COURT FILE NO.: FC-10-35650-00
DATE: 20131025
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Philip John O’Brien, Applicant
AND:
Galina O’Brien, Respondent
BEFORE: The Hon. Mr. Justice J.P.L. McDermot
COUNSEL: Jason Isenberg, for the Applicant
Respondent unrepresented
HEARD: By written submissions
ENDORSEMENT
[1] On May 21 and 22, 2013, I heard a two day trial in this matter. The matter was bifurcated pursuant to the endorsement of McKelvey J. dated October 30, 2012 and the only issues before me at this time were the dates of cohabitation and separation, as well as the severing of the divorce from the corollary relief proceeding. Property and support matters, as well as the issue of a marriage contract signed by the parties, have yet to be determined.
[2] As I noted in my endorsement issued on September 12, 2013, the matter was unusual only because the Respondent refused to acknowledge that separation had then taken place notwithstanding the fact that the parties were participating in a trial of that exact issue. In my endorsement, I characterized that position as being “completely unrealistic.” I determined that the parties had commenced cohabitation on July 1, 2005 and separated on October 15, 2009. I ordered as well that the divorce could be severed from the corollary relief and could be granted once the Applicant filed an affidavit pursuant to Rule 36 of the Family Law Rules.[1]
[3] In my endorsement, I gave the parties the right to make submissions as to costs. Mr. Isenberg provided his costs submissions on September 20, 2013. Ms. O'Brien provided material; however, that material was served and filed late and was titled “Response to the draft Order of Justice McDermot, dated September 12, 2013”. The Respondent’s materials were not costs submissions. It was in large an attempt to file further submissions and evidence respecting the date of separation as well as a “response” to my endorsement. There was only one paragraph covering the issue of costs.
[4] Ms. O'Brien does not seem to have the ability to accept matters disagreeable to her. She was not willing to accept the fact that Mr. O'Brien had separated from her. Moreover, she had asked in her final written trial submissions that the trial be re-opened for the purpose of entering further evidence; she was obviously not willing to accept my dismissal of that request for the reasons given in my endorsement. Finally, she was not able to accept my judgment. She does not appear to have any understanding that my findings on the issues before me are final and not open to review.
[5] In any event, and as advised in correspondence from my office, I was not willing to review the “response” to my endorsement. If Ms. O'Brien wishes to appeal my ruling, she is free to; otherwise it is final and it is to no purpose to consider her submissions. I have reviewed the paragraph of that document respecting costs as well as the response of Mr. O'Brien’s counsel respecting costs only.
[6] Mr. Isenberg has also requested that the trial be adjourned from these sittings in order to attempt to settle issues through the conference process prior to the second stage of the trial commencing. He further requests that his client be permitted to bring a motion for security for costs, which requires leave under the trial management endorsement.
Costs Issues
[7] Mr. Isenberg requests substantial indemnity costs, which he states his client is owed based upon both his offer to settle, as well as the Respondent’s conduct at the trial of this matter. He states that his client’s full indemnity costs since the trial management conference were $23,370.89 inclusive of disbursements and HST. The claim of Mr. O'Brien is for 90% of that amount, or $21,033.80, which he requests be paid forthwith.
[8] Ms. O'Brien objects to paying costs based upon the respective economic circumstances of the parties. She states that Mr. O'Brien is “a wealthy party” and that he gave away a million dollars to Kyle O’Brien in the last six years. She says that she spent $30,000 on the case and that she has “no means” to pay costs. She apparently did not file an offer to settle and did not provide evidence of legal fees or disbursements incurred by her in this matter.
[9] In considering costs, under Rule 24(1) of the Family Law Rules, costs follow the event, and a successful party is presumed to be entitled to costs. In considering the respective positions of the parties at trial, it is unquestioned that the Applicant was successful in the result. He is entitled to his costs of the trial. Conversely, Ms. O'Brien is not entitled to costs. The issues to be considered as raised by Mr. Isenberg go to the quantum of costs as well as the payment of those costs.
