Studerus v. Studerus, 2014 ONSC 2223

COURT FILE NO.: FD1876/07

DATE: April 10, 2014

SUPERIOR COURT OF JUSTICE – ONTARIO

FAMILY COURT

RE: Ruthanne Winnifred Studerus, applicant

AND:

Thomas Milton Studerus, respondent

BEFORE: MITROW J.

COUNSEL: Michael Nyhof for the applicant

William Clayton for the respondent

HEARD: written submissions filed

decision on costs of the second trial

[1]

Introduction

This is the decision on costs following trial on the issues of equalization payment, spousal support and child support for the youngest child. I have received the following written cost submissions: the submissions of the applicant (“Ms. Studerus”) dated December 5, 2013; the responding submissions of the respondent (“Mr. Studerus”) dated January 6, 2014; and Ms. Studerus’ reply submissions dated January 24, 2014.

[2]

Background

This was the second trial for these parties in this bifurcated proceeding that started in 2007. The first trial was heard by Harper J – it was a trial of issues on the validity of the separation agreement and the date of separation. That trial judgment, released in April 2009, determined the date of separation and set aside the separation agreement, which then paved the way for Ms. Studerus to continue with her claims for equalization payment, spousal support and child support. Mr. Studerus was ordered to pay to Ms. Studerus $29,000 in costs (approximately) in the first trial.

3Similar to my reasons for the trial judgment (paras. 10 – 16), I approach the decision on costs based on the record before me, and the fact that costs were awarded against Mr. Studerus in the first trial is not a factor in my decision on costs for the second trial.

[4]

Results of the Trial

After the trial judgment was released, the parties had to return to make submissions on two issues: how and when the equalization payment owing by Mr. Studerus should be paid; and when Mr. Studerus should pay the spousal support arrears.

5The result of the trial was:

a) Mr. Studerus was ordered to pay an equalization payment in the amount of $68,260 and spousal support arrears of $41,520. On November 15, 2013 (at the post-trial judgment hearing) it was ordered that both of these amounts were to be paid by December 15, 2013 (although the spousal support by the time of the hearing had been reduced to $38,520 because of ongoing monthly payments provided for in the trial judgment);

b) Mr. Studerus was ordered to pay forthwith the sum of $3,956 representing money owing by him to Ms. Studerus when sole ownership of the matrimonial home was transferred to Mr. Studerus;

c) Both parties’ claims for child support were dismissed;

d) No prejudgment interest was ordered.

6There is no dispute that Mr. Studerus, to date, has paid all amounts, as ordered, pursuant to both trial judgments including the costs ordered after the first trial.

[7]

Offers to Settle

Three offers to settle was served: Ms. Studerus served offers dated November 17, 2011 and November 24, 2011; and Mr. Studerus served an offer dated November 21, 2011.

8Ms. Studerus submits that on the issue of spousal support, the trial judgment was as favourable, or more favourable than her first order, thus engaging r. 18(14) and entitling Ms. Studerus to full recovery of costs on the spousal support issue. I do not accept that submission.

9Ms. Studerus’ first offer, as alluded to in Mr. Studerus’ submissions, bears more resemblance to a request to admit than an offer to settle. All the paragraphs in this offer to settle were severable, and Mr. Studerus had the option of accepting any number of paragraphs in the offer. The two relevant paragraphs dealing with spousal support that are contained in this offer are as follows:

6. The applicant Ruth Studerus shall be deemed entitled to spousal support.

7. Spousal support shall commence January 1, 2008.

10The trial judgment awarded spousal support retroactive to January 1, 2006. Ms. Studerus argues that because her offer provided for spousal support to be paid commencing January 1, 2008, that the order is therefore as favourable or more favourable than her offer.

11There are numerous flaws with this argument. The offer makes no reference to the amount of spousal support, making it impossible to come to any conclusion as to whether the judgment was as favourable or more favourable than the offer on the issue of spousal support. The offer contains no termination date for spousal support. However, in quantifying the arrears of support pursuant to the trial judgment, there was no spousal support ordered after 2011. This was consistent with Ms. Studerus’ submission at trial that she was not seeking spousal support beyond 2011 (a position that Mr. Studerus submits he was not aware of until trial).

12The burden of proving that the order was as favourable or more favourable than her offer rests with Ms. Studerus: r. 18(15). Also the offer required acceptance within four days (by November 21, 2011) for there to be no costs; acceptance thereafter required that Mr. Studerus pay full indemnity costs.

