties are agreed that none of the offers satisfied the requirements for application of subrule 18(14). However, as indicated above, I am entitled to take into account the terms of the parties’ Offers to Settle in exercising my discretion with respect to costs, as such Offers to Settle may become the yardstick by which to measure "success" in the proceeding (see Osmar v. Osmar 2000 20380 (ON SC), [2000] O.J. No. 2504 (SCJ) at para. 7).

[8] As indicated in the Reasons, the issues of the quantum and duration of spousal support to be paid by the Respondent to the Applicant formed the central focus of the trial. These issues necessarily engaged questions relating to the Respondent’s historical and current income as well as the full history of the roles played by the parties in the marriage, in reference to the Applicant's claim for indefinite support on both a compensatory and non-compensatory basis.

[9] The Applicant’s Offer to Settle called for spousal support in the sum of $5,000.00 per month from June 2012 to September, 2021 (a period of almost 11 years post-separation including the period covered by the Order for interim spousal support of $3,500.00 per month commencing December 1, 2010), together with a lump sum payment of $90,000 in satisfaction of the Applicant’s claims for retroactive spousal support and child support from the date of separation to the date of trial.

[10] The Respondent's last Offer to Settle called for spousal support in the sum of $5,000.00 per month from July 2012 to June, 2014, with no adjustment to the interim award of spousal support.

[11] The Applicant was awarded time-limited spousal support in the sum of $7,276.00 per month commencing on July 1, 2010 and ending on December 1, 2013, inclusive of the amount paid for interim support referred to above.

[12] On the question of child support, there was little appreciable difference between the quantum of monthly support payable for the younger son Chandler in the Offers to Settle of the two parties and the amount awarded following trial. The Applicant had proposed monthly support of $4,300.00 based upon the Respondent's income of $560,000, while the Respondent proposed $4,297.00 based upon the same level of income. The amount awarded was $4,580.00 per month, being somewhat more than the amount proposed by each party. Neither Offer to Settle contemplated an adjustment to the interim order for child support for the period prior to trial.

[13] The Applicant was also awarded child support for the older child Cole to the extent that he continued to divide his time during the summer equally between the parties. Neither Offer to Settle called for any support for Cole.

[14] The Applicant’s Offer to Settle called for the Respondent to continue to pay for all of the s. 7 expenses relating to postsecondary education costs of the children while the Respondent's Offer to Settle called for the Applicant to pay the first $5000 per year towards Cole’s tuition and housing expenses for his first degree and the cost of all of his books, with the Respondent to pay the balance, and the parties to share proportionally the cost of postsecondary expenses for Chandler.

[15] Following trial it was determined that all s. 7 expenses going forward should be shared proportionally.

[16] On the question of equalization of net family property and property division, neither party obtained a result more favorable than his/her Offer to Settle. The Respondent proposed a payment to the Applicant in the sum of $44,007.69, while the Applicant proposed that he retain the matrimonial home upon payment by him to the Respondent of $90,000. In my decision I ordered that the Respondent make an equalization payment of $34,984.03 and pay to the Applicant an additional net sum of $97,987.62 in respect of an accounting of post-separation transactions between the parties, and that the matrimonial home be sold and the proceeds divided between the parties.

Who was the successful party?

[17] Given the number and range of the issues at play in many family law proceedings, and certainly in this one, it is often difficult to determine who the “successful” party is when some issues are decided in a manner more closely aligned to the position of one party and other issues are decided the other way.

[18] The Court of Appeal has observed 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 behavior by litigants (see Fong v. Chan (1999) O.J. No. 3707 (CA) at para. 24).

[19] The third factor is not a consideration in the present case as there was no inappropriate behavior by either party in the proceeding, and none has been suggested by either side.

[20] Given that the issue of spousal support dominated the trial, it is appropriate to consider the positions taken by the respective parties on that issue in the pleadings and in their Offers to Settle. The Applicant claimed indefinite spousal support, on both a compensatory and non-compensatory basis, and his Offer to Settle contemplated an eleven year duration of spousal support payments, post-separation. Although the Respondent argued at trial that there should be no entitlement to spousal support, her Offer to Settle was based on a four year duration following separation, exceeding the three and one-half year duration awarded, albeit in a lower amount.

[21] In my view, the approach to settlement taken by the Respondent demonstrated flexibility, particularly as her last Offer to Settle was presented such that her proposals on each of the three issues of custody, access and child support, spousal support, and property division, equalization and sale of the matrimonial home, were capable of acceptance individually. Had the Applicant also demonstrated similar flexibility on the issue of spousal support, the trial may very well have been averted or considerably shortened.

[22] Since success on the remainder of the issues was more divided, in my view it is appropriate to award costs to the Respondent, given her greater success on the major issue, and to make an appropriate adjustment to account for the divided success on the less dominate issues.

Quantum

[23] It is well known 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 party. 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 (see Boucher v. Public Accountants Council (Ontario) 92004) O.J. No. 2634 (CA) at para. 26 and Coldmatic Refrigerator of Canada Ltd. v. Leveltek Processing LLC 2005 1042 (ON CA), [2005] O.J. No. 160 (CA)).