(a) Offer to Settle
[10] Mr. O'Brien served an offer to settle on the Applicant on April 26, 2013. That offer to settle suggested a date of cohabitation of December 20, 2005 and a date of separation of October 20, 2009. The Applicant’s offer to settle was not matched by my finding of the date of cohabitation, which I found to be several months earlier, in July, 2005. However, it is almost spot-on respecting my finding of the date of separation or valuation date. It did not address the issue of severing the divorce from the corollary relief.
[11] Ms. O'Brien did not serve an offer to settle.
[12] In the event that a party is more successful than his or her offer, I am bound to order costs on a full indemnity basis: see Rule 18(14) of the Family Law Rules. For this Rule to apply, the offer has to comply with the formalities required under Rule 18 including a requirement of service at least seven days prior to trial, that the offer be signed by the party and that the offer not expire or be withdrawn prior to trial: Rule 18(4) and (14). Finally, 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(14) as noted above.
[13] In the event that the offer meets the formal requirements of Rule 18(14), and is better than the result attained by the party at trial, I lose some discretion in assessing costs; Rule 18(14) mandates that I award full indemnity costs from the date the offer is served “unless otherwise ordered”. Accordingly, it is important that the offer fall squarely within the provisions of that rule, as costs are normally discretionary depending upon the result at trial and conduct of the parties.
[14] In the present case, the offer meets the formalities required by Rule 18. However, the real issue is the contents of the offer, as the offer was not more successful than the result at trial on the issue of the date of cohabitation, although it almost exactly matched the result respecting the valuation day. Mr. Isenberg submits that the offer should fall within Rule 18(14) as the date of separation was the major issue before the court.
[15] That may be correct, but, as noted above, because the Rule removes discretion and mandates full indemnity costs, the offer must fall foursquare within the result. This offer does not. Accordingly, the offer does not attract mandatory full indemnity costs after service as requested by the Applicant.
[16] However, it is correct that the offer was within the result, in fact nearly mirrored the result, on the issue which was foremost at trial, being the date of separation. As such, I will take into account the offer in setting costs pursuant to Rule 18(16) of the Family Law Rules as discussed below.
(b) Respondent’s Conduct at Trial
[17] Mr. Isenberg submits that the Respondent conduct warrants a greater costs award. He notes my finding that the Respondent’s position on separation was, in effect, unreasonable. He states that the Respondent’s conduct at trial lengthened the trial and increased the costs to his client. He notes as well that the Respondent did not serve an offer to settle or make any reasonable attempt to settle the matter.
[18] In awarding costs, I may 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 the amount of costs.
[19] Mr. Isenberg did not raise bad faith and Rule 24(8) is not engaged. I do agree with Mr. Isenberg that Ms. O'Brien’s position that the parties had not then separated was unreasonable within the meaning of Rule 24(11). However, I do not see that as having necessarily lengthened the trial; Ms. O'Brien was her only witness, and her case took the same amount of time as did the case of the Applicant. And had she agreed that the parties were separated, but disagreed with Mr. O'Brien’s contention that the parties had separated in 2008, the trial may very well have taken the same amount of time in determining the actual date of separation.
[20] However, the Respondent’s position that the parties were not separated may, in fact, have necessitated the trial, as I suspect that the Applicant would have accepted any reasonable date of separation, even were it later than October, 2009 as found by me. That is because these parties’ cohabitation was short by any measure. Moreover, the Respondent’s failure to serve any offer to settle is indicative of her intent to bring this matter to trial, regardless of the result. Finally, the Respondent’s post-trial conduct, especially her failure to comply with my direction as to the service and length of costs submissions, and her failure to accept the result contributes to my finding of unreasonable conduct.
[21] Accordingly, I find that the Respondent is guilty of unreasonable conduct within the meaning of Rule 24(11).
(c) Ability to Pay
[22] Ms. O'Brien raises her relative financial situation as an issue regarding costs. She states that he is the “wealthy party” and that her “accounts are empty.”
[23] A party’s economic circumstances or his or her inability to pay costs can be taken into account in determining costs: see C.A.M. v. D.M., 2003 18880 (ON CA), [2003] O.J. No. 3707 (C.A.) at paragraph 45 and Harrington v. Harrington, [2009] O.J. No. 827 (C.A.) at paragraph 8. However, it appears that this principle is normally applicable where either a costs award or the costs of trial affect the ability of a party to bear the expenses of a child: see Beckett v. Beckett, 2010 ONSC 2706, [2010] O.J. No. 1957 (S.C.J.) at paragraphs 37 and 38 and C.A.M. supra, at paragraph 45. That is not the case in the present situation.