13Ms. Studerus’ offer was “a dynamic” rather than a “static” offer because the nature of the offer changed over time by imposing a costs component depending on when the offer was accepted. This presents a further obstacle for Ms. Studerus in discharging her burden under r. 18(15) because the trial judgment, of course, did not order Mr. Studerus to pay any costs – and yet, the applicability of r. 18(14) must be determined by comparing the trial judgment to the offer, before costs are even dealt with. Ms. Studerus bears the burden in r. 18(15) no matter when the offer is accepted – meaning whether the offer is accepted before or after the cost consequences referred to in the offer come into play. A litigant who includes costs consequences in an offer may place at risk his or her ability to rely on r. 18(14).

14There must be strict compliance with r. 18(14) to trigger its consequences: Osmar v. Osmar, 2000 20380 (ON SC), 2000 CarswellOnt 2343 (S.C.J.) at para. 5. Ms. Studerus has failed to prove that the order is as favourable or more favourable than her offer to settle in relation to spousal support. However, given that one of the components to be determined in relation to spousal support included the date that spousal support should commence, I can, and do, take this offer into account pursuant to r. 14(16) in fixing costs.

15It is clear that the two other offers, one by each party, also do not engage the automatic costs consequences of r. 18(14).

16The equalization payment issue was dominated, at trial, by two main issues that centred on the deductibility of date of marriage assets: firstly, whether Mr. Studerus could deduct $43,000 that he alleged he had in a bank account, and the sum of $15,000 for a Thunderbird motor vehicle that he alleged he owned; and secondly whether Ms. Studerus could deduct $240,000 representing the contingent value of her claim for damages arising from a motor vehicle accident occurring shortly before the date of marriage. The trial judgment disallowed all three deductions.

17Mr. Studerus’ offer provided that spousal support was to continue in accordance with the interim spousal support order and would terminate effective November 2011. There was no provision for ongoing spousal support thereafter nor for any retroactive spousal support. In relation to property, Mr. Studerus’ offer provided for a payment of $48,850 ($20,000 payable within 10 days, the balance payable at $500 per month without interest).

18Ms. Studerus’ second offer to settle (the terms of which were not severable), offered to settle spousal support for a lump sum payment of $15,000, which was most reasonable and less than the trial order. However, the reasonableness of the spousal support proposal was offset substantially by the balance of the offer that included: $150,000 for equalization payment; $20,000 for child support arrears; and $25,000 for pre-judgment interest. All these provisions were substantially in excess of the trial judgment.

19I find that the $240,000 deduction claimed by Ms. Studerus was a significant factor that increased the length of the trial and was an obstacle to settlement; however, Mr. Studerus’ entrenched position on spousal support and his claim for date of marriage deductions should not be overlooked as contributing factors to the lack of settlement and extending the trial.

20Both parties were criticized in the reasons for judgment as to their evidence regarding household contents and personal possessions, including the “chattel by chattel” evidence in-chief and on cross-examination of the parties. Other than some minor exceptions, the lack of admissible evidence resulted in household contents and personal items of being excluded from each party’s net family property. The following was stated at para. 73 in the reasons for judgment:

73. Both parties lost all focus in their responsibility to assist the court. There was a lack of any semblance of cooperation between the parties to deal with their disagreement in a process that was efficient and that minimized cost. The result was an unnecessary use of court resources and an unnecessary increase in legal costs.

21I find that Ms. Studerus was successful in her claims for spousal support and equalization payment (the latter also including the payment, noted above, regarding Ms. Studerus’ equity in the matrimonial home), and as such, Ms. Studerus is presumptively entitled to costs pursuant to r. 24(1). Ms. Studerus did not succeed in her child support claim; neither did Mr. Studerus. Each party claimed child support from the other for their son Roman. The dispute involved child support for Roman for a period of under two years following the parties’ separation in September 2005. Both parties agreed that Roman was no longer a “child of the marriage” within the meaning of the Divorce Act by June 2007. Each party’s claim was dismissed. Although this was not a substantial issue, neither was it a trifling issue, as both parties gave evidence and were cross-examined, with the main issue being as to which parent Roman was living with during the relevant time. Mr. Studerus in fact called Roman to testify as a witness on this issue.

22In dismissing the claim of each party for child support, the reasons for judgment noted that Mr. Studerus’ pleadings contained no claim for child support, and that Ms. Studerus’ claim for the retroactive child support was commenced after Roman was no longer a child of the marriage, and hence Ms. Studerus’ claim was barred, pursuant to the Supreme Court of Canada decision in S.(D.B.) v. G.(S.R.), 2006 S.C.C. 2007 (see paras. 17 – 23 of the reasons for judgment).

