COURT FILE AND PARTIES
COURT FILE NO.: FC-12-1007-00
DATE: 20140221
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Melanie Meghan Varcoe, Applicant
AND:
Christopher Melvyn Varcoe, Respondent
BEFORE: The Hon. Mr. Justice J.P.L. McDermot
COUNSEL:
Fay A. McFarlane, for the Applicant
Lynn Burgess, for the Respondent
HEARD: By written submissions
COSTS ENDORSEMENT
Introduction
[1] On January 9, 2014, I heard a motion and countermotion brought by the Respondent and the Applicant respectively. The major issues argued concerned the matrimonial home and the disposition of the home and secondarily, issues of child support and the execution of a parenting coordination agreement.
[2] As suggested by Applicant’s counsel, Ms. McFarlane, this has been a high conflict case. Ms. McFarlane’s client listed the matrimonial home, and then entered into an agreement of purchase and sale without input from the Respondent or his counsel. Mr. Varcoe then offered to purchase the home from the Applicant and he brought a motion to approve this purchase. The majority of the argument concerned the terms of that sale, including a requested holdback as security for the property claims he was making and notional real estate commission. Ms. Varcoe brought a counter-motion for increased child support and that the Respondent comply with a consent order for the appointment of a parenting coordinator.
[3] I granted the request for a holdback and for partial notional real estate commission. I dismissed the Applicant’s claim for a further 30 days’ possession of the home after the closing date. I also dismissed the claim for child support as neither party had filed an updated financial statement including their 2013 income as required by the rules. Regarding the parenting coordination agreement, I did not find it appropriate to grant an order that a party comply with an order; as well, the Applicant failed to provide the draft parenting coordination agreement or proof that the Respondent was in default of the provisions of the order.
[4] Both parties now request costs. The Respondent claims full recovery costs and says he was successful on the motion and he had submitted an offer which he says was bettered at the motion. He also claims bad faith or unreasonable conduct on the part of the Applicant. The Applicant also claims costs, based also on bad faith. Ms. McFarlane also suggests that the Respondent was not successful on the motion based upon the relief requested by him. She also raises the issue of hardship in my assessment of the costs of this motion.
Analysis
[5] In determining the costs of this motion, I must firstly determine whether one or the other party was successful at the motion. That must be determined in light of the offers to settle provided by each of the parties. As well, I have been asked to assess the behaviour of the parties surrounding this motion. Finally, the Applicant has raised the issue of the hardship that a costs award would impose on her.
Success at Motion
[6] In considering costs, under Rule 24(1) of the Family Law Rules,[^1] costs follow the event, and a successful party is presumed to be entitled to costs. I may take into account unreasonable conduct of either party (Rule 24(4)) and if success is divided, I may apportion costs as appropriate (Rule 24(6)).
[7] In determining success, I may also take into account the offers to settle submitted by each of the parties: see Sims-Howarth v. Bilcliffe, 2000 22584 (ON SC), [2000] O.J. No. 330 (S.C.J.) at paragraph 9 and Lawson v. Lawson, 2008 23496 (ON SC), [2008] O.J. No. 1978 (S.C.J.) at paragraph 7. Finally, where there are a number of issues before the court, I can have regard to the dominant issue at trial in light of those offers to settle: see Firth v. Allerton, [2013] O.J. No. 3992 (S.C.J.).
[8] 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 one day prior to the motion, that the offer be signed by the party and that the offer not expire or be withdrawn prior to the hearing of the motion: 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.
[9] It is apparent to me that neither of the offers complies with Rule 18(14). As such, neither offer attracts full indemnity costs as contemplated in the rule.
[10] I agree with Ms. Burgess when she says that Ms. Varcoe’s offer was incapable of acceptance based upon uncertainty. It speaks of the signing of an “amended Agreement of Purchase and Sale as negotiated between the real estate lawyers” and although the offer to settle contains a price and a closing date, were Mr. Varcoe to have accepted this offer, it was, in effect, open ended and without certainty. In this high conflict situation, to expect the parties to negotiate the terms of an Agreement of Purchase and Sale was, in my view, wishful thinking. Further, the offer contained no fallback position; if the agreement could not be negotiated, would Mr. Varcoe still have been obligated to purchase, and Ms. Varcoe obligated to sell, the interest in the matrimonial home?
[11] Even were the offer sufficiently certain, it did not address the relief sought by the Respondent including notional real estate commission and the holdback. Finally, the offer specifically does not comply with the formalities of Rule 18(14) as it states that it expires five minutes before the commencement of the motion; the rule provides that an offer cannot expire “before the hearing starts.”