[24] Moreover, the parties’ relative financial circumstances have not been thoroughly litigated. In fact, Ms. O'Brien’s income outstripped that of the Applicant during several years according to the financial statements filed in this proceeding. And Ms. O'Brien’s lack of assets is contributed to by the fact that she transferred her major asset, her Toronto condominium, to her daughter.
[25] I decline to take into account Ms. O'Brien’s financial circumstances in setting costs at this stage of the proceedings.
(d) Quantum and Payment of Costs
[26] As noted, the Applicant claims costs of $21,033.80 or 90% of the Applicant’s full indemnity costs.
[27] The bill of costs filed by the Applicant is reasonable and I also find that Mr. Isenberg’s hourly rate and the disbursements claimed by him to be reasonable. I also note that he is correct that the majority of the trial costs were incurred after the service of the offer to settle on April 26, 2013; lawyer’s time after the offer was served was $16,970; taking into account HST, that would translate into full indemnity costs after that date of $19,176 of the $23,370.89 claimed on a full indemnity basis.
[28] In assessing costs, I take into account the Respondent’s unreasonable position respecting settlement of this matter, and her position at trial that the parties had not yet separated at that time. I also take into account the total lack of an attempt by the Respondent to settle this part of the litigation.
[29] Finally, I note that the offer to settle served by the Applicant was extremely close to the result respecting the date of separation, which was the major issue before the court. It would have made very little real difference to the result had the Respondent accepted the offer, and her failure to do so directly resulted in the Applicant’s costs in this matter.
[30] I fix costs payable for the first stage of this trial in the amount of $19,000, which is just over 80% of the full indemnity costs of the Applicant for this trial.
[31] I am not going to order costs to be payable forthwith. I am not in a position to prejudge the result at trial, and whether an equalization payment will or will not be owing by the Applicant to the Respondent, considering the fact that the business has not been valued, and the fact that s. 5 of the Family Law Act allows the court to equalize the full value of the matrimonial home without deduction. I am also not in a position to pre-judge the effect of the domestic contract signed by the parties. Finally, to order the costs to be payable forthwith would permit the Applicant to request the striking of the Respondent’s pleadings for non-payment; that would hardly be an equitable result in a bifurcated matter such as this. The costs payable by the Respondent for this portion of the trial may have to be set off against any award made in the final stage of this trial.
[32] As such, costs are payable by the Respondent to the Applicant in the amount of $19,000 inclusive of HST and disbursements in any event of the cause but enforcement of this costs award is stayed pending the result at trial.
Procedural Issues
[33] The Applicant requests the adjournment of the trial from these sittings until the May, 2014 sittings. Mr. Isenberg says that it is important, now that there is a finding on the dates of separation and cohabitation, that the matter now be further conferenced in order to explore settlement opportunities. As well, he notes that valuations are not yet complete based upon the valuation date, as this was only apparent once my endorsement was released.
[34] Ms. O'Brien did not appear to take any position regarding this request.
[35] In light of the position of the Respondent, it appears that any chance of settlement is remote. However, it is doubtful that valuation could have been completed between the dates of the sittings and the date of the release of my endorsement. Certainly, the expert’s report could not have been served within the 60 days required under Rule 23(24). Accordingly, the matter will be adjourned to the May, 2014 sittings. The parties to schedule a settlement conference once valuations are complete. Both parties shall serve and file Settlement Conference Briefs and offers to settle prior to the conference.
[36] I am also going to give the Applicant leave to bring a motion for security for costs. I am concerned about the transfer of assets to Ms. O'Brien’s daughter, and in particular the Respondent’s Toronto condominium. I am also concerned that any income that Ms. O'Brien has earned since separation appears to be from foreign sources; however the determination of the import of those issues is in the hands of the motions judge.
McDERMOT J.
Date: October 25, 2013
[1] O. Reg. 114/99