[24] In this case, although the trial was not lengthy, the issues were relatively complex, due, to some degree, to issues pursued by the Applicant upon which he was ultimately unsuccessful, including his claim for compensatory spousal support, which necessitated a detailed examination of the roles played by the parties throughout their marriage, and his claim that the Respondent's income for support purposes should include the proceeds received by her on the sale of Ford shares which had been issued to her, following separation and on a one-time basis, as part of the company's executive retention program,. Having pursued these claims, the Applicant should have had a reasonable expectation that, if unsuccessful, the Respondent’s costs would reflect the complexity of these issues.

[25] I am prepared to accept that there was some degree of redundancy resulting from the Respondent’s change in counsel on the eve of the original trial date. Without detailed information respecting the degree of overlap, I would reduce the amount of the Respondent’s solicitor-client costs referable to the fees charged by previous counsel by 30%.

[26] It is noted that the Respondent was represented by two counsel at trial, Mr. Nieman, who was called in 1976 and Ms. Rajczak who was called in 1996. The Respondent’s Bill of Costs indicates block fees on a solicitor-client basis for attendance at trial of $7,500 per day for Mr. Nieman and $5,500.00 per day for Ms. Rajczak. They divided their responsibilities in the conduct of the trial, with Ms. Rajczak handling examinations in chief of the Respondent and her expert and Mr. Nieman conducting the cross-examination of the Applicant as well as opening and closing submissions, which no doubt resulted in some efficiencies during trial preparation. However, there was a marked difference between the total counsel fee for the Respondent at trial in the sum of $13,000 per day and that of the Applicant in the sum of $3,000 per day. Although it may have been fully justifiable to have two counsel at trial in the context of the Respondent’s retainer arrangements with her lawyers, that choice is not necessarily to be visited upon the Applicant to the fullest extent. In applying the "reasonable expectation" principle, I would reduce the total solicitor-client counsel fee at trial of the Respondent to $7,500.00 per day, which is still 2.5 times that of the Applicant.

[27] Although the Respondent may be regarded as the “successful party” with respect to the predominate issue of spousal support, success was divided on the remaining issues and accordingly, I would reduce the Respondent’s costs claim by 35% to reflect that fact.

[28] The Applicant argues that the hourly rates of the various lawyers for the Respondent who worked on the matter are not commensurate with the rates typically charged in the Region, pointing to his own hourly rate, as senior counsel, of $370.00 as an example. Mr. Nieman’s actual hourly rate is stated at $735.00, Ms. Rajczak’s at $450.00, two junior lawyers (called 2011 and 2012 respectively) at $240.00 each and a clerk’s at $210.00. These rates would translate into partial indemnity rates (at 60%) of $441.00 for Mr. Nieman, $270.00 for Ms. Rajczak and $144.00 for the two junior lawyers. By way of comparison, the maximum partial indemnity hourly rates published by the Rules Committee for use under Rule 57 of the Rules of Civil Procedure would be $350.00 for Mr. Nieman, $300.00 for Ms. Rajczak, $225.00 for the juniors and $80.00 for the clerk. Applying the principles in Boucher and Coldmatic, I would reduce the Respondent’s claim for legal fees (excluding trial time) by 15% in reference to this item.

[29] The Applicant also submits that the Court, in the exercise of its discretion on costs, may take into account the relative financial situations of the parties, citing the cases of C.A.M. v. D.M. 2003 18880 (ON CA), 2003 O.J. No. 3707 (CA) and Murray v. Murray 2005 46626 (ON CA), [2005] O.J. No. 5379 (CA). He points to the fact that the Respondent’s income exceeds his by almost ten-fold. It is also noted that the Respondent’s net worth greatly exceeds that of the Applicant.

[30] The Court of Appeal in C.A.M. v. D.M. at para. 43 found that the court has a discretion not to make an award of full recovery even where a party has met the conditions in Rule 18(14) (which is not the case here), in consideration of the financial condition of the parties. I agree that the disparate financial position of the parties is a relevant consideration mitigating the Respondent’s claim for costs. An award of costs against the Applicant on a full or substantial indemnity basis would largely negate the benefit of the relief provided to him and would not properly recognize the wide disparity in the parties’ financial positions. I would therefore fix the Respondent’s costs on a partial indemnity basis.

[31] Taking all of the factors set forth above into consideration, in the exercise of my discretion, I fix the fee component of the Respondent’s claim for costs in the sum of $86,437.58 plus HST thereon in the sum of $11,236.89, calculated as follows:

Previous counsel fees @ 70%

$49,468.00

Pre-trial preparation and attendances

$137,899.50 x 85% (to adjust hourly rates)

$117,214.58

Counsel fee at trial $7,500.00 x 7

$52,500.00

Costs submissions $2,885.00 x 85%

$2,452.25

Subtotal -

$221,634.83

x 65% (to reflect mixed success on non-spousal support issues)

$144,062.64

x 60% (partial indemnity rate)

$86,437.58 (Total fee).

HST @ 13%

$11,236.89

As no issue was taken with respect to claimed disbursements I would allow $8,171.57 for disbursements, plus HST thereon in the sum of $906.00, as well as $12,825.50 paid to the Respondent’s expert.

Disposition

[32] For the reasons set forth above, it is ordered that the Applicant pay to the Respondent $119,577.54, in respect of costs.

D.A. Broad J.

Date: August 26, 2013