[12] The offer made by the Respondent, on the other hand, contains sufficient certainty as it refers to the agreement of purchase and sale which was appended to the affidavit sworn by the Respondent. It addresses the $35,000 holdback requested by the Respondent as well as the child support which was confirmed by my order. It finally addressed the signing of the parenting coordination agreement, a claim by the Applicant which was dismissed by me. It meets the formalities of Rule 18(14) as it was served on time, expires as contemplated by the rules and is properly signed. Ms. Burgess says that the net effect of the offer, based upon the waiver of more than $10,000 in costs, comes within Rule 18(14) and as such full indemnity costs must be awarded.
[13] Although closer to the mark, the Respondent’s offer also does not comply with the rule as it was not, on the whole, bettered by my order at the motion. Firstly, it contained a provision for full notional real estate commission; my order halved it. Although it offered a waiver of costs, that provision begs the question when the offer is being submitted in order to support a claim for costs. Moreover, as with the Applicant’s offer, that costs provision expired prior to the hearing of the motion. As well, the offer contains a provision regarding the division of household contents, something not argued before me, and as far as I know, not resolved between the parties in the manner set out in the offer.
[14] The result may have been different had the offer been severable: see Sepiashvili v. Sepiashvili, 2001 25708 (ON SC), 2001 CarswellOnt 3459 (S.C.J.). However, it was not, and as such, Rule 18(14) is not applicable to the Respondent’s offer either.
[15] As mentioned, the Respondent’s offer is much closer to the result than was that of the Applicant. In contrast, the Applicant’s offer was, in my view, too uncertain as to be capable of acceptance. And it is important that the Respondent was largely successful on the major issue argued, which was the sale of the home to him pursuant to the agreement attached as Exhibit “A” to his affidavit. In fact, had the Applicant disclosed on a timely basis that she was willing to sell her interest in the home to her husband, that may have avoided the motion or the preparation of the extensive material filed on behalf of the Respondent. As such, I find that the Respondent was successful in the result and as such is, prima facie entitled to his costs of the motion.
Unreasonable Conduct / Bad Faith
[16] In determining costs, I must take into account the conduct of the parties to this motion: 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 costs.
[17] Both parties allege bad faith on the part of the other. If I make a finding of bad faith, I must also order full indemnity costs payable forthwith. Accordingly, as with Rule 18(14), I must examine the claims for bad faith carefully.
[18] Bad faith is not unreasonable conduct. It is something more. A useful evaluation of the distinction between bad faith and unreasonable behaviour can be found in S.(C.) v. S.(C.), 2007 20279 (ON SC), [2007] O.J. No. 2164 (Ont.S.C.J.) where Perkins J. states:
In order to come within the meaning of bad faith in Rule 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith. The requisite intent to harm, conceal or deceive does not have to be the person's sole or primary intent, but rather only a significant part of the person's intent.
[19] Based upon this definition, I do not find bad faith conduct on the part of either party to this proceeding. The actions of neither party was done with the intent of inflicting harm on the other; the conduct of both parties arose, in my view, out of their lack of trust for the other and out of the high conflict nature of this separation. There was, in my view, no bad faith conduct which would support a finding under Rule 24(8).
[20] Was either party guilty of unreasonable conduct regarding this motion? In her costs submissions, Ms. McFarlane lays the entire blame for this whole matter at the feet of Mr. Varcoe. She says that he acted unreasonably in announcing on short notice that he was intent on moving out of the home after a four way meeting on August 15, 2013. It is her submission that Ms. Varcoe needed an immediate sale of the property because she could not bear the costs of the home. She finally says that Mr. Varcoe was unreasonable in making a late offer to purchase her client’s interest in the home, when he had previously failed to act on that for a five month period.
[21] Notwithstanding these submissions, which were also made at the motion, I have, however, made certain findings based on the materials filed. The first finding is that Ms. Varcoe unreasonably listed the home without input or consent from Mr. Varcoe. I specifically found that Ms. Varcoe unreasonably placed a “for sale” sign on the home at a crucial stage in the custody and access negotiations; it appeared as though she was trying to sabotage those negotiations considering the impending trial of those issues. Moreover, although she sent a co-listing agreement to Mr. Varcoe’s brother, this was not, as I stated in my endorsement, a true joint listing of the home; Mr. Varcoe had no input into the terms of the listing or, for that matter, the offer to purchase negotiated by Ms. Varcoe’s realtor. Finally, I also found that Ms. Varcoe did not negotiate the issues in this motion in any reasonable fashion; as noted above, I found that Ms. Varcoe only notified her husband that she was willing to entertain an offer from him when her reply materials on the motion were served on him. It is neither productive nor principled to negotiate through service of motion materials, especially when Mr. Varcoe was previously under the impression that his offer was competing with the offer negotiated by Ms. Varcoe’s realtor, and he drafted his own motion materials accordingly.
