ONTARIO

Court File Number

Ontario Superior Court of Justice

02-FP-274895FIS

(Name of Court)

at

Toronto

Endorsement

(Court office address)

Date

Applicant(s):

Mirilyn Rachel Selznick (now Sharp)

Present

Heard February 13, 2014

Counsel:

Sarah M. Boulby

x

Present

Duty Counsel

Respondent(s):

Stephen Selznick

Present

Counsel:

Diane Klukach

x

Present

Duty Counsel

Order to go in accordance with minutes of settlement or consent filed.

Fa Factums required on all motions 2 days before.

The motion:

The Motion

1In October of 2011 Greer J heard a child support motion in this case. She released her reasons in early November of 2011, with supplementary reasons following in January of 2012. She conducted a further hearing on s.7 expenses in June of 2012, and delivered her reasons on that aspect of the motion later in July. She released final reasons on the motions on September 18, 2012. In those reasons, (the Costs Order) she ordered the applicant to pay the respondent’s costs of the motion(s) fixed at $32,974.57, all inclusive and payable forthwith. The applicant has not paid.

2The applicant unsuccessfully appealed various parts of Greer J’s orders. The applicant apparently intended to appeal the Costs Order. She did not, however, seek leave to do so.

3The applicant now moves to set aside the Costs Order. She asserts that the respondent had a “fees arrangement” with Cassels Brock, the law firm in which he is a partner, and in which his counsel was also a partner at the time of the Costs Order. By virtue of this arrangement the respondent transferred some of his fee credits with the firm to his matrimonial counsel to be added to her own fee credits to satisfy some of the fees she had billed him.

4The applicant alleges the respondent should have disclosed this arrangement to Greer J. She says that had he done so, the Costs Order would likely have been different. She asserts that as a result of this fees arrangement the respondent will receive a windfall if she pays the Costs Order. She says she did not learn about the fees arrangement until long after the Costs Order was made. She says she has moved with reasonable diligence to move to set aside the Costs Order.

5The applicant relies on West v West[1] to support her position that the court has jurisdiction to set aside orders on the basis that “new facts have arisen or been discovered.” In West Perkins J found the court’s jurisdiction to do so in order to prevent a miscarriage of justice was “ancient”, forming part of the court’s inherent jurisdiction. He noted that the cases impose a fairly stringent test before the court will exercise that jurisdiction. He articulated the test as follows:

a) The evidence on the motion must be clear and credible;

b) It must be of such a nature that the original order would have been different if the evidence had been available;

c) It must not have been in existence at the time the order was made or not discoverable by the diligent effort of the party asking the court to change the order;

d) The party must have acted with diligence once the information came to light; and

e) The evidence must establish that action is needed to prevent a miscarriage of justice.

6The respondent resists the motion on a number of bases. First, he says this motion is nothing more than a collateral attack in the nature of an appeal of the Costs Order. He submits the proper course was for the applicant to seek leave to appeal the Costs Order to the Court of Appeal. He says that since she failed to do so, she should not be permitted to now attempt to do indirectly what she failed to do directly.

7Second, even if the court has jurisdiction to set aside the Costs Order on the basis the applicant suggests, the respondent says she has failed to meet her burden. He says he had no obligation to disclose the fee credit arrangement to Greer J since it did not exist until after Greer J made the Costs Order and the applicant failed to pay it. He goes further, and says the transfer of fee credits is not a “fees arrangement” in the sense contemplated by the case law. He says he did not receive a reduced fee, or relief from payment. He says none of the fees or disbursements he was charged have been written off or forgiven. He characterizes the transfer of fee credits as no more than a payment mechanism to satisfy a portion of his existing liability for legal fees. He denies the Costs Order would provide him with a windfall of any kind.

Discussion:

Discussion

8While the applicant’s motion might be characterized as an indirect attempt to appeal the Costs Order, I am satisfied on the basis of West v. West that the court has jurisdiction to set aside the order if the applicant is able to meet the “stringent” test set out in that case.

9First, is the evidence “clear and credible”? In this regard, the applicant must satisfy me that the arrangement is a “fees arrangement” or “special arrangement” regarding fees. The law is clear that where such an arrangement exists, the beneficiary of the arrangement must disclose it in the context of an adjudication of costs. To do otherwise would run contrary to the fundamental principle that awards of costs are designed to indemnify a successful litigant for all or a portion of its costs. The cases that deal with these kinds of arrangements characterize them as situations where a lawyer is seeking costs in excess of the costs actually charged to the client. A lawyer has an obligation to disclose this kind of arrangement to the court.