[23]

Analysis of Costs Factors

I now turn to the r. 24(11) factors. The issues in this case were important; they were not complex; they were of moderate difficulty.

24I find on the facts before me that neither party acted unreasonably. I disagree with Ms. Studerus’ submission that Mr. Studerus behaved unreasonably.

25In support of her argument, Ms. Studerus points to Mr. Studerus failing to prove his date of marriage deductions at trial. She submits this demonstrates unreasonable conduct. I reject that submission. If this was true, then Ms. Studerus would have equally engaged in unreasonable conduct in failing to prove her date of marriage deduction. Mr. Studerus was entitled to, as was Ms. Studerus, to assert a position at trial. The risk, if the position is not upheld, is exposure to costs. A litigant has a right to assert a position at trial, and lose, without having his or her conduct branded as unreasonable.

26Ms. Studerus also points to some unfavourable credibility findings made against Mr. Studerus at trial as further evidence of unreasonable conduct. I do not agree. Unfavourable credibility findings were also made against Ms. Studerus on some issues. In the context of this case, a preference of one party’s evidence over the other on certain points, or a finding that a party lacked credibility on certain points, is nothing more than the natural “ebb and flow” of a trial, and does not rise to a level of unreasonable conduct.

[27]

Quantum of Costs

Both parties submitted time dockets and/or a bill of costs.

28I find that both lawyers’ rates were reasonable, although there was a discrepancy in the amount based on Mr. Clayton’s seniority. I also accept that Mr. Nyhof’s hourly rate of $250 was discounted and on the modest side, and less than his experience would justify. Mr. Nyhof expended 148.7 hours on the issues regarding the second trial. Mr. Clayton’s time of involvement was 70.9 hours but he employed a clerk who docketed 59.1 hours and there was also some modest time docketed by articling students. However, the time spent on Ms. Studerus’ behalf in unsuccessfully pursuing the issues of a $240,000 deduction, the household contents and child support will reduce her entitlement to costs. I do agree to some extent with Mr. Studerus’ submissions that some of the work done by Mr. Nyhof could have been done by a clerk, and although I take that into account, it is tempered somewhat by the fact that Mr. Nyhof was giving his client a discounted rate. Also Mr. Studerus’ bill, as shown, is over $55,000 on a full indemnity basis while Ms. Studerus’ bill is a little over $45,000 on a full indemnity basis. These amounts are inclusive of fees, disbursements and taxes.

29Disbursements claimed by Ms. Studerus were a little over $2,000 inclusive of fees, and are reasonable.

30Aston J. has stated that the Family Law Rules differ significantly from the Rules of Civil Procedure. The two traditional scales of costs are no longer appropriate. Under the Family Law Rules, costs are to be quantified according to the factors in r. 24(11). If a party is liable to pay costs, the court must fix the amount of costs at “some figure between a nominal sum and full recovery”: Sims-Howarth v. Bilcliffe, 2000 CarswellOnt 299 (S.C.J.) at para. 4, which said discussion by Aston J. was approved in C.A.M. v. D.M. 2003 18880 (ON CA), 176 O.A.C. 201 (Ont. C.A.) at para. 42.

31The Court of Appeal for Ontario has clarified that in fixing costs the overriding principle is reasonableness. The judge, in awarding costs, should reflect on what the court views as a reasonable amount for the unsuccessful party to pay, rather than engage in a purely mathematical exercise or any exact measure of the actual costs of the successful litigant: Davies v. Clarington (Municipality) 2009 ONCA 722, 2009 CarswellOnt 6185 (C.A.)

32Ms. Studerus seeks full recovery costs totalling $45,213.61. There is no basis to award full recovery costs on the facts of this case.

33There must be a not insignificant reduction relating to the time spent by Ms. Studerus unsuccessfully pursuing the issues discussed earlier.

[34]

Disposition

I find that a reasonable amount of costs to be paid by Mr. Studerus to Ms. Studerus is $18,000, payable forthwith, and inclusive of assessable disbursements and HST. I have considered the financial circumstances of the parties. There is no reason to defer the payment of costs.

35I find that approximately 50% of the time spent, in respect of which costs have been awarded, related to spousal support.

36Accordingly, in relation to the costs as ordered, the sum of $9,000 constitutes a “support order” within the meaning of the Family Responsibility and Support Arrears Enforcement Act, 1996, and is enforceable by the Director.