[22] Based upon the findings that I made in considering this motion, I find that Ms. Varcoe was guilty of unreasonable behaviour within the meaning of Rule 24(11).
Hardship Issues
[23] In making her submissions regarding hardship, Ms. McFarlane states that the unfavourable orders received at the motion cause her client hardship. She states that because of these orders, which have resulted in financial hardship to Ms. Varcoe, she should not also be penalized in costs.
[24] To rely upon the result of the motion to argue hardship begs the question of whether there costs are an additional hardship, as the success or failure of a party at a motion directly affects the court’s determination of costs. Rightly or wrongly, based upon the material filed, I made certain findings and granted relief which I thought appropriate. Generally costs follow the event, and that is because it is presumed that the losing party should pay the successful party’s expenses to compensate that party for having to argue the issue. It goes without saying that a negative result at a motion will often cause financial hardship; however, it will often also result in a costs award against that party by reason of rule 24(1).
[25] That being said, the Applicant submits that she is also suffering financial hardship as a result of the actions of the Respondent. She notes that, unlike the Respondent, she has been left with the costs of caring for the children without the assistance of a partner. She states that she will have to obtain accommodation for the children and an award of costs will impair her ability to do so.
[26] The means of the unsuccessful party may not be used to shield his or her liability for costs where that party has acted unreasonably. However, in such circumstances, it may be relevant to the quantum of costs to be awarded: see Parsons v. Parsons, 2002 45521 (ON SC), [2002] O.J. No. 3034 (S.C.J.) at paragraph 12.
[27] In Beckett v. Beckett, 2010 ONSC 2706, [2010] O.J. No. 1957 (S.C.J.), Pazaratz J. considered the issue of the affordability of a costs award at the end of a five day equalization trial. Although he determined that “any other matter” in Rule 24(11)(f) included the “affordability and enforceability of a costs order” [paragraph 33], he also stated that the real issue is the effect of the costs award on the financial ability of the parties to care for the children. In that case, because the care of the children was shared, he determined that costs should follow the event.
[28] Accordingly, I do not feel it appropriate to deprive the Respondent of his costs based on hardship, both because custody of the children is shared and because of the unreasonable behaviour of the Applicant. I will bear hardship issues in mind in quantifying costs. However, the Respondent was successful on the motion and the Applicant is guilty of unreasonable conduct. The Respondent shall have his costs of the motion.
Quantum of Costs
[29] The Respondent requests full indemnity costs of $14,762.61 inclusive of HST and disbursement as set out in the Bill of Costs attached to her costs submissions.
[30] Under Rule 24(11), in fixing the amount of costs, I may take into account the “importance, complexity or difficulty of the issues” as well as “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.”
[31] Full indemnity costs are the exception to the rule and should not be ordered barring exceptional circumstances: see Boucher v. Public Accountants Counsel (Ontario) 2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.). Those circumstances do not exist in the present case. I have not found that the Applicant was guilty of bad faith bargaining, and the Respondent’s offer is not within the requirements of Rule 18(14). As such, the Respondent is not entitled to full recovery costs.
[32] Accordingly, the issue is whether costs should be payable on a partial or substantial recovery basis. The facts that would result in a substantial recovery award are the unreasonable conduct of the Applicant as well as the fact that the offer submitted by the Respondent was close to the result ordered by me.
[33] However, I am concerned that any costs award will result in hardship to the Applicant. Whatever occurs, she is correct that once the sale of the home closes, she will have to purchase a reasonable residence for herself and the children and she will have to do this on her own. Child support is differential, and may well not be a large amount once the dust settles. The costs will be payable from the net proceeds of the matrimonial home and will affect her ability to purchase another home for herself and the children. As such, in the end, a substantial indemnity costs award may very well result in the hardship to to the Applicant in her ability to financially support the children while in her care.
[34] I am also concerned about one entry in the Respondent’s Bill of Costs, being the 5.5 hour meeting which took place on January 6, 2014, presumably to prepare the offer to settle and the reply affidavit. The entry is concerning because counsel spent a further 6 hours on the previous day to prepare the affidavit; 11.5 hours for the preparation of that material appears excessive. I am sure the time was spent in these tasks but the reply material and offer results in a costs claim of nearly $4,000 which I find to be more than warranted for the tasks performed.
[35] As such, it is my determination that costs will be payable by the Applicant on a partial recovery basis, in the amount of $7,500 inclusive of disbursements and HST. That amount shall be adjusted for and deducted from the net proceeds payable by the Respondent upon the sale of the Applicant’s interest in the matrimonial home to the Respondent, which is scheduled to close on March 20, 2014.
McDERMOT J.
Date: February 21, 2014
[^1]: O. Reg. 114/99