10This is because costs awards are based on the principle of indemnity. As the Supreme Court of Canada has said: “Indemnification is and always has been one of the cornerstones of the costs award.”[2] The Court of Appeal has held that it is not appropriate for a litigant to seek or receive an award of costs in excess of the amounts it was actually charged.[3] Simply put, a costs award is not intended to provide a windfall to the recipient of the costs.

11Thus, I must look at the respondent’s arrangement with his firm to determine whether it is the kind of “special arrangement” contemplated by the case law.

12Here, the respondent’s lawyer charged him at her regular hourly rates, with no discount. He was charged for all disbursements in the same way as the firm charged other clients. With the exception of 2012, the respondent paid all the accounts rendered to him with a combination of personal cheque or credit card payment. In 2012 he paid his accounts with a combination of personal cheque, credit card or fee credit assignment to his lawyer.[4] Thus, in 2012 he was able to pay a portion of his legal fees owing to his firm by transferring some of the fees he himself had billed to the credit of his counsel.[5] The CFO of the firm advises there is no fee arrangement in place. She says, in her letter of January 31, 2014, “the Firm no longer, as a policy, uses fee transfer arrangements to satisfy any accounts and will not do so in this case.”

13The evidence persuades me that there was no special arrangement in place in relation to the respondent’s fees. He was charged like any client, at his lawyer’s regular rates. He paid the fees, which were not discounted in any way. I am therefore not persuaded there is “clear and credible” evidence to engage the court’s discretion.

14Second, is the evidence such that the original order would have been different if the evidence had been available? As the respondent explains, the fee transfer arrangement was nothing more or less than a payment mechanism to satisfy a portion of the liability he had to pay the legal fees he had incurred. He goes further and says the fee credit payment mechanism did not even exist when the Costs Order was released; it was not put into place until December of 2012, some two to three months later. The arrangement did not come into existence until after Greer J made the Costs Order and the applicant failed to pay it. There was therefore nothing to disclose to Greer J. I am not persuaded the result would have been different even if the arrangement had been in existence at the time the Costs Order was made and had been disclosed.

15Third, was the evidence in existence at the time the order was made, or not discoverable by exercising due diligence? The applicant is able to meet this part of the test since the fee credit arrangement was not in existence at the time Greer J made the Costs Order.

16Fourth, did the applicant act with diligence once she found out about the arrangement? I am satisfied that she did. She clearly did not know about the transfer of fee credits the respondent used until long after the attendance before Greer J. I accept that she could not have known about it with the exercise of due diligence since the information was solely within the respondent’s knowledge.

17Last, is action required to prevent a miscarriage of justice? Since I am not persuaded there was a fee arrangement that would have resulted in a different order, I am not persuaded there has been any miscarriage of justice that would require any action on the court’s part.

Disposition:

Disposition

18The applicant has failed to meet her burden. She has not met all aspects of the “stringent test” in West v. West. I therefore decline to exercise my discretion in her favour. The motion is therefore dismissed.

19The respondent is entitled to his costs of the motion. As agreed, they are fixed at $2,500 all-inclusive on a partial recovery basis, unless there are offers that bear on the appropriate scale of costs. If there are such offers and the parties cannot agree on the appropriate costs disposition, the parties will provide me with brief written submissions of no more than two pages in length, double spaced. They will include copies of the offers, and bills of costs that include each lawyer’s year of call and actual billing rate to her client. They are to be provided to me within 7 days of the release of these reasons. If they are not, then the respondent will have his costs of the motion on a partial recovery basis, fixed at $2,500 all-inclusive.

MESBUR J.

Released: 20140217

12001 CarswellOnt 1936 (S.C.J.)

2Walker v Ritchie 2006 SCC 45, [2006] 2 S.C.R. 428, quoted in GasTOPS Ltd. v. Forsyth 2010 CarswellOnt 10494 (S.C.J.)

3Stellarbridge Management Inc. v. Magna International (Canada) Inc., 2004 9852 (ON CA), 2004 CarswellOnt 2065 (O.C.A.)

4Letter of June 12,2013 from Patricia H. Southern, FCA, Chief Financial Officer of Cassels Brock

5According to Ms. Southern’s letter of October 4, 2013 the respondent’s 2011 accounts with the firm totalled $41,616.58. He took care of those accounts in December of 2012 by paying $10,000 of this amount by credit card, and the balance by fee credit transfer to Ms. Klukach. No other fee credit transfer occurred in relation to any of the fees he